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Scottish Affairs Committee

Oral evidence: Access to cash in Scotland, HC 80

Monday 23 May 2022

Ordered by the House of Commons to be published on 23 May 2022.

Watch the meeting

Members present: Pete Wishart (Chair); Mhairi Black; Deidre Brock; Wendy Chamberlain; Jon Cruddas; Sally-Ann Hart; John Lamont; Douglas Ross.

Questions 208-258


I: Laura Mountford, Deputy Director – Payments & Fintech, HM Treasury; and John Glen MP, Minister of State (Economic Secretary), HM Treasury.

Examination of witnesses

Witnesses: Laura Mountford and John Glen MP.

Q208       Chair: Welcome to the Scottish Affairs Committee and our ongoing inquiry into access to cash in Scotland. I am delighted to welcome our witnesses, and I ask them to introduce themselves.

John Glen: I am John Glen, Member of Parliament for Salisbury, and Economic Secretary to the Treasury since January 2018. I bring with me Laura Mountford, deputy director for payments and fintech in the Treasury, who works very closely with me, and has done for at least two years.

Chair: Do you want to say anything by way of an introductory statement, or do you want to go straight to questions?

John Glen: I am happy to take questions. We have a lot to talk about and I hope I can be helpful to the Committee.

Q209       Chair: Thank you to both of you for attending today. You know of this Committee’s long-term interest in access to cash. This is the second time we have looked at this. Now, of course, we have a Bill—the financial services and markets Bill, which was announced in the Queen’s Speech. I guess you are going to tell us straight off when we will see it on the Floor of the House, aren’t you, Minister?

John Glen: Not quite, but I hope it will be very soon. I have been working on this for a long time and I am excited to have it before the House. The provision on access to cash is a key commitment that I made a long time ago, so it will be very satisfying to bring it before the House for colleagues’ scrutiny.

Q210       Chair: I know we are all looking forward to seeing it. A consultation has been ongoing for a number of years, and this has been looked into by all sorts of bodies and organisations and those with an interest. Can you start by telling the Committee what you intend to put in the Bill and what you really hope to see achieved with it?

John Glen: Yes, I can—and thank you. We have seen a significant change in the way that people use cash. In 2009, 56% of transactions were in cash; it is now at 17%. But I recognise that those headline figures hide quite a different set of experiences between urban and rural, and between different parts of the United Kingdom. What we need to do is find a way of creating a guarantee around access to cash, taking account of the changing use of technology; for example, last year we put through the means of accessing cash, using a card, without making a purchase. We have seen a significant number of bank branches close as people have moved to apps and so on, but not everyone has. The latest figure we have, which I think is from two years ago, is that 5.4 million people—about 10% of adults—rely on cash.

This legislation will do two things: it will give the Treasury the power to designate institutions—banks, significant building societies or other institutions—to contribute to the ongoing provision of cash, and it will give the FCA the regulatory power, using the broad set of powers it has already, to work out solutions. They will be working closely with LINK, which will be the interface for the public, and we will see a range of interventions. We will see the bank hubs, which have been trialled by the Cash Action Group over the last 18 months, I think; there will be 10 of those. There will be other interventions as well—obviously, the use of mobile banking, and the banking framework, which has been renewed for the next three years, to use the post office network. I mentioned using cards to access cash without purchase, but obviously it is in the detail. An average figure is not appropriate, because we will all have communities where the distance qualification will not be enough by itself. That is why we will make provision for LINK to be able to make interventions based on representations from consumers, Members of Parliament and the like. I think that sets the broad intention.

Q211       Chair: That is really helpful, and I think it is what we expected you to say to us about what was going to be included in the Bill. We are all very much looking forward to seeing it when it is presented to the House, but it has taken a bit of time, hasn’t it? We were alerted to some of the difficulties by Which? a couple of years ago, and there have been a number of consultations. You mentioned some of the groups that have looked at this. What is there in the way of infrastructure left to be able to service some of the contingencies in the Bill? Since 2015, 52% of all bank branches in Scotland have closed. Is there the resource—the facility—to achieve what you want to do with this Bill? Will it match the ambition that I am sure you are going to tell us is there? 

John Glen: I do not doubt the Which? figure of 52% since 2015, but ONS figures from 2012 to 2020 show that the fall in branches across Scotland was the same as the UK average over that period. All statistics will tell a slightly different story.  

Q212       Chair: What Which? tells us is that Scotland has experienced the highest proportion of closures across the nations and regions of the UK. 

John Glen: I am not going to get into trading figures. All I know is that the Office for National Statistics has that figure over eight years and says that it is in line with the rest of the UK.

The point is whether the infrastructure is sufficient. Clearly, banks are playing a different role, as a whole, in society. I had the opportunity last week to visit Edinburgh, and I went to a museum that showed the history of banking and the history of cash. It was very interesting. Institutions have come and gone and amalgamated in different ways over time, but the way that we transact and purchase things has changed; overall, we rely on cash a lot less. This is not about saying that I have in mind a certain model—a certain number of branches in each town, city and rural locality across the country. It is about saying, “How can we create a regulatory framework that stands the test of time and adapts as our patterns of behaviour adapt, but that also takes account of the fact that there are significant populations who will rely on cash?”

Indeed, I think there is evidence to show that latterly, in the context of the uncertainties in the economy at the moment, people hold on to cash as a means of budgeting more effectively. I am acutely aware of the responsibility to deliver outcomes that are not one size fits all but take account of the fact that different communities have different needs, which relate to demographics, socioeconomic situations and so on.

Chair: I think it is inspired to have the FCA as the regulator, underpinned by statute. I think that is the way to go.

John Glen: And they are accountable to you here in Parliament and can come to you.

Q213       Chair: Absolutely. That is one of the things that we hinted at when we previously looked at all this. Is it right—you didn’t mention this in your response about what is going to be in the Bill—that the FCA will have powers to fine banks if they don’t meet the access criteria? 

