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Cash Infrastructure

Volume 814: debated on Monday 19 July 2021

Question

Asked by

To ask Her Majesty’s Government what plans they have (1) to designate the United Kingdom’s cash infrastructure as critical national infrastructure, and (2) to introduce a universal service obligation for the provision of cash.

My Lords, designation of the United Kingdom’s critical national infrastructure is sensitive and, as such, not made public. However, the Government have committed to legislating to protect access to cash and to ensuring that the UK’s cash infrastructure is sustainable in the long term. On 1 July, the Government published a consultation which sets out proposals for new laws that seek to ensure that people need to travel only a reasonable distance to pay in or take out cash.

My Lords, does my noble friend agree that the future of financial services is digital, and that that future must be inclusive, accessible and empowering? At least until that future arrives, cash still matters materially to millions.

I absolutely agree with my noble friend. In fact, cash remains the second-most used payment form in this country. That is exactly why we have made this commitment to legislate and launch the consultation on our specific proposals, which we look forward to taking forward.

My Lords, cash is essential to many people’s ability to budget. I am sure the Minister is aware that cash machines that charge for use are often found in communities that have fewer alternatives for accessing cash. Can she assure this House that the proposed legislation will contain a requirement to ensure that cash is both accessible and free of charge?

My Lords, industry is best placed to develop the most efficient and sustainable solutions for access to cash. However, the legislation is proposed to set out geographic requirements so that people do not have to travel too far for access to cash. It will also make the FCA the lead regulator on consumer access to cash, ensuring that access to cash is reasonable—that should take into account vulnerable users and factors such as costs when looking at the provision in the country.

My Lords, the data tells us that cash usage is higher among higher age groups, those with mental health issues, those on lower incomes and other categories. Does the Minister agree that what works in terms of digital payments for some groups in society and proves financially viable for major banking institutions simply does not work for large numbers of people in a diocese of 3 million such as Southwark, and many others?

My Lords, the Government believe that we need to make digital payments as accessible as possible, but we also acknowledge the continuing role of access to cash, particularly among some of the groups that the right reverend Prelate mentioned. That is why, as part of the consultation, reasonable access considerations will be given to the FCA to regulate, as I have said, so that people can have access to that cash. LINK, the UK’s largest ATM provider, has taken action to protect the distribution of free-to-use ATMs, including in deprived locations and more remote locations.

My Lords, as an independent non-executive director of LINK, I recognise the valuable work being done to help ensure that cash remains readily available right across the UK. What analysis have the Government made of the declining acceptance of cash by retailers, particularly in the hospitality sector, and are any measures planned to reverse that apparent trend?

My Lords, analysis has been done by the Bank of England which showed that 40% of people had visited a store that did not accept cash in the six months prior to January 2021. That is an increase on the January 2020 figure of around 15%. We are taking forward several measures; as part of this consultation, we will help businesses continue to accept cash by ensuring reasonable access to cash depositing facilities, as well as cash ATMs and withdrawal facilities. There was also an amendment to the Financial Services Act 2021 to allow for cashback without purchase, which will also support local cash recycling and continued cash acceptance.

My Lords, access to cash is part of the broader financial inclusion crisis. Will the Government empower the FCA and other regulators to set aside competition rules where it would lead to co-operation by financial institutions to fill the gaps—for example, with shared premises and staff and potentially shared machines and software?

My Lords, I understand that a number of industry-led pilots are already under way which are taking forward the kinds of initiative that the noble Baroness is talking about, and they have been able to take place within the current competition framework.

My Lords, I agree with my noble friend Lord Holmes that, for those without bank accounts, access to cash ATMs and to retailers which accept cash is crucial, and both are becoming rarer. Is there a role for the Department for Work and Pensions in helping pensioners who do not have bank accounts by issuing them with a prepaid card, topped up monthly, as it already does for universal credit claimants? This would give them financial inclusion and independence.

My Lords, the Government are committed to ensuring that all individuals have access to financial products, including a bank account, but the DWP recognises that some customers may be genuinely unable to open or manage a bank account. For those customers, payment is made via the payment exception service. My understanding is that this may already be available to a wider set of customers than the noble Lord referred to, but I will take up this point—as it is a very good one—with the DWP and get back to him.

My Lords, today another 12 sub-postmasters have had their convictions for fraud overturned, so would this be a good time for the Post Office to salvage its reputation by relaunching as a mutual with a cause of providing cash and the other services that communities need? Would the Minister agree with me that the “people’s bank” could be a useful step towards levelling up?

My Lords, I think I join noble Lords across this House in being shocked at the outcome of these cases and the ongoing issue. The Post Office has an incredibly important part to play in the provision of access to cash and free-to-use access to cash. The Government’s intention is that that role will continue.

My Lords, as we have heard, cash is essential for all sorts of reasons—for children, charities, savers and budgeting, or just for some people wanting to split a bill at the end of an evening. But as it is a critical infrastructure, would the Minister confirm that it is covered by the National Security and Investment Act, such that a beady eye is kept on the IT behind its provision so that that does not fall into hostile hands? Could she also outline the steps the Government are taking alongside industry to ensure the security of the IT systems which underlie that access to cash?

My Lords, as I said in my initial Answer, designation of the UK’s critical national infrastructure is sensitive. However, financial services more broadly are an area of infrastructure covered by CNI. In terms of operational resilience, the noble Baroness is absolutely right. In March, the Bank of England, the PRA and the FCA published a joint policy statement on operational resilience for the finance sector. This clarifies and sets new expectations for firms to improve their operational resilience and comes into effect from March 2022.

My Lords, I am much encouraged by my noble friend’s answers to date. But is she also aware that many companies appear to be quite actively discouraging the use of cheques and that many people wish to see them maintained?

My Lords, the Government have committed to financial inclusion in all its forms. As I said, we are taking forward this action on access to cash. We also want to look at more modern methods of payment and make sure that those who may have trouble accessing them have help and that they are made as accessible as possible to everyone in the country.

My Lords, does the Minister agree with me that the Financial Conduct Authority should be given overall responsibility for maintaining a well-functioning cash infrastructure as part of its proposed new duty of care to consumers? Can the Government provide details of what discussions they have had with the regulator about it taking on this role and the additional powers it may need in order to do so effectively?

My Lords, the Government propose that the FCA is the lead regulator for the provision of cash withdrawal and depositing facilities. There are other regulators that have a role to play in access to cash—for example, the Payment Systems Regulator and the Bank of England. The Government convene all those regulators together on a regular basis to make sure that they are all working together properly.