Pwyllgor yr Economi, Seilwaith a Sgiliau - Y Bumed Senedd

Economy, Infrastructure and Skills Committee - Fifth Senedd


Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

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

Y rhai eraill a oedd yn bresennol

Others in Attendance

Daniel Arrowsmith Swyddog Cydymffurfiaeth Rheoleiddiol a Pholisi, Cymdeithas Undebau Credyd Prydain Cyf
Policy and Regulatory Compliance Officer, Association of British Credit Unions Limited
Duncan Hamer Prif Swyddog Gweithredu Busnes a’r Rhanbarthau, Llywodraeth Cymru
Chief Operating Officer Business and Regions, Welsh Government
Julie James AM Y Gweinidog Tai a Llywodraeth Leol
Minister for Housing and Local Government
Julie Mallinson Rheolwr Datblygu Busnes, Undeb Credyd Celtic
Business Development Manager, Celtic Credit Union
Lee Waters AM Dirprwy Weinidog yr Economi a Thrafnidiaeth
Deputy Minister for Economy and Transport
Maureen Howell Dirprwy Gyfarwyddwr, Yr Is-adran Dyfodol Ffyniannus, Llywodraeth Cymru
Deputy Director, Prosperous Futures Division, Welsh Government
Steve Mallinson Prif Weithredwr, Undeb Credyd Celtic
Chief Executive, Celtic Credit Union

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Ben Stokes Ymchwilydd
Lara Date Ail Glerc
Second Clerk
Robert Lloyd-Williams Dirprwy Glerc
Deputy 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 y cyfarfod am 09:33.

The meeting began at 09:33.

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

Bore da. Good morning. Welcome to the Economy, Infrastructure and Skills Committee. I move to item 1 and there are no apologies this morning. If there are any declarations of interest, please state them now. 

2. Mynediad at Fancio: Craffu Gweinidogol
2. Access to Banking: Ministerial Scrutiny

In that case, I move to item 2, and this is our ninth session with regard to the committee's inquiry on access to banking and I'd like to welcome two Ministers this morning, Julie James, the Minister for Housing and Local Government, and Lee Waters, the Deputy Minister for Economy and Transport. And if I could ask your officials to introduce themselves as well for the public record—. 

Hello. I'm Duncan Hamer, chief operating officer for business and regions. 

And I'm Maureen Howell, head of Prosperous Futures Division.

Okay. Well, thank you, all, for being with us this morning. Perhaps if I could ask a question for either of the Ministers to start with as an opener: do you think that banks and ATMs are essential public services in our communities?

Well, they remain an essential part of how the economy functions. I guess the question is whose responsibility it is to ensure that there's a network of them existing, and, as much as this committee's discussed the impact of automation, I think we're seeing in real time a case study of what automation looks like, because I can remember the excitement 30 years ago when the first cash point arrived in Ammanford. You then rapidly moved on to telephone banking and now app-based banking. I infrequently, personally, visit a bank, so it's not unreasonable when banks turn around as commercial operators to say, 'We simply don't have the footfall to keep the business case going for these branches to remain open.' However, we know that, as in other aspects of automation, there are advantages from new technology, but, equally, there are those who lose out. The role of Government is to step in to help those who lose out and to make sure the benefits are spread easily.

Now, banking is not a devolved subject, but the consequences of the failure—the market failure, if you like—to deal with the consequences of automation do fall to our communities and, therefore, through devolved responsibility. So, it's a tricky one for us. We know that there's been rapid change since 2015, we know there have been 235 bank closures and a further four have been announced recently. We all, as constituency Members, know of towns and villages that now have no access to free cash. So, there's clearly a problem. I think the difficulty for the Welsh Government is understanding where it's our responsibility to step in.


Thank you for that. Has the Welsh Government had any discussions with, or what discussions have they had, with the UK Government and any of the regulators as regards the extent of bank closures in Wales?

We've certainly made representations to the UK Government. We haven't—

I think the last one was Rebecca Evans when she was the Minister for Housing and Regeneration, who wrote to the then UK Government Minister basically asking for their co-operation in assisting us to keep some of the branches open. But their response has been that they regard it as a purely commercial operation for the banks and that they weren't prepared to interfere and make any kind of market intervention, on the basis that it was a purely commercial decision.

I think there are some interesting things about the way that people perceive banks and so on. Enormous numbers of people are incredibly loyal to the bank that they have banked with for a long time. We have statistics showing very few people change banks despite the enormous efforts that have been made to make it easier to do so—the vast majority of us don't. I've never changed my bank since I joined it when I first went to university, for example, and that's a very common pattern.

One of the things I know with my Assembly Member hat on—and I'm going to very carefully not name the banks—in an area of my constituency, all the banks had slowly gone and the last bank standing made, actually, considerable efforts to host the accounts of all the other people in the area and so on. And I went from being very angry with them to actually feeling that they'd gone quite a long way down the road of trying to help. They ran digital sessions for everybody, they wrote individually to every person who'd held a bank account in that area—they tried really hard. But despite the fact that people were upset about the closure of their branches and so on, they didn't use the branch of the other bank. They went to the nearest branch of their existing bank. So, it's very hard to change people's loyalty or traditional pattern of working as well. We've had to make some big cultural changes in the way that people view banking in order to be able to do some of this stuff as well.

We've got quite a bit to get through today. Do you both mind if we interrupt you if you're not quite getting to the point we want? Thank you. Appreciate that. Bethan Sayed.

Roeddwn i jest eisiau gofyn ynglŷn â mynediad at arian parod. Roedd Which? wedi dweud ein bod ni’n mynd i fod mewn sefyllfa lle rydyn ni’n mynd i fod yn gymdeithas—. Dwi ddim yn siŵr bod—

I just wanted to ask about access to cash. Which? has said that we're going to be in a situation where we're going to be a society—. I'm not sure if—

I haven't asked the question. [Laughter.]

I didn't think you had, but there was a long pause, so I was being courteous. [Laughter.]

Julie, I don't know if—

Jest yn fras, roedd Which? wedi dweud ein bod ni’n symud at sefyllfa lle na fydd yna fynediad at arian parod a’n bod ni’n mynd i fod yn symud tuag at gymdeithas heb arian. Beth yw’ch barn chi ar hynny, ac oes yna ffordd mae Llywodraeth Cymru’n gallu helpu i wrthsefyll hyn, er enghraifft trwy helpu rhoi mwy o ATMs mewn i ardaloedd sydd ddim yn cael unrhyw fath o access i arian parod?

Just briefly, Which? has said that we're moving to a situation where there won't be access to cash and that we're going to be moving to a cashless society. What's your opinion on that, and is there a way that the Welsh Government can help to withstand this, for example by helping to install more ATMs in areas that don't have any access to cash?

We've been working very hard with the LINK network to make sure that we understand where they're coming from. Very recently, they've agreed to put the subsidy [correction: maximum subsidy] up to £2.75—I think I'm right in saying, Maureen—to enable the people who host the machine to be able to do so without detriment to their own business, and that has proved a problem in some areas. So, in the example I was giving earlier in my own constituency, a local pharmacy tried to host an ATM for that population, but, actually, they found it very onerous and it was costing them more money than they were prepared to give, and that's no criticism of them, they were prepared to give quite a bit. So, we've worked very hard with LINK to understand what subsidy might be necessary to allow that to happen for small businesses that would be taking on quite an onerous burden otherwise.

