High Street Bank Closures and Banking Hubs
(11 months, 3 weeks ago)
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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.
Stephanie Peacock (Barnsley East) (Lab)
It is a pleasure to serve under your chairship, Mr Davies. I thank the right hon. Member for Aldridge-Brownhills (Wendy Morton) for securing this important debate. Between 2012 and 2022, Yorkshire and the Humber saw a 43% decrease in the number of bank and building society branches. Earlier this month, the Barclays branch in Hoyland announced its closure, which is of great concern to many local people. It follows a string of other branch closures in Barnsley, such as Yorkshire Bank in Wombwell, and will leave my constituency of Barnsley East with no bank branches at all, four having closed in recent years.
Physical branch closures are often justified by the rise in online banking, which has undoubtedly been a great convenience for many. However, closures risk financially excluding communities, and it is regrettable that people are no longer able to choose whether to bank online or in person. More than 3 million people aged 55 and above have still never been online, with those aged 75 and over most likely to be excluded. Furthermore, Age UK found that four in 10 over-65s with bank accounts—amounting to more than 4 million people—do not manage their money online.
While there has been a shift towards online banking, connectivity should not be assumed across the country. Rural areas are less likely to have reliable digital infrastructure, which therefore impacts their ability to access online banking. Although Labour is calling for mandatory, well-advertised broadband social tariffs for those who need them, they have not yet come about. As the cost of living continues to rise, many people find using cash easier for budgeting purposes, but it is not just access to physical money that people are seeking. It has been found that more people report wanting to speak to a real person as they become increasingly worried about their stretched finances.
There is some provision in place to establish shared banking hubs, which will offer people access to cash services. These hubs have the potential to help many suffering with bank closures, but there are still some issues to be resolved with this system. A routine trip to the bank often turns into footfall for local businesses, helping them to keep their doors open and our struggling high streets to stay alive. I hope that banks will take local needs into consideration—particularly those in rural areas where public transport is not as frequent or reliable—before continuing with further closures, and recognise the impact that removing branches can have on different groups in the community.
Elliot Colburn (Carshalton and Wallington) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing today’s debate and on an excellent opening speech, which set the scene as to why community banking is still so important. It is also a pleasure to follow the hon. Member for Barnsley East (Stephanie Peacock).
The matter we are discussing is indeed very important. A lot has been said about rurality and access in more rural areas, but even in suburban towns such as Carshalton and Wallington, just outside London, this is proving to be a difficult issue. The main high street in Carshalton no longer has any banking facilities left whatsoever. There is a post office, but all the high street banks have left; I think Barclays was the last to leave, and that was quite a few years ago. The high street in Wallington lost Halifax a few years ago, and it has just been announced that Barclays is closing its branch on the high street as well. Of course, people can vote with their feet and switch to another bank that has a high street presence; Wallington does still have a NatWest, a Nationwide, a TSB, an HSBC and a Santander. However, the worry is that the Barclays branch will not be the last closure, and that many if not all of them will eventually close. As my right hon. Friend the Member for Aldridge-Brownhills said, at this rate of change, the next few years could see the end of high street banks altogether. We have seen it in other parts of the London Borough of Sutton, too: Cheam village, for example, has no high street banks left, having lost four over the course of the past decade.
In my short contribution today, the question I want to touch on is what is left behind when banks decide to close? Of course, the nature of banking is changing, and I respect that tough business decisions need to be made around the future model. However, as the hon. Member for Barnsley East mentioned, it is a huge issue that many people, for a number of reasons, are excluded from digital participation in online banking, and the same is true of those who rely on cash transactions, be they small businesses, charities or individuals. It is important that there is a left-behind service for them.
I thank Barclays for being very constructive in engaging with me since its decision to close. It has agreed to set up a Barclays van for customers, which will be in the car park of Dobbies Garden Centre—no relation to the house elf—twice a week every fortnight, on Tuesdays and Saturdays, I believe. It has also agreed to retain a single member of its staff so that it has a presence in another location on Wallington high street five days a week. That is very welcome news. I welcome the fact that Barclays realises that it needs to leave something behind, but that is sadly not always the case when other banks decide to close. They simply point to ATMs or the post office in the area, but as my right hon. Friend the Member for Aldridge-Brownhills pointed out, access to cash and ATMs—particularly free ATMs—is also in decline.
