Cynulliad Cenedlaethol Cymru

Yn ôl i Chwilio

Pwyllgor yr Economi, Seilwaith a Sgiliau

Economy, Infrastructure and Skills Committee


Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Bethan Sayed AC
Hefin David AC
Joyce Watson AC
Mohammad Asghar AC
Russell George AC Cadeirydd y Pwyllgor
Committee Chair
Vikki Howells AC

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adrian Greason-Walker Eiriolwr Polisi, Cynghrair Twristiaeth Cymru
Policy Advocate, Wales Tourism Alliance
Chris Larmer Cyfarwyddwr Profiad Cwsmeriaid, Y Banc Cydweithredol
Director of Customer Experience, The Co-operative Bank
Dr Llŷr ap Gareth Uwch Ymgynghorydd Polisi, Ffederasiwn Busnesau Bach Cymru
Senior Policy Adviser, Federation of Small Businesses Cymru
Eric Leenders Rheolwr Gyfarwyddwr, Cyllid Personol, UK Finance
Managing Director, Personal Finance, UK Finance
Matt Brown Arweinydd Cyngor Dinas Preston
The Leader of Preston City Council

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Amy Knox Dirprwy Glerc
Deputy Clerk
Ben Stokes Ymchwilydd
Lara Date Ail Glerc
Second Clerk

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd rhan gyhoeddus y cyfarfod am 10:03.

The public part of the meeting began at 10:03.

3. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
3. Introductions, apologies, substitutions and declarations of interest

Croeso, bawb, i Bwyllgor yr Economi, Seliwaith a Sgiliau.

Welcome, everyone, to the Economy, Infrastructure and Skills Committee.

I'd like to welcome Members to committee this morning. And, first of all, I would like to say that we have had some changes to committee. Jack Sargeant is no longer a member of committee. So, we'd like to thank Jack for his contribution in his time on committee. And we would like to welcome back to committee Oscar Asghar, who has been a previous member of committee in the not too distant past. So, welcome back, Oscar, to committee as well. We've had no apologies or substitutions. If there are any declarations of interest, please do state them now.

4. Papurau i'w nodi
4. Papers to note

In that case, I do move to the next item, and we have a number of papers to note. We have correspondence from myself, on behalf of the committee, to Keith Williams in regard to the rail review. We have a response in regard to the future of Transport for Wales report, both from the Government and Transport for Wales. Are Members happy to note those three papers? Yes.

5. Mynediad at Fancio: Gwasanaethau Bancio
5. Access to Banking: Banking Services

In that case, I move to the next item. And this is our further session on access to banking. And we have this morning a session in regard to banking services. And we have two colleagues from the industry to support us in our evidence this morning, and I'd be very grateful if you could just introduce yourselves and who you are just for the public record.


We both turn to each other. My name's Eric Leenders. I'm the managing director responsible for personal finance at UK Finance.

Good morning, everyone. My name's Chris Larmer. I'm the director of customer experience at the Co-operative Bank.

Lovely. Thank you very much for being with us this morning. Perhaps if I could just ask a general question, can you just give a very brief assessment of how the banking industry has changed over the last five years in terms of access to banking services, and particularly if there's a relevance to Wales that perhaps is different to the rest of the UK?

So, perhaps if I was to give a broader industry perspective—and my colleague, Chris, if you wanted to follow up with a more specific Co-op experience—I think that the principal driver in the way that we manage our everyday banking is through the digitisation of the economy. So, it's not a phenomenon unique to financial services or banking—it's much more, I think, a societal change. As a consequence, we have seen a number of different patterns in customer behaviours. As a former bank manager, I would perhaps have seen far more customers than we see walking through bank branches today. Certainly, technology has proved very, very popular in the context of making payments, particularly in a context of smaller discretionary or everyday payments, such as travel, lunch, et cetera, where contactless is increasingly predominant. And we see that trend increasing. So, that has been the driver for a couple of particular phenomena. It's been the driver for the reduced use of bank branches and the resizing of bank branch estates. It's also been the driver for the reduced use in cash, and, therefore the resizing of ATMs as well.

Just a couple of quick points, if I may. We consider that no customer should be left behind through digitisation, so we've published papers, and we're actively considering how digital technologies can support all in society and all communities. And I know Co-op has done good work in that space. And we also think it's important that consumers are able to manage their money in the way the prefer. So, for some that might be predominantly or wholly in cash. For others—about 10 per cent, currently, of society—it's almost entirely cashless. And we're all somewhere in that spectrum between the two.

We've had evidence that—witnesses tell us—banks are essential public services. Do you believe that banks are essential public services?

I think that financial services, the distribution of cash and the management of cash within communities and local economies, is very important. I think that bank branches, as a function of that, and the role of bank branches, is changing. Actually, we see the availability and access to cash in a range of outlets as much more the future model. But there's no doubt that, as a conduit for cash within local economies, banks play an important role. 

Lovely. And if I come Chris Larmer, if I can—. It's the same question, but, essentially, what I want to draw from you is the degree of bank closures that we've seen—your assessment of that across the country, but particularly in Wales, if you have a view on that, and perhaps not so much from your perspective as the Co-operative Bank, but perhaps a wider, general assessment.

Absolutely. Delighted to. So, from a Co-operative Bank perspective, we're delighted to have 150,000 personal customers and just under 4,000 business customers. As Eric said, we've—which is not specific to Wales, but across the UK—seen a shift in customer demand, moving into more digital services and other services for their banking. From a coverage perspective for branches in Wales, in 2013 we had 17 branches. We've now reduced to four branches, which are located in the south east of Wales, where we've got approximately 67 per cent of our customer base. 

Sorry, I think I must have misheard. Did you say you went from 70 banks to four banks?


Right. Sorry. Okay. What about—have you got an assessment of beyond your own business at all, about the banking sector in general across Wales in terms of the other bank networks?

I think the trends will be similar, regardless of the bank, and those are the trends we talked about before, the digital, which does bring many advances in making it easier for customers. The customers are choosing the digital. I think your point before was very important, but, from a Co-operative Bank perspective, we're absolutely in the place that we should be supporting appropriate access to financial services, and our role in that is obviously serving our own customers but also signposting to other parts of the financial services or support mechanisms to help the customers, like our relationship with the citizens advice bureaux.

Thank you, Chair. I'd like to discuss the process for bank branch closures. So, if I could start with yourself, Chris Larmer.

Could you talk us through the decision-making process that the Co-operative Bank uses when deciding to reduce the number of branches? You've given us the stats already, and, looking at the evidence we've got, you're surpassed only by HSBC in the percentage of branches that you've closed in Wales over the last decade. So, what kind of decision-making process do you use?

Of course. First and foremost, it's not a decision we take lightly, and we recognise the importance of that decision. We try and do it on a case-by-case basis, use as much information and a variety of sources of information that we've got available to us. But I suppose the first part—as always, we try and start with the customer. So, what types of customers are using the branch? Is the demand decreasing? Is it from a personal customer perspective, a business customer perspective? Also, we're very aware that each customer is different and has different needs, particularly from a vulnerable perspective. So, we'd also look at the customers that we've got within that area, from a vulnerable situation.

So, the first bit is the usage, and, as I've said before, we've seen a significant reduction—so, around about a third of the transactions are going down. I think, trying to bring that to life, in the branches that we have closed, some of them were as low as 200 transactions per week. I think one of them you were very, very familiar with as well, and you helped us with that process; I know you were challenging it, quite rightly, but you helped us with that process in Aberdare. So, the first part is around really understanding the customer usage of the branch and their needs, and then the second part is around what are the appropriate alternative banking services to meet those needs. So, that's not just our own services. So, we've obviously got the digital services, we've got the telephone banking service, which we continually make easier, or as easy as we possibly can, for our customers to use. We work shoulder-to-shoulder with the post offices, so I meet regularly with the Post Office, as do the other banks. And my view, from a Post Office perspective, is that they remain our customers, so I remain having the accountability to make sure they get the service that they require, which we work with the post offices on delivering. So, that's making sure that there are alternative arrangements.

I suppose the third part is the community bit and the discussions and the engagement we have—again, similar to the support you gave us, Vikki—around the local community. And, when we had the discussions with you, you quite rightly pointed out the colleague impact, which is hugely important to us as well. And our colleagues—. We're very fortunate in the Co-operative Bank; we've got great colleagues who are very much part of their communities and care about their communities. So, getting their view gives us another aspect around the communities' needs that we're considering around branch. And then, with the wider stakeholders—so, I know from speaking to the teams that dealt with, for instance, the Aberdare branch, that can help us with the 'how' when we have made the decision to close, to make that as good as possible. So, I know you helped us with some of the communication changes that we could make with that. But we do own those customers even after a branch is closed, and we have a responsibility to keep looking after those, which we do; we can do that by telephoning them, et cetera, et cetera.

But we try and help particularly the vulnerable ones to get that alternative banking and make sure that's right for them, even if that's walking them down to the post office to introduce them to the postmaster, or, at times, because the key bit for us is what's important for that customer. If that means a change in banking, we will even do the referral to a different provider if that's the right thing for that customer.


Thank you. I must say I'm uncomfortable with you using the phrase that 'I supported you' with the closure. I think your earlier statement that I was challenging—

A healthy challenge, which we welcomed, Vikki. But you did help us not with the decision, but with making the implementation better, which we're grateful for. But it was a healthy challenge.

Thank you. I think I mentioned this to you at the time—that the Facebook post that I put out about the bank closure was the most viewed Facebook post I've had on my Assembly Member page. It reached over 30,000 people, which is more than half of the population of the Cynon Valley constituency. The comments on there were overwhelmingly negative, and I think what that tells us is the strength of feeling that there is in communities about bank closures and the feeling that the public have, where they believe that banks have a social, moral and ethical responsibility to be there at the heart of the high street, and that is very much at odds with the discussions that we've been having with all sorts of lending providers, not just you, where the decision-making process is all based around what is commercially viable. So, do you understand the feelings of communities regarding the closure process, and particularly around the issue of consultation—that communities feel really strongly that banks should be consulting, and what would be your response to that?

So, your first point, Vikki—do we understand the community reaction? Absolutely, that's why that third stage is so important to us, of getting that feedback, both as we're going through the process and afterwards. So, we follow up on that process. Sorry, what was the second part, Vikki?

I can't remember, to be honest with you. Just generally, do you think that individuals and businesses have a point when they say that banks should be consulting before making these decisions?

So, the consultation bit—sorry, Vikki, you're quite right. There's a significant internal process that we go through first. So, we have to get to a place where we believe we've made the right decision on the criteria that we talked about around the customer needs, the usage of it. So, there is a significant—. Because it is a decision that isn't taken lightly and that we do internally, there is a lot of internal challenge to make sure we are doing the right thing for our customers and the right thing for the communities that we serve and we care about. When we've made that decision, which, again is not taken lightly, then we move into the consultation, and our personal consultation—because we go off the banking standards, but we see that as a minimum standard, so we want to make sure that we're doing the right thing for our customers, so a full range of engagement—. So, again, our colleagues already are a part of that community, know the community—but the full range. What we do, both before and after the branch closures, is do an impact assessment. So, it explains the rationale that we've used, it also explains who we've engaged with and the views—the views of why we shouldn't do it, et cetera, et cetera, and the actions that we've taken. So, that's the process we do to tackle that, but the consultation is important to us.

Thank you. If I can come to you, Eric Leenders, according to UK Finance

'Looking after every customer, especially those in vulnerable circumstances, is a priority for our members'.

So, having said that, what would be UK Finance's view on the extent to which the impact of closures on local communities and businesses is taken into account by banks themselves?

