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Cash Network

Volume 814: debated on Tuesday 7 September 2021


Asked by

To ask Her Majesty’s Government what plans they have to amend competition law to enable collective action to ensure an efficient, effective, accessible, and sustainable cash network across the United Kingdom.

My Lords, the Government have not set out plans to amend competition law. However, we are committed to legislating to protect access to cash. The Government are consulting on legislative proposals to protect access to cash withdrawal and deposit facilities. Together with this, the Bank of England has brought together industry to design a new model for wholesale cash distribution. The Government will explore how they can best enable and support an efficient, sustainable and resilient model.

My Lords, does my noble friend agree that, although the future of payments is digital, the case for cash remains material—material for millions, for individual financial inclusion and national financial resilience for the foreseeable?

I agree with my noble friend that cash remains a very important measure of exchange in this country. It is now the second most important—it is less important than it was—but we are committed to supporting it.

My Lords, in answer to a Question on 19 July this year, the noble Baroness, Lady Penn, stated that

“industry is best placed to develop the most efficient and sustainable solutions for access to cash”.—[Official Report, 19/7/21; col. 3.]

If that is the case, can the Minister explain why 8,000 ATMs—13% of the total—have disappeared in the past 18 months, making access to cash even more difficult?

To reassure the noble Baroness, there are still some 40,000 ATMs in the country at the last count, and we remain committed to supporting their continuation. Link, the payment services provider for cash machines, has restated that a number of times. The other side of the coin is that the percentage of transactions using cash has declined dramatically; it was 56% of all transactions in 2010, and is now down to 17%. The usage is declining, which is why some of these facilities are going.

My Lords, post offices are highly valued by the communities they serve. Will the Government consider committing to the Post Office’s future by developing it as “The People’s Bank”, providing cash withdrawal facilities in the communities that need them?

My Lords, the Post Office plays a vital role in supporting payments across the system. There are some 11,000 post offices, and some 95% of business customers and 99% of personal banking customers are able to deposit cheques, check their balances and withdraw and deposit cash. The banking framework allows banking via post offices.

My Lords, the Minister’s answers seem to me to fail to sense the problem for minorities and people who are poor. My real concern about access to cash is how poor people will manage. For poor people, frequently cash is the only way they can budget—they are not up to systems and that sort of thing. There are not many of them, but society must be responsible for them. I have read the document on this that the Treasury has pushed out; it seems pretty reasonable when you read it, but the key issue is the charging. The system is losing free-to-use cash machines. To us, the charges look trivial, but when you are taking small amounts of cash out, proportionately they are eye-watering. Will the Government insist that the free-to-use network is maintained and possibly enhanced?

My Lords, to reiterate my earlier point, there are some 40,000 cash machines that are free at the point of use; they are sustained through an interconnection charge between the banks. As for what the Government are doing, in the Financial Services Act of this year we legislated to allow cashback without purchases. That became law in June this year, and it is something where everyone’s interests are aligned: the retailer gets the opportunity to increase footfall into their shops and to reduce the cost of having to bank cash, which is expensive. We are optimistic that this will provide a wide range of additional outlets for cash.

I declare my interest as an independent non-executive director of Link. What are the Government’s plans to ensure that an effective hub network of physical access to financial services is maintained right across the country in the future? Amid the increasing tension that exists between banks, post offices, the banks’ attempts at hub pilots and local shop services such as cashback, what are the Government doing to co-ordinate the picture to ensure we have free access to cash?

My Lords, the Government welcome industry efforts to develop solutions to provide continued access to financial services. The community access to cash pilots are an industry-led initiative, taking place in eight locations in the UK at the moment. These are trialling and testing sustainable solutions for ensuring that communities can conveniently withdraw and deposit cash. The Government’s proposals for cash will enable firms to use a range of solutions, including existing facilities, to provide access to cash for the purpose of meeting geographic requirements, provided they are judged to be delivering reasonable access by the responsible regulator.

My Lords, I accept that change will come but it is vital we protect those who rely on cash. It is people on tight budgets, but it goes beyond that: it is also people who are cared for in their own home, with carers who do the shopping. I declare an interest: I was shielding for months last year. Three people were doing the shopping, with cash provided sometimes before the shopping and at other times after. What was I supposed to do? Cash was absolutely vital for those transactions. You cannot give a cheque or give your plastic cards out, so the idea that it affects only a few people, and that change is on the way in digital, is nonsense—we are going to be a cash society for a long time to come.

I agree with the noble Lord that we are going to remain a cash society for a considerable time, but I reassure him that, as of the first quarter of this year, over 99% of the population was within two kilometres of free cash withdrawal.

My Lords, in July I asked whether unbanked pensioners could be issued with debit cards, topped up with their monthly pensions, which they could use in shops—a facility already available to universal credit claimants. I was told that this service was widely available, but when I asked the DWP it told me that only 350 pensioners have these cards. As more and more retailers refuse to accept cash, should not more unbanked pensioners be issued with these cards?

As my noble friend is aware, the DWP payment policy is to pay benefits and pensions into a standard bank, building society or credit union. The DWP encourages customers to provide standard bank account details, to give them greater choice in where and how they collect their money. Customers who receive their payment into an account of their choice are financially included and can benefit from a wide range of financial services, such as direct debits. A standard account allows customers to access cash payments via post offices, as I mentioned in a reply to an earlier question. The DWP payment exception service is a small-scale scheme where vouchers are uploaded to a card or sent electronically by SMS or email. It is available to that small minority of claimants who cannot open or use a standard bank account. It is not a prepaid card and cannot be used to purchase goods and services.

My Lords, the Minister knows that the ending of the Post Office card account, with the Government refusing to renew the contract, is going to really hit those very poorest pensioners who depend on that cash—that is practically all they have to take out each week. Week after week they are now getting letters telling them they must get a bank account or some other kind of digital banking. Why will the Government not accept that the Post Office card account should be retained to help those very poorest pensioners who rely on it, without the bureaucracy of a bank?

My Lords, it is not difficult to open a bank account. What we need to do is keep encouraging these elderly people who do not have an account yet to open one.

I congratulate my noble friend on the work he is doing in this regard, but surely we should keep from retailers the costs from the banks themselves for handling cash, which seem to be an impediment. Does my noble friend agree that there is still some reluctance, following the Covid crisis, about handling cash? Is anything being done to reassure the public that it is safe to handle cash?

My Lords, I think what has happened is that people have discovered the ease of not using cash for a number of transactions. Indeed, retailers would not be turning down cash if their customers were objecting to it.