Financial Inclusion: Rural Areas

16:00:00

I beg to move, That this House has considered financial inclusion in rural areas. It is a pleasure to serve under your chairship, Mr Pritchard. I am grateful to the Chairman of Ways and Means for granting this debate. Financial inclusion is the ability of people to access, understand and use financial services to manage their money and reduce poverty. I hope the Minister will agree that we need better financial inclusion across the UK. I have been heartened to hear the new Government talk about financial inclusion, but more rural areas face a whole host of issues that make the challenges around financial inclusion even greater, and that is what I will focus on today. My constituency of Frome and East Somerset is a predominantly rural area, with a number of market towns such as Frome, Midsomer Norton and Radstock, and 150 villages and hamlets. Frome has recently been allocated a banking hub, after our last bank branch announced that it would close. Thankfully, Midsomer Norton still has two bank branches open, but they serve surrounding areas as far as the city of Bath, meaning that residents in the surrounding villages still have to travel miles to reach their nearest bank. Access to cash and face-to-face banking is vital for about 5 million customers across the UK who may be vulnerable because of low income or age, and in rural areas many people are dependent on cash for their livelihoods. When bank branches close, which is already more likely in rural areas, residents are increasingly vulnerable because the alternatives are more physically spread out, and after losing free-to-use cashpoints, rural residents have to travel three times as far to get cash as those in urban areas.

I thank my hon. Friend for securing this debate. Large banks are leaving our high streets at an alarming rate. Ystradgynlais, the biggest town in Brecon, Radnor and Cwm Tawe, has been denied a request for a banking hub, despite the billions of pounds of profit that Lloyds bank made in 2023. Does my hon. Friend agree with me that communities such as Ystradgynlais, which has some of the most deprived areas in Wales, should be at the forefront of moves to expand banking hubs across the UK, and that the big banks should treat their customers well and deliver a fair share of services for local residents?

It will not surprise my hon. Friend to hear that I do agree. I will come on to talk about the criteria that Link uses in allocating banking hubs. In Frome and East Somerset, an average of £630,000 is withdrawn in cash each month, showing how vital access is for people in these areas. The two main groups most affected by lack of access to cash are the deprived and the elderly. For people on low incomes, cash can act as an effective method to budget efficiently. Many elderly people feel excluded by the increasing reliance on digital services. With BT set to swap from analogue to digital landlines for millions of customers across the UK, there are concerns that that will lead to more isolation for elderly people who rely on landlines for their access to the outside world, and in many rural areas they may not have good broadband or mobile signal either.

I commend the hon. Lady for securing this debate. Unfortunately, in my Strangford constituency, 11 banks have closed, I think, so the impact on rural dwellers is very real. Does the hon. Lady share my concern? If people do not have a bank or the face of someone to talk to, what do they end up doing? They can look towards unregulated moneylending and not receive the appropriate financial advice that they need. With that being the case, the banks and the massive profits they make mean that the ordinary person is suffering even more.

I totally agree. I had not considered that for my speech, but I will take away unregulated moneylending as a point to note. Since the Financial Conduct Authority changed its regulations, Link has been able to do some valuable work to provide cash access to local areas. However, I urge the Government to look at how to make the regulations for Link more flexible to allow it to work on a case-by-case basis, as the current criteria do not take into account certain geographical and other barriers that affect rural areas. We know that 93% of people live within 1 mile of an ATM, which on paper sounds good, but it does not take into account issues that might come up in rural areas. For example, if someone lives in a village or hamlet, that 1-mile walk might have no safe walking routes and no bus connection. That is why we want to see the legislation expanded to include specific geographical, physical and societal barriers, so that they are taken into consideration.

The hon. Lady is making an excellent speech about both the accessibility of banks and other financial services and the challenges faced by residents in rural areas. In my Reading Central constituency, we face similar challenges with the large village of Caversham, which is now part of Reading. Many Caversham residents struggle because they have to go into Reading town centre. Although it is pedestrianised, it can be quite an intimidating journey for someone who is disabled, and perhaps involves a bus journey for someone with limited mobility. Does the hon. Lady agree that there is a valid point about the location of banking services in terms of how close they are to parking and residents homes, and that short journeys are much better for disabled and vulnerable residents?

I totally agree with the hon. Member; that is exactly the point that we are trying to make. I believe Link wants the flexibility to make more subtle judgments, rather than working on a flat assessment structure. With the closure of bank branches, banking hubs are becoming a lifeline for many towns, reinvigorating high streets and increasing football—footfall, even. They probably increase football as well. Frome residents are excited to have their banking hub open soon.