John Glen: Yes, it is.

Chair: Tell us how that would work.

John Glen: They will have a range of powers, in line with what they have already, to collect data, look at behaviours, and then fine and issue directions. The actual detail of what they prescribe and how they are going to operate will obviously be worked out in due course, but it will be in line with the powers they have at the moment. You see from time to time that the FCA issue press releases when they fine a bank or somebody under their regulatory perimeter. I hope they will not be fining too many people, and I hope this will be a great solution.

On a more positive note, the delay, which you mentioned, has induced market behaviour and the banks have come together to pilot these bank hubs. In 2019, I think, I visited a business bank hub in Birmingham, and now we have moved into retail hubs. In September, I visited one in Cambuslang outside Glasgow—apologies if my pronunciation was defective—

Chair: You were spot on.

John Glen: That was a great resource for the community. It was one where there were not any more branches, but four or five banks were there participating with the support of the local community. There is another one in Rochford in Essex, which I think Minister Scully is visiting today. It has distributed £12 million of cash over the period of the trial.

Q214       Chair: I have seen some of the responses since this was announced, and most of them seem to be warm and welcoming—even from the banking industry. Do they mean it? Is the banking industry behind this?

John Glen: We have been talking to them throughout. There are some bits that they will be anxious about—they will be anxious about the evolution of the 1 km imperative, in terms of free access points for cash—but we have said to them that we want to legislate to protect access to cash for vulnerable communities. I have had quite a lot of conversations with colleagues in the House who represent less well-off constituencies, who have said, “That 1 km rule doesn’t really work, because it’s up a steep hill and there are other factors.” That is why there is room for flexibility. The exact parameters of that flexibility will be set out in the FCA’s guidance.

I also see innovation in the marketplace. OneBanks, for example—a small fintech business that is setting up—will use QR codes to allow people to access cash. We have to accept that too. Often the urban/rural difference is important. Some people here say to me, “Why don’t you just get rid of cash?” because they are not fully sensitised to the range of needs out there. Of course, we have to think of those 5.4 million for whom it is a major part of their daily routine to use cash in their transactions.

Chair: Well, we are all looking forward to seeing the legislation. I am sure it will be introduced in due course.

Q215       John Lamont: Good afternoon, Minister. It is good to see you, Ms Mountford. My first question is about the access to cash consultation and the UK Government’s proposed geographical access requirements. My concern is whether you think the proposed geographical requirements appear to be acceptable in theory, but might not work in practice, from the perspective of consumers’ needs.

John Glen: The point, as I said, is that an average won’t work. I am conscious, when I look at the UK as a whole and Scotland in particular, that there are differences in the number of people who can access a free cash access point in rural communities in the UK as a whole. The proportion of people less than 2 km away from an access point is 80% in the UK and 66% in Scotland. When I visited your constituency a few years ago, there were very real concerns about the declining number of branches. That is why the FCA will regulate and LINK will continue to be that access point, and then the banks will set up a bank hub company, essentially to pool their resources to be deployed under the direction of LINK on where to put those hubs and provisions.

There will not be a single threshold. It will not be like saying, “If you have a settlement of x thousand people, you’ll have to have a hub.” It will depend on what is happening and how well thought of and used the post office is, for example—as I say, there are 11,500 of those. I accept that a lot of people don’t see, or haven’t seen, or aren’t comfortable seeing post offices as a bank.

I think the Committee has looked at the Lending Standards Board and overseeing access to the banking standard. We refined that to give the banks responsibility to be very careful and deliberate in their assessment of a group of customers who would have to migrate to a post office when they left a town. That means helping them, literally, to move their accounts over. But 99% of personal banking needs can be dealt with through the post office, and I think 95% of business transactions can be done through it.

To answer your question, I am confident that there is enough flexibility built into this solution. As I said with those opening figures, it has evolved over time. It may stabilise, or it may go down further, but it seems quite likely that some communities will need protection around the distance to free access to cash.

Q216       John Lamont: You mentioned my constituency in the borders. You are right that we have lost a lot of bank branches; since you visited we have lost even more. There is a feeling that these decisions are taken by city bankers sitting in Edinburgh and Glasgow—or, indeed, London—without any real understanding of how small-town rural Scotland works. Are you confident that the FCA will not fall into the same category of being out of touch with small-town rural Scotland, or anywhere else in the United Kingdom?

John Glen: That is often the suspicion, and I understand why. Obviously, I have my own constituency, and when they say they are going to shut a bank branch, I go through that journey of looking into it. When I looked at one just outside Salisbury, I looked at the volume of people going in there and what they were doing in there, and it was economically impossible to justify it.

Then you get into the argument that banks are the core of the community, and all the rest of it. I understand that sentiment, but someone has to pay for it. The question is how you find an efficient way of creating banking provision on the ground. I think these hubs will be very useful. I have visited them, and you have an individual banker from each bank on different days, so you know that on Wednesday the Barclays lady or man is there and you can have that deeper conversation rather than just access cash or pay in a cheque.

I am confident that, given the commitment that the designated entities have shown to finding a solution, the legislative underpinning will be important but the combination of the two will give us a positive outcome. It will not mean, though, that we will enforce—I have never defended bank closures. I have defended the process by which they are overseen and sought to improve it, but it is not for me to make banks’ commercial decisions.

Q217       John Lamont: I want to finish on a slightly more abstract question about the trend away from the use of money to online banking and contactless. Clearly, the supply of money is essentially in the control of the Government. When you move online, how people spend their money becomes under the control of the banks. When you use cash, you can use it anonymously, whereas spending online is monitored and people can check how you are spending your money. Do you have any concerns about the lessening of the Government’s control over the supply of cash, and giving that control over to the banking sector?

