Mr. John McFall (West Dunbartonshire) (Lab/Co-op): It is my pleasure to speak on behalf of the Treasury Committee about our report on cash machine charges, which was our fifth report of Session 200405 and was published in March 2005. I welcome you to the Chair, Mr. Martlew. We were elected at the same time, and it is a pleasure to be under your chairmanship for the first time.
There are not that many people around this afternoon because this is the last day before the recess, but that belies the intensity of the public debate on this issue. When the Committee produced its report, there was a great deal of public discussion and public concern, and I hope that hon. Members will see from my remarks that we still have a very live debate on the issue.
The Committee examined three issues. The first was the principle of charging for access to funds through cash machines and the increasing prevalence of machines at which a charge is levied. The second was the transparency and clarity with which such charges were presented to the consumer. The third was financial exclusion and location, and there were concerns about the impact that the spread of charging cash machines might have on financial inclusion and low-income households. We took evidence from consumer groups, banks, leading operators of charging cash machines, the Post Office and the then Financial Secretary to the Treasury, now the Minister for Pensions Reform, my hon. Friend the Member for East Ham (Mr. Timms).
I turn first to the growth of charging machines. To understand how the market for cash machines has developed over the past five years, it is necessary to go back to the review of competition in banking that was completed by Don Cruickshank. The cumulative effect of the changes that were made as part of the Cruickshank review was that the ATM market developed with a recognisable split. There is generally no charge to a cardholder who uses a cash machine that is operated by the major banks and building societies. Opening up the market allowed independent ATM operators to enter and to provide cash machines that typically levy a surcharge to the consumer.
The number of charging machines has grown rapidly in recent years. In December 2005, there were 24,823 such machines. That was 43 per cent. of the total number of cash machines and more than 64 per cent. of the number of cash machines that were not located in bank branches.
David Taylor (North-West Leicestershire) (Lab/Co-op): There was a debate just yesterday in this room
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about the Post Office cash card, and the issue also came up in Trade and Industry questions today. Will my right hon. Friend refer later to the section of the Committee's excellent report that deals with the role of the Post Office in tackling financial exclusion and to the fact that three quarters of the cash machines in post offices charge a fee? Surely, that was not envisaged when the Government made the present arrangements.
Mr. McFall : My hon. Friend is so lively and intelligent that he has anticipated what I am going to say on the issue, which is no surprise. The Post Office card account is very much tied up with financial inclusion, and I shall refer to the issue later. Indeed, the Committee's ongoing inquiry into financial inclusion will take evidence on that very point, which is germane to this debate and to that inquiry.
Although the expansion of charging machines resulted in there being cash machines in previously unserved locations, free machines were forced out of some sites and replaced by charging machines. Major high street banks have sold free machines to the charging operators. For example, HBOS sold 816 non-branch machines to Cardpoint, and Abbey sold 50 machines to Moneybox. Information from the Cardpoint annual report indicates that more than 300 of the machines that HBOS sold to it have now been converted from free to charging. The Committee noted that if other high street banks
Mr. Andrew Love (Edmonton) (Lab/Co-op): Does my right hon. Friend agree that the recent tailing-off of the increase in free cash machines is a worrying sign that we may be entering an age of less competition in the ATM marketplace?
Mr. McFall : Exactly. The two buzzwords during our inquiry were competition and transparency. I shall refer later to the notion that there could be free ATM black holes in different parts of the country. That certainly collides with the Government's intentions on financial inclusion.
Many witnesses to our inquiry argued that the number of free machines has not declined and that there is no danger of consumer detriment. Although the number of free machines has increased, it does not automatically follow that there has been a commensurate increase in the number of different sites at which the general public can access free cash withdrawals. Some of the new machines are in locations such as casinos, betting shops and bingo halls, which do not have general public access. More importantly, the number of free machines could have become concentrated in fewer locations. For example, Westminster tube station used to have just one free-to-use cash machine, but now has four. Although that represents an increase in the total number of free machines, it is difficult to argue that it extends access to free cash withdrawals.
To supplement that argument, I should add that some card company representatives told us that they had increased the number of their cash machines in low-income areas or what are referred to as areas of
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deprivation. One such area is Canary Wharf, but I do not think for a minute that we would see too many low-income people if we went down there. None the less, that is the situation and that is why the argument is very complex.
Mr. Philip Hollobone (Kettering) (Con): I was particularly struck by recommendation 10 in the report, which deals with the use of paid-for ATMs in public sector locations. For many fairly low-paid public sector employees, the only convenient way of accessing their cash is by paying a fee to use one of those ATM machines. I therefore very much applaud recommendation 10.
Mr. McFall : I accept the hon. Gentleman's point of view. During the inquiry, we found that that situation prevailed at several Ministry of Defence sites. I have written to the MOD about that, and it, too, is a live issue.
I turn now to the prospects for the future. The evidence that the Committee received indicated that the market's dynamics will continue to lead to free machines being converted to charging machines. The Committee expressed concern that
Since the report's publication, I have continued to monitor the situation. For example, Link told us that for 2005 as a whole, 500 machines were converted from free to surcharging, whereas 210 were converted from surcharging to free. We therefore e-mailed Link requesting a list of the 500 locations where, previously, surcharging machines had been free. I would have assumed that that information was readily available and that the Treasury was monitoring it closely to ensure that there was not a substantive reduction in the availability of free cash withdrawals, particularly in low-income areas. Alas, I was wrong.
"not currently able in an automated manner to create a list of every machine that has converted, making this a very labour intensive task that we cannot complete by your deadline. We have recognised, however, that this is a gap in our ability to provide useful data and technical work to make this possible in future is in hand."
On Monday evening last, Link managed to send us a sample of 200 locations that had had free machines, but which now have a surcharging ATM. Although we need to be cautious about drawing conclusions from such a small sample, particularly given the unreliability of the Link database, several things were clear: for 25 per cent., the nearest free cash machine was more than 1 km away; for 15 per cent., it was more than 2 km away; and about 13 per cent. were in postcodes in which the Treasury considers there to be concentrated financial exclusion.
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That seems to indicate that the number of areas without access to free ATMs is growing. Sadly, it seems to take the intervention of the Treasury Committee to uncover that information, as the matter is not being examined by the industry or the Government.
There remain serious gaps in the industry's and Government's knowledge of the issues that have not been addressed. How many of the increased number of free machines are located in casinos, bingo clubs and other locations not accessible to the general public? How many are accounted for by increased concentration, rather than expansion in the number of genuinely available and different sites? Is there any evidence of existing free machines becoming concentrated in fewer locations? In which locations are free machines being converted into charging machines, and to what extent is that resulting in localities where there is no access to free cash withdrawals? In which low income areas is there insufficient access to free cash withdrawals?
The Committee recommended that the Office of Fair Trading payment systems taskforce conduct research into the geographical distribution of cash machines as part of its work into the efficiency of payment systems. The response from the OFT was that while
"members of the taskforce believed that there might well be important social exclusion issues raised, they did not believe that the geographical distribution of charging ATMs was an issue that fitted well with the Task Force mechanism, given the Task Force's specific remit . . . The task force considered that the issue could be better dealt with elsewhere: possible locations could include HM Treasury or the Treasury's Financial Inclusion Taskforce".
On transparency, it is essential that the industry provides consumers with clear information to enable them to make an informed choice about whether to use a charging cash machine. When I go to a petrol station, I see a clear sign showing the price per litre in large numbers. Why can there not be a similar high standard of transparency for cash machine charges? Although consumers using a charging cash machine are given notification of the charge and the option to cancel, that comes very late in the transactionafter the customer has inserted their card and personal identification number and selected the amount they wanted to withdraw.
David Taylor : Is my right hon. Friend surprised to hear that in one of the largestand probably least well-offformer mining villages in North-West Leicestershire, there is a cash point near the local parish office that charges, but no one would know unless they had extremely good eyesight? Written at the top left of the machine in microscopic letters is "£1.50 per charge". That is written in biro on the wall of the office. That is the sort of thing that needs to be tackled, is it not?
Mr. McFall : I agree entirely. When we undertook our inquiry into the subject, we found that the signs for some
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cash machines were in awkwardly low positions, and one had to search for them. As I said, anyone can go to a petrol station, find the price per litre, and so decide which station to go to; why can that not apply to the industry that we are discussing? The lack of transparency means that consumers found it difficult to identify which machines charged and which were free before they started to use the machine, as my hon. Friend says.
When we started the inquiry, the Link rules required all cash machines that charged to carry a sign, clearly visible to cardholders before a card was inserted, that stated: "This machine may charge you for Link cash withdrawals". Witnesses described that warning as vague, bland and non-specific. The Committee described the notice that a cash machine "may" charge as "disingenuous" and noted that it did little or nothing to inform consumers.
"Poor standards of transparency surrounding ATM charges are detrimental to consumers, in that they result in charges being incurred unnecessarily and make the practice of shopping around to find the cheapest cash machine difficult."
