I beg to move,
That this House
has considered bank branch closures.
It is a great pleasure to serve under your chairmanship, Sir David. I will start my comments with a bit of nuancing. This debate was applied for and considered at a time before much of the current advice was put in place encouraging many of those in our communities who would be the natural users of a local bank branch to stay at home. Many of my comments calling for banks to remain open are therefore very much inclined towards the time when we get past the current situation and are returning to something of a more normal environment.
The debate is clearly taking place against the backdrop of an unprecedented public health crisis and grim news. One positive I already see emerging from that, though, is the mobilisation of communities to protect the most vulnerable among them. I hear tales of shops delivering groceries to older customers, of dog walkers dropping off prescriptions and of people sending kind messages to neighbours in isolation just to let them know that they matter. These are all hugely important to keep our communities functioning and working together through challenging times. It would be good to see the banks exhibit that same sense of public spiritedness, show a sense of responsibility to the communities they serve and at the very least call a halt to their closure programmes until we are through the current situation rather than quietly closing down branches never to open them again. I wrote to the Bank of Scotland urging it to consider that action.
The latest tranche of closures announced by Lloyds/Bank of Scotland comes after years of watching the vital network being decimated. Between 2012 and 2019, the UK lost 22% of its bank and building society branches. In 2017, about 10% of the rural population lived at least 10 miles away from their nearest branch. Scotland, with its highly rural population and more challenging demographics, saw a third of branches close in just nine years, with 610 closures between 2010 and 2018. The announcement in January from Lloyds Banking Group of 56 branch closures was still a little surprising as it came just a month after Bank of Scotland managing director Tara Foley was reported to have said at the opening of a hub in Glasgow that the bank was committed to its branch network and that branches were “not going anywhere.” Tell that to my constituents in Loanhead.
For hundreds of years, the Bank of Scotland was a respectable stalwart of the Edinburgh establishment, ahead of the field in finance and in finding innovative solutions to meet customer needs. Founded in July 1695 by an Act of the original Scottish Parliament, the independent one, the bank started opening branches back in 1774. It was the first bank in Europe to offer paper currency and, in 1826, fought a spirited campaign against attempts by the Westminster Parliament to outlaw its notes below £5. The campaign was much aided by the fantastic writer Walter Scott, whose head now adorns the bank’s modern notes, in tribute to that popular and successful campaign. I hope this campaign will be equally successful.
It is therefore disappointing to see the modern incarnation of this once proud brand making life so much harder for those who work with paper notes, wielding the axe so brutally against the communities that helped to build the bank. When the banks crashed in 2008, Lloyds Banking Group was one of the major recipients of the Government bail-out, to the tune of £20.3 billion and a 43% public stake. Now, public shares are paid back, profits are high and big bonuses have made a bit of a comeback. In 2018, Lloyds unveiled a £4 billion pay-out to shareholders, statutory profit before tax was up 13% and £464.5 million was given out in bonuses. Payment protection insurance pay-outs took its toll last year, with pre-tax profits down from £6 billion to a meagre £4.4 billion, so chief executive António Horta-Osório took one for the team, pocketing only £4.7 million, compared with £6.5 million the previous year. That is meagre, and it must be difficult to survive on such limited earnings. The idea that the bank cannot afford to maintain the existing branch network is therefore clearly nonsense.
My particular concern, as the MP for Midlothian, is the looming closure of the last bank in Loanhead. In fact, it affects not just Loanhead; that bank represents the only one in the communities of Loanhead, Bilston, Roslin, Rosewell, Straiton and Damhead. Many of my constituents beyond the town itself are clearly concerned about how they will access banking. The decision is staggering, with dire economic and social consequences for a town with a population of about 7,000 now, but set to rise rapidly with significant new housing developments. The Bank of Scotland has not taken that into account in coming to its conclusion.
Future growth will rely on start-ups and microbusinesses setting up in the area, so access to a banking service remains vital. About 20% of small businesses with turnover below £2 million use branches as their primary source of banking. Being able to get into the bank at a time suitable for them will clearly be critical. The sheer geography of Midlothian does not lend itself to a bank being even two or three miles away—the physical journey might not always be a straight or simple one.
The Select Committee on Scottish Affairs, in its 2019 report on access to financial services, stated:
“The impact of losing a bank is particularly is acute when it is the last bank in town”— as in this situation. Statistics tell the same story. Research mapping branch closures against the British Bankers Association postcode lending data found that growth in lending to small and medium-sized enterprises was dampened by 63% on average in postcodes that lost a bank branch. When it was the last bank in town, that figure shot up to 104%. On average, postcodes that lose their last bank receive almost £1.6 million less in lending over the course of a year.
The Loanhead branch closing will without doubt damage this historic town economically, as it will the nearby communities of Bilston, Damhead and Roslin, all of which rely on that bank.