High Street Bank Closures and Banking Hubs

Gareth Davies Excerpts

Thursday 11th May 2023 Westminster Hall

[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.