Financial Services and Markets Bill

Siobhain McDonagh Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Tulip Siddiq]

I had to think for a second about what the hon. Lady was referring to, but she is absolutely right. I agree with her on that, and I will address it a bit later in my speech.

The Opposition particularly welcome the inclusion in the new secondary objective of a focus on the medium-term and long-term growth of the UK economy. Financial services are already an important driver of growth in the UK, but much more can be done to support the sector to invest in companies in every sector and every region in the country, to deliver long-term growth and well-paid jobs in the real economy. I understand that clause 26 requires the PRA and FCA to report annually on the new secondary objective, but will the Minister confirm in his closing speech whether that will include being held to account specifically on the advancement of long-term growth in the real economy?

That brings me on to the provisions in clauses 27 to 46, which deal with accountability more broadly. The Bill facilitates an unprecedented transfer of responsibilities from retained EU law to the regulators. We recognise the need for a rethink of how the FCA and PRA are held accountable by democratically elected politicians and Governments. We particularly welcome clause 36, which will formalise and strengthen the role of the Treasury Committee in holding regulators to account. However, as my hon. Friends the Members for Wallasey (Dame Angela Eagle) and for Kingston upon Hull West and Hessle (Emma Hardy) said, we need to be able to scrutinise decisions taken by the Treasury, and I hope the Minister will elaborate on that. Any new powers allowing greater involvement of and policy input from Government in the FCA’s and PRA’s rule making process must be carefully balanced with the need to protect their regulatory independence. We will be scrutinising these provisions closely in the weeks ahead.

The UK’s reputation for regulatory independence is a key driver of our competitiveness on the world stage, as I am sure the Minister will agree. Equally important, however, is ensuring that the City has a clear direction of travel on post-Brexit reform. I was worried about that, because over the summer the now Prime Minister made a series of off-the-cuff policy announcements and people around her were spreading rumours, which left the sector in a state of uncertainty about her Government’s plans for this Bill. The Minister has today confirmed that the intervention powers, or so-called call-in powers, will be included in the Bill through an amendment. I am disappointed that the Government have decided to cause greater uncertainty in the City by introducing a significant change at this stage, and I hope he will reassure me that they will publish the details of these new powers as soon as possible. I would also be grateful if the Minister would confirm in his closing remarks whether the Government have plans to abolish the FCA and PRA. That would seem to undermine many of the provisions in the Bill.

I also wish to discuss the issue of access to cash and banking services, which some Members have spoken about. The Opposition broadly support the Bill, but we are concerned that there are some serious gaps in it as it stands. Of course, we strongly welcome clauses 47 and 48, which will finally, after years and years of Government delay, protect access to cash. The industry, and particularly the major banks, should be applauded for coming together to help protect cash services at the end of last year, in advance of this legislation being put on a statutory footing. But the Bill does nothing to protect essential face-to-face banking services, which the most vulnerable in our society depend on for financial advice and support.

On this Government’s watch almost 6,000 bank branches have closed since 2015, and the “Community Access to Cash Pilots” report found significant overlap between those reliant on cash, estimated at about 10 million people, and those who need in-person banking support. Those without the digital skills to bank online, people in rural areas with poor internet connection and the growing number of people who are unable to afford to pay for data or wi-fi as the cost of living crisis deepens are at risk of being left behind. Banking hubs or other models of community provision, such as banking kiosks, will need to be part of the solution. These are spaces where dedicated staff can provide vital face-to-face support for those who need it, and tackle digital exclusion by teaching people how to bank online.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Does my hon. Friend share my concern that although a great deal is offered by the hubs, they do not deliver? They certainly do not for those of us who live in cities, as people require the bank most days if they are dependent on cash, and they are just expected to get the bus.

[Tulip Siddiq]

I agree with my hon. Friend, and I have seen examples of that in my constituency, especially the parts where people are from lower socioeconomic backgrounds.

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[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I am furious to report the imminent loss of yet another bank branch in Mitcham town centre. The year before last it was Nationwide, last year it was Barclays and this time it is Halifax—a bank that pretends to consult its long-standing and loyal customers about its branch closure, but then refuses to attend my public meeting to hear the concerns of those customers in person. Contrary to its slogan, “It’s a people thing”, it seems that Halifax does not care at all what people think, at least if they live in Mitcham and are elderly, disabled or rely on face-to-face banking services.

Every day this week I have stood outside the branch, gathering customers’ views and listening to their concerns. Their opposition is overwhelming; this latest bank closure is yet another nail in the coffin of access to free cash, and I have the evidence to prove it. When Barclays Mitcham closed last year, one of a staggering 650 Barclays branches to disappear since 2015, we surveyed more than 500 residents outside the bank. An extraordinary 50% did not use online banking and were reliant on that branch. Many did not have access to the internet. Some did not trust it. Others, particularly the elderly, only used cash. Then there were those who relied on the help and support of the staff, who they could trust with their money.

I do not believe these views are unique to Mitcham. When high streets lose their banks, the digital divide prevents far too many people from turning online. Age UK highlights that one in five older people still rely on cash for everyday spending. But Barclays did not care. Despite having three years still to run on the lease, it closed the branch and swapped it for a bus—yes, really, a bus—that pulled up randomly outside the empty branch, on the off-chance that a customer was fortunate enough to be passing by and willing to queue in the rain. That sounds safe as houses.

“Do not fear,” they said. “There are other branches just a bus ride—or two—away, or your constituents could just use the post office for their basic banking needs.” That is the same post office whose doorway was too small for my disabled constituent to access with her wheelchair, the same post office that no longer has a free cash machine outside. Fortunately, we still had Halifax—well, until now. Its loss is the latest hammer blow to our high street. Does the Minister agree that Mitcham now makes a perfect location for a new shared banking hub?

We are told that a community can demand access to free ATMs, but that is not the experience on the ground. People in Pollards Hill have tried for years to get a free ATM. Residents literally have to pay for access to their cash—small amounts of money that they get on a daily basis and for which they are charged. The nearest post office had one installed, but now even that has gone, and a ridiculous clause in the new Co-op’s lease prevents a free ATM from opening because there is a paid-for machine further down the terrace. How can that possibly make sense?

I believe that the need for access to cash is growing. The cost of living crisis has seen the return of money jars, with households separating their cash and counting out their pennies to ensure they can make ends meet. Of course I accept that we are in a changing society and reliance on cash has changed for many, but those on the wrong side of the digital divide are simply being cut off from society, made to feel not part of the same world that we inhabit.

Take Mr Barley, chair of Mitcham’s British Legion branch. Throughout the lockdowns, he relied on his milkman for milk delivery and the rest, but, as hon. Members will have guessed, Milk & More is now going online too and such loyal, long-standing customers no longer get that service. I say to the Minister that the Mr Barleys of this world are treasured in our communities. Halifax Mitcham’s remaining open is not a silver bullet to solving the problems they face with the digital divide and access to cash, but if we are not careful, and everything from milk to money moves online, then they are at risk of simply being left behind.

Financial Services and Markets Bill (First sitting)

Siobhain McDonagh Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Gareth Davies]

Q Thank you. Sarah, how do you believe the secondary competitiveness objective might change your behaviour and your policy making?

Sarah Pritchard: From an FCA perspective, it is very much as Sheldon has said. It is important to say we support the Bill as it is currently framed. We think a secondary competitiveness objective can work alongside our primary statutory objectives. It will give us another lens through which to look at the policy work and the development of the regulatory agenda that we are taking forward. Back to the points raised previously on transparency and accountability, it will give us another method by which we will be reporting and considering our outcomes against. We will take that into account. We think it can work as a secondary objective.

On the various elements that make up competitiveness that have been touched on earlier, I think that innovation and ensuring that we can stay ahead of the game with the pace of development across the financial services markets is really important. You can see the financial markets infrastructure sandbox proposals contained within the Bill. There are proposals there on critical third parties as well, so you can already see on the face of the Bill in those particular areas a real desire to make sure that the UK can stay in lockstep or stay competitive as a country enabled through the way in which the financial services regulatory framework is developed going forward.

I think the agility is important. We often hear that regulators are too slow. Sometimes we hear that regulators are too fast in terms of putting out too many consultations. Clearly there is a balance there. We have shown ourselves able to act at speed through the Russia-Ukraine conflict and introduced new rules on side pockets to enable support in that context of war. We will need to maintain that flexibility to be agile when we need to, while retaining the checks and balances that are really important in terms of transparency and accountability.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Q The FCA announced in June that you would be strengthening the protection of access to banking services. Some might say that this was closing the stable door after the horse has bolted, given that 50% of branches in town centres have now closed. What powers does the FCA currently have to protect banking services, and why were you not doing that before?

Sheldon Mills: Thank you very much for the question. The first framing point to this question is to understand that banking services have and are changing, and there are many, many benefits of those changes. The move towards digitalisation of banking services provides a huge amount of support to many people who are vulnerable. My mother is deaf and the change to a digital means of banking services has transformed her life completely.

