[Relevant documents: Nineteenth Report of the Treasury Committee, Household finances: income, saving and debt, HC 565; and the Government response, HC 1627; Oral evidence taken before the Treasury Committee on 12 March, on the Access to Cash Review, HC 2011; Twenty-ninth Report of the Treasury Committee, Consumers’ access to financial services, HC 1642; and Correspondence with the Chancellor of the Exchequer relating to Access to Cash (dated 13 March and 2 May).]
That this House has considered financial exclusion and the future of access to cash.
It is an honour to serve under your chairship, Sir Henry. I thank the Backbench Business Committee for granting our request to hold the debate. I also thank the Access to Cash Review panel, Joe Fortune from the Co-op party, the RSA, Responsible Finance, Hounslow Council, UK Finance, the Payment Systems Regulator, the Treasury Committee Clerks, Visa, Mastercard, the Financial Inclusion Commission, Citizens Advice, the Money Advice Service, Age UK and many others for their help in preparing for the debate. I mention them as an indication of how widespread the concern is and how much of a contribution many stakeholders are making. I also declare an interest as a recent nominee to become a new commissioner on the Financial Inclusion Commission.
There is considerable interest in the debate, so I will try to keep my remarks to about 15 or 16 minutes. I will set out some of the context; where progress is being made, which we should recognise; opportunities that we should seize, including a particular mention for credit unions; and the importance of joining up to move forward together. I will also cover the potential for and importance of future legislation, which the Government have so far resisted and I am sure the Minister will mention.
As the map of stakeholders shows, access to cash is an important and complex issue that can no longer be primarily led by industry. We need a joined-up plan led by the Government that looks at the cost and effectiveness of our wholesale cash infrastructure, programmes for digital inclusion and incentives to diversify services based on complex customer needs. We need to ensure that those services can reach people, and that we both maintain free access to cash for those who need or choose cash as their method of payment and ensure that cash remains accepted.
There is clear cross-party interest, which the Chair of the Treasury Committee referred to in her recent correspondence with the Chancellor. That gives me hope and confidence that we are setting the right foundations for moving forward and addressing the challenges ahead.
Fundamentally, the bigger picture is inclusive economic growth and flexibility, security and choice in personal and family finance. Cuts to welfare, stagnant wages and economic instability in the last decade have exacerbated the precarious position of millions of people in the UK. The Money Advice Service estimates that 22% of UK adults have less than £100 in savings, which makes them highly vulnerable to a financial shock such as job loss or an unexpected bill. Some 8 million people rely on high-cost credit to pay essential household expenses, and may frequently turn to alternative forms of finance such as high-cost lenders or illegal loan sharks to make ends meet. Recent Financial Conduct Authority data shows that the number of high-cost short-term credit firms has decreased, but the volume of lending has increased.
Ten years ago, six in 10 transactions were made in cash, but by March 2019, that number had halved to three in 10. The combined number of banks and building societies is falling steadily, and in 2018, the number of free-to-use ATMs fell for the first time in 20 years.
I congratulate the hon. Lady on securing the debate. The issue of free-to-use ATMs is particularly acute in rural areas, and especially among elderly and more vulnerable communities, which should be at the forefront of the debate.
I, too, congratulate my hon. Friend on securing the debate. Does she agree that when banks, such as the Yorkshire Bank in Royton, close with an agreement to relocate a cash machine in a convenience store, the agreement must be that it will remain free to use? In Royton, just a year into that agreement, a charge has been introduced.
My hon. Friend makes an important point about the situation in his constituency, and that is why regulation is increasingly important. In future, the issue will be maintaining not just access to cash but free access to cash.
There has been a renewed focus on the issue of the last bank standing in a community. As Sian Williams of Toynbee Hall pointed out, however, when we get to that point, it is often too late. There is an urgent need to join up, particularly in areas that are more likely to be left behind. Financial institutions have not tended to talk to one another, so towns and communities have been left with piecemeal and inaccessible financial services.
The change has not been orderly. In the RSA’s excellent report published earlier this year, “Cashing Out: The hidden costs and consequences of moving to a cashless society”, the situation is described as a “disorderly dash from cash” with
“a misalignment of incentives between individual banking institutions seeking to shed their costly physical infrastructure…and the needs of…thousands of communities that remain reliant”
on what, for them, are essential financial services. The report finds that substantial numbers of people rely wholly on cash and that access to bank branches is about not just the older generation but the younger generation, small and medium-sized enterprises and increasing numbers of self-employed people, who all have an important stake in the debate.
