Financial Services Bill

Lord Hunt of Wirral Excerpts

3rd reading & Report stage
Monday 19th April 2021 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I draw attention to my interests as set out in the register, particularly as one of the independent directors of the LINK scheme, the UK’s largest cash machine network. I support my noble friends Lady Neville-Rolfe, Lord Holmes of Richmond and Lady McIntosh of Pickering, on Amendment 37E in particular.

It is, of course, far too soon to be drawing definitive conclusions based upon our experiences of the past year or so. However, it is striking how the pandemic has tended to accelerate some existing trends. One has been the declining use of cash. For many people, this decline is something to be embraced. Last summer and again in recent days, pubs and restaurants have begun to reopen, almost universally on the basis of card payments only; the commonly preferred method is to order from the table and pre-pay through a mobile device—no cash, no cards even, and with minimised physical contact. Home delivery of food has expanded dramatically. It is therefore hardly surprising that withdrawal of cash from ATMs almost halved during the worst of the pandemic. I know people who have stopped carrying cash. However, as my noble friend Lord Holmes of Richmond pointed out, this approach does not work for everyone.

Think, for example, of the disadvantages for isolated, elderly people who have to rely upon neighbours for food shopping. Unless they bank online, how can they repay them? My noble friend’s amendment reminds us that even when a trend is broadly welcome to the vast majority of people, it can isolate a minority from the mainstream, sometimes with cruel and unjust consequences. Financial exclusion, digital exclusion, social exclusion and economic exclusion all too often go hand in hand. I know from my work with LINK that those in charge of the UK financial system are acutely aware of these problems and challenges. Indeed, they are working tirelessly to address them, and LINK in particular is committed to maintaining free access to cash across the country, for as long as consumers want and need it.

As part of this commitment, LINK maintains a financial inclusion programme. This has so far provided 1,800 communities with a new, free-to-use ATM service, by providing financial subsidies to operators who install the machines. Consumer and community groups, local authorities, Members of Parliament—including Members of this House—and indeed any other interested parties, can help to identify further, suitable sites. Some providers of ATMs base their business model on charging for transactions. That is a perfectly valid approach, but no one should underestimate just how precious a resource a free-to-use ATM is.

It may be that this amendment is too prescriptive, and I look forward to hearing from my noble friend the Minister on the wording, but these challenges can be overcome only by partnership, including banks, the Post Office, retailers, regulators and the Government, all founded upon the latest possible information and analysis. This will require leadership and a positive, co-operative spirit.

We would be wise to take care in drawing any lasting conclusions from our experience of the pandemic. Much more analysis needs to be done of how financially marginalised people, particularly those without bank accounts, have fared since the beginning of 2020. I am confident that the trends and suggested responses set out in Natalie Ceeney’s excellent report of March 2019 will broadly stand the test of time. All that has changed is the acuteness of the challenge and the urgency of coming together to fashion a sustainable response.

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to speak to these amendments, both of which are in my name. In doing so, I declare my financial services interests as set out in the register. I will move also Amendment 40A when we get to that stage.

I thank my noble friend the Minister for the way that he has engaged not just on this amendment but across the whole of the Financial Services Bill. Indeed, I thank the whole ministerial team and all Treasury officials for having numerous meetings with myself and other noble Lords. It has been the model of how to progress legislation through your Lordships’ House.

There is a very simple and, I hope, clear purpose at the heart of the amendments: to enable cashback without a purchase. As with so many other areas of our lives, Covid has had a dramatic impact on cash usage across the United Kingdom, which has been divergent across different nations, regions, socioeconomic groups and people with different protected characteristics. If cash is no longer king, to millions across the UK it is certainly still more than material. It is beholden on all of us to ensure that people have a right to rely on cash and that a network exists across the country where they can reasonably access it. ATM withdrawals have dropped by over 50% since 2019. We have to look to other resources, other things that we have across the country where individuals and small businesses can access cash. That is the purpose of my Amendment 37D.

