I beg to move,
That this House has considered bank branch closures.
It is a great pleasure to serve under your chairmanship, Sir David. I will start my comments with a bit of nuancing. This debate was applied for and considered at a time before much of the current advice was put in place encouraging many of those in our communities who would be the natural users of a local bank branch to stay at home. Many of my comments calling for banks to remain open are therefore very much inclined towards the time when we get past the current situation and are returning to something of a more normal environment.
The debate is clearly taking place against the backdrop of an unprecedented public health crisis and grim news. One positive I already see emerging from that, though, is the mobilisation of communities to protect the most vulnerable among them. I hear tales of shops delivering groceries to older customers, of dog walkers dropping off prescriptions and of people sending kind messages to neighbours in isolation just to let them know that they matter. These are all hugely important to keep our communities functioning and working together through challenging times. It would be good to see the banks exhibit that same sense of public spiritedness, show a sense of responsibility to the communities they serve and at the very least call a halt to their closure programmes until we are through the current situation rather than quietly closing down branches never to open them again. I wrote to the Bank of Scotland urging it to consider that action.
The latest tranche of closures announced by Lloyds/Bank of Scotland comes after years of watching the vital network being decimated. Between 2012 and 2019, the UK lost 22% of its bank and building society branches. In 2017, about 10% of the rural population lived at least 10 miles away from their nearest branch. Scotland, with its highly rural population and more challenging demographics, saw a third of branches close in just nine years, with 610 closures between 2010 and 2018. The announcement in January from Lloyds Banking Group of 56 branch closures was still a little surprising as it came just a month after Bank of Scotland managing director Tara Foley was reported to have said at the opening of a hub in Glasgow that the bank was committed to its branch network and that branches were “not going anywhere.” Tell that to my constituents in Loanhead.
For hundreds of years, the Bank of Scotland was a respectable stalwart of the Edinburgh establishment, ahead of the field in finance and in finding innovative solutions to meet customer needs. Founded in July 1695 by an Act of the original Scottish Parliament, the independent one, the bank started opening branches back in 1774. It was the first bank in Europe to offer paper currency and, in 1826, fought a spirited campaign against attempts by the Westminster Parliament to outlaw its notes below £5. The campaign was much aided by the fantastic writer Walter Scott, whose head now adorns the bank’s modern notes, in tribute to that popular and successful campaign. I hope this campaign will be equally successful.
It is therefore disappointing to see the modern incarnation of this once proud brand making life so much harder for those who work with paper notes, wielding the axe so brutally against the communities that helped to build the bank. When the banks crashed in 2008, Lloyds Banking Group was one of the major recipients of the Government bail-out, to the tune of £20.3 billion and a 43% public stake. Now, public shares are paid back, profits are high and big bonuses have made a bit of a comeback. In 2018, Lloyds unveiled a £4 billion pay-out to shareholders, statutory profit before tax was up 13% and £464.5 million was given out in bonuses. Payment protection insurance pay-outs took its toll last year, with pre-tax profits down from £6 billion to a meagre £4.4 billion, so chief executive António Horta-Osório took one for the team, pocketing only £4.7 million, compared with £6.5 million the previous year. That is meagre, and it must be difficult to survive on such limited earnings. The idea that the bank cannot afford to maintain the existing branch network is therefore clearly nonsense.
My particular concern, as the MP for Midlothian, is the looming closure of the last bank in Loanhead. In fact, it affects not just Loanhead; that bank represents the only one in the communities of Loanhead, Bilston, Roslin, Rosewell, Straiton and Damhead. Many of my constituents beyond the town itself are clearly concerned about how they will access banking. The decision is staggering, with dire economic and social consequences for a town with a population of about 7,000 now, but set to rise rapidly with significant new housing developments. The Bank of Scotland has not taken that into account in coming to its conclusion.
Future growth will rely on start-ups and microbusinesses setting up in the area, so access to a banking service remains vital. About 20% of small businesses with turnover below £2 million use branches as their primary source of banking. Being able to get into the bank at a time suitable for them will clearly be critical. The sheer geography of Midlothian does not lend itself to a bank being even two or three miles away—the physical journey might not always be a straight or simple one.
The Select Committee on Scottish Affairs, in its 2019 report on access to financial services, stated:
“The impact of losing a bank is particularly is acute when it is the last bank in town”—
as in this situation. Statistics tell the same story. Research mapping branch closures against the British Bankers Association postcode lending data found that growth in lending to small and medium-sized enterprises was dampened by 63% on average in postcodes that lost a bank branch. When it was the last bank in town, that figure shot up to 104%. On average, postcodes that lose their last bank receive almost £1.6 million less in lending over the course of a year.
The Loanhead branch closing will without doubt damage this historic town economically, as it will the nearby communities of Bilston, Damhead and Roslin, all of which rely on that bank.
I congratulate the hon. Gentleman on securing this debate. I recognise that he is talking about the Royal Bank of Scotland and Bank of Scotland groups, but the issue is truly UK-wide. I particularly noted his points about the last bank in town closing, because I am seeing that in Knaresborough, in my constituency. Does he agree that access to financial services and advice, alongside the banking services that he described, is particularly important at a time of great financial uncertainty, when people are anxious about their financial futures because of the coronavirus emergency?
