Access to Cash

Margaret Ferrier Excerpts

Wednesday 20th October 2021 Westminster Hall

[Ronnie Cowan (Inverclyde) (SNP)]

I congratulate the hon. Member for Pontypridd (Alex Davies-Jones) on bringing forward this debate.

Of course, most of us still want access to cash. For some, it is still their preferred method to manage their incomes and their outgoings; for many, it is still something they use—less frequently, but it is still required. I read with interest this morning on the BBC that:

“People are taking out more money when they visit ATMs, with the average amount climbing more than £10 to just under £80 in the last two years.”

My immediate thought was, “Cash is making a comeback,” but the next line said:

“But they’re using cash machines 40% less than before and withdrawing £44 a month less.”

I thought, “Is this because there are fewer ATMs? When people find one, are they taking out more money, so that they do not run out before they find another one that is working and is free to use?” However, Nick Quin, head of financial inclusion at LINK, has said:

“Covid has turbocharged the switch to digital”.

While cash usage is down in every constituency in the country, some have seen a 20% drop, while others have seen a drop of as much of 60% over the same time. Different parts of the UK are moving at different rates. It comes as no surprise that the most deprived areas of the country are likely to be using more cash than the wealthiest. Some 5 million people still rely on cash, and as we have heard, and 1 million people do not have a bank account. The average adult withdrew £1,500 in 2020. Cash will remain an important part of life for many people for a long time to come. That is reflected in the UK Government statement that they are

“preserving the long established, traditional services like cash that are integral to people’s lives.”

However, the reality is somewhat different. Access to cash is getting harder.

In my constituency of Inverclyde, the number of free-to-use ATMs has dropped from 87 to 68 in three years. Across Scotland, there has been a 16% reduction, which is compounded by the loss of 400 bank and building society branches, a 34% reduction—which in truth leaves me none the wiser, because I do not know what we are doing as a society. Are we working towards a cashless society? Is it the UK Government’s belief that we are moving towards a cashless society? If so, what is their timescale?

I have a number of issues with a cashless society that have to be addressed. For it to work, we require technology that is robust, secure and available 24/7. Currently, it is not. Only last Saturday, mid-way through preparing a meal for friends, I realised that I was missing a key ingredient. I went to my local convenience store, and there on the front door it said, “Cash only”, with a sign on the ATM saying, “Out of order”. By good luck rather design, I had a fiver in my wallet, and my Nigella Lawson fish curry was a huge success. Cash saved my curry, but what if we had relied on entirely on cashless transactions? What if there was a serious situation, where somebody had to pay a bill to stop the electricity being cut off or needed to pay for a taxi, bus or train to get to a loved one in distress, and cash was a thing of the past and the technology had been compromised?

What I am looking for from the UK Government is a destination and a plan. I remember when we transitioned from old money to decimal. It was a perfectly natural thing for me—as a very young child—but I had to try to explain to my gran, who was used to 12 pence to shilling and 20 shillings to the pound, that, from 240 pennies in a pound, there was now going to be 100. “Where’s my other 140 pennies?” She was baffled by this. To handle these concerns, there was a UK-wide advertising campaign to explain where we were going, what it would mean and how we would get there. If people’s fears are to be allayed and those that require cash are not left behind in a two-tier system, we need to look at a hybrid system that accommodates cash and electronic transfers. To make it work we need a strategy that encompasses a network of ATMs on the high street and in convenience stores with post office services and bank counter services. We need cash without purchase and banking hubs that serve our communities.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Will the hon. Gentleman give way?

[Ronnie Cowan]

I am sorry, but I do not have time. Most importantly, the roles of each part of the system need to be clearly defined so that they complement each other, and when technology fails there must be a safety net to ensure that people can still top up their meters, purchase food and access public transport.

--- Later in debate ---

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I begin by thanking the hon. Member for Pontypridd (Alex Davies-Jones) for bringing this debate forward. I share her sincere and passionately held views on the issue; I and many other Members have participated in access to cash debates on umpteen occasions. Despite the huge consensus on what we need to do and what the problems are, I do not see much change, but we all agree that we need direct Government intervention to halt the decline of cash and to protect access to cash for our communities. I echo the words of the hon. Member for Blackpool North and Cleveleys (Paul Maynard): we need to just “get on with it”.

