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John Robertson (Glasgow, North-West) (Lab): May I say what a pleasure it is to have you in the Chair today, Mr. Cummings? I am delighted that my hon. Friend the Economic Secretary to the Treasury is replying to this debate. He was good enough to attend the meeting that I organised on this subject a few weeks ago. I know that he will use a constructive approach, listen to the concerns felt by me and many other hon. Members, and furnish me with the answers that I seek.
I would like to begin by telling a couple of stories that illustrate why I became involved in this issue. I will then fill in the background on the work done in the fight for free cash machines, and finish by saying what I want to happen, and by putting a series of questions to the Minister.
A constituent in Yoker in my constituency came to see me, and told me what had happened to him. He received a benefit payment of £41, and later he went to his nearest ATM in Dumbarton road to take out some money. That ATM is just round the corner from his flat, so he did not have to travel far. He put in his card, but although he had £41 in his account he could not withdraw the £40 that he had requested because the machine said that he had insufficient funds. At that point, he took more notice of what the cash machine was saying, and he discovered that there was a charge of £1.75. That meant that he would be 75p short of £40. In the end, he was allowed to withdraw only £30, because it was necessary to withdraw sums in multiples of £10. My constituent was rightly upset at being allowed to take out less than 75 per cent. of his money, but he was more upset that the cash machine that was nearest to where he lived was no longer a free machine; without public notice, it had become a fee-paying machine.
My second story is about a corner shop in the Knightswood area of my constituency. The shop used to provide a free cash service to its customers, many of whom are elderly as there is a large elderly population in the area. The shop did that as a service to its customers, but it also did well out of that, because when people came in to get some money they bought goods at the shop. Therefore, the shopkeeper was in a win-win situation, until an ATM man visited him and explained that if he installed one of his machines he could charge £1.75 every time that somebody took out money. The shopkeeper installed a machine, and thus the service that he gave to his local customers was no longer free; they now had to pay £1.75 for the honour of buying goods in his shop. Fortunately, another shop has opened nearby which does not have a charging cash machine, and I have noticed that it has been used a lot more than the other shop. Needless to say, the owner of that shop was persuaded by the ATM company to agree to the deal on the grounds that he would make money, and that the sums received for the use of the machine would be his.
That was the point at which I decided that I had to do something about this matter. I tabled some early-day motions, and I want to read them out, as they tell part of my story. My first early-day motion was number 451 of 10 January. It was
"That this House views with concern the increasing number of fee-charging ATMs in post offices; notes that up to 78 per cent, of ATMs in post offices now levy a surcharge; is concerned that many people on fixed and low incomes rely on ATMs for access to their state pensions or benefits."
"the major suppliers of ATMs to the Post Office are the Alliance and Leicester and Hanco; and calls on the Post Office, the Alliance and Leicester and Hanco to guarantee free withdrawals from ATMs in post office premises."
"That this House expresses its concern that nearly half of all cash machines charge a fee for withdrawal; notes that five years ago almost all cash machines in the UK were free, and believes that this trend represents a real and current threat to the UK's network of free cash machines."
Mr. Jim McGovern (Dundee, West) (Lab): I congratulate my hon. Friend on securing this debate and on the fantastic work that he has done in campaigning on this issue. I agree with him entirely about the disproportionate impact on those on low incomes. Does he also agree that there is a double whammy, inasmuch as people on low incomes tend to withdraw smaller sums and therefore the percentage of the withdrawal that the fee represents is disproportionate?
John Robertson : My hon. Friend highlights a problem that is well known. If I withdraw £20 and am charged £1.75 for it, that is a much greater proportion than if I withdraw £100 and am charged £1.75. That is unfortunately what occurs with people who have little money, because they withdraw only the money that they need.
Moreover, the siting of fee-charging ATMs attacks the poor. There is no competition because the banks have closed and moved their premises into areas where there are many people, such as town or city centres or areas where there are shopping complexes. Banks no longer go to the former small shopping areas where the
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shops have now closed, such as Anniesland Cross, which used to be the centre of my constituency and where everything that was anything in the area happened. Anniesland Cross is now a very quiet place, and the banks have closed up and moved. Unfortunately that leaves only fee-charging ATM machines.
