High Street Bank Closures and Banking Hubs

Wendy Morton Excerpts

Thursday 11th May 2023 Westminster Hall

[Wendy Morton (Aldridge-Brownhills) (Con)]

I beg to move,

That this House has considered the matter of high street bank closures and banking hubs.

I thank you for being in the Chair, Mr Davies, and Members from both sides of the House for joining us in this debate. The numbers may be low, but I think that is because it is a Thursday, and we have just had the coronation. I know that this is an important matter, as it has been raised across the House for some time.

Banks are an important part of the fabric of our high streets and communities, providing access to cash, a vast range of banking services and, importantly, advice. At a time when we are all concerned about cyber-security, scams and fraud, this is particularly relevant. I appreciate that, like many businesses and commercial entities, banks are understandably facing changes in customer transaction patterns, requirements and behaviour. Some of these started before the covid-19 pandemic, but much has changed since that time, when the pandemic necessitated us all to live our lives very differently, not least in terms of technology.

Despite that, banks still provide an essential service—one that I believe neither a call centre nor a phone app will ever be able to fully replicate for all customers. When I heard in March this year that NatWest in Aldridge was due to close at the end of July, I was quite alarmed and disappointed. That will leave not only Aldridge but the entire constituency with just one bank—the HSBC. Surely that cannot be right. The issue does not just affect the Aldridge-Brownhills constituency or the west midlands; we are seeing a worrying pattern and up and down the country. The stats for 2023 alone show that 114 HSBC branches, 95 Barclays branches, 52 NatWest branches and 23 Lloyds branches have closed or are scheduled to close. That is 352 closures altogether. I know there are other bank branches closing on top of that, including TSB and more.

This topic is of interest to colleagues on both sides of the House, as I have said. That is clear from the number of parliamentary questions about it that have been submitted to the Treasury, which I am sure the Minister is aware of. On the day I raised this matter in the Chamber with the Leader of the House and requested a debate, I was not alone. I maintain that MPs should be champions of their communities, which is why I am standing here today bringing this matter to the attention of Ministers. Why am I doing it? Because every time a bank closes, our constituents—often the most vulnerable in our communities, who need a little bit of extra help —lose a service.

Our high streets, the very streets we seek to regenerate, risk seeing a reduction in footfall. Our businesses, charities and local organisations find it all so much harder to do business and transactions. I want to share a couple of examples. A local charity explained to me at the weekend how they always had an informal arrangement with their local bank so that when they did major fundraising collections in the village, they could go early to that branch and the staff would take the collection buckets and count out the change for them—hopefully there were some notes in there too, not just loose change. That is a service we cannot always expect a small local post office to offer.

A local business, Taylors Auto on Northgate, set the scene very well when on the closure of Lloyds last year they said that they have been running the business for 12 years, trading there for years and been customers for all that time. Without the bank in Aldridge they would have to go to Lichfield or Walsall. So many businesses in my constituency are family-run small and medium-sized enterprises. They are part of the community as well as the business network. My local residents are also affected. The number of elderly people in my constituency is above the national average: 26.7% of people are over 65 in the Aldridge Central ward, compared with the UK average of 18%. Although IT is familiar to many, it is by no means accessible to all. That can be because of a lack of tech skills, or a lack of access to a smartphone, a laptop, a computer or even the internet.

I will make two further points. First, if IT must be the only option, access to IT must be affordable and available. As many know, the cost of an internet connection has increased because of inflationary pressure. Secondly, personal independence must be maintained. Not everyone wants, or is able, to ask their children or their partner to help them every time they want to pay a bill. This is about dignity. Unless Members generate greater awareness of these issues, I fear that we will simply see these invaluable services continue to disappear quietly from our streets. When they are gone, they are gone.

Experts warn that in-person banking will not exist in a matter of years. While researching this topic, I discovered that 5,391 branches were lost between January 2015 and January 2023—an average of 54 branches a month. Do the maths: at that rate, there will no longer be in-person banking anywhere by 2027.

The recent announcement of the closure of NatWest’s Aldridge branch, which came so soon after the closure of Barclays and Lloyds branches, will be our fourth loss in just three years. That highlights the speed of loss. In-person banking offers clarity on payments and trustworthy advice, as well as convenience and accessibility to people’s own money. Surely that is a freedom that we should all have.