The access to cash Bill will be an important piece of legislation, but we need to see it. Covid has placed our cash infrastructure in an even more precarious situation. We need clear protections for the future of cash payments which, as we have heard, are so important to so many people, including those who simply do not have the option to pay by card and those who simply want to pay by cash for budgeting or other reasons. As my hon. Friend the Member for Inverclyde (Ronnie Cowan) reminded us, more than 5 million people still rely on cash, and that must not be forgotten. Cash transactions are very important for many people, and will remain so for considerable time to come. We have heard as much from every single Member who has spoken today.

Alongside that is the loss of free-to-use ATM cash withdrawals. We know that withdrawals from cash machines dropped significantly at the height of the covid pandemic. My fear, which I know is shared by Members around the Chamber, is that that will feed further closures of free cash machines across our communities. Increasingly, ATMs are charging for access to cash, and I am afraid that the situation is becoming normalised.

[Margaret Ferrier]

Will my hon. Friend give way?

[Patricia Gibson]

I just want to make this point. To help address the situation, we need to make sure that banks pay their fair share so that their customers can get free access to cash. By cutting the interchange fee, banks have saved £120 million, but the financial brunt is being borne by those who live in less affluent communities. That is a disgrace. The more affluent the area in which someone lives, the less likely that they will be required to access their own cash through an ATM. That is unjustifiable by whatever measure we care to use. It is another example of banks expecting others to pay for the so-called service that they want to provide. They do not properly renumerate post offices for taking over basic banking, which they have abandoned in so many of our communities, nor do they properly renumerate the ATM providers.

A pattern is emerging and the banks need to explain themselves. It seems to me that they are simply not fulfilling any social obligation or any duty of care either to those to whom they expect to provide a service or to those that provide that service on their behalf. If the access to cash Bill is to make any real difference, it must hold them to account for their responsibilities.

Of course, it is welcome that the Financial Conduct Authority is to oversee access to cash and provide analysis of what needs to be done where in order to support it. The issue has become more critical because banks have left gaps in our provision. As a result, our sub-postmasters need more financial support. Banks need to stop taking them for granted, given the essential role that they play in our communities, doing the job that banks are no longer interested in doing. It is worth remembering that throughout the pandemic, post offices continued to serve our communities and we relied on them then, as we do now. Many banks closed their doors during the pandemic. So much is expected of our post offices, but sub-postmasters are leaving the service because they are under so much financial pressure. Many are simply shutting up shop, as it is much more challenging to make a living now.

Sadly, post offices have been systematically run down over the years by successive Governments. I remember the 2000s, when the previous Labour Government stripped post offices of many of their functions. Then, in 2008 it was announced that 2,500 small and rural post offices would have to close, with Scotland disproportionately hit with 600 closures, six of which were in my constituency of North Ayrshire and Arran. Since then there have been so many bank closures that seven towns in my constituency—Kilbirnie, Kilwinning, West Kilbride, Stevenston, Ardrossan, Dalry and Beith—have no bank at all.

Now we have an access to cash crisis, with sub-postmasters expected to do so much of the heavy lifting without being properly paid to do so. The threats to our cash infrastructure, with the banks abandoning our towns, with sub-postmasters under intolerable financial pressure, with free access to cash being increasingly difficult to find and with many being increasingly locked out of paying by cash, mean that urgent action is needed if we are to protect our financial infrastructure and ensure that we have a society where financial inclusion matters.

The situation is critical, and the contents of the access to cash Bill will be the crossroads where the Government have a real opportunity to step in to do something to stop the decline. I think we can all agree on what needs to be done, but we need to start with the banks and their responsibility to communities and consumers. I look forward to the Minister’s telling us more today about the meaningful actions he expects the access to cash Bill to provide and when we can get sight of it. The future of our financial infrastructure depends on that Bill, so its content will determine the future of cash.

--- Later in debate ---

[The Economic Secretary to the Treasury (John Glen)]

What a pleasure it is to serve under your chairmanship, Mrs Miller. I commend the hon. Member for Pontypridd (Alex Davies-Jones) for her speech and for securing the debate. She set out many of the core issues and gave a very fair assessment of them, which was echoed by the 13 speeches from Back-Bench Members and three interventions that we have heard this afternoon.