I absolutely agree with the hon. Gentleman. It is absolutely critical that people have access to the best possible advice, especially now, where none of us really knows what situation we will be facing in a month or two months, never mind next week. It is critical that there is access to information and advice, and that that is easily accessible for all our communities across the country, wherever they happen to be.
Losing the last bank in town will increase the financial exclusion of our older and less mobile residents. Being able to go to the high street to do their finances is an important part of staying independent for many people. It is a lifeline. It is fair to say that banking habits have changed and the Loanhead branch, like most, is certainly less busy than it historically was. The figures in the bank’s own closing branch review found a 4% drop in counter transactions from personal customers over one year and an 8% drop when businesses are included. To me, that appears to be a fairly manageable figure, especially when we consider the town is set to expand significantly in the coming years.
It is also true that the majority of the population will be able to do much more of their business online. I am not denying that, but we do not always want to do business online, and certainly there are a number of people in our communities who cannot do their business online. Most of us appreciate being able to check balances and do transactions whenever we want, although we do not necessarily like it when the IT breaks down or we stumble over the pass codes. Even with that change in behaviour, a significant number of bank customers completely rely on the local branch; they do not even have a digital option.
The bank’s review found that 76% of customers sometimes use other branches, internet or telephone banking. That leaves almost a quarter of their customers who never use those other methods and are solely reliant on the branch. Many of them are in older age groups—44% of customers were over 55, 26% over 65 and 13% over 75. It is quite clearly the older population who will face the worst disruption from the proposed changes. According to Age Scotland, 67% of people over 75 do not use the internet at all. Many older people expressed frustration with phone banking and lack of trust in digital options, and said that the cost of accessing the technology is in itself inhibitive. In some areas, fast enough connections are not even available.
I know that work has been done to improve banking services in our post offices and I welcome that. The post office network is a fantastic resource for our communities and it does whatever it can to pick up the pieces when a bank abandons a town. We are particularly lucky in Loanhead to have a very accommodating postmaster, who I have no doubt at all will do everything in their power to ease the transition for customers seeking another local place to perform day-to-day transactions, but the post office network is under pressure too. As great a job as it does, it does not have the resources, financial expertise or facilities needed to deliver the full range of bank services when the bank leaves town, nor should it be expected to do so.
Concerns were expressed to the Treasury Committee last year about the way the agreement with banks was operating, and that the Post Office would be put under added pressure, as it did not make a profit from those services. More than half of adults were unaware that they could even use it and said when asked that they would prefer to deal directly with their bank. There is a long way to go before that gap can be filled. We must protect for the future both the post offices and the branch networks. That is not just for the vulnerable, although that is a good enough reason to call a halt to this ruthless cull of face-to-face banking. Those who predict the relentless rise of automation sometimes forget another key factor—human nature. Digital banking has convenience on its side but will never replace the human interaction. It was predicted that e-readers, such as the Kindle, would kill off printed books. That did not happen. We see vinyl record sales booming for the younger generation, despite the ridiculous price tags and the simplicity of streaming. Digital and physical formats are finding a happy co-existence in the modern world; they complement each other, as they both have advantages and disadvantages.
The same goes for banking. There are many individuals who sometimes use a branch and sometimes use other means. We need both branch and online banking to thrive in a flexible, inclusive, modern society and we lose them at our peril. When IT goes wrong, as it does, we all return to the bricks and mortar of a branch. We need to protect those branches so that they are there for the future. The Treasury Committee in the previous Parliament warned that
“if no action is taken, the UK risks inadvertently becoming a cashless society. For a large portion of society, including some of the most vulnerable, this would have stark consequences.”
We have seen a rapid drop in free ATMs, as the reduced interchange fee made the business model less viable. Latest figures from LINK, the UK’s largest cash machine network, revealed that 1,300 ATMs were lost between the end of January and the beginning of July 2018. The consumer organisation Which? predicted that free cash machines would become a thing of the past, after it emerged that 1,700 ATMs switched to charging in the first three months of the year alone. We are being pushed towards a cashless society that we are not prepared for and do not want. That is not solely through consumer demand but financial incentives to go cashless, the creation of a cashless deserts and the continued running down of the branch network.
We are asking people to wash their hands a lot more these days, but it is no longer good enough for the UK Government to wash their hands of this serious issue. Like the politics of austerity, the decision to let things slide is a choice, not necessity. The current access to banking standard does not go far enough to protect customers from branch losses, and the alternatives just do not plug the gap. They will show customers how to sign into mobile banking or where to get a bus to the next town, but the loss of a branch is already a done deal.
Where the financial services markets fail, we need the Government to step up to the plate. We could introduce a public service obligation to protect the last branch in town, for example, and ensure that people have a right to a physical bank branch. The Treasury Committee agreed, saying that
“intervention by Government or the FCA may be necessary to force banks to provide a physical network for consumers.”
It suggested they could
“make changes to competition law to allow banks to share facilities”.
I would be keen to see that. For the Government to keep brushing this off as a commercial decision is to neglect their responsibility. There are options to intervene; in fact, they have a duty to do so, for the wellbeing of millions of citizens.
I look forward to the Minister’s response. I hope that we will see some action, and that the Bank of Scotland will reverse the decision to close so many branches.