It is a pleasure to serve under your chairmanship, Mr Pritchard. Does my hon. Friend agree that banking hubs are key for financial inclusion? Does she share my concern that the Government’s plan to build 350 banking hubs over five years across the entire country is not enough to ensure proper access to in-person banking and cash services in rural communities? Does she also share my frustration that the town of Ilminster in my constituency has just been denied a banking hub by Link’s reassessment? Will she join me in calling for Link to reconsider its decision?

I am sorry to hear about what is happening in Ilminster; it sounds very frustrating. I will talk a little more about banking hubs and why they are a good thing that we need more of. Prosper Frome, an organisation in my constituency that focuses on improving financial accessibility, had been advocating for a banking hub for over a year before it was announced by Link and Cash Access UK in September. That was a great relief to residents, who were about to see their final bank close, but Jean and Sam at Prosper Frome believe that the scope for banking hubs is too narrow, and have been lobbying hard to get a banking hub included as part of a much wider community project, enabling the hub to be multi-purpose. Making banking hubs more diverse widens their appeal and can make banking and financial inclusion the anchor of the kinds of community third spaces that many towns currently lack.

I congratulate my hon. Friend on securing this important debate. She is right to say that banking hubs are about more than just access to cash. In the market towns of North Norfolk, our small businesses need access to banking services, which full banking hubs can provide. Does my hon. Friend understand why residents of North Walsham are so frustrated that the outcome of their recent cash review was simply to give them a cash and deposit machine located in the local fried chicken shop?

That sounds very frustrating; I am sorry to hear it. I will talk about the importance of face-to-face contact in banking. Shutting branches and opening banking hubs is currently financially efficient for banks, but there is a real risk that those banking hubs could close after a few years once the banks stop saving money and see the hubs as a drain on their profits instead of a benefit. We need reassurance about the long-term provision of banking hubs and a requirement on banks to keep funding them on an ongoing basis.

I congratulate my hon. Friend on securing this important debate. In Wokingham, our application for a banking hub was declined, despite the hard work of one of my constituents, Lynn Forbes. The work of Link, within the current legislation, can help to encourage the protection of face-to-face banking. However, it is not explicitly empowered to take that into account, and it is therefore not considered in Link’s final decision-making process for a banking hub. Does my hon. Friend agree that the Government need to introduce further legislation to require the protection of face-to-face banking services?

I agree with my hon. Friend that we need to tighten up and look again at the criteria to which Link is working, to make sure that banking hubs are in the right places. To turn away from banking hubs, I would like to raise the role of the post office, which is a vital service in many rural areas. In the village of Rode in my constituency, the post office sits within the local shop and café, doing vital work in not only posting parcels but supporting the local community. We have pop-up post offices in communities such as Freshford and Mells. For the elderly, the post office is a vital support in providing information on how to deal with bills and understand their pension credits, as well as generally giving them someone to talk to. Post office branches provide basic banking services, and in small towns where a banking hub is not viable, post offices are often the only remaining financial institution for customers and small and medium-sized enterprises.

The hon. Lady is making an eloquent speech and has been generous with her time. I have talked before about the need for a banking hub in Haltwhistle, in the west of my constituency. It has, unfortunately, lost banking services. Local businesses tell me that the Post Office van that stops there infrequently is simply not enough to regenerate the local economy. I have been pleased to hear the hon. Lady speak about the need for banking hubs to be decided on slightly more loose criteria. Does she agree that for rural areas in particular, where central towns can be the linchpin of local economies, we should look at how we underpin their economic growth when we consider where we can bring in banking hubs?

I absolutely agree with the hon. Gentleman. In my constituency, cash deposits are valued at £2.1 million each month, which shows how reliant small businesses and charities are on having access to banking facilities that allow them to withdraw and deposit money. I would also like to talk about digital inclusion. In a world that is increasingly moving online, many elderly and vulnerable people are being left behind. Older people are not necessarily comfortable using online or even phone banking. They are being forced on to those services, which reduces their financial inclusion and puts them at greater risk of financial fraud. Rural communities can find themselves doubly excluded as more banking services move online, with a lack of access to cash facilities locally and poor digital connectivity.

Residents have told me that they really valued paper statements. Some 6,000 bank branches have closed in the past nine years. Two of the new banking hubs are in the area that I represent, in Axminster and Sidmouth, but people cannot get hold of printed statements. Does my hon. Friend agree that they ought to be able to get them at banking hubs?