John Glen: It is probably helpful for me to talk another aspect: wholesale cash provision. We have talked about retail cash distribution, but there is also how you get cash around the country for the networks. Think of a shop: G4S, say, will take a load of cash from it, and that will be sent to processing centres. We have given the responsibility for that to the Bank of England, and the Bank of England will then, with them working together, oversee a rationalised wholesale distribution system, because obviously it is less needed. That is something that needed to happen as well, so there is that aspect of it.

The amount of regulation from the Bank of England and the FCA is significant. We have had new banks start up. We helped set up a new bank start-up unit in the Treasury seven years ago. There have been a lot more banks, but they are very well regulated, so I don’t see any significant concerns.

Q218       John Lamont: Currently, when I spend £20 in the Co-op in Coldstream High Street and I use cash, nobody knows what I have bought. If I go in and use a contactless card, a whole raft of data on me is being collected. There is a clear shift in power in terms of—

              John Glen: Is it a shift of power or the opening up of new opportunities? Open banking—we have had the Open Banking Implementation Entity, which, under a CMA direction, made the nine biggest banks co-operate in terms of letting fintechs access that data, if the consumer wanted, in order to offer them new services. There is more progress to be made on that. I hope that in time we can extend that to open finance. I would say that that digitalisation of money can give us more flexibility, if we want it, and can give us more opportunities to do transactions more efficiently and conveniently.

In terms of the aggregation of data, it arguably gives us more information, and more information is available to then offer new products or give us the option to choose to go elsewhere. Switching to other banks is now easier, although people don’t do it as often as people anticipated when it came in.

Q219       Sally-Ann Hart: Good afternoon, Minister Glen and Ms Mountford. Cash continues to play an important role in society, particularly for older people, those on lower incomes, who often struggle to budget, and those living in rural areas. Looking at the Government’s view of the role of cash in society, how will it recognise the importance of maintaining access for these groups?

John Glen: I think the whole driver of the solution is to find enough flexibility in the regulatory oversight of these designated entities, these banks, such that a set of outcomes can be made clear around the distance from a free access point. That will be different in different places, but it will also give room for individual communities and Members of Parliament to make appeals to LINK to say, “There may be this provision on this side of town, but actually there is a whole significant community of people”—who are in one of those demographic groups, let’s say—“who need a free access point somewhere else.” They will then be able to direct the banks to collectively bring that provision in, be it through a free ATM or one of the other mechanisms. There is an inherent desire to recognise that the needs of communities around the country are different. In there, we see this to be an appropriate response to what is an evolving market reality.

Q220       Sally-Ann Hart: So, rather than a blanket “No one will be less than”—

John Glen: X distance.

Sally-Ann Hart: Yes, x distance away. It will actually be based on whether there is a good public transport system or what the demographic is based on.

John Glen: I am not going to sit and prescribe all those factors here, but that is the right sort of thing, yes. At the moment, we have the 1 km designation, but it will need to be more sophisticated than that, and that will evolve over time. I don’t want to suck the FCA into political decisions; it will be for the Treasury to make decisions on that. Of course, there is a difference between withdrawing cash and depositing cash. These sorts of factors and the market demand for these different cash services will need to be considered.

Q221       Sally-Ann Hart: The RSA cash census found that 15 million people use cash for budgeting and about 10 million people would struggle to cope in a cashless society. As cash demand falls over time, which it looks to be doing for the majority of the population, how will the Government ensure that no one—in particular, the elderly and those with disabilities—is left behind in the transition to digital?

John Glen: I think that is in the application of customised additional service provision in certain communities. We have to accept that use of cash overall is changing, and one cannot reasonably oblige banks to keep open the same branch network that they had 10 or 15 years ago. What we can say is that they should be using the technology to find solutions that are reasonable, where there are certain groups of people who need to use that. I think there is a difference between, say, an ATM and a post office. The vast majority of people live within very close proximity to a post office—I am trying to find the figures, but I don’t think I can quite—and BEIS set out those criteria. I think 93% of people live less than a mile from a post office, and 99.7% less than three miles. If post offices are providing that cash access point, which they are, then that will be a significant part of this. But that will not be true for everyone, and I can see circumstances where there might be communities with a high proportion of elderly people who still retain the priority of using cash, or people from a certain socioeconomic group who would value the cash access, and that needs to be taken account of. I believe that this provision will give the means to achieve that.

Q222       Sally-Ann Hart: Looking at the past few months and some difficulties arising with an increase in the cost of food or of fuel, for example, more people might end up using cash to budget. What steps do the Government plan to take should people begin to use more cash for budgeting reasons?

John Glen: I think we are seeing that. The data points, and the reliability of those data points—I have not yet seen authoritative data on it, but anecdotally, I think people are doing that if they are more comfortable using cash, rather than tapping to buy things. We will see whether that is a short-term phenomenon. The Government are looking closely at the cost of living challenges, and there is more to be done on that, but I think it depends how that follows through—whether that becomes normalised behaviour beyond the immediate crisis challenge, or we get to a point where it goes back and the trajectory downwards continues. That remains to be seen. Obviously, we used less cash during the covid period.

Q223       Sally-Ann Hart: So you will be able to track that a bit, and find out whether there is a trend towards the use of more cash to budget.

John Glen: Again, I am quite sensitised to the fact that we have to be thoughtful about how we interrogate the data here, because certain groups in the community will use cash more, so we will need to work with different bodies—Which? and others—who will no doubt look at this across different sectors of the community. I will be keen to listen and respond, but at the moment I do not think that we can say that—I certainly have not seen the data yet that tells us that vast numbers of people are using only cash, in a way that is answerable by a particular policy solution today. This framework will give a lot of flexibility to keep cash accessible to many.

