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Financial Exclusion

Volume 792: debated on Wednesday 4 July 2018


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact on financial exclusion of (1) bank branch closures, and (2) moves to restrict the use of cash as a means of payment.

My Lords, the Government are committed to financial inclusion. Along with the FCA, we are taking steps to ensure that everyone has access to useful and affordable financial services, including face-to-face banking services and free access to cash. The Government recognise that banking and ways of making payments are changing rapidly, but we do not make assessments of branch closures or payment methods.

My Lords, I thank the Minister for his response. I am sure that he is aware that since 2015, some 2,900 bank branches have closed in the UK, and that only last year, the banks removed some 2,000 ATM machines, despite the fact that cash remains a very popular choice for many consumers. Does he agree that the increasing lack of face-to-face banking services, particularly in rural areas, not only threatens the financial exclusion of particularly vulnerable groups—I am thinking in particular of older people and those with limited mobility—but risks disrupting the entire cash economy in local communities, especially shops and small businesses? Given that, what concrete steps do the Government intend to take to ensure that physical banking facilities and cash payments remain available to all who want and need them?

Perhaps I may first pay tribute to the noble Baroness for her work as chair of the ad hoc Financial Exclusion Committee of this House, which provided important recommendations which the Government are steadily working to implement. The issue she raises is an important one. The way we pay for things is changing, as is how we use banks. Cash used to account for 60% of transactions. That has reduced to 40% of transactions and is predicted to go down to 20% by 2026. As I say, the way that banking is carried out is changing. However, we recognise that there is a particular issue for vulnerable people and vulnerable communities. For that reason, in January 2017 we launched the banking framework agreement between the high street banks and post offices. Some 98.7% of people live within three miles of a post office, even those in rural communities. We have introduced the Payment Systems Regulator, which monitors ATM machines to ensure that they are maintained as a source of free access to large parts of the community. We have a great deal to keep under review, but this is an important issue that the noble Baroness and the Government are very aware of.

My Lords, the Minister will be aware that post offices have taken up a lot of the slack caused by the closure of banks, but post offices close down as well and they do not offer the suite of services that banks can. People who are still dependent on cash are being squeezed even more. While I join the Minister in congratulating the noble Baroness, Lady Tyler, on her work with the ad hoc committee, perhaps I may press him to agree that simply passing the buck to post offices does not solve the problem.

I accept what the noble Lord says, but one of the points about the ground-breaking nature of the framework agreement with post offices on banking services is that 99% of personal financial services can now be transacted at the post office. That is helping to keep post offices open as an important part of the community. Some 95% of banking services can be provided by post offices as well. However, although this is a ground-breaking development, we are keeping it under review.

My Lords, does my noble friend agree that, while in no sense contradicting what the noble Baroness has said, there is a key role for fintech to play in addressing financial inclusion? Will the Government look at all the opportunities arising in fintech and consider promoting them to all vulnerable consumers?

Again, as another member of the ad hoc Financial Exclusion Committee, my noble friend initiated an important debate on the digital economy. We do believe that fintech, in which the UK is a leading force in the world, can be a powerful way of introducing significant change in this area for the benefit of those who need it.

My Lords, the Financial Conduct Authority estimates that 2.7 million people are stuck with permanent overdrafts and are using them more than 85% of the time, thus incurring higher and higher charges. Can the Minister tell us what measures the Government are putting in place to end the cycle of persistent debt and whether they will commit to imposing a cap on overdraft fees?

We have done a lot in that area, such as capping payday loans—those egregious payments. The Financial Conduct Authority has looked at the whole issue of buy to rent and is considering whether a cap is necessary. We have also done a number of things to try to help those with low incomes to improve their situation. My noble friend Lord Young took the Financial Guidance and Claims Act, which created a new single financial guidance body, through this House. All these measures are designed to improve the situation. We also announced our ambition to increase the number of people who have access to credit unions in this country from 2 million to 3 million.

My Lords, is the Minister aware of the attempts being made by the Post Office to make cash available to named individuals by arrangement with their bank when they are unable to manage cash withdrawal at an ATM, for example if they have a learning disability or may be at risk of financial exploitation?

I am not aware of that particular scheme. Of course, pressure is now being brought forward. One particular body, the Equality Advisory Support Service, oversees how this operates for people with disabilities. It can report and require the Financial Ombudsman or the Financial Conduct Authority to look at these areas and take action. I am happy to look further into the matter raised by the noble Baroness.

My Lords, many small businesses are still part of the cash economy. Where both the banks and the post office are closed, they face a conundrum: they cannot travel long distances during the day to get to facilities so where do they take their cash in the evening? Old banks used to have cash boxes in the wall where they could deposit cash safely. We are creating a serious security problem for many small businesses.

That reason, among others, is why the Government announced in March a review of and consultation on cash and digital payments in the new economy. That is precisely the type of question that is being looked at now as part of that consultation, to which we will bring forward a response in the autumn.

I am pretty sure that the answer is yes. There is a piece of legislation: the Bill of Exchange Act 1882, or something like that. I will probably have to write to the noble Lord. If it is not that Act, another serious piece of legislation is the Equality Act 2010, which carries certain mandates that need to be there to provide access for the wider community to ensure financial inclusion, particularly for the most vulnerable.