It is a pleasure to serve under your chairmanship, Sir David. I am grateful to my hon. Friend the Member for Midlothian (Owen Thompson) for securing this important debate. Like him, I have a sense of déjà vu, having spoken in similar debates a number of times before.
I am aware of the very serious situation that we are dealing with. People at home will be watching and thinking about the difficulties that the covid-19 crisis presents us. We are well aware of that, and I encourage people to follow the most up-to-date advice at every point. Bank closures is quite a pertinent issue at the moment. This is not quite the speech I might have given under different circumstances, but it is possibly even more pressing that banks do not abandon our high streets—goodness knows, they have troubles enough without banks upping sticks and leaving behind all the businesses that are struggling so much.
I am really scunnered on behalf of my constituents; there have been repeated bank closures in towns all over East Renfrewshire over the past few years. When I served a previous term as MP, East Renfrewshire was apparently one of the worst hit areas for bank branch closures, yet here I am again because more closures are planned. When MPs and members of the public are notified of bank closures, there is no acceptance or acknowledgement of the actual impact on local residents and businesses. There is no consultation; it just hard lines, and that makes a difference to people’s lives.
Knowing that I would speak in this debate, somebody told me that after the closure of a bank branch of which they were a customer in East Renfrewshire, they got some text messages asking what they thought about bank branch closures. They could only click the boxes provided—there was no free text option for whatever reason—and the options, to paraphrase, were, “They’re good,” “They’re fine,” and “They’re okay”. They are not okay. That kind of ridiculous box-ticking exercise really does not give people any comfort that they are being listened to, and will come as no surprise to any Member of the House who has had to deal with bank closures. It feels as if there is a disregard for the needs of our communities and often of basic geography.
In East Renfrewshire, we face three additional closures, which is the last thing that people need. According to Virgin Money, it is closing the Giffnock branch because it is shutting up shop in locations where it has duplicate provision. The difficulty is that there is no duplicate provision in Giffnock because Virgin Money closed the other branch three years ago—it is now a bistro, which I wish every success, and which I am sure could use the support of a local bank. Virgin has suggested that people affected by the closure in Giffnock can use the bank in Newton Mearns. The implication was that Newton Mearns is the same as Giffnock, but they are different towns. I wondered, “How might people get there? They could go on the bus.” I checked, and it is a 50-minute round trip on the bus. That is really not a practical solution or a sensible way for people to be told to proceed.
TSB is closing branches in Barrhead and Clarkston. To my surprise, TSB suggested that customers who used the Barrhead branch could use the one in Pollok. That is a round trip of at least an hour by public transport. I can only assume that TSB does not want those customers to remain its customers and anticipates that they will all march across the road to the first-class credit union in Barrhead, Pioneer Mutual, which I have no doubt will not abandon the people of Barrhead and will continue to provide the wide range of fantastic services for which we are grateful.
TSB suggests that when its Clarkston branch closes, people can go to Thornliebank, but they would need to take the half-hourly train or the hourly bus. None of those things are what people need. It is unhelpful in the extreme for banks to suggest that those are somehow substitutions. Like when someone orders teabags in their online shop and the supermarket sends a dishcloth, the solutions are absolutely ludicrous and really quite upsetting to people who are accustomed to banking locally.
The people who need the service most are always the worst affected, as my hon. Friend said. Among them are older people, who are accustomed to dealing in cash and who should not be prevented from doing so; people who are less mobile; people who do not have cars; and of course local businesses, which absolutely rely on high-street banking services. People who run local businesses are genuinely concerned about bank closures, which make a significant difference to what they can do.
As my hon. Friend said, despite the significant difficulties that businesses currently face, they are doing great things, such as delivering things to people and being flexible in their services. They are going above and beyond and being imaginative in the way that they do business, so this is the very time when they need an assurance that the banks are there and will still be there afterwards. They need the banks upping sticks like they need a hole in the head.
Businesses will rely on Government support in the coming weeks and months—that will be so important. If we hope—and we do—that our businesses find ways to sustain themselves, surely that necessitates the availability of banks so that discussions and banking can take place in communities where those businesses are rooted. The Government stepped up when we bailed out the banks, so now it is their turn.
Banks and bank bosses need to step up and recognise that the situation is unique. This is the time for them to reconsider any plans to close bank branches and to think about what they are really for and whether they should be turning away from our constituents. They should not be turning away from our high streets now. We need them to be with us when things are difficult; now is certainly not the time for them to walk away.
Thank you for allowing me to catch your eye, Sir David. I congratulate my hon. Friend the Member for Midlothian (Owen Thompson) on bringing forward the debate. I want first to touch on the potential closure of the Bank of Scotland branch in Galston in my constituency. It is not just the last bank in Galston, but actually the last bank in town for nine settlements. Kilmarnock, the major town in my constituency, will be the only one left with banks. That is unacceptable. Settlements with a combined population of more than 40,000 people will be without access to a bank.
The Bank of Scotland always uses the same mode of operation; it sends out a letter to notify its customers and produces statistics that say that the branch has had a drop in numbers and performs less well than the average bank. I pointed out that if it keeps reducing branches and concentrating on big urban centres, the remaining rural branches will clearly have less footfall than the urban branches. They also have less overheads, and possibly less staff. It is not comparing apples with apples.