That is a great question from my hon. Friend. I believe people should. As I understand it, there is a challenge relating to banking hubs and printers because there is a data or GDPR issue with the different banks sharing the printer. That definitely needs to be looked into for banking hubs. To return to poor digital connectivity, just this week I had an email from a couple in their 70s who run a small artisan business in Pilton. They are getting speeds of only around 1.5 to 3 megabits if they use a normal router, but when they asked to be connected to the nearby Glastonbury exchange they were told it would cost them £290,000, including VAT. I have heard about similar issues from farmers in my constituency who cannot get broadband past the boundary of their farm, which can be several miles from the actual property. Financial and digital inclusion are critically linked. For those on low incomes, access to online banking can be costly, requiring a computer or mobile phone data. For people in rural areas, it is tricky to manage finances online with limited access to broadband.

I congratulate the hon. Lady on securing this important debate. I also represent a rural constituency, and one of the big problems is that many older-generation residents have lost their buses over the past 10 years—thousands of bus routes have been lost. Right now, some of my oldest residents in a rural area are facing the prospect of losing the 145 bus, which is their only connection to the banks that remain in the constituency. I hope the hon. Lady agrees that the Government’s recent extra funding will help us to protect those routes. I urge local councils not to risk older residents being cut off from key banking institutions.

I agree that bus routes are critical to rural communities. It would have been lovely if we could have kept the bus fare cap at £2—that has made it a bit harder—but I totally agree with the hon. Gentleman about buses and their importance in those areas. I am going to make some progress now. I urge the Government to think carefully about how they move forward with legislation on digital services for banking, especially in rural areas. Finally, although this is not necessarily a rural issue, I would like to make the Minister aware of a specific issue relating to the identity requirements for a bank account. I visited my local food bank in Frome on Monday, and people told me that although the Government have a website designed to help those without an address to get the ID they need to open a bank account, there is a critical flaw in the process. The last stage of the website requires the applicant to get a professional, such as an accountant or lawyer, who is personally known to them to sign off on their application. Clearly, that is not possible for many of those who apply. Please will the Minister look at that? It is currently preventing many people from accessing the ID they need to get a bank account. I am pleased that the Government’s plans talk about financial inclusion, but the Lib Dems want to go further and see a dedicated national financial inclusion strategy. That would require the Financial Conduct Authority to have regard to financial inclusion, such as by protecting access to cash, especially in remote areas, by supporting banking hubs, by expanding access to bank accounts and by supporting vulnerable customers. As technology and innovation evolve, it is critical that we bring everyone along on the journey. That is very much the case when it comes to finances. Rural areas deserve the same levels of financial access as everyone else, and I urge the Government to bear that in mind in their decision making.

16:14:00

I congratulate the hon. Member for Frome and East Somerset (Anna Sabine) on securing her first Westminster Hall debate on such an important topic. Debates like this are very conversational; it is always nice when lots of people agree on the same thing. It is heartening when lots of people intervene and everybody agrees, so I thank the hon. Member for drawing attention to these important issues that really matter to the lives of all our constituents. Ensuring that individuals have access to the appropriate financial services and products that they need, when they need them, is a key priority for the Government. It is an essential part of improving household financial wellbeing and ensuring that everyone is able to participate in the economy and benefit from the Government’s inclusive growth agenda. I recognise that tackling financial inclusion issues is particularly important for residents living in rural areas who face specific geographical challenges in accessing financial services. In today’s debate, we have had good examples of the particular challenges that people face.

We tend to think of the issue as being principally about people having access to cash, but in communities like mine, where a lot of cruise ships come in the summer, tour guides get tipped in dollars, euros and other currency. For that, they need access to a bureau de change, which in our case is effectively the post office. Having a full range of post office services is particularly important so that they can pay their money in. When the Minister talks to her colleagues in the Department for Business and Trade about the future of Crown post offices, will she remember the range of potential impacts on local communities?

