The Royal Bank of Scotland’s decided towards the end of last year to close 259 branches. Communities will be cut adrift from the face-to-face banking that is so essential. The towns of Dunbar and North Berwick are to be hit, which have high streets with divergent mixes of independent and chain businesses.
The impact has been very succinctly described by a constituent: “Dunbar supports many small businesses, not just on the High Street. How and where will they bank their cash takings? Online banking does not work for cash. Many older people in the town are dependent on the bank local branch, especially those who have no computer, or are wary of internet banking. Dunbar whose population is rapidly expanding, and the nearest RBS branch is 12 miles away.” We need to ask a very pertinent question about the responsibility and the relationship between retail banking and the communities they should be so proud to serve.
Banking as an institution goes back many thousands of years. It began in the temples—other buildings that communities held sacrosanct and safe. Tensions between money and religion have run in parallel throughout the same period. It shows the close link between the trust that people put in the individual who they give their money to, to look after, and religion. Looking forward through history, the banking sector developed with the European banking families, who established a way of transferring money across Europe and then the world. Then, the Bank of England was established in 1694 and, perhaps more importantly, the Bank of Scotland in 1695.
Deposit banking has been a part—a foundation—of our society from the very beginning. That relationship was not built on pure profit, but on trust; initially, trust of individuals who promised to take care of others’ money; promise and trust of families who looked after moneys, and then the institutions. Such trust has developed over time, reinforced by close contact. That trust moved and continued to deepen and develop as banks became the cornerstone of our high streets. What of that bond of trust today? What is the feeling of banks’ most important stakeholders—those community individuals? They still entrust their money, which is then used by the bank to do so many other business activities.
In 1998 there were more than 11,000 branches. Today, the most recent figures indicate that there are just 6,000 local branches. Bank closures have escalated rapidly, with just over 1,000 closures in the last two years. The losers are the very community that we hold so dear; the losers are the high street—that geographical area where people gathered together and still try to. As my hon. Friend says, we have high streets that have been hollowed out. We need to find a way to stop this hollowing out and fracturing. The banks form a crucial, fundamental part of the foundation of maintaining our high streets, which we need to maintain our community, and which we need to maintain our society. We have reached a tipping point now—a point of no return—where the Government must step in with practical solutions to stop future closures and to address the fragmenting relationship with banks.
In 2015 we had the access to banking protocol, which spoke highly of financial inclusion and local engagement from big banks, but that fell short of any statutory protections. The Griggs report the year following offered a series of constructive ideas to improve the settlement. Unfortunately, it addressed areas where the last bank had already left town. It does not commit to a new legal protection that would enable banks to keep a presence in their local communities. Any new settlement should be constructively built in partnership with the banks and should engage with the shareholders of the banks, who often engage with them most at a local level.
The Government have tried over the past three years to try to displace some of the local bank branches with community post offices. The PO is another fundamental cornerstone of our high street and community. Alternative provision works only if the POs are not themselves being ripped from our high streets and from the communities they serve at a similar rate. POs rightly have a valued position on our high streets, but we cannot place the burden and responsibility of banking on a workforce that is already stretched. The decision to merge retail banking into our POs is not workable in the present form, and nor is it a popular alternative. Figures from Which? show that although the British public think most POs are doing a great job, many do not even know of the alternative banking options available there.
The trust that people have is also influenced by the quality of protection that communities witness. Local bank staff, placed at the heart of communities, have a responsibility to be the last check and balance in terms of consumer protection. I was heartened to hear of cases where people had gone into their local branch to withdraw large sums of money and the bank teller has said, “This is unusual for you. What is this about?” With that simple question they have prevented a retired couple from losing substantial sums of their life savings. That solid local relationship with trained members of staff in the local bank can go a long way to protect current accounts from bank fraud, and staff can also advise on and discuss people’s challenging financial problems.
When it comes to the assessment of community safety, there is the question of the bank’s responsibility when a sophisticated thief dupes an individual out of money. Is it right that the bank can absolve itself of all responsibility simply because the crime was so complex and maliciously delivered that the victim genuinely believed they were dealing with their own bank branch? Such a crime might be a lot harder if the perpetrator first had to build a branch on a high street to defraud retired couples of their money.
The advent of online banking has been transformative, and it will continue, but it would be completely irresponsible to abandon the 20 million people who still depend on face-to-face bank services. Online banking, which will continue to grow, must be accessible. It is certainly not the fault of the big banks that Governments have failed to implement a broadband service fit for the 21st century. Nor is it the fault of the banking industry that nearly two million people across the UK experience internet speeds of less than 10 megabits, meaning that online banking will not work. But banks should be made to consider broadband blackspots and digital inclusion when they plan closures, as well as the impact of shifting consumer services from face-to-face banking to online services.
Physical money is the most symbolic representation of trust, but there is strong evidence that banks want to move as quickly as possible away from the physical movement of cash on to online and electronic transfer. Any transition from face-to-face banking to online services must be transitioned at a similar rate to a drive to remove cash from society. Significant numbers of our constituents rely on cash to facilitate their budgeting, and those that do must not be abandoned in the rush by banks to change.
Last year it was suggested that 10,000 free-to-use cashpoint machines are at risk of closure. Some 2.7 million people in the UK still rely entirely on cash. The free-to-withdraw cashpoints will vanish first from communities where the individuals who rely most on cash for budgeting are based. Additionally, among the small and medium-sized businesses that make up our high streets, the challenge of banking cash is increasing. The closure of cash machines and the continued closure of high street branches are alienating business owners and older customers, fracturing still further their trust.
Banks are and should be a trustworthy pillar of any community. They should stand proudly on our high streets as responsible hubs, along with post offices, GP and dental surgeries and the high street shops that draw constituents into their community. Recent figures from Unite have shown that the proposed closures of 62 branches will lead to 165 job losses. That is devastating for small communities, but we hear that the losses will be offset by the shifting of jobs to head office and call centres. However, the people losing their jobs are of course predominantly women responsible for families, who are unable to make long journeys to different areas. The change in banking models affects vulnerable customers most, with 90% of closures taking place in communities where the income is below the national average.
The model being advocated by the banks is one in which few industries operate. They are founded on so little face-to-face contact, with such limited real-time relationship between consumers and the organisation, that they represent something more like social media network platforms. The relationship of trust that once existed between the bank manager and the individual is in serious danger of being lost to an algorithmic financial model.
I am not being luddite about digital reform. I embrace it, but I cannot envisage, with so many still not using online services, that we should continue dogmatically to push through changes to people’s accounts, affecting such large groups of people. Social media platforms had their users come to them; banks seek to migrate their customers onto their digital platforms. The trust that the banks have had and have treasured so much throughout their and their community’s history is at risk.
Communities are now looking to the banks to save the high streets and the bond of trust that is the cornerstone of the relationship. We need a social responsibility clause so that members of the communities to which our banks belong can have an integral and valued role, and trust can once again be established.
Martin Whitfield is Labour MP for East Lothian. This is an edited extract from a Westminster Hall debate.