Steps were taken by Link to improve matters duringsome might say because ofthe Committee's inquiry. Link told us that all cash machines that charge will have an initial on-screen message that shows the charge. For example, it might say "This machine will charge up to £1.50". Secondly, there will be external signage on the cash machine saying "This machine will charge you for Link cash withdrawals". The sign must be at normal eye level, close to the ATM screen, with a minimum font size of 14 point. Thirdly, where there is signage away from a surcharging ATM that directs towards its presence, the sign must include the words "This machine will charge you for Link cash withdrawals".
The Committee welcomed the improvements to transparency agreed by Link but was disappointed that five members of Link voted against the new requirements. The Committee also identified a number of areas where further progress was needed. It recommended that
Mr. McFall : Yes. At our hearings, we asked that question, and that information came out. If the hon. Gentleman will bear with me, I will later refer to the votes taken by Link, and that might provide him with further information.
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Many charging machines prominently advertise the ability to make free balance inquiries. The Committee concluded that that practice should not be permitted on any machine that levies a surcharge on the consumer. We also concluded that
We noted that the banking code requires banks to notify customers when it closes the last branch within a specified distance, and it called on banks to examine whether a similar requirement should be introduced when removing the last free cash machine within a specified distance.
Many witnesses thought that it would be useful if consumers could see at a glance whether a machine was free-to-use or levying. It has been suggested by Nationwide and HBOS that that could take the form of red signs for charging machines and green signs for free machines. That proposal attracted support from some major banks, but was rejected by the majority of Link members last December. Unless the industry engages, and collectively tries to secure further improvements in transparency, it will give the public the impression that it is happy to make money out of the veil of secrecy surrounding cash machine charges.
On regulation and enforcement, to be effective it is essential that compliance with voluntary regulation is adequately monitored and effectively enforced. During the inquiry it became clear that Link's approach to enforcement was ad hoc and ineffective. Surveys indicated that up to 50 per cent. of cash machines were not compliant with the Link requirements. The Committee concluded that that degree of non-compliance was totally and utterly unacceptable.
We welcomed moves by Link to strengthen its enforcement procedures. A survey conducted in late 2005 found that 1.6 per cent. of machines still did not have the required on-screen warnings, and a disappointing 13.2 per cent. did not comply with all Link's surcharging rules. Fines totalling some £20,000 had been levied on those operators, but Link needs to publish details of which companies it has fined, so we can put pressure on repeat offenders to improve their practices. To date, that information has not been forthcoming.
The Committee recommended that charging cash machines be brought within the banking code. The Banking Code Standards Board wrote to me in January to say that as Link was now taking its enforcement responsibilities more seriously, the board did
soon, and informed me that it will be reviewing the situation at six-monthly intervals. I continue to believe that in the longer run there would be considerable benefit in extending the code to include all cash machine operators.
"As part of an agenda tackling financial exclusion, it is very important that those on low incomes have access to free cash withdrawals. We note evidence that the cash machines most likely to be converted to charging are those away from existing bank branches in low footfall locations. If there were to be a substantial reduction in the availability of free cash machines then that could exacerbate existing financial exclusion".
The Treasury document entitled "Promoting financial inclusion", published alongside the pre-Budget report 2004, contained analysis indicating the concentration of financial exclusion in certain areas of the country and concluded that 68 per cent. of the financially excluded live in the 10 per cent. most financially excluded postcodes and 25 per cent. of the financially excluded live in the 3 per cent. of postcodes with the highest concentration of financial exclusion. The Treasury initially told the Committee that it was unable to send a list of the postcodes as the terms of the contract with the company that provided the information meant that it was unable to provide the raw data to any third party. The Committee concluded:
"If the Treasury is going to spend public money identifying areas of concentrated financial exclusion, it seems unhelpful not to share this information with those organisations that might be able to make improvements in those areas."
After much cajoling, the Economic Secretary, God bless him, kindly agreed to share the postcodes with the Committee, but on the understanding that we did not give them to anyone else. But it would be far more helpful if the Minister shared this information with the Post Office and other banks so that they can review the provision of free cash machines in those areas. I understand why the Minister said what he did, but there is still an urgent need for that to happen. Low-income and financially excluded areas that lacked access to free cash withdrawals included Speke in Merseyside, Aston in Birmingham and Grangetown in Redcar and Cleveland.
The Post Office, which gave evidence in the Committee's inquiry, has a large network of branches, giving it a unique opportunity to be at the forefront of tackling financial exclusion and providing a method of free cash withdrawal where many people would otherwise have to use charging cash machines. The Post Office told us that more than 93 per cent. of the population live within 1 mile of a Post Office branch, with this figure rising to 99 per cent. in urban areas.
In March 2000, the Prime Minister announced that the Government would work with the Post Office to install some 3,000 cash machines in post offices. However, when the Committee examined the issue in December 2004, it found that there were 2,493 cash machines within Post Office branches, of which 1,856 charged a fee direct to the consumer. That meant that more than 75 per cent. of cash machines in post offices, including many of those in low-income areas, charged a fee to consumers. Witnesses, including Citizens Advice and the National Federation of Sub-Postmasters, expressed concern over this trend, telling the Committee:
"Since most benefit claimants and a significant proportion of all Post Office customers are people on low incomes, charges on Post Office based cash machines are likely to hit those using them particularly hard".
Sub-postmasters were also unhappy as they were given little or no choice as to whether they had a charging or free ATM installed. The Post Office told us that it was not making a profit from charging ATMs. Post Office customers were paying more than £10 million a year in cash machine charges, thereby threatening efforts to address financial exclusion, with apparently little contribution being made to the viability of individual sub-post offices or the Post Office network. The consumer was spending £10 million a year and nobody was making any money.
One of the recommendations in the Treasury Committee's report was that post offices should put signs on their machines informing customers that a free banking service is available if they have a basic bank account. Has there been any progress on that?
Mr. McFall : My hon. Friend needs a little bit of patience. There has been some progress and I will talk about that in my speech. He is a member of the Treasury Committee, so he will have the privilege, in a month or two, of questioning the Post Office personally to see what progress has been made.
"the large network of the Post Office and its presence in many locations without a bank branch gives it a unique opportunity to tackle financial exclusion. The Post Office needs fundamentally to re-examine its policy concerning charging cash machines".
I am pleased to note, as I mentioned to my hon. Friend, the Post Office's positive response to the Committee's report; it has withdrawn from its over-arching contractual arrangements with existing ATM suppliers and, going forward, will introduce only free-to-use ATMs. The Post Office has also reached an agreement with the Bank of Ireland to provide approximately 1,000 Post Office-branded free-to-use machines across the network. There will be at least 300 new free-to-use machines located in the network over the next three years. I am pleased to say that the Post Office has advised me that the surcharging machine in the Speke area, on which the Committee focused in its inquiry, will be removed as soon as it can install a free cash machine. Overall the Post Office is moving in the right direction, although it is not off the hook, and the Committee will continue to monitor progress and press it to do more to provide more free cash machines across its network.
On access to cash over Post Office counters, under the arrangement that set up universal banking services in 2003, the public can gain access to cash withdrawals over the post office counter if they have a basic bank account, or have a current account with a number of banks, including Barclays and Lloyds TSB. However, there is evidence that that provision was being poorly communicated to customers. Data that the Committee obtained concerning the post office in Speke found that more than 38 per cent. of people using the charging cash
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machine could have made their cash withdrawal over the counter, free of charge. We concluded that the Post Office needed to make additional efforts to promote the ability to make free cash withdrawals at the post office counter. However, as we all know, more than 40 per cent. of the current account market, including customers of HSBC, Royal Bank of Scotland and HBOS, are not able to access cash for free over post office counters. We need to extend post office access to ensure that all current account holders are able to withdraw cash for free over the counter.
Ms Sally Keeble (Northampton, North) (Lab): Before my right hon. Friend moves off the subject of exclusion, will he pay regard to students, who make a lot of small-scale withdrawals and for whom the charges would be especially high and punitive? There is an issue, with regard to the university in my constituency, about students' access to cash.
Mr. McFall : That point was raised in the report in regard to students and people on benefits. My right hon. Friend the Member for Oxford, East (Mr. Smith) will tell me that when he occupied the distinguished role of Secretary of State for Work and Pensions, the Department advised people to take their money out in small amounts. Am I correct?
Mr. McFall : Well, I am correct, as my right hon. Friend will see if he looks at the record. Whether students or low-income households are taking money out in small amounts, they are being penalised disproportionately. We will return to that.
The Government's move to direct payments will result in increased cash machine usage amongst benefit recipients, and if they have problems getting free access to their money they will have less available for other essentials. One safeguard that the Government stressed in their response to the Treasury Committee's report was that customers would be able to open a Post Office card account to receive their benefits. It now seems that the Government will be withdrawing the product when the contract expires in 2010. There are still 4 million people regularly using the POCA to receive their benefits. The Government need to consider carefully the effect that the closure of these accounts could have on access to free cash withdrawals, especially if it results in the closure of some post offices that remain one of the few sources of free cash withdrawals in many low-income areas. The Treasury Committee will be examining the future of the POCA as part of its current inquiry into financial inclusion.