I have been the Minister for this issue for quite a long time, and I very much feel the urgency in resolving it while I am still around. I appreciate having the opportunity to update hon. Members on the Government’s efforts to protect cash and, in particular, the recent consultation on legislation to do exactly that.

As a number of colleagues said, many people still rely on cash and the infrastructure that delivers it. It is changing rapidly, but we need to recognise that it is an imperative for everyone’s daily life. That is especially the case for more vulnerable groups, be it in Pontypridd or in my constituency of Salisbury. Just today, we have seen more bank branches close, including one in Amesbury in my constituency. My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) once again showed his encyclopedic understanding and depth of knowledge and powerfully expressed the urgency with which we must address the matter.

During the pandemic, there was evidence of access to cash being stretched. However, I am pleased that the Treasury was able to work closely with financial regulators, such as the FCA, and industry to maintain that access while protecting the safety of staff and customers. The vast majority of people were able to get hold of the cash they needed throughout the pandemic. Indeed, the share of the UK population who lost access to a source of cash within three miles during spring 2020 never exceeded 0.1%. In this conversation, I have always been very aware of the fact that—as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone), with whom I have met separately, said—we have to deal with a very wide range of constituency interests, with very urban constituencies and very sparsely populated constituencies. That guides me as I contemplate what next to bring forward from the Government’s perspective.

[Margaret Ferrier]

With the closure of many high-street bank branches, many communities are finding it hard to get essential access to physical money. A pilot post office bank hub in Cambuslang, in my constituency, provides face-to-face services for customers. Would the Minister agree that the scheme could be rolled out UK-wide?

[John Glen]

I am very grateful to the hon. Lady for raising that point. I visited her constituency last Thursday and saw that facility first hand, and I will say a little bit about it in a moment. It was a great example of banks coming together and working with the Post Office to find a practical solution—one that many colleagues in the Chamber have raised in previous debates.

We are in a strong position to build on our success in meeting the needs of local communities across the country over the long term. Access to cash across the UK remains extensive. Over the last year, the Financial Conduct Authority and the Payment Systems Regulator have undertaken important work to map cash access points across the UK. That has shown that access remains comprehensive, even though it is evolving. As of the first quarter of this year, more than 95% of the population were within two kilometres of a free cash withdrawal point. I would say to the hon. Member for Pontypridd that, as of August 2021, Pontypridd itself had 76 ATMs, 50 of which were free to use.

However, we are in no way complacent about access to cash. I recognise that we need a range of solutions. We understand that cash remains important for millions of people across the UK. That means that we have a responsibility to protect the cash system and ensure that it is sustainable. That means two things: being innovative in the provision of cash while ensuring that we maintain sufficient coverage.

The Government have already taken decisive action in a number of ways to support the widespread availability of cashback without a purchase from shops and other businesses, including legislative changes as part of the Financial Services Act 2021. That is a significant step change, and the industry is really on board with it. We have already seen the success of cashback without a purchase as part of the community access to cash pilots, which are trialling bespoke cash access solutions across a number of areas.

The hon. Member for Harrow West (Gareth Thomas) raised the issue of the role of credit unions. On my visit to Glasgow last week, I was pleased to meet with Glasgow Credit Union and discuss some of the legislative changes required to allow them to expand the provision of services. The notion of a bespoke solution in individual communities is very much uppermost in my mind as we move forward. It was great to hear how well received those pilots have been by the local community in Cambuslang, where I visited the post office bank hub pilot and saw at first hand the impact that innovative industry solutions can have. The hub is a post office counter service, and different bank representatives come there on different days. When a customer’s bank representative is not there, other representatives can also help them.

I am delighted by the industry’s announcement that, following the Government’s changes to the law, cashback without a purchase will be rolled out to thousands of shops over the coming months. When it comes to ATMs, LINK, which, as a number of hon. Members have mentioned, runs the UK’s largest ATM network, remains committed to protecting the broad geographic spread of free-to-use ATMs, and it is held to account against that commitment by the Payment Systems Regulator. The Government also continue to fully support the post office banking framework agreement, which allows 95% of business and 99% of personal banking customers to deposit cheques, check their balance and withdraw and deposit cash at the nation’s 11,500 post office branches. The Access to Banking standard and FCA guidance force the banks to look at their mitigation responsibilities to maintain face-to-face banking services in situations where branches close.