They have a renewed system of trying to ensure that there's a subsidised, free ATM every kilometre or so, and they're reducing the subsidy in cities in order to achieve that, because at the moment, of course, with a commercial operation, it's like everything else, the footfall is where the people are, and, actually, therefore cities are oversupplied with free ATMs and rural areas, where there's a sparser population, are undersupplied, and yet the subsidy had been similar. So, we've been working hard with the LINK network, who have been working hard themselves to try and get some social justice into that.

But there are a load of other issues associated with that, so it's not just about the ATMs, it is about whether we can get other community facilities to be able to pick up that space, so whether the post office network has been successful in stepping into that space in some areas, which they have in some areas, but there will be some areas where there's no post office either. So, there are a number of related issues—it's not just flat cash, if I could put it that way.

Chair, I wonder if this would be a reasonable point in time to say that I've brought some infographics about financial inclusion and digital inclusion, which are in this space about where we are with the roll-out, and the infographics I just thought might be helpful, rather than me repeating a load of stats. They're all just set out nicely on this.


Well, if you pass them to Rob behind you, I'll ask Rob to distribute them.

Dwi'n mynd i ofyn cwestiwn yn hwyrach ar gynhwysiant ariannol, felly gallaf i ofyn hynny bryd hynny. Ond dŷn ni hefyd wedi clywed tystiolaeth bod yna ddim un corff sydd yn gyfrifol am fynediad at arian parod. Beth yw'ch barn chi ynglŷn â'r joint authorities cash strategy group sydd wedi cael ei sefydlu gan Lywodraeth Prydain? Ydych chi'n credu mai hyn yw'r lle ar gyfer trafodaeth? Roedden nhw'n dweud bod yna ddiffyg rheoleiddio, bod dim un rheoleiddiwr yn cymryd cyfrifoldeb yn y maes yma—beth yw'ch barn ar hynny?

I'm going to ask a question later on financial inclusion, so I can ask that at that point. But we've also heard evidence that there's not one organisation responsible for access to cash. What's your opinion as to the joint authorities cash strategy group that's been established by the British Government? Do you think this is the right space for a discussion? Do you think that there's a lack of regulation, that there's no one regulator taking responsibility in this area—what's your opinion on that?

Well, we welcome anything, frankly, that would help us work together with the UK Government to try and get a network established, because I think what Lee Waters said right at the beginning is absolutely right. We're in the wave of an automation revolution here and what's going to happen is we're going to go too fast for large sections of the population if we're not careful, and there are a large number of interlinked issues as a result of that.

So, the joint authorities cash service thing is in a very early stage, but we're very keen on working with any agency that allows us to make sure that we don't have cash-excluded as well as digitally or financially excluded people or sets of people across Wales. Obviously, there's an issue with an ageing population that doesn't have some of the digital and financial inclusion skills, but, actually, there's a huge issue for anyone with any kind of sensory impairment, so if you've got a visual or hearing impairment, some of the apps are really hard to use. There are whole issues around other people who are already disadvantaged in society, and we need to level off that playing field for them and not make them jump over higher hurdles. So, we're really interested in working with any agency that can assist us to help those people adjust to what is, I fear, an inexorable automation tide, really.

Can I just answer Bethan's point directly there in terms of what's the correct space for this? As I said, we're not walking away from our responsibility to deal with the consequences of this, but I think we should remember this is for the industry themselves and for the UK Government, as the regulator of the financial system, to make sure that these issues are addressed. We have a part to play, but the principal focus I think should be on them.

I think it's just worth adding as well that—we were discussing earlier, actually—for example, in Sweden, the Government has said that it's in the early stages of trying to ensure that the cash infrastructure network stays resilient and present, and that's the stated aim of this joint authorities group, because, let's make no bones about it, once the infrastructure has gone, it's really hard to put it back. So, once you've closed everything in an area, trying to put back—even the electronic means of delivering cash is really hard. So, it is about trying to preserve what we've got as well as trying—. If we go into the space where we're trying to retrofit it, then we're in real trouble, it seems to me.


Just a quick question on ATMs to you, Minister, Julie James, with your planning, perhaps, hat on. A town in my constituency, Machynlleth, a few years ago had three banks, now it's got none. The banks take away the ATMs as well. Certainly there's an application going through the local authority to put an ATM—from one of the providers—into a shop, but there's an issue there of the heritage officer weighing the balance up against the application—or did do at one time. And, of course, there's a need in the town and there's an issue here of balance between access to cash and preserving the heritage of the town centre as well. Is that something that you've considered in terms of perhaps updating any particular regulation in that regard?

'Planning Policy Wales' would certainly allow the right balance to be arrived at by the officer there. It will very much depend on whether there's a local development plan that says something different; or whether there's specific planning guidance for that area that says something different; or whether they have a heritage buildings set of guidance. 'Planning Policy Wales' sets a framework, as you know. In those sorts of instances, it very much matters what the local plan says.

Okay. It's at the local authority's discretion rather than—

I'm very happy that 'Planning Policy Wales' allows you to put a framework in place that would allow that kind of development. We are, however, looking, as I think the First Minister said in Plenary yesterday, again at some of the use class Orders so that we can make it harder to change use from some facilities in particular areas. Pubs was what was under discussion yesterday, but the last bank is another one that we are seriously looking at; whether we would make it much harder for a change of use. So, at the moment, the use class Order is very wide for that kind of retail operation, so we are considering whether we would narrow it.

Thank you, Chair. Yesterday, the cross-party group on co-operatives and mutuals took some really interesting evidence around the need for a community bank in Wales, and I think perhaps one of the most startling statistics was to see just how great a void there is in the UK when compared to all other developed nations. When even America is ahead of the game in terms of community banking, it shows you that the potential really is there for us. But with a void as big as that, the world is your oyster in terms of how you look to fill it. So, my first question is: what is the specific problem that you think that a community bank in Wales would look to try and solve?

You're right to point out that the movement towards a community bank is part of a broader movement. In the UK, the Royal Society of Arts, Manufactures and Commerce has been doing some important work around this in London and in the north-east, so I think we need to see this as part of a broader movement. The way we seek to fill that space should be done in common cause with others so we learn the lessons and the just based on them.

To answer your question directly, clearly, I think there's a social justice issue at the heart of this. We know that, for example, over 15 per cent of people with an income under £10,000 a year rely completely on cash compared to less than 2.5 per cent of those in higher income groups. So, there's definitely an issue of how do we help those on the lowest incomes, those who are most vulnerable, who are less able to move around to be able to access cash, as it still remains a part of the way the economy works. So, I think that is a key one.

I think small business is another key issue, the need for small traders in towns to have access to cash, to have daily banking facilities. I think that is also a key facility too. Perhaps I can ask Duncan Hamer, who's been doing some of the work on the community bank, to see if there's anything he'd like to add as well.

Yes. I think, really, the key issue is to identify the gap that's out there. We know instinctively credit union to high-street bank, there's a gap there. We don't think it's ever been accurately sized and understood. So, one of the first stages of this piece of work is the whole feasibility of size of market and opportunity. And I think all I'd add as well is that the potential community bank has an opportunity to reach a broader population as well. So, it only focuses on the ones who can't actually service it; it probably needs to act in a broader social purpose, if you like, not just meeting difficult-to-meet areas.