If the Minister reads yesterday's Westminster Hall debate secured by my hon. Friend the Member for Leeds, East (Mr. Mudie) with the support of others, he will see that a political storm will be coming the Government's way if they do not plan in good time between now and 2010. We want to see a sensible, joined-up approach to this issue. The Government have made many valid points, but they need to make a co-ordinated response.
On the overall conclusions and further action, we need far more systematic monitoring by the Government of access to free cash withdrawals to ensure
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that low-income consumers are not adversely affected by the spread of charging machines. The Departments involved, the Office of Fair Trading and the cash machine industry need to stop passing the buck and take this issue more seriously and commission research into the geographical location of cash machines.
The Treasury needs to share with the Post Office its list of postcodes where there is concentrated financial exclusion. The Post Office should review cash machine provision in those areas and install a free machine, wherever it is viable. Link needs to provide all the locations where machines have been converted from free to charging and improve the reliability of its database.
The banks need to set out a specific commitment to the free-to-use network and to expand into under-served areas. It is the banks' responsibility to convince the public that they are not departing from the areas of greatest need in the country.
Don Cruickshank predicted that the Link arrangements would lead to concentrations of free ATM machines in particular areas. Banks therefore need to examine how they can rebalance the location of cash machines to combat financial exclusion and reduce the number of occasions on which customers are denied access to free cash withdrawals.
The transparency improvements proposed by Link do not go far enough. Consumers should be able to see at a glance whether a machine is free or charging, and the amount of any charge should be identified on external signage. In answer to the point made earlier by the hon. Member for Wycombe (Mr. Goodman), deciding regulation with secret votes at confidential meetings is certainly not best practice for a self-regulating body.
All the banks and independent ATM operators need to state publicly where they stand on proposals for standardising the labelling of free and charging machines. The director of the Link card scheme wrote to me saying that it was inappropriate to publish how individual banks had voted on this proposal, but it was agreed that
Today I shall take up his invitation and write personally to all Link members to ask where they stand on the transparency issue. Link needs to reassure us that its enforcement of the rules is systematic, and to provide a list of the companies that it has fined.
I welcome the Post Office's change of strategy. It should continue to review its network to determine whether free machines might be viable in more of its branches, particularly those located in low-income areas. As I mentioned earlier, the Committee will monitor that closely.
I refer the Minister to the three areas examined by the Treasury Committee: first, the increasing prevalence of machines that levy charges; secondly, the transparency of those charges and the clarity of their presentation; and thirdly, the issues of financial exclusion and location, and the impact of charging machines on low-income households. On prevalence, good statistical information is lacking and that should be addressed. On transparency, huge steps are still required to assist consumers. I look to the Government and the industry to work on that issue.
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Lastly, there is a public policy issue. The Government and the industry need to work together systematically in the light of the Government's objectives on financial inclusion. They need to look at the statistical studies and geographical locations to ensure that there are no free-cash-machine black holes in low-income areas. If the Government address those concerns, they will have the support of the Treasury Committeeand, I am sure, Back Benchersand ensure that there is a systematic approach to ATMs and that we do not let down consumers and low-income households in this country.
Mr. Andrew Smith (Oxford, East) (Lab): I greatly welcome this debate and the chance to press for further action on the important question of charging people to get at what is, after all, their own money. Like others, I am particularly concerned to get more done to tackle the injustice of people on low incomes paying too much of their money just to be able to spend it.
I greatly welcome the Treasury Committee's report, and congratulate my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) on his excellent introduction and the recommendations of the Committee. The report is a thorough and informative piece of work that asks all the right questions and makes sensible recommendations. While I am thanking people, I should say that we all owe a vote of thanks to the Nationwide, which has been such a consistent and staunch defender of free access to cash and an effective advocate of clear signing to indicate when machines are charging.
I should also like to thank Link for the briefing that it has given me on this issue and its particular impact in my constituency. Any Members who are not aware of its website should know that it is very helpful. It enables people to bang in a postcode and find the nearest charging machine; anyone wanting to do a survey of their constituency can sit at their computer and do it. I should also mention our local newspaper the Oxford Mail, which has taken a lead on exposing the unfairness of our local pattern of charging machines, which is the issue on which I intend to focus. I have some of the relevant cuttings with me.
The evidence shows that, certainly in Oxford, there is a clear pattern of communities where more people on low incomes live being much further from free machines than those where more people on higher incomes live. I understand that Link has undertaken analysis that shows that there may be a higher proportion of free ATMs than surcharging ATMs in more deprived areas. Whether that is the case nationally, I do not know. However, we have to be straight: that analysis does not make the issue any less of a problem for those living in communities that do not have access to the machines.
There certainly does not appear to be that higher proportion of free machines in deprived areas of Oxford, the geography of which is such that a number of social housing estates are on the edge of the city or some way from the centre. More people on lower incomes live in those areas, some of which fall within the most deprived 10 per cent. of wards in the country, but those communities have charging machines and are furthest from the free machines.
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The Barton, Blackbird Leys, Minchery Farm, Northfield Brook, Rose Hill and Wood Farm estates all have charging machines; the Northway estate does not have a machine at all. The charges are typically £1.50 to £1.85, which represents a big percentage if people take out only £10 or £20. On the other hand, the free machines are mainly in the city centre, in some suburban shopping centres and on the radial roads. Frankly, it would surprise me if there were not a similar pattern in other parts of the country.
Analysis undertaken by the Oxford Mail shows the same pattern. People are charged on the estates, but there is easier access to free machines in more affluent areas such as Summertown. The banks and the machine companies argue that charges may be needed in some areas to make machines economic, and that if it were not for the charges, more areas would have no machine at all. That underlines the need for further research, which the Select Committee has called for.
I know from the briefing that Link gave me that at least some of the machines in the areas in my constituency that I mentioned are well-used high-volume machines that should be viable without a charge. We need to get to the bottom of how far that is the case more generally.
As my right hon. Friend the Member for West Dunbartonshire said, there is a clear and important public policy aspect to tackling financial exclusion. The Government and local authorities need to work with the banks, the Post Office and other public sector sitescommunity centres, area housing offices and so forthto open up free machines wherever that is viable and consider installing low-charge cash machines where it is not. As my right hon. Friend and his Committee recommended, the analysis of areas with a high concentration of low-income earners and social exclusion should be available to the Post Office and others, which are working together to tackle that problem.
However, action does not even have to wait for that information; all local authorities are to some extent addressing financial and social exclusionthe Labour ones certainly are. Those in local authorities know where the areas of social exclusion are. There is room for local action as well; it does not all have to come from the centre.
As my right hon. Friend said, the trend towards higher and higher proportions of charging machines needs to be monitored and limited, as does market concentration among charging operators, to address the danger that, if the sector becomes unduly concentrated, more free sites will be poached by those who charge and competition will be restricted.
We also need to be alert to a point that is well brought out in the Select Committee report: banks who dispose of their machines have a vested interest in there being a transfer to charging machines, because where the machine operators are making the charge, the bank will not then be charged under the interchange fee arrangement. That installs quite a perverse incentive in the system, which needs to be addressed.
I welcome the steps that the Post Office has taken, not least in response to the Select Committee's inquiry, to install free machines. As my right hon. Friend said, there was a disturbingly high proportion of charging ones. I
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encourage the Post Office to examine the possibility of putting free machines in the areas in my constituency that I mentioned. I also urge more banks to allow their current account customers to withdraw cash over the post office counter and, as has been said, for that facility to be more clearly advertised. We also need industry agreement. We must be firm about that. If such agreement does not materialise, we should say that there must be legislation to enforce consistent, clearly visible signs about which machines are free and which ones charge.
All of that is important now, but it will be even more important if the Government end the Post Office card account service for those in receipt of benefits and pensions. Many people with limited mobility could end up paying an extortionate and unaffordable amount in machine charges. That is not what the Government or I want, and I hope that my hon. Friend the Minister, who I know is taking a close and informed interest, will be able to tell us more about the action that they are taking. We must get this issue right or it will not just be those withdrawing their money who will pay a high price.
I start by congratulating my right hon. Friend the Member for West Dunbartonshire (Mr. McFall)my neighbouron the contribution that his Committee has made. The document is a lengthy one. A great deal of evidence was taken, but I know that a lot more still has to be done.
I got involved with the issue of cash machine charging after a constituent came to one of my surgeries. He explained that he had received £41 of benefit money and went round to the old HSBC hole in the wall to get his money out. He found that it was a Cardpoint facility, but he did not realise what that meant. He put his card into the machine and was told that he was to be charged £1.75 to extract his money, only to find out that he could take out only £30 because he had to extract his money in multiples of £10. By the time he had paid the £1.75 and withdrawn his £30, he could not get access to the other £9 or so. He would not get access to it until he received his next benefit payment, and even then it would have taken him about six months to get his own money out of that machineuntil he got the balance down to almost nil.
Such a situation is not right and is not fair to the people who were mentioned by my right hon. Friend the Member for Oxford, East (Mr. Smith); the fee-charging machines seem to be put into deprived areas. If we ask the companies in question, they say that that is not true. They also tell us that they do not make much money on the machines. If my recollection is correct, the estimated profit from cash machines this year is about £500 million.