Q224       Sally-Ann Hart: Moving on from access to cash, I want to look at cash acceptance. Richard Piggin from Which? told us that there is currently no publicly available information on cash acceptance levels in the UK and recommended that the FCA track and monitor those. Under the financial services and markets Bill in the Queen’s Speech, I read that the Government intend to appoint the FCA as lead regulator for retail access to cash. It would have the responsibility for monitoring the cover of access to cash across the UK. Will the Government also commit to giving the FCA responsibility to start tracking trends in cash acceptance levels among UK businesses?

John Glen: We will not mandate the use of cash—the last FCA survey showed, I think, that 98% of businesses surveyed would not stop people from paying in cash—but it is a relevant issue to be concerned about, in terms of behaviours and what we see. There are differences in concentration in some areas, where people are potentially prevented from using cash. I generally think that it is for individual businesses and retailers to look at what forms of payments to accept. If they have customers who want to pay in cash, they will find a way of making that happen. That is what will happen: customer preferences driving behaviours.

It would be very odd for a situation to arise in which there is a significant amount of unrealised customer demand because people are not accepting cash. It would drive that behaviour naturally. I am open to looking at a reasonable way of dealing with that, but that would be something for the FCA to consider.

Q225       Sally-Ann Hart: Over the pandemic, some local shops—we are looking at local rural shops—said that they would take only a minimum spend on a card, and that they would take only card, not cash, because some did not want to handle cash. Do you think that is a problem? If there is a minimum card spend but people need cash to budget, is that a problem that needs to be looked at?

              John Glen: It is something that we have to continue to look at. I do not think it is an issue that necessitates a specific intervention at this point. What I have seen is cards being used more and more freely for a wider range of transaction values. I have learned in this job never to say never; this is something we have to keep under review.

Q226       Sally-Ann Hart: Will the Government need, at some point, to take steps to ensure that it is commercially viable for businesses to continue to accept cash? Do you think that will be an issue?

John Glen: I do not think that is the likely outcome; the market and consumers will direct businesses in how they want to be paid and receive payments—that is likely to be the way forward. People will use cash where they want to, and businesses will receive cash where they need to secure that custom.

Q227       Sally-Ann Hart: Do you think Scotland is in any way different in the use of cash from anywhere else in the UK?

John Glen: On the rural side, there is a difference. I have mentioned the proximity of less than 2 km to free cash access points in rural areas. Urban areas are the same; there is a small difference overall: 94% live within less than 2 km from a free access point.  Obviously, the sparsity of rurality means that in some parts in Scotland there will need to be different solutions. That is the difference between a universal obligation for x distance, and a set of options for the regulator to take a view on and for LINK to make a deployment decision based on the number of people and the nature of the situation. That seems to me a reasonable way of handling a complex problem.

I have spoken to Jamie Stone, for example, who is a Member of Parliament for a particularly large rural Scottish constituency. His situation is very different from a rural constituency in southern England because of the sparsity.

Sally-Ann Hart: Yes, the sparsity of the population. Thank you; I have no further questions.

Q228       Chair: What exactly happens if people want to pay by cash but that facility is not available? I think even in the House of Commons some facilities take card-only payments. Is there any way that you would be able to compel people to take cash? Is that something that you would like to see? Should people who want to use cash exclusively to make payments not be allowed to do so?

John Glen: The legislation that we are putting forward will allow cash to continue and make access to cash as universal as possible. We have no plans to compel any retail provider to accept any form of payment one way or the other, including cash. As I said in my previous answer, when customers want to pay in cash, the vast majority of businesses will make provision for it, as the 98% figure in the FCA survey shows.

That is the situation as it stands. However, we have innovated in this policy area. We said we would legislate. We encourage market evolution to find some solutions. We are now bringing those things together in this legislation and we expect to listen to what parliamentarians and commentators on those matters have to say. However, I cannot see that the case has yet been made to have a universal obligation to receive cash.

Q229       Mhairi Black: Can I begin by asking, when free-to-use ATMs are replaced by pay-to-use ATMs, what trends have the Government observed?

John Glen: I don’t know that I am qualified to answer that. What I want to do is to make sure that we have as many free-to-use ATMs, or cash access points, as close as reasonably possible to populations. Maybe I need to write to the Committee with the figures, because I do not have the precise figures on the evolution and number of ATMs with me. From memory, we are still significantly higher in terms of free ATMs than we were in 2010. This whole intervention is about free cash access, not paid-for access. Of course, if we can get this right then we change that whole dynamic, because we are making reasonable provision within a reasonable distance. I was speaking to one of the big banks last week, on my visit to Edinburgh, and they were telling me about how, when you put your card in, the machine actually tells you that there is a free card machine x distance away. That has saved people quite a lot of money. So, technology is helping with that.

Perhaps behind your question is the concern that paid-for ATMs are exploiting people. They have been part of the provision, but what we are trying to do is create universal expectations around proximity to access to cash that is free.

Q230       Mhairi Black: It was good to hear you mention some of the issues that rural Scotland, in particular, might be facing in the future. Are you satisfied that the current regulatory regime for the ATM network ensures sufficient geographical coverage in Scotland? Do you have any plans to look at that more locally, as opposed to a national plan?

John Glen: The national plan sets the legislation, the rules and the flexibility. LINK will continue to administer it. It has been given the provision to look at the future of the one-kilometre obligation. Obviously, LINK functions at the local level; it looks into what happens in the individual communities that it is brought to. It uses that framework and then applies it. What the framework does is give flexibility around factors other than distance. Obviously, sometimes that leads to bespoke solutions that are very satisfying to a particular community. At times, there will be a sense of, “We haven’t got the sort of provision that we expected or that some people want.” LINK will then have to justify that, based on a combination of the FCA rules and the decision it made.