Certainly. So, I think, building on Chris's first-hand example of the process the Co-operative Bank, at least, goes through in terms of bank branch closures, from my discussions across the high-street banking community, to complete a decision, the ultimate decision, to close a bank branch rests at, perhaps, executive committee level, so a step down from board. It's that level of seniority within an organisation, and there's an approvals and gating process that takes you to that level of seniority. So, quite a rigorous internal process.

I think I'd also reference the work that Professor Russell Griggs did when reviewing the first bank closure protocol. He identified that there was a lot of due diligence internally that perhaps wasn't surfaced or published, and certainly the revised access-to-banking standard looks to put a lot more of that in the public domain so that the decision taken doesn't look like such a closed book. And what we've tried to achieve through the current access-to-banking standard is very much a consistent process of communication in that 12-week period prior to and post closure. We've also looked to introduce some oversight and audit rigour through the lending standards board so that consumers can be assured that, when a decision has been taken, due process has been followed and the appropriate steps have been taken.


Thank you. Then just briefly, Chris, you gave the example about staff actually signposting people to local post offices, and I know that that was something that was done in Aberdare, where vulnerable customers were actually walked up to the post office. But evidence that we've taken from the FSB cites instances where the information signposting customers to alternative banking services in the event of a closure, such as the post office, that information has been out of date or inaccurate. Does that reflect any of your experiences, both of you?

I think you've heard evidence from the Post Office previously. Some post offices, of course, are owner managed in a slightly different franchise model than necessarily a bank branch, and it can be on occasion that a post office might close at short notice, which does create a local difficulty. I'd return to the point that the oversight and audit scrutiny by the Lending Standards Board is designed to ensure that, if there is a systematic failure, that is picked up, that is fed back to the bank concerned, and they can remediate their processes accordingly.

So, it has never come to your attention that banks have been giving out incorrect information about where the nearest post office is, then?

I have to say I'm not aware, certainly, of that circumstance in Wales. But, should that be the case, I would expect that the audit process that we have in place would pick it up and provide the feedback loop.

From our perspective, we've got to make sure, for our customers, that banking is as easy as possible, so that's not just Post Office, but all the ways that they can bank with us. Around communicating where the local branches are, from a branch perspective, normally if we've got a branch in that location they would come to our branch, but our branches are trained on where the local post offices are and the services that the post offices provide, which I think is equally important. Obviously, online we make sure that that's kept up to date and that makes it clear from their postcode, et cetera, where the local banking service is, whether that's Post Office or other. Not everyone, which we'll probably come to later on, is online or has access readily to digital, so leaflets that we have, or the literature, includes the services that they can get, including the Post Office.

If we could all just bear in mind we're going to struggle to complete the session by 10:45—so, just bear that in mind. Bethan, you wanted to come in with a supplementary, and then Hefin.

Yes, I wanted to just quickly, if I can, unpick that the rationale for some of these closures is the digital aspect. When we went to visit Principality and Nationwide, they said to us, 'Well, we haven't closed any branches, and a lot of this is to do with the banks being accountable to their big investors and looking at other priorities that they may have in the banking sector', and a quick Google search will show that Lloyds, Barclays, HSBC and RBS made a combined profit of £23.9 billion last year. So, is it just about digital, that people are switching, or it is about where you are putting your priorities, and it's not on the high street, in the banks where people are accessing their cash?

Certainly, and I think that comes back to my opening comments, that actually the pattern, the way that people are banking has changed, and the experience for some branches is that as little as 2 per cent or 3 per cent of customers visiting bank branches are typically accessing cash at all. So, what we want to do is to change that so that there are various places where customers can access cash. If a bank branch is no longer viable or commercially sustainable—it has a very high fixed cost base—then we see it's important that customers can continue to manage money the way that they prefer. That would be, for example, through Post Office, through ATM outlets. We're also thinking carefully about different sorts of ways to access cash, such as cashback at shops, at retailers, which puts cash right at the heart of transactions and back into the point made earlier, I think, through the Chair, around ensuring that cash stays and is very much dynamic within communities.

I think it would be a little inappropriate to necessarily bracket the total profitability of an organisation and relate it specifically to bank closures. I would argue that, actually, there are a number of drivers and considerations around return on equity, et cetera, that go beyond just—


But if building societies are not doing it and banks are, then how is it possible for one element of the banking sector to say, 'Well, actually, we're going to keep them open', and for you to say, even though you do have substantial funds, 'Actually, this isn't profitable'? Surely, if the demand is there—. We've had people going out and saying to us that they want to access cash in their communities. Why are you not keeping those branches open?

Eric, just briefly, before I move on, if you could just address the point. Sorry, I was just saying I want to move on quite quickly.

Yes, so, very quickly, we represent across the spectrum of small, medium and large-sized banks with different types of business models, such as a mutual, which doesn't necessarily have a shareholder interest, and otherwise. What I think one would find as one starts to look at bank branch estates is that, typically, smaller and medium-sized banks tend to have a branch network or a branch estate that is much more reflective of the size, the optimum size, for the current level of demand. Larger bank networks have larger estates, where a number of those bank branches are simply no longer used to the extent that makes them viable. 

Do you think the Post Office fills the gap left when a local bank leaves a location?

We've done a lot of work with the Post Office, and we've worked closely with them in the negotiation of two versions, now, of what's called the banking framework, which determines exactly which transactions can be undertaken by the Post Office. So, we feel that the level of service provided for cash in and out for personal customers, and cash in, out and cash exchange or change giving for business customers—I think, it's about 27 brands for personal customers and 15 or 16 for business customers—is quite a comprehensive level of coverage. 

The debit card experience would be very much the same. It's pretty much the same technologies. The banking experience is largely the same as well, in terms of paying and change giving. We have service level agreements with the Post Office built into the contract so that the quality of service—and I know the Post Office is very proud of their quality of service—that quality of service level is consistent with the services provided by banks as well. 

Which?, the consumer organisation, were here last week and they categorically disagree with you. They suggested to us that people cannot transfer money from their account, cannot seek advice or make inquiries about savings, current accounts, credit cards, mortgages and personal loans or investments. And post offices, they said, are not yet a robust alternative for people to do their banking and manage their everyday finances. 

I think I would beg to differ on the latter point and, certainly, I think that the Post Office provides a very good service across its 11,500 branches. I think, on the point that Chris made earlier, there are a range, a whole number of ways, that customers can contact their bank to undertake a number of the transactions that you have referred to. So, if I think back to when I was a bank manager, principally one could walk into a branch, one could phone the branch or one could write a letter; now, of course, there's online, mobile, alongside those other technologies as well. So, I think the diverse range of options is actually a customer benefit, and I think it would be inappropriate to necessarily consider that all transactions can only be conducted through a bank branch. 

So, you challenge the argument about whether it's robust, but you don't challenge the fact that people can't transfer money from their account, can't seek advice, can't make inquiries about savings, current accounts, credit cards and mortgages. So, there's a significant loss to a community that the Post Office doesn't fulfil, and I think they'd probably agree with that, wouldn't they?

I appreciate we're short for time, but I think I'd come back to the point that, actually, there are a range of different ways to be able to address those particular points that you raise, such as a call to the bank concerned, such as mobile or online banking, et cetera. So, whilst it's not the same provision, certainly the accessibility and the availability—. Considering bank branches used to typically be open only from 09:30 till 15:30, and now, of course, there is 24-hour access, seven days a week, I think that, actually, the opportunity to undertake some of that more administrative requirement is somewhat broadened.


So, you're suggesting that continuity and quality of services is actually improved when a bank leaves a community.

I'm not suggesting it's related to, specifically, a bank branch closing; I'm suggesting that, actually, overall, the opportunity to contact a bank, through a range of different channels, has expanded in number and certainly in terms of timeliness and the ability to contact much more at the customer's behest, rather than to the timeline dictated by perhaps the opening hours of a bank branch.

Okay. And just coming back to the Post Office and business banking, the Federation of Small Businesses told us that there's an inconsistent service across the Post Office network, and that business banking services provided at some Post Office branches and franchises are too limited. Cash-based, very small enterprises, microfirms in communities—they will miss that.

Again, I stand by my earlier comments about the quality of service by the Post Office. You've heard evidence from the Post Office—

And they concede that they're not trying to fill the gap. Their job isn't to fill the gap.

I think that, certainly, there is a role for the Post Office. Equally, we see that there is demand for different types of service, and there's space for innovation. So, currently, there is an ongoing pilot whereby there's a shared banking facility, a banking hub, whereby small businesses are able to bank their takings, potentially outside business hours, which has clear and distinct benefits for the small business itself. Should that pilot be successful—I think they're halfway through the process—then we anticipate that that would roll out. And that could be an alternative and an additional solution that would be available in communities as well.

And finally, what kind of timescale would we be looking for to provide that level of consistency?

All I can speak of is the pilot just now. The initial phase of that pilot would run for six months from March. So we're about halfway through that. The feedback I had, by way of the colleagues involved in that process, in preparing for this session, was that, actually, the initial pilot seems to be progressing well—they're looking to expand the number of pilot sites over the next three months. But we need to wait until that process concludes before we've got any more substantive and less anecdotal, I suppose, evidence.

I'll ask my questions in Welsh.

Jest o ran mynediad at arian parod, mae Which? eto wedi dweud bod yna berygl o symud tuag at gymdeithas lle na fydd mynediad at arian parod cyn bod pobl yn barod i hynny ddigwydd. Hynny yw, symud at ddigidol lle na fydd lot o bobl ddim yn mynd i allu ymdrin â digidol—oherwydd lle mae'n nhw'n byw, neu oherwydd eu bod nhw ddim yn mynd i allu cael access i ATM. A hefyd, roeddech chi'n dweud yn gynharach, Eric Leenders, ynglŷn â cashback. Wel, fe wnaethom ni glywed tystiolaeth hefyd yr wythnos diwethaf yn dweud bod hynny ddim yn ateb chwaith, achos mae hwnna'n ailgylchu arian ychwanegol sydd gan y siop—mae'n nhw'n ei wneud yn wirfoddol, so dyw hynny ddim yn rhywbeth sy'n ateb i'r sefyllfa arian parod. So, eich barn chi ar hynny.

Just in terms of access to cash, Which? once again have told us that we risk drifting towards a no-cash society before we are ready, and that millions of consumers still reliant on cash could be left behind. So people perhaps who won't be able to deal with digital services—because of where they live, or with no access to an ATM—may be affected. And, Eric Leenders, you were talking earlier about cashback. But we also received evidence last week saying that that was no solution either, because that recycles additional money—cash that is available in a shop—so they do it voluntarily, and therefore it is not something that is a solution to the situation with cash. So, I was just seeking your views on that.

Thank you. I think I'd better take that question first, as you referenced the point towards me. We don't feel that there should be any prohibition for customers who prefer to manage their money in cash. I've made that point earlier. We certainly recognise that we need to tackle the situation proactively. I think you have already seen the Natalie Ceeney report on access to cash as a committee. She made five recommendations; we're supportive of those five recommendations. Your colleague referenced Which? magazine, which held a summit just last week regarding ongoing access to cash, and certainly they're concerned that we could be moving to a cashless society before we're ready. We understand that point. We have undertaken to develop a commitment around sustainable access to cash. The first point would be to map across the UK—and that would, obviously, include Wales—where consumers can get free access to cash.

The second point is to look at a number of pilots. I've mentioned cashback through retailers. We could also perhaps add to that list pilots with PayPoint and others that we know are in production. We also want to think about how industry might work with local authorities, where the local authority considers that there is a gap in cash distribution. And if we can establish the right sort of metrics, et cetera, we would certainly be able to consider perhaps—an analogy might be a little like the LINK ATM commitment. We could consider putting a free-to-use cash access point in a community, which would help to ensure that there is sustainable access to cash.

