High Street Bank Closures and Banking Hubs

Kirsten Oswald Excerpts

Thursday 11th May 2023 Westminster Hall

[Kirsten Oswald (East Renfrewshire) (SNP)]

It is a pleasure to serve under your chairship, Mr Davies. The right hon. Member for Aldridge-Brownhills (Wendy Morton) set out the case very well for why bank closures are a problem and why they cause such concern in our constituencies. It feels like I have stood here innumerable times deploring the loss of another local bank in one of the towns in East Renfrewshire. I really related to the comments of the hon. Member for Barnsley East (Stephanie Peacock): bank closures are highly frustrating and cause such difficulties and challenges for people in our communities.

Sometimes, the way the banks deal with closures adds to the frustration. Some have reduced the number of hours they are open to provide a service, and they tell us in all seriousness that the reason they are closing is that fewer people are attending the bank. Well, of course fewer people are attending the bank if there are fewer hours available for them to do so. The reduction in the availability of service is a challenge and a self-perpetuating issue.

The hon. Lady’s comments about rural areas were absolutely right. This is an issue for people in rural areas—some of my constituents feel that very strongly—but we also heard about issues in more suburban areas. The suburban communities of East Renfrewshire are scunnered; they are fed up to the back teeth of banks disappearing from their high streets and leaving behind big gaps in the local shopping areas. That is particularly an issue for groups in our communities such as disabled people and the elderly, and for local businesses. Our local high streets face not only the challenge of bringing in customers but the additional challenge of the closure. A bank is a destination in and of itself, but people who go to banks may then visit local businesses—that will not happen if the banks are not there. Bank closures leave a gaping hole behind, which is unattractive, and the service that local businesses may also wish to avail themselves of is no longer available, so this is not just a one-dimensional issue for our high streets. I do not think that the banks are paying due care and attention to that.

Local residents are also aggravated by the correspondence they receive from banks that are going to close. Without asking in advance what they think about it, the closure is presented as a fait accompli—whether the community likes it or not, and regardless of its views, the local bank is closing, and people are unable to scrutinise the facts and figures. The bank also tells them not to worry because they can go to another bank that is 5 miles away. Well, it might be 5 miles away for a crow, but that is entirely irrelevant for a human being who has to catch two buses, with a half-hour wait between the two, to get from A to B, or if people do not have time to make the journey because they have other commitments. Such messaging from banks is profoundly unhelpful and insults the intelligence of their customers. The banks seem to be assuming that everybody is standing outside the closing bank, ready to make the journey, but some of the people affected may live in a town that has already lost its bank, which means that they will have to travel even further. It is understandable that people feel vexed.

The right hon. Member for Aldridge-Brownhills pointed out that when a bank is gone, it is gone—it is not coming back—and that is one of the reasons why people are so concerned. There are many other reasons why in-person banking is valuable, including the opportunity it gives people to have a conversation about their money. We all value such conversations, which can advise us on how to stop fraud attempts, particularly those targeted at elderly and vulnerable people. Obviously, if there is no bank branch, such discussions cannot take place.

The ability to access cash is a huge issue in my community and others. If there are fewer free-to-use ATMs and fewer banks, we are taking away the opportunity for people to choose how they transact things in their day-to-day lives. Again, that is a bigger problem for those who have the least cash and for those who are most marginalised in our communities.

The hon. Member for Carshalton and Wallington (Elliot Colburn) is right to worry that banks might just be disappearing from our high streets altogether. Technology is great—I absolutely accept that a lot of the banking technology is really helpful—but it is not always what is necessary. We need to appreciate that both approaches are necessary. Technology and the ability to access it are valuable, but face-to-face services also need to be made available, whether for reasons of accessibility or because the relevant technology is not available. Such services also help us put criminal elements in perspective. The fewer the number of bank branches, the more opportunities for online and digital frauds. I have spent a lot of time recently looking at push payment frauds, and it seems to me that there would be fewer of them if people had access to someone they could speak to about their banking on a day-to-day basis.

Are banks doing what we need them to do? I am not sure that they are doing so. There is a very unfortunate assumption that communities will just cope with banks disappearing from their high streets. When I moved to the home I have now lived in for about 15 years, there were numerous bank branches on my local high street, but that is not the case any more. People in towns all over East Renfrewshire will feel the same way. The banks have just disappeared—they have walked off the pitch. The promises we heard about never closing the last bank in town are laughable. My constituents would think that that was ludicrous, which is a shame, because they and our town centres need bank services.