I agree 100%. The banks are forcing a change in behaviour. In Galston, Bank of Scotland also highlighted that businesses are now using the cash machine to lodge more money. Why is that? It is because the staff have advised businesses to do that. Guess what? It is now taking away that cash machine anyway, so that argument is completely undermined.
It is really frustrating for people when they get a letter with fancy pie charts and statistics that are frankly meaningless. I believe that I have got some analytical skills, so as an MP I contacted the bank to ask a number of questions about the statistics it provided on changing behaviour. I got the most ridiculous, bland response, all dressed up in woolly words and ignoring my questions. I call on the Bank of Scotland at the very least to up its game, increase engagement and answer questions that come from the likes of me and the members of the community who are lobbying hard.
In concluding, I would like to raise another issue that is pertinent to people who have worked for Royal Bank of Scotland. Many women who worked in banks were part-time workers who had less wages. They had to suffer redundancies through bank closures. Some of them might be WASPI women—Women Against State Pension Inequality—who will have to wait longer before they access their state pension. Those who were RBS employees discover that, once they access their state pension, RBS initiates a clawback on their private pension. I met constituents on Friday, and one of them loses up to 25% of her pension. It turns out that is legal—it goes back to an agreement that RBS put in place—but it is also immoral.
Royal Bank of Scotland is part of the NatWest group—that is how it is to be rebranded—and NatWest does not employ such a clawback. I urge the Minister to think about that and the impact it is having on people. Given that the Government are the major shareholder in Royal Bank of Scotland, and it is now returning a profit of billions of pounds, the very least they could do is look after those workers who were loyal to Royal Bank of Scotland but got a kick in the teeth when bank closures were implemented.
First, I congratulate the hon. Member for Midlothian (Owen Thompson) on bringing forward the debate—I think there has hardly been a banking debate that I have not been at. The Minister is always in his place to respond, and I am sure he knows what we will say before we say it and that he shares our frustration over bank closures. As I mentioned earlier, my constituency has seen one of the largest numbers of bank closures in the whole of the United Kingdom of Great Britain and Northern Ireland. There has been some attempt to fill the gap with credit unions and post offices, which have done so to a certain extent, but not in totality. That is where my concern lies.
I joined in the debate last June—we had another one a few weeks ago—to express my frustration with the banks that were closing branches because they say there is another one just 15 minutes up the road, or 50 minutes up the road, as the hon. Member for East Renfrewshire (Kirsten Oswald) explained. That is not very helpful for people who are on their lunch break or reliant on public transport, which is not always available at the time that they need it to get them back to work, as she also suggested, especially in a rural constituency.
Physical branches are important to the consumer, but not to the bottom line, and it would seem that that is the only consideration for some of those at the top of the banks. How annoyed was I, last month, to find that yet another bank closure is planned for Newtownards, the main town in my constituency? This time it was Barclays. I got the obligatory email of intent, as we all do, and an offer to meet, going through the format of a visually arranged meeting. I have arranged it in my diary, by the way, and I will meet them, but the fact is that although the meeting might relieve some of my frustration, it will not make one button of a difference to Barclays.
I mean no disrespect—I try to be respectful to everyone as best I can—but I have no hope at all of persuading them to keep the Barclays bank in Newtownards open. I have sat in too many of those meetings, which is why I have become a bit cynical about meeting the banks. I think I have had some nine bank closures in total in my constituency. I have had a meeting with the banks on every one of those occasions, and with all the persuasion of stats and letters from customers that we had, we were not successful in turning things around.
As those branches have closed one by one, I have sat in too many of those meetings and been shown increases in online activity, as the hon. Lady mentioned. If we take the logic that she referred to, it is true that, if we close all the banks, more people will go online. But it does not suit everybody to go online—that is the point we are making, but it seems to fall on deaf ears. What is not explained is that the increase is because staff members have been pushing this, which they have. There is nothing wrong with pushing the online deal if it suits people, but it does not suit everybody, and the bank customers on whose behalf I went to all those meetings were not able to bank by logging on to the system. It is not always easy, either, when people do not have the broadband access to enable that to happen.
Over the years the bank closures in my constituency have been Kircubbin, Portaferry, Killyleagh and Ballynahinch—all Ulster Bank—Danske Bank in Kircubbin and Portaferry, Barclays bank now imminent, Bank of Ireland and Allied Irish. Those banks have all moved to other towns or moved out of the area completely. I remember when we used to have at least four banks on the Ards peninsula, but they have all been closed. There were some sub-banks, which would have been there on certain days a week, but they are away as well.
The hon. Member for Midlothian referred to credit unions, and we have been fortunate that credit unions have grown in my constituency, as they probably have in all our constituencies. They have tried to fill the gap, and they have done so to some extent, but they cannot provide what the banks offer to customers. We have a new credit union in Kircubbin; I am very pleased to see it, and it is very active and very able. The credit union in Portaferry has grown as the banks have closed, as has the credit union in Newtownards. I had the Minister over about a year and a half ago to visit the one in Newtownards, which is doing extremely well. The credit unions are filling the gap.
Then there are post offices. The Minister might say that post offices are able to fill the gap, and in some ways they are, but they cannot provide all the range of support and services that can be given in the banks. Post offices can only fill those in a small way. We need to have all the opportunities that the banks offer. I am becoming increasingly frustrated with the banks. I say that not as a socialist—
There is nothing wrong with that.