There is a wider point as well, which is certainly one of the recommendations in the Ceeney report, and that's about the wholesale distribution of cash—in other words, the supply of cash to those free-to-use cash outlets. We are aware that the current model is certainly due for a strategic review. We're midway through that process. We're looking to establish wholesale cash supply for at least the medium term. That will ensure that the supply of cash, coupled with the commitments that we have made around access to cash, continue to provide cash into communities. We feel that that will protect, as I said, the supply of cash, and also will support the customers who prefer to manage their money in cash.


I totally support and agree that we've got to have that commitment to cash and not leaving anyone behind. So, we are absolutely with that.

Ocê. Jest un cwestiwn arall. Rwy'n gwybod bod amser yn dynn, so gwnaf jest gyfuno'r ddau gwestiwn arall. Mae LINK wedi dweud wrthym ni eu bod nhw'n gweld bod yna wendidau allweddol gyda'r trefniadau statudol ar hyn o bryd o ran pwy sydd yn gyfrifol am fynediad at arian parod mewn cymunedau penodol. A ydych chi'n credu bod y joint authorities cash strategy group yn mynd i fod yn ateb i hyn, neu ydych chi'n credu bod angen creu naill ai comisiynydd neu rywun newydd sy'n mynd i oruchwylio'r maes penodol yma, gan nad oes dim wedi digwydd yn y gorffennol?

Okay. I have another question. I know that time is short, so I'll just combine the other two questions. LINK have told us that a key weakness in the current arrangements is that no organisation is responsible for ensuring cash access in a particular community. Do you think that the joint authorities cash strategy group is going to be a solution to this, or do you believe that there is a need to create perhaps a commissioner or someone new who will have oversight in this specific area, as nothing has happened in the past?

We're very familiar with the participants in the joint authority on cash supply group, JACS. We think that it's an appropriate and balanced solution. We recognise that—. I hope that I've articulated that industry has a role to play, and that oversight by a combination of Government regulators and the central bank, the Bank of England, is important to ensure that the part that industry plays maintains that ongoing access to cash. We wouldn't see that there's a need for a new regulator or commissioner just now, and I think we're encouraged by the terms of reference that were published in the last week or so by JACS, because we see that the commitments to consumers, sustainability et cetera are very much at the heart of what access to cash should be about.

Good morning. I'm particularly interested in the role that you might play in financial digital inclusion, because that's the way we're going, and whether UK Finance would like to expand on the comment in the evidence that we've had that the industry is committed to supporting those people who might be vulnerable in the way that they might access or use digital.

In preparing for this session, I looked at a report that we published probably about a year or maybe even less ago called 'Financial Inclusion in a Digital Age'. It is referenced in the written submission that we made. Actually, when I look at the recommendations, they already look a little out of date and a little bit stale. Touching on the Which? summit last week, Natalie Ceeney made the point on Radio 4 on the Today programme back in September that the first pub to go cashless was referenced as if this was a wholly new phenomenon. I think we've seen that, actually, a number of retail outlets are increasingly following that course. So, I think those are both illustrations of just how quick and how dynamic the adoption of digital has become. I know that the Co-op has been able to use digital technologies with fantastic referral programmes et cetera. Perhaps I’ll leave my colleague Chris to speak on that. But that’s not atypical of other initiatives within and across the banking sector as well. So, I think that absolutely we should see digital as an opportunity for developing and innovating for good as much as in the context of perhaps the slant of some of the earlier conversation around driving efficiencies across the industry.


What I'd like from the Co-op is for you to expand on the relationship that you've had with Citizens Advice and the support that you might have been able to give to the customers who might be challenged in this way.

Yes, of course. So, obviously, looking after our customers is our core purpose, and more and more we’re finding our customers in financial difficulties. So, originally, like probably most other banks, we would refer cases such as that to support from the citizens advice bureau. Our experience from that was that the demand was going to be too much for the citizens advice bureau to cope with. So, in partnership with the citizens advice bureau, we had a more focused partnership where we resourced a dedicated specialist that would help our customers.

So, when we were dealing with customers in financial circumstances, we found that 58 per cent had more than two or three challenges underneath what’s causing the financial difficulties and they’re split pretty much into two: one’s around debt, whether that’s bank or building society overdraft, whether that’s fuel debt or whether that’s council tax debt; and then the other proportion that’s driving the difficulties is things like challenges with benefits et cetera. And obviously, the the citizens advice bureau is in a much better place than us to look at the holistics.

So, we introduce our customers to the dedicated resource that we've got at the citizens advice bureau and then normally, within 24 hours, they would have the holistic review and then on the back of that, they can identify the best solutions for that customer to get them out of the financial difficulties. So, to give an element of context, there are 1,300 customers who we've helped through this process, which has managed over £1 million of debt. But the powerful outcome for me is that it's helped 20 families to not lose their homes. I just think that that brings it to life. That's in partnership with the citizens advice bureau, who have been fantastic—that's helped us do that.

Actually, on the digital inclusion element, because of the success of that part, we've continued the relationship with the citizens advice bureau. Again, the digital inclusion is not just about banking—we all know that that's a lot wider than banking. So, they see the wider root causes and where the customers are most vulnerable from a digital inclusion perspective. So, now we work without—. It's almost like a referral back now, whereas when they're identifying communities that have got that digital exclusion challenge, our colleagues—we've trained them up to be able to go and volunteer to support the citizens advice bureau to help with digital inclusion.

I know we're conscious of time, but one other quick example that the Co-operative Bank is exploring is recognising that digital can be the solution to some of the challenges as well around inclusion. So, it's about understanding, and getting better at understanding, why customers aren't using digital. From our experience, there is a range of reasons for that, but it's about using the technology that is out there, which we're now adopting, for instance, if language is the barrier—which it could be for Welsh customers as well, using tools within digital that will enable Welsh-speaking services. If there are other disabilities that are stopping them using the digital, it's about using the technology to help us do that. So, it's a range.

Yes, or technology can—absolutely. 

—a deterrent. Yes, technology. But moving on to that, are you aware of any cases where fast broadband coverage might not meet or be enough for those customers or your services? Is the broadband fast enough and adequate enough in all cases? And if it's not, if you've come across that, is there a role for Government?


So, I can give a perspective from the Co-operative Bank. Our online service is fully operational and sufficient on standard broadband. And from a mobile perspective, 3G is absolutely the standard required for our particular digital offering.

That standard is pretty much ubiquitous. So, I think it's less the speed, it's more about coverage, and I think the Government has commitments around rolling out coverage. But I'm afraid one would need to speak to Government for the detail on that programme.

Thank you very much, Chair, and thank you very much, Chris. I like the words 'healthy challenge' that you mentioned. And I would like to ask you, the establishing of a community bank in Wales, what are the challenges and the benefits of that? The Principality Building Society mentioned or advised that you need subsidy before you can have that sort of facility here in Wales.

I think my initial observation is that there are already probably two or three community models if one was to consider the mutual model of a building society, if one was to consider a credit union, perhaps, and also the provenance of the co-operative movement as well.

The costs of establishing a banking franchise are non-trivial—they are quite significant. And the fixed costs of maintaining a bank branch or a branch network are significant as well, principally across the premises, the IT and the human resource requirement.

We've looked at models such as Bendigo Bank in Australia, which has become a very successful community bank. I think there are, probably, some quite compelling geographical drivers as much as commercial drivers in that particular model. I would have thought that, in considering community banking, it would be very sensible not to discount partnering with existing models—perhaps building societies, perhaps credit unions, perhaps other forms of mutual—to save the significant investment and some cost in establishing an entirely new competing brand. And I think that competing brand would also, potentially, dilute a market that is already, I would suggest, fairly fully served by existing providers. 

Can I just pick up on the point about the cost of setting up a community bank? The First Minister, Mark Drakeford, was asked about this in the Chamber yesterday, and he referred to the Government supporting a model developed by the royal society of arts, and he went on to say:

'that does not involve large sums of public money as a subsidy. In fact, when I met with representatives of the RSA who have been leading this work, they are at pains to say...that the last thing they wanted was the Welsh Government to be putting large sums of money into this bank.'

So, I'm just trying to understand, from your professional opinion—. There's a disconnect here somewhere.

Certainly, and I'm not familiar with that specific piece of research—I'd be very interested to read it. I think that I've mentioned, frankly, just the operational costs of, broadly speaking, any retail franchise. But, behind the slightly more common cost base, one does need to think about the capital requirements for maintaining a banking operation, the liquidity requirements for maintaining a banking operation, the support that provides in the context of, for example, the financial services compensation scheme. That, of course, protects customers should the community bank find itself in its own financial difficulties. That is a substantial undertaking and that contributes to the fixed-cost base. I don't know the extent to which the royal society of arts paper has explored some of those dimensions, but, certainly, I would suggest that the committee considers them quite carefully and is quite thoughtful about them as it reviews any approach to a community bank.

Just on that same point, is it, from your perspective, feasible for a community bank to be set up without government subsidy?

I don't know if it's necessarily my place to answer that question, because I haven't run the detailed numbers, so I wouldn't be able to speak from a position of authority. I don't know, Chris, if you've got a view. I can't say that I would have—.


[Inaudible.]—you probably think not. Your instinct would suggest that it wouldn't be.

As far as I can perhaps go, and I appreciate it's not the full answer to your question, as far as I can perhaps go is that in trying to establish a community bank, I would encourage whoever the entrepreneur or instigator might be to be very thoughtful about the broad cost base and the on-costs, because they are, I think, very much central to certainly some of the considerations around branch closures. So, as a parallel, if one can see branch closures because those particular types of banking are no longer viable, I just wonder the extent to which a community bank could survive in that space.

Okay. Last question—just one more thing. In the First Minister's answer yesterday, he also said,

'There are others who are further down the track than we are—in London and in Avon in the south-west of England. We are in discussions with the Scottish Government'.

Are you familiar with what's happening elsewhere with regard to that—community banking elsewhere?

So, we speak to a number of organisations, of entrepreneurs, of start-ups, looking to establish as banks, looking to go through the licensing, onboarding, mobilisation process with the regulators. It takes time. It takes several years. And the profit trajectory is some years beyond establishment and live date. Of course, that is very capital intensive, and therefore the private equity that typically supports the initiatives that we have seen needs to be quite patient capital. To the specific examples that you have mentioned, I can't say that I recognise the particular initiatives at all.

On that same theme, when asked about this yesterday, in terms of the Welsh Government's proposals for supporting a community banking model, the First Minister said that the intention was,

'to submit an application for the establishment of a community bank for Wales to the Bank of England.'

Can you talk us through what's involved with that application?

I think I would prefer, perhaps, to provide some written submission after the session this morning.

There is a lot of valuable information on the Prudential Regulation Authority and the Financial Conduct Authority websites to support those who are looking to start up a banking operation as a licensed deposit taker.

I ask because we asked the same question in a similar way to Nationwide and Principality, and they were expressing the complications and the time it takes to set up a new bank, and I was wondering if you had any experience of that. I look to both of you, really—Chris Larmer, if you have any comments as well. If you're happy to give it some thought and provide us with any additional evidence in that regard, then that would be welcome.

Can I just ask, as well? You've heard the views of committee members in terms of expressing the frustrations of Welsh consumers when it comes to access to banking service, but is there anything that the Welsh Government, the UK Government or regulators can do that you think is going to be helpful in terms of supporting some of the issues that have been raised by Welsh consumers here today? In other words, is there anything you would like to see in our recommendations to the Government that would support you? I should say, 'support you in providing additional services to customers, access to services'.

