UK Cash Network - Question

– in the House of Lords at 2:48 pm on 8th November 2021.

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Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative 2:48 pm, 8th November 2021

To ask Her Majesty’s Government what plans they have (1) to designate the United Kingdom’s cash network as Critical National Infrastructure, and (2) to introduce a Universal Service Obligation for the provision of cash.

Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative

I beg leave to ask the Question standing in my name on the Order Paper and in doing so declare my technology interests as set out in the register.

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, designation of the United Kingdom’s critical national infrastructure is sensitive and as such is not made public. However, the Government have committed to legislating to protect access to cash and to ensure that the UK’s cash infrastructure is sustainable for the long term. The Government recently concluded a consultation setting out proposals for new legislation which seeks to ensure that people only need to travel a reasonable distance to pay in or take out cash.

Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative

My Lords, does my noble friend agree that, whether for the financial inclusion of individuals or the overall resilience of the UK economy, until we have high-speed reliable digital connectivity and high levels of universal digital inclusion, cash still matters, and it matters materially?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

I agree with my noble friend; he is completely correct. It is worth pointing out as some reassurance that over 79% of adults over 65 have made a payment using contactless in the last year and 84% of adults over 65 have used online banking, so I think the digital revolution is spreading to all parts of our society.

Photo of Lord Berkeley Lord Berkeley Labour

My Lords, the Minister’s answers seem to indicate that the Government are very keen that we end up as a cashless society, with everything done with cards and so on. Is he aware that Sweden has stopped this move because of fears of a covert attack? In which case, if we were cashless and had a covert attack which disabled everything, we would be a moneyless society.

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

The noble Lord makes a good point—though perhaps he meant “cyber” attacks—and it is certainly part of our responsibility to ensure that the banking system is resilient to attacks. We have convened the banking system and ensured that operational resilience is a key part of protecting the UK’s financial system, institutions and customers.

Photo of Lord Young of Cookham Lord Young of Cookham Conservative

My Lords, is there not a levelling-up issue behind my noble friend’s Question, in that areas that are left behind have more people without bank accounts and fewer ATMs? Will this be addressed in the forthcoming levelling up White Paper?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My noble friend is right that access to cash can be more difficult for those less well off. However, as he will be aware, LINK has committed to protect free-to-use ATMs more than one kilometre away from the next nearest free ATM or post office and free access to cash on high streets. It remains a priority of this Government to ensure that cash is available.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy)

My Lords, I wonder if I can press the Government, because the Bank of England is looking closely at a central bank digital currency. Many have suggested that this will be the substitute for cash in the future, but its characteristics are quite different, in many ways, from cash. Can we have an assurance from the Government that they will keep in place a cash infrastructure running alongside—if they choose it—a digital sterling?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, we are certainly looking at a digital system, but I reassure the noble Baroness that cash remains a key part of the ecosystem.

Photo of Lord Empey Lord Empey UUP

My Lords, as a former member of the Select Committee on Financial Exclusion, so ably chaired by the noble Baroness, Lady Tyler of Enfield, I first endorse what the noble Lord, Lord Young of Cookham, said about levelling up. Even though the statistics show a reduction in the number of those needing cash, people still become at the mercy of ruthless illegal moneylenders and others, and this is destroying lives. Can the Minister assure the House that he will keep pressure on the banks to ensure that there are effective and accessible services that allow these people access to the financial system, so that they can avoid all this desperation and the criminality that flows from it?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, basic bank accounts are one requirement of the banking system; the nine largest account providers are required to provide this to customers, and there are some 7 million basic accounts open with these providers. They are easier to open than ordinary bank accounts, and that facility remains available.

Photo of Lord Hunt of Wirral Lord Hunt of Wirral Conservative

I first draw attention to my interests as set out in the register, particularly as an independent director of LINK. Does my noble friend the Minister have an indication of when the fundamental review of financial services regulation will be concluded? Given that the pressure on cash infrastructure is now so acute, what news is there of the work the FCA is overseeing with the banks on developing a much-needed plan to protect cash infrastructure?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My noble friend asks important questions. On access to cash, as I said in earlier answers, the Government are committed to legislating to protect access to cash and ensuring that the UK’s cash infrastructure is sustainable in the long term. In answer to my noble friend’s second question, the Government are undertaking a wider financial services future regulatory review, which aims to build on the strengths of the UK’s existing framework as set out in the Financial Services and Markets Act 2000. An initial consultation exploring these issues and a proposed approach was published by the Treasury in October last year, and we had 120 responses. We will publish a second consultation with detailed proposals shortly.

Photo of Lord Tunnicliffe Lord Tunnicliffe Opposition Deputy Chief Whip (Lords), Shadow Spokesperson (Defence), Shadow Spokesperson (Treasury), Shadow Minister (Transport)

My Lords, the noble Lord, Lord Holmes of Richmond, is right to keep up the pressure on this important issue. The problem to date has been the lack of ownership, with the Treasury urging action from a variety of regulators and public bodies, none of which has a whip to crack when providers leave town. The recent consultation sought to place overall responsibility with the Financial Conduct Authority. Is this still the Treasury’s preference? If so, when and how will this be enacted?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, the Government’s consultation set out proposals for the Financial Conduct Authority to become the lead regulator for oversight of the retail cash system, including having responsibility for monitoring and enforcing new legislation and cash access requirements. In adopting this approach, the Government intend that the Payment Systems Regulator and the Bank of England continue with their existing functions with regards to cash. Co-ordinated actions by the FCA and PSR on cash as part of the Covid response have shown that joint working between the regulators at both strategic and operational levels is working.

Photo of Baroness Tyler of Enfield Baroness Tyler of Enfield Liberal Democrat

My Lords, following on from the questions from the noble Lords, Lord Hunt and Lord Tunnicliffe, will the Government commit to giving the Financial Conduct Authority responsibility to start tracking trends in cash acceptance levels among UK businesses to help understand what action might be required to prevent that problem worsening? Separate from the legislation—it will be great to get a timetable for when it will be introduced—what specific measures will the Government take to ensure that people, particularly those who rely on cash, can continue to use cash to pay for goods and services?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, as part of the FCA’s role in monitoring and enforcing cash access, the Government consider that it should be given responsibility for ensuring that access points provide reasonable access. In terms of recent activity, since the passing of the Financial Services Act, retailers now have the ability to offer cashback without purchase—I think it was from 29 June—and we are already seeing some take-up of that. Indeed, PayPoint, which operates terminals in several thousand outlets across the country, has committed to provide that extension to its service.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

Will my noble friend give an assurance that there will continue to be access to cash in rural areas? Could he please define what, in his view, is a reasonable distance to travel to pay in or take out cash?

Photo of Lord Agnew of Oulton Lord Agnew of Oulton Minister of State (HM Treasury), Minister of State (Cabinet Office)

My Lords, to reassure the noble Baroness, the provision of cash access across the UK remains extensive. As of March this year, 95% of the population were within two kilometres of a free cash withdrawal point.