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Lord Graham of Edmonton: That's the way to do it!

Baroness Dean of Thornton-le-Fylde : I also welcome the speech of my noble friend Lady Greengross. She has vast experience and the House will look forward to her contributions. Perhaps in future my noble friend will be more controversial than she has been allowed, by custom, to be tonight.

The current development by the banks is simply a fight for the customer without any concern for the social implications of what they are doing. It is about abuse of market dominance. The present confused situation and the proposals by some, but not all, of the banks will worsen social exclusion. That will be particularly so in rural areas and in areas where the banks feel they do not have a place. I refer to some of the sink estates and poor areas of this country. What the banks are doing is appalling. It almost goes back some years to the review about bank charges. The public were absolutely astonished at the way in which they were being ripped off by the banks, of which they were customers.

I changed what I planned to say after receiving a press release from Barclays. Rarely have I been so enraged by receiving something. It contains the headline that the "Link decision" is a victory for consumers and for common sense. If that is not an abuse of the English language, I do not know what is. It states that consumers will have choice. I do not know what choice consumers have in rural areas. They may be miles from a cashpoint machine. There may be only one machine which may not belong to the bank of which they are a customer or the bank into which their pension is paid. They will have no choice. They will have to pay a fee. Depending upon the bank, they may also have to pay a so-called "disloyalty fee". It may be that they are not drawing from their savings

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but from their pension. Many people use banks in that way and do not hold substantial amounts of money in their bank accounts.

This decision today is not a victory for consumers. It is an abuse of consumers and of consumer choice. The press release states that customers will know in advance of any charges. However, we know from the work carried out by Don Cruickshank, but, more importantly, from what the banks are charging each other at the moment--that is, 30p--that they will charge fees which cannot be justified to their customers and all other people who use the machines. I agree strongly with the comments of the noble Lord, Lord Lucas. We certainly need regulation. If banks are to act in this manner, which is market-dominance-led, there should be regulation.

The press release states that user fees will encourage investment in bigger and better cash machines. It goes on to state:

    "A switch to user fees is likely to result in the reduction of income".

That statement is completely contradictory. The press release does not state what the charges will be. It does not state that the disloyalty payments will discontinue, nor that there will be a guarantee of more machines. By implication, it states that the devil will take the hindmost as far as the consumer is concerned. The biggest and most powerful banks will edge and elbow the smaller banks out of the market. Consumers may go to that one hole in the wall in their rural area or out of their area if they live on one of the dreadful sink estates. They will see the name of the bank on the hole in the wall. They will know that they do not have to pay a charge if they are with that bank, and will be encouraged to change their account to that bank. We will then see less consumer choice and much more market dominance than we have at the moment.

Today has been a bad day for the consumer; a bad day for social inclusion; and a bad day in the long term for the banks themselves if we say that we will not accept these decisions. I see the present Government, of all governments, as the champion of the consumer. When my noble friend replies to the debate, perhaps he can give us some assurances in relation to the regulation of the high fees being charged. This may involve the private sector, but sometimes the consumer needs protection from market dominance.

One of the anxieties in the debate in relation to post offices and people obtaining their benefits from the hole in the wall is what the charges will be and also what choice the consumer will have.

8.10 p.m.

Lord Newby: My Lords, like other noble Lords who have spoken, I am extremely grateful to the noble Lord, Lord Graham of Edmonton, for initiating this debate. Even if he did not know how appropriate the time was, he is to be congratulated because it is so appropriate. Equally, it was a delight to listen to the maiden speech of the noble Baroness, Lady Greengross. It must be said that, if the noble Baroness

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had been making it on many other subjects in the dinner break, I might not have heard it, so I am doubly grateful that she chose this subject.

I am sure we all agree that many aspects of the present situation are unsatisfactory. First, the scale and extent of disloyalty fees; 85 per cent of transactions today are covered by disloyalty fees of up to £1.50. Secondly, most people making those transactions do not realise the scale and extent of the fees. There is a tremendous lack of transparency in that regard. Thirdly, we all agree that the uneven spread of cash machines is unacceptable, both in terms of areas of social exclusion and in rural areas. Fourthly, we agree also that it is unsatisfactory to impose a new fee structure, particularly one in which the fees bear no relation to the marginal cost of making a transaction.

We know what is wrong. In general terms we also know what we want to see. First, we want maximum and increased coverage of cash machines. Secondly, we want to see maximum transparency so people know what they are paying. Thirdly, we want to see the greatest possible degree of competition. Fourthly, we want to see minimum, and arguably and hopefully zero, costs for making a transaction.