I think there are probably two points, which were discussed in one of the earlier questions. I think encouraging society to consider technology and digital as a potential force for good and a driver for inclusion—not just financial, but, as Chris has identified, societal inclusion. I think that's a very compelling subject area that we should all look to explore further, to ensure people are comfortable, confident and able to use digital services.

And then, on that latter point about being able to use digital services, the infrastructure and the availability of a sufficient standard of broadband, for example, which is not superfast but nonetheless needs to be available, is quite important as well. I know, on that latter point, I referenced that the Government has plans in hand, so I think it's more a case of ensuring that those plans are discharged.


Just on the final one, for us, the co-operation part is key. So, similar to what Eric talked about with the joint authorities cash strategy group, et cetera, on the access to cash, that fills a vital—. But, also, just that co-operation, not just across the banking industry, but wider. Our big belief is just being able to signpost customers who need help as well, and with the case study being the great support that citizens advice bureaux can provide to customers in need.

Okay. Well, can I thank you both for your time? There will be a record of the proceedings provided to you. Have a look over them, and if there's anything additional you want to add, then please do, and if you do have any additional information in terms of my latter question, then we'd be grateful for any further information on that. So, can I thank you very much for your time this morning and for being with us? Thank you.

We'll take a 10-minute break. Back in 10 minutes—back just before 11:10.

Gohiriwyd y cyfarfod rhwng 10:56 ac 11:11.

The meeting adjourned between 10:56 and 11:11.

6. Mynediad at Fancio a'r Economi Sylfaenol: Cyngor Dinas Preston
6. Access to Banking and the Foundational Economy: Preston City Council

Welcome back to committee. I move to item 6, and this is in regard to our piece of work on access to banking and the foundational economy. And on the voiceover, we have Councillor Matthew Brown, who is the leader of Preston City Council. We haven't got a visual on this, we've just got a voice connection this morning, so just bear that in mind. 

So, Councillor Brown, thank you for agreeing to speak to the committee this morning. Could I perhaps just ask you, initially, if you could just talk to the broad principles that are behind the Preston model?

Yes, it's very interesting, because it's basically trying to respond to the economic crash of 2008, which obviously hit Preston very badly, as a northern city. So, obviously, we had the economic crash, but linked to that was the abandonment of quite a large retail inward investment project involving two very large global developers. And the city, for nearly 15 years, had tried to facilitate that inward investment and then, in 2011, the economic crash came and that £700 million investment for the city was abandoned by the main anchor store that was going to be the main tenant of the development. So, it's there that our administration took control in 2011, and we were looking at ways to really regenerate our economy from the grass roots upwards.

We did things initially around introducing the real living wage and also a credit union, which is obviously relevant to the discussion today. But the biggest part of it was this work we've done with anchor institutions. So, that's using the local public sector to buy from locally based suppliers to try to keep wealth within the economy. Now, that in itself has linked to a number of other measures about trying to encourage the public sector pension fund to invest within the area, but also moving on to things like democratising the economy. So, we're very keen to expand employee-owned businesses within Preston. We've got a project now that's starting in July. It's a transnational project, actually, funded by the Open Society Foundations, which has New York City doing a similar thing. So, there are going to be 10 worker-owned businesses, but, linked to all of that, is this need we have to have a bank that's going to be customer-owned, and it's got to operate across Lancashire, Merseyside and Cumbria. And it's very much linked to the Preston model, because it's about trying to create our own wealth and keep wealth within the local economy. Obviously, we've got an evidence base now around jobs and around how it's having a positive effect on inequality and reducing that. So, that's a quick idea of what we're trying to achieve.  

Okay, thank you, Councillor Brown. The volume's gone down a little bit, just to let Members know, because it was a bit loud for the committee next door. So, we'll just have to concentrate on listening at this level.

Councillor Brown, thank you for that outline, and I wonder if there's any specific achievements that you could outline to us. 


Yes. We're now out of the bottom 20 per cent most deprived local authority areas by rank average, so that's an achievement. There's an achievement in the sense that these figures have been independently verified by Pricewaterhousecoopers and Demos, which has an economic well-being index. So, we've outperformed—. We're the most improved city out of 42 cities for increasing growth, so that's things like housing affordability, skills, jobs, equality—indicators like that—but also in terms of people receiving at least a real living wage of £9 an hour or more. We're now the best out of 14 local authority areas [correction: areas in Lancashire]. And a big part of that is that as well as trying to encourage our public sector to purchase from locally based businesses, we're also encouraging them to be living wage employers as well, and bring that into their procurement practices. 

So, all these ideas put together, they're quite powerful. They're really putting that democracy back in the local economy at a very grass-roots level, and we feel that these ideas as well would—if we bring them to the scale that we need, they will protect us from a further economic crash, because the evidence base around the German banking system and also the Bank of North Dakota, which is an American publicly owned bank, is that they're actually lending to local businesses while the taxpayer is bailing out the large banks. In North Dakota in America, unemployment was actually about 40 per cent of the rest of America, because they managed to get to a situation where I think 86 per cent of the deposits of individuals and businesses was actually put into that banking arrangement, whereas in the rest of America it's about 15 or 20 per cent that was in institutions that weren't the larger banks that had to be bailed out.

So, it's very fascinating reading about these things, but the key thing is that these ideas actually seem to work, and I think that they're very essential to trying to protect our communities going forward.     

Thank you, Councillor Brown. I'll come to other members of the committee now. Vikki Howells. 

Thank you, Chair. Good morning, Councillor Brown. I'm really interested in the council's approach to procurement and I wonder, first of all, if you could tell us a bit about how the council developed its current approach to procurement. 

Yes. The disadvantage and advantage we have within Preston is that we're not particularly big, so to bring what we want to scale, we've got to work collaboratively with other institutions. So, we started working with an organisation, the Centre for Local Economic Strategies, which does similar work for the foundational economy on community wealth building. And we decided that, to bring this to scale, we had to go around the main public sector organisations mainly to try to encourage them to increase the spend for local businesses, and potentially to co-operatives and other organisations like that. 

So, we went to the county council, which is also headquartered in Preston. We went to the leader and the chief executive, we went to the police and crime commissioner of Lancashire, we went to the largest housing association, we went to the sixth form colleges, of which we've got two in Preston, and now on board we've got the university, which is going through a £250 million regeneration project, with interest. And, then, the hospital now are on board as well, because the NHS has now signed up to become an anchor institution as part of the NHS long-term plan; it's in the last paragraph. 

So, these organisations in central Lancashire, they spend probably £2 billion or £3 billion on goods and services. So, we've been leading the project, and it's been operating through the European Union through a project now called Making Spend Matter. So, we've been getting the heads of procurement together, and also with Preston council and the other institutions we tried to change the culture to try to get them to buy more from locally based businesses. So, that's things like looking at the European threshold, which is quite high for works contracts. It's breaking contracts down into pieces, so if you're feeding schoolchildren, the contracts are worth £2 million—break it down into 10 smaller contracts for cheese and eggs and meat, and often local companies are successful. It's having 'Meet the Buyer Days' and, also, it's making the local companies aware of the opportunities. But all of the anchor institutions as well have got social value contracts, which mean that you can weight contracts based on things like local supply chains, which is very helpful, and also things like apprenticeships and living wage and all the rest of it.

So, that's the way that we've managed to do it, and the figures are very—. The last figures we had for the first six anchor institutions involved—we've managed to increase spending in the Preston economy by probably about £75 million. And a lot of that is construction, so it's locally based construction firms, but it's also printing, food, consultancy—quite a number of sectors to be honest.


That's really interesting. Thank you very much. And you've touched on this briefly, but is there anything else you'd like to add about how that actually differs from the previous approach to procurement?

I think it's a cultural thing, because what we did find is that the organisations were really keen to do it, but they'd not really thought within the procurement teams about—. First, you've got to look at the amount of wealth in these institutions—it's billions, tens of billions, across the UK, and, obviously, it'll be billions in Wales. And a lot of these institutions and the procurement departments, and even the politicians, have not thought, 'Well, this organisation is spending £80 million every year; are we making sure that spend is having the maximum benefit to tackle deprivation and increase jobs and increase wage levels?' And it's really trying to get them to change their culture. And it can be done, but they do need to change the way they see it, really. But what is really important is that you can't repatriate 100 per cent, but you can make a significant difference. And, as I said, in Preston, we managed to triple what we spent, I think from 5 per cent to 18.2 per cent, in the institutions involved. Now, a lot of them were Lancashire based, so they're not specifically there to serve Preston alone, but it's still quite a big achievement. 

Thank you. And you've already mentioned the EU project that you've been working within. So, could you tell us a bit more about how your current approach to procurement fits within EU procurement rules?

Well, that's a big part of it, because there's other countries involved in this project. So, there's six. Now, I think there's some in Poland and France and Italy that are doing it, and they're looking at, obviously, trying to increase spend for SMEs, because the European Union now is very keen on looking at how SMEs can actually win more public contracts because they do tend to create more jobs if they win more of these public contracts. But, also, I think Bologna, actually, in Italy—they were very interested about how procurement can reduce carbon emissions to support environmental agendas. So, there are different ways of looking at it, but the whole idea behind it really is to try to—a big part of it is to try to make sure that a lot more of this wealth does stay locally. Because if it does go to large corporations, especially multinational corporations—not all, but some—what you do find is that there are fewer jobs, and, often, some of the wealth can end up in a tax haven somewhere. So, in some ways, there's that extraction that we need to tackle at a local level. 

Okay, thank you. And here in Wales, we have a shortage of procurement specialists within local government. So, I'm just wondering how this worked for you in Preston. What's your view on the number of procurement specialists that you have, and have those individuals had to undergo any specific training or skills to adapt to this new process?

We had an individual in the Centre for Local Economic Strategies—he became a deputy—called Matt Jackson. And he was a real expert in procurement. So, CLES started working with Manchester City Council in 2008, and that was the council alone, but, obviously, it's a very large council in Manchester. But they managed to increase spending from 51 per cent to about 73 per cent. And Matt was quite a big part in that, especially around the technical stuff about how it's practically done. So, we, obviously, have been working with him, and he's the lead expert that works on this European project. And, obviously, you've got Karel Williams, who's part of CRESC, and, obviously, I'm sure he'd have knowledge on this as well. So, what we did is we used a think tank, and the think tank then worked with the procurement departments. But the think tank, obviously—you know, 
they did get a lot of their experience, I think, from procurement specialists in local government. But that's the way that we approached it.


I imagine that your SME landscape is very similar to Wales, with a lot of microfirms, particularly, perhaps, in the construction and the sectors that would do the kind of work that the council would be able to offer, and the public sector would be able to offer. How do you encourage collaborative bids from microfirms to amount to a whole sum greater than the sum of its parts?

I'm not a huge authority on that. But my understanding is that a lot of the smaller firms have actually collaborated to actually get together to win bigger contracts. I can't give you an example of that, but it has been discussed by the procurement officers. Especially some of the larger anchor institutions—I know they are getting together and actually trying to compete for contracts there. I think, within demolition and construction as well, a lot of the firms are coming together as well to bid. There's one that I don't think was successful, but there was—. To demolish our market, there were two local companies that did actually bid to do it. One was involved in the demolition business, and the other in the construction business. So, they did get together there to bid for this contract on that. So, you're seeing a lot more of that happening.

But, quite crucially, what we have been inspired by is how these responses are very similar to the responses in the American rust belt, especially areas like Ohio, and Cleveland especially. What happened there was, the local public sector, they realised they were buying very little from the economy in north-east Ohio. So, what they did is they bought a number of goods and services from locally based, worker-owned businesses, which they actually created to feed in the supply. So, they created a network of co-operative businesses, called Evergreen Cooperatives. So, what happens there is they've actually created businesses based on that public sector procurement power, and they're employing about 350 people. And, where they have created these businesses, it's in the areas of the biggest deprivation within that city. So, it's mainly an African-Caribbean area, where life expectancy is about 64 years of age; there's a 25-year gap. So, if you live near the area where the millionaires live in Cleveland, you can expect to live to 88 or 90. But, as I say, it's very poor life expectancy.