I asked the Deputy Prime Minister, when he was substituting for the Prime Minister, the very same question. I received the usual sympathy that we get at Prime Minister's questions. Unfortunately, not much has happened since then.
I also made a submission to the Treasury Committee's when it was drawing up its Fifth Report of Session 200405 on cash machine charges. I gave the Committee a Glasgow view of the problemthe problem that I have laid out to hon. Members todayusing the facts and figures that I had at my disposal at that time. I made some recommendations, and I will be interested to see whether the Minister will care to consider those or even take them up.
My first recommendation was for a code of practice that would build on the Link agreement on early warnings. In other words, if someone complained enough, they could go to Link and it would look at the problem. Nationwide has developed that idea; the Minister and I went to a reception that it held to launch its idea of red and green stickers. A green sticker would mean a free machine, and a red sticker a fee-charging machine. The one thing that has been missing that I have been trying to get is up-to-date information from the banks that can be verified.
"There is a lack of openness about the way LINK rules are decided and there is no comprehensive enforcement of the LINK rules on transparency . . . cash machines need to be brought within the Banking Code so that the system of voluntary regulation is responsive to the needs of consumers and is effectively enforced."
The report goes on to mention post offices, and a pet hate of mine. The Government did a lot to change the way in which pensioners receive their pensions when they did away with pension books, and we have encouraged people to get bank accounts, but now when people want to withdraw money, they get charged for it. The recommendation on the role of post offices said:
"75% of cash machines in post offices charge a fee, and consumers are paying over £10 million a year to use these machines. A number of factors may have been involved (including the Direct Payment programme). This runs counter to the Government's policy goals of tackling financial exclusion and improving the quality and efficiency of public services. There is a need for a fundamental change of strategy: the current arrangements are not in the best interests of sub-postmasters, benefit recipients or the local community."
During our meeting the other week, some information was given out by Nationwide, and I have also received information from Link. Nationwide says that between September 2004 and September 2005, the number of fee-charging machines increased by 16 per cent. and the number of free machines was reduced by 0.3 per cent. The proportion of charged transactions has increased by nearly 40 per cent. since the Treasury Committee's report.
According to Nationwide, if the UK has the same trends as the United States, the proportion of charged transactions will go up from 3.6 per cent. to 40 per cent. by 2007. We should remember that the banks are using our money and are charging us to retrieve it. Link has contacted me; it disagrees with some of Nationwide's figures. It disagrees about the number of free cash machinesthere is a difference of 600 between the two bodies' figuresand on percentage numbers, but if the total numbers are considered, the difference between their figures is less than 1 per cent. However, that emphasises the need for the Government to take the lead and ensure that there is an open and accountable review of standards.
Can the Minister tell me how the banking industry can be regulated on cash machines? Is there a place for more than a voluntary code of practice and a general Office of Fair Trading eye on banking? There has been a worrying trend of high-street banks selling off their cash machineswhich are freeto charging companies. HBOS sold 816 machines to Cardpoint, Abbey sold 50 to Moneybox, and Alliance & Leicester is reported to have appointed Citigroup to explore selling its ATM network. Those sales and possible sales must be looked into, and I ask the Minister to look into those companies, and others like them who are misrepresenting themselves as free cash machine operators while selling them off to charging companies.
I understand why Alliance & Leicester would want to sell its cash machines off, as it already charges at post offices and the publicity is damaging to it. Its 600 charge machines in post offices are a disgracean attack on pensioners in particular, and on the less well-off, who use their post office either because it is the only one in town or because it is nearest to home.
The Royal Bank of Scotland is probably the worst example of double standards, but it is only an example of a growing trend. It makes a big play about its ATM coverage and the fact that its machines are free to customers, but it forgets to tell us about its purchase of Hanco. Surely there is a need for more than a code of practice. If a company can get away with that, what chance is there for the ordinary customer?
Citizens Advice has been in touch with me and asked for the following suggestions to be considered. It said that ATM charging should be restricted and possibly capped, that machines should display warnings before a card is insertedalthough labelling would solve thatand that all current card holders should be able to withdraw cash over the counter at post offices without having to pay.