There is nothing wrong with being a socialist, by the way—I am letting you know that right now. I am not against the banks, but I get immensely frustrated when it seems that they make decisions in order to bring bigger dividends for their shareholders. I suspect that everyone who spoke and the shadow Minister will say the same thing, but to me it is simple: the wee man and wee woman need help, and they deserve to have their banks, yet it is all about the profit at the end of the year. Whenever banks are making a massive profit, in a way it is about getting more profit. Was it Jean Paul Getty who said that the only thing better than having £1 million is having another £1 million? Speaking about Jean Paul Getty probably ages me, but I am just making the point that banks focus only on their profit margin and how much they can make, not on delivering.
The hon. Members for Midlothian and for East Renfrewshire referred to online banking—I know that others will refer to it as well—but it does not suit everybody. I tried to help a number of customers of those banks to do online banking, but it was lost on them. I hope those people took their savings to the post office or the credit union, but I suspect that some did not, and I therefore fear money being stored under the blanket, the pillow or the mattress, or in some tin box somewhere, because those people want to be in control.
My wife’s auntie was in that situation. She had some money in the house, which we did not know about. One day she was out for only half an hour, but the thieves obviously knew, and they came in and stole her life savings—£8,500—which were probably to pay for her funeral. It is soul-destroying. The community came together to help as best they could. That happened to a couple of others in my constituency as well, and again the community reached deep into their pockets and made some of that money available.
I realise that time is flying. I was sitting here almost loth to speak, to again use the same words and rhetoric, because it is not stopping the closures. Then I realised that this is the place where changes need to take place. I have the utmost respect for the Minister, as he knows, but I urge him and his Department to give serious consideration to supporting those banks that support their local community. For Newtownards, that is the Danske Bank, the Ulster Bank—the one that is left—the Santander bank, which has filled some of the gap for some customers, and the Nationwide building society. Those are the last four banks in Newtownards. All pay rates and council tax, provide local employment and are all available for the vulnerable—for me, this debate is about the vulnerable; those who do not have access to banks—to open their first bank account or for those who want face-to-face advice, because we need that from the banks as well.
I ask the Minister what we can do to reward those banks that do right by local communities and keep an online thrust as well. I understand that some people want to go online. I am an old traditionalist; I will probably still write cheques for all my things every week, as I always do, and I will probably still carry cash in my wallet, because that is how I did it when I opened my first bank account at age 18. How can we encourage more banks to be part of local communities, instead of being removed and literally counting their pounds rolling in? I look to the Minister for guidance, because asking, reasoning and pleading with the banks is not working. Maybe rewarding community-minded banks is the way forward.
I echo the thanks to my hon. Friend the Member for Midlothian (Owen Thompson) for securing this important debate. I feel as if I have spent quite a lot of time in the five years since I was elected bemoaning the stampeding of banks out of our communities without so much as a backward glance.
My constituency has several towns where there is no bank at all, and other Members have talked of similar issues. Ardrossan, Stevenston, Kilwinning—a town of 21,000 people—West Kilbride, Dalry and Beith are all without a bank, and Kilbirnie’s last bank has reduced its opening hours. That is the only bank left in the entire Garnock valley, which is three distinct towns with a collective population of more than 19,000 people. Losing the last bank in our towns is a severe blow to our communities. It undermines their commercial stability and has a significant social impact, which we have heard much about today.
My constituency, like that of every Member who has spoken, has been hit particularly hard, and I share all the concerns expressed by my hon. Friend the Member for Midlothian (Owen Thompson). In Scotland, according to research, we have lost more than one third of our bank branches since 2015. The consumer organisation Which? found that banks shut 396 Scottish branches between January 2015 and August 2019, reducing their number by 38%—an alarming rate of closure, by any measure. My hon. Friends the Members for Midlothian, for East Renfrewshire (Kirsten Oswald), and for Kilmarnock and Loudoun (Alan Brown) and the hon. Member for Strangford (Jim Shannon) have all said similar things.
As we have heard from my hon. Friend the Member for East Renfrewshire, it is clear that any consultations are simply window dressing. They are tick-box exercises so that the banks can reassure themselves and the Minister—“Oh yes, Minister, we have undertaken consultation”—when we know that is not true in reality. I remember the same thing happening in 2007 and 2008, when there were mass post office closures in my constituency. That was long before I was elected to this place, and perhaps innocently—perhaps even naively—I, along with other Scottish National party activists, set up street stalls. We went door to door with petitions. We did everything we could to get the post office to reverse those closures, but of course nothing changed, because the consultations were not at all meaningful. We have memories of these consultations from other times, and I say to the Minister that this has to stop.
The Treasury Committee concluded that
“there are still large sections of society who rely on bank branches to carry out their banking needs. A bank branch network, or at the least, a face-to-face banking solution, is still a vital component of the financial services sector, and must be preserved.”
I know that the Minister probably will not agree—I have said this to him before, during one of the countless debates on this topic I have participated in—but I genuinely believe that because there was no UK Government intervention when RBS announced its radical, eye-watering programme of closures, although we as taxpayers owned a significant stake in RBS, the fact that nothing was done emboldened the other banks that have no element of public ownership. If a publicly owned bank can do it, why can a private bank not do the same without any kickback or repercussions from those in the corridors of power?