So, they've created these businesses there. So, it's in sectors like laundry, it's in renewable energy. And they've got a greenhouse that supplies food, as well, to the public sector, and elsewhere. And it's 300 jobs. So, that is quite amazing, in that—. If you ever go to America, and you look at the way the cities are organised, there are certain parts, if you're not in the centre of the city, there's absolutely no economic activity whatsoever and everything's boarded up. So, they've actually created these worker-owned businesses there. So, that's what we're hoping to do in Preston, with the project we've got to actually expand the co-operative economy. And I think that is really exciting. Because there's work I know that's taking place with Lee Waters around the—

It's easier when you're looking in your eyes, but I can't see you, so it's harder to interrupt. I just wanted to—. Just before you move on, I wanted to just bring you back to this idea of collaborative bidding for contracts, and the sustainability then across multiple contract periods. So, if you're going to collaborate and bid, then you've got to be able to sustain that bid, and that group of businesses, on to the next contract and the contract after that. And what we've found, particularly with the Welsh housing quality standard work in Caerphilly, is that the sustainability of multiple bids is very difficult to achieve. And you're telling me, in Cleveland, they've achieved that, and that's what you're looking to do in Preston.

It's not as simple as that. What we're doing is we're encouraging SMEs, and you see them naturally collaborate on a lot of these bids. I just don't have the specific—. I can get the information for you where that's happening, but it is happening, but—

—as I said as well, we want to expand the co-operative economy. So, we're looking at where there are gaps, especially where there's leakage. So there's leakage out of the Preston economy that's obviously mainly going to large companies headquartered in greater London and the south-east and it's there we want to fill these gaps with these co-operative businesses. Helping us in that is the university, because we have a business school that's called Propeller, which can incubate companies and that's how we're hoping to get there. What we have identified with our spend analysis is that there are still tens of millions that are leaking out of the economy that could be supplied by Preston-based businesses, and it's there that we want to fill these gaps with co-operative businesses and that's the project we're working on at the moment.


Okay. And I'll just come to the last question. So, just to be clear, before I ask the last question, we'd like that information on how you would approach the long-term sustainability of collaborative bids—that would be a really interesting thing to receive—and how you plan to encourage ground-up microfirms to work together to provide something that is a critical mass. I think that is something very, very difficult to achieve. And if you're able—. If you are going towards cracking that, then we'd be really interested in how you're doing it and how we can replicate that in Wales. So, some extra information there would be very, very helpful. 

And, finally, last question: how do you identify local benefits, both in terms of the amount of money spent locally and kept locally, and also the standard of work and the quality of the work that is done as a result of that process?

The way we've managed to do it is with the gross value added. So, the £75 million that wasn't before spent with Preston-based businesses that is now being spent with Preston-based businesses, what we're doing is we're using gross value added. So, we're saying that, within Preston, within 2016-17, which are the latest figures that we have, the £75 million of that equates to 1,600 jobs. So, that is the way that we're measuring it.

There are also other ways that we can look at it: with the employment rate, which is published by the Office for National Statistics. Again, the employment rate is fairly high. It's higher than the north-west and higher than the United Kingdom. So, again, we're using that also. Then there are figures around job density as well, which seem to evidence this too. 

And then, about the standard and quality, well, obviously, when contracts are won, my understanding is that the quality of the contract is checked, and we haven't seen any fall in quality so far. Cost—you've got cost—[Inaudible.]—already, because it's very marginal; it's less than 1 per cent, really. Because, obviously, when companies bid for contracts, there are various things you look at, mainly price and quality but also social value as well, so that is how we probably manage to encourage a lot more locally based businesses to be successful, but there's not been anything reported back of any decline in quality. If anything, it tends to be the larger construction firms where there tend to be issues that we hear about, especially about the way they treat the staff and other things. The trade unions aren't very happy sometimes about the reclassification of workers as self-employed with some of the larger construction companies. What we're finding is that, the local construction companies, they do tend to treat the workers pretty well. And then I think that does actually see the quality of the projects actually improve.

We're just going to come to one supplementary question, from Joyce Watson.

You talked about the living wage being important in all your procurement. Does that filter down to the SMEs and the microbusinesses, if they're involved in that bidding process? In other words: is everybody involved in working on any of these projects assured of the living wage?

It's done as far as is legally possible. So, if you become an accredited living wage employer, it's the staff that you directly employ, but also I think there's a requirement that, if contractors work on your site for 10 hours a week, the contractor must pay the living wage on those contracts, but what you can do is you can actually extend it beyond that—for other contracts, through procurement, you can ask for the living wage as part of social value or separate from that. One of our construction companies called Conlon, they do encourage it across their own supply chain in Preston. But it's obviously down to the legal regulations. So, I don't think you can do everything, obviously. If food for a vending machine is being supplied in a council leisure centre, you can't, obviously, say that the company must pay the living wage to the suppliers of chocolate bars. But you can do a lot more, especially around construction, and other contracts as well potentially.


Councillor Brown, I'm just conscious we've got three blocks of questions left from Members and we've got about 10 minutes, so we're going to have to allocate roughly around about three minutes to each block of questions. So, the next block of questions is from Bethan Sayed. 

Hello, there. It's quite surreal talking to somebody and I'm hearing the audio, but hey, I'll try. You said earlier about working with Open Society Foundations to create the community bank that you're working on. I just wondered if you could give us a bit more information about that in the context of the fact the First Minister here says that he is working on a concept with the Royal Society of Arts for a community bank in Wales. So, if you can just tell us about your experience and what you think Wales can learn.

Okay. The Open Society Foundations project, that is to do with expanding co-operative businesses. That is separate to the banking project that we do have. What we have done with the banking project is, similar to Wales, we're working with a number of councils in the north-west. Initially, it's Liverpool council and Wirral, and there are other councils in Lancashire and Cumbria that we're going to approach. So, we're trying to get to the £20 million that we need to capitalise a bank, and we're also trying to incubate the bank as well, so we're looking at trying to get the members and the directors, so we're hoping to have the bank up and running very soon. But we do find it a very compelling argument, especially around the—. Again, it's about the wealth extraction from the regional economy. Because the reality is that something around 86 per cent of people bank with the large banks, and again that wealth then leaves the community. We're very attracted by the idea it'll be a co-operative bank that will be able to lend to local businesses especially. 

Okay. I won't go into the cost, because somebody else has those questions, but I just wanted to understand where you're actually at with opening it up to the public, in terms of timescales and how the staff are going to need to be upskilled, or whether you have the capacity in the area to do that. So, if you can just give me an idea of that. 

Yes. We're hoping it's going to be two years. 

That's the idea, but obviously you've got to go through the process of—we're currently doing the due diligence, so that should be completed very soon. We then hope to incubate the businesses in about two or three weeks.

It means that you register with the Financial Conduct Authority the co-operative business, and that can be done relatively quickly and it only costs £40. But, before you do that, you need the members and the directors, which I think is six or seven. I think there needs to be six or seven members, who we're training to be directors, and then after that you then apply for the banking licence. But what we will be doing is we will be employing people to actually move towards that process. And then there needs to be a piece of work looking at where the gaps are in provision for SMEs and local people. James Moore of the CSBA—they've got some way of calculating it so it looks at where the branches have got to be. So, we're basically there now, pretty much. What we wanted to do first was actually get the commitment from the local councils, mainly, to actually get them to invest in it, and they are very interested, particularly Liverpool and Wirral, which are much bigger councils than us. Wirral have said they willing to put up to £5 million in their version of the community bank. So, it's going quite well.

Okay, good luck with that. You'll get questions on costs, because I think that's where the sticking point comes, but I'll leave that to other AMs. Thanks very much.

Carrying on with the bank, how many branches are you seeking to establish? We all know, don't we, that on the high street currently banks are closing not opening, basically because they're saying it's not profitable. So, what would be the difference?


The model would be very similar to the bank that's being opened in Wales, supported by the Welsh Government. We're envisaging in our region—which is Lancashire, Merseyside and Cumbria—that, I think, the figures are probably about 33 extra branches. So, that's going to be a mixture of automated branches and manned branches. So, that's extremely positive, because, within Preston and surrounding areas, within a 10 to 15 mile radius, over the last eight years, I think, there have been about 24 branches that have disappeared. Now, obviously, the banking industry will say that that's needed because people are banking online and other issues like that, but, ultimately, small businesses need somewhere to deposit their money, and elderly and disabled people also tend not to be online often. And if you've got a disability, often you need to actually physically go in and speak to someone, to remove any disadvantage you might face, potentially, if you can't access it online. So, that's the plan with that. Out of the 33, I think there are about two that will be planned within Preston. So, we've got a population of 140,000. So, we're very pleased about that.

Crucially, I think the big part of this is to lend to local businesses, because access to finance for SMEs is still very difficult for a lot of SMEs. Some of them have actually approached the council for loans because they have found it difficult to get commitments from the larger banks. Or if there is a commitment from a larger bank, sometimes the interest rates are very high—10, 12, 14, 16 per cent.

I notice that you've been quoted in the Lancashire Post saying that you'd need 3 million people to join to make it sustainable. That's actually the population of Wales.

That's actually been misreported, I'm afraid. That's going to be the footprint, because the amount of people within Lancashire, Cumbria and Merseyside is 3 million. So, obviously, we're not going to get every single person to join. I think that's just been misreported.  

I think what's been planned is that we've got to get 2 per cent to switch. And if we get 2 per cent to switch, within the eighth year, the bank should be lending £0.5 billion—

—both to individuals and business, which is good. And that's a very cautious prediction. If we could publicly support this and get organisations like churches and trade unions to support it, and get that up to 5 per cent or 10 per cent, it would be a lot more wealth that would actually be stimulating our regional economies.

Thank you very much, Matt, and I'm very pleased to hear about all your work—what you're doing for Preston. But the thing is, to get this licence for banking from FCA, and with all the Bank of England requirements, is a hefty job. I'm pretty sure the start-up capital and ongoing costs must be a hefty, and we have information from the Principality Building Society that once you set up a bank it's unviable without major subsidy for that setting-up of the bank. How do you overcome that? 

That's an excellent question. The people involved in setting up the bank—. I think the guy's called Tony Greenham, who's the former president—. I think he was involved with the RSA at a very senior level, involved with enterprise. He's a former banker himself. So, they actually have a test-bed laboratory down in Bicester. They've got all the equipment that actually will be at the bank. So, I've actually been down to see it. It's very impressive. It's cash machines, it's video-conferencing, it's the debit cards—that's all ready, And also the banking licence, which is a very large document—I think it's about 730 pages that you need to actually fill in to apply for a banking licence—that has been done anyway. So, a lot of this appears to be ready. We're not told that it's going to be a huge cost to the people investing in it. What we are told is that, potentially, it's going to lose money for the first three or four years, but, after that, they envisage the rate's going to be 6 per cent return for those who invest in it.


All right. Thank you very much, Matt. Just finally, Preston council—have they had any discussions with Welsh Government or Banc Cambria in relation to the establishment of a community bank in Wales?

No, not formally, but I know that, obviously, the foundational economy is a big part of what you want to achieve. What is happening with these regional co-operative banks is we're seeing them emerge in a number of places. So, there's the Greater London Mutual, which has been incubating for some time. There's now greater Manchester showing interest, and they've incubated a business there. I think the east of Scotland is interested. You've obviously got Avon Mutual in Bristol, and then there's one down in the south-west for Somerset and Devon and that area.