There is a big problem with an over-reliance on the Post Office, which is not without its own problems. The post office in Wallington often has massive queues stretching up the road, particularly on a Saturday, and its opening hours are a lot more restricted than those of a bank. Over-relying on the Post Office to provide a banking service to people once a branch decides to close is wrong; we need to take a more holistic view.
I absolutely support the idea of banking hubs. It is a great idea to have representatives from all major high street banks in one place. It is a way for the banks to save money on rent for buildings that are not being used as well as they could be, so it is a good deal for banks and customers. However, I worry that they are often considered only when everything is lost. They can take a long time to set up from scratch, so potentially absolutely nothing will be in place for years. Will the Minister outline whether the Treasury will consider using its convening power and its influence to persuade banks to work more collaboratively and holistically to look at community need and plan in advance for these things to happen? We should not wait for every high street bank to close and then try to set up something from scratch. That is probably the best way forward.
We all understand and appreciate that the nature of banking is changing, but for so many—not least those who are digitally excluded—having that in-person service is not only desirable but vital. I hope the Minister will outline what work the Treasury is doing and will continue to do to ensure banking remains fair and accessible for everyone.
Kirsten Oswald (East Renfrewshire) (SNP)
It is a pleasure to serve under your chairship, Mr Davies. The right hon. Member for Aldridge-Brownhills (Wendy Morton) set out the case very well for why bank closures are a problem and why they cause such concern in our constituencies. It feels like I have stood here innumerable times deploring the loss of another local bank in one of the towns in East Renfrewshire. I really related to the comments of the hon. Member for Barnsley East (Stephanie Peacock): bank closures are highly frustrating and cause such difficulties and challenges for people in our communities.
Sometimes, the way the banks deal with closures adds to the frustration. Some have reduced the number of hours they are open to provide a service, and they tell us in all seriousness that the reason they are closing is that fewer people are attending the bank. Well, of course fewer people are attending the bank if there are fewer hours available for them to do so. The reduction in the availability of service is a challenge and a self-perpetuating issue.
The hon. Lady’s comments about rural areas were absolutely right. This is an issue for people in rural areas—some of my constituents feel that very strongly—but we also heard about issues in more suburban areas. The suburban communities of East Renfrewshire are scunnered; they are fed up to the back teeth of banks disappearing from their high streets and leaving behind big gaps in the local shopping areas. That is particularly an issue for groups in our communities such as disabled people and the elderly, and for local businesses. Our local high streets face not only the challenge of bringing in customers but the additional challenge of the closure. A bank is a destination in and of itself, but people who go to banks may then visit local businesses—that will not happen if the banks are not there. Bank closures leave a gaping hole behind, which is unattractive, and the service that local businesses may also wish to avail themselves of is no longer available, so this is not just a one-dimensional issue for our high streets. I do not think that the banks are paying due care and attention to that.
Local residents are also aggravated by the correspondence they receive from banks that are going to close. Without asking in advance what they think about it, the closure is presented as a fait accompli—whether the community likes it or not, and regardless of its views, the local bank is closing, and people are unable to scrutinise the facts and figures. The bank also tells them not to worry because they can go to another bank that is 5 miles away. Well, it might be 5 miles away for a crow, but that is entirely irrelevant for a human being who has to catch two buses, with a half-hour wait between the two, to get from A to B, or if people do not have time to make the journey because they have other commitments. Such messaging from banks is profoundly unhelpful and insults the intelligence of their customers. The banks seem to be assuming that everybody is standing outside the closing bank, ready to make the journey, but some of the people affected may live in a town that has already lost its bank, which means that they will have to travel even further. It is understandable that people feel vexed.
