High Street Bank Closures and Banking Hubs

Tulip Siddiq Excerpts

Thursday 11th May 2023 Westminster Hall

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I thank the right hon. Member for Aldridge-Brownhills (Wendy Morton) for securing this debate, and for eloquently laying out the case for why bank branches are still important in many of our constituencies, whether rural or suburban. Too often the political discussion on bank branch closures focuses only on concerns around cash. While the issue of cash is important, and I will touch on it later, there is also the issue of the many other essential services that bank branches provide. They have been outlined in this debate.

Age UK and others have rightly highlighted the importance of the local bank branch to communities across the country. It provides vital in-person services that older people rely on, whether they are opening accounts, applying for a loan, making or receiving payments or need help with a standing order. It would, however, be wrong to assume that it is just older people who use bank branches. There will always be a significant part of the British population that needs the extra face-to-face support that hon. Members have mentioned.

Natalie Ceeney has been working on the issue for a long time. She is the chair of UK Finance’s access to cash action group, and she has made it clear that there is a substantial overlap between the people who rely on access to cash—around 10 million adults across the UK—and those who depend on their local bank branch for financial advice and support. In her report of her research and engagement with local communities, which I encourage hon. Members to read, she found that it was often the most vulnerable—ethnic minorities, people whose first language was not English, and the poorest in society—who relied on cash and in-person help with their finances in their day-to-day life. That point was echoed by the hon. Member for East Renfrewshire (Kirsten Oswald), who talked about what happened in her constituency, and noted that many people from hard-to-reach communities needed those services. That is why some of the figures that we heard in today’s debate are so concerning.

Analysis published by Which? found that over half of the UK’s bank and building society branches have closed since January 2015. That is a shocking rate of around 54 closures each month, and there have already been 158 closures in 2023, with another 274 branches expected to close by the end of this year. My hon. Friend the Member for Barnsley East (Stephanie Peacock) said that that is taking place in her constituency, and explained how it has cut off countless people in her area from the goods and services that they require. Unfortunately, last year, when the Government introduced provisions on access to cash in the Financial Services and Markets Bill, which I led on, they did not introduce protection for essential face-to-face banking services, which was a glaring omission. I wonder whether the Minister will comment on that. It risks leaving millions of people behind—not just those without the digital skills needed to bank online, but people in rural areas with poor internet connections, and the growing number of people who cannot afford data or wi-fi because of the cost of living crisis. That is another point made powerfully by my hon. Friend.

The Opposition recognise that it is inevitable that payment and banking systems will continue to innovate, which is a good thing. Online banking is a far more convenient way for people to manage their finances, but we have to ensure that the digital revolution does not further deepen financial exclusion in our country. That is why the Labour party wants to give the FCA the powers that it needs to protect essential in-person banking services. To be clear, I am not calling for banks to be prevented from closing branches if they are genuinely no longer needed—quite the opposite. I recognise that access to face-to-face services could and should increasingly be provided through banking hubs, whether those are delivered by the Post Office, as we have heard, or take the form of shared bank branches or other models of community provision. If a branch is genuinely not being used, it makes sense that it should not exist, but if it is well used, I do not see why we would close it.

I anticipate that the Minister will say that the Government support banking hubs. We have heard that time and again, but let us be honest: the roll-out of banking hubs has been pathetic. Communities have lost 5,605 bank branches since January 2015, while only four hubs have been delivered so far. That is just not good enough. Figures from LINK reveal that only a further 52 are in the pipeline. The figures do not add up or make us feel very positive. People in our constituencies are telling us that it is not enough, and a lot more has to be done. On top of that, many of those planned banking hubs will not even provide essential in-person services. They must provide a more comprehensive service when they are built. That is why we must empower the FCA to review the community’s need for access to essential in-person banking services, and get a clearer picture of what is needed in our constituencies.