I am confident that the framework will be applied locally. We have seen that with the hubs that LINK worked. There was an announcement last month about additional hubs. In Scotland, hubs will be brought out in Carnoustie and Troon, in addition to the one on the outskirts of Glasgow in Cambuslang. What we need to do now is continue to work with communities to find more solutions. Obviously, a vast number of bank branches have been lost—those hubs will be part of the solution to that. Four and a half years ago, some of the people in the Treasury—I am sure it wasn’t Laura—said to me, “It will be a market-driven thing and we can’t sort this.” However, what they also told me was that if you threaten to legislate, you will induce a market solution. Natalie Ceeney has done an excellent job of chairing the cash access group and bringing industry banks together to find that solution. I think that sets the way forward.

Q231       Mhairi Black: Would you say that if in the future there are local communities thinking, “This isn’t working for us”, or, “We need something else,” the Government will be open to rectifying anything that doesn’t work?

John Glen: I think Governments always have to be open to listen and to see what solutions can be made available. We have tried to get this hybrid, using Government legislation and input from colleagues across the House, but we also say that the industry players are the key to driving the solution, because they can see what is happening, in terms of consumer behaviours. We will see how we get on with this. As the Chair said, this has been a little while in coming—necessarily, because I did one piece of legislation relevant to this last year, in the Financial Services Act 2021, on cashback without a purchase, and this is the culmination of it.

Q232       Mhairi Black: Just to touch on my colleague’s former question, Which? did an access to cash consultation and floated the idea of the FCA being tasked with looking for cold spots, so to speak. Is that something that you would support?

John Glen: I think cold spots become clear pretty quickly, through Members of Parliament, with reference to LINK and the mechanisms that exist. There are spots of varying warmth when it comes to cash access, but there are new solutions out there. Mobile banking may be an appropriate solution in some areas, and the hub will be useful in perhaps a more suburban area. However, we have to embrace the fact that there will not be a single solution, now, and we have to say, “Well, actually, what does it take in this particular community at this time?” Maybe it is a retailer—at a garage or some such establishment—playing a role in providing cash. Again, that will be notwithstanding the wholesale distribution network.

Q233       Mhairi Black: Okay, thank you. To turn to a slightly different topic, if we were looking at deposit-taking ATMs for both consumers and SMEs, is that something that you see benefit in, or is it something that makes you anxious? 

John Glen: When I visited the deposit-taking hub in Birmingham in the summer of 2019, it was a pilot, but I am not sure quite how effective it was for taking deposits. I think it will be part of the solution for some communities but not everywhere. The FCA will have to be, and will be, open to looking at that constructively, in terms of the different roles that cash plays—in handing it in to be processed or taking it out to spend—and how and where that works, in different ways and in different places.

Q234       Mhairi Black: So you wouldn’t say you were for or against it either way?

John Glen: Sometimes, people say to me, “What’s your philosophy on this?” and I think this is a problem in evolving consumer behaviour that needs a pragmatic, can-do, fix-it attitude, bringing everyone together to sort it and recognising that you cannot please everyone, but you can find mechanisms—to find reasonable challenge—to provide new ways of solving the problem.

Q235       Mhairi Black: Right. The reason I ask that is that one of the big concerns that we have had cross our desks is about the prospect for money laundering with these deposit-taking ATMs. Is that something that has crossed your radar, or something that you are concerned about, and if so, how are the Government working with banks to combat that?

John Glen: We are reviewing money laundering regulations more generally. I think we plan to say something about that next month. However, I have not had money laundering raised in the context of access-to-cash conversations.

Q236       Douglas Ross: Good afternoon, Minister and Ms Mountford. Minister, you mentioned that 5.4 million people rely on cash. Do you know what the figure is for Scotland?

John Glen: I do not have the figure for Scotland, no. That was a specific survey—the 10% of UK adults. However, I would imagine it would be broadly similar, from what I can see across the patterns in this area generally.

Q237       Douglas Ross: Thank you. If it is any different to that, maybe your Department could let us know for our report.

John Glen: Of course.

Q238       Douglas Ross: You mentioned quite a lot about how consumers, MPs and so on will be able to feed into LINK if they are unhappy. How will that work, and how much bearing will be placed on what local people think?

John Glen: That mechanism exists to take account of local opinion, but local opinion cannot totally overwhelm every factor. If we worked on that basis, you would just sort of say, “Well, if you can get a petition to a certain level, you can force things.” It is about how the market is behaving and how a branch is used, so the criteria around what sort of consultation would need to take place and how an additional provision will exist outside the basic framework will be something the FCA will work with LINK to discern and set out. But what we’ve got there is the mechanism for the FCA to hold these designated entities to account for what they are doing.

Q239       Douglas Ross: It is going to be important, though—this is something I would encourage—that we do have enough flexibility and that local views are heard. A small number of people in a remote rural area is still a big percentage of the people who are concerned, and yes, it may be easy to get people to write up a petition, but that is because people are concerned about it. They are worried, and I have had local constituency cases that I am about to come on to discuss with you, so I do think it is important that people do not feel that this is almost a tick-box exercise where they are told they will be heard, but it is actually then dismissed very easily.

John Glen: The point you are making about the proportions of a smaller community is an important one, and one that needs to be carefully considered, but I do not have—and will not seek to have—a personal right of veto through this legislation. What I want to do is make sure that LINK evolves, and the FCA comes up with a framework that is transparent and something you can share with your constituents.

We also have to recognise that if we are going to maintain a broad and basically minimum standard of access, we need to have different mindsets about where you can get cash. That means using post offices, using retail cash-back, and recognising there may be a hub or a mobile provision. That is inevitable, given what is happening overall with the use of cash.

Q240       Douglas Ross: A lot of our discussions this afternoon have focused on access to cash. What is your view, or the Department’s view, about the final bank in a town being retained? How important is that to you and the Treasury?

John Glen: Under the coalition Government, there was briefly a policy of maintaining the last bank in town. It is often cited by some as a good policy that we should have retained. It was never actually sustained for more than a very brief period, because it was completely unaffordable given the speed of the decline in the use of cash that was actually happening. As I said, it is not my job to regulate individual banks—the decisions around the branch network are for them individually—but they are going to be a designated entity subject to a responsibility to keep provision available.