The starting point must be that we have to consider the variety of ways in which people can provide banking services. That said, we know that, locally, branches can be important for communities. It is not just branches. It is a point at which people can deposit money and take out money. You can have a variety of those. They can be branches or post offices. They can be what we are trying to encourage the industry to develop when they close branches.

[Siobhain McDonagh]

Q Sorry, but my question is: what powers do you have and what are you doing?

Sheldon Mills: I am coming to it. In the light of that, what we have sought to do as we have seen firms decide to close their branches in the face of changing to digitalisation—there is the cost of keeping branches, which are very underutilised—is ensure that they look very closely at the alternatives to those branches when they go through those closure plans. We have had branch closure guidance in place for almost a year now. We work very closely with all the largest lenders and institutions to monitor their branch closure activity and ensure that they are providing appropriate services to those who need them in those localities as they seek to close some of those branches.

In terms of access to cash, the majority of the population—99.7% of the UK population—is within 5 km of a free-access cashpoint. We welcome the Government’s proposals on access-to-cash legislation so that we can get greater powers to ensure certain aspects of access to cash.

[Siobhain McDonagh]

Q I am really pleased that your mother gets good access to banking services. Unfortunately, that does not extend to a lot of the people in my constituency who do not feel able to use online services, either because they do not have access to the internet or know how to use the internet or because they are frightened because they are worried about being scammed. As I understand the current rules, it is only when the last bank in town closes that there is there any consideration of banking hubs or other facilities. That is far too late for the vulnerable customers that my hon. Friend the Member for Kingston upon Hull West and Hessle referred to in her earlier question. What power does the FCA have to do something real to help those excluded customers, and what extra powers would you need in order to make that real?

Sheldon Mills: We are using our existing “treating customers fairly” principle in order to put pressure on banks to ensure that they are looking after those customers that you talk about, who are vulnerable, in those communities and providing them with alternatives to branches if they close. Our updated guidance, which is stronger, asks for those alternatives to be in place before they close that last branch in town. It also deals with partial closures and issues such as that. I have been out to many local communities in order to see the impact of branch closures, and I have been public in terms of saying to the banks that they need to pick up the pace in relation to the alternatives for those communities: banking hubs, mobile banking and other activity. We are working very closely with LINK, which is currently helping the banks with the banking hubs, and seeking to get them to pick up that pace.

[Siobhain McDonagh]

Q But you are not slowing the number of branch closures, and people are still experiencing these difficulties in Mitcham. Please: I would love you to come to Mitcham—

Sheldon Mills: I would be very happy to do so.

[Siobhain McDonagh]

And I will show you around. It is a great place. I will even buy you lunch in one of the cafés.

Sheldon Mills: I am sold—I will come.

[Siobhain McDonagh]

Q In the case of the Halifax, I could not even convince the Halifax to come to a public meeting to talk to people about their experiences. The banks are just carrying on in the way they have always carried on—with hope of some service tomorrow. We are told that the post office will be great, but what if the post office is not accessible? What if people are worried about accessing cash right in the middle of other people and fearful of not being able to hang on to their money? What if they are disabled and just cannot get into their post office branch? These are the things that are really happening, whatever the current regulations are.

Sheldon Mills: Yes, these are real, genuine issues for people and I do understand them. We have researched some of the ways in which people access cash but also branches. It is important that all the institutions—I will not mention individual institutions—should be willing to speak to their customers and their communities as they close branches, because that is the way to understand what alternatives they need to be providing to those services. We recently worked with a major provider and we got it to pause its branch closures while it made a significant assessment and researched the needs of the local community, and then it was able to provide for that, so we are proactive in relation to this. I would be very happy to come to Mitcham and understand what is going on there.

[Siobhain McDonagh]

Q Lovely. You will be very welcome; the people there would love to meet you. Finally—I crave your indulgence, Mr Sharma—I want to ask about access to cash. For most people’s constituents, access to cash is only any good if it is access to free cash withdrawal.

[Emma Hardy]

Yes.

[Siobhain McDonagh]

If people have to pay £1.99 every time they try to access £10 from a machine to keep them going for the week, that is a huge premium on being poor. In Pollards Hill in my constituency, we have only two pay-for machines, and that is what happens on a daily basis—people have to pay £1.99 for every bit of money that they get out. People take small amounts of money to try to control their budgets. We were delighted when the Co-op came to the parade, but it could not get free cash machines because its lease prevented it from having one.

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for this panel.

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[Siobhain McDonagh]

Can we just have a few words about free cash?

[The Chair]

No. That is the time allotted for the Committee to ask questions.

Sheldon Mills: We would be very happy to write to you.

Financial Services and Markets Bill (Second sitting)

Siobhain McDonagh Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Sally-Ann Hart]

Q So you are not necessarily specifying a mileage.

Paddy Greene: We need to acknowledge that if, let’s say, you came down to a certain kilometre base that might sound reasonable in broad terms, it would under-serve some communities, so we need to be alive to that.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Q I thank Which? for all the work it has done about the imperative of free access to cash. I do not think any of us are surprised that the Post Office announced that it had £3.45 billion taken out in cash in August, which is the highest figure since its records began. Does the Bill ensure that people will have free access to cash, or is there a need for an amendment to be very specific about that?

Paddy Greene: I think we need to be specific about the need for consumers to have free access to cash. I have concerns that the Bill could be interpreted in a way that undermines those objectives. We absolutely welcome the provision of cash legislation and I am very happy to see it here, but this is our opportunity to get it right. Consumers need confidence that they will have free access.

[Emma Hardy]

Q I will be super quick. Do you think we need to see regulation of buy now, pay later firms?

Paddy Greene: Absolutely. We need to see it and we need to see it very quickly. We are in the situation where a lot of people use such buy now, pay later. I acknowledge that a lot of people use it safely, but a growing number of people are struggling with repayments. It gets to the point where people presume that it is regulated. It is an unfortunate reality that lots of consumers do not really differentiate between types of financial products when it comes to the payments and credits that they use, but we need to have buy now, pay later regulated and we need to have it regulated very quickly.

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[Dr James Davies (Vale of Clwyd) (Con)]

Q Many thanks for all your work in this area. I am interested in your thoughts on the increasing number of businesses refusing to accept cash. If that becomes commonplace and we become a virtually cashless society, will that not pose a risk for SMEs, if payment transaction costs rise, for example?

Natalie Ceeney: That is a really important question. When we look at some other countries, that has been the real crisis point. In Sweden, for example, the crisis point hit when shops stopped taking cash. If you are dependent on cash, there is no point having it if you cannot spend it.

I have spoken to literally hundreds of small businesses. The main reason that they do not take cash is not hygiene or anything like it; it is the ability to bank cash. If you go back three or four years, a small retailer used to shut up for 10 minutes at lunch time, pop over the road, deposit their cash in the bank and pop back. What they might now have to do, with the local bank 20 miles away and open between 10 and 3, is to shut up for an hour in the peak of the day, drive, park, queue and drive back. No wonder many shops say, “You know what? It is only 20% of my customers. I will go cashless.”

That is why in this legislation, deposit facilities are just as important as cash access. It is an area where the industry is behind. You can have deposit-taking ATMs—they are just as well tested as ATMs that issue cash. We do not yet have any mechanism in the UK for third parties to use them. It is something that I am working with the industry to solve, but this legislation is utterly critical. If small businesses can deposit cash easily, most will keep taking it.

[Siobhain McDonagh]

Q To both our witnesses, do you agree that there is a societal duty for the Government to ensure that the most vulnerable people in our society have free access to cash?

Natalie Ceeney: Yes, I do. The one thing I would say as you consider the drafting is that the Bill covers small businesses as well as consumers. Small businesses, typically, via their contracts, pay for their cash access. As you draft amendments, limiting that to retail consumers is going to be important. I do not think that there is any appetite for banks to want to charge for cash access, so I do not think that you would get any opposition to putting that in the legislation or empowering the FCA to take it through to regulation.

Martin Coppack: There is absolutely a need for this. Bearing in mind today’s audience, I did a bit of research and looked at the poverty premium at a constituency level for different MPs. It might surprise you to know that a typical parliamentary constituency loses £4.5 million a year in terms of the poverty premium. That is money that could be going into your constituents’ pockets. We have linked that to research that shows that the poorer you are, the more likely you are to spend that locally. The reason I am talking about this point right now, as well as it costing £2.8 billion across Great Britain, is that the poverty premium very much exists for people trying to access cash.

If you lived in, let us say, the Conservative constituency of Vale of Clwyd, people are paying about £40,000 to access their own money. If, for example, you were in Kingston upon Hull West and Hessle, you would be paying around £70,000 to access your own money. Say you lived in the SNP constituency of West Dunbartonshire —I cannot say it; I should have practised that before I came—people are paying £64,700 in that constituency to get access to their own money. I hope that is a good representation of why we need to tackle it.

