Financial Exclusion: Access to Cash

Jonathan Reynolds Excerpts

Tuesday 21st May 2019 Westminster Hall

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank you, Sir Henry, for giving me the opportunity to respond to the debate. I thank my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for securing this debate on such an important issue. It is good to see such a significant turnout of colleagues. There has been a fair degree of consensus in what has been said.

As shadow City Minister, I spend a great deal of time thinking about how financial services can be changed to improve financial inclusion and how we can remove the poverty premium that we know exists in the UK and that so many Members have referenced. For me, it is impossible to build a fair society—the kind of society we all want—without guaranteeing a degree of access to basic financial services. It always confounds me that we are one of the most advanced global financial centres in the world, yet there are 1.6 million adults in the UK who remain unbanked, and thousands more who are denied access to the basic levels of credit that many of us take for granted.

When I look to the future, I see the challenge as making sure that we can use new technology to tackle financial inclusion, rather than compound the problem. Some new financial technology companies are doing brilliant work to break down historical barriers in banking, such as providing easier access to bank accounts or using rental payment data to help build up credit scores, but technology risks leaving people behind if we do not protect and equip them along the way. That has been evident in the trends surrounding the use of cash.

As many Members have said in the debate today, our use of cash as a nation is declining. According to figures from the British Retail Consortium, cash accounted for just 22% of retail transactions in 2017, which is an inevitable consequence of the rise in popularity of contactless and mobile payments, but there is a significant danger of sleepwalking into a cashless society without giving careful thought to what that will really mean. Some communities, especially vulnerable ones, are still reliant on cash and their ongoing access to cash must be protected. I unreservedly commit the Opposition to that position.

Some poorer families and individuals need cash to budget effectively, a point that was well made by my hon. Friend the Member for Makerfield (Yvonne Fovargue). There is no solution that compares with cash for people who are reliant on, for example, a carer to carry out tasks for them—it is quick and easy to see how much change there is when a carer has done the shopping for someone—and, of course, for the unbanked, cash is a lifeline without which participation in society would simply be impossible. It is up to us to carefully consider access to cash and to create a system that protects more vulnerable individuals.

Natalie Ceeney’s Access to Cash report, which was commissioned by Link and has been referenced quite a lot in the debate, outlined the situation we face and made some sound recommendations for consideration. The Chair of the Treasury Committee noted at the time that

“leaving the future of cash to be determined by market forces will not work.”

The Opposition certainly agree with that.

Establishing cash as a utility will be central to protecting consumer access. I have heard quite a lot of support for that in my initial conversations with the big UK banks, with ideas such as how they could share cash-centre facilities—the sort of back-office function that underpins much of the cash system.

Bank branch closures form a critical part of this debate. In the Opposition’s view, the reduction of the bank branch estate has been too severe. Under a Labour Government, there would be mandatory consultation on bank branch closures, given the negative impact they have on communities, which many Members have referenced. I am mindful that we have held quite a few Westminster Hall debates on this topic recently, and Members will have heard our views then, so I want to focus on the ATM estate.

We know that the number of ATMs has dropped significantly. There are complex factors at work that we must be mindful of. We should focus on protecting ATMs in communities that would end up being stranded long distances from free access to cash if they were to close. LINK’s offer to pay a subsidy on those machines of up to £2.75 is an important step towards preventing cash deserts from emerging.

In other places, especially city centres, we will ultimately see that there is an excess of cash machines. It is inevitable that there will be closures in areas of high concentration. For example, I am planning to go home today and when I get to Manchester Piccadilly station, there are at least six free-access cash machines on the station. I think that will probably decline over time.

I add a word of caution. We must be alert as politicians and regulators not to be seen as being there to protect the incumbents from the consumer change that we have seen. We can protect access to cash at the same time as recognising changing consumer habits.

We must also must be open-minded about creative solutions that will help to safeguard choices for everyone in how we pay. Lloyds Banking Group, for example, has launched a pilot scheme to incentivise cashback by paying retailers a small fee per transaction. We will have to see the results to ascertain whether it is effective, but at face value it seems like an interesting addition to the provision of cash. Cash can be expensive for shops to process and handle securely, yet keeping a small cash float that can be passed on to consumers would help address that problem. It means they can still accept some cash from customers who want to use it, and it would encourage visits to the high street. The point about business rates raised by my hon. Friend the Member for High Peak (Ruth George) must also be addressed. There will not be one panacea that regulators can impose to solve access to cash. The solution will lie in deploying a mix of such co-operative tools that see banks and shops working together.

The Opposition urged the Treasury to open an urgent review into access to cash when Natalie Ceeney’s report was published. I am pleased that those calls have been heeded with the establishment of the Joint Authorities Cash Strategy Group, which must act quickly to ensure that the future of cash can be safeguarded. I am particularly keen for local communities to be given the right to demand a review of access to cash in their areas, which the regulator will then have to respond to if necessary. For our part, the Opposition are ready to support any effort that moves us towards treating cash as the essential utility it is, guaranteeing access to it for all and protecting cash for those who really need it.