In February 2020, I visited a hub in the northeast, in Yarm, where the last bank was about to go and the community rallied around that bank. They found a venue and worked collaboratively to keep it open. With the provision of the mechanism to mandate a hub being set up, it may be in the interests of the last bank to convene that and work it forward, because clearly, in circumstances where the last branch is about to go, this provision to find an alternative solution will kick in, particularly where there is a significant population.

Q241       Douglas Ross: What do you view as a significant population?

John Glen: I do not have a view on that, because it is not just about the population; it is about the sparsity, whether the post office is functioning, the existence of ATMs, and other factors. I know it is always tempting to try to get me to say one thing or another, but the point is that it does vary according to different communities. It is for the FCA to look at in the context of the LINK obligation.

Q242       Douglas Ross: The reason I ask is that there was a very recent constituency case in which the Bank of Scotland decided it was going to close from 11 July this year the final bank in Forres. When I was first elected, I put my constituency office in Forres, and there were three or four banks then. This summer we will be down to none at all. The population of Forres is about 10,000, and the bank covers a far wider geographical area. We were told by Bank of Scotland officials that it did not meet the criteria for a banking hub, despite the fact that we have seen this reduction in banks. Just as recently as three or four years ago, banks thought that there was enough custom there for three or four of them, and now there are no banks. Why would that not trigger the need for a banking hub? The one you mentioned in Troon was cited by the officials who came to see me and other MPs affected. They said they had done one in Scotland—this one in Troon. Why would there be such a difference?

              John Glen: Because there will be different behaviours and factors to consider in each different decision—for example, the density of the population and the existing provision of alternative points of access. What we are talking about here is access to cash, not whether there is a comparable population size somewhere. I don’t know what exists in each of those towns that is different. The appeal mechanism that is there can be used to actually say, “Things might change over time.” The details of this are for LINK and the FCA to be working through. It is challenging, though, and I accept that. One wants to have a situation that is as transparent as possible, but there will have to be some area of judgment in a situation where no bank is prepared to maintain a branch because of the behaviour of their customers over time.

Q243       Douglas Ross: That is something I was going to come on to next. You have rightly mentioned the behaviour of customers a number of times in your answers. Do you accept that that behaviour is very often guided by the banks and their staff, who encourage people to go online, which reduces the footfall? These same banks that are closing these branches are doing so because of reduced footfall due to them encouraging people to stop coming in and to go online.

              John Glen: I don’t believe that banks sit down and try to depopulate their branch network by moving people online. I think that there are often reasons of customer convenience behind people using online banking services. The services won’t be for everyone, but banks are making customers aware of a service that has evolved from when they first started using the bank. Clearly, the consequence of people feeling comfortable using online banking may be that their visits to a bank branch then diminish, and that threatens the viability of the branch. I can see how the two are related. I don’t think that there is necessarily a causal link.

I think the question is: what is the provision of access to cash? The point is that you can do a lot of banking services really conveniently online, but you will still need to access cash to pay people to do certain things in the community. That is the distinction. We are seeing an evolution in the way that the bank is used. On some of my bank visits over the years, I have seen the way that mortgage advice is given via an online Zoom facility from a regional hub. Frankly, the quality and specialism of that advice is far superior to what has been available in a small branch in a remote location. There are positives to this changing of the profile of banking, and there are obviously negatives. I am very sensitive, given our correspondence, to your situation in your constituency.

Q244       Douglas Ross: On that, the correspondence I have had with the Treasury has always been very helpful—not so much with the banks. When they are leaving an area, do you think banks treat their customers with respect? Do you think they genuinely listen to their customers? You have an overview of what is happening across the country. You must get MPs, as you have mentioned several times this afternoon, writing to you with concerns about closures. My own view is that the banks disrespect customers as soon as they announce they are leaving. As I explained to you in my letter, Bank of Scotland announced that it was closing its last branch in town. It told people to use the local TSB, which had actually announced it was closing several months before. It then said to use the post office, but the post office is removing their ATM. Everything about that letter to customers showed they didn’t even really care. They were ticking a box to inform customers they were closing. They told me, as a customer of the Bank of Scotland, that my nearest branch would be in Nairn, despite there being another branch about a mile away from me in Elgin, because the Forres branch is closer to Nairn than it is to Elgin. It just came across as they don’t care. They’re moving away, they’ve given up and—frankly—I thought the response was tone-deaf.

When I met their representatives, they weren’t interested and—crucially—I have now written to four different people at the Bank of Scotland, asking them to come to Forres and explain to the 10,000 people who live there, many of them their current customers, why they are leaving that location, and they have refused every invitation to come to a public meeting to discuss that. Is that the type of behaviour you expect from the banks?

John Glen: I think it is very unfortunate that you haven’t had the level of engagement that you need to support your community. We did engage with the oversight of the standards, which are applied through the Lending Standards Board and the access to banking standard—one oversees the other—and that forced the banks to go through a process of evaluation of what to do when they wanted to close a branch and help individual customers through that journey, to use the post office or whatever. If you have discerned behaviours around that process that you think fall short of those standards, I would invite you to engage with that body around overseeing that.

However, it is very frustrating for some of our constituents when a bank that they have used for a long time is no longer available to them. I recognise that sometimes, particularly with elderly people, that change in where to access cash can be disorientating. That’s why I think it is very important that that refinement to that support, if you like, to use a post office or whatever is pretty thorough.

I have seen other examples, which I won’t name, with other banks where the process has been very thoughtful, and there have been letters about helping individuals to use the envelopes, etc., that the post office have, which have been well-received. Obviously, I cannot comment on every individual bank.

