I am eternally grateful to you, Madam Deputy Speaker, as I am to the Backbench Business Committee for giving us the time for this statement. It is on the third report of the Scottish Affairs Committee and is the result of our short inquiry into Royal Bank of Scotland branch closures in Scotland.
In our inquiry, we took evidence from representative groups and organisations, and we invited members of the public affected by the closures to get in touch. We had two evidence sessions involving senior executives from RBS, with the RBS chief executive officer, Ross McEwan, joining us in our second session. We also took the opportunity to hear from the Lending Standards Board, which oversees the voluntary code of practice on branch closures. We are of course grateful to all who took the time to help us with this report.
In our evidence, we were told that rural communities would be particularly affected by the closures. Scottish Rural Action told us that
“it can take people a really long time, having to use several modes of transport and at great expense, to travel to the next nearest bank, sometimes involving ferries as well as public transport.”
We were told that people with mobility issues and caring responsibilities would also be particularly badly affected, and we received accounts from individuals concerned about the impact on their elderly relatives. The consumer group Which?—it was very helpful to us in this inquiry—noted:
“Bank branch closures disproportionately impact vulnerable consumers, particularly those in rural areas, those without access to good broadband, and those on lower incomes.”
We heard from business groups, which told us that it would be much
“more difficult to run a business in much of Scotland—including many deprived communities and tourism hotspots”.
My constituents are dependent on such hotspots. In its evidence, the Federation of Small Businesses said that closures often created additional costs for business owners, making it more difficult to manage cash flow, with productivity in the wider local community suffering as a consequence.
We concluded that the closure of these branches would be a devastating blow to the affected communities, removing vital services that are relied on by businesses and disproportionately affecting vulnerable customers. We were not convinced that RBS fully appreciated the damage that these closures will do to the communities and businesses that rely on these branches.
RBS told us in its evidence that these closures were driven by changes in customer behaviour. It said that it is closing branches in response to the increasing numbers of its customers accessing services online and via mobile devices. While there is absolutely no doubt whatsoever that customer behaviour is evolving, with more people now using digital services, our inquiry found a real demand for a local branch as a feature of local communities.
We also explored whether RBS was in fact trying to lead customer behaviour by incentivising customers to transfer to digital accounts and force them on to other platforms by this programme of closures. RBS was keen to assure the Committee that no targets were set and that there were no incentives for digital take-up. However, we did see such reports in the press, including a screenshot of a document appearing to show that targets were set in its centres, and we asked RBS to clarify that. In its response, it told us that
“colleagues have goals to serve our customers well”,
and that the screenshot was a
“standard performance document”,
in which staff are
“expected to agree objectives with their line manager...as well as ways of measuring against these goals”.
I will leave it to the House to assess whether public behaviour is being met or being led by RBS.
We did find, quite curiously, that these closures are not motivated by any savings to the bank. RBS will save only some £9.5 million. That is a significant sum, but absolutely nothing against a cost base of £4 billion. It is actually a smaller figure than RBS spent on sponsoring rugby, which came in at £11 million a year. That prompts this question: why is RBS antagonising its customer base with this unpopular closure programme for what, to it, is merely a pittance of a saving, but with all the subsequent reputational costs? That might have something to do with Unite the union’s view that this is intended to improve the value of the bank’s shares and for
“ripening it up to go back into the private sector”.
This week, of course, we find that RBS shares are to be marketed, at a significant cost to the taxpayer who acquired them at almost double the value when the banks were recapitalised in 2008.
That brings us to the majority shareholder: you, Madam Deputy Speaker, me and all the taxpayers of the United Kingdom, who still own over 70% of the stock of RBS. The Government are the steward of this public interest, but they have showed no interest whatsoever in exercising any influence as our guarantor in this closure programme. The stock response from the Government was to say that they do not get involved in commercial decisions. We were profoundly disappointed that no Minister showed us the courtesy of coming to our Committee and being prepared to be challenged by the Committee on that assertion. Perhaps we could explore further with Ministers what influence may have been exerted. It remains baffling that, as the main shareholder, the Government have expressed no view whatsoever about these bank closures.
We repeatedly asked RBS what would happen if the Government sought to make their displeasure known and perhaps asked it to reconsider its closure programme, but we never secured a satisfactory response to that question. What Ross McEwan told us was that he had received no representations from the UK Government on the subject of branch closures. We say in our report:
“If RBS does not act on our recommendation to halt the closures we recommend that the Government use any influence that its majority shareholding provides to apply pressure on RBS to reconsider the closure programme.”
We did, however, make some headway in securing concessions from RBS. After our first evidence session, RBS announced a reprieve for 10 branches until the end of 2018. It also offered a variety of other concessions, such as giving the buildings it owns over to community use and assistance with digital services for high-use, regular customers. The reprieved branches were primarily the last bank in town and those more than nine miles from the next nearest RBS branch.
When this reprieve was announced, RBS said:
“Should any of these branches see sustainable transactional increases and viable new income over this period, then the bank will reconsider the closure of the relevant branch as part of a full independent review.”
RBS provided little information about how such reviews would be conducted, and the company originally charged with leading this work is now unable to do so. There remains a great deal of uncertainty about how these branches will be evaluated and on what basis decisions about their future will be taken. We therefore have serious concerns that these branches are being set up to fail. In our report, we say that
“RBS should postpone the review of these branches until 6 months after the independent reviewer has been appointed”.
Lastly, the whole process of consultation has been spectacularly woeful. There is currently no requirement under the access to banking standard for banks to consult customers or staff ahead of a decision to close a branch. Given the public response we have seen to this report, there is great interest in local communities about being consulted ahead of branch closures. We therefore recommend that the Lending Standards Board consult on amending the access to banking standard to require banks to consult their customers, to assess the impact of closures on customers and communities, before final decisions on branch closures are taken.
Branches are now being closed and vital community assets are being lost. We say, even at this stage, that we should see what we can do to keep these branches open. If RBS truly wants to meet the needs of its customer base, it should respond to this overwhelming evidence and halt its closure programme. Given the recent profits reported by RBS, this is a cost it could easily afford to bear.