How do the Link decisions announced earlier today meet those criteria? On one count only--namely, transparency--do they do so unambiguously. That is a move we should welcome. When we come to increased coverage, the best one can say is that the jury is still out. A number of noble Lords made the point that there is no guarantee that the banks will increase the number of cash machines, and certainly not the number in the most deprived areas. They claim that, following a similar decision in the US, the number of cash machines either doubled or tripled in a short period of time. Let us hope that we receive assurances from them that they will put their money where their mouth is and begin to expand the cash machine network in areas from which, rather than expanding, they have been withdrawing in recent years.

In terms of coverage we must also look at other activity in this area. I was talking earlier today to the National Federation of Retail Newsagents, which entered into an agreement with Euronet to introduce cash machines into newsagents in areas where bank cash machines are currently absent. That is a welcome development. We should also press Link, in its discussions with the Post Office and the Government, in respect of electronic transfer of state benefits. That may produce more general cash withdrawal opportunities into the sub-Post Office network, which, by definition, reaches more people than the current cash machine network.

Understandably, the issue which rightly generated most heat today and in the run-up to the Link decision related to cost. I share the view expressed by every other noble Lord that for large banks to seek to charge £1 is excessive, particularly in relation to the cost of transactions and the amount likely to be withdrawn by poorer customers, not least students and young people. We seek to encourage them to open bank accounts. Other noble Lords may have received, as I

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did, an analysis undertaken on behalf of M&G of the proportion of adults in this country who have savings. Apparently, nearly 25 million adults have less than £500 in savings. Many prefer to go into debt when confronted with unexpected expenditure. That cannot make financial sense and we should be doing everything we can to encourage them to open bank accounts. The prospect of being charged 10 per cent--or possibly 25 per cent if the disloyalty fee continues as a result of today's decision--is moving things in the wrong direction.

It is difficult to be quite as condemnatory of charges at the point of use in the case of the newsagents. They are not involved with the large banks and unless there is some return for those installing the cash machines, they will simply not be installed. That demonstrates that the whole area is both confused and more complicated than first meets the eye.

I agree that extending the cash machine network is an essential component of persuading a greater proportion of people to join the banking system. But it is not the only solution. The Policy Action Team report No. 14 of last autumn makes a whole raft of proposals in this area which are being considered by both the Treasury and the British Bankers' Association. It deals, among other things, with entry level accounts and the need for better education. It rightly goes way beyond the cash machine issue. Therefore, in looking at social exclusion and formal entry of people into the financial services sector, we need a multi-faceted approach, beginning with cashpoints.

I had great sympathy with most of the points made by Don Cruickshank last week and hope that they will be acted upon. The first was that, if any charges were to be imposed, they should reflect the cost. I hope that many other banks will follow the example of the Nationwide and the Co-op and not impose such charges. I hope equally that all banks will commit themselves to a single charge across the country so we do not have differential charges between rural and urban areas, and prosperous and poor areas. As I understand it, today's decision will allow that kind of differential charging to take place.

Secondly, Don Cruickshank asked that charges be transparent on the screen. That is likely to happen as a result of today's decision. Thirdly, he suggested that the charges should not discriminate against telephone and Internet banks. That sector is changing more rapidly than many realise. Fourthly, he said that non-banks should be able to set up cash machine networks. That again is an important way of increasing competition in this sector.

However, I urge the banks to give up the disloyalty fee. Whatever argument there may have been for it has now gone. Barclays, who have been rightly criticised in a number of respects this evening, gave up the disloyalty fee last October. So people banking with Barclays will not be faced with charges of £2.50; they will be faced with charges of £1 which is bad enough, but there has been a certain exaggeration of some of

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the charges. I hope that all the other banks which are still charging a hidden disloyalty fee of up to £1.50 now voluntarily agree to abolish that fee.

We need a broad strategy to bring the use of cash machines to socially excluded groups. It must encompass rural as well as inner-city areas and mesh in with other policy changes. In my view, doubts about the future of rural post offices and the proposed changes in the benefit system offer both a threat and an opportunity. Such a strategy should involve pressure on the banks, but it must also involve dialogue with them.

As the noble Lord, Lord Graham, said, the banks pride themselves in public of being socially aware and interested in the well-being of the communities that they claim to serve. We must now name and shame the banks and get them to act in such a way that they both reduce fees and expand networks that we believe are essential. I am not arguing for that instead of any regulatory hand on them, but I think that we need both a carrot and a stick. The Link network needs to open up its procedures and economics.

While preparing for this evening's debate, it was very difficult for me to find out what was going on and how the system works. In the interests of their consumers, I think that banks need to be more open--

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