Currently, it is possible to get cashback with a purchase and, under the Payment Services Regulations, it is not possible to get cashback without a purchase. This amendment would change that, enabling cashback without a purchase and taking it away from what would be considered a payment service under the PSR 2017. The amendment has wider implications, I hope, than just the ability to access cash. It speaks to well-being, social isolation and a real sense of community, and to using the resources that currently exist far more efficiently and effectively for the benefit of all. In 2019 there were 123 million cashback with purchase transactions. Clearly, there is huge potential for cashback without purchase if we pass the amendment this evening.

The amendment is drawn in a deliberately permissive way to enable innovation. For example, if a fintech wanted to offer a service across a number of locations on behalf of those locations, the amendment would enable it to. Similarly, if a rural café wanted to offer cashback without a purchase on its own behalf, the amendment would enable it to.

We have seen such dramatic changes in the use of cash in recent years, heavily accelerated by the Covid crisis, yet cash still matters. If we do not act, the network that supports cash could disappear in a trice, or become inordinately expensive and leave millions of people without access to cash and, through that, to social inclusion, financial inclusion and an ability to play the part that they have a right to in our society.

Amendment 40A merely enables the regulation to come in two months after the passage of the Bill to give a reasonable period post passage.

I hope that Amendment 37D is clear and that it achieves what it seeks to: enabling cashback without a transaction for millions across the country. I believe it is good for individuals, financial inclusion, business and the high street. Cashback without a transaction could enable part of our Covid build back. I beg to move.

[Lord Hunt of Wirral (Con)]

My Lords, I again draw attention to my interests as set out in the register, particularly as an independent non-executive director of LINK.

In speaking to an earlier amendment, I touched on the challenges of financial exclusion. The problem is complex and the answer, in so far as there is one, is never going to be simple. However, I congratulate my noble friend Lord Holmes of Richmond, particularly on his vision in seeing a way to at least meet the problem that he so clearly set out. I welcome word that the Government propose to act along the lines set out in this amendment and the subsequent one to help create greater flexibility in access to cash. Of course we all accept that financial services require regulation, but that regulation should always be proportionate, not stifling.

In some respects we have been fortunate in the past year. Not only have food supplies been maintained, but our digital infrastructure held up remarkably well, despite the increased demands on it. Imagine if it had not—if the internet had crashed for a few days or our banking system had cracked and digital payments had failed. I believe there would then have been rather less talk of cash being a thing of the past.

The principal theme of recent months has been resilience, which demands diversity and innovation. The amendment, and my noble friend Lord Holmes of Richmond’s vision and thinking behind it, perfectly captures that.

For the foreseeable future, cash will continue to be a vital medium of exchange for millions of people. The viability of our system for providing access to cash is therefore a necessity, not a luxury. I pay tribute also to the foresight and leadership shown by my noble friend Lord True. These decisions demand innovation and flexibility, and the kind of thinking captured by my noble friend’s amendment will be vital. I know that everyone involved in the payment system will be very supportive.

[Baroness Kramer (LD)]

My Lords, on reading Amendment 37D I think I recognised some of the distinct phraseology to denote an expert hand in its drafting, so I am exceedingly hopeful that the noble Lord, Lord Holmes, has been effective in persuading the Government that this is language they can accept and live with.

Of course, I join in all the calls to make sure that access to cash remains. Despite Covid and all the pressures that have encouraged people to change to digital and electronic payments, 5 million people have stuck to cash, and those people deserve to be served as much as anyone else. Indeed, the point made by noble Lord, Lord Hunt, that digital systems can always go down and that you had better have a back-up, did not occur to me but strikes me as fundamentally important.

My concern is this: I hope the Government do not think this is all they need to do and that this is part of a broader programme of ensuring access to cash. I spoke to quite a number of the storekeepers in my local area. It is a mixed area, with a lot of wealthy and middle-class people but also many people living on a former council estate, now housing association. Among that range, quite a number of people, for a whole variety of reasons, still want to use cash—but I could not find a single shop that would be willing to do cashback without a purchase. In fact, they did not want to do cashback with a purchase in most instances, simply because they did not want to have the cash on the premises, especially at night. Frankly, because of all the various bank branch closures, it would be at least a 35 to 40-minute drive to get to a place where you could deposit the cash overnight. Then you would have to collect it in the morning, which of course would make no sense because most of the shops would be open before the bank was available to hand it over.