Let us consider that in comparison with the major banks, which will have a profita net profit; it is not running costsin excess of £30 billion. Is it unfair to ask companies to foot the bill by not charging customers for getting, as my right hon. Friend the Member for Oxford, East said, their own money out?
There has been foul play. The people in my constituency have been ill-treated and the city of Glasgow has been unfairly treated. It contains about six
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of the most deprived constituencies in the country. In the area of the highest deprivation, the fee-charging cash machines outweigh the free ones by 2:1. The free machines are all in areas with high shopping value, shopping centres or retail parks. The expensive machines are in the corner shops, which our constituents have to go to because they cannot afford to get the bus to the city centre or to the retail park on the outskirts of the city where they can buy cheaper food.
It is not true what some banks are telling methat they put in such cash machines because they are providing a service in an area where there are no cash machines. In the west end of Glasgow, probably one of the most affluent areas in the country never mind in the west of Scotland, there is a road called Byres road. It is well known to people who have been to Glasgow; they will probably have had an evening out there for a few libations and possibly a curry as well. It is a high-student shopping area, which has many banks and building societies, and therefore lots of cash machines, not one of which charges. Yet, less than a mile up the road is probably one of the more deprived areas, Maryhill. It has a cash machine that charges.
The banks tell me that they do not get rid of their free cash machines and that they are putting in more by the day. The other day I had an interesting discussion with a representative of the Royal Bank of Scotland who came to see me in my office. He told me that it had bought a company called Hanco, which is one of the biggest fee-charging cash machine operators in the country. When RBS bought the company, about 800 cash machines were involved. Today it has about 7,000 fee-charging cash machines in this country.
That has happened in less than a year and a half. I started campaigning for free cash machines at about the same time. I find it outrageous that the company has invested that kind of money, yet it tells me that it does not make much money on the machines. If it does not make much money and it is a bit of a bother having them, why has it obtained an extra 6,200 cash machines in the country to fight off the competition? If there is no money to be made, what competition are we talking about? I believe that RBS made £6 billion profit last year, yet it cannot afford to run free cash machines.
There is a real problem. The Minister and I have had discussions about it. He has been helpful, and I commend him on the work that he is doing. He promised me that he would examine the issues if we raised them with him. I told him that there was evidence throughout the country on this issue. My right hon. Friend the Member for Oxford, East has produced it, and my right hon. Friend the Member for West Dunbartonshire has quoted examples in areas of London. We know from Glasgow that fee-charging cash machines are not being put in areas that have high employment, lots of money and nice big houses, because if they were, people who lived in such places would jump into their cars and drive to a free machine.
Helen Goodman (Bishop Auckland) (Lab): This is also a serious problem in rural areas, which have suffered many bank branch closures. People are even more dependent on cash machines in such areas. Does
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my hon. Friend agree that the needs of rural areas should be taken into account in future examinations of financial exclusion?
John Robertson : My hon. Friend makes a good point. I have tabled early-day motions on the subject. Charging cash machines are in areas of high deprivation and areas where the elderly live. Knightswood and Blairdardie in my constituency have the highest concentration of over-60s in Europe, yet there are no free cash machines in the area. There is one on the outskirts of Glasgow, and people should go to Anniesland Cross and hear about some of the feelings that prevail there. Fee-paying machines are near an old person's home and the corner shops.
Reference has been made to the Post Office, and I have a criticism of the Government. When payment books were taken away, our benefit receivers and the elderly were forced to change to a system in which money was obtained by cards. We made it difficult for people to obtain Post Office cards, but banks made it easy for them to take out bank cards. Banks have told me how well they did out of a lot of people.
Depending on whether we listen to Link or we listen to Alliance and Leicester, Alliance and Leicester bought between 800 and 1,200 cash machines in post offices. Of them, 400 to 800depending on which company is to be believedare fee-charging cash machines. Let us consider the situation of elderly people. We told them that they would be better off and that it would be easier for them to get their money. Yes, it is much easier for them to get their money, but it is also much easier for them to spend it before they even receive it. Did we really set up the system so that when pensioners withdraw perhaps £20 or £30 from their pension, we ask them to pay £1.75 each time they use a machine? That is not right. Those elderly people have worked all their lives for this country, yet we turn round at the time when they should receive their money from machines for nothing, and charge them. It is a disgrace. Companies such as the Alliance and Leicester must take a real look at themselves because they have deliberately cashed in on elderly people.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) talked about rural areas. They have the same problem because sub-post offices have fee-paying cash machines. People could withdraw their money for nothing before we changed the system, yet we havethrough no fault of our ownassisted companies to make money from those who can least afford it. I accept that I have had a bit of a rant, but I feel strongly about the subject, as do many of my constituents.
I wish now to say a few words about the report and the conclusions of my right hon. Friend the Member for West Dunbartonshire. I am pleased that the recommendations in my submission to the Committee were similar to those that my right hon. Friend made in the report. We must seriously examine the growth in the number of charging machines. I have also received letters from Link and the National Association of Citizens Advice Bureaux. Faced with the same statistics and questions, it is funny that two different organisations have two different answers. Link did not
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look too bad, with about 13 per cent. of machines being a problem that needed to be investigated. However, Citizens Advice stated that 50 per cent. of their people had trouble understanding how to operate the machines. That is not right.
Nationwide put forward the excellent idea of big red and green stickers that can be clearly seen. I received a letter from the Halifax Bank of Scotland in which it said that it would be willing to take such action and recommended it. The Royal Bank of Scotland has said the same. If those banks, which are particularly big in Scotland, can agree, why have we reached the stage at which five companies within the Link set-up suddenly say that they do not want to operate in such a way? We must ask ourselves why they do not want to take such action. Why do they not want people to understand how their machines work?
Mr. McFall : I mentioned further transparency in respect of the five companies at the meeting of Link on 12 December 2004, at which the green and red stickers for HBOS and Nationwide were discussed. They decided not to proceed with such action. We do not know how many members voted against such a decision because the meeting was secret. At the invitation of the director of Link, I am writing to those Link companies to find out what happened on an individual basis, and I shall share that information with my hon. Friend.
John Robertson : I thank my right hon. Friend. It makes matters worse when such companies can behave in such a way. I would not mind, but this is our money. It is not their money; it is ours. Not only do they use our money to make more money, but they charge people who cannot afford it to withdraw their own money. If a bank said to me, "We think that our profits might go down slightly, but I would like to use your money to ensure that those people do not have to pay a charge", I would say, "Go ahead. I am happy with that. If you make only £29.5 billion profit rather than £30 billion, I do not think that too many shareholders will be upset about it."
Mr. Love : Will my hon. Friend congratulate Citizens Advice on setting up the ATM watch that it will be carrying out later this year? Let us hope that it will illuminate matters and inform people about what is happening throughout the country and that, as a result of that exposure, we will obtain the changes that we want.
John Robertson : I thank my hon. Friend for that intervention. Now is an opportune moment to introduce the briefing that I received from Citizens Advice. I believe that what it says is right. I refer to its four bullet points, the first one of which is that
"All non-financial transactions should remain free . . . Machines should display a clear and prominent warning of charges before a card is inserted. Citizens Advice agrees with Nationwide Building Society that there should be a clear distinction between fee-charging and free cash machines by means of red and green signs . . . All current account holders should be
That does not seem much to ask. Such a system will not cost a great deal of money, but it will ensure that those of us who can least afford it, such as my constituent who only gets £30 of his benefit of £41, will be better looked after than we are at present. I do not want my elderly constituents to go to the corner shop or the sub-post office to collect their pension in the knowledge that it will cost them £1.75 each time they go. It is as though they are taxed for being old, and that is not on.
Kerry McCarthy (Bristol, East) (Lab): As a new member of the Treasury Committee and a new Member of Parliament, I was not involved in the investigation that led to such an excellent report. However, I wish to congratulate my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) on securing the debate and on giving us the opportunity to discuss what undoubtedly affects many of my constituents in Bristol, East.
I also congratulate the Bristol Evening Post on its "Don't Feed the Money Monsters" campaign against fee-charging cash points, which it described as one of the great cons of the early 21st century. I carried out a mini-survey in my constituency the other day and discovered that of the 10 cash machines closest to my constituency office, seven imposed charges, with fees in the range of £1.50 to £1.75. My constituency is certainly not in an affluent part of Bristol. Far from it. It includes the Lawrence Hill ward, which is the most deprived ward in the south-west of England and the 133rd most deprived ward in England and Wales, out of more than 8,000 wards. It also ranks 108th in terms of household income deprivation. I therefore have a particular interest in ensuring that my constituents do not fall among the ranks of the financially excluded.
The industry will say that 96 per cent. of cash withdrawals from ATMs are free of charge. I am not sure whether that means that 96 per cent. of actual withdrawals are free of charge, or 96 per cent. of money withdrawn. That is an important distinction. However, what I do knowand what has been made clear by my right hon. Friendis that about 43 per cent. of cash machines now charge, and 64 per cent. of machines that are not in bank branches charge.