Q245       Douglas Ross: My final question is a little off-tangent and slightly outwith your remit, although it concerns what we are discussing today. What is your view about what happens when these banks leave towns and leave very large, dominant buildings in the high street? For example, the Bank of Scotland is in very iconic building at 102 High Street in Forres, right on the toll booth.

Should there be any obligation on banks to work with communities to get something else in these buildings when they close down? As I have seen in Forres and many other communities in Moray, the banks just lock the door and we have a deteriorating building that could be put to public use, but again the banks are looking at something on a balance sheet, and what they could get for that building is never actually going to be realised. Could they be encouraged to do more with the buildings they vacate?

John Glen: You are tempting me to engage in areas of policy without my area in the Treasury. I think what you are talking about here is the whole challenge of the high street and how it is evolving, in terms of its use. I think there are provisions in the Queen’s Speech for other broad measures around that. Obviously, it will depend on whether it is a leasehold or freehold arrangement, and what sort, and those factors. However, it is always frustrating when you see vacant iconic buildings in a town centre being unused for an extended period of time.

Regarding the treatment of that entity as an asset, obviously what the Government do in terms of providing incentives and inducements to get something to happen to those buildings is something that we will have to look at, but I think it’s probably an area that my colleagues in DLUHC would be better placed to answer.

Q246       Chair: We were only supposed to have you for an hour, but we have two very good questions now. Is that okay for you, Minister?

John Glen: I think so.

Q247       Deidre Brock: Thanks, Minister, and thanks to Ms Mountford as well, although you have not really had a chance to say much so far.

John Glen: There is no prohibition, but I try to say that if I’m doing my job properly, then hopefully Laura won’t have to say anything. But you can say something if you like, Laura.

Laura Mountford: I’m very happy to leave it to you.

Deidre Brock: Following on from Mr Ross’s questions, with regard to the self-regulatory regime that banks operate under at the moment, do you still think that is the most appropriate way to manage bank closures? I ask because the consultation with the communities that it requires and the various amounts of engagement that can take place all occur after the bank closure decision has been reached, don’t they? So, it seems to me—certainly from listening to Mr Ross, and in my own constituency I have a bank that is supposed to be closing shortly—that there is still quite a lot of discontent with the amount of consultation that communities get. They feel as if it’s a fait accompli and that the consultation doesn’t really make any difference. Do you feel that there is room for a shift there? We have the Cash Action Group, which has introduced some welcome changes such as the independent assessment, but again, it is after the event.

              John Glen: To some extent, there is a certain inevitability to the decline in the branch network. I think the application of a consultation process that somehow gives the prospect of a veto of such a closure, and that overwhelms the declining economic use of a bank branch, just will not work. I get why people are frustrated with that apparent consultation process, which is only going to have one ending. The way I have thought about this is to tackle it by saying, “Look, you’ve got collective responsibility to maintain access to cash. I recognise that other banking functions will be aggregated and provided, often in other ways, but what I have to do is make that intervention effective in terms of access to cash thereafter,” recognising that some of those other broader functions will be provided at a greater distance.

I understand the frustration, but realistically, given the decline of cash use and the changes in banking behaviour, we have to make the next generation of cash provision and access work. I don’t think I am there to hold on to a slightly extended tail of bank branches for a short amount of time, given where the overall direction—notwithstanding any normalisation over the last six or three months—will probably take us.

Q248       Deidre Brock: There have been suspicions raised, certainly in my own constituency, that some of the bank closures have been brought about simply because of a footfall drop since the pandemic, and that that has been used by banks to justify closing their branches at a greater rate than has been the case up till now. Is that something you are familiar with? Further to that, how does the Treasury monitor the Lending Standards Board and the Access to Banking Standard?

              John Glen: We engaged with the Lending Standards Board following the last meeting of this Committee, when there were significant concerns around the way it was overseeing the banking standard, and that involved the way they were doing it.

With respect to the question about covid, bank workers were key workers. Banks stayed open and were a key part of the defence in terms of dealing with covid, because people needed to access some of the forbearance measures and interventions that the banks provided, and they did a good job at that.

On whether it accelerated bank branch closures, I have no evidence for that. It has been speeding up quite steadily over the four and half years I have been in office, frankly. 

Q249       Deidre Brock: Which? has done various investigations into this issue, and it suggests that banks are not really considering the profile of the local population or taking into account its needs, and that they have not properly considered issues such as the location of post offices, their proximity, what facilities are available, the impact on local businesses and, up in rural areas, the drawbacks of poor broadband connection for people trying to access personal banking services. Is that taken into account when decisions are taken to close banks in rural areas? I am thinking of my parents-in-law. They live in Jamie Stone’s constituency and have certainly encountered increasing problems accessing cash because of the remote location that they live in. 

              John Glen: I think that the shared rural network will increase access significantly in rural areas. In terms of the direct application of a percentage of digital access or mobile access, that is not a specific criterion that is overseen specifically. A bank will make a decision about its branch network based on a variety of factors and, as I said, that is not something I oversee. We must lean into the fact that we have urgently to improve that connectivity for lots of reasons, and that is obviously challenging. We are now working in the territory of more bespoke interventions for more rural areas. It won’t be the same as what you have had in other parts of the country.

Q250       Deidre Brock: Sure, but in the meantime, while that bespoke intervention is being adopted, those folk have great difficulty in accessing banking services. Is there nothing to be done?

John Glen: It’s not a question of saying that there is nothing to be done; it is just about being realistic. A very sparsely populated area with a different settlement proximity will obviously have different solutions, and they won’t be the same as those for people who live in the centre of a city. We have just got to accept that that is the reality. There are pluses and minuses to living in urban and rural areas. We have to find a reasonable provision that takes account of that, and of the shared responsibility that these designated entities have to make provision for access to cash.

Q251       Deidre Brock: Lastly, on the pilot bank hubs that you have been speaking about, what guarantees can the Government or the banks give that those will continue for as long as they are needed—I am thinking in particular of rural areas—and will not close in a year or two after the bank closures have taken place, and when what the banks see as the fuss has died down? Where are we on that? How will the Treasury and the Bank of England monitor that?