Okay. Thank you. We've taken some evidence from the National Federation of SubPostmasters, and they believe that, rather than establishing a community bank, a more effective option, to quote their words, would be to

'capitalise on the huge potential that the post office network offers.'

What would be your view on that statement?

Currently, post offices don't offer the full range of banking services, nor do credit unions. So, there's a missing space that the community bank could potentially fill. Done well, I think all these different players can complement each other. Done not well, we could damage the whole ecosystem. So, I think it's really important that we proceed carefully and thoughtfully into this space and involve all of them in a conversation about whether there is room to partner up, whether there is room for differentiation, and how we do that in a way that achieves the impact and outcome we all want.

Okay. What would you see as being the ideal relationship between a community bank of Wales and the credit unions in Wales?

I guess that is a question for them, isn't it? Because they are seeking to do different things. We are aware that credit unions are evolving rapidly, and there are a number of examples, for example, where they've accessed financial transaction funding. There's £1 million that's been put into them recently to give them extra capital. They're looking at aggregation, ways that they can diversify their services; they can offer pre-payment cards. So, there's a lot going on in this area where they're innovating themselves, as, indeed, they should—they are non-state actors. As I said earlier, we're quite clear what the policy objectives here are. I think we've got to be relatively agnostic about the tools that are applied to achieve that, and the clue's in the title: this is a community bank. This is not a Government-sponsored bank. Our role is to try and help set it up, to facilitate it, and we certainly are supportive and want it to happen, but it's not for us, really, to be overly prescriptive on how it happens.

We had a concern raised by the Cambrian Credit Union, which said that a community bank would take away some of its members and have the

'unintended consequence of making it harder for credit unions to serve the needs of the most financially excluded'.

How would you respond to that?

Well, as I just said, I think there are some dependencies here and some potentially clear unintended consequences if we proceed in a way that isn't thoughtful. So, that's why we are doing the scoping work now that Duncan mentioned, working closely with the Cambria bank and others to think through what the role of Government is, what the perils are here that we can see and how, together, we can get more than the sum of the parts.

Could I add to that as well? It is interesting, picking up your observation about the US. So, we've had a look at what, for example, Silicon Slopes on the west coast of the US is doing. One of things that struck me is that their guiding mantra is that there is no competition in community building. So I think we have to position it in that way, working collaboratively. The other thing I think about the community bank is that it can't replace what the high-street banks have taken away, if you like. It has to think differently, so sharing public space, working with credit unions, working with the Post Office. I think it really needs to be that sort of collective impact and focus to have any chance of being feasible, I think is the plan of attack.

I think the only other thing to add—it's what Lee said but just to make the emphasis on it: one size doesn't have to fit all. So, if you have a credit union offering particular services in north Wales that aren't offered by a credit union in south Wales, a community bank might fill that eco-space. It doesn't have to fill that space in every part of Wales, if there is not a space in the system. So, I think it's really important not to assume that a community bank for Wales would look exactly the same in Swansea as it would in Wrexham, because the services available via the credit union and other community facilities will be different. The feel for how that ecosystem looks will be really important, and the community of that area will have to play a significant role in deciding what that looks like. So, I just want to emphasise that, because we've gone to a lot of trouble in 'Planning Policy Wales' to emphasise that kind of place-building approach. So, I think this is a prime example of something that probably won't look the same, depending on where you are.

Have any assurances, either informally or formally, been given to Banc Cambria that they'll receive seed funding from the Welsh Government?

I've not been directly involved in any conversations. Duncan, can you help?

Yes. We've had a proposal in from Banc Cambria, which we're currently assessing. At this point, formal advice hasn't gone forward to Ministers. So, taking all the feedback that we've been listening to from the committee, for example—well, that will be included in any consideration of further finance.


I think it's going to need to move, so, basically, I've been keeping an eye on all the various evidence pieces and that will, obviously, form part of our consideration.

In an answer on 21 June to the Chair of the committee regarding that very question, the Minister said:

'A stakeholder group has now incorporated a mutual society under the name of Banc Cambria and have submitted a proposal to Welsh Government requesting support to meet the cost of the early work phases. This seed finance will allow the group to recruit suitably qualified banking professionals with the aim of developing a business plan and submitting an application for a banking licence to the respective Bank of England agencies'.

It sounds like there have been discussions between the Government and Banc Cambria. Can you just outline the nature of those discussions?

Yes. So, the way I describe it is: the discussions are almost as if Banc Cambria were a start-up business, so, like any other start-up, it's bringing a proposal to the Government and we're considering it. That proposal includes a request for—the seed funding they've identified in their proposal is, in total, £600,000. We can see there's an identified minimum of around £300,000 that they're looking for, and that is the proposal we're assessing, and, in due course, will give advice to the Minister in terms of a recommendation of support or not, depending on the outcome. What I would say is that any support that is offered would need to include various provisions, for example, working with stakeholders, and the feasibility of the bank, that has to be the key assessment—

Can you give us a timescale for when you're likely to get that decision?

Ultimately, I wouldn't like to put a timeline on the Minister's decision, but we are in the closing stages of assessment of that proposal, so I'd anticipate we would get initial advice probably during the month—we're in July now, aren't we, so by the end of the month, I would hope we'd get that initial advice out.

I feel I need to emphasise that just because the officials have got the advice to a Minister doesn't mean they instantly decide it.

Of course, Minister, but the First Minister's also said that he wants the bank to be up and running by the end of the Assembly term—

But you also have to consider carefully the advice that you're given. So, I just didn't want to give the committee the false impression that the arrival of the advice coincides with the decision.

I absolutely understand that, and Ministers decide.

What would happen if you had 10 other applications from other very similar organisations with exactly the same proposal, with exactly the same provenance—10 other banks wanted to do the same thing—would you give them seed funding as well?

So, I think this is why we need to proceed carefully, isn't it? You've got to weigh the balance. Clearly, I think there is a positive, a benign political and policy environment, where we want this to succeed, but it's got to stand or fall on its own merits. So, we've been encouraging of Banc Cambria, as we would with anybody else who came forward. As far as I'm aware, nobody else has come forward, though we have been in conversations with the RSA and others who are working in Preston and London and so on. So, this is a relatively small community, all trying to do the same thing and learning from each other. But we need to treat it on its merits and make balanced judgments.

But if you had—from the point of fairness, if you give £300,000 to Banc Cambria and you have another nine Banc Cambrias with exactly the same proposals, how do you differentiate between those? You can't make a differentiation, because they're all the same.

But as Duncan said, the parallel is with a start-up business. We face exactly the same situation with a potential entrepreneur or set of entrepreneurs coming towards us with a set of proposals, and you may have 10 people wanting to start a business. We would weigh each one. We don't say—

So, what you could say, then—if you're giving £300,000 to Banc Cambria and they're on their way, you could then say to the next Banc Cambria that comes to you, 'Well, we've already done it, and we can't do it again, because they're filling the space in the market.'

I think it's a slightly theoretical point. I understand the point. There are not 10 businesses approaching us to try and set this up. There is a co-ordinated movement across the UK who are trying to make this happen. You have read between the lines between Duncan's comments. The officials are, rightfully, putting a critical eye on this to make sure that public money is being well spent and that we have been proceeding in a way that is not going to trip us up in the future. We, as politicians, want to see this happen, and there's a balance to be struck between those two positions.