[Craig Tracey]

Q Martin, as you alluded to, you gave some powerful evidence to our all-party parliamentary group last year on the poverty premium, which I think was off the back of a report from the FCA that said there were about 27 million people with characteristics of vulnerability. I think most of those were around buying insurance. In the last 12 months, has any progress been made? One of the areas we have talked about as much as cash machines is, when looking at things like insurance, the digital disadvantage that is a problem. There seems to be an ever-growing push to push people online. You are a former teacher, but I am a former insurance broker, and I think that the benefits of advice, in particular to vulnerable customers, should not be understated. What are you seeing now?

Martin Coppack: Unfortunately, not a lot of progress has been made. We have had numerous conversations with the Treasury, signposting to the FCA. Some days we have the conversation about how we do not have enough data, which we cannot get hold of—firms have their own data on insurance, how it is distributed and how the calculations are made—so, unfortunately, nothing can be taken forward.

We have now done a second piece of work. We did one with the Institute and Faculty of Actuaries, which agreed that there is a real positive premium issue. We are doing a second report with the Social Market Foundation, calling again for the FCA to collect the data and for the Treasury to understand how far prices are a market problem, so regulation can tackle it, or how far it is a social policy problem, so social policy makers can tackle it. However, we cannot get further than that. I have probably been having this conversation for the past 10 years. In our world, as an ex-regulator, if it does not get measured, it will not get done.

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[Peter Grant]

Q According to the Financial Conduct Authority website, in just over the last year, eight credit unions have gone into administration; only one did in the preceding three years. Is there something about the current financial services sector, or about the credit union model, that means there is a systemic problem? Or is it simply that, if we move from having a small number of big players to a large number of small players, inevitably we will lose some of the small players?

Robert Kelly: We recognise the difficulties in terms of reputational risk, and the challenges that failure brings. We are working tirelessly with our member base. We are a very broad church. Our members have asset sizes from a couple of hundred thousand to well over £220 million, and everything in between. We recognise that failure is difficult and painful. We are working extremely hard behind the scenes collaboratively with the BSA and other interested parties. Credit unions that fail often have a couple of items in common. There tends to be a lack of good governance, and sometimes there is key person risk. Covid has exacerbated some of that, just in terms of volunteer burnout and sustainability challenges, demand for lending and bad debts. We have been impacted by insolvency and mis-selling in many cases as well. We have identified that it can be difficult to maintain a smaller asset range using a volunteer base—not always, but sometimes. We are working tirelessly behind the scenes to make sure that credit unions look at their business plans and numbers on a regular basis, and take the tough decisions.

Let me bring that to life, very quickly. The original development of the fiscal principles was in 2002. In that year, we had 698 credit unions in GB; we are now down to fewer than 250. Most of that reduction in numbers came through consolidation and mergers or acquisitions. Some of it has been failure. We certainly believe that the number will continue to come down. It would be appropriate to find solutions that allow credit unions to come together as part of mergers or acquisitions and maintain services in their local communities.

[Siobhain McDonagh]

Q Would both our witnesses support giving the FCA and the PRA an explicit remit to report on how they have considered specific business models—including credit unions, building societies and mutual and co-operative regional banks—to ensure that they are given parity of esteem with other providers? If so, how would that support your sector?

Robin Fieth: That is a great question; thank you very much. We are already part of the way there with the PRA. It has had a secondary competition objective since the 2014 Act, and it was subsequently enhanced at the BSA’s behest. Every time it consults, it has an obligation and a requirement to determine whether there are specific aspects that disproportionately affect the mutual sector, and that has been welcome. We have seen a real change in the PRA’s approach to the financial mutuals since the financial crisis, and it has been largely positive.

There is a very important question as far as the FCA is concerned. We saw it last year with the proposed demutualisation of LV. It was apparent that the FCA was entirely agnostic on the business model, in terms of their competition objective and the good competition that achieves better customer outcomes on the conduct side. There is certainly a case for the FCA to consider that far more closely. I am always very careful when we talk about conduct outcomes with the FCA because, as a consumer, you should not have a different outcome, but you might experience a different journey. There are some nuances in there. As to how it best achieves that without adding ever more reports and burdens, that is in its annual reports, which are obviously open to examination and scrutiny. In the regulator’s annual reports, it should report back on that; that would be the most straightforward way to achieve that.

Robert Kelly: Thank you again for the question. I echo Robin’s comments, but I will try not to duplicate them. Credit unions have an ongoing consultation with the PRA on future supervision and the regulatory environment. We have a long track record of working in tandem with the PRA, and there is a move towards making sure that the supervision model is in tandem with the legislative reform agenda, which seems eminently sensible. It also allows us to take cognisance of the fact that there are many more larger, asset-based credit unions than there were five or 10 years ago—we have to factor in whether that comes through consolidation, or just through business growth—which is hugely beneficial for all parties.

In terms of the FCA, obviously the credit union sector is dual-regulated. We have a relationship from the conduct side. It will be interesting to see how that approach develops. Again, I would echo Robin’s view: the FCA has such a broad remit, in terms of the firms that it looks after, and we are always championing the cause of proportionality. Consumer duties are an example of where we have to work in collaboration with all relevant stakeholders and interested parties to make sure that the good consumer outcomes that credit unions provide can be evidenced, and that we can go on that journey. There are live examples of those on both sides of the regulatory environment taking steps to be innovative and to future-proof the business development that we expect to see through this legislative programme. That is to be welcomed, but we are on a journey, and we are not yet at the end.

[The Chair]

Order. I am afraid that brings us to the end of the allotted time for this panel. On behalf of the Committee, I thank our witnesses.

Examination of Witness

Mike Haley gave evidence.

Financial Services and Markets Bill (Sixth sitting)

Siobhain McDonagh Excerpts

Committee stage
Thursday 27th October 2022 Public Bill Committees

[Dame Angela Eagle]

I agree with my hon. Friend.

I will wrap up. Given that this is a systemic issue, a “have regard” is the best way of dealing with it. I hope that the Minister will think carefully about that and about how it might help us arrest the dynamic that is taking financial services away from people on modest incomes, and making it less and less profitable for the industry to serve them, leaving them much diminished in their attempts to engage appropriately in our society in ways that many people take for granted, such as by having a credit card and bank account, or being able to conduct electronic cash transfers and so forth.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I rise to support my hon. Friend the Member for Kingston upon Hull West and Hessle. Like her, I am on the Treasury Committee, and I have to say to this Committee: please pass the amendment, so she can stop talking about it in our meetings! [Laughter.] To be fair to her, it is something that she repeats and that bears repeating, because I fear that if the FCA is not responsible for having regard to financial inclusion, the responsibility continues to sit with us as MPs. Who became aware that closing bank branches in town centres was getting to be a problem? Who was concerned about access to ATMs, especially free ATMs? It was MPs, through their constituents raising the issue with us. This is a cross-party effort. It is not the sole responsibility or the sole campaign issue of one side of the House.

More and more of our hard-working, respectable constituents are being excluded from financial products. They desperately want to insure their cars, but if they pay their car insurance monthly, they pay more. They desperately want to contribute to their pensions and life insurance policies to give comfort to their families. They want to do all those things, but an increasing proportion of them are being excluded from those products. If the FCA had regard to how the issue affects an ever growing part of our society, we would at least have a different way of looking at it.

An issue that I know is close to your heart, Dame Maria, is women’s exclusion from many financial products, given the nature of their work, including part-time work and periods off work for raising children. In the end, the taxpayer picks up the bill if those products are not available. It is in the interests of all of us—our constituents and our parties—to support the amendment in the name of my hon. Friend the Member for Kingston upon Hull West and Hessle.

[Tulip Siddiq]

When I was first elected, I was told by another MP here that I should pick an issue, stick to it and talk about it constantly. I pay tribute to my hon. Friend the Member for Kingston upon Hull West and Hessle for following that advice to a tee. I follow in the steps of my hon. Friends the Members for Kingston upon Hull West and Hessle, for Wallasey and for Mitcham and Morden, who spoke about financial inclusion and how it affects us all. Later, we will debate essential face-to-face banking services. For now, I want to focus on the poverty premium, which my hon. Friend the Member for Mitcham and Morden mentioned: the extra costs that poorer people have to pay for essential services such as insurance, loans or credit cards.

We believe that everyone should have access to financial services—whether it is savings schemes or insurance—when they need them, regardless of their income and circumstances. If the Government are serious about building a strong future for our financial services outside the EU, they should recognise that the Bill is an opportunity to rethink how financial resilience, inclusion and wellbeing are tackled in the UK.

We support amendment 1 and new clauses 2 and 3, which would give the FCA a new cross-cutting “must have regard” to financial inclusion measure as part of its regulatory framework. As the Minister knows, that would mean that the FCA would have to consider financial inclusion across all its activities and report on its progress.