What does the Minister believe is the correct role of the Government in regulating cash machines? Does he believe that the state has a responsibility for ensuring
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that everyone has access to money, irrespective of income or geographical location? What recent assessment has the Minister made on the effectiveness of Link rules on signage? Would he at any point deem self-regulation to be ineffective and further Government intervention to be required? In what circumstances would he consider the direct regulation of the retail prices of the machines? Do the Government have the power to impose that, or would further legislation be required?
I hope that I have been able to give the Minister an understanding of the problems of a constituency such as mine, which has a large number of elderly peoplearound 17,000two social inclusion partnership areas and many first-time buyers. Such people's needs and aspirations should not be determined by whether they can afford to withdraw their own money from an ATM. People should not be charged to get their own money, particularly by a company that uses it to make even more money but gives its depositors a fraction of what they are entitled to. The Royal Bank of Scotland alone made £3.7 billion in profit in the first six months of this year. It is reckoned that next year, ATMs will charge consumers £250 million, which is a drop in the ocean for the banks.
If we, the investors, had a say, we would not be charged for withdrawing our own money. I should like to thank The Times, The Guardian, the Daily Mirror, The Sunday Times and in particular the Evening Times, my local evening paper, for all their help and support.
Perhaps this is the time for people power and for those of us who just might influence those greedy banks to think again; we could move our money into banks or building societies that think of us first, not themselves. I hope that the Minister has listened to my questions, and I look forward to his reply.
The Economic Secretary to the Treasury (Mr. Ivan Lewis) : I congratulate my hon. Friend the Member for Glasgow, North-West (John Robertson) on securing this debate and on the work that he has done on these issues nationally, and, as we have heard today, in his constituency. The examples from Yoker and Knightswood were important and telling and they have probably been a significant influence on his airing of this important issue.
The Government believe it essential that the ATM industry should be as competitive, transparent and efficient as possible. We therefore see cash machine charges and the ATM market as important areas of public policy. We welcome recent interest during
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debates on these matters and the Treasury Committee's recent inquiry into cash machine charges. Without any doubt, withdrawing cash from the hole in the wall is the most common method of cash acquisition by consumers. In 2004 alone there were more than 2.5 billion withdrawals, an increase of 155 million withdrawals over 2003. An APACS figure shows that ATMs supplied more than half of all cash to individuals, and that 32.9 million adults were regular ATM users.
I shall outline some of the principles of the Government's position. People should be able to access their cash for free, especially those on low incomes, but like the Treasury Committee, we also believe that charging cash machines are a legitimate business model. There are more than 20,000 charging cash machines in the United Kingdom, the majority being new machines in locations where previously there had been no cash machine. Most are in places where there are few transactions and where a free ATM would not be commercially viable. That is shown by the average number of withdrawals per day at different types of ATM. APACS figures show that in 2004 there were on average 204 withdrawals per day at each bank or building society ATM, virtually all of which are free, compared with an average of 19 withdrawals per day at independently operated ATMs, most of which have a surcharge. However, I stress that when charges are applied, we strongly insist that they should be transparent, so that consumers can make an informed choice about whether to use that ATM.
What are we doing in response to hon. Members' concerns? We are considering two areas of work: first, in our response to the Treasury Committee's recent report on cash machine charges, we reaffirmed our commitment to monitor the ATM market closely, and we continue to do so. The Treasury maintains close contact with Link and receives regular updates on developments. Secondly, it is hugely important that vulnerable and low-income consumers in all communities can access their cash for free. As hon. Members know, financial inclusion is a very important priority for the Government, which is why, when we monitor the ATM market, we also examine the impact of charges on vulnerable and low-income consumers.
It should be remembered that ATMs are not the only way for people to access their cash for free. All basic bank account holders, and many current account holders, can withdraw money for free over the counter at the post office. For example, in December 2004, approximately £30.5 million was withdrawn for free over post office counters. Many banks, including Barclays, Lloyds TSB, Alliance & Leicester, the Co-operative Bank and recently Nationwide, signed contracts with the Post Office to enable their customers to use post office counters for cash withdrawals.
Ninety-nine per cent. of people in urban areas and 84 per cent. in rural areas live within one mile of a Post Office branch. Overall, more than 93 per cent. of people in the United Kingdom live within one mile of their nearest post office. Cash back is also increasingly available in supermarkets and shops, and benefit recipients can have their benefits paid into accounts at credit unions. However, we wouldand shouldbe concerned if people on low incomes incurred a disproportionate cost in accessing their money. That is why work is focused on discovering the evidence base for that contention.