That, of course, will not be enough on its own to tackle financial exclusion. Alongside that, we will need to put in place a proper strategy for digital inclusion. Banking hubs will have to play a role in that. The Post Office has called for banking hubs to have financial inclusion advisers, who can ensure that no one is left behind. That is a very interesting idea, and I hope that the Minister will comment on it. Labour believes that banking hubs have the potential to tackle digital exclusion—for instance, through dedicated staff, who could teach people how to bank online and provide internet access to those who need it. I would like to hear what the Minister has to say about those proposals, although I recognise that this is not his brief; perhaps he could comment on behalf of his colleagues.

We of course welcome the fact that the Financial Services and Markets Bill finally introduced some protection for access to cash, but it sadly falls short of what is truly needed. It does not make any commitment to protect free access to cash. The hon. Member for Carshalton and Wallington (Elliot Colburn) talked a bit about free access to cash and the community need in his constituency, which I know well. I was born in St Helier Hospital, like him—many years earlier, I have to say. I think his point was important. It shows that it is not just rural areas that are affected; suburban constituencies in London still have that community need. We need free access to cash.

Data collected by Which? shows that there has been a rapid drop in provision of free-to-use ATMs in recent years. There must be something in legislation that protects free access to cash; otherwise, our constituents will be in trouble. We saw a decline of 30,000 free-to-use ATMs between August 2018 and February 2023. That is a stark 26.1% fall. It is a shocking statistic. It is forcing the poorest people in the UK to pay for access to their own money. That seems ludicrous. We know that a massive 3.8 million people are in financial difficulty, and 15 million people in total use cash for budgeting purposes. The right hon. Member for Aldridge-Brownhills made the point that more and more people are using cash to budget because of the cost of living crisis.

The need to protect cash services will only grow in importance as the cost of living crisis increases. The data collected by the Post Office that I looked at showed that the use of cash has actually risen in recent months. The cost of living crisis is deepening. The poorest in society are increasingly turning to cash to manage their budgets day to day, and week to week, and we should help them by providing free access to cash.

I hope the Minister will take on board the concerns that have been raised today. If his Government are serious about leaving no one behind, there are three fundamental questions he must address in his closing remarks, or take back to the Minister who has this brief. Does he agree that the rate of bank branch closures is reaching an all-time high? This is the time to empower the FCA to protect in-person services. If not now, then when will that happen? Secondly, does he recognise that the Government must work with industry to accelerate the roll-out of banking hubs if the initiative is to have any impact at all, and that banking hubs must provide all the services that people need, not just a select few? Finally, how will he ensure that everyone—particularly the poorest in society, who rely on doing so—can access their own money, without it burning a hole in their pockets?

--- Later in debate ---

[Gareth Davies]

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

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

[Tulip Siddiq]

We are lucky in this place, with two post offices that hardly ever have queues, but in my constituency there are massive queues outside the post offices, in which people have to wait a long time. Also, some of the services that constituents want to use a bank for are just not appropriate in a post office. Some post offices, certainly in my constituency, are based in WHSmith or another shop; it would not be appropriate to go in there to talk about personal banking services. Will the Minister comment on that?

[Gareth Davies]

What services banks provide is a commercial decision for them, but they provide a lot of different ways to interact with them these days, including several online options. As I pointed out right at the start, the majority of the British public access banking in those ways, whether online through a website, web chat or a mobile banking app, or via the telephone. Customers of commercial banks have a variety of ways to interact and get advice, and I would encourage them to do so. It is not the Government’s place to intervene in the commercial decisions of banks on what services they provide and where.

In addition to what I have just laid out on the variety of online services, many banks and building societies have programmes in place involving community centres, libraries, mobile banking vans or semi-permanent banking pods. The pods are structures that provide a dedicated private space to support customers with banking services. They can be moved around to different locations, depending on demand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) may wish to engage the banks on those for her area. For people who need to speak to their bank face to face, such places can make a vital difference.

Alongside those programmes, there is the high-profile innovation of shared banking hubs, which many Members have referred to in the debate. The hubs provide a dedicated space where customers can meet community bankers, who support them with more complex services. The hubs also offer a range of everyday banking facilities, allowing customers to deposit cheques, check their balance, and withdraw and deposit cash. More than 50 shared banking hubs have been announced for communities across the country, as has been said. Four have opened their doors already and two more are expected in the coming weeks.