As my right hon. Friend the Member for Oxford, East (Mr. Smith) outlined in compelling detail, the ATMs that do charge tend to be based in poorer areas, and it is self-evident that people in poorer areas who are on lower incomes will withdraw small amounts of money at any one time. The citizens advice bureaux found that over a quarter of paid-for withdrawals are for £20 or less. Therefore, people taking out £100 or £200 at a time are less likely to pay for that, whereas people who take out £10 or £20 at a time are more likely to do so. The person taking out £200 usually pays nothing for that, because they either live in a banked area or they have a vehicle so they can drive to a free cashpoint. The person taking out £10 at a time can end up paying £1.75 for that, and another £1.75 for the next £10, and the same sum for the next £10and so on, until their £200 has, by my calculations, cost them £35, which amounts to a 17.5 per cent surcharge.
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People whose state benefits are paid into their bank accounts are, in effect, charged simply for receiving their benefits, and if they abide by the advice given out by the Department for Work and Pensions not to withdraw all their benefits from the cash machine at once, they pay over and over again. For example, a single person aged 25 or over and in receipt of jobseeker's allowance gets £55.65 per week, and if they use a fee-charging ATM to take that out in several instalments they could face losing up to 8 per cent. of their weekly benefit.
As my hon. Friend the Member for Glasgow, North-West (John Robertson) said, if somebody has £30 in their bank account and they need that £30 to get through the week and they go to a fee-charging ATM, they will be able to withdraw only £20 if the machine dispenses only £10 notes because they will need £1.50 or so to meet the charge. Most of us would not miss that extra £10 in any given week, but for some people that £10 is the difference between getting through the week with enough money to feed their children or to travel to workor to pay a bill that is already overdue with the bailiffs knocking on the doorand not having enough money to do so. They are faced with a choice between having the money to do that, or not having the money.
Of course, it could be argued that people have a choice about which machine to use. However, as in many areas of policy, choice is a luxury for some and no choice at all for others. For a mother on benefits with young children who relies on public transport to get around, making an extra trip across town with her children in tow to find a free cash machine is just not practicalwith the level of bus fares in my constituency, it is not economical either. The disabled, the elderly, the sick, and the carers who cannot leave their responsibilities behind for more than a few minutes at a time are not free to exercise choice.
The rise in the number of cash machines also has a disproportionate impact on our student population. In the city of Bristol there are two thriving universities, the university of Bristol and the university of the West of England, as well as a large further education college, the City of Bristol college. According to Nationwide building societyI congratulate Nationwide on its free ATM campaign and its efforts to promote the use of red and green stickersstudents pay £4 million per year in cash machine charges, nearly half of UK universities host fee-charging cash machines and almost 2,000 fee-charging machines are within a half-mile radius of UK universities. Students are also likely to be on tight budgets, and to make smaller withdrawals. If they take out £10 a time, they could be charged a fee of nearly 20 per cent. if they are not careful. The hole in the wall all too often leaves students with a hole in their pocket.
The rise of fee-charging cashpoints is a new phenomenon. Five years ago, nearly all cash machines in the UK were free; now, nearly half of them charge. Nationwide estimates that consumers could pay £250 million this year. The number of fee-charging machines has increased by 16 per cent.
Dan Norris (Wansdyke) (Lab): I join my hon. Friend in congratulating the Bristol Evening Post on its campaign against fee-charging machines, and not least for publishing the locations of those machines that do not charge, which is extremely helpful and allows consumer power to have an impact on this debate.
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However, does she agree that the real issue here is old-fashioned greed? The banks originally saved a lot of money on staff costs by introducing machines, and they now want to get a double-whammy by charging after the machines are in place in order to increase that saving. Therefore, the reason for these machines is simply old-fashioned wickedness and lack of moral fibre, which is being displayed by banks that already make huge profits.
Kerry McCarthy : I agree that that is the case in some instances. A huge amount of bank branches have closed. The Select Committee Chairman gave some interesting figures on the number of cash machines that have been sold off by the banks to companies that charge. I think that HBOS has sold 816 machines, Abbey has sold 50 and the Alliance and Leicester is looking to sell its cash machines. While I am on the topic of the Alliance and Leicester, it is interesting to note that its machine in the Lobby of the House does not charge, whereas elsewhere its machines do. It is clear who it is trying to impress.
I have been looking into the situation in the United States of America to search for an example of what could happen here if we do not take steps to address the growing phenomenon of fee-charging machines. In 2005, customers in the USA were estimated to have paid $4.3 billion on withdrawal fees from ATMs. Double-charging is still prevalent there: 96 per cent. of banks hit non-customers for withdrawing money from their machines, but 87 per cent. of banks also charge their own customers for doing the same thing. I am pleased that the UK Link agreements have now outlawed double-charging.
I shall conclude by picking up on some of the points that my hon. Friend the Economic Secretary made in an Adjournment debate on this topic that my hon. Friend the Member for Glasgow, North-West secured last autumn, and in doing so I will return to the issue of choice. In that debate the Economic Secretary said that
Transparency is undoubtedly important for people who have a choice about whether to use a certain machine, but I dispute the contention that for some people the choice can always be facilitated by greater transparency. I simply do not believe that the majority of my constituents who use fee-paying machines have simply been caught unawares by a fee being levied. They know they have to pay the charge, but their personal circumstances all too often mean they have no choice but to pay.
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The Economic Secretary also talked of the level playing field that our citizens deserve. We are far from achieving that level playing field at present, and I hope to hear from him today about what more can be done to ensure that we do.
Mr. Andrew Love (Edmonton) (Lab/Co-op): I welcome you to the Chair, Mr. Martlew, and I apologise for arriving a second or two late for the start of the debate. I also wish to say to my hon. Friend the Member for Glasgow, North-West (John Robertson) that I well remember Byres road, but, sadly, before cash machines ever arrived there.
I also congratulate the Treasury Committee on undertaking its report, and I am grateful that, as a new member of the Committee, I now have an opportunity to speak in this debateand, I hope, to be able to follow matters up in various future Committee hearings and investigations.
I shall begin by making a general comment that has not been made so far in our debate by reaffirming one of the principles that the Committee set out in its report, which is that charging machines are a valid and appropriate business model. In certain circumstances, they can offer the convenience that many people wish to have. However, we must look carefully at a number of issues. My right hon. Friend the Member for West Dunbartonshire (Mr. McFall) mentioned competition; I would also mention transparency and access. Competition has been at the centre of our discussion, and we must take into account all aspects of that principle.
It is perhaps understandable that so few Members are present, but that saddens me. I was a little surprised about that because accessing cash machines affects a large majority of our constituents, and it is therefore important to them. I looked up some of the figures in the material I was sent: 33 million people use cash machines every year, which is 84 per cent. of the adult population. There were about 58,000 cash machines as of the end of last year and, as several hon. Members have mentioned, 43 per cent. of those machines now charge people to access their money. Last year, £161 billion was withdrawn, and about £200 million was made from access charges. It is estimated that that figure will probably rise to £250 million this year.
It is important to take recent developments into account, and one worrying recent development is that while the number of machines charging a fee has increased by 16 per cent., there has been a reduction, albeit a very modest one0.3 per cent. last yearin the number of free machines. Although that trend has levelled out, one of the big worries is that, in future, there will be a further decline in the number of free machines. That would cause quite a few alarm bells to ring.
John Robertson : Is my hon. Friend surprised to hear that one reason why the figure for free machines has remained so high is that sites with multiple machines have been introduced? At such a site, there may be
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anything up to four machines, and they are counted as being at four different sites even though they are all in one place.
Mr. Love : I thank my hon. Friend. I was not aware of that fact. It just shows how important it is that we monitor effectively what is happening in the marketplace, so that we understand what action needs to be taken to ensure that people can access the type of machine that they want, with the convenience that they expect in this day and age.
Let me return to those wonderful statistics that we love to cite. It is important to place cash machine charges in context. About 96 per cent. of all transactions are still free. I think that everyone recognises that we want that to continue to be the figure in future. However, the Treasury Committee suggests in its evidencethis figure appears to be accepted fairly broadlythat the growth in ATMs that charge will level off when the figure reaches about 5 to 10 per cent. We need to consider what the consequences will be if that phenomenon takes place, and how we can ensure a proper market for the future.
Interestingly, according to the industry, ATMs owned by banks and building societieswhich are generally but not always free, as other hon. Members have mentionedhave, on average, £13,000 withdrawn daily. The independent sector, which generally charges although not always, has, on average, about £800 withdrawn per day. That has consequences for the balance between free ATMs and charging ATMs.
One great concern, which other hon. Members have mentioned, is whether there will be a significant shift from banks and building societies holding ATMs to the independent sector holding ATMs. Of course, that would entail a move from free provision to charging provision. HBOS has been mentioned in that regard. I shall not go into the figuresthey have already been citedbut there is that worry. We cannot know as yet that the balance will change significantly but, again, we must monitor the situation. I welcome the role that the Treasury has played in this and other matters by recognising the critical importance of monitoring all developments at present to ensure that we maintain an adequate marketplace, in which everyone can receive their money at a cost appropriate to them.