One of the things the Principality Building Society said in their evidence is that

'establishing any form of likely to be unviable without major subsidies’.

And some of the figures we've seen are £300,000, okay, to proceed to due diligence, but actually to apply for a banking licence is £3 million, and then the next stage is going to be in the £20 million-£30 million. You're talking about £6.50 at least from every man, woman and child in Wales. This is an expensive process. The principle I fully support and fully understand, I think it's a great principle, but the detail often causes problems. Isn't this how Circuit of Wales started?


Well, we're not in the business of setting a bank up. It's a community bank, so it's for the community to be able to demonstrate that this is viable. We're happy to help them along the way to do the due diligence necessary to see if that test can be met. If it can be met, they should fly on their own. If it can't be met, they won't. 

So there's a clear limit on what the Government will do.

And once you hit the £300,000, for example, there's not much more money coming after that. 

Well, I'm not at this stage going to set a barrier for where that limit is. The point is: we are not in the business of fully funding a bank. We're in the business of seeing whether or not we can create the conditions where a community bank can flourish, and we'll set in place the foundations for that with others. But if that doesn't look like a runner after we've done all the due diligence, then clearly it won't stand on its own merits. 

So, you're willing to write off the £300,000, but not much more than that. 

Well, I'm not going to set an arbitrary figure of where our support stops, and our support isn't just financial—it's in other resources and support we can give. As I said, this is part of a linked movement that is happening in other parts of the UK, and they will stand or fall together, is my guess. 

I suppose what I'm trying to get at is: you're willing to accept the risk. 

Well, the risk to a point. This is not a blank cheque. 

No, and that's what I'm trying to understand: is what is the point—

There's a good public purpose for the risk as well—that's the point. It's not just a blind risk on a commercial enterprise that—

No, I understand that, but I'm trying to say: where does your risk appetite end?

Well, we don't know, because we don't know how feasible it is, and so that's a chicken and egg, isn't it? Until we see how feasible the business plans are we don't know how risky it is, we don't know where the risk will end. They've got to go through a rigorous process of getting permissions from the Bank of England, for example. If they can get through that, then I'd be inclined to think they were less risky. During their passage through, we will have to see how much support they need in order to achieve that, and we'll have to make some assessments about their likelihood of achieving that. This is a movement across the UK with other community banks, so they'll be learning from each other and we will rightly want to see one succeed in Wales if it's possible to have a community bank succeed. But if the movement cannot succeed, we will certainly know about it soon. In my response to Bethan, I talked about making sure that all of our populations can access the kinds of services they need as we go through an automation revolution. We are duty bound, it seems to me, in a public space, to make sure that we encourage any enterprise that covers off that public service. 

So, if we're looking at it from the point of view of a small business and the viability of a small business, doesn't it worry you that you're actually going to be investing in a business that is following a business model that other businesses are actually removing themselves from?

It's not the same business model, though, is it? It's not a high-street bank. My understanding about the community bank is that it's in a very different space, co-existing with things like the credit unions and the Development Bank of Wales. That's not the same space as a high-street bank. 

And you're convinced there is a profit in that space.

And also, the other issue is—. I don't know enough about the business model for the high-street banks, but my understanding is that no bank that's removed its services from the local population in my community is actually in loss. They're just not making enough profit. That's not the same issue.

That was the evidence that was presented to us by Banc Cambria. 

So, a community bank is not in the space of wanting to make the kind of money that any of the four big banks want to make.

That's a fair point, but what you need to be assuring yourselves of is that there is some profit in there, and what you're telling me is that you think there is. 

It has to be viable. You don't want an ongoing public subsidy. 

Okay. When do you expect the first branch to be open?

I would say the banking licence is the first phase. They can't open a branch before the licence, and with a fair wind, that's not going to be till the end of 2021, so you're into 2022 before it even—. And bear in mind that decision is not made by Ministers or the Welsh Government. So, ultimately, and to your point about viability, the licence will not be issued unless the viability in the plan is proven. So I think there is a risk, absolutely, in this space. It's an innovative approach and there is a market sizing needed, but in terms of assurance on that risk, ultimately the licence means you can open a branch or not. So if there's no viability, no licence will be issued. So, I think there's a—

Did you think the First Minister was being a bit optimistic in what he said in his leadership manifesto?

That's a question, probably, for one of the Ministers.

Our advice, Hefin, is that the bank—with a flying wind, there's a good chance that the Bank of England can get through its licensing processes in about three years, but the word 'about' is important. So, it depends how much due diligence they have to do, and on, presumably, the merit or otherwise of the application. So presumably, if they have to do a lot of work with the application to make it work, it takes longer, and if the application is spiffing when it goes in, it will take shorter. But an average timescale, we are told, is somewhere between two and three years.

There are a fair number of unknowns in this, and it's going to be a bit of a white-knuckle ride, isn't it?

But it's being done in co-ordination with other movements across the UK. Others are going through this process now, and they are talking to each other and they will learn lessons from each other. So, it's not simply a case of us going it alone; this is part of an effort to try something new and do something different for a good public purpose. And there is risk to that, and there are some unknowns to that. 


But there are other things that have been done in the past that fitted exactly that criteria, though. 

Sure. Well, we'd give up today if we just simply said that other things have failed therefore we won't do anything innovative, wouldn't we? 

The Chair of this committee will have heard me say on many occasions that a Government that takes no risk is not a Government worth having. So, the fact that, sometimes, we back something that doesn't fly is not an indication of failure; it's an indication of success. 

And that's why we're asking these questions, so that we will have that reassurance. 

The First Minister's commitment that he made in his manifesto to be First Minister—is that Welsh Government policy?

Well, he wasn't the First Minister when he made the commitment. 

No, but he is the First Minister now. And we are actively, for good public policy reasons, looking to see whether we can develop services for the people of Wales that fill a gap in the market because the market is failing them, and that is the proper space for governments to be in. 

And the First Minister wants the first bank to open before the end of this Assembly. 

If at all possible, but we have to proceed with all of the diligence necessary, not just to make sure that the Government's risk is a proportionate one but, actually, to make sure that the enterprise, as it grows, does so correctly. Some things that accelerate too fast fail, so we will want, as Lee has made very clear, to be part of the movement of community banks across the UK, and to be part of this ecosystem where at all possible. We would not want a community bank system to be running in England, for example, that we had not taken some part of, and they will need our help to get there. I'm not an expert in setting a bank up, and neither is Lee, and neither are the officials, so what we're doing is trying to understand, through this process, what is necessary to do to make sure that the people of Wales have some services that are not now being delivered by the market. And it's incumbent upon us to do that, but with the right amount of diligence. 

I'm just being clear as well, because the Deputy Minister has said that we're not in the business of setting up a bank, so the Welsh Government is facilitating the creation of a community bank for Wales, as in the First Minister's manifesto. I just want to be clear on Duncan's role as well, because Duncan, I think, said that looking at this application is like any application that comes in for business support. What's the extent of Welsh Government—perhaps this question is for Duncan—what's the extent of Welsh Government involvement and time in working with Banc Cambria to develop their proposals?