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The financial inclusion task force will explore how financially excluded citizens access cash and transmit their money. Among other things, that work will identify the extent to which fee-charging ATMs are disproportionately used by the financially excluded. The results are due next year and, depending on the outcome, we will consider which further steps may be appropriate. I hope that that will reassure my hon. Friend. I expect him to maintain the pressure on the Government when that information becomes publicly available.
It is important to put the debate in context. There have been improvements in the ATM market over the past five years; we welcome the fact that the industry has been opened up to independent operators. It has brought greater competition to the market and has led to a substantial increase in the number of cash machines in the UK; there are now well over 50,000 ATMs.
At the time of the Cruickshank report on competition in UK banking in 2000, people using the ATM of a bank other than their own were likely to have to pay. Each bank generally had agreements with only some of the other banks to offer free ATM withdrawals to their customers, and if people made a withdrawal at a bank other than their own they risked being charged. The charges were complicated, opaque and discriminatory. Consumers frequently did not know whether they were being charged and found out only when they searched their monthly statements. The charges could be set at between £1 and £1.50. However, the latest Link figures show that there are now more than 32,000 free ATMs in the UK and 96 per cent. of cash withdrawals are free.
The number of ATMs in non-bank branch locations has also increased by 2 per cent. in the past year. Virtually all banks and building societies now offer free ATM withdrawals to other banks' customers, and the banks have abolished card-issuer charges for Link cash withdrawals. That is all a great improvement in the situation. Consumers now have a far greater choice of ATMs that they can use for free. They do not have to hunt around for an ATM belonging to their own bank.
Let me be clear that, at this stage, we are not convinced that free cash machines are under threat. However, it is equally important to state clearly that we will remain vigilant. My hon. Friend asked about regulation, codes of practice and so on. Vigilance from a Government point of view means that we stand ready to take appropriate action if there is any evidence that it is required. Public policy has moved forward as a result of pressure from the Government and hon. Members.
John Robertson : Will the Minister allay my fears that fee-charging machines will always be placed in poorer areas? There are plenty of charging machines in poor areas in my constituency, and no free machines.
Mr. Lewis : I hope that the work being done will begin to establish the facts around that. Financial inclusion is central to the Government's commitment to creating a more economically vibrant country and a fairer society. If putting financial inclusion at the heart of that commitment is jeopardised by what we find when the evidence emerges, we will be obliged to consider the most appropriate response. My hon. Friend will be one of the first people with whom I discuss what action would be appropriate.
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It is still vital that we argue for the maximum possible transparency. People must be able to make informed choices about whether they should use a particular ATM. We believe that there have been significant improvements in transparency. Link agreements have banned double charging, which means that a customer cannot be charged by both their card issuer and the ATM operator. New Link rules in place since July are a good step forward for increasing transparency. They have introduced stricter requirements on the location and size of signsthat relates to another point that my hon. Friend made. A clearly visible warning sign must be on the machine itself. It must be at a normal eye-line, of at least font size 14 and must state that the machine will charge for Link cash withdrawals. All surcharging ATMs must also carry a message in the idle sequence specifying the exact amount of the charge, and any other signage directing people to a surcharging ATM must warn that it will charge. The font size, the colour and the background must be such that the message is clearly visible to anyone reading the sign.
The Government intend to monitor the effect of those new rules. We expect them significantly to increase consumer awareness of charges. We believe that the
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Treasury Committee was right to raise the issue of enforcement of Link rules. Sadly, we are aware of examples of charging ATMs that do not display the required signs. I welcome the Link agreement last year to strengthen sanctions for non-compliance. We are pleased to note that a Link-commissioned independent survey to monitor the situation is already under way.
In conclusion, let me make this clear: free access to cash is vital, and a transparent, fair and easily understood market is more than desirableit is the level playing field that our citizens deserve. We also have a responsibility, of course, to be proportionate in how we deal with the matter, but we must be steely in our resolve to ensure those most in need and most at risk of exploitation do not suffer as a consequence of decisions that are made. That is why I said earlier that we are considering specifically the challenges facing people on low incomes, including the disproportionate costs of ATM charges.