Our post offices do a brilliant job. I have stood here before and waxed lyrical about the brilliant post offices in East Renfrewshire. They are fantastic. I know it is a strange thing to suggest, but people should come to our local post offices. They are great, but they have their own job to do. They have a long and varied list of things they can do, but they are not banks, so although they are doing a great job, there are still gaps. The banking hub in Cambuslang is certainly a model to look at, and I am encouraged by others following that. But whatever the model, people on our local high streets and communities, particularly those who are most marginalised, must be able to access cash and banking services. I do not think that it is an unreasonable expectation that we should have that in our local communities, and I very much look forward to hearing what others have to say today.

This conversation will become all the more pressing in the next couple of years, as banks continue to close apace and people begin to really wonder what the banks are for, who they are providing a service to, and how we ensure that we have access to cash and banking facilities, which is what people need.

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[Marion Fellows]

I absolutely agree with the right hon. Member. If someone is poor, they cannot afford to run up bank charges. They cannot afford to be overdrawn. I am old enough to remember my mother having pots of money—some was used for this, and some was used for that, but if it was not there, we could not spend it. It is a better way to keep oneself in the black altogether.

Before 2021, about six branches a month were closing in Scotland, but since 2021 that has increased to about eight a month. Post offices are also now closing: between 2011 and 2021, we lost 112 post offices to closure in Scotland alone.

[Kirsten Oswald]

My hon. Friend is making a really important point about both banks and post offices potentially being lost to communities. Does she agree that when banks close and abdicate their responsibility, their suggestion that post offices will simply take over their services is unfortunate and unacceptable? It is as if the banks think they are not at all accountable. That is not how we should address this.

[Marion Fellows]

Absolutely. Banks are allowed to say, “Well, it is okay if we close, because there is a post office nearby.” That will not always be the case, as more and more sub-postmasters struggle. I will come on to that later.

The head of policy at Age Concern Scotland has noted:

“These closures often hit older customers hardest, leaving them cut off from vital services and making it harder for them to manage their money...As we battle through this cost of living crisis it is more important than ever that older people can access their money as cash, for free, and use it whenever they need to.”

The number of cash machines that are closing is disgraceful. For example, in my local area in Lanarkshire we have lost nearly 100 cash machines in four years. In July 2018, Lanarkshire had 650 cash machines but that had fallen to 561 by last February. And the really important point is that the number of free-to-use ATMs in my area had dropped by 555 to 426. That means that the only ATMs that people can access are ones that charge them for taking out their own money; they are paying a poverty premium. That is ludicrous and it is really affecting people on a daily basis.

As I have said, for years banks have said, “It’s okay if we close our local banks, because there will always be post offices nearby.” However, as I have also already said, post office closures have picked away at their number, too. What will the Department do to protect network and community services that are run through post offices, especially in relation to people who cannot get to banks?

Given the different ways of running post offices, it is really difficult to tell how many sub-postmasters who have taken on banking to a great degree are now struggling. I do not know whether folk here are aware of this, but 70% of the members of the National Federation of SubPostmasters are only earning the national minimum wage, despite the good work that they do in providing post office services and now banking services. That figure came out before the cost of living crisis, so the situation will be even worse now.

It is also very difficult for Post Office Ltd to encourage people to take on post offices or sub-post offices because of the Horizon scandal. The other thing is that the Post Office lozenge—the sign that we are all very familiar with—goes outside a building and says, “Post Office”, but inside that particular building there might only be a drop and collect service for parcels. So, people think that there is a post office where there is not one.

On banking transactions, many Members have already said that many local businesses now use local sub-post offices to pay in takings in cash. That is important, because it keeps money in the local area and it really keeps some high streets going. However, last year new regulations to combat money laundering were introduced by the Financial Conduct Authority—actually, I have found it difficult to find out if it was entirely the fault of the FCA or UK Finance. Recently, it has been very difficult for local businesses. There are no banks, so they take their money to the post office, but a limit was imposed on how much each business could deposit.

I am very pleased to say that last month the FCA noticed that a more tailored approach should be taken by banks for cash deposits by business customers, on the basis of expected business customer activity. However, that also links back to the problem that sub-postmasters have, because they were losing money as customers could not deposit all of their takings and many customers then had to travel many miles to be able to deposit their money safely. I am hopeful that, when this issue is properly sorted out, a tailored approach will allow local business owners to go back in and carry out their business the way they did before.

