Bank Branch Closures

Debate between Mims Davies and David Lammy

Thursday 30th June 2016 Commons Chamber

[Mr David Lammy (Tottenham) (Lab)]

I congratulate my hon. Friend the Member for City of Chester (Christian Matheson) and the hon. Member for Wells (James Heappey) on securing this important debate and echo the concerns that have been raised. Looking at the evidence, it appears that the Government lack the political will to hold the banks’ feet to the fire. What happened when a review into banking culture was announced? It was quietly shelved a few months later. What happened when branches were closing down at a rate of almost two a day in rural communities and deprived areas across the UK, affecting local businesses, the elderly and the disabled? Very little indeed. And what is happening when banks renege on their promise to retain the last bank in town, meaning that 1,500 communities have lost all their banks? Absolutely nothing.

It does not strike me as fair that ordinary people are paying the price for the failure and mistakes of banking executives. Those ordinary people have been good to the banks. They have loyally paid in their savings month after month. They have taken out their mortgages with their bank. In the cases of Lloyds, Halifax, RBS and NatWest, they have bailed them out after the banks got themselves into trouble during the financial crisis. The banks have got themselves into trouble time and again, lurching from one scandal to the next, by aiding and abetting clients who want to avoid paying their taxes, fixing the LIBOR rate, money laundering, mis-selling PPI—the list goes on. Barclays, HSBC, Lloyds and RBS have been hit with fines of more than £55 billion since 2010, and that figure is set to rise to £75 billion by the end of next year, but who takes the hit? Their customers, whose views and needs are completely disregarded by the banks’ management teams.

It is not as though there is no evidence to tell the banks that their customers value their local branches and want them to remain. Research from the Competition and Markets Authority in April 2015 found that 63% of current account customers felt that having a convenient local branch was either “essential” or “very important”. Research conducted for TSB in June found that 69% of people believed it was important to have a bank branch close to where they lived. Just because more people are repaying small debts to friends or carrying out basic money management online or by using an app on their phone, that does not mean that branches are becoming redundant—far from it. The Social Market Foundation has found that, when it comes to big financial decisions such as taking out a loan or a mortgage, or seeking financial planning advice, the majority of consumers still use bank branches. In these troubled economic times, ordinary folk want to be able to go into their branch and get good advice so that they can properly plan their finances, but in towns, villages and cities across the country, that is soon going to be nigh on impossible. That is why this debate is so important.

Banks are disproportionately shutting up shop in lower income areas. Indeed, 90% of the 600 branch closures between April 2015 and April 2016 took place in areas where the median household income is below the average of £27,600 a year. Move Your Money has told me that, far from responding to demand pressures, the major UK banks are simply closing branches in poorer areas and opening or retaining them in more affluent ones. We are seeing the creation of a dual financial system in all but name, with one section for the wealthy and the middle classes, and another for those on low incomes.

The University of Nottingham has found that the least affluent third of the population has borne the brunt of two thirds of the total closures since 1995. Indeed, the rate of closures experienced in traditional manufacturing and inner-city areas is 3.5 times higher than in areas defined by academic researchers as middle England—mainly suburbs and small towns. It is therefore a cruel twist of fate that those who are most likely to be adversely affected by branch closures are the people living in those areas in which most closures are happening. Do we really want this country to become like some areas of the United States where those who are already deprived and poor are bereft of quality financial services and left to flounder? Again, that is why this debate is so important.

I know the situation to be true because earlier this year HSBC decided to close its branch on Tottenham High Road after almost 100 years. That followed the closure of a branch of Barclays the year before. In just two weeks’ time, that HSBC will close its doors for the last time. My constituents have been told to travel to Southgate if they want to access a branch, but the journey takes at least 45 minutes by bus. What is the impact of that closure on the elderly? What is the impact on the disabled, the vulnerable and local traders who rely on such branches? I am appalled that HSBC’s management did not feel it appropriate, or even a matter of common courtesy, to consult the local Member of Parliament, the local authority, councillors or the community before making that decision.

The situation is an outrage because my constituency is a target regeneration area for the Government and the Mayor. The Treasury has underwritten regeneration in Tottenham to the tune of £500 million. We have Spurs—the best premiership football club—building a new stadium in the constituency, yet the bank did not think that it was worth picking up the phone and calling the local authority leader or the local MP to say, “We are thinking about this. What do you think? What will the High Road look like in the months and years ahead?”

[Mims Davies (Eastleigh) (Con)]

The right hon. Gentleman is making an important speech about the value of banks to our communities. Barclays and HSBC have contacted me about closures in Hamble and Hedge End respectively. In my experience, there is no point hearing from them because they have already made up their mind. The situation is difficult and disappointing for my elderly, vulnerable and, perhaps, non-internet-savvy residents.

[Mr Lammy]

The hon. Lady makes an excellent point; that is also my experience.

I am talking about consultation with democratically elected people. Banks certainly ought to speak to the local authority leader before making a decision to say, “We’re thinking about it. What do you think the impact might be?” All of us, as professionals and Members of Parliament, are used to having private, confidential conversations every day of the week. We are sometimes able to say, in private, “Have you thought about this or that?” We can talk about the future economic context of a community of which the bank may not be aware. But there was none of that; I was presented with a fait accompli. Frankly, HSBC was patronising.

When I was a 16-year-old with what felt like very little prospects way back in the mid-1980s, I got a little job over the summer holidays in that local HSBC branch—it was then Midland Bank. I feel personally affronted that the bank where I saw my first prospects, and where I had put on a suit and thought that I might have serious job one day, is to be shut down without HSBC even thinking of consulting me. It meant a lot in the local community that I used to work in the bank, but HSBC was not interested. That is what big banking has come to in this country after all that we have paid in. I am frankly appalled by HSBC’s behaviour.

Given that the Government talk about being a friend of small business and the high street, it is important that they think carefully about this issue. In June 2014, research by YouGov for the British Bankers Association found that over 50% of people see a branch as important, with that figure rising to 68% for SME customers. The impact of branch closures goes far beyond local businesses having nowhere to go to get credit or to do their banking. The consequences are grave for the whole high street.

Local retailers are hit hard by the fact that customers go elsewhere when they do not have easy access to cash, which is still the preference for many, despite the rise of chip and pin and contactless payments. Cash still accounts for 46% of high street sales, with that figure rising to 75% in newsagents and convenience stores. On average, local ATMs inject some £16 per withdrawal directly into nearby stores, which amounts to £36 billion a year. More than a third of total high-street spending is contingent on the ready availability of cashpoints.

I was told by HSBC that one reason why it was closing my local branch was footfall on the high street. I pointed to the fact, which it had seemed not to realise, that we had had riots just a few years before and that we had found wonderful businesses that wanted to support the high street, not desert it, as it made its way back from the riots. Given that this bank was meant to be one of our national institutions, citing footfall as its reason was deeply painful to my constituents.

In tough times, people remember who their friends are. The banks should think carefully about their customer base and how their customers feel when banks desert a community that has already been through the mill and is trying to build its way back. I think of parts of this country that not so long ago had floods, for example. It takes a long time for a high street, a village or a town to get over a flood. Are the banks going to blame lack of footfall and say, “Things were a bit depressed for a few months so we just couldn’t stand by you. We’re disappearing”? Customers have stood by them, so it is about time that they grew some, as my mum would say, and stood by the community.