The right hon. Member for Aldridge-Brownhills pointed out that when a bank is gone, it is gone—it is not coming back—and that is one of the reasons why people are so concerned. There are many other reasons why in-person banking is valuable, including the opportunity it gives people to have a conversation about their money. We all value such conversations, which can advise us on how to stop fraud attempts, particularly those targeted at elderly and vulnerable people. Obviously, if there is no bank branch, such discussions cannot take place.
The ability to access cash is a huge issue in my community and others. If there are fewer free-to-use ATMs and fewer banks, we are taking away the opportunity for people to choose how they transact things in their day-to-day lives. Again, that is a bigger problem for those who have the least cash and for those who are most marginalised in our communities.
The hon. Member for Carshalton and Wallington (Elliot Colburn) is right to worry that banks might just be disappearing from our high streets altogether. Technology is great—I absolutely accept that a lot of the banking technology is really helpful—but it is not always what is necessary. We need to appreciate that both approaches are necessary. Technology and the ability to access it are valuable, but face-to-face services also need to be made available, whether for reasons of accessibility or because the relevant technology is not available. Such services also help us put criminal elements in perspective. The fewer the number of bank branches, the more opportunities for online and digital frauds. I have spent a lot of time recently looking at push payment frauds, and it seems to me that there would be fewer of them if people had access to someone they could speak to about their banking on a day-to-day basis.
Are banks doing what we need them to do? I am not sure that they are doing so. There is a very unfortunate assumption that communities will just cope with banks disappearing from their high streets. When I moved to the home I have now lived in for about 15 years, there were numerous bank branches on my local high street, but that is not the case any more. People in towns all over East Renfrewshire will feel the same way. The banks have just disappeared—they have walked off the pitch. The promises we heard about never closing the last bank in town are laughable. My constituents would think that that was ludicrous, which is a shame, because they and our town centres need bank services.
Our post offices do a brilliant job. I have stood here before and waxed lyrical about the brilliant post offices in East Renfrewshire. They are fantastic. I know it is a strange thing to suggest, but people should come to our local post offices. They are great, but they have their own job to do. They have a long and varied list of things they can do, but they are not banks, so although they are doing a great job, there are still gaps. The banking hub in Cambuslang is certainly a model to look at, and I am encouraged by others following that. But whatever the model, people on our local high streets and communities, particularly those who are most marginalised, must be able to access cash and banking services. I do not think that it is an unreasonable expectation that we should have that in our local communities, and I very much look forward to hearing what others have to say today.
This conversation will become all the more pressing in the next couple of years, as banks continue to close apace and people begin to really wonder what the banks are for, who they are providing a service to, and how we ensure that we have access to cash and banking facilities, which is what people need.
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.
Kirsten Oswald
My hon. Friend is making a really important point about both banks and post offices potentially being lost to communities. Does she agree that when banks close and abdicate their responsibility, their suggestion that post offices will simply take over their services is unfortunate and unacceptable? It is as if the banks think they are not at all accountable. That is not how we should address this.
Marion Fellows
Absolutely. Banks are allowed to say, “Well, it is okay if we close, because there is a post office nearby.” That will not always be the case, as more and more sub-postmasters struggle. I will come on to that later.
The head of policy at Age Concern Scotland has noted:
“These closures often hit older customers hardest, leaving them cut off from vital services and making it harder for them to manage their money...As we battle through this cost of living crisis it is more important than ever that older people can access their money as cash, for free, and use it whenever they need to.”
The number of cash machines that are closing is disgraceful. For example, in my local area in Lanarkshire we have lost nearly 100 cash machines in four years. In July 2018, Lanarkshire had 650 cash machines but that had fallen to 561 by last February. And the really important point is that the number of free-to-use ATMs in my area had dropped by 555 to 426. That means that the only ATMs that people can access are ones that charge them for taking out their own money; they are paying a poverty premium. That is ludicrous and it is really affecting people on a daily basis.
As I have said, for years banks have said, “It’s okay if we close our local banks, because there will always be post offices nearby.” However, as I have also already said, post office closures have picked away at their number, too. What will the Department do to protect network and community services that are run through post offices, especially in relation to people who cannot get to banks?