In our evidence session, Fair by Design talked about the higher costs that poorer people have to pay for insurance products. Research from the Social Market Foundation, with which the Minister will be familiar, has shown that those who are unable to pay for their car insurance in annual instalments face an average extra cost of £160. Surely the Minister agrees that that is unjust, and that regulation must play a role in tackling the poverty premium. If he accepts that principle, what is the argument against introducing a new “have regard” provision to empower the FCA to monitor how well financial services are meeting the needs of low-income consumers? For example, a “must have regard” for financial inclusion could allow the regulator to review practices such as insurers charging more to customers who pay for their insurance in monthly instalments.

Does the Minister recognise that exclusion from financial services is a growing problem in the UK? If he rejects the arguments for a “have regard”, what solution does he propose instead? It is something we all see in our casework as constituency MPs.

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[Andrew Griffith]

I thank my hon. Friend for that intervention. He put it far better than I did, bringing to bear his personal experience, but that was precisely the point that I was making.

[Siobhain McDonagh]

Does the Minister agree, though, that unless we know what is happening and somebody keeps the figures, there can be unintended consequences? Martin Coppack from Fair by Design made the point that he has been trying to get this thing done for years and what he has found is that when he goes to the internal Treasury committee that considers financial exclusion, it says, “It’s not our job to keep the numbers. Go to the FCA.” The FCA says, “It’s not our job to keep the numbers. Let’s go back to the Treasury.” Surely it needs to be somebody’s responsibility, so that we understand and know the direction of travel.

[Andrew Griffith]

Once again, the Government will not oppose those points for the sake of opposing them. I would like to take this matter away. Powerful arguments have been made and the FCA has made its contention. I think it is entirely appropriate that the Government consider the matter further.

Financial Services and Markets Bill (Seventh sitting)

Siobhain McDonagh Excerpts

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[Shaun Bailey (West Bromwich West) (Con)]

It is a pleasure to see you in the Chair, Mr Sharma—

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I apologise to the hon. Member; I am getting my procedure a bit mixed up, Mr Sharma, so I wonder whether you could clarify something for me. I have amendments 16, 17 and 18, on the issue of free access to cash. When will it be convenient for me to come in?

[The Chair]

They are in this group, so you may speak to them in this debate.

--- Later in debate ---

I agree with the basis for and philosophy behind the amendments. I hope that my hon. Friend the Minister and the hon. Member for West Dunbartonshire will continue the dialogue that appears to have started today. We have some important issues to address in this part of the Bill.

[Siobhain McDonagh]

It is a wonderful moment when there is unity on both sides of the Committee. SNP and Conservative Members, as well as—I hope—my Labour colleagues, are coming together to ask the Government not just for access to cash, but for free access to cash. I believe that much of the Bill arises as a direct result of Members of Parliament doing our constituency work and understanding our constituents’ concerns.

[Dame Angela Eagle (Wallasey) (Lab)]

My hon. Friend’s amendments are an extremely important part of the debate, and I hope that the Government accept them. I should point out that when I sat on the Treasury Committee several iterations ago, we held an inquiry about free access to cash. We got agreement that all machines that charge for withdrawals should say so up front rather than right at the end. Although that transformed some of the problems, we are now discussing access to cash itself. It is funny how these things evolve but the issues remain the same.

[Siobhain McDonagh]

I thank my hon. Friend, who I understand is currently serving as the interim Chair of the Treasury Committee.

[Dame Angela Eagle]

For at least another week!

[Siobhain McDonagh]

My amendments 16, 17 and 18, together with new clauses 10, 11 and 12, address access to free cash, which is indisputably important in our society. Ten per cent. of UK adults—5.4 million people—continue to rely on cash to a great or very great or extent in their daily lives. One in five people says that they would struggle to cope in a cashless society, and that struggle would disproportionately affect those on lower incomes, the elderly and people with physical or mental health difficulties.

Without Government intervention, we are losing free access to cash in our society. In my constituency, the number of free-to-use ATMs has declined by 36% in the last five years, while the number of pay-to-use ATMs has increased by an extraordinary 22%—there is money to be made somewhere. The problem is not confined to Mitcham and Morden: since 2015, the UK has lost more than half its branch network—5,003 branches—at a terrifying rate of 54 branches each and every month.

Through my amendments, I wish to draw the Committee’s attention to the notable decline in the provision of free-to-use ATMs. Since August 2018, the UK has lost 12,599 free-to-use ATMs—a decrease of nearly 24%. Meanwhile, almost a quarter of ATMs now charge people for access to their own cash. It is no wonder that more than half of consumers experienced one or more issues accessing cash at a bank branch in the past year.

Who are the losers in this cashless society? The access to cash review unsurprisingly revealed that those earning less than £10,000 per year were 14 times more likely to be dependent on cash than those earning more than £30,000 per year, and yet they are the residents of the areas where free access to cash is hard to come by.

Take Pollards Hill in my constituency, where a ridiculous clause in the lease prevents the new Co-op from opening a free-to-use ATM because of two paid-for cash machines further down the row of shops. Residents are taking out small sums of money in order to control their budgets, some of them at just £10 a time, but they are charged £2 to take that out—a 20% charge for every single payment. They literally have to pay for access to their cash. Surely the legislation must be tightened to avoid imposing additional costs such as that on the most hard-pressed.

I believe that the need for access to cash is growing. Age UK highlights that one in five older people still relies on cash for everyday spending. The cost of living crisis has seen households reliant on cash counting out the pennies to ensure that they can make ends meet—it is no wonder that in August, the Post Office handled its highest total of cash ever. The evidence is overwhelming and I believe that there should be a societal duty on the Government to ensure that the most vulnerable people in our society have free access to cash and are not left behind.

It is not just me who has such concerns. The hon. Member for Vale of Clwyd (Dr Davies), now the Under-Secretary of State for Wales, stated on Second Reading that he hoped the Government would commit to protecting free cash withdrawals and deposits, presumably in light of Prestatyn losing TSB, Barclays, HSBC, NatWest and Royal Bank of Scotland in recent years, initially leaving the town’s high street without a single bank or cash machine despite being a major regional shopping centre.

On 19 April, the hon. Member for Beaconsfield tweeted after the announcement of bank branch closures in her constituency that she would take up the issue in Westminster, describing crisis talks with the banks on access to cash on high streets everywhere as essential. I am sure she agrees that this is the moment to vote where her voice was.

The hon. Member for Havant has seen at first hand how damaging the removal of access-to-cash provision has been for his most vulnerable constituents, having launched campaigns against TSB, NatWest, Barclays and HSBC in recent years, and having raised his concerns with HSBC about the potential impact on the elderly, who might not be able to access online banking and are reliant on face-to-face services. The hon. Member for Orpington has seen Nationwide, Santander and Barclays close in Petts Wood. He pledged to hold the latter to account in support of those residents who do not use mobile or online banking. Well done to that Member!

The hon. Member for Grantham and Stamford, in advance of the closure of the HSBC branch in Bourne, shared concerns with his constituents about the impact on his elderly constituents whom he said relied on the bank as a vital service in the town centre.

[Gareth Davies (Grantham and Stamford) (Con)]

The hon. Lady is making a fantastic speech—let me say that straight out of the gate—but may I clarify that her proposed access-to-cash solution is for the Treasury to make an intervention on the regulator?

[Siobhain McDonagh]

I do not believe that the regulator, the FCA, will force through free access to cash unless we legislate for that. As Members, we are responsible for that. I suppose I am trying to say that hon. Members are doing their job excellently by highlighting concerns in their constituencies. Even though we have been through a very rough time in politics and a lot of our constituents are unhappy about the turbulent times we have entered, many of them still have faith in democracy, party politics and our system because Members do that sort of work. I believe that we need to follow through when we are given the power to do so.

I have more. The point was even more strongly expressed by the hon. Member for West Bromwich West, who made a powerful speech. Following HSBC’s decision to close its branch in Wednesbury, he gave this message to his constituents:

“The argument of go to West Brom is not good enough! I am determined to fight this”—

good on him!

The hon. Member for North Warwickshire described the impact on local residents as “obvious” when the Lloyds Bank branch closed, leaving Coleshill High Street without a bank branch. As an MP for a rural constituency, the hon. Member for Hastings and Rye detailed her concerns to our witnesses last week about her constituency being able to access cash free, and about the distance her residents would have to travel otherwise.

I do not doubt that my constituency neighbour, the hon. Member for Wimbledon, shares my concern about the loss of cash machines and bank branches in Morden town centre, which we share. One of the only remaining free-to-use ATMs is hidden in a Cashino—an arcade. That is extraordinary.

Government Members need not worry: the new Chancellor shares their view. He was pictured in the Alton Herald just last November celebrating the arrival of a new free-to-use cash machine in his constituency. I say to the Minister: do not worry. If these amendments pass, the Chancellor is right behind you.

Given what appears to be an overwhelming consensus on the issue, I hope Members on both sides of the Committee acknowledge that the Bill needs to be amended to ensure not only that there is access to cash but that there is free access to cash. They will be lauded in articles in their local newspapers and posts on Twitter and their social media for passing these amendments.