If the Government are as willing as they have demonstrated to accept closures of bank branches—banks that they owned, in the case of RBS—that is extremely disappointing. Throughout RBS’s entire closure programme, I listened very hard, but I could not hear anybody in Government condemning those closures. All I heard was a distancing from any sense of responsibility, which is really disappointing for our constituents. It seems that other banks felt they could employ the same tactics and close down wherever they felt it was no longer convenient to have a branch, without any consequences or official condemnation from Government. As a result, the people who pay the price are those in our communities who are suffering for want of a bank, and will continue to suffer. We have heard a lot about that today.
Of course, we have these mobile banks, but they really do not answer the question of what we do without a bank. They are not disability compliant, their reliability is questionable at best, and they simply do not fit the bill or take the place of a bank. We also know that the gaps left by banks cannot be properly filled by post offices. That is no reflection on post offices, which work hard to provide a good service to our communities, but they are not banks and they cannot fill the gap. As the Minister will know, the Treasury Committee concluded that post offices
“should not be seen as a replacement for a branch network, but a complementary proposition”.
Other Members have talked about the fact that post offices simply cannot fill that gap.
Along with branch closures we are witnessing the demise of free cash machines, as we have heard. About 10 free-to-use ATMs a week have been shut down in the past year. As far as I can make out—although I hope the Minister will contradict me—the Treasury seems to have been deaf to all pleas for Government intervention to protect free cash. I hope that the Minister is able to offer some comfort today.
It was in the Budget.
I look forward to hearing from the Minister, who is speaking from a sedentary position.
The ATM Industry Association has warned that one fifth of Scotland’s free ATMs will start to charge consumers in the next year. That can be seen only as a cynical move to force us to become a cashless society. Picking up what has been touched on by my hon. Friends the Members for Kilmarnock and Loudoun, for East Renfrewshire, and for Midlothian, and the hon. Member for Strangford, bank closures have, as we now know—the game is up—been a tool to force people to bank online. As banks have quietly cut the fees that they are willing to pay machine operators to provide bank customers with access to cash, they are forcing us to go cashless and online. Banks are attempting to put pressure on customers who do not act in a way that they—the banks—find convenient. What happened to the customer being king?
Going cashless and banking online may, as we have heard, be the preferred option for some—and good luck to them—but some of us do not want to go down that route, and increasingly aggressive efforts are being made for it to happen, at breakneck speed. I and those of my constituents who do not favour those options will not be forced to bank online. We will not be bullied into doing so or into going cashless. It is a rum do when the service provider is bullying the customer—because that is how it feels. In any case, even among customers who may be interested in banking online there are some who simply are not able to, for a variety of reasons that the Minister will understand, and of which the hon. Member for Strangford reminded us.
I have corresponded with the Treasury about online banking in the past, and it accepted that broadband access is not yet good enough for everyone to rely on digital banking. The Government and the access to banking standard must ensure that banks have a social responsibility to provide banking facilities to all our towns. Such services could be provided relatively easily through the wide rolling-out of banking hubs. Indeed, I met the Minister in his constituency to discuss that very issue last year. I am hoping—I am quite excited about it—that he will be able to update me on progress with that. I am sure that the Minister will correct me if I am wrong but I cannot see any discernible obstacle to the option except for perhaps a lack of political will and, indeed, the arrogance and intransigence of the banking industry.
Our communities and constituents deserve better than they have had up to this point. Banks have to face up to their social responsibilities, get their heads together and create banking hubs in our towns, across the board. There is no real impediment to that, and I urge the Minister to use his good offices to bang some banking heads together and ensure that customers’ voices are heard. The Government have a role to play when the last bank in town is closed. They have said repeatedly that those are commercial decisions, but it is not just a commercial matter. It is about social responsibility and financial inclusion. I urge the Minister to reflect further on the strong feelings and concerns that have been expressed today. Will he finally bring forward legislative proposals to ensure that banks live up to their responsibilities to our communities?
It is a pleasure to see you in the Chair, Sir David.
I thank the hon. Member for Midlothian (Owen Thompson) for securing this debate on a topic of vital importance to people across the UK. Today’s debate takes place at a time of unprecedented national crisis, but, as the hon. Gentleman said, the conversations that we are now having about the social and health implications of compulsory isolation show how important our high streets and shared social spaces are. Bank branches play a fundamental part in maintaining contact for vulnerable people. Even in a time of rapid change, when we are shifting a lot of our lives online, we have to make sure that communities that need a physical bank branch are not left behind.
We have had many debates on the issue. We gathered here, by my reckoning, just over a year ago to address it; the hon. Member for Strangford (Jim Shannon) was definitely present. In the year since, the matter has become no less pressing. At the time, I shared with colleagues some of the experiences of my constituents and what bank branch closures have meant for them. Too often, we are distracted by the headline numbers and forget the impact of the closures on real people’s lives. I will revisit some of those comments today.
I represent the towns of Hyde, Stalybridge, where I live, Dukinfield, Longdendale and Mossley. They are exactly the kinds of towns that have suffered very badly from the closures in recent years. I have lost branches of RBS, Lloyds and Yorkshire Bank. Here are some direct quotes from constituents about how it has affected them. One constituent said:
“Losing the Lloyds in Stalybridge has been a blow. Yes there is one in Ashton and there is online banking. But there is no substitute for making an appointment you can walk to and talking to an actual human being.”