So, I guess, to try and put the context—and it was picked up in some of the earlier points—they do have a first mover advantage in that they're coming to us and they have exclusive rights on the CSBA model, which is already active. Both Ministers have mentioned Bicester and London, which are operational and already active in this space. The Community Savings Bank Association—

Yes, in short. So, they've got an operating model in Bicester, for example, which is exactly that; it's a shipping container bank, end to end. So, the principle of that shared location works. Preston, I think, also gave you similar evidence there, linked up with CSBA. So, we're appraising on that basis. Like any innovative business start-up that would approach us, they've got that first mover advantage; they've also got some features that others can't replicate.

Timewise, it's like any other innovative business. So, we often get applications in the research and development space, part of my broader brief, where, in effect, we're looking at that sort of 'valley of death' phase. So, they've got a great idea, they're trying to start it and trying to make it sustainable, and we as a Government recognise that market failure in taking it from great idea to commercialisation—not dissimilar to what we're assessing. It's a major part of our project work, so it's taking time, but it's time well spent, I'd argue.  

Is it a case of the First Minister's made this commitment, and it's Welsh Government policy, so it's your role to go out and find an organisation to support that policy, or did the organisation, Banc Cambria, or the wider group, come to you first?

Can I step in there? This has not come from a vacuum. As we said, this is part of—. The RSA has been doing this work in London for some time. The First Minister's interested in that work. He has a particular policy interest in the role that currency and banks have in local economies, and how they work. So, this is not something that's been plucked out of the air. This is part of an emerging movement, as Julie James said, to address a market failure in the way that the fourth industrial revolution is proceeding at pace. The commercial business model is failing many of our communities, and there is a civic society-led movement to try and address that. Now, we are looking at how we can support that civic society movement to come forward to grow responsibly and to flourish, and we have a role in that. As ever, with any proposal, the civil service—this is their job—is to apply a critical eye and apply due diligence to make sure that public money is being well spent and that the policy process has been thoughtfully applied. And we'll end up where we end up.


I do want to assure you, Deputy Minister, that some of the questions that we have here—. We haven't got a particular view as a committee; we're just trying to get to understand—. There's been quite a bit of information passed to us through witnesses that is varying, and I'm just trying to understand and get—

It's important these things are tested; I'm not complaning.

—to the bottom of where these things have come from. Joyce Watson.

Like you said, it's an unknown quantity, it's something delivering back to the people—we all get requests. It's serving a specific sector of our communities that currently aren't being served, and in the future might not be served at all. Like any business, and it is being dealt with as a business, it has to make a profit. Of course, where the profit goes is a different matter, or you can say that it has to be sustainable, whichever way you look at it. So, in terms of the sustainability of a community bank, can anybody offer up any evidence that they have that it will be self-sustaining and move into the future from the models that you've already said that you've been looking at?

Well, that’s a fair challenge, and that’s the challenge for Banc Cambria and anybody else to meet, isn’t it? And I think that one of the big questions that we have is—. As I understand it, to make it sustainable they need to have 30,000 accounts open—depositors—and that’s the challenge they’ve got to meet, whether or not they can do that. Because if they haven’t, it will not work, it will not be viable and it will collapse. As I say, this is a civic society movement. They’ve come forward with a proposal. It’s for them to demonstrate this is viable and we’re going to try and support them to get to that point, but it’s their challenge.

I’d go slightly further than that and say that we would support stakeholder meetings across Wales, and so on, because we know that there are excluded groups of people who would benefit from this who might not naturally come forward. Because we see that there is a gap in the market, and each one of us, with our Assembly Member hats on in our constituency or region, will be getting that message, then we would look to make sure that the people who are expressing the view that they are being left out of those kinds of services are enabled to come forward and express an interest.

If, after that, they don’t do so and the bank cannot make itself viable, well, then, it cannot. But I think it’s incumbent on us to assist people who are otherwise excluded to come forward and help themselves, if you like, with one aspect of that exclusion. And that’s exactly the same as we do for all other excluded populations in a number of other spaces. So, we can talk endlessly about what we’ve had to do to stimulate people to take up broadband, for example, because that’s what gives us the money to spread it out into more excluded areas. And the same thing—

I'm sure we will. I was looking directly at you when I made the point. And the same thing for other digital and financial inclusion programmes that we have, where we have to do outreach to people in order to make them aware of an opportunity that we feel might assist them with something that they're otherwise excluded from.

Before we move on to a new subject area, I just want to bring in Hefin one last time.

Just something that struck me—. And, of course, you're the Minister for local government; one of the things that the co-operative cross-party group yesterday, when we met the south-west of England bank—I can't remember the name of it—

South West Mutual. They said, 'Well, we get the money from local authorities as well.' Are you expecting local authorities to invest in this?

They certainly could, if they wanted to. For a community bank to flourish in Wales, its local authority will have to be, at the very least, supportive of it, for all of the reasons that we started to go into around other things. They've been very supportive of the credit union movement in Wales, which is a proud tradition in Wales.

So, will you be having dialogue with the local authorities in your job as local government Minister, saying, 'You should be investing in this'?

Now is not the time—so, at the appropriate time—but we will certainly be wanting local government to step up in identifying communities that might benefit, that might need to be assisted to—

Well, I'm not in a position to say that one way or the other. I don't see any big problem with that, but at this point in time, we are not at that stage.


Thank you very much, Chair, and good morning, Ministers. I'm listening to you very carefully, that you've been very loyal to the bank for a long time. I put in an enterprise Bill over eight years ago, Chairman, and a bank for Wales was part of it—they're only 10 years late, or eight years. But the thing is we're talking today about access to banking. That's the point of this scrutiny committee here. The thing is that banking is a highly professional sector. It's mostly run by private enterprise. The thing is it's deposit, transfer, money exchange, mortgages, lending, all these different areas. The thing is you need highly professional people. It is licensed by the Bank of England and regulated by FCA, the Financial Conduct Authority. Have we got that sort of association or institution in Wales to make sure that all these—whether it's a community bank or the bank of Wales—are monitored by that sort of authority here? Is that in the pipeline, or are you just looking to the other side of the channel to regulate our institutions, which is I think where you're heading?

We haven't got independence yet, unfortunately, Oscar. [Laughter.]

The short answer to that is, 'Yes, of course', because any bank that comes forward will have to get all of the right licences from the Bank of England, and in order to do that they will have to have all the right qualified people and have the right structures in order to get that licence, and, I will say, in exactly the same way as a credit union has to.

Absolutely. So, the credit unions also have to have all of the right people with the right professional qualifications; they are also regulated by the FCA and so on. So, there are plenty of people who are prepared to use their professional expertise for a community purpose at various points in their career, or indeed to swap careers. All of us will have been involved in a credit union where there's somebody who was previously in a commercial bank who is now giving their time and effort to a community enterprise. So, I'm not worried about that at all, but we will of course have to go through the process of making sure that they get all of the right regulatory approvals and so on, otherwise there will not be a bank—but in exactly the same way as the credit unions have to.

I appreciate your concern and zeal on this, but our Chair just asked you about timescale, how long it will take to get. I think the Post Office is also playing a crucial part, a critical part, of public service in the sector—money was available to them, post offices, and they're asking for more money and if they get more they can give the same service that you're asking for.