[Emma Hardy]

It is an absolute pleasure to follow my hon. Friend the Member for Mitcham and Morden, who is just awesome. Is awesome a parliamentary word? It should be. On a personal level, let me say how much I enjoy being on the Treasury Committee with such incredible Labour women. It is brilliant—inspiring.

To follow on from a couple of points that my hon. Friend made, I hope the Minister’s response will touch on the baseline geographical distances between free cash points. It frustrates me immensely that in one of the poorest estates in my constituency, the ATM charges £1.50 every time people use it. We would like some details about the geographical distances between the places where people can access free cash.

We should also look at why businesses do not take cash. As my hon. Friend said during the evidence sessions, it is often because there is nowhere for them to deposit it. If we are to make access to cash free, which I completely support, we should also help businesses to take cash. There is no point having free cash if it cannot be used. Bank or other branches should accept cash, and we should look at the geographical distances.

I got a bit frustrated when banks were closing branches in my constituency, because they said, “Well, the other one is only one-point-however-many miles away, so it’s fine.” I said, “It is not easy for people to get to.” There is sometimes an assumption that everyone is able to drive and has the mobility to go around and find a free cash machine, but that is not always possible. Can we look at geographical distances, at businesses accepting cash and at ensuring branches accept cash so that businesses can pay it in? My hon. Friend made a powerful speech on cash access and the principle that people’s access to their own money should be free.

--- Later in debate ---

[Andrew Griffith]

I will speak first to clause 47, before turning to the many amendments and new clauses proposed by hon. Members.

Although the transition towards digital payments brings many opportunities, the Government’s view is that cash remains an essential payment mechanism for many, particularly those in vulnerable groups. I am particularly familiar with the work of Age UK in this respect. Protecting access to cash for those who rely on it is a priority for the Government, and clause 47 delivers on that.

The hon. Member for Mitcham and Morden highlighted not just her own concerns about the issue but, rather thoughtfully, those of all hon. Members, to which I should add mine as well.

[Siobhain McDonagh]

I thank my brilliant researcher, Dan Ashcroft, for finding the great comments of all the Conservative Members. It was harder to find anything from the Minister, so it is good to find out what he believes about free access to cash.

[Andrew Griffith]

As part of the research for this debate, I looked at the prevalence of free-to-use ATMs in the constituencies of members of the Committee. My quite rural constituency is somewhat bereft compared with the embarrassment of riches, surprisingly, in the constituency of the hon. Member for Kingston upon Hull West and Hessle, which has a staggering 120 free-to-use ATMs, reportedly. That puts many of us to shame.

--- Later in debate ---

[The Chair]

The advice is that if you withdraw your amendment, I will take one of the three amendments from the hon. Member for Mitcham and Morden.

[Siobhain McDonagh]

Just to clarify, Chair, will you take 16, 17 or 18, or will you take the whole bunch?

[The Chair]

You choose one of those three, and I will take it if the hon. Gentleman decides not to push his amendment to a Division.

--- Later in debate ---

Division 5

Ayes: 6

---

Labour: 5
Scottish National Party: 1

Noes: 9

---

Conservative: 9

[Siobhain McDonagh]

I beg to move amendment 19, in schedule 8, in page 154, line 12, at end insert—

“(2A) Before making a determination under subsection (2), the FCA must publish how it intends to define and assess the reasonable nature and extent of provision when making the determination.”

[The Chair]

With this it will be convenient to discuss the following:

Amendment 21, in schedule 8, page 154, line 32, at end insert—

“(7) In carrying out its functions for the purposes of section (1) the FCA may put in place arrangements for the purposes of ensuring that members of the public, elected officials, community groups, local authorities, councils, and other local persons the FCA considers may have an interest, can request a review of their local community’s access to cash needs.”

Amendment 20, in schedule 8, page 154, line 32, at end insert—

“(8) Upon making a determination of local deficiency in the course of carrying out its functions under subsections (1) to (7), the FCA must—

(a) make provision for the publication of this assessment, and

(b) outline steps to be taken by relevant parties to address such deficiency.”

That schedule 8 be the Eighth schedule to the Bill.

[Siobhain McDonagh]

I rise to support my amendments 19, 20 and 21, which are grounded in transparency and evidence, requiring the Financial Conduct Authority to collect and publish relevant data related to access to cash. Examples include enabling public bodies to request a review of the local community’s access to cash needs or to publish how they intend to define and assess the reasonable nature and extent of provision when meeting a determination of access to cash; making provision for the publication of that assessment; and outlining steps to be taken by relevant parties to address such a deficiency.

Currently, under the voluntary agreements put in place by the Cash Action Group to preserve access to cash, individuals or community groups can request a review of their access to cash where they consider it to be inadequate. Where unmet needs are identified, LINK can recommend the installation of a new cash access point. I must say that it is doing precisely that in my constituency, in Pollards Hill, so I am grateful to LINK and the Cash Action Group for their progress.

The amendments call for a similar ability for individuals or communities to request a review of local cash provision, irrespective of whether baseline geographic distances set in the Treasury’s policy statement are met. I argue that that should be enshrined in the Bill to give consumers confidence that their concerns in their local areas will be considered by the regulator. Whether for transparency, fairness or consumer confidence, it is vital that the legislation compels the FCA to publish both the criteria that will apply when determining whether a cash access point is required in a community and the assessment of a local community’s access to cash.

I hope that chimes with commitments made by the hon. Member for Vale of Clwyd on Second Reading, when he argued that assessments of the needs of communities should be transparently published and that there should be a formal process of appeal. Surely such an appeal is impossible unless the data is collected, understood and available. I hope that this uncontroversial call will have the support of hon. Members as we seek to strengthen access to cash for communities and individuals up and down the country.

[Tulip Siddiq]

I shall speak to schedule 8 and amendments 19, 20 and 21 together. We recognise that the Bill sets out an important, overarching framework to protect access to cash. However, many critical elements, such as the baseline geographic distances that will apply to withdrawal and deposit facilities and which are factors that the FCA will take into account when assessing a local area’s needs with regard to access to cash, will be set out in a policy statement to be published by the Treasury. That makes it impossible for members of this Committee, more widely, Members of Parliament to judge whether the Government’s proposals will deliver an adequate level of free access to cash services. That is why the organisation Which? and others have called on the Government to assess the significant gap by setting out, in Committee, the details of the draft policy statement, which will determine the proposed baseline distances between cash facilities.

As my hon. Friend the Member for Mitcham and Morden has said, we also want the Government to set out how local deficiency of free cash access will be assessed by the regulator and how local people can request an FCA review of their communities’ access to cash needs. That is why we will be supporting amendments 19, 20 and 21 today. If the Conservative party does not lend its support to the amendments, will the Minister set out how he will ensure that Parliament has adequate opportunity to scrutinise the Government’s draft policy statement before the Bill leaves the House of Commons?

--- Later in debate ---

It is hard to hide a cash machine. Cash machines do not appear by stealth in the undergrowth. Therefore, when it comes to regulating access to cash, the FCA does have form on extensively consulting and on putting a great deal of data in the public domain, and hon. Members—carrying out their job of diligently representing their constituents as we have heard today—will continue to have a role to play in surfacing data and exposing points of weakness. I am content that the FCA will diligently listen to that.

[Siobhain McDonagh]

I would suggest to the Minister, though, that the FCA was late to the party over bank branch closures and that the groundswell created by people and by Members of Parliament forced the FCA finally to act. Who believes that individual communities, particularly poorer communities, have the same strong voice as the chief executive of a major high street bank? That is not going to be the case, and we know it is not going to be the case. We also know that unless the guidelines are there, people will not be listened to.

I held a public meeting about the closure of my local Halifax branch, and I could not convince anybody from the Halifax to attend. The idea that we can get these things done by institutionally agreeing that those people will understand the same things we understand, and understand the concerns of those who come to our advice surgeries and the concerns in our constituencies, is also not the case.

[Andrew Griffith]

The hon. Lady makes a powerful point that I will take away, but I perhaps do not entirely share her view of the FCA. It will be interesting to explore that further. However, I should congratulate her, which I omitted to do earlier, on successfully procuring a new LINK ATM for Pollards Hill. If she would like me to do so, I should be delighted to come to witness her opening this important facility for her constituents.

Let me turn to amendment 21. Following the Government committing themselves to legislating, industry has, in parallel, established voluntary arrangements to co-ordinate its response to provision of cash access—that includes the process for LINK, of which the hon. Lady has availed herself; LINK operates the UK’s largest ATM network—to assess a community’s needs in the event of closure of a core cash service or a request made by a local community, or indeed by a diligent Member of Parliament representing their constituents.

The Bill will provide the FCA with powers over operators of cash access co-ordination agreements such as those operated by LINK, so it provides a legislative safety net. However, members of the Committee will recognise that no decisions can be made in respect of designating any firms until we get the Bill on the statute book—the important work in which we are engaged today.