John Glen: On 1 May, the Cash Action Group said there would be an additional eight bank hubs. I mentioned the ones in Carnoustie and Troon. There will be 11 free-to-use ATMs and 30 enhanced post office branches. I see that as the opening bid, if you like—the opening set of interventions that they can honestly see are needed at the moment—but I think that will evolve over time. It will be for us to look at that when the FCA rules and regulations come out and the perspective of LINK evolves, and we will monitor it carefully.

Q252       Deidre Brock: How will you monitor it? Sorry to interrupt.

John Glen: Not at all. We will see it by the amount of use and the interaction that we have—I speak to banks all the time—about how those hubs are working. I can see a situation at an unspecified future point when the use of cash has deteriorated or changed—I do not want to use a loaded term—to an even smaller percentage, and the economic model has evolved. We will have to look at that when it happens. This hub is a meaningful intervention that solves the sort of problem that Mr Ross and others are facing, which is what is the provision when there are no bank branches? If the post office isn’t enough for whatever reason, there must be meaningful dialogue to challenge and move to a solution.

Q253       Deidre Brock: Do you see ensuring that there is some sort of meaningful solution for all those communities as part of the UK Government’s responsibility?

John Glen: The reason we are legislating for access to cash is because we do, and I have set out the principles behind it. Obviously, nothing is forever, so the question is: what will it need to move to in time? I can’t make provision for that at the moment.

Chair: Lastly, I call Wendy Chamberlain.

Q254       Wendy Chamberlain: Thank you very much, Chair. Thank you, Minister and Ms Mountford, for your time. I want to move on to talk a little more about post offices. Although we have had some bank closures in North East Fife, since the turn of the year, we have had six post office closures: Balmullo, St Andrews, Ladybank, Newport, and most recently Leuchars and Wormit. I share Douglas Ross’s view that sometimes the response to bank closures is, “This is the post office.”

The Post Office indicated at a previous session here that it intends to reopen those services once it finds new providers, but currently those are being provided by mobile services. Given that the Post Office has a responsibility to maintain a certain number of post offices within the UK, what is the Government going to do to ensure rural communities have post office networks? One of my concerns about banking hubs is that the post office services provided there do not provide the full range of post office services. In some ways, access to cash is trumping the wider community need for post office services.

John Glen: Post offices will always be a major part of this provision, because they are a universal network—I think we have 11,500 of them. I cannot speak to the specifics of your constituency, because I am not familiar with it, but what I see is them becoming hubs for more and more services. It is I think £50 million a year for the past several years that the Government have been subsidising the network. I get this transition from where someone has been familiar with going to a bank, but then moving to a post office, and that it is not the same—

Wendy Chamberlain: There are security issues—

John Glen: Yes, and that is why the concept of the Cash Action Group’s enhanced post office branches exists—to provide additional space and security, and recognising that that will be the place. It is a massive proportion: 99% of personal banking needs and 95% of business banking—that is a lot. Will it do everything that people did? No, it won’t. Will it be the same person? No, it won’t. But can you pay in easily and get money out? Yes, you can. In terms of the future direction of the Post Office and of the three-year commitment from the banks to support the network—for them, making a contribution to the maintenance of that network is important—it is better for the banks to have their customers able to access that, rather than not having any access at all. So I see post offices as being a key part of the delivery mechanism of access to cash, but in terms of the specifics of your constituency cases and where they are, forgive me, I do not—

Q255       Wendy Chamberlain: No, I absolutely understand that. I thought that the comments you made to Douglas Ross about the last bank standing and the hub mandate, which was a coalition policy, were very interesting. I am very conscious that the Post Office is doing a lot of the heavy lifting in relation to hubs. Do you see scope, potentially, for the last bank in a place to be responsible? You mentioned that kind of leadership, but what about some of the financial heft as well?

John Glen: There is a certain randomness to the last bank being the responsible agent. What I want is the designated entities in all those banks to take responsibility for the problem of society as a whole. That is a more effective way of doing it. For various reasons, different branches and networks have had different footprints over the years, so to intervene and just to say randomly, “It’s the last one in town”, does not seem to me to do justice to the complexity of the problem.

Q256       Wendy Chamberlain: Potentially, I suppose, it is that bit where the banks need to work within the hubs. The banking framework agreement is a commercial and voluntary agreement, but given that the FCA has the power to address cash access issues, do you see that potentially becoming less of a voluntary arrangement in the new legislation? Would you like to see all the banks on board?

John Glen: On 31 January this year, Banking Framework 3 was agreed. It will run from January next year until December ’25, and I see no prospect of those banks pulling out of it. That is a commitment that they have made. In due course, probably at the back end of next year, there will be more conversations about what happens beyond that. It is evolving, but the banks and the post offices are working together, as far as I can see at the moment, to be a massively important part of keeping access to cash—

Q257       Wendy Chamberlain: And LINK being important—

John Glen: LINK is obviously very important in terms of the ATMs and overseeing that.

Q258       Wendy Chamberlain: Finally, Citizens Advice has said that there has been a big increase in people’s understanding that they can do basic banking services at post offices. Do you think that there is more to do to increase that awareness?

John Glen: Yes, I think that is right. The challenge of getting people to see that they can do a lot of their banking—virtually all their banking needs, in most cases—at the post office is something that we have to shift into. People should be reassured about what they can do, but that will not always be the solution. In other places, bank hubs will need to happen, or the other provision that I have mentioned during the course of the afternoon.

Wendy Chamberlain: Thank you.

Chair: Thank you, Minister. Although we have detained you just a little longer than the anticipated hour, we are grateful to you for answering all our questions today. If there is anything else useful that you think would help us, or could contribute, you know where to find us.