I would like to discuss a number of issues, the first of which is transparency. The second issue is affordability and financial exclusion, which several hon. Members have touched on. I shall then say a few words about the Post Office, because it will begin to come into its own if some of the changes that we are discussing do take place.
Let me first of all, as others have done, welcome the progress that Link has made on greater transparency. It has taken action to ensure both that a message now appears on the screen of its ATMs telling people that a charge may be made, and that there is an external sign to tell people before they get to the machine that a charge may be made. Link has also reviewed its compliance with those conditions. We are told that the figure for compliance is 98 per cent. and that penalties have ensued for those who have failed to comply. I accept all that. However, from my reading of comments from interested individuals and organisations and those affected, I believe that a number of outstanding issues remain.
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The first issue relates to clarity. There are concerns that the minimum point size for the message that appears on the screen might not be appropriate for all members of the community. There is still quite a lot of confusion. For example, ATMs often state that balance inquiries are free, which might confuse someone into thinking that all the services are free. As my hon. Friend the Member for North-West Leicestershire (David Taylor) said, the position of the signage that goes along with a machine is often not appropriate to inform the individual. It might be very small or placed in an awkward spot. We need consistency of provision. Nationwide and Which? have suggested the red and green signage about which many have spoken. That suggestion seems appropriate for various reasons, in terms of clarity and of being widely understood. If it is not accepted across the board, it will be incumbent on all the organisations to suggest ways in which we can be reassured that there is clarity and that the provision is easily understood by all members of the community.
Associated with that is the concern raised by several hon. Members about non-financial transactionspeople wanting to find out how much money is in their account. This issue particularly affects the less well-off, who may be worried about how much money is in their account. Reassurance needs to be given that charges will not be introduced for that service.
Secondly, let me consider affordability. It has to be said straight away that 25 per cent. of all withdrawals from ATMs that charge are for £20 or less, so there is very significant use of such ATMs by the less well-off. Those on low incomes might even withdraw smaller amounts. It has already been mentioned that sometimes people can withdraw only £10 at a time. Some people will choose to withdraw only £10 or perhaps £20. We are told that the average charge made at an ATM is £1.50. In Glasgow, it is £1.75. The figure will vary, and if we are monitoring the situation, we should be becoming aware of whether a differential charge impacts adversely on lower-income communities. However, just to take the average charge for a moment, if someone withdraws £20, the charge is 7.5 per cent. of the amount that they have withdrawn. If they withdraw £10, the figure is 15 per cent. That is the position for low-income households. I am not sure how we should deal with that issue. I would be interested to hear what my hon. Friend the Minister has to say about making charges proportionate to the income of the person withdrawing the money. I am not suggesting a cap, but the situation that I have described needs to be considered.
Thirdly, as several hon. Members have mentioned, more than 6,000 branches of banks and building societiesit is banks in the mainhave closed since 1990, 1,000 of which were in rural areas. The Building Societies Association and others have carried out studies that show that generallyI do not want to go too far with this pointthose bank branches have been withdrawn from less well-off areas. In addition, we are all acutely aware, because there have been many Adjournment debates on the subject, that post offices have been closing in many areas. Some have closed in rural areas, although that has slowed significantly. When there was a review of the post offices in my constituency, five of the nine local branches closed, but
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not all of those were in what one would term deprived areas. However, there have certainly been closures.
Regarding the concerns about the fact that areas where there are neither branches of banks nor post officesor even ATMsmay develop, I remind the Minister of his letter to the Chairman of the Committee on 26 October where he said:
We all agree with that. In the case of my constituency, one in three of the ATMs available to my constituents are free, so two in three charge, and my constituency is in a relatively deprived, low-income area. Last year, we lost one of our free machines and added one to the total of charging machines. The largest single employer in my constituency is the local hospital. Many people are employed there and many patients pass through it. It has only one cash machine, which charges £1.50 and people have to walk half a mile to withdraw money from a free machine. That hospital is in one of the most deprived areas of Edmonton and Tottenham and I say without fear or favour that it represents probably the most deprived community in the whole of Greater London.
We need to consider carefully the distribution of free and charging machines. I listened carefully to the Chairman and read the letter from the Minister that provided the figures on financial exclusion. Those figures need to be matched up to the location of ATMs as soon as possible, with regard to those that charge and those that are free. As has been said, gaps in provision, such as those in my constituency, are critically important, and if we are to maintain competition and the ability to access funds, we must ensure that those gaps do not occur.
I welcome the work of the Treasury Committee and, more importantly, the Treasury on the matter, as well as the work of organisations, such as Citizens Advice, which consider the issues carefully. That all adds to our knowledge and leads to the drawing up of a comprehensive picture to ensure that our constituents and people nationwide are able to access their money.
I shall just say a few words about the role of the Post Office and a couple of issues that have already been touched upon. In its report, the Treasury Committee said that 75 per cent. of ATMs in post offices carried a charge. Indeed, the figure suggested that £10 million was raised in fees last year. The first thing we should do is strongly welcome the decision of the Post Office to convert 1,000 of its ATMs from charging to free machines. The Chairman went into detail about the way in which the Post Office is addressing that issue and I strongly welcome the critical consideration of the services that it provides. I suggest that if it can move to an entirely free network in post offices, it will add significantly to the need to maintain that branch network in rural areas and low-income communities throughout the country.
There are 14,500 post office branches nationwide, roughly 8,000 of which are in rural areas. As was mentioned earlier, almost everyone is within a mile of a post office branch so access is reasonable, although I am
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sure there are areas in Members' constituencies where access may not be as good as it should be, and we need to consider that.
I was pleased that the Post Office entered an agreement to allow free withdrawals from its branches for those who held basic bank accounts. That service was much needed and addressed a gap that existed in the marketplace; I strongly welcome it. As I mentioned in an earlier question to the Chairman, we must ensure that customers who use the post office are aware of that service, especially when they may be using machines that charge in the village or the post office. They must be made aware of those choices.
Concern has been expressed at the announcement that the Post Office card account will be discontinued in a few years' time. I fully understand the different cost structure of accessing funds through a Post Office card account compared with accessing them through a bank. It is a sensible move, if we ensure that those who have Post Office card accounts can, do and want to access the alternatives available. The latter point is critically important: people must have trust and confidence that the alternative system is one that they want to undertake.
To achieve that the Post Office needs to do two things. First, it should seek membership of Link. I understand that this will open up doors for the Post Office; it will be able to allow people with any bank account to access their fundsnot just those with basic ones. That would give the Post Office a credibility in the banking structure that will be enormously helpful and may well encourage the national banks that currently resist the temptation to make agreements with the Post Office to do so. That should be urgently considered, not just in the context of the withdrawal of the Post Office card account.
Secondly, there is a role for the Post Office in relation to basic bank accounts. We know that there has been a massive increase in the number of people holding those accounts, but, to be honest, that is not particularly due to the work that the banks have done. Indeed, some banks are hesitant regarding basic bank accounts and there is more that the Post Office network could do. If it did so in relation to the card account, there would be a much smoother transfer than some of us believe might happen.
I strongly welcome the report overall. I am incredibly impressed with the thoroughness with which the Treasury Committee undertook the inquiry and the strength of the recommendations, many of which have been implemented, but many of which have not. This matter affects all our constituents: all of them have a vested interest in it, not just those on a low income. People have come to my surgery to complain about being charged £1.75 or £2, even though they may be relatively high-income earners, because they were not aware that they were going to be charged.
There are many issues to consider, but with good will on all sides, the continuing work of the Treasury Committee and the help and support not just of the Nationwides of this world, which are already on board, but all financial institutions, I hope that we can achieve the sort of marketplace that gives people real choice with regard to how they withdraw funds.
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Susan Kramer (Richmond Park) (LD): I am very conscious that a number of people have planes to catch; they do not have the luxury of going home on the tube, as I do. Therefore, I shall try to be brief and not reiterate many of the points already made, but I want very much to associate myself with the speeches that have been made.
I reiterate how much I appreciate the excellence of this report. I was not a member of the Treasury Committee at the time, so I can take no credit for a really superb piece of work, or its recommendations. However, I also read the Government's response, which I thought was weak and disappointing. I hope that today the Government will redeem themselves on a matter about which they have made a number of policy statements that ought to mean that they are taking a more active and forceful interest.
I suspect that none of us objects to charging for ATM use where it is genuinely just a matter of convenience. There is a wine shop at the top of my street, and as far as I am concerned, if anyone wants to pay to use the cash machine there, that is their problem; there is a free machine two minutes round the corner, if they can be bothered to walk. However, even in the area where I live, which is an affluent area of Barnes in my constituency, there are two free machines within five minutes' walk of my house.
If I were to live on the North Barnes estate, which is one of the most deprived in south London, the only machine in reasonable distance would be in a convenience store, and the machine charges. It would be even worse if I were a pensioner, or, as others have said, a mother with small children, dragging a buggy and whatever else. It is not in the interests of the site owner to put in a machine other than a charging machine, because of the basis on which the fee works. At the heart of this debate is charging within areas of financial exclusion where people are on low incomes, deprived and do not have any other reasonable options for obtaining cash without paying.