More widely, the Bill will require the FCA to use its powers to seek to ensure reasonable provision of cash access services—we are giving the FCA the corpus of work to do that. The Bill will allow the FCA to make rules or issue a direction requiring designated entities to establish a process to allow cash users to request reviews, should the regulator consider that appropriate. I understand the point made by the hon. Member for Mitcham and Morden about the conduct to date, but I would respectfully say that we are also giving the FCA very significant powers and putting duties upon it. The Treasury, the Select Committee and Parliament itself will continue to scrutinise those duties, and ensure that they are being fulfilled diligently. For that reason, I ask her not to press amendments 19, 20 and 21 to a vote, following a good debate on them.

Briefly, schedule 8 has attracted considerable interest from Members. Part 1 of the schedule inserts a new part 8B, titled “Cash access services”, into FSMA 2000. That introduces the legislative framework for access to cash and establishes the FCA as the responsible regulator. The schedule places a new statutory responsibility on the FCA to exercise the powers granted to it for the purpose of seeking to ensure that there is reasonable provision of cash access services in the UK. The FCA is then responsible for determining what it considers to be reasonable provision—I understand that some hon. Members would like to go further and be more prescriptive on that—while having regard to the policy statement, which will be issued in due course and at the appropriate moment by the Treasury, and any local deficiencies in the provision of cash access that the regulator has identified, the impacts of which it considers significant.

The FCA may also have regard to other matters that it considers appropriate. The FCA has already developed extensive monitoring of the coverage of cash access, and has undertaken research on the use of cash to inform its approach. In terms of the entities that will be subject to FCA oversight, the Government believe that it is right that the largest retail banks and building societies are held accountable for ensuring that their customers or members can continue to access cash services. The schedule therefore gives the Treasury powers to determine which banks and building societies—[Interruption.] I can see from the expression of the hon. Member for Mitcham and Morden that Halifax may well be auditioning as a candidate. It would be wrong for me to prejudge that list, but I imagine that hon. Members have lots of potential candidates to put to the Treasury.

The schedule gives the Treasury powers to determine who they should bring within the scope of FCA oversight through the designation regime. Furthermore, the Treasury will be able to designate operators of cash access co-ordination arrangements for FCA oversight. In order for it to fulfil its new role effectively, the Bill grants the FCA the ability to make rules, issue directions and impose disciplinary measures, including financial penalties upon any of the organisations designated by the Treasury. The new legislative framework will be an effective, proportionate and strong way to ensure that there is reasonable provision of cash access across the UK in the future. I therefore recommend that the schedule stand part of the Bill.

[Siobhain McDonagh]

We will come back to the amendment, and those with which it is grouped, but for now I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 8 agreed to.

Clause 48

Wholesale cash distribution

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss that schedule 9 be the Ninth schedule to the Bill.

Financial Services and Markets Bill (Ninth sitting)

Siobhain McDonagh Excerpts

Committee stage
Thursday 3rd November 2022 Public Bill Committees

[Harriett Baldwin (West Worcestershire) (Con)]

Thank you, Mr Sharma, for allowing me to contribute to the debate on new clause 1. My colleagues on the Treasury Committee have raised a very interesting and topical subject for us to debate regarding the best way forward. I must declare an interest, as someone who has bought things on the internet and has used this convenient way of paying for them. Clearly, when we have the FCA in front of us, we need to ask how it is approaching regulation in what has been an area of innovation, where fintech has really come to the fore.

It will be very interesting to hear the Minister’s reply to the points that have been raised, and what he sees as the best way forward. That innovation is supporting our retail sector, but at the same time, consumers deserve to know what they are getting into and to have good information when they make decisions. I look forward to hearing the Minister’s comments.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I, too, support new clause 1, not because I wish to stop buy now, pay later as a form of credit or to restrict people’s choice, but because I want people to fully understand what they are getting into before they do it. I did not understand what Klarna was. I like the Space NK website as much as the next woman who likes to spend too much money on skin products, but I could not quite understand why all of a sudden, about two years ago, Klarna was mentioned as a means of buying now and paying later. I thought, “How terrifying. If you cannot pay that ridiculous price this month, how are you going to pay that ridiculous price next month?”.

My hon. Friend the Member for Walthamstow has done some brilliant work on this issue. Buy now, pay later is the form of credit for the under-30s. They use it more than store cards or credit cards. It is often used on clothing websites, primarily by young women who buy different sizes to see which dress they actually want.

--- Later in debate ---

[Tulip Siddiq]

I would like to say from the outset that I will push new clauses 4 and 5 to the vote.

New clause 4 would require the Treasury and the FCA to conduct and publish a review of the community need for, and access to, essential in-person banking services, and enable the FCA to ensure that areas in need of such services receive them, and to make sure that banking services have a minimum level of access.

New clause 5 would require the Treasury to publish a policy statement setting out its policies in relation to the provision of essential in-person banking services, including policies relating to availability of such services, support for online banking and maximum distances that people can expect to travel to access banking services.

Of course Labour welcomes the fact that, after years and years, we finally have a Bill that introduces protection for access to cash. However, the Bill has some serious gaps that we are concerned about. We have already debated in a previous sitting the Government’s failure to guarantee free access to cash, but this Bill also does nothing to protect essential face-to-face banking services, which the most vulnerable people in our society depend on for financial advice and support.

Analysis published by the consumer group Which? found that almost half the UK’s bank branches have closed since 2015. That has cut off countless people from essential services. In its written evidence to us, Age UK called for the Bill to be amended to protect the in-person services that older people rely on, such as the facility to open a new account or apply for a loan, to ensure that banking services can meet their needs.

However, it is not just older people who struggle without support. Natalie Ceeney, chair of the Cash Action Group, who many Committee members will know, warned us at our evidence session of the significant overlap between those who rely on access to cash—around 10 million British adults—and those who need face-to-face support. She said that

“every time I meet a community, the debate goes very quickly from cash to banking. It all merges. The reason is we are talking about the same population.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 49, Q98.]

She is completely right: it is the most vulnerable, the poorer people in society and the older members of society, who depend on that extra face-to-face help, for instance in making or receiving payments, or dealing with a standing order. These are the people who will be left behind if this question about banking is left completely unaddressed. Nor should we forget those without the digital skills needed to bank online, people in rural areas with poor internet connection, or the growing number who cannot afford to pay for data or wi-fi as the cost of living crisis deepens.

As the FCA warned in its written evidence to us, the powers granted to the regulator by this Bill do not extend to the provision of wider banking services beyond cash access. That is why I hope the Minister will today commit to supporting new clauses 4 and 5, which will give the FCA the powers it needs to protect essential in-person banking services.

Just to be clear, Labour is not calling for banks to be prevented from closing branches that are no longer needed—far from it. Access to face-to-face services could be delivered through a shared banking hub or other models of community provision. We also recognise that banking systems will inevitably continue to innovate, which is a good thing. Online banking is a far more convenient way for people to make payments and manage their finances. However, we must ensure—indeed, as constituency MPs we have a duty to ensure—that the digital revolution does not further deepen financial exclusion in this country.

That would require protecting face-to-face services and putting in place a proper strategy for digital exclusion and inclusion. Banking hubs or other models of community provision must be part of that solution. These spaces have the potential to tackle digital exclusion through their dedicated staff, who can teach people how to bank online and provide internet access for those without it. I was delighted to hear this week’s announcement from the Cash Action Group that the sector will be launching additional banking hubs on a voluntary basis, but if we want to ensure that no one is left behind—the most vulnerable in our society—these services must be protected by legislation. I ask the Minister to support these two new clauses.

[Siobhain McDonagh]

I rise to support new clauses 4 and 5, which we know are supported by our constituents. No matter what kind of constituency we represent, whether it is wealthy, rural or urban, people are desperate for face-to-face services. Recently, in Mitcham town centre, Barclays and Halifax have closed. I stood outside both branches for a week during their opening hours, asking customers why they wanted face-to-face services and if they used online banking. In both cases, about 50% of customers had no access to online services, either because they did not know how to access them or were too frightened to use them because they were concerned about being scammed. That is an enormous concern, but it is completely rational and understandable, when we consider how many people are scammed.

This is about those quintessentially un-financial market issues of community and human contact. The closure of our banks and building societies is symptomatic of so much more—of our town centres being destroyed, of people feeling excluded from progress and the new society, and even of their feelings of loneliness. I am not suggesting that it is the banks’ job to resolve issues of loneliness, but we can talk about these issues as much as we like; people crave human contact to give them the confidence to use financial services and their bank accounts.

The branch staff do an enormous amount for our communities by protecting some of our most vulnerable constituents from doing things they really should not do, such as giving their life savings to people who they have never met who have offered to marry them. So much goes on in our banks and building societies, but it is only through the closure of banks in my town centre that I have understood what is really happening. Banks are retreating from branches on the high street but also from phone services. The number of banks that will allow people to do things by phone is reducing. Anyone here who has tried to contact their bank by phone knows that unless they have a significant amount of credit on their phone, they will not get through any time soon.