Well, I think as Lee Waters said earlier, it's very much part of an ecosystem, and we'll have to make sure that we don't inadvertently do anything that undermines any existing service and the bank fits into the gap in the market that we know exists. That will be different depending on where you are in Wales, and we are working actually very hard—this is an opportune moment to say it, I think, that, in the space before the bank is able to form, assuming it is able to form, we still have people who need access to cash, and so we are working very hard with the post office networks and with, actually, small retail networks to ensure that their members are enabled to do cashback schemes and other such schemes across Wales so that people do have, still, access to cash in their local area. So, we're very keen on supporting small retailers and post office services so that people can go in and get cash from a local shop, for example. So, we've been working very hard in that space to make sure that we can support any retail operators or the chamber of commerce or whoever to come forward with members who are prepared to run that sort of service. Because this is a real problem right now and many people across Wales are already struggling with that kind of access to cash service. 

The thing is, in your paper, you state that the Welsh Government:

'Post Office Development and Post Office Diversification Funds provided capital grants worth over £10 million to local post offices in Wales between 2004 and 2015.'

Why did those schemes come to an end and what consideration has been given to reinstating them again?

Well, I think the simple answer, Oscar, is austerity. We simply didn't have the money available to keep offering generous grants like that. I think it also goes back to the question at the beginning of what is the role of the Welsh Government in this space. These remain the responsibilities of the UK Government, and, just as in broadband, there are cases where we can step into a non-devolved space because of a broader interest, but we don't have the resources to do that freely and we need to keep checking whether or not we're still right to be in that space. I think, on the post office development fund, we invested some £10 million, I think, in investing in these private businesses and we were able to do that at that time, but it reached the point where we thought there were diminishing returns and we stopped.

And also the post offices are also closing now. The National Federation of SubPostmasters also suggests that

'without further support there is a risk that individual branches within the post office network may struggle to cope with some of the consequences of an increase in banking transactions as banks continue to desert the high street'.


That’s self-evident, it seems to me—post offices can’t replace banks. They can replace some of the services of banks in some circumstances, but they, generally, don’t have a private place that you can talk to somebody. Most people are not going to want to discuss their private financial matters loudly over a post office counter. That’s not how it is. But they can replace small cash services and deposit services, and general automated teller machine type services if there’s not an ATM there, but it’s not in any way a replacement for a full banking service, and that’s the space in the market that we’re talking about. So, that is the gap in the market—how can we provide those services? And, as we’ve said repeatedly, it has to be part of an ecosystem, so one size will not fit all. It will look different in different bits of Wales, depending on what currently exists.

The ageing population in Wales, as was said earlier—they’re quite used to those fountain pens and pencil and writing paying-in slips and everything. And the modernisation you're putting forward—it takes time. Don’t you think it’s a good idea that it should be replaced gradually rather than straight away?

And, finally, my question to you is on the views as to the potential benefits from the fact that the Post Office is seeking to extend the banking framework to credit unions.

We're very aware that credit unions are working with post offices to give more access to credit union services via post office counters, and that’s a very good thing, in my view, so that more—. We want to encourage more people to join their credit union. They have better access to being able to both deposit and take out their money or access other credit union services. So, that’s to be encouraged. But, again, that’s not a full banking service. So, we will want to see whether there’s any appetite for doing it.

And I couldn’t agree more with you about the pace, but we’re not in charge of that. The commercial banks don’t care about their communities—they only care about their money. And their money is not high enough, and so they are pulling out. And that’s the problem with too much reliance on solely commercial operations, I’m afraid—that they don’t actually care about the public service that they provide. So, I couldn’t agree with you more, but I suspect we differ strongly in what we think the solution is.

Just quickly, Deputy Minister, you mentioned on the post office diversification fund that there was diminishing return. Have you got any further background on that at all? Or, if not, perhaps you could provide some. But if you could speak to that a little more.

Well, I'm happy to write with any further background. As I understand it, Jeff Cuthbert was the Minister at the time. A bid was put in to the Welsh Government for a continuation. We pushed back in the bid to require further evidence and weren't provided with it. So, a judgment was made that that wasn't—. Going back to Hefin David's challenge earlier about how decisions are made and the balances of risks that are weighed up, a decision was made by the Minister at the time that that wasn't the best place to put public money, and I think that's right.

Okay. So, it wasn't about austerity or it was about austerity as well?

Well, austerity in the sense that we had less funds available, so we had to make tougher choices of where we put the limited funds that we had. When there had been more money available, under a different UK Government, we had more money at our discretion. And, as you know, the amount of money we have to spend on things has reduced dramatically, so that brings into sharper focus the choices we make.

Dwi’n credu, yn y drafodaeth yma, beth sy’n bwysig yw bod pobl yn gallu cael mynediad at wasanaethau, ond hefyd bod nhw’n teimlo’n bwerus pan fyddan nhw’n mynd at y gwasanaeth hwnnw. A dyna pam dwi’n credu fod cynhwysiant ariannol mor bwysig. Dwi’n gwybod beth dŷch chi wedi’i roi i ni fan hyn ar daflen—ac mae hynny’n sgleiniog ac yn neis—ond mae tystiolaeth yn dangos fod e’n dal, mewn ysgolion, yn bytiog iawn o ran addysg ariannol, fod undebau credyd yn amrywiol iawn ac efallai ddim wastad oherwydd pethau da—mae rhai undebau credyd yn cael mwy o gefnogaeth a mwy o beiriant y tu ôl iddyn nhw, a byddai undebau credyd eraill eisiau gweld bach o hynny, felly mwy o fuddsoddiad gan Lywodraeth Cymru. Felly, beth mwy ydych chi’n gallu ei wneud o ran cynhwysiant ariannol i helpu pobl sy’n mynd at y gwasanaethau penodol yma?

I think, in this discussion, what's important is that people can access services, but also that they feel empowered when they do approach those services. And that's why I believe that financial inclusion is so very important. Now, I know what you've given us here on this sheet—and that's all very shiny and all well and good—but evidence does show that it's very patchy in schools in terms of financial education, that credit unions vary a great deal and not always in a good way— some credit unions do receive more support and have more machinery underpinning them, and other credit unions might want to see that level of support and so they would need more investment from Welsh Government. So, what more can you do in terms of financial inclusion to help those people who approach these specific services?

I'm not in a position, Chair, to talk about the service in the education service. I hear what you say, but I'm not in a position to respond to that. In terms of the rest of the strategy, I completely agree with what you said. What we need is a strategy for almost each individual set of people with specific issues, so where the credit unions are able to do that—. So, credit union coverage is full across Wales—everybody in Wales is covered by a credit union—but credit unions offer very different services. So, some credit unions offer an enormous range of services. Others offer really basic deposit and loan services and so on. The amount of support that they're able to give differs, and there again I can't emphasise enough—Lee Waters has said it a few times—these are not a Government programme. These are a proud tradition, I think, of—.


I'm sure they would have said to you over the years that, because the support for credit unions, financially, has changed, that may have hindered how they can develop. That's what I get as feedback, anyway, from some of them.