The thing is, with all of these things, if a council is going to be committed to investing in a business like this, then obviously you have the section 151 officers and other people who do look at it, and we're not being told at any stage that this is something that couldn't be feasible and that couldn't, in the long term, make money, which is what's envisaged after the fourth year, I think. It's envisaged it will make a return for the investors. So, in that respect, we are quite positive about it, and crucially, as well, this piece of work, the due diligence, that's been done for the Greater London Mutual, and I think it was a firm called Arlingclose, which is quite respected within accountancy, and they've looked at the model and they've actually said that it is very likely to get a banking licence and it is sound. So, from what we've seen so far, it does seem to be good and credible.

Thank you very much, Matt, for all the information you've given us. Thanks.

I just wanted to pick up on the £20 million, briefly, before we finish. Can you just tell me how much all the councils have put in individually? And if the Welsh Government was going to do it, who would you perceive as needing to foot the bill? Because the First Minister has said that it's not going to take large sums of public money, but they would still need to have that upfront cost. So, tell us how that £20 million has been arrived at, and, if not the Welsh Government, who would have to set that up in Wales, if you can.

Yes. I'm absolutely considering this, but both Tony and James from the CSBA, they're very good at mentioning the process. There's a small amount—about £300,000—that's needed at the first stage, and that is just to actually do the due diligence, incubate the co-operative, and actually employ staff who are actually going to work to move towards a banking licence. You can then obtain a provisional banking licence with £3 million, and then to actually have it fully operational, which will be in two years' time, you then need £20 million, and that's just a requirement that the Financial Conduct Authority and the Bank of England require. But at that stage, I think we'll be in a situation where there will be a lot of people convinced of the banking proposal there. But as for individual councils, well, they're all putting in different amounts at the moment. So, obviously some of the larger councils are putting in number of millions, but the smaller ones, like us, we're putting in £1 million.

Sorry, if you could just comment—so, it would have to be either the local authorities or the Government that would have to pay some of this money upfront to even get it off the ground is what I'm trying to understand. Yes?

That's correct, yes. Obviously, somebody needs to do this. I think Liverpool are looking at using the public sector works board to do that. Others may look at grants to do that. There might be a cost at the initial stage to actually do it, but in the long run it is anticipated to make a return, but obviously, with any project, sometimes you do need to have some small upfront costs.

Councillor Brown, can I thank you ever so much for your attendance and the conversation this morning? It's really invaluable evidence to us, and we're really grateful on two fronts, really, in terms of the information we've obtained from you on the foundational economy and helping them support our piece of work on access to banking services. So, thank you ever so much for your time this morning. We appreciate you're a busy person.


Thank you, and I do apologise for not being able to get the video link up and running. There are some issues at the town hall with that, because, apparently, Skype is not available. So, I'm sorry that you can't see me.

No. We can see you, actually. [Laughter.] We've had a picture of you on, so we could all look at you diligently throughout the last 45 minutes. But, thank you for your time; we really appreciate it, thank you.

Okay. Take care. Thank you.

7. Mynediad at Fancio: Effaith ar Fusnes
7. Access to Banking: Impact on Business

Okay. We do move to the next item on our agenda, and that is item 7. We continue with our piece of work on access to banking, and this next session, up until 12.30 p.m., is in regard to the impact with regard to businesses. So, we welcome our next two witnesses, and if I could just ask you to introduce yourselves. We know you, as you've been to the committee before, but just for the public record, could you introduce yourselves?

Dr Llŷr ap Gareth, Federation of Small Businesses. We're a membership organisation for smaller businesses and have a membership of about 10,000 members in Wales.

I'm Adrian Greason-Walker, the policy advocate for the Wales Tourism Alliance. Again, a private sector membership organisation with about 6,000 members around Wales.

Lovely, thank you. Perhaps if I could just ask a general question, tell us about the impact that bank closures have on businesses.

Do you want to go first?

Yes. Well, I guess there are a few things to separate out there. There's first the idea of access to cash for the public. This has an impact for tourism businesses in particular, but I think I can leave that for Adrian to discuss, though, it's probably worth mentioning also that foreign tourists need that access to cash more, because, basically, they'll get charged more if they use things like contactless and cards and so on.

But, for the businesses themselves, I think we look at things such as the everyday functions that were probably taken for granted previously: the access to change, particularly for areas such as retail, food and drink, hospitality and those sorts of areas; and the depositing of money and the fact that people have to travel so far in order to deposit money or deposit cash and cheques, and that sort of thing. So, that involves also the time spent, which means people having to leave their businesses, coming back home later and the amount of money it costs for the travel. And there are also security implications around that as well in terms of needing to carry a lot of cash further away and that sort of thing, and that has insurance implications. There are also pressures such as, perhaps, owners feeling the need to ask staff to take that cash as well, which also has implications in terms of security and insurance, which may not be obvious to all of our members, actually. 

So, those are the different sides of everyday functions. And then there's also, of course, the business relationship in general between banks and our businesses, both in terms of lending, in terms of the help they need where, often, they quite like to have face-to-face meetings on some things, where relationship managers are then centralised away from local communities, where there's less intelligence about those communities for those decisions. So, it becomes more abstract and further away from where our businesses are at. So that, we think, would have an impact on SMEs, on start-ups and that sort of thing.

And the same question to Adrian, from a tourism business perspective, but perhaps you could also add or respond to whether there are any particular differences in Wales that are perhaps not evident in other parts of the UK.

I don't want to go over what Llŷr said, and I'd back up what he said, pretty much, there. I think, in terms of the differences, certainly with tourism businesses, first of all, we have got a lot of similarities with the rest of the UK, but I think, in terms of the rurality of Wales and the amount that we actually, as rural businesses, depend on our banks is greater and enhanced. Something we did a few years ago, as WTA, is that we did a bit of research that showed that the actual spend per visitor is much lower in Wales; it's around £25 to £30 a day, whereas in, say, Scotland, it's £40 to £50 a day. Obviously, if we take away banking facilities, particularly ATMs of course, it's not that we're not giving them the ability to spend, or even taking their money away from the start of it. So, it's little things like that, I think, which make a difference. I think also, in terms of Wales, we're a social community; we want social interaction, and the more we take away facilities like banks, alongside our pubs closing, alongside our schools—. For instance, I come from mid Wales; we've seen that diminishment of that high street product. We've got to ask ourselves what sort of society do we really want at the end of the day. Tourists come to us—it's a social business. We can do so much online—we're not going to stop that, obviously—but I think, at the end of the day, we've got to say enough is enough at some point. We need to go online, but we also need to maintain a certain level of service as well in the community, so that everyone can actually benefit, not just—well, obviously, the old, the young are affected particularly, but also our visitors. They're going to be less likely to come.

One other slight point, which I'll say as well, which I don't think has been discussed, is the actual damage to our landscape within our towns and cities as well. Because a lot of those banks actually occupied very prestigious-looking buildings. Some of them are now falling into disrepair, some of them are turned over to charity shops—nothing against charity shops—but junk shops, or even cheap—for want of a better word—lcohol outlets, which is good and bad. But I think we need to look at the fabric that's left behind as well.


Okay. Thank you. I'm just going to say to Members that we are really tight for time, so perhaps you will have to curtail some of your questions that you might have wanted to ask today. Just ask what you think's the most important. Vikki Howells.

Thank you, Chair. What are your views on the extent to which the impact of closures on local communities, businesses and individuals is actually taken on board by the banks themselves when they make these decisions to close branches?

Shall I take that? Our report on this problem is—. The main one that you have in your evidence is basically from 2016, so some of this might have developed since then. Just to be clear, there was actually a typing error in the evidence I noticed—in the footnotes, it said 2019 for that; it's actually 2016, so it's quite important that you know that.

Yes, I'm sure you have. But from the series of focus groups, and both the qualitative and quantitative analysis we had from that, there were some questions about the accuracy of the information there. Members felt that it was cursory, really, in terms of the engagement there. In terms of following on from that over the past three years, obviously, things might have become better after the Griggs review, and so on, but we don't have the analysis on whether that's true or not. But anecdotally, I know we get a lot of complaints from members about the fact that this is quite a cursory engagement. And it's sort of understandable, if you think about it; if somebody's leaving somewhere, the incentive to engage is perhaps not as high as it might be. We do have some proposals in terms of the access to banking protocol of changing the minimum time to 24—I was going to say months there—weeks, rather than 12. When you think about it, three months is not much time for the message to get out about what's available and all that sort of stuff. We think there should be a higher minimum threshold, basically.

Yes. I went online, and I had a look at the various statements that were made by banks, and one of them said—and this is, again, to back up Llŷr, really— 

'Wherever we do business we work to build stronger and more inclusive communities.'

And as you've just said, if they're actually pulling out of a community, then, really? That's meaningless, basically—it doesn't mean anything. In terms of looking at the actual code, I think, we're signed up to, the access to banking code, the first line says that

'Customers and local communities will now receive more timely, improved notification and support'.

Notification, yes. I'm a business customer of Santander, who pulled out of Builth Wells and Llandrindod Wells; I think they had a full-time service at that particular point. They then went down to part-time, they then closed. Yes, we had notification, but I have to question the word 'support' there.

I also have from one of our—. We went out to our members. I've had a number of anecdotal responses, usually cross, angry ones, and a couple that didn't seem to care, really, as well. But one of them said that it was down to the fact that we're not paying banking fees on our personal accounts. That's not true. At one point I was not paying, for instance on my own personal account, fees, but prior to those two branches closing I was paying fees on my personal account. So I just want to make that clear. That's not an argument anymore. We are paying fees on our personal accounts for this service. 


Quickly, then, do you have any views on the point raised there by the FSB about extending the notification period for customers regarding a closure?

Well, if they're going to close a bank, they're going to close a bank. I'm not sure that extending the notification is going to make any difference. It's the support afterwards. It's saying that we're going to have a tail-off period, not just for the community, but obviously for the staff. Because that's another point; we've actually lost a lot of staff. When we hear, as we have over the last few weeks, of a large manufacturer closing, obviously the press pick up on that, but this is like job-loss creep, I think, a lot of the time. 

Very quickly from you both, then, we did take written evidence from the FSB that cited that sometimes information signposting customers towards alternative banking services in the event of a branch closure has been inaccurate. Do you know how widespread a problem that might be?

For now, again, it would be from focus groups and work we did around October 2016. Anecdotally, we've heard this a lot, but we haven't done a systematic survey of it since then. In that report—that was the 'Locked Out' report—it was focus groups from across the UK and it was something we were hearing from a lot of focus groups in different places. So at that time, it certainly was true. We have no reason to think that it's got any better, but on the other hand, we don't have a sytematic overview that it's the same, either.

No, but I'm sure I could some comments back from the industry on that.

Which? are very clear—the consumer organisation—that the post offices don't fill the gap. Is that the case?

For us, yes. We think it has the potential to address some of the issues around access to banking and access to cash. At the moment it depends what post office it is and what function you want. Some post offices, if they're in a convenience store somewhere, you're not going to have access to that much cash there for cash deposits and that sort of thing, particularly in rural areas, I think, in terms of tourism and that sort of thing. There's a question of expertise around aspects of this, and if we separate that out with the business relationships, it's very difficult to see how it would fill that gap. The facilities available vary drastically across the service as well. 

You mentioned business relationships. Going to a post office, there's no business banker there to help you out, and if you're a microfirm in an isolated community, that's incredibly difficult. But they also talk about—Which?—the fact that people can't transfer money from their account, seek advice, as you said, make enquiries about savings, current accounts, credit cards, mortgages, loans. All of these things actually are, in your view—. You said it was 2016, your evidence; are you still seeing a significant loss now, and is it still as patchy as you suggested?

