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It would be naive to suggest that the world of banking has not changed with the rise of apps and internet banking. However, this debate is important, not least because the continuing closure of bank branches is emblematic of insufficient access to affordable credit, both for individuals—particularly those who, for whatever reason, are in challenging financial circumstances—and for small and medium-sized businesses that struggle to access the capital they need to expand. In that context, it is a pleasure to follow my hon. Friend Susan Elan Jones, who made several particularly good points about the specific challenges that bank branch closures cause for people and businesses in rural areas.
I will, if I may, dwell on a number of areas. My right hon. Friend Mr Lammy mentioned the difference mutuals make. He is right to suggest that the mutuals sector is smaller than it once was, but building societies such as the Nationwide, the Skipton, the Yorkshire, the Coventry and so on still play an important role in the communities they serve. They are much slower to close branches, which is an important symbol of their determination to do the right thing by their communities. They are helped in that by the fact that they do not have shareholders putting pressure on them always to maximise profits.
In that spirit, I encourage the Minister to dwell in her winding-up speech on what she and her Treasury colleagues might do to encourage the expansion of the mutuals sector. That sector covers not just the traditional building societies, but organisations that are part of the responsible finance movement—the community development finance institutions—of which I know she is aware.
I am thinking of the excellent work done by responsible finance institutions, such as Fair Finance, to encourage lending for individuals who cannot get loans from traditional institutions. I am also thinking of the work done by CDFIs focused on businesses, such as Greater London Enterprise, which are much more willing to provide loans to organisations set up by individuals in London which cannot access traditional sources of finance.
The responsible finance sector lends some £250 million annually to small and medium-sized enterprises, social enterprises and individuals unable to access mainstream finance. I give the Government credit for the fact that, under their regional growth fund, many community development finance institutions—or whatever we want to call them—have been able to access small additional funds to enable them to expand a little. I wonder whether it is not now time for the Treasury to be a bit more ambitious for the responsible finance sector and to look at what more it can do significantly to expand its capacity to lend more, particularly to small and medium-sized enterprises.
I ask the Minister to reflect on the way in which credit unions might be expanded. My hon. Friend Christian Matheson—I commend him and the hon. Members for Ceredigion (Mr Williams) and for Wells (James Heappey) for securing this debate—mentioned the significance of credit unions. They are expanding fast, but they are still a relatively small sector within the financial services world.
The previous Government initiated a project to consider whether credit unions’ back-office functions could be significantly improved. I wonder whether it is not now time to look at how the Government can help to improve the front end of the credit union world. What can be done to encourage better marketing of credit unions? I wonder whether it is possible for the major credit unions in London to come together, perhaps with a bit of Government support, to offer a common platform of services across London. As a result of a bit more marketing support, credit unions would get more attention than they do at the moment.
Similarly, I wonder whether there should be a duty on public services actively to encourage their employees to consider the promotion of credit unions to their staff. I find it unbelievable that some public service bodies, such as Transport for London, still do not have an arrangement to enable staff to pay money directly from their wages so that they can be members of a credit union, if they want to. Many NHS hospitals do that, as do some Departments. I ask the Minister to reflect on whether the gentle prod of a letter from her, sent around the civil service and devolved institutions, could be a positive step forward in encouraging the better promotion of credit unions.
I commend the hon. Member for Wells for taking the time to look at the Community Reinvestment Act from the United States. That Act should serve as a model for further UK debate about financial services regulation and what can be done to ensure that those who take money from us in the form of savings accounts and so on also put proper financial services back into our communities.
The Community Reinvestment Act arose from US civil rights activists’ concerns that banks were redlining areas where black people lived and were not providing financial services for those communities. There are similar concerns about under-served communities in the UK. I do not think that anyone is suggesting that that is happening on racial lines, by any means; rather, there are significant areas of deprivation that are not being served properly by major financial services institutions.
I think of the Thamesmead estate of about 50,000 homes in south London. There is no major bank on the estate—the nearest is a 30 to 40 minute car or bus journey away—and, needless to say, the high interest credit providers are extremely active there. Again, that is a worry, as it can increase the cycle of indebtedness. Volunteers on the estate are making efforts to encourage access to credit unions, but there should be more support from the Government to put pressure on the big financial institutions either to lend to those communities themselves or to work with other organisations such as community banks, responsible finance providers and credit unions to offer a more comprehensive service on site. Such pressure is extremely important.
To give the Government credit, they have required the British Banking Association to publish data on the level of lending in particular communities. That is welcome. But I wonder whether the Minister has had the chance to review the quality of those data, and consult those who actively look at what banking data reveal, to see whether there are more detailed requirements for better data from banking institutions. Certainly, I have had representations from the Community Investment Coalition suggesting that banks are not yet providing detail of the right granularity to enable effective conclusions to be drawn about where lending is appropriate. Will the Minister look at that?
Lastly, I commend the work of the think-tank Demos, which in 2015 published the case for a network of independent local banks across the UK. It noted in particular that the 2014 Breedon report, commissioned by the Government, showed a lending gap for small and medium-sized businesses of between £26 billion and almost £60 billion. Given the current level of uncertainty that all of us in the House are all too conscious of, doing more to make it easier for businesses and entrepreneurs with great ideas to get access to the finance they need to expand is clearly hugely important.
The work by Demos also revealed the significant differences in the rates of lending to small and medium-sized enterprises, with rejection rates for bank loans for SMEs highest in Wales, Yorkshire and the Humber, the north-east and the north-west. That suggests there is a strong case if not for regional banks then for putting more effort into securing new types of banking institutions with a stronger reach in those areas in particular. Many community banks, responsible finance banks and so on, which are already in existence, could be scaled up in those areas, but again that would require Government commitment to move in that direction. I gently encourage the Minister to look upon that idea with enthusiasm going forward.