We do support them, and I hear that myself, but what I would say is—and I always say this to them—if the support enables certain services in some parts of Wales, why doesn't it enable it in others? They are the master of their own fortunes. If some credit unions, with the support we give them, are able to produce a range of services, why can't they? And we do encourage a sharing of good practice with the credit unions, and we've seen some consolidations, as you're aware. In your region and my constituency, we've had some consolidation of credit unions, and that's been to the good. The—. I was thinking 'new'—the surviving credit union—. I can't find the right word, but you know what I mean; the resulting credit union is more robust and is offering a better range of services, in my view, than its predecessors, and that's a good thing as well. But they're able—. They make their own choices. They make their own decisions about how to use the underpinning funding.

But where do you think that we can make improvement? I know that you're not directly in control of them; I'm talking wider in terms of financial inclusion. When I did the work to put forward my financial inclusion Bill, some local authorities didn't have a financial inclusion strategy at all, and some were doing very, very basic stuff. If we can get this right, then, when you go and access a community bank or when you go and access a credit union, we know that people will feel more powerful in how they communicate that. That's where I'm trying to—.

So, I completely agree with that. We've worked very hard with them to, for example, get more employers on board in their area, and to encourage—. So, I'm very keen, with my housing hat on, to encourage all of the registered social landlords in Wales to encourage their tenants to sign up to the local credit union with a small £1 payment, or whatever it is, regularly, so that they have a buffer if they do find themselves in financial difficulty, but also because they access, then, the credit union support for other financial services. So, I'm very keen on doing that and we've worked very hard with the local authorities as well to make sure that they allow access via their payroll to their employees for the credit union, because a credit union requires people who don't need their services to support the credit union so that they have the finance in order to support the rest.

We're a bit tight for time. Duncan Hamer, you wanted to come in.

Yes. It's just an observation, really, on the responsibility of everyone in financial inclusion. So, yesterday we had the Enterprise Troopers final in Cardiff Met—primary school kids basically thinking about starting and running a business. A key part of that is that principle of handling budgets and money and finance. So, again, it's that kind of cross-Government principle of, 'We're all—'. I think we've all got a part to play. It links back to the community bank evidence; it's very much about that community cross-Government approach. That's a great example where we're getting six and seven-year-old kids thinking about a budget and how to handle it and the cash they're using in a business context.

Is that happening everywhere? Because what my experience is is that some schools are amazing at letting, for example, a credit union in, or this type of thing, and others go, 'Do you know what? Not my priority—not going to do it,' and then children are leaving schools without any life skills, and that's something the Youth Parliament has raised as well.

Can I just say—? We have been working with what was MAS, and now is the Money and Pensions Service, in terms of getting it into the new curriculum. So, within the new maths curriculum—

Not as read at the moment. Having read it, it doesn't look like there's going to be much in there.

We're also working on resources to support that, and also in the health and well-being side of it.

Okay. I appreciate the officials are trying to be helpful, but I just want to point out that we haven't got the Minister who is responsible for that here, so I don't feel that we're in a position to answer very specific questions on that—not because we can't, but because I don't think that's the right protocol.

No, no. If you think it's right, we can write appropriately. Ministers, are you okay to stay a further five minutes? I appreciate it. Last five minutes—Joyce Watson.


We have got the right Minister in the room for this question, because it's about the Digital Communities Wales scheme. Are there any aspects of that scheme that specifically are linked to issues caused by bank closures?

I think the straightforward answer to that is 'yes'. We have two problems, don't we, with bank closures. One is that people still want to use cash, which we've explored at great length, but the other is that not everywhere in Wales do we have the right kind of technology infrastructure to allow people to access digital technology for banking. I became very aware yesterday, Chair, of something I hadn't previously been aware of. We use the term 'mobile banking', but increasingly that means mobile as in on your mobile phone, whereas the term 'mobile banking' actually means a bank in a lorry that goes around the place. So, I've become aware myself that we've got a crossover of those terms. So, I just want to be really clear about which—

So, mobile banking in the sense of on your phone is reliant on the technology and the infrastructure to be there, which we've rehearsed often, but it's also reliant on people having the digital and financial ability to be able to manipulate that. So, it's a little bit back to the question that Bethan Sayed asked. But we are working very hard with the credit unions as well to make sure that people have access to digital enablement so that as the credit unions go to mobile technology in the sense of phones, they enable their customers to have the digital skill to be able to do that. So, it's quite a complex area where you need both the technology—access to the technology—access to the digital skill and access to the financial skill to be able to manipulate that. And many of the apps are very easy to use if you have those skills, but you'd require quite a bit of engagement with people in order to get them enabled. So, as part of our roll-out of our digital inclusion programme across Wales, we very much focus on day-to-day skills like access to mobile smartphone banking to enable people to be able to use those. Because if you're excluded from that, then the problem of the diminishing bank network is exacerbated for you, isn't it?

I suppose the last question is also the access to the capability—which is not necessarily broadband, either; it could be 4G, and probably, in most cases, it will be 4G—and where you think we are with that.

Well, as has been much rehearsed, this is not a devolved area. We have intervened and spent £200 million of money that we would have otherwise spent on education and health intervening in a non-devolved area because the UK Government have not. We think there should be a genuine universal service obligation. So, we've discussed post offices. We're very familiar—if you want to send a letter to a farm down the end of a track even though that may not be commercially viable for the post office, they're obliged to do that, and we think this parallel should stand in the digital space too. The UK Government are bringing out what they're calling universal service obligation, but it's an obligation that they have a right to request. A person has a right to request a connection and there's a threshold, I think, of £3,500, and anything above that, the person themselves has to pay it. Now, we don't think that is a genuine universal service obligation and we think the UK Government should change that to be equitable. Because even though we have reached 95 per cent of properties in Wales, that means 5 per cent have not been reached, and we know that they are disproportionately clustered in rural areas. So, there's some real social justice issues here, and if, as we've discussed earlier, the fourth industrial revolution is going to reach and benefit everybody, then everybody needs the ability to access it. So, we're doing what we can in that space and we're looking at new technologies as the fibre roll-out reaches the limits of the market appetite to access that. But we don't have all the abilities to intervene here. 

But nonetheless, you have put money in to the space, as you're trying to do with banking, to help alleviate that.

Yes, and the parallel stands, doesn't it? This is not devolved. It's important. There's much we can't fix, but we can't fix everything. 

Can I just add one other thing that I was remiss in not saying? One of the issues for this transformation to digital banking is actually the Welsh language as well. Because, obviously, your local bank would have provided the service in Welsh where that was the language of its community and the mobile banking apps tend not to do that. So, we have been working very hard to make sure that credit unions in particular have applications that can be accessed through the medium of Welsh. So, I do want to put that on the table, because that is another issue that we need to address, because we don't want this to drive people away from using Welsh in a digital space. So, digital inclusion must include inclusion in the Welsh language, and that's something we need to be very aware of as we take the agenda forward.


Thank you. It's been a fascinating piece of work for us because so much information has unravelled—to us, in any case—during the course of our work in this area. And I'm encouraged—I think I'm right to say—that the Deputy Minister and Duncan Hamer alluded to perhaps waiting for our work before—or at least our report will influence your decisions, as well, going forward. So, that also is greatly appreciated. But can I thank both Ministers and officials for their time this morning? Thank you. We'll take a 10 minute break and be back just before 10:50. 

Gohiriwyd y cyfarfod rhwng 10:36 a 10:52.

The meeting adjourned between 10:36 and 10:52.