Alongside the end of in-person banking on the high street, we are also witnessing the decline of ATMs, especially those that are free to use. Before the pandemic, the magazine Which? produced a worrying report setting out that one in 10 free cashpoints across the country closed or switched to a fee-paying machine during a 17-month period. The rate in poorer communities was higher than in the least deprived areas of the country. Some 979 free-to-use machines in the poorest communities were lost. That will inevitably force those most reliant on cash, who can least afford to pay for withdrawals, facing charges or being forced to travel to access their money for free; surely, that cannot be right. By its very nature, cash is transactional. We must ensure that people and businesses of all sizes that depend on their ability to freely deposit and withdraw cash at a time of their convenience can continue to do so.

Businesses such as Pat Collins Funfairs, which is a long-standing family business from my constituency, have raised this issue of access to cash with me. It is by no means the exception. In 2021, a Treasury consultation proposed ensuring “reasonable access” for withdrawal and deposit facilities for personal customers, and deposit facilities for small and medium-sized enterprise customers. I ask my good friend, the Minister—I know that he has not been in post long—whether that commitment remains. If so, how is it that we are allowing such a decline in access to cash and banking to happen?

It is time to incentivise and attract people back to the high street, so that we can continue to support local businesses and communities and ensure that our town centres survive and thrive throughout the 21st century. We hear that shared banking hubs and post offices must play a greater role. I agree, but we must put this into some sort of perspective and be proactive. Banking hubs offer a counter service where customers of all major banks and building societies can carry out regular transactions throughout the working week. The hubs also provide dedicated rooms where customers can see community bankers from their own banks to discuss more complicated banking issues. That seems like a sensible and straight- forward approach.

However, according to Link, even with the closures in my constituency, which I have already addressed, Aldridge-Brownhills requires no additional services and certainly has not been recommended for a hub. In fact, the vast majority of Link’s investigations when banks are due to close conclude with “no additional services recommended”. Will my hon. Friend the Minister tell us why we have to wait until a community has lost everything before we take action? Surely that is too late and we need to get ahead of the game. I think that NatWest is still part of the Royal Bank of Scotland, in which I think the Government may still have a stake. If they do, I gently urge the Government to take another look at the issue of hubs for communities.

I turn to the role of post offices. We have some good post offices across Aldridge-Brownhills. Banking framework 3, announced in February, is to be welcomed. It will allow the customers of 30 branches across the country to carry on making cash payments and withdrawals in a post office, and it will allow small businesses to deposit cash until 2026. But the question is, what happens then? Again, the framework relies on access to post offices. In Aldridge, the post office sits outwith the main shopping centre. It is not on the high street or in the precinct; it requires the crossing of a two-lane carriageway, and there is no dedicated car park. That is not a good enough alternative to the bank. Citizens Advice reports that we are losing two post offices a week on average—we lost one in Walsall Wood, in my constituency, just this year.

It is important that we support both post offices and banking hubs as part of the solution when discussing the future of in-person banking on the high street and access to banking services and cash. In his response to a written question earlier this year, the Economic Secretary to the Treasury stated:

“the government believes that everyone, wherever they live, should have appropriate access to banking services.”

I agree. Can we ensure that that happens? It is also important to recognise that what might be an appropriate situation or solution in one place is not necessarily the right solution everywhere. There needs to be a much more tailored and localised approach. Perhaps that is something that the Government can work on with local councils, but they must not just pass the burden on to local councils—they must give them the resource to do it.

I appreciate that decisions on opening and closing branches and the provision of in-person services are a commercial matter for banks and building societies—absolutely, I do. But I press the Minister to take a more holistic, future-proofing approach that acknowledges the bigger role that our banks have always played at the heart of our communities. It is time to work in particular with the Department for Levelling Up, Housing and Communities, which holds the policy pen on high streets and regeneration, and to look at the social and not just the economic impact of bank closures. Driving footfall into our town centres and local high streets is the key to the ongoing rejuvenation of commercial and retail areas and to the regeneration and success of thriving communities. As I said, we must also consider working with local authorities on where we can provide hub services.