Yes, I think it is, from what we gather. Again, it's probably anecdotal follow-up from the 2016 report, but my understanding is that that's the way it is. It would logically make sense, when you think about some of the areas where—the places where parts of this network are as well. They are of different sizes, they're in different places, they are looking to serve different functions. I know the post office down the road from me is only able to handle a certain amount of stuff because they only have so many staff. That place is a newsagent. You only have so much expertise. 

It's good that post offices are used, but they're not necessarily appropriate for that purpose. Do you think that it's an unfair thing to say that banks are a little bit complacent when they close branches about the fact that post offices can take the weight, or do you think they're realistic about it?

I don't think that's probably part of the commercial reasons why they leave. 

It's a post hoc justification, isn't it? So, there is an area where—. The subpostmasters' evidence indicates that there are areas where some parts of the Post Office could take up some of the slack, but it cannot take over the whole functions—everyday functions, even—as well as some of the more specialist things that businesses require. So, yes, probably there's an element of complacency or it's a justification that comes after the fact. 


No. The comments I've had back are more or less the same, but it is that issue of who is actually undertaking an audit. If you've got three banks in a small town and the three banks disappear, are you really going to upscale the staff—is the Post Office going to upscale its staff to do that? And that's the front of house, the day-to-day activities, let alone what we used to call the relationship manager role, I suppose, in the bank—who sits in the back of the bank. Who is actually going to take that role? I suspect that's not going to be the case. So, I think it's coming down to, in some way, we have to audit the way in which a town is actually run and the people that it's serving. So you take, actually, a much bigger, macro-economic viewpoint of the whole thing. And I think certainly from the tourism aspect, if you're running a business and you're out in the middle of nowhere or you're on the coast and you've got to drive 20 minutes, 30 minutes or 40 minutes somewhere—and there's an environmental impact there, by the way—and then you've got to drive back again and you've got to queue for another 30 or 40 minutes because you happen to have hit the time when other people are taking money out of the post office, then that's quite a lot of time out of your business as well. And you have to factor that in. And there's a security issue as well. That's something somebody raised. 

I want to move on now to Which? saying that we risk drifting towards a no-cash society before we're anywhere near ready for it—that's their statement—and any consequences of moving towards a cashless society before people and businesses want it. So, do you think that's a correct observation and, if it is, what are the impacts, really, for you?

Do you want me to go first? I would agree with the statement. I would say we're not a cashless society. Tourism depends on cash. If you take the cruise ship market, which we're trying to encourage in Wales, you've got 11,000, I think, projected to arrive in Fishguard this year, and I've had reports that it's difficult for visitors, international visitors, to get cash out. Handling cash in the local currency is something that we like to do, particularly as we have got a different currency and we don't have euros here. But also, Holyhead—we're looking at 25,000 visitors from cruise ships and luxury yachts arriving there. They will need to have access to banking facilities internationally. They need it for paying for everything from ice creams to tipping in a restaurant. We're not a cashless society. I always have to ask the question as well: what if we remove that physical cash? Are we going to move towards a cryptocurrency next? There are all sorts of implications, but I would say no, we're not a cashless society and we're not ready for it, even though I also have to acknowledge that it has been a good thing that you can swipe your card easily, and all the rest of it. But there is still a need for cash for tourists, for elderly people, for the young. 

I'd agree with that as well. I was discussing with a member the other day who had phoned me—not actually in relation to this—but he was quite frustrated about aspects affecting his shop, which is in mid Wales. He had a cashpoint, for which he was being charged quite a lot to use, and he didn't find that it had any commercial benefit for him, because people would come to the shop, use the cashpoint and then leave, but he felt he needed to keep it for particularly vulnerable people in that community. But he felt that people were coming from quite far out to pick up cash there as it's the only cashpoint in that area—well, there is another one, but that is very unreliable. So, this tells me that a lot of people in that area are using cash. And this was not necessarily for tourism; this was farmers and so on, for everyday use. So we're not ready for a cashless society yet.

There is a question in my head that, if we make the presumption we're moving to a cashless society, that's going to impact on what our poilicies are in terms of financial inclusion. If we're presuming that's where we're going, we're looking for mitigatory actions. It's quite a leap to say that we're going to be completely cashless at the moment, and in fact, the areas that are more likely to be left behind are the particular areas that we've discussed already, which are the rural areas, the poor areas, the areas we know that in Wales, along with other parts of the UK such as the north-east, the south-west and the north of Scotland, have been impacted by bank closures. So, I think the whole discourse around technology and a cashless society is probably almost in danger of exacerbating that problem.


One area of concern that we've had is by LINK, and they've said the current arrangements mean that there is no organisation that has overall responsibility for ensuring that there is access to cash, and particularly cash without being charged for getting it. Have you looked at that as an aspect, or are you going to, or do you have any comments to make?

Yes, we have. We're part of the Save our Cashpoints campaign, and we've called for a regulator to look at the access-to-cash issue in particular. I think some of the evidence indicates that where there are cashpoints that have been identified as being particularly important for financial inclusion, they have been closed. So, that tells us that something's not working and that not having a single point or single organisation that's looking at this is probably a problem, especially if we're thinking of it as being important enough to look at, then we need the governance to follow, I think.

The UK Government have said that there's going to be a joint authorities cash strategy group, and it's been recently announced. Have you got any views on that? Have you had any interaction and discussion around that and what it might mean?

Well, I've had no interaction with it. There might be colleagues in our London office who may have—I can get back to you on that. But in terms of looking at the—I'm always going to get this term wrong—the joint authorities cash strategy group, having people around the table is a good thing, but the proof will be in the pudding and what comes out of it, I guess. It really seems to be an advisory role, where the different regulators have to take into account some of the discussions that have happened within that group, from what I've seen in the terms of reference. So, this doesn't feel like the regulatory, statutory role that we're advocating, basically. So, it's probably a good thing, but it's not enough.

Mae lot o’r cwestiynau wedi cael eu cyfro o ran mynediad at arian parod, so gwnaf i ddim gofyn mwy am hynny. Rwy jest eisiau gofyn ynglŷn â pha rôl ŷch chi’n credu sydd gan Lywodraeth Cymru o ran cynhwysiant ariannol, a hefyd addysg ariannol. Rŷch chi’n delio, mae'n siŵr, gyda busnesau o bob math, o bob lliw a llun, ac os maen nhw’n cael mwy o sgiliau, efallai, i ymwneud â sut i ddelio â’r system ariannol, os maen nhw’n deall sut i gyllidebu, 'budget-io', maen nhw’n gwybod wedyn beth maen nhw’n gallu fforddio o fewn cymuned neu o fewn cymdeithas. Ac os nad oes yna fynediad at arian parod, sut ydyn nhw’n ymdrin â realiti y cymhlethdodau hynny, er enghraifft? Felly, pa rôl sydd gan Lywodraeth Cymru yn hynny o beth a beth ydych chi’n ei wneud eich hun, efallai, i helpu gyda’r materion hynny?

Many of the questions have been covered in terms of access to cash, so I won't ask any more on that point. I did want to ask about what role you think that the Welsh Government can play in terms of financial inclusion, and also financial education. I'm sure you deal with businesses of all types, of all shapes and sizes, and if they had more skills in relation to dealing with the finance system, if they understood how to budget, they would then know what they could afford within a community or within society. And if there is no access to cash, well, how then do they deal with the reality and the complexities that ensue? So, what role does the Welsh Government have in that regard and what are you doing to deal with those issues?

Ocê. Mae lot yn fanna, sori.

Okay. There's a lot there to the digest.

Roeddwn i'n trio jest gofyn un cwestiwn achos amser.

I was trying to ask just one question because of time.

Ar addysg ariannu, dwi'n meddwl dy fod di fwy na thebyg yn gwybod yn well na fi. Ond, yn amlwg, mae yna rôl gan Lywodraeth Cymru yn cydlynu ei pholisïau i gyd-fynd â’r ochrau yma o ran mynediad at arian ac yn y blaen, a hefyd o ran ariannu a 'budget-io' a ballu. Un ochr amlwg ydy bod Business Wales—Busnes Cymru, sori—a’r banc datblygu, yn amlwg, yn edrych ar sgiliau busnesau yn ogystal ag ariannu busnesau ac efallai bod yna ychydig o liferau yn fanna i geisio helpu efo’r meysydd yna, felly.

O ran ychydig o bolisïau Llywodraeth Cymru, mae’n bosib efallai bod angen meddwl am le mae yna lefydd lle maen nhw’n gallu gwneud gwahaniaeth hefyd, boed hynny—. Dwi'n dal efo mynediad i arian parod yn fan hyn, mewn ffordd, ond un peth rydym ni’n ei weld ydy bod yr ardrethi busnes yn tueddu i fod yn broblem ynglŷn â phobl efo ATMs yn eu siopau, er enghraifft. Maen nhw’n meddwl eu bod nhw’n gorfod talu mwy o ran ardrethi busnes achos mae’r Valuation Agency—does gen i ddim syniad beth ydy hwnna yn Gymraeg—yn tueddu i’w fesur o fel yna. Felly, mae hwnna’n rhywbeth i edrych arno, yn enwedig gan ein bod ni’n edrych i ddiwygio’r systemau ardrethi busnes, efallai, yn y blynyddoedd nesaf. Efallai bod yna ychydig o liferau yn fan hyn sy’n helpu hefyd. Ond dwi ddim yn siŵr os ydy hynny’n ateb dy gwestiynau di.

On financial education, I think you probably know better than me. But, obviously, there's a role for the Welsh Government to play in co-ordinating its policies to correspond in terms of access to cash and so on, and also in terms of financing and budgeting and so on. The obvious one is Business Wales and the development bank, which are looking at the skills of businesses as well as the financing of businesses, and maybe there are a few levers there to try and help with those areas.

In terms of the policies of the Welsh Government, maybe we need to think about where there are places where they can make a real difference, either—. I still have access to cash here, myself, but one thing we do see is that business rates tend to be a problem as regards people having ATMs in their shops, for example. They tend to think that they have to pay more in terms of business rates because the Valuation Agency—I don't know what that is in Welsh, I'm sorry—but they tend to measure them like that. So, that's something to consider, especially since we may be looking to reform the business rates system in the next few years. Maybe there are a few levers there, too, that can help. But I'm not sure if that answers your questions.


Gwnaethon ni glywed gan holiaduron—rŷn ni wedi bod o gwmpas Cymru—fod efallai addysg ddigidol i fynd draw at—. Dwi’n gwybod dŷch chi ddim eisiau bod arian ddim ar gael, ond os yw pobl eisiau datblygu sgiliau digidol, ydy hynny’n cael ei gynnig gennych chi, os ŷn nhw, efallai, yn wyliadwrus o beidio ag eisiau mynd ar-lein ar hyn o bryd achos sgamio neu achos fraud? Ydy hyfforddiant yn digwydd ar unrhyw lefel ar hyn o bryd?

What we've heard from surveys across Wales is that perhaps digital education—. I know you don't want there to be no cash, but should people want to develop their digital skills, is that something that you offer, if they are maybe hesitant of going online at present, perhaps because they're worried about scams or fraud? Is there any training that takes place at any level presently?

Ydy. Wel, rŷn ni’n wastad yn cael digwyddiadau o’r math yna, yn enwedig pethau fel gwneud treth yn ddigidol, a’r math yna o bethau. Mae’n bwysig inni nodi, dwi’n meddwl, ei bod hi’n bwysig i beidio â gwneud y split yma rhwng rhyw Luddites sydd yn wrthun i bob peth digidol a’r rhai sydd yn tech-savvy ofnadwy, felly. Mae yna le i’r ddwy ochr, wrth gwrs, ac mae’n haelodau ni, yn sicr, yn defnyddio lot o ochr ddigidol bancio ac yn y blaen ac yn eithaf tech-savvy.

