Local Bank Closures — [Joan Ryan in the Chair]

Part of the debate – in Westminster Hall at 4:44 pm on 12th June 2019.

Alert me about debates like this

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury 4:44 pm, 12th June 2019

That behaviour that my hon. Friend experienced in his constituency is not best practice. It is not acceptable. It is very unfortunate when that happens. My job is to try to ensure that there is a systematic upgrade to the quality of the consultation and engagement from the banks, and I will now set out what is happening.

The access to banking standard has been noted by a number of colleagues today. Since May 2017, the major high street banks have been voluntarily signed up to the standard, which commits them to work with customers and communities to minimise the impact of branch closures. The standard ensures that banks keep customers informed about branch closures, and that the bank sets out its reasons for closure and the alternative options for continued access to services. How meaningful that consultation process is has been raised, on the basis that it happens when a decision has been made and not prior to the decision. I am looking into that. I have written to the Lending Standards Board and will be meeting its representatives to discuss the matter further.

The options for continued access should include specialist assistance for customers who need more help. For example, the Lending Standards Board, which monitors and enforces the standard, has told me it sees evidence of support from firms to assist customers in understanding and using alternative banking options. I recognise that that happens in some, but not all, cases. Such support might include digital experts being placed in the relevant branches to demonstrate how mobile and online banking works and assisting those customers who wish to use that functionality, as well as making introductions to nearby post offices and retained branches.

I continue to be very supportive of the access to banking standard and I value the commitment it places on banks to communicate the next steps for customers when the decision is made to close a branch, but I am aware of the concerns that colleagues have expressed about the standard. I confirm that I recently wrote to the Lending Standards Board to seek reassurances that the access to banking standard remains fit-for-purpose, and I intend to meet the chief executive to discuss matters further, drawing on the meetings I have had with various groups from all parts of the House and on the representations made so forcefully by colleagues this afternoon.

I turn to the Post Office. I was pleased to see the successful renegotiation of its commercial agreement with high street banks. That will enable 99% of personal customers and 95% of small and medium-sized enterprise customers to continue to carry out their everyday banking at one of the UK’s 11,500 post office branches; that is 91 more branches than there were in March 2018. I acknowledge the point that my hon. Friend the Member for Moray made about functionality and how not all functions can be carried out at the post office. That could evolve, but we already see aggregation of banking services at the sub-regional level when more specialist advice is required. The issue is about working out ways to solve that challenging problem. I am engaged in that work and am happy to explore that further with him.

As a result of the renegotiation, postmasters will see a considerable increase in fees for processing deposits, and the fees will rise further if transaction volumes continue to grow. An increase in fee income will help the Post Office and its network become more financially sustainable and will allow for investment in automation, training and security in post offices. Some £2 billion has been invested by the Government since 2010.

It is essential that more people know about the banking services offered by the Post Office, which is why I asked it to work together with UK Finance to raise awareness. According to a survey by Which?, only 55% of UK adults are aware that they can use their post office for banking services; that statistic was made clear this afternoon by my hon. Friend. The point he did not make was that 77% of those who had used the post office for banking said they would do so again. We are on a journey of understanding, as people become familiar with what can happen in a post office. After that work, UK Finance and the Post Office found that awareness had increased and committed to using community outreach to further improve awareness. I will continue to take a keen interest in the progress of that work.

Although many customers are satisfied with the Post Office’s banking services, I am aware that there are still some outstanding concerns—they have been mentioned this afternoon—such as with privacy and queueing. I have therefore written to my hon. Friend Kelly Tolhurst, the Minister in the Department for Business, Energy and Industrial Strategy responsible for postal affairs, to request that our officials continue to work closely to explore the issues.

My hon. Friend Bill Grant made a point about credit unions and post offices. I welcome any feasible innovations in that space. The main trade body for credit unions is conducting extensive UK-wide consultation, and it will come back to the Government in September. I would be happy to explore with it how the solution he suggested might be acted on.

Related to bank closures is the issue of continuing access to cash. It is clear that for some people, cash remains their preferred, or only, method of payment for a variety of reasons. My hon. Friend Peter Aldous set out his experience, and that situation remains true for many people out of choice. Our financial system needs to cater for everyone in our society. Although it is exciting for many consumers, technology must not come at the expense of choice. There will be therefore be no changes to our current system of notes and coins. We want to ensure that cash is available for those who need it, when they need it.

In 2015, we established the Payment Systems Regulator, a powerful economic regulator of the payments industry. Its objectives balance the need for competition and innovation on the one hand with the protection of consumer and business interests on the other. Through the creation of the joint authorities cash strategy group, we are acting to ensure a comprehensive approach to regulation in light of changing trends and preferences for cash. The Payment Systems Regulator is already examining the factors that affect the distribution of ATMs across the country. I was concerned by what happened in Lossiemouth: it is a good case study for the regulator to be examining during the early weeks of its work.

I welcome today’s announcement by UK Finance, the trade body for banks, that it too intends to explore key issues around access to cash, including the role of local areas and communities. The industry must continue to play its part, and developers should consider the needs of all customers as they design new digital banking products and forms of payment. We are seeing companies such as Square trying to increase the use of card payments in small towns. No one should be locked out of the benefits that technology brings.

I recently concluded a Westminster Hall debate speech with a call to arms to the industry to think about all consumers when developing its services, and I re-emphasise that here this afternoon. I welcome the innovations that banks are introducing to respond to changes in customer behaviour as more of us choose to bank on demand online or via an app, rather than visiting a branch. We cannot reverse digital innovation, and nor should we, given the benefits it brings to our constituents—I acknowledge once again the point made by Jamie Stone about his constituents’ experience of connectivity—but we need to find solutions for the whole of the United Kingdom. Improving digital and financial inclusion is key to ensuring that vulnerable customers are not left behind.

I will keep pushing the industry—someone mentioned the carrot and the stick: both are required—to move forward and do more. I hope Members will recognise that I have responded thoroughly to the points made. I am happy to continue the dialogue, but I am working to engage on the specific issues raised and to secure the improvements needed.