I met with NatWest this morning, and I will continue to work with it. NatWest is reaching out to customers across Aldridge-Brownhills. I impress upon the bank the importance of the needs of my constituents, businesses, organisations and charities. We had an incredibly productive meeting, but the bank is still closing. I welcome the fact that NatWest is holding a community outreach event next week for local residents. The announcement of the closure of Aldridge NatWest within a matter of months highlights exactly why we need to look at the bigger picture now, before it is too late.

--- Later in debate ---

[Marion Fellows (Motherwell and Wishaw) (SNP)]

It is a real pleasure to serve under your chairmanship, Mr Davies. I think that I am about to reiterate a lot of what has already been said, but I think it is worth saying again. I congratulate the right hon. Member for Aldridge-Brownhills (Wendy Morton) on securing this really important debate. Before I start, I should declare an interest: I am the chair of the all-party parliamentary group on post offices. I do not think that I technically have to declare that, but I do know a fair bit about post offices as a result.

Scotland has been hit harder by bank closures than anywhere else in the UK. Scotland is geographically bigger than any region of England or any other nation in the UK, and consequently it has a very spread-out population. Because of that spread, bank closures can be more damaging to us, which is why it is shocking that last year’s Scottish Affairs Committee report found that Scotland has also lost a greater share of bank branches than any other country in the UK. That is diminishing the ability of people to access cash and other banking services. Since 2015, 53% of Scotland’s bank branches have closed, which is the highest percentage loss of all the nations in the UK. In 2009, 56% of transactions were in cash, but today’s cash payments represent only 17% of transactions. Despite that drop, cash remains the second most frequently used form of payment, second only to debit cards.

[Wendy Morton]

We talk a lot about services and access to cash. Does the hon. Lady agree that for people who are on a fixed budget and for whom managing money is difficult, having cash makes that very tricky job just that little bit easier? They can see what they have in their purse, wallet or pocket in front of them. That is why I think—and I hope she agrees—that that is another reason why the banking service and access to cash and advice, particularly at a time of cost of living challenges, are even more important.

[Marion Fellows]

I absolutely agree with the right hon. Member. If someone is poor, they cannot afford to run up bank charges. They cannot afford to be overdrawn. I am old enough to remember my mother having pots of money—some was used for this, and some was used for that, but if it was not there, we could not spend it. It is a better way to keep oneself in the black altogether.

Before 2021, about six branches a month were closing in Scotland, but since 2021 that has increased to about eight a month. Post offices are also now closing: between 2011 and 2021, we lost 112 post offices to closure in Scotland alone.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a particular pleasure to see you in the Chair, Mr Davies, because I know that if you were not in the Chair, you would be making an impassioned speech. I thank my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) for bringing forward this debate. There is strong feeling on this subject across communities and constituencies, including mine. She spoke with great passion and knowledge on behalf of her constituents, whom she serves very well.

My hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) quite rightly said that banking is changing. In recent years, innovation has led to an increase in online banking, which many people find quicker and more convenient than banking in branch. We know this from our experience, as well as seeing it in the data. In 2021, the industry body, UK Finance, found that 86% of UK adults made contactless payments; 72% banked online; and 57% banked using their mobile phone. That is not just young people. The latest data shows that more than 70% of people aged over 65 use online banking.

As the hon. Member for Barnsley East (Stephanie Peacock) pointed out, given the rise of online banking, we have to ensure that digital connectivity and mobile phone coverage are strong. In 2020, the Government announced a £1 billion deal with mobile operators to deliver the shared rural network, which will see operators collectively increase mobile phone coverage across our country. As for speed, in 2021 the Government launched Project Gigabit, which commits £5 billion to expanding gigabit coverage to 85% of households in the country.

The basic fact is that local bank branches receive fewer and fewer visitors because, frankly, many customers’ needs can be met digitally through video calls, banking apps or on the phone. In that environment, banks and building societies have a decision to make about how to provide in-person services to those who need them in the communities in which they operate. Those decisions are nuanced, local and, most importantly, commercial. The Government rightly cannot and do not intervene in them.

That being said, we recognise the real concerns expressed more widely about losing access to bank branches, which, as has been said, are important to many communities. For a variety of reasons, some members of our communities, such as those who are vulnerable, may need to do their banking in person. All firms should follow the FCA’s guidance to ensure that they carefully consider the impact of planned closures on their customers. That guidance sets the expectation that if a branch closes, firms will put in place reasonable alternatives in order to meet customer needs. Where firms fall short of that expectation, the FCA has the power to ask for closures to be paused, or for other options to be put in place.