I hope that the Government's work to identify the postcodes of exclusion will be used as creatively as possible to understand the areas in which people are effectively shut out of using a free ATM. The Government say that they have been unable to make the information available, because it came from a private company and there were commercial constraints. The information is now available to the Treasury Committee.
My goodness sake, paying the small additional fee to get wider use of that material has to be a small price to pay for opening up the opportunity to work with the voluntary and private sectors and others to tackle financial exclusion. The benefits of dealing with that underlying problem must be so much greater than the cost that would have to be paid to use the data. Frankly, it ought to be a no-brainer for the Treasury.
The Government responded to the report, saying that they would be worried if people on low incomes genuinely had to pay to obtain cash, but that they were confident that that was not true, because people could go to post offices. In this debate, we have discussed charging at post office machines. I hope that it is fading
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and that it will end. However, the reality for many people is that there is no local post office, and there will be fewer post offices in the future.
There is not one single post office in Ham and Petershamprobably the poorest ward in my constituency. There is a post office within a mileprovided that one can fly across the Thameswhich meets the criterion established for the Post Office on the number of branches that it has to have.
We are now looking at the withdrawal of the Post Office card account. There is a set of issues about that product, but I am worried about the predictions made by the Post Office and the sub-postmasters that the withdrawal of the account will force yet more branches to close. That will be as true in urban areas of deprivation as in rural areas. Adam Crozier himself said that he could meet the criteria set down for a full distribution of post offices with roughly 4,000 sub-post offices, of which there are presently in excess of 14,0000. A loss of even 1,000 or 2,000 post offices would be devastating for many communities, especially if that meant that we would loseagainthe avenue down which the Government were going to provide people with free access to their cash.
We must consider the dynamic, and I hope that the Government will do so and recognise that the situation is getting worse, not better. The issue must be considered in the context of financial exclusion more broadly. I believe that we are starting to realise what an impact financial exclusion has. It is not just a matter of convenience; it is the gateway for people to change their lives and achieve their personal goals. That issue is wrapped up at the heart of the debate; it is neither a side nor a minor issue. The hon. Member for Wansdyke (Dan Norris) made the point that for banks, the move to ATMs was a cost-saving measure. It is three times more expensive to serve someone at a counter than it is at an ATM. The banks withdraw counter capacity, shift to the ATM and then move on to close the branch. There is a lingering social obligation to serve the community, and it must be part of negotiations with the various providers.
The issue was raised of ATMs at public service sites. I reiterate the problem of fee-paying cash machines in hospitals. When that issue was put to the Government, they basically said, "Not our problem, guv; it is for the trust." An issue as fundamental as that cannot be for a trust. West Middlesex university hospital is just one example in my neighbouring constituency of Twickenham, where if someone has to pay for a prescription, they have to pay cash. It is probably not a poverty issue if the person is paying, but they still have to pay cash. Someone feels ill, is not at their best and needs medication. They go to draw cash and the only ATM charges. In additionas others have saidfor low-wage employees such as nurses, medical staff, cleaners and whoever else is dependent on that machine, it makes no sense.
I cannot believe that the differential between the cost of a free machine and a charging machine could wreck the viability of a trust, but it sure can be problematic for individuals who are attempting to deal with all the minor problems that one has obtaining cash in a hospital.
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The issue of transparency is utterly fundamental. I am in a state of shock about the out-of-hand rejection of the proposals for the traffic light, red and green sticker system. It seems such a simple and obvious mechanism, and the Government must use all their ability to advocate it and to apply pressure for it. I support those who say that if necessary, we should legislate. However, we should go a step further: each paying machine ought to state clearly where one can find a free machine. People stand at the paying machine, and they have no idea where to go. Having additional information would be salutary and make it evident quickly if they were in an area where free machines were not available.
I find disturbing the direction in which some of the industry is going. I am sure that the Royal Bank of Scotland's purchase of Hanco was an appropriate corporate strategy, but it begins to underscore the conflict of interest between different parts of the community in supporting free machines versus fee-paying machines. We are all concerned about an underlying tendency to shift in the charging direction, except where there is an articulate and affluent population. When one sees such activity, a warning flag is raised, indicating that we are moving in the wrong direction.
Dan Norris : Does the hon. Lady agree that that is part of a cynical attempt to create a situation in which most machines charge? Then the banks that owned the free machines could simply say, "Market forces are now such that we must also charge."
I said at the beginning of my remarks that the Government's response had been weak, and I want to illustrate that point. The Committee's recommendations were powerful, and they would have been effective if fully implemented and pursued. After the report came out, I noticed an interesting effect on the banks. Shortly after the report's publication, HSBC closed its last bank branch in Old Colwyn in Wales. Aware that so much tension was in the air and that the Government might act, it carefully negotiated with the local Somerfield supermarket to provide a free machine to replace the one in the closing bank branch. Having seen the weakness of the Government's response to the report, HSBC simply closed its branch in Ogmorea community with almost identical circumstances and deprivationand bothered neither to negotiate nor to look for a substitute. The Government's response to the Committee's very powerful report sent out the wrong message.
Mr. Paul Goodman (Wycombe) (Con): It is a pleasure to see you in the Chair, Mr. Martlew, and it is a pleasure to be shadowing the Economic Secretary for the first time. I look forward to constructive exchanges with him on this subject today and in the future.
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One of the first things that I do when I read a Select Committee report is to turn to the back to find out whether there was division in the Committee on the subject under consideration and whether amendments were tabled, voted on or voted down. I note that there seems to have been strong consensus on the conclusions in this report. It was signed by my hon. Friends the Members for North Dorset (Mr. Walter) and for Sevenoaks (Mr. Fallon) and by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). I want to tell the Chairman of the Committee, who opened this debate, that it is a thorough and measured piece of work.
I should pick up on a point made by the hon. Member for Richmond Park (Susan Kramer). Although I did not follow what was going on at the time, it seems that the banks, building societies and independent operators responded in some degree to the investigation, presumably from fear that when the report was published it would be even more critical than it turned out to be. It is evident from what the Chairman of the Committee said that there is a lot of progress to be made.
When I read the report in full earlier this week, it came to me that one way of thinking about its conclusions is as follows. We could live in a country in which the banks and building societies were allowed to charge what they liked with no regulatory framework. They could charge whatever transaction feesdisloyalty fees is one of the technical termsthey wanted. One could argue that in such circumstances the market would work perfectly and that there would be clear signage, font sizes would be adequate and the financially excluded would have access, but I doubt very much from reading the report and from the temper of the debate that that would be the case.
As we are a little short of time, I will not go through some of the stories buried in the report that prove that present practices are less than perfect, but I recommend that any hon. Members who have not read the report fully should turn to page 28, where an interesting instance is given of a practice that is less than perfect.
On the other hand, we could live in a country in which the Government effectively acted in such a way as to make it impossible for the banks, building societies and independent operators to charge. If that were the case, what would surely happen is that the number of machines would fallthe hon. Member for Edmonton (Mr. Love) referred to the proportion of transactions that are currently carried out on non-charging machines. The banks would argue that they were no longer receiving revenue from the charging machines that they would not, in this imaginary world, be allowed to provide. The conclusion that I draw from the report is that the Committee got it about right; it is all about the balance between freedom and regulation.
The report covered four main areas: the growth in the number of charging machines, financial exclusion, better transparency, and regulation of the banking code. Many of the points in the report have already been covered and I shall not rehash them all, but I want to comment briefly.
It is true that there was a sharp rise in the number of charging machines of about 25 per cent. between 2000 and 2004 and that the rise was much more rapid than the
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growth in the number of non-charging machines, which was 3 per cent. However, the industry argues that the number of non-charging machines will continue substantially to outnumber the number of charging machines. The question is where all this is going.
Mr. Love : So long as we can monitor the situation, I think most people are relaxed about an increase in charging machines if that means greater convenience. I think the worry is a reduction in the number of free machines if that creates a desert in poor communities.
Mr. Goodman : That is exactly so, and it brings me to my next point, which follows on from the remarks made by the hon. Member for Richmond Park, who said that the Government's response was weak and disappointing. It was certainly confusing in one way. The response states on one page:
A great deal has been said about post offices and there was a lively and well attended debate in Westminster Hall yesterday. The Chairman of the Select Committee produced some good news on free machines earlier. His report set out clearly some of the impasses between the postmasters, who would like to introduce free machines, the Post Office, which is apparently not taking that into account, and the operators, who are getting the money from them. That is good news, but the Government must give a fuller response on what will happen after 2010 when the Post Office card account contract ends. The Economic Secretary will know that early-day motion 1531 on the pilots that are running now has been signed by about 25 of his hon. Friends who are extremely concerned about the matter. I look forward to hearing what he has to say in that regard.
Citizens Advice has said that it has serious concerns about the lack of clarity on the future of the Post Office card account when the current contract runs out in 2010. It is frustrated by the lack of clear information from the Department for Work and Pensions about its plans for the account. The Chamber will be interested to hear what the Economic Secretary says about that.