The right hon. Gentleman has made a good pitch for a cruise ship to visit his constituency. It was a good advertisement, and he made an important point about the role and importance of the post office. I am sure that it will be noted by the Department. I know that many rural constituencies are concerned about the availability of cash, especially when they rely on it to pay for essential goods and services. We recognise how important that is for many vulnerable people. Arguments have been made by some—not by the Government—that people are using digital more and more, so there is less need for cash. However, we recognise that for some people it is the only way of paying bills and accessing funds. It is important that we continue to have it, because many rely on it for essential goods and services. Although it is positive that data from the Financial Conduct Authority shows that over 98% of people in rural areas are within three miles of free-to-use withdrawal facilities, I understand the importance of ensuring that cash remains available for those who need it. The Financial Conduct Authority introduced its regulatory rules to protect access to cash on 18 September. In fact, under a previous Government I was on a Bill Committee debating that very issue, so I am pleased that we mandated access to cash. The rules require the UK’s largest banks and building societies to assess the impact of the closure of a relevant cash access facility and put into place a new service if necessary. That ensures appropriate access to cash for those who need or choose to use it. Lots of people asked about banking hubs. I should probably declare that I am getting a banking hub in my own constituency soon, which is very exciting. How do people get a banking hub in their constituency? I completely agree about face-to-face banking services. It is not just about accessing cash; it has a wider role to play. If someone is accessing banking facilities, it can be a way to spot financial crime and financial coercion as well, so it is important to have that. The locations are independently determined by Link, the largest provider of the ATM network. When a cash service such as a bank branch closes, or Link receives a request directly from a community, Link assesses a community’s access to cash needs. A couple of people mentioned how they were not successful in their appeal for a banking hub. If people have already made a community request to Link and it has decided that no banking hub is needed, they can ask Link to review the decision within 28 days of the original assessment, stressing their concerns and evidence. I urge people to take advantage of that appeal process.

Can the Minister clarify whether Link is covered by the growth duty, which requires regulators to consider the economic consequences of their actions? A point has been made a couple of times about the impact of these closures on local businesses.

Absolutely. Link is covered by the Financial Conduct Authority, which has a duty to promote growth. The criteria on which it bases its decision include whether there is a bank branch remaining, the population size, the number of shops on the high street, the distance to the nearest bank branch, the public transport links and the vulnerability of the population. I urge Members to appeal if they find themselves unsuccessful the first time around. Alongside access to cash, I know that constituents are concerned about challenges in accessing in-person banking. As has been highlighted in this debate, that is particularly an issue for individuals living in rural areas, where in-person services are less easily accessed than in urban areas.

Does the Minister agree that an important point is that disabled and vulnerable people want to speak to another person? Getting advice and guidance from a qualified person who represents the bank and can help them with their banking is something that particularly concerns my constituents. It can also apply to small businesses, many of which want the ability to engage with bank staff to discuss their own financial matters.

I absolutely agree that that is important. On the issue of vulnerability, sometimes in-person services are a way in which financial coercion can be identified, which is always a huge concern. That is why the banking hubs are so important and the Government are committed to rolling them out. It is completely in character for my hon. Friend to highlight the need to support vulnerable people in his constituency. My hon. Friend the Economic Secretary to the Treasury is working closely with the industry to roll out 350 banking hubs across the UK, which will provide individuals who need face-to-face support with critical banking services. As I say, I am personally hugely supportive of the banking hubs. We are taking further steps to ensure that individuals can access the financial services and products that they need. Last week—I was very excited about this—the Government announced a financial inclusion strategy to further tackle the problems of financial inclusion. The strategy will be supported by a committee that the Economic Secretary convened for the first time last week. The committee brings together consumer groups and the financial sector to consider a range of barriers to inclusion for excluded groups, focusing on key policy areas such as access to banking, insurance and affordable credit, another huge problem for vulnerable people. It is clear that there are significant challenges that need addressing. A quarter of adults have less than £100 in savings. Over a million adults are unbanked. There is a reported £2 billion of unmet need for credit, and over 8 million people are struggling with financial debt. Under the financial inclusion strategy, the committee will be working with consumer groups and industry to develop a strategy, considering a range of barriers. To tackle the long-term issues effectively, we need to listen to the voice of experts. That is why we have convened this group, which will be tasked with drawing on relevant expertise across the sector and on lived experience. We will also be listening to people on the ground, because this will require a joined-up approach across Government, the financial services sector and frontline organisations. We will be engaging widely on this agenda to ensure that the strategy considers a wide range of frontline perspectives. The strategy will be published next year, following extensive work by the Financial Inclusion Committee to consider the barriers to access and solutions to address them. It is important that we take the time to get this right and seek input from those who are most affected by the issue of financial exclusion. That is why the Government have made clear our commitment to going further in tackling it. While that work is in its early stages, I know that the Economic Secretary recognises its importance to our constituents and will keep the House updated as it progresses. I thank the hon. Member for Frome and East Somerset again. It has been a pleasure to participate in her first Westminster Hall debate, and I thank all hon. Members for participating. There is a lot of support in this room for banking services, and a recognition of the importance of face-to-face services and access to cash. It is crucial for everybody in our society to have access to the financial services they need, regardless of where they live. Question put and agreed to.

16:24:00