[Wendy Morton]

I am interested to know the number of occasions on which an intervention has been made after a closure. I hope the Minister agrees that this is important. Banks should not close a branch and then review the engagement and so on, because then it is too late. Too much is happening on the back foot.

[Gareth Davies]

My right hon. Friend makes a good point. I will have the Economic Secretary to the Treasury write to her with any figures that we have on the pauses that have taken place as a result of FCA guidance. LINK carries out reviews in order to suggest and recommend the services that can be put in place. If there are no bank branches left in a community, a banking hub can be suggested. However, if my right hon. Friend will allow me, I will ask my colleague to write to her with more detail on that point.

The industry is innovating and finding new ways to respond to customers who want and need to access in-person services. I am pleased that we have heard a lot of discussion today about post offices, because they play a vital part in this issue. It is right to point out the statistics, which I was quite shocked to learn when preparing for this debate. Some 99% of personal banking customers, and 95% of business banking customers, can do their everyday banking—can do such things as withdraw cash or check their balance—at one of 11,500 post office branches across the country. I was also shocked to learn that 93% of people in this country live within just 1 mile of a post office, so almost everyone can access their everyday banking services locally.

--- Later in debate ---

[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.

[Wendy Morton]

Does the Minister agree that 52 hubs are due to open, which is great, but only four have opened? What more can he or his Department do to encourage, or gently push or prod, the organisers of the hubs to get them in place? The point made by Members across the Chamber today comes down to banks closing and hubs not opening.

[Gareth Davies]

I am grateful to my right hon. Friend. The Government recognise and share the frustrations that she has voiced about the pace of the roll-out of the hubs. Those are commercial arrangements and the industry is working to deliver the hubs quickly. We expect the delivery to accelerate over the coming months, but I share the frustration. The Government have laid out very clearly, as I have today, our expectation: we want the delivery to speed up. We welcome these initiatives, which clearly demonstrate how innovation is supporting access to banking in the longer term. We believe that the impact of branch closures should be mitigated where possible, so that all customers, wherever they live, continue to have access to appropriate banking services.

We are also taking strong steps to protect access to cash, as has been asked of me today. It is true that electronic payments are being used more and more, and cash less and less. Over the last decade, the use of cash to pay for goods and services has declined by almost three quarters. However, cash continues to be important for millions of people across the UK, including businesses and people who may be in vulnerable groups. There is, as ever, a balance to be struck. As more and more people and businesses embrace the benefits of new payment methods, the Government should not stand in the way, particularly when those innovations can make it easier to start and grow a business or to manage family finances, but we must offer reassurance and protection for those who do need cash.

My right hon. Friend the Member for Aldridge-Brownhills asked me to make a commitment on this, and I will say that the Financial Services and Markets Bill, which is going through Parliament right now, does just that. It will enshrine access to cash in legislation. In doing that, we are helping to ensure that everyone, whoever they are and wherever they live, is able to manage their finances in a way that works for them. I hope that that commitment has been heard today by not just my right hon. Friend but many of her constituents, who I know will be concerned about that.

Like many of the speakers in today’s debate, the Government understand the challenges that these changes have brought, and the nervousness that can accompany any change, but supporting customers, communities, businesses and people across the country remains our key duty. Of course, we will always welcome innovation, especially in financial services, to support competition and grow our economy. We will continue to work with the sector, the public and all Members across the House to ensure that we have a modern, flexible banking system that caters to the needs of every person and business in our country.

[Wendy Morton]

I am grateful to the Minister for his response and to all colleagues, from across the House, who have made contributions today. None of us here is anti-innovation at all, but what we are seeking from the Minister is continued reassurance that the Government are on the side of customers, be they residents, constituents, businesses, charities, organisations or the most vulnerable in our society. I think we will continue to watch this issue; I certainly will. It would be really helpful to have greater clarity on hubs. I appreciate that that is a commercial matter, but I will continue to look to the Government to see what they can do to ensure that the people whom we all seek to represent have access not just to banking, but to banking services, information, advice and, most importantly, cash. I am grateful to the Minister for his time and contribution this afternoon.

Question put and agreed to.

Resolved,

That this House has considered the matter of high street bank closures and banking hubs.