A constituent just outside of my area said:
“Here in Droylsden we now don’t have a single bank! We’ve gone from having Lloyd’s, NatWest, Royal Bank of Scotland and Halifax to having none!!! Our infrastructure dwindles by the day.”
For businesses in particular the closures have posed challenges. One of my local business owners said:
“You can do banking at the Post Office but, in order to pay things in, you have to get in touch with your bank first and get paying in slips sent out. Santander would only send me 5 and I have run out now. It means I can’t accept cheques for my business easily. I don’t have the time to keep ringing up for paying in slips…It’s a killer for small businesses who have to close their shops to go and stand in a queue for a lengthy period of time just to get change.”
I have also heard moving stories from those who care for others, who have inevitably borne the brunt of closures. One said:
“My mum with Alzheimer’s relied on her Lloyd’s branch in Droylsden before it was shut. The staff knew her well and helped her. They knew her condition and if she was in a bad way they would phone me and give her a cup of tea while they waited for me to arrive. The staff said there were lots of other people like my mum. The closure really affected her.”
The most recent disappointing news that I have had in my constituency is that Barclays will be closing its branch in Hyde, too. When I announced that on my Facebook page, it very quickly attracted more than 100 comments from local people. People really care about this issue, and they are right to do so. A common thread among the feedback that I hear from constituents is that nobody wants their community to become a ghost town.
Equally, no one is saying that they want to halt progress, but we must ensure that technology works for us and not the other way around. Some of the technological advances could be harnessed to include people who historically have had trouble interacting with traditional banking, such as offering remote video appointments or having speaking ATMs. However, the goal must be to strive to ensure that we use technology to benefit bank customers, rather than creating a pared-down automated banking sector that leaves people without the support that they need.
That is also true of access to cash, which many Members have raised. Although habits around cash are changing—when I am at work in London, I tend not to use cash very much—I certainly need it when I go home at the end of the week. Members are correct to say that we must not allow ourselves to sleepwalk into a system that leaves some communities stranded without ATMs. I know that the Government and the Minister are concerned about that, but communities must have the fundamental right to demand an access to cash review in their area, like the access to cash review proposed, so that the power is theirs to ask for a review of their cash arrangements.
Although, as habits change, we would anticipate that some bank branches would have had to close in recent times, the hon. Member for Midlothian is right that the rate at which the branch network is shrinking is accelerating, which is the primary concern. Figures from Which? show that 3,509 branches have closed across the UK since January 2015. That is at a rate of 55 a month. The scale of those closures seems disproportionate and does not necessarily match what people are saying to us about how they want to use their bank branches. Research conducted in 2016 by the Social Market Foundation found that there remains a strong consumer appetite for a physical presence.
Labour’s proposal in our recent manifesto was to change the law regulating banks so that no closure could take place without appropriate local consultation and without FCA approval. I share the concerns that have been raised about the existing nature of consultation. Crucially, a bank should have to consult with not only the customers of that branch but representatives of the local council. Fundamentally, it should have to publish details of the reasons for closure, including financial calculations showing the revenues and costs of the relevant branch.
The share of central costs, such as those for accounting systems, IT, security, personnel and so on, would have to be allocated to the branch and separately identified, especially as many of those costs are relatively fixed and are not proportionate to the number of branches. The FCA’s approval would then be needed for any bank branch closure. I urge the Government to think perhaps not about the specifics of that, but certainly about the transparency of information published by a bank when a branch is to close. In addition, we wanted to see the Post Office evolve from its current banking framework to being a bank in its own right. Many countries operate very successful postal banks, and that could have been the basis for the long-term future of the Post Office, too.
In the next few months, we will be shown the harsh realities of social isolation. This is an important moment to think about how important communities are, and the role that bank branches play in holding high streets and localities together. Regulators, banks and policy makers must work together to improve what we have at the minute and to ensure that we end up with a banking infrastructure that works for all customers, all communities and the future.
It is a pleasure to serve under your chairmanship, Sir David.
I thank the hon. Member for Midlothian (Owen Thompson) for securing this debate on an enduring concern across this Chamber and the House as a whole. I thank him for our conversation yesterday, following up on his question during business questions at the end of February. Since the start of this year, I have had conversations about similar matters with the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) and my hon. Friend the Member for Colne Valley (Jason McCartney).
In the debate, I listened carefully to the speeches of the hon. Members for East Renfrewshire (Kirsten Oswald), for Kilmarnock and Loudoun (Alan Brown), for Strangford (Jim Shannon) and for Stalybridge and Hyde (Jonathan Reynolds). In my remarks, I will address the points they made.
The hon. Member for Midlothian, in opening, referred to the current context. At this time, obviously, banks will operate using contingency plans. In the light of such circumstances, we expect them to consider what that means for their branch closure programmes.
Customer-facing financial services are undeniably changing, as consumers and businesses opt for the convenience, security and speed of digital payments and banking. In 2018, almost three quarters of UK adults used online banking, half mobile banking and two thirds contactless payments. Meanwhile, branch usage fell by 26%, on average, between 2012 and 2017, with many communities seeing even more drastic declines.
Banks clearly must balance changing customer interests, market competition and other commercial factors when they consider their response. Many have proceeded in different ways. Sometimes they take the difficult decision to close branches in order to strike that balance. Although that is disappointing for communities, I have been clear that banks are best suited to know what works for their customers, and these must ultimately be commercial decisions.