This year, the Access to Cash Review’s significant report found that 17% of Brits say that they would not cope without cash. As has been said, they are the most vulnerable people, such as the disabled, the poorest and the elderly, who are unlikely to be early adopters of contactless technology. Figures from the Financial Inclusion Commission suggest that they are also more likely to be among the approximately 700,000 people in the UK who want a bank account but, for various reasons, cannot open one.
My hon. Friend is making a characteristically passionate speech. We have heard about the provision of cash machines in rural areas and in deprived areas, but does she agree that another consideration is the provision of cash in market towns? When the last bank closed in the small market town of Sowerby Bridge in my constituency, taking the cash machine with it, there was a detrimental impact on the market, and on its traders, who deal exclusively in cash. We really need to reflect on that problem as, I am sure, it is replicated all over the country.
My hon. Friend makes an important point. I agree that this whole debate also needs to be part of a strategy for towns, which are often left out of how progress is made, how policy is implemented and who is the first to benefit when new resources are rolled out. The provision of financial services and ATMs is absolutely vital for ensuring economic progress and the viability of businesses.
Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)
The banks are closing down everywhere and are using the excuse that we can use post offices to access cash. Yesterday it was announced that 1,000 post offices are to go and more to follow. Sub-postmasters are not making the same money as the banks. That is now going to lead to a more cashless society. That, to me, is what the banks are heading for.
My hon. Friend’s extremely important point is one I was about to go on to. We have seen this debate previously in relation to post offices, and have then seen post offices become an important part of the strategy for maintaining access to cash—Mastercard and others are also working with them. Research from the Post Office shows that about 44% of small businesses believe that the convenience of cash is essential to their business, and also that they use post offices. Yet, alongside this debate, we see these warnings, and alongside the challenges that the post office network faces, deprived and rural communities will have even poorer access to cash.
My hon. Friend is making an excellent speech. Does she agree that the change in the post office contracts, particularly in the local and local plus contracts, meaning that post offices get only £12 for handling £1,000 of cash, is driving down the provision of post offices in rural communities and towns in particular?
I congratulate the hon. Lady on securing the debate. Should we also not look at what I see as the opportunities to improve the situation, including the opportunity to ensure more free cash machines supported by the banking system, which I hope the Treasury will take on? There is also an opportunity to require retail businesses to accept cash. The other day I walked into a Vodafone shop and they said that they did not accept cash—they had gone completely cashless. I thought, “What about vulnerable people? What can we do for vulnerable people?” Does the hon. Lady not agree that it is really important to do that as well, and to maximise the opportunity for the post office network to ensure that vulnerable people can still access cash and financial services in their often rural communities?
The hon. Gentleman makes an important point. Indeed, he has made similar important contributions in his work on the Treasury Committee. He talks about the acceptance of cash needing to be part of the debate, and I know that other hon. Members will be speaking on that issue later. It is an important part of the jigsaw.
I want to make a few points about our policy response and about how we need to move forward. The report from the Access to Cash Review made five broad and important recommendations: to guarantee access to cash, to ensure that cash continues to be widely accepted, to create a more resilient wholesale cash infrastructure, to make digital payments an option for everyone and to ensure joined-up regulation of cash. Within that, there are important roles for national and local government, banks, regulators, FinTech, building societies, payment systems operators and others. I also want to mention credit unions and their role, and I hope that the Minister will be able to respond to this important issue, as we plan for the next decade and beyond.
There are 1.9 million members saving £2.4 billion in the UK’s 500 credit unions. Credit unions are financial co-operatives and are therefore member-owned and democratically run. They have huge potential to play much more of a role, but that will need support and Government leadership. The Treasury Committee recently raised concerns about credit unions either going bust or having to consolidate to survive, and there is an urgent need to consider how we better support them. I want to make a few suggestions about how we can support the expansion of the UK credit union sector. A response from the Minister today on that would be helpful, and perhaps we can continue the discussion after this debate, which is only an hour and a half long.
The first suggestion is to appoint a Minister for credit unions [Interruption.] Yes, but I hope that the Minister has a cross-cutting responsibility and is committed to placing credit unions at the centre of retail financial services to ensure more competition and choice in banking. The Minister will know that the Treasury is responsible for credit union legislation and that other Departments also have an important stake, especially the Department for Work and Pensions and the Cabinet Office. I hope he can discuss how, in his role, he will continue to join up that work across Government and where we might see faster progress.
I thank the hon. Lady for her knowledgeable, detailed and excellent speech. We are going to have to introduce a voluntary time limit of three minutes, which I ask right hon. and hon. colleagues to try to stick to.