On top of that, the Government are doing more. As several hon. Members have mentioned this afternoon, we have been developing new legislation that will enable us to protect cash over the long term. The most recent step in that process was the consultation on proposed legislation, which closed less than a month ago, on 23 September. That consultation was designed with a simple principle in mind: finding that crucial balance between supporting the use of cash and embedding flexibility as the cash landscape continues to evolve.

At the most fundamental level, that has meant setting out proposals for new laws to ensure that people need to travel only reasonable distances to pay in or take out cash. Through our actions to date and these proposals, we seek to support the continued use of cash in people’s daily lives, including supporting local businesses in continuing to accept cash. The consultation also set out proposals on what sort of organisation should be within scope of legislation to ensure that industry, especially banks, continues to play a key role in supplying cash, be it through their own branches or through funding customer transactions at ATMs or post office counters.

It is crucial, of course, that any legislation is coupled with appropriate regulatory oversight, and that has been another important aspect of the consultation. We want regulators to have appropriate powers and responsibilities, but without imposing unnecessary burdens on businesses. We believe that the FCA is best placed to play the leading role in holding firms to account on access to cash, so that the needs of consumers and businesses are met.

The Government also intend the Payment Systems Regulator and the Bank of England to maintain their existing functions regarding retail cash. As I mentioned earlier, the co-ordinated actions by the FCA, PSR and the Bank of England on cash as part of the covid-19 response have shown that co-operation between the regulators at both strategic and operational levels works well.

For all that the Government are doing to preserve access to cash, it is also worth acknowledging that the trend away from the use of cash towards cards and other digital payments has been both significant and accelerating over the past 18 months. That brings with it many opportunities, such as the potential for cheaper and more tailored payments, as set out in the Government’s recent response to the payments landscape review call for evidence, which was running in parallel.

It is important that digital connectivity is in place to help individuals and businesses to seize those opportunities, as has been mentioned by many hon. Members this afternoon. That is just one of the reasons why the Government are striving to ensure that no one is left behind in the transition to digital. To improve digital connectivity, the Government’s £5 billion Project Gigabit is helping to deliver lightning-fast, reliable broadband, including in Wales and therefore in towns such as Pontypridd.

We are working with industry to target a minimum of 85% gigabit-capable coverage by 2025, and will seek to accelerate roll-out further to get as close to 100% as possible. Action is also being taken to improve mobile connectivity in rural areas, recognising the challenges of getting to that complete coverage. The Government are providing £510 million for the shared rural network, and by 2025 that will expand 4G mobile coverage to 95% of the UK.

Out of respect for the hon. Member for Pontypridd, I looked into what is happening in Wales. The shared rural network programme is helping to reduce partial mobile phone notspots in Wales, and in the South Wales Central area, where her constituency is located, 4G coverage from all four operators will increase from 82% to 90% by the end of the programme.

Our consultation on proposed legislation closed on 23 September and the Government will set out the next steps in due course. I hope hon. Members will understand that it was only three and a half to four weeks ago, but I acknowledge the urgency that has been expressed this afternoon. I take it to heart, and I recognise the determination to get this done as quickly as possible.

I also acknowledge the recognition by my right hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) of the imperative for banks to come forward with proposals. The Government are always open to constructive suggestions from the banks as to what they wish to do in the meantime, but I cannot say much more at this stage. What I will say is that the Government remain absolutely determined and committed to legislate to ensure that people have access to cash over the long term. In doing so, we need to strike a balance between, on the one hand, being open to innovation and, on the other, ensuring that people are not financially excluded by losing access to cash. That is what we will do.

I sincerely thank Members for their thoughtful and constructive advice and contributions, and I can assure them that I will continue to work with Members from across the House. I do not see this as a partisan matter at all. I will continue to hear from them and to work with them to come up with an enduring solution next year and beyond.