That said, in January, I visited Yarm in Stockton to look at what Barclays is doing with its network. It has taken a group of more than 100 branches—102 or 112, I think—that are the last bank in their towns, and is working hard with the communities to secure a future. I encouraged it in that work, because models exist to sustain such branches, if transfers are made into that last bank. Barclays is optimistic about a large proportion of the cohort surviving for a significant time.
The Government cannot reverse changes in the market and in customer behaviour, and nor can we determine the commercial strategies of individual firms. I still believe that it is not for me in Westminster to decide the shape of a branch network or whether a bank should place a branch in Wolverhampton or Wick, but it is important that the impact of closures on communities is understood, considered and mitigated. I will set out some of the ongoing work in that area.
The access to banking standard is a key mechanism to ensure that customers are well informed about branch closures, and that banks set out their reasons for closure and the alternatives available to consumers. Since May 2017, the major high street banks have voluntarily signed up to the standard. However, I acknowledge that hon. Members have made representations to the effect that the application of the standard lacks transparency, is inconsistent and is insufficiently tailored to local conditions.
Last July, therefore, I met representatives of the Lending Standards Board and UK Finance, which enforce and own the standard, to discuss some of these concerns. As a result, they have agreed to two key improvements to the application of the standard. The first is agreement on a common definition of what constitutes an impacted customer when a branch closes, and the second is agreement on a number of common metrics to be used in impact assessments. Both of those will drive greater consistency of information among banks when they are closing branches.
In its recent annual report, the Lending Standards Board reported improved compliance with the standard among firms. It found that firms were providing more local information specific to the branches in question, and strengthening their relationships and engagement with the Post Office. In due course, the Lending Standards Board will publish examples of best practice to highlight positive approaches and provide a standard for under-performing firms to work towards.
Hon. Members will know the important role that the Post Office plays when branches close, and I have noted the comments of the hon. Member for North Ayrshire and Arran (Patricia Gibson) about the Treasury Committee’s report on this issue. I was therefore pleased by the successful renegotiation of the Post Office’s commercial agreement with the high street banks. That means that for the next three years at least, 99% of personal customers and 95% of small and medium-sized enterprise customers can continue with everyday banking at one of the UK’s 11,500 Post Office branches.
The agreement also ensures that local postmasters will see a considerable increase in fees for processing transactions, which will rise as volumes grow. I acknowledge the hon. Lady’s point about this being a complementary activity; I do think we are on a journey when it comes to the functions that post offices can provide, because they clearly cannot provide face-to-face banking services. Those are being aggregated generally across the industry, but these are issues that the banking industry must come to terms with. I will say more about that in a minute.
Post Office figures from between 2018 and 2019 show that overall transactions increased by 15.5%, deposits increased by just under 40%, and withdrawals grew by 16%. Increased income from fees will help the post office network become more financially sustainable and will allow for investment in automation, training and security. As high street entities, post offices face similar challenges when it comes to footfall and the changing behaviour of customers.
Turning to the issue of access to cash, three in 10 payments in the UK are still made in cash, and the Government want to ensure that cash remains available for those who need it. That is why in last week’s Budget, the Chancellor announced that the Government will bring forward legislation to protect access to cash. We will work with regulators and stakeholders as we develop our approach, including with LINK, the Payment Systems Regulator, and people such as Natalie Ceeney, who carried out the “Access to Cash” review last year. That process will also involve stakeholders such as Which?, who have taken a great interest in this issue.
Improving digital access must be an equally important part of our response. The opportunities created by digital and online products should be open to all, which is why we established the digital skills partnership to bring together the public, private and third sectors to address the digital skills gap in a more co-ordinated and collaborative way. Of course, doing so depends on physical connectivity; some 98% of premises in the UK can access decent broadband, but there is more work to be done. That is why the Budget announced a £5 billion commitment to support the roll out of gigabit-capable broadband.
Mobile coverage is also important; as the Chancellor has announced, the shared rural network agreement has been finalised, which will involve an extra £510 million of funding from the Government. That means that 95% of the UK’s landmass will have that connectivity.
Last year, I concluded a Westminster Hall debate on this topic with a call to arms for the industry, which I reiterate and re-emphasise today. We cannot reverse digital innovation—nor should we, given the benefits it brings. However, this House can agree that vulnerable customers must not be left behind or locked out of opportunities. Government, regulators and industry are already acting to ensure cash remains available. I have just come off a call this afternoon in which I discussed mutual banks, credit union reform—which was also announced in the Budget—and hubs and cash access, which is something I am actively pursuing the banks about.
We must keep putting energy into digital inclusion, and not let the process of innovation run out of steam. I will be working with the industry and pushing it to go further. I value all the contributions that have been made today; they reinforce the energy that I will continue to bring to solving some of these difficult problems, which differ across the country.
I thank all hon. Members for their contributions. The sense of déjà vu among many, most or all Members regarding the situation with banks is certainly of note. It is frustrating that banks’ consultations are so flawed—they are simply box-ticking exercises—and I welcome the innovative thinking that the Minister has outlined. Hopefully, we can press that thinking on banks, but more needs to be done to make sure we maintain that face-to-face connection with our communities.
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).