[Emma Hardy]

I thank my hon. Friend for the incredible speech that she is making. Looking at the Royal National Institute of Blind People briefing, does she agree how important it is for visually impaired or blind people to be able to access telephone and face-to-face banking services?

[Siobhain McDonagh]

Absolutely. As always, I agree with my hon. Friend. I think we will see an even greater explosion of financial fraud if there is an ever-quickening closure of branches in our town centres, and even more reductions in the ability to access services by phone. Unless there is regulation, we can appeal to the best motives of banks and building societies, but I understand that they are challenged. They have new competitors that do not have the infrastructure of the branches or staff. They are doing everything online, but they are doing it for a particular segment of society that does not, and will not, include everybody. We really have to grapple with that.

The work by the CASH Coalition has been excellent, but unless there is pressure from regulation, that will not happen. The idea that we all have to wait for the last bank in our town centre to close before we can even start thinking about a banking hub is as good as useless. I am only saying things that every member of the Committee knows, and that we know the consequences of. We have an opportunity today to do something about it on behalf of our most vulnerable constituents.

[Dame Angela Eagle]

It is a pleasure to follow the powerful speeches of my hon. Friends the Members for Hampstead and Kilburn and for Mitcham and Morden on this important issue. It is not an issue that affects most people, who have been able to make the switch to online banking and find it more convenient—although it has to be said that there is an increasing level of worry about online banking services because of the increasing prevalence of fraud and scams. We dealt with that in earlier parts of the Bill, but we touched only the very edge of it, as the tide of the problem rises. I am sure that we will come back to the issue many times in future Bills.

A significant number of our constituents cannot participate, for whatever reason, in the IT and tech changes that have made banking available on our phones and computer screens, and that allow us to chat to various bots that put us through to the places where we need to go. I do not know whether the Minister has had occasion to phone a bank recently or, to be honest, any other service after the pandemic, but it is one of the most frustrating things that anyone has to do. It seems there is only one phone line for all the telephone access points. One has to hang on listening to appalling music for hours on end.

[Siobhain McDonagh]

That should be against the law.

[Emma Hardy]

Outlaw that!

[Dame Angela Eagle]

We will have to come in a Digital, Culture, Media and Sport Bill to outlawing the appalling music that one has to listen to when trying to access any kind of service, private or public, by phone. We have to remember that many people cannot hang on the phone forever. They cannot afford to, and they are the people who tend to need the most help. They may have pay-as-you-go phones that run out quite rapidly. They may be unable to afford to hang on at the whim of an artificial intelligence bot, or the fewer and fewer actual human beings at the other end. They cannot access even ordinary banking in the way that the majority of people do. As I have said, that can be for a number of reasons. All Members present may get to a stage in our lives when we cannot either, and when we cannot remember our PIN numbers.

[Siobhain McDonagh]

It has arrived!

[Dame Angela Eagle]

We already have trouble with our PIN numbers, but many people’s memories fail as they get older, or they may be in the early stages of Alzheimer’s or other dementias. They cannot remember things, they cannot deal with the security issues that are required to make banking in this way safe, and they cannot go and ask somebody to help them.

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[Stephen Hammond (Wimbledon) (Con)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I will make a short speech. It is more of a speech of curiosity. I listened very carefully to my next-door neighbour, the hon. Member for Mitcham and Morden, who said what most members of the Committee would probably say. She will know as well as I do that everybody looks at my constituency and thinks “leafy Wimbledon suburbia”. But she will also know that parts of south Wimbledon, of Raynes Park and of Morden town centre, which we share, have exactly the problems that she spoke about.

I may have misheard the hon. Lady, but she said that she did not wish to compel banks to stay open, or did not think that we necessarily could do so, and she spoke therefore about the establishment of banking hubs. What I am curious about is how banking hubs would be established. Are we saying that, as part of getting or maintaining a banking licence, there should be a contribution to a social fund, so that banking hubs can be established around the country? Are we saying that that levy should be extended, particularly because some of the harm that we are talking about is the rise of online banking? Should online banks make a contribution to the cost of those banking hubs? Or are we saying—I think it was said that the hubs should be inside local authority areas—that local authorities should offer them, for instance in town centres?

That is a genuine point of curiosity. As in previous discussions with the hon. Members for Kingston upon Hull West and Hessle, for Wallasey, and for Mitcham and Morden—my next-door neighbour—there is huge sympathy for ensuring that our constituents, including vulnerable constituents, have access to banking services. But we need to more tightly define the practicality of how we ensure that they have that access.

[Siobhain McDonagh]

I am completely open-minded about how the hubs are paid for, but they have to be paid for from the banking sector itself. I would not wish to put the responsibility on already overstretched local authorities. Many high street banks have had decades of loyal support from these customers, and they cannot just walk away from that responsibility and ignore them. They have been good, loyal customers. There should be a banking hub, but not at the point that the last bank closes. We need to have a view towards what happens in the future. There can be collaboration about sites, but there needs to be access to those services.

[Stephen Hammond]

That is extremely helpful in setting out the thought processes behind the new clause. One of the issues that the hon. Member for Hampstead and Kilburn might wish to clarify is that, if the hon. Member for Mitcham and Morden is correct, the new clause has to contain the stipulation that to get a banking licence in the United Kingdom, one needs to pay a certain amount of social levy so that banking hubs can be established. For me, that is the issue with the clause. I therefore suggest that the hon. Member for Hampstead and Kilburn might want to take it away and bring it back on Report, or have a discussion with the Minister about exactly how the levy that the hon. Member for Mitcham and Morden is effectively talking about is to be established. This new clause does not make that clear, and therefore, frankly, the practicality of the new clause—notwithstanding that we all agree with its intent—is clearly flawed.

Financial Services and Markets Bill

Siobhain McDonagh Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Andrew Griffith]

The hon. Member draws our attention to the very tragic cases that occur when financial regulation goes wrong and does not do its job in the way every Member of this House would like to see. He also talks about a legal threshold for that. He will perhaps appreciate that I do not have the facts of that particular case before me and that we are not drafting things here and now. I have heard from Members on both sides of the House about some of the problems in what we are talking about, which is essentially the conduct of the regulator, and I understand colleagues’ desire to look at legal liability as one remedy, but there are many powers in the Bill, and as I say, the Bill will not constrain the ability of this House or Ministers going forward.

The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), with whom I spent a lot of time in the Bill Committee—I suspect we will hear from her later this afternoon—has tabled a new clause on considering economic risks in regulators’ cost-benefit analysis panels. I would like to reassure her that the regulators already take steps—and, to assuage her concerns, they could perhaps do more—to think about economic crime when they do that. They have the power, of course, to consult experts where they consider it relevant.

I thank my hon. Friend the Member for North East Bedfordshire again for raising the issue of regulatory proportionality. I wish to reassure him that the Government are clear that the burden of any regulation should be proportionate to its benefits, and that is set out in existing legislation. I am very happy to reiterate again today that I expect the regulators to fully and proactively embrace that principle, which is embedded in statute. That is particularly important, as the Bill confers on them greater rule-making responsibilities. I suspect we will hear from my hon. Friend later on.

I will now turn to Government amendments 8 to 11 —I apologise, but there are quite a lot of amendments to crack on through. Clause 6 already enables the Treasury to exempt regulators from the statutory requirement to consult on rules when they are replacing retained EU law repealed by the Bill without making material changes. Amendments 8 to 11 go further. They create a blanket exemption from the statutory requirement to consult in situations in which the regulators remove EU-derived rules from their rulebooks without replacement. The amendments also allow the Treasury to exempt the regulators when they are amending EU-derived rules or replacing retained EU law in their rulebooks, and when the only material effect of the change is to reduce regulatory burdens. That ensures that the regulators can take that proportionate approach to consultation, accelerate the repeal of retained EU law, and not let the requirement to consult be an obstacle or delaying factor. It is a long time since the British people voted for Brexit, and it is time to start delivering those benefits. Nothing in the amendments changes the obligation on the regulators to act to advance their statutory objectives, so any reduction in regulatory burdens must be compatible with those objectives.

Let me briefly cover the two remaining Government amendments, and I will then move on. New clause 20 ensures that a new type of fund vehicle currently being explored—the unauthorised contractual scheme—would be commercially viable if it were introduced. The proposed fund has the potential to improve the competitiveness of the UK by filling a gap in the UK’s existing fund offering and supporting the domestic growth agenda by facilitating greater investment in UK real estate by UK funds. Amendment 17 is a minor and technical amendment to rectify an inadvertent omission in drafting.

I will now address the amendments tabled by other Members. I am conscious that I am speaking before Members have had a chance to introduce their amendments, so I look forward to responding in more detail, where necessary, at the end of the debate. Let me start with the important issue of access to cash. I represent a rural constituency with a higher-than-average proportion of elderly and vulnerable residents, so I am acutely aware of the very real concerns around this topic. As of today, there remains extensive access to cash across the UK as a whole—over 95% of people live within 2,000 metres of a free cashpoint. I want to be clear that it is not acceptable for people to have no option but to travel large distances or pay ATM fees to access their own money.