On transparency, it seemed to me that the report was right to push the operators in the direction of clearer signage, larger font sizes and so on. I note that the industry's argument in the report was that it would take a great deal of effort to alter all the machines and that there would be a resulting cost, but the report pointed out that the operators must service the machines anyway, so surely it should be possible to improve transparency.
This has been a useful debate. I am aware, as the hon. Member for Richmond Park said, that some hon. Members and perhaps even Ministers have planes to catch, so I will not inconvenience them further. I wait to hear what the Economic Secretary has to say.
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The Economic Secretary to the Treasury (Mr. Ivan Lewis) : I welcome you to the Chair, Mr. Martlew. It is always good to see you there. I also welcome the hon. Member for Wycombe (Mr. Goodman) to his new responsibilities and look forward to jousting with him in future. I thank him for his sensitivity to airline arrangements, although I do not know how they will pan out. I also thank my hon. Friend the Member for Colne Valley (Kali Mountford) for her usual excellent support. She always draws the short straw in the Treasury, which seems to mean ending up with me, but she is always a great support.
This has been an important debate and continues a long line of important debates on this area of policy. I want to comment briefly on the speeches and interventions that have been made. First, my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) in his capacity as Chairman of the Select Committee has made a massive difference in this area of public policy. If he and his Committee had not taken such a close interest in these matters, we would not have seen the progress that has been made in recent times. We can discuss how much progress has been made and I shall come to that. It is exceptionally important that the Select Committee, under his leadership, is seen to be keeping a close eye on this important issue.
It is a pleasure to have my right hon. Friend the Member for Oxford, East (Mr. Smith) take part in this debate. He was a distinguished, highly respected Secretary of State, and brings specialist knowledge to the discussion. It is fair to say that my hon. Friend the Member for Glasgow, North-West (John Robertson) recently put me on the spot in an Adjournment debate. It is clear that he has decided that this campaign is important to his constituents and to citizens throughout the country.
My hon. Friend the Member for Bristol, East (Kerry McCarthy), who is a new member of the Select Committee, made an excellent speech. She rightly drew attention to the impact of the problem on vulnerable people in the real world in our respective constituencies. My hon. Friend the Member for Edmonton (Mr. Love) spoke about long-term implications. Long before this was a major public policy issue, he drew attention to its impact and serious consequences.
I thank the hon. Member for Richmond Park (Susan Kramer) for the way in which she presented her contribution. As ever, I shall do my best to redeem myself in her eyes. That is something on which I spend many a night reflecting. I hope that I shall have redeemed myself satisfactorily by the end of my speech.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) rightly referred to the fact that financial and social exclusion is not just about means. If one lives in a rural community, the lack of cash machines is yet another thing that can cause disadvantage and make life more difficult. As usual, my hon. Friend the Member for North-West Leicestershire (David Taylor) gave an independent perspective on the issue. He does that on almost any matter that comes before the House of Commons. He and I saw off the same Conservative parliamentary candidate. After I beat her, she followed him to North-West Leicestershire. I am delighted that he was successful.
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My hon. Friend the Member for Wansdyke (Dan Norris) referred to the wickedness of the banking industry. That is one remark that was made today with which I, as the Minister in the Treasury with responsibility for financial services, simply cannot associate myself. I spend many of my days with bankers of one kind or another, and my job would be made unnecessarily more difficult if I were to endorse a view of them as being wicked. Many people in the financial services sectornot all, but manyshare the concerns that have been expressed today. As representatives of that sector, they view their responsibilities as being about more than just profitability and the bottom line, and recognise the importance of the sector's credibility, of political accountability and of being responsive to public concern and opinion. Many people in that sector understand those things, although, as I said, not always and not everybody.
On the substance of the issues that have been raised and of the policy, it is absolutely clear that the Government and the Select Committee have a shared objective, which, as far as I can see, is to maximise access to free cash machines. That is particularly important for people in disadvantaged communities and vulnerable individuals.
The issue should be put in a broader context. It is central to the Government's financial inclusion objectives and beliefs, and, to some extent, to the credibility of the financial services sector. It is at the heart of the Government's determination inextricably to strengthen this country through the link between social justice and fairness, and economic success and competitiveness. Therefore, the issue is not marginal or minor. It runs to the heart of much of what the Government, uniquely, have tried to do to change this country for the better, and to our underlying philosophy and principles.
This is not an appropriate occasion to make party political points of any significance, but, frankly, there were no policies to tackle financial exclusion or poverty in this country only a few years ago. There was even denial in most public policy documents that there was such a thing as poverty. When the Government are criticised for being weak or indecisive, let us be absolutely clear that they are the first UK Government in living memory who are committed to getting rid of poverty in this country. This issue has a direct resonance to the philosophical value base that drives everything that we seek to do.
The Government and the Select Committee share the objective of maximising access, and also the belief that there will never be 100 per cent. access to free cash machines because of the legitimate financial viability case that is made by banks and building societies in certain circumstances. However, we also share the belief that there must be total transparency and no hood-winking of the customer or the consumerno attempt to deceivewhere it is accepted that charging machines are required. That is extremely important. If we accept that there has to be charging in some circumstances for
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financial viability reasons, the quid pro quo is that there must be complete transparency and no attempt to con the customer or the consumer.
Mr. Andrew Smith : Would the Minister accept the point that was made strongly in the report but has not been adequately reflected in this debate that the income expected by the proprietors of the places where machines are located is an important factor? If they expect too much income, that affects viability and charging. Therefore, public sector premiseswhether post offices, community centres or other facilitiesmight play a useful part in providing cheap locations that make it viable for lower volume machines to be free.
Mr. Lewis : That is an entirely common-sense intervention; it has to be correct, and there has to be some reflection on what the Government can do to influence public sector policy in that area. My right hon. Friend referred to local government. We cannot do everything from the centre; we have also to consider how we can influence local government and local health trusts on policy.
The hon. Member for Wycombe suggested that there was some contradiction in the Government's response to the Select Committee report. I do not think that that is correct. Recently, there has been a significant improvement as a direct consequence of the Select Committee's pressure, the scrutiny that has been applied, and the Government's response. Without that focus from the Government and the Select Committee, we would not have seen some of the improvements that we have seen recently in the direction of travel towards access to free cash machines. However it is important to remember that we have a joint responsibility to keep an exceptionally close eye on the situation. It needs to be made clear that we shall do so; we will keep the matter under review. We expect the financial institutions to honour the commitments that they have made to the Government and the Select Committee, and retain the right to act if they fail to do so.
It is also important that we have a considered debate on the issue, basing our arguments and decisions on credible evidence, not on anecdote. The financial inclusion taskforce is collecting evidence that will help us to consider the impact in terms of financial exclusion. I am sure that my right hon. Friend the Member for West Dunbartonshire will accept that although we were told that collecting information on a postcode basis was not doable, the more that we open the door, the more it appears that it is very doableso it is a question of willingness rather than of practicability. We need to demand more and more evidence, so that we can base our decisions on that evidence.
I would like to go one stage further than the Government have gone so far. The confusion, doubt about direction of travel and lack of clarity about progress are leading to a deceleration in that progress. In the next few weeks, I will broker a meeting between members of the Select Committee, key representatives of the industry and the chairman of the financial inclusion taskforce, Brian Pomeroy, to thrash out the current position, the outstanding issues of division between us and what action we expect over an agreed period in order to ensure that the shared objective to which I referred at the beginning of my speech is fulfilled.
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Rather than holding parallel debatesperhaps firing shots across each other's bowswe should get together in the interests of all consumers, particularly financially excluded communities and vulnerable consumers, and see whether we can reach a consensus. At least we should be clear on where we do not agree. I hope that my right hon. Friend will feel able to respond positivelyI am sure that he willto my invitation, I expect the industry to respond positively, and it is important that the financial inclusion taskforce participates as well.
Mr. McFall : I thank my right hon. and hon. Friends who have participated in the debate, and also the hon. Members for Wycombe (Mr. Paul Goodman) and for Richmond Park (Susan Kramer) for their contributions. The hon. Gentleman mentioned the Select Committee report. Throughout the last Parliament, almost all our reports were unanimousunanimity is important if reports are to have credibility. I am grateful to all the members of the Treasury Committee, from all parties, who produced the report. They worked as one and their unanimity was its strength.
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I agree with the Minister on total transparency. I mentioned earlier the veil of secrecy surrounding cash machines. If that can be lifted, that will be a step forward. I can tell the Minister that in the past few years I have had regular meetings with people who have come into my officeI have a nice office now, because I am Chairman of the Committeeto give me their point of view. However, there is a disparate element to that, so the suggestion that the Minister has just made is excellent.
May I also say that since the Minister has been in post, he has met me on every occasion on which I have wanted to meet him, and we have always had constructive debates? Today's statement could lead to a significant leap forward, and I think that I am speaking for all members of the Select Committee when I say that we will enter into the negotiations in a positive way so that we can realise the aims and objectives of the Committee, the Government and the Opposition. I thank the Minister, and wish him every success in getting to Heathrow in time for his plane.