It is a pleasure to serve under your chairmanship, Sir Henry, and I thank the hon. Member for Feltham and Heston (Seema Malhotra) for bringing this important debate to the House. This issue has been debated many times, and I see many familiar faces in the Chamber today.
We are moving towards a cashless society far too fast, and a number of our constituents are simply not ready. As the chair of the Access to Cash Review stated:
“If we sleepwalk into a cashless society, millions will be left behind.”
Between 2015 and 2017, I have lost 12 banks in my constituency. Since I was elected, I have lost the Royal Bank of Scotland, the Bank of Scotland, the Clydesdale Bank and Santander, and my TSB branch has reduced its hours. That acceleration is concerning, and we cannot continue to sit back and let it happen.
In the short amount of time I have, I will raise three issues. First, rural areas are suffering most, because when those areas lose a branch, their communities cannot simply adapt. They have poorer transport links to get them to the next branch; they have poorer connectivity in terms of digital options; they are scared of using phone banking, and sometimes do not have the mobile signal that they require; and they have fewer cash machines. Quite simply, those communities are an easy target for our banks. Like many Members present, I have a higher number of older people—those over 65—living in my constituency, and those people rely heavily on that banking provision. Some 20% of the population lives in rural areas, yet only 12% of bank branches are in those areas. Banks exist to serve all consumers, but what we are seeing is banks serving urban consumers, with rural consumers losing out.
Time and again, the banks say that the solution is digitisation. However, in Angus, only 83% are covered by superfast broadband, so they immediately alienate the other 17%. We have lost a number of post office branches, and—as has already been mentioned—for viability reasons, that is not going to pick up. Quite frankly, the numbers do not stack up. Post offices do not provide the same service: many services are missing, and we do not have privacy in our post offices. As we all know, when we go in to post our letters or a parcel, we are often waiting in queues. It is not particularly private, and often this is taking place in a small shop as well.
20 of 67 shown
There are significant regional, area-based and income-based disparities. More than 15% of people with an income under £10,000 rely completely on cash, in contrast with only 2.5% of those in the highest income bracket. People who have less access to cash are already subject to a poverty premium; they have been left behind by contactless and digital payment technologies and cannot shop around to get the best deals.
There are also difficulties for disabled people. Eleanor Southwood’s evidence to the Treasury Committee recounted how people who are blind or partially sighted can struggle to use a taxi driver’s touch screen PIN pad, and then often need to give away their PIN. It is important to think about the role of assistive technology in this space. As chair of the all-party parliamentary group for assistive technology, I understand the potentially transformative impact of accessible technology and why it needs to be part of the debate about how financial services move forward.
The gaps in broadband provision, including in rural communities, can make access to cashless payments more difficult. Indeed, broadband notspots are not confined to rural areas; an estimated 1,000 households in my constituency do not have access to decent-speed broadband. Hounslow Council’s work to help to end notspots is a key part of the jigsaw, which will take years to deal with.
The question is how we are going to respond to the drivers of such changes, including new technologies, lifestyles and uneven economic progress, and the consequences of the increasing cost of our nation’s wholesale cash infrastructure, alongside the need for better financial education and financial inclusion. I thank the hon. Member for Solihull (Julian Knight) for being here and for his work on the all-party parliamentary group on financial education for young people.
I will say a few words about supporting the cash infrastructure. We know that The Telegraph reported last year that there were about 123 cash deserts—postcode areas that do not have a single ATM in their geographical coverage—and there are more than that now. A further 116 areas have just a single ATM, 36 of which are fee-paying ATMs. The Association of Convenience Stores also highlights how convenience retailers and ATMs enable financial inclusion, but they are also under threat from high business rates bills and cuts to interchange fees.
In addition, research by the University of Bristol on the distribution of ATMs in that city has found that the provision of cash is almost opposite to the geographical need for it. Lower-income communities are poorly served by current cash infrastructure. ATMs are changing from free to fee-charging, with deprived areas disproportionately hit. Of the 16 ATMs in Bristol that changed from free to fee-charging between October 2018 and March 2019, 11 were located in deprived areas.
The second suggestion is that all workers be given the right to save in a credit union directly from their pay. Some 39% of the population have no savings, and to counter that we believe that all employees should be given the right to save directly in a credit union, by payroll deduction and at no cost to them.
Thirdly, all schoolchildren ought to be given the right to join a credit union school savings club. Good savings habits for life should be encouraged at an early age. All policies in this area should reference credit unions as able to take such deposits, in the same way as banks and building societies can.