If hon. Members have a concern in their local area, as I know many have, I strongly recommend that they reach out to LINK, which is leading the industry-led initiative to see what can be done to help constituents. LINK is delivering, for example, a new free-to-use ATM in the Pollards Hill estate in the constituency of the hon. Member for Mitcham and Morden (Siobhain McDonagh)—I have already made a commitment to her to visit and open it.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

May I say to the Minister that I am delighted that LINK is providing that machine? That part of outer London is, as many Members here will know, inaccessible apart from by limited public transport. There are two paid-for machines in the terrace, but a free one has been refused for years and years and years. I believe that this machine may be coming because of this very amendment—new clause 7. Unless it is there in writing, how can anybody in this House feel confident that free cash machines will be kept? Their numbers are reducing at pace.

[Andrew Griffith]

The hon. Lady probably proves each of our points, including my point that we start from a position where there is an industry-led solution, and I am sure that many colleagues will be auditioning for these new industry-led free cash machines.

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[Andrew Griffith]

My right hon. Friend is just one of many colleagues—many in the Chamber today, but also my hon. Friends the Members for Newton Abbot (Anne Marie Morris) and for Don Valley (Nick Fletcher)—who have made precisely this point. It is the Government’s expectation that the industry-led initiative must deliver. As I will come on to clarify, the powers we are taking in the Bill—we are not mandating them, because we do not support the amendment from the hon. Member for Mitcham and Morden (Siobhain McDonagh)—give us the flexibility in future, by means of a direction statement to the industry, to mandate free cash machines.

[Siobhain McDonagh]

rose—

[Andrew Griffith]

Let me finish this point, because I know many Members are vexed by this issue and we understand how important it is. Work has been done since my right hon. Friend the Member for South Northamptonshire occupied my position. A further 47 communities represented in this House will benefit from similar cash facilities funded by the banks, as part of that LINK assessment process. I urge all colleagues to take advantage of that, and my office is happy to help to do that.

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[Andrew Griffith]

My right hon. Friend is right and illustrates well the Government’s desire to achieve the right balance in this debate, rather than operate at either extremity. He will know from his former role the significant move in relation to Oyster and the ability to be cashless.

[Siobhain McDonagh]

Is the Minister aware that we have lost 12,599 free-to-use ATMs since 2018? That is a reduction of 24%. Who in this House, understanding that trajectory, would believe that the numbers are not going to fall further?

[Andrew Griffith]

I will repeat my previous point, and the hon. Lady will have her chance to speak later. It is the objective of the Government, in the course of the transition that my right hon. Friend the Member for North West Hampshire (Kit Malthouse) talked about, to protect the vulnerable and ensure that protection of access to cash. The hon. Lady’s statistic is right, but I reiterate that more than 95% of people today live within 2,000 metres of a free cashpoint, and I hope she recognises that.

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[Andrew Griffith]

My right hon. Friend makes his points very well. As he said earlier, there are significant benefits in relation to fraud, traceability and the environment from dematerialising, but it is not the position of the Government to advocate for it.

[Siobhain McDonagh]

rose—

[Dame Andrea Leadsom]

rose—

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[Chris Grayling]

My hon. Friend makes an important point. What makes it possible for big organisations to track their supply chains is the presence of Earth observation data, which many supermarkets now use to understand where they are sourcing from. Interestingly, it is a central part of this week’s proposal by the European Union. The data is available, but it is complicated. I recently had a meeting with a major institution that financially supports companies in Brazil, and it said it is incredibly difficult to track, all the way down the supply chain, where products are coming from. Well, it may be incredibly difficult, but it still has to be done.

New clause 24 would place a duty on financial institutions, as we did with retailers, to carry out proper due diligence on their investments, to understand and to be absolutely certain that the companies they deal with have due diligence processes in place themselves, so they know from where they are buying beef, soya or palm oil and so they work properly to ensure they deliver products from sustainable sources in a responsible way.

We hear warm words coming from the executive suites of our major financial institutions all the time about their commitment to sustainability, to net zero and to being responsible citizens. Sometimes they do it, sometimes they do not. There might be the will in head office, but sometimes a local branch does not deliver. New clause 24 would make it a clear duty on those institutions to do due diligence to make sure they know where products are coming from and so they know where investments are being made. This country has been a leader, and new clause 24 would be one further step in dealing with the blight of deforestation, which affects everyone’s future.

[Siobhain McDonagh]

I rise to support new clause 7, which stands in my name and those of dozens of right hon. and hon. Members from all corners of this House. The amendment is simple: it proposes that the Treasury must not only make provision to guarantee a minimum level of cash access, but ensure that this access is free. Why? Because surely it cannot be right in 2022 that almost a quarter of our cash machines charge people to access their own money.

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[Siobhain McDonagh]

I am tempted to give way, because I want to debate this, but I am observant of the Chair’s ruling on limiting speeches, so I apologise to the hon. Gentleman.

Adding the word “free” into the Bill would not result in the loss of a single paid ATM. It would simply preserves free access for every community, so that no one is obligated to pay for their own money. We have all seen how devastating the impact of bank branch closures can be on our communities, particularly for the elderly, the disabled and the most vulnerable, who are least likely to be able to use online banking and most reliant on access to cash. For them, cash is king. It is why MP after MP has led local campaigns fighting to save bank branches in their town centres, but what is the point of the photo in the local newspaper or the packed public meeting unless the rhetoric is matched by a vote in favour today?

It is time for Members to put their money where their mouth is, to listen to their constituents, to challenge their Whip, and to make a simple, lasting change for the most vulnerable people in their community. It is uncontroversial, tangible, straightforward, no nonsense, common sense and cross party. Free access to cash is, quite simply, bang on the money, and I hope that it will have the support of the House.

[Richard Fuller]

After such a thoughtful presentation by the hon. Member for Mitcham and Morden (Siobhain McDonagh), I am sure the Minister will consider carefully her entreaties and also the opinions of those on the Conservative Benches.

I congratulate the Minister and his Treasury team on this important and big Bill passing through its Committee stage and maintaining its cross-party support, which is so evident here today.

One of my greatest concerns about the Bill is that we underestimate the importance and the severity of the international competition that our financial services face. We are in a fierce global competition and the balance of risk has to be that the UK will not move fast enough, it will not be smart enough and its moves will not be significant enough to maintain and build the comparative advantage of our financial services sector, which is why I have tabled some of my new clauses. It is also why I am looking forward to hearing what the Minister will say to reassure me in his closing remarks.

We need a Bill, a Government and a country that are pro the financial services sector. That is where the wealth is created in this country. If we do not allow the financial services sector in this country to grow to be globally competitive we are harming the taxes that then pay for all the public services on which our constituents depend. In addition, as my right hon. Friend the Member for Chelmsford (Vicky Ford) has said, and as is the case in my constituency and the constituency of my hon. Friend the Member for North Warwickshire (Craig Tracey), I have many constituents whose incomes are directly related to the success of our financial services sector.

My new clauses put down some requirements on the regulator to get with that spirit behind its new objective of international competitiveness. New clause 12 would make it a requirement to publish regulatory performance information that is material to new authorisations, because new authorisations mean growth for the United Kingdom’s financial services sector. We need a very close focus on how effective the regulators are being on that, and the new clause asks for some general statistics.

New clause 13 talks about how the Financial Conduct Authority and the Prudential Regulation Authority work effectively to support already authorised firms, and is specifically to do with approved persons, rules and timings on change in control, variation of permissions and waivers and modifications. Those are the tools of doing business, and if they are not greased and moving quickly enough, that is a source of competitive disadvantage.

New clause 14 is about determination of applications. It would create a new key performance indicator for the FCA. None of this is a criticism of the two individuals who run the FCA and the PRA. They are doing a fine job, but the FCA has a lot of KPIs, which have nothing to do with how effective it is in building the financial services sector in this country. It needs to rebalance—I know the Minister is supportive of this—and I will talk about that in a minute.

New clause 15 would create a duty for the regulators to report on their competitiveness and growth objectives. For me, this is a crucial new clause, and I would like to hear from the Front Bench today that the Minister will commit to this report. If he could look through some of the specific items in my new clause about what should be included, I would very much appreciate a specific response.

The Minister talked about the proportionality principle, and there is indeed a proportionality principle, but I reworded it, because it was not done in a way that was effective for the success of our financial services sector and made a difference between wholesale and retail financial services firms. I have tabled amendments about the cost-benefit panel, which gets to the root and branch of how Government should work out whether to enact a new regulation: what are the cost and what are the benefits?

I appreciate that the Minister has said that he is excluding people who are direct employees of the regulators from being part of those panels, and it seems a pretty basic principle that people should not mark their own homework. However, we need the voices of those who are being regulated in that cost-benefit analysis—their opinions, their views and their data.