Given the different ways of running post offices, it is really difficult to tell how many sub-postmasters who have taken on banking to a great degree are now struggling. I do not know whether folk here are aware of this, but 70% of the members of the National Federation of SubPostmasters are only earning the national minimum wage, despite the good work that they do in providing post office services and now banking services. That figure came out before the cost of living crisis, so the situation will be even worse now.
It is also very difficult for Post Office Ltd to encourage people to take on post offices or sub-post offices because of the Horizon scandal. The other thing is that the Post Office lozenge—the sign that we are all very familiar with—goes outside a building and says, “Post Office”, but inside that particular building there might only be a drop and collect service for parcels. So, people think that there is a post office where there is not one.
On banking transactions, many Members have already said that many local businesses now use local sub-post offices to pay in takings in cash. That is important, because it keeps money in the local area and it really keeps some high streets going. However, last year new regulations to combat money laundering were introduced by the Financial Conduct Authority—actually, I have found it difficult to find out if it was entirely the fault of the FCA or UK Finance. Recently, it has been very difficult for local businesses. There are no banks, so they take their money to the post office, but a limit was imposed on how much each business could deposit.
I am very pleased to say that last month the FCA noticed that a more tailored approach should be taken by banks for cash deposits by business customers, on the basis of expected business customer activity. However, that also links back to the problem that sub-postmasters have, because they were losing money as customers could not deposit all of their takings and many customers then had to travel many miles to be able to deposit their money safely. I am hopeful that, when this issue is properly sorted out, a tailored approach will allow local business owners to go back in and carry out their business the way they did before.
Real clarity is needed on banking hubs. I have visited the banking hub in Cambuslang, and one is to be opened quite near my constituency in Carluke, hopefully reasonably soon. The building in Cambuslang was fantastic. The way it works is that each bank that has signed up sends a representative to the banking hub once a week to give business advice. As many Members have pointed out, people go to banks not just to take out money; they need advice, help with filling in forms, and other things like that. Those things were being done in the hub. I spoke to many customers that day, and they were very happy with the service given. It was a pilot programme, and it is still unclear what effect it had on the local post office branch, so we have to bear that in mind. The NFSP is concerned about the fact that there is no third-party oversight of the banking hub recruitment process. It is not known how those who gained the right to run the banking hubs were selected. I have already written to LINK about that, and I am awaiting a response.
Consumers are able to access cash at a post office only if their bank has signed up to the banking framework agreement. Which? has raised concerns about the long-term viability of the agreement, as it is voluntary and there is a time limit on it—I think the last one to which banks signed up was for three years. Barclays bank originally did not sign up, which was quite a loss for its local customers. I am calling for access to cash at a post office to be placed on a firmer and more sustainable footing in areas where local cash needs are unmet. Can the Minister comment on that, and update us on where we are going?
Returning to the post office argument, if banking hubs have an impact on local post offices, then that is something that we have to be very careful about. Part of the difficulty is that the Treasury and the Department for Business and Trade are both involved, and there is not a great deal of communication between them. I know it is getting sightly better, but this Government have for many years almost had a silo mentality, in which one Department did not really know what the other was doing. That is to the detriment of people who have to use banks and post offices—if they are still there. I would really welcome the Minister’s comments on that.
I again thank the right hon. Member for Aldridge-Brownhills and all the other Members who have spoken. This is a real ongoing problem, and like my hon. Friend the Member for East Renfrewshire (Kirsten Oswald), I have stood here to speak on the subject innumerable times. I have come at this problem from different angles, and have tried to say something different each time, but hat is proving harder and harder. It is time that the Government got a real handle on the issue, and started to protect consumers more, as well as those who cannot use digital banking. That is not just older people, though many older people struggle with either bad broadband or the inability to handle new technology. We need a joined-up approach from the Government to ensure that people can still access banks, post offices and cash.
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?
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.
Kirsten Oswald
Does the Minister appreciate that that will be cold comfort to people who no longer have a post office, or who have an on-and-off post office, which is not a very reliable way of doing business, or who do not live in the heavily populated areas that presumably make up that 99%? That is probably an unhelpful comment, in their opinion.
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.
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.