Real clarity is needed on banking hubs. I have visited the banking hub in Cambuslang, and one is to be opened quite near my constituency in Carluke, hopefully reasonably soon. The building in Cambuslang was fantastic. The way it works is that each bank that has signed up sends a representative to the banking hub once a week to give business advice. As many Members have pointed out, people go to banks not just to take out money; they need advice, help with filling in forms, and other things like that. Those things were being done in the hub. I spoke to many customers that day, and they were very happy with the service given. It was a pilot programme, and it is still unclear what effect it had on the local post office branch, so we have to bear that in mind. The NFSP is concerned about the fact that there is no third-party oversight of the banking hub recruitment process. It is not known how those who gained the right to run the banking hubs were selected. I have already written to LINK about that, and I am awaiting a response.

Consumers are able to access cash at a post office only if their bank has signed up to the banking framework agreement. Which? has raised concerns about the long-term viability of the agreement, as it is voluntary and there is a time limit on it—I think the last one to which banks signed up was for three years. Barclays bank originally did not sign up, which was quite a loss for its local customers. I am calling for access to cash at a post office to be placed on a firmer and more sustainable footing in areas where local cash needs are unmet. Can the Minister comment on that, and update us on where we are going?

Returning to the post office argument, if banking hubs have an impact on local post offices, then that is something that we have to be very careful about. Part of the difficulty is that the Treasury and the Department for Business and Trade are both involved, and there is not a great deal of communication between them. I know it is getting sightly better, but this Government have for many years almost had a silo mentality, in which one Department did not really know what the other was doing. That is to the detriment of people who have to use banks and post offices—if they are still there. I would really welcome the Minister’s comments on that.

I again thank the right hon. Member for Aldridge-Brownhills and all the other Members who have spoken. This is a real ongoing problem, and like my hon. Friend the Member for East Renfrewshire (Kirsten Oswald), I have stood here to speak on the subject innumerable times. I have come at this problem from different angles, and have tried to say something different each time, but hat is proving harder and harder. It is time that the Government got a real handle on the issue, and started to protect consumers more, as well as those who cannot use digital banking. That is not just older people, though many older people struggle with either bad broadband or the inability to handle new technology. We need a joined-up approach from the Government to ensure that people can still access banks, post offices and cash.

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[Gareth Davies]

My right hon. Friend makes a good point. I will have the Economic Secretary to the Treasury write to her with any figures that we have on the pauses that have taken place as a result of FCA guidance. LINK carries out reviews in order to suggest and recommend the services that can be put in place. If there are no bank branches left in a community, a banking hub can be suggested. However, if my right hon. Friend will allow me, I will ask my colleague to write to her with more detail on that point.

The industry is innovating and finding new ways to respond to customers who want and need to access in-person services. I am pleased that we have heard a lot of discussion today about post offices, because they play a vital part in this issue. It is right to point out the statistics, which I was quite shocked to learn when preparing for this debate. Some 99% of personal banking customers, and 95% of business banking customers, can do their everyday banking—can do such things as withdraw cash or check their balance—at one of 11,500 post office branches across the country. I was also shocked to learn that 93% of people in this country live within just 1 mile of a post office, so almost everyone can access their everyday banking services locally.

[Kirsten Oswald]

Does the Minister appreciate that that will be cold comfort to people who no longer have a post office, or who have an on-and-off post office, which is not a very reliable way of doing business, or who do not live in the heavily populated areas that presumably make up that 99%? That is probably an unhelpful comment, in their opinion.

[Gareth Davies]

I accept the challenge, of course. The hon. Member for Motherwell and Wishaw (Marion Fellows) also asked me to comment on what support the Government are providing to post offices. I can respond to both points.

In the 2021 spending review, some £227 million was secured in Government investment between ’22 and ’25, including a subsidy of £50 million to protect access to post office services in commercially challenging locations. That later increased to £335 million, including a £150 million subsidy to those in commercially challenging locations. I therefore accept what the hon. Member for East Renfrewshire (Kirsten Oswald) says, but the reality for the 93% who live within 1 mile of a post office cannot be ignored. For those who are not within that catchment area, the Government have stepped in with subsidy and significant funding to ensure access to a post office.