So, un esiampl: roedd un o’n haelodau ni’n rhoi tystiolaeth ddydd Llun i bwyllgor, ac roedd o’n dod o fusnes eithaf tech, felly, ac roedd o’n gwybod pob peth o’r ochr ddigidol a ballu, ond wedyn yn ei chael hi bron yn amhosib i weithio allan sut i gael cerdyn credyd busnes, sut i gael pethau bach fel yna, sut i gael enw un o'r cyfarwyddwyr oddi ar yr account a’r math yna o bethau, a'i fod e wedi ffeindio bod angen mynd i mewn i fanc i sortio’r math yna o bethau. Wel, mae o yng Nghaerdydd, felly dydy hynny ddim yn gymaint o broblem, ond pe buasai fo yn rhywle efo ychydig bach mwy o broblemau yn hynny o beth, buasai hynny'n bwysig. So, mae’n bwysig peidio â gwneud y ddau ar wahân. Mae’r pethau sydd eu hangen o'r banciau, mae rhai ohonyn nhw yn cael eu defnyddio’n ddigidol, ac mae SMEs yr un fath ag ydyn ni yr un mor debol o ddefnyddio’r rheini, ond mae yna rai pethau sydd ddim yn gallu cael eu gwneud yn ddigidol, felly.

Ond o ran y dysgu a dysg am sgiliau, rydyn ni’n gwneud digwyddiadau ac yn y blaen, yn debyg i fel mae'r Llywodraeth a mudiadau eraill yn ei wneud, wrth gwrs, yn pwyso i geisio cael ein haelodau i godi eu sgiliau yn y meysydd yma, yr un fath â lot o feysydd eraill.

Yes. We always hold events like that, especially on subjects such as doing taxes digitally, and so on. I think it's important to note that we shouldn't have this split between the Luddites who are against everything digital and those who are very tech-savvy. There's room for both sides, of course, and our members certainly use a lot of the digital side of banking and such like and are quite tech-savvy.

So, one example: one of our members was giving evidence on Monday to a committee, and he came from a tech business and he knows everything on the digital side and so on, but then he found it almost impossible to work out how to get a business credit card and small things such as that, how to remove the name of a director from the account and those sorts of things, and he found that he needed to go into a bank personally to sort out those kinds of things. Well, he lives in Cardiff, so it's not that much of a problem, but if he lived somewhere with greater problems in that sense, that would have been important. So, it's important not to make both separate issues. The things that we need from banks, some of them can be dealt with digitally, and SMEs like us are just as capable of using those, but there are some things that can't be done digitally.

But in terms of training and skills education, we do run events and so on, similar to those run by Government and other organisations, encouraging our members to improve their skills in these areas, in the same way as in a lot of other areas.

Gosh, there was a lot in that question. In terms of upskilling the industry, well, yesterday, actually, I was at a meeting of a partnership—the starting of a new partnership—to look at skills, and part of that is digital skills and upskilling the tourism community as well, of course. In fact, Cardiff Metropolitan University have a project specifically dedicated to that at the moment. But because we represent microbusinesses—and a lot of them are micro, it's not even SMEs; they're tiny businesses—there is still a need for a lot of those owner-managers who need that resource in order to continue to adapt.

I also think it's about bringing more people, more youngsters forward into the industry from secondary school. We certainly have an issue with trying to get tourism and hospitality into secondary schools as an option. I think one of the ways to do that is to try and train them—and this is being a father of two myself—is to get them interested in entrepreneurship and giving them the skills of entrepreneurship. And that, inevitably, means now that they have to be digitally linguistic, if you like. They need those skills. So, I think we've got to start—. You know, we're not coming from a standing start here by any means, but we do need to continue to keep our eye on the ball, and make sure that we're, not ahead of the game, because it's very difficult to catch up with the digital game, it's moving so damn fast; it's getting those people who are actually able to discuss and look at the future, as much as anything. It's very difficult.

But I think banks withdrawing, they should be engaged in that process, if that's what you're asking. They should be there as part of that banking code, their support should be saying, 'How do we upskill?' I'm aware of the time.  


Thank you very much, Chair. Thank you, gentlemen. I 100 per cent agree with you that a cashless society is a baseless society in world trade and transportation. I agree with that 101 per cent. My question to Adrian is: what are the potential benefits and challenges involved with establishing a community bank? And also the Principality Building Society advises that until there's a subsidy there, it's not viable. 

I think, firstly, I don't know the structure of what the community bank entails. I've looked—. Obviously, I did a little bit of research to try and find out what a community bank entails. 

It's really difficult to put a framework on it. But the thing that jumped out at me, thinking about it from a tourism point of view, a microbusiness point of view, and not just tourism businesses, was that if you're going to enter into the banking world—which is a global industry, it's absolutely massive—you need huge capital outlay, you need to have parity in all sorts of markets, et cetera. For us to start from a standing start this time, I think, would be very difficult. I think what concerns me as a business is, yes, if we had a community bank and it started offering a service that is being withdrawn by banks, which obviously see that as an economic—. They're doing it for economic reasons, let's be honest here. If the Government's stepping in, somebody's got to pay for it at the end of the day, and I suppose—. I know what would happen is that we'd be a bit concerned that eventually our businesses, who are strapped a lot of the time—they're microbusinesses who are working on a fairly low level of profit at the end of the day, are they going to end up having to pick up the tab in terms of increased taxation again? I think it would have to be looked at in a macroeconomic context.

So, I do think a community bank has a place, but it's a gigantic beast that could be extremely expensive and get out of hand. But I also think that we have to look at it holistically and we have to, as I said earlier on, look at what services we need, how they're currently provided and how we can meet those shortfalls. The danger is that it gets out of control and there's mission creep.  

Thank you very much. Llyr, for you now, your comment, your organisation's comment:

'We would be concerned if public resources were to be used to create another, potentially competing mechanism that could damage the progress made by the Development Bank over recent years.'

That's your quote, so could you expand on that, please? 

I think the point there is quite similar to what Adrian has said, actually. There's an element of it being, 'We need to be clear what solution this is providing to the problems.' So, we've identified a lot of the problems probably today, and you've probably identified many more, but we need to be clear what the business case is. We need to make sure that we know that it's affordable. We need to make sure that we know why this is the solution to these problems, and which parts of the problems around access to banking it's supposed to be addressing. So, the question here with the development bank, I think, and with things like Business Wales is whether the solution of the community bank is overlapping with other things that other instruments and institutions that we already have in place in Wales could be, actually, in a better place to do.

Now, this is not to say that there is no room for a community bank per se, but we'd want to see a strong business case for it. We'd want to see if it's going to be that physical banking infrastructure on the ground. How is it going to be affordable? How much of the loss of banking branches that we already have can it fill, and what functions is it looking to, if you like, take over from those? It's clearly early days, but we're happy to part of the conversation around this. In our report a few years ago, there were a few quotes from members who were quite up for the idea of a community bank, albeit these were people in Bristol, or perhaps at a more localised level than all-Wales and doing that from a standing start. So, we'd be interested in seeing what it looks like, and we'd also be interested in finding out from our members subsequently what they think of the idea, because, clearly, it would need a lot of buy-in in order for people to switch accounts and that sort of thing. So, it's something we'd be interested in looking at, but I think it does need to have a very clear business case and needs to be clear about what its functions are and remit is, especially in relation to other institutions in this sort of ecosystem, if you like. 


Banking is a very serious world. There's a lot of things involved with it, with the financing—money transfers, mortgage lending. It used to be that, 20, 30 years ago, mortgage and building societies were only allowed for mortgages, and finance companies and insurance was different. Banking was this one. Now, they're all coming into one, this free-for-all sort of business involvement in the banking sector. So, basically, the FSA is putting in so many legal conditions to set up a bank, so the requirement, plus the deposit, to make sure you can set up a bank—a huge amount needs to put in the Bank of England to make sure you run the bank properly. My question is: in Wales, we have—. I was talking to the Development Bank of Wales the other day, the head of the Development Bank of Wales, and it is his word that there is a shortage of skills in Wales in the banking sector. So, how can we cater for the banking sector if there is a lack of skill in Wales in this financial sector or banking sector?

It's a good question. 

I know you are. I don't think I'm in a position to give you a full answer on that. I haven't looked at that in detail, so I'm going to keep adrift on that one, to be honest. 

Sorry to interrupt you, the reason being—finally Chair—in the profession, there's no shortage of talent, but the reward is much better on the other side of channel than this side of the channel. Most of the brain drain in the financial sector is going on from here. 

Well, there is a move to have some more financial sectors around here. Perhaps there is a way to have a virtuous cycle of things developing, but, to be honest, I haven't looked at it, and I don't think I can answer that properly at the moment. 

The First Minister said yesterday that the Welsh Government has been talking to a number of stakeholders about this proposal. Has he talked to either of you or your organisations about the proposal for a community bank at all?

Not beyond the fact that we know that there are proposals forthcoming. So, we'd be interested in being part of that conversation.

I know that the First Minister said yesterday that the Welsh Government wants to develop proposals developed by the Royal Society of Arts, and he went on to say that that doesn't involve large sums of public money, which is perhaps an opposing view to the one outlined by the both of you today. Any further comments on that at all?

We haven't been contacted in that conversation and we'd be interested to hear more about it. We'd be interested to be involved in the debate as it progresses. And, again, I think it comes back to what we said: I think a strong economic case would have to be made and met, and you'd have to work out how much it's actually going to really cost businesses in Wales, because, otherwise, they may as well just go back to the banks and pay a fee to them and tell them, 'Come back, please, and carry on doing what you were doing—in a different way maybe.'

Are you suggesting that as a potential option rather than setting up a community bank?

Well, I doubt they'll come back just from me asking them nicely—or anyone else for that matter— 

—but, yes, there are means. 

In his response you, Chair, the First Minister was very clear and he said that—[Inaudible.]—community bank developed by the Royal Society of Arts, as you said, does not involve large sums of public money as a subsidy. He was categorical, and he said, in fact, that the last thing they wanted—the last thing they wanted—was the Welsh Government to be putting large sums of money into this bank. Is that realistic? 


Again, it depends on the scale of it, doesn't it, and what it's trying to do? I find it difficult to see—. Well, we'll have to see what the business case is, in terms of—. How many physical branches are we looking at? What are the cost benefits?   

If the First Minister is being categorical about not putting large sums of public money into it, then it isn't about waiting to see, because you just can't do those things.

Yes. It seems that that would be the case, yes—to me. But we await to see what the business case is before—. It's difficult to respond to something properly without knowing exactly what the business case we're responding to is. So, I'd rather not speak about it in abstract—

Yes, very diplomatic.

Yes. Okay, thank you. We're out of time, but is there anything you briefly want to add that has not been raised or addressed through questions? If there's not, that's fine. Don't repeat what—

Well, just very quickly, because I realise everyone wants to have lunch. Some of this is down to effective research, and I wonder whether there needs to be an ongoing programme of some sort of research looking at this. There are various aspects that we both find very difficult to answer because a lot of this is anecdotal evidence from our members. We don't have the ability, and we certainly don't have the resources, to engage in large amounts of research. But if we're going to be presented with proposals by the Welsh Government, then I certainly think that there needs to be a much better means by which we can make those judgments—not just value judgments.

Okay, thank you. In that case, that you for your time. We'll send you a transcript of the proceedings for you to have a look over and let us know if you want to add to anything that's been said today. But thank you very much, both, for your time. We're very grateful. That brings our meeting to a close.

Daeth y cyfarfod i ben am 12:32.

The meeting ended at 12:32.

Dysgu am Senedd Cymru