Fourthly, early changes should be introduced in the new legislative programme, to take the opportunity to build on the pre-election Treasury consultation on credit unions and dismantle obstacles that prevent the transformation of the UK credit union movement into a player with the significance of its international peers. Elsewhere, although there are market differences, credit unions are significant players: in Ireland 73% of the population are members of credit unions and in North America the figure is 43%.
I am pleased that, following the publication of the Access to Cash Review report, there were moves to respond to it very quickly. The Bank of England announced that it would convene relevant stakeholders to design a new system for distributing cash on the basis of the concerns that had been identified. The Treasury Committee took evidence and produced an important report on consumers’ access to financial services, which was published last week. The Treasury announced that it was commencing a new joint authorities cash-strategy group, involving the Treasury itself, the Payment Systems Regulator, the Financial Conduct Authority and the Bank of England. There will indeed be much work for the new body to do.
I would be grateful if in his response the Minister updated Members on strategy formulation, and how the work of the group will operate alongside the work being done by the Bank of England. There needs to be more joined-up working, rather than silos, overlap and duplication. I would also be grateful if he told us what progress he expects to be made by the autumn, when I understand the Access to Cash Review panel plans to meet and review its progress; which consumer bodies will be involved in the development of the strategy, particularly co-operative institutions; and how the group will respond to the individual recommendations made by the Access to Cash Review panel.
We face unique challenges in the modern world, and we need to make sure that both Parliament and the Government are responding to those challenges. Access to cash is not a problem that is unique to the United Kingdom, and neither is the need for robust legislation—as and when necessary—and regulation to ensure it. The Swedish legislature was recently forced to create a cross-party commission on access to cash, due to a public outcry after hospitals announced that they would no longer accept cash payments. Swedish bodies and representatives repeatedly told the Access to Cash Review that we needed to act now, as it is much harder to re-establish cash infrastructure than to preserve it.
Local authorities are an important part of this jigsaw and of our response. My local council in Hounslow, led by Steve Curran and Lily Bath, is taking steps towards financial inclusion, which is vital as local authorities are at the forefront of helping local citizens deal with a lot of changes. Those changes have come through welfare reforms, but also from the housing crisis that we face—a number of people are in temporary accommodation, and may have been waiting for a long time—and are affecting people’s access to services in many ways, as well as their resilience.
I am pleased that there are more innovations in communication and that better research into segmentation is under way, including understanding the financial capabilities of council tenants. A higher than expected number of those tenants do not have bank accounts into which payments can be made, whether welfare or other payments. That is why it is important that we all, including local authorities, revisit the idea of closer working with credit unions. Given the importance of this work, Parliament and Government must act to promote the role of local government in making sure that we preserve access to cash and financial services.
To conclude, joining up how we move forward together is increasingly important, because of the complex map of the stakeholders involved. We are not going to get multiple chances at this; change is going to take time, and it has to be done right. It has to be done with the right research, the right underpinning and the right policy frameworks, with confidence, and with the message that if all those involved in financial services who have a stake and a role, including banks and those involved in cash infrastructure, do not play their part effectively, there will be regulation and legislation. We also need considerable programmes for digital inclusion, and incentives to diversify services within the industry. We need to make sure that those services continue to reach the people who need them and that cash continues to be accepted.
I also hope that we can have a discussion about how this issue forms part of wider economic strategies, including industrial strategy. Labour has talked about regional banks providing an opportunity to ensure financial inclusion; there are examples from abroad that we can learn from, including the Sparkassen, and the Mann Deshi bank in India—I have been looking at whether we can do some reverse learning from that bank in my constituency. Mobile technology, which some of our financial services have already begun to use, has been vital in supporting women, particularly in rural areas—to set up their own businesses and manage their household finances.
I thank organisations such as City Pay it Forward that make an important contribution to increasing financial education in our schools; as I mentioned before, I consider that to be extremely important. Our new local charity, Hounslow’s Promise, is working to make sure that we have financial understanding and financial literacy, which are vital to ensuring that people can take advantage of new services that are on offer.
There is a whole host of issues; I do not have enough time to cover them all in three minutes, but one obvious issue is access to cash. We cannot continue to suggest that everybody is turning to digital, because we have small shops; my high streets are struggling, and we need to ensure that they have access so that they are not penalised every time somebody makes a card payment. We need that continued access to be able to secure the future of our high streets.
My final point, which I have made to the Minister several times, is that we must look towards banking hubs. We have to look at alternatives to ensure our consumers continue to have choice.