3. Mynediad at Fancio: Undebau Credyd
3. Access to Banking: Credit Unions

We move to item 3 in regards to our access to banking inquiry piece of work, and this is our tenth and final session in regards to access to banking. We have colleagues from credit unions this morning before us, and we're very grateful for you being with us and for your time this morning. If I can go straight into the first question, which is from Joyce Watson.

Before that, I just want to declare that I am a member and have been a long-standing member of a credit union in Wales. I want to understand the current provision of credit unions in Wales, how those have changed and whether the closure of bank branches has led to an increase in demand for credit unions, and if the coverage of credit unions correlates in any way with the areas of Wales most affected by the bank branch closures or ATMs.

So, generally, the provision of credit unions in Wales in terms of pretty much all aspects—in terms of members, assets and loans—has increased over the last 10 years. Membership has almost doubled in Wales. So, it now stands at almost 80,000 members; assets have more than doubled, so they've gone up by 146 per cent and now stand at just under £50 million; and loans are roughly half of that at £26.5 million, and that, similarly to assets, has more than doubled. In terms of credit unions, there's a slightly different trend. So, within Wales, as with the rest of the UK, the number of credit unions has gone down. There's been quite a long trend of consolidation within the sector. So, the number of credit unions in the last 10 years has declined from 29 to 18. On all of these measures, I would say that membership, assets and loans have increased over the last five years, but to a lesser extent. So, membership had almost doubled over 10 years, but in the last five years, it's only increased by 12 per cent. So, I would say, in terms of the correlation between credit union growth and bank closures, ABCUL, as a trade body, doesn't see any evidence for that.


Can I apologise? I didn't ask you to introduce yourselves for the public record. So, perhaps I could do that now before the next question.

My name is Daniel Arrowsmith; I'm here representing the Association of British Credit Unions Limited. I am the policy and regulatory compliance officer there.

I'm Steve Mallinson; I'm chief exec of Celtic Credit Union.

I'm Julie Mallinson and I'm the strategic and business development manager for Celtic Credit Union.

Thank you, and apologies I didn't start with that. Joyce Watson.

Thank you, Chair, and good morning to the panel here. I'm going to ask my question to you, Daniel, and Steve there. What are your views on the effectiveness of the Welsh Government’s support for credit unions in Wales? And the similar second is: is there any need for Government to provide a similar level of funding for the future?

[Inaudible.]—to expand on comments that you may want to make at the start of the session as well.

The Welsh Government have been extremely supportive of credit unions in Wales, particularly as far as Celtic union is concerned. Without the support that the Welsh Government have given, we would not be undertaking the kind of community development work and the school savings clubs that we do. And then, Julie, you can probably take over from there and say how much support that is.

We feel it's essential. We as a credit union are one of the largest in Wales and we've tried to continue to provide services in communities and in schools, particularly, which many credit unions don't—and that's no reflection on them; many aren't able to. Credit unions come in all different shapes and sizes. But these sorts of programmes don't generate an income, and in order to continue to provide them, the support we have from Welsh Government to do that is essential.

We're just going into our third year of funding now for our schools and communities. About 18 months ago, nearly two years ago, we expanded into Swansea. We were originally just Neath Port Talbot, and we're now trying to duplicate the schools and community programme that we ran in Neath Port Talbot into Swansea, and that's really starting to gather momentum. And as I say, without the support of Welsh Government, that would not have been possible. The other aspect of Welsh Government support recently has been the capital grant that's been available to credit unions, which has been distributed by Welsh Government. I think the money originally came from Westminster, and that's being used to bolster capital reserves. And again, that is essential in order to allow credit unions to grow.

The way that we're regulated means that the more you grow, the more you have to have in capital reserves. We've had our views aired quite frequently with the regulator on this because—I don't know if the committee's familiar with the way it works—but broadly speaking, there are membership thresholds and asset thresholds, and once a credit union hits either a membership threshold or the corresponding asset threshold, they have to meet a certain level of capital adequacy. To give an example, 5,000 members or £5 million in assets would require you to have a 5 per cent capital adequacy level. That assumes that the average credit union member has £1,000 in their account; that's very, very far from the truth.

So, we have to have quite large sums of money sitting in reserves when, necessarily, we want to grow, we want to take on more members, we want to help more people, and that can be a barrier for very many credit unions. So, that aspect of support from Welsh Government has been extremely welcome. It comes in the form of subordinated loans, and Welsh Government has offered those loans on a 0 per cent interest rate, so they're long-term loans and the money sits in our reserves, basically.


Thank you. I just heard you mentioning children's savings in the credit unions; that's great. You're saving money from children and they're getting awareness of the benefit of saving, but have you spent any money for children to learn some numeracy skills in your sector to make sure that they know about it when they're 10, 12 and 13?

Yes. Do you want me to take that as well? When Welsh Government first—. They kind of changed the way that they offer support to credit unions, so it stopped being a grant, if you like, to help with running costs and it started being more focused on project-based work. We initially applied for support for our schools, our communities programmes and for a financial education programme. We see this as essential in tackling issues going forward. Many of the problems we face come from the fact that people don't have budgeting skills; they don't know how to manage their money. There has been welfare reform along the way; we are working in areas of quite high levels of deprivation where, sometimes, we're on second and third generation unemployed. So, children are growing up in families where they haven't seen someone go out to work, they haven't seen someone have to budget that income over a period of time.

It's refreshing—and I know we're coming on to the financial inclusion strategy a little later—that the new curriculum does include budgeting and finance, to a degree, in the maths and numeracy area of learning and experience, and also in health and well-being. It remains to be seen how that will work and what difference it might make. We have, in the past, developed a pilot programme, which we delivered in a local comprehensive school; it was extremely well received. One of the things I think is important, going forward, as far as the education side of it is concerned—it's all very well having that in a curriculum, but you need to ensure that the teachers who are delivering it have the necessary skills and experience to do it. I don't think it's acceptable just to say, 'Yes, we're going to do it'; we need to be looking at teacher training programmes. I speak from a certain level of experience, because my daughter is a teacher and she teaches maths, but maths is not finance—it's a totally different thing. So, I think it's hugely important that we make sure that teacher training covers those sorts of aspects, so that teachers have the necessary skills to deliver what our young people need in schools.

You've touched on what I was going to ask in relation to the financial inclusion strategy, really, and whether you feel that it's sufficient enough, whether it's gone far enough and how you feel credit unions can be more involved in that particular strategy.

The strategy itself—and I've brought my copy with me—it has a vision for the future, and I feel that those are very important points that the vision makes, and it starts off with financial education: that everyone needs financial education, but not just in schools—in communities and throughout life. Credit unions, I think, have a very important role to play in that. Our credit union offers budgeting advice. We have qualified budgeting officers. Budgeting is not debt advice, which is a different activity altogether. We think it's very important. Another point is that everybody has access to affordable and appropriate credit from responsible lenders. And again, credit unions are regulated. We provide those sorts of services to some of the most financially excluded in our communities.

On the subject of access to banking, I think it's important to distinguish between those who don't have access to banking because there are no bank facilities in their areas and those who have no access to banking because they would struggle to comply with the requirements of the banks. So, they would struggle to provide the correct identification, accommodation, credit scores, financial background. So, there are two aspects, in my view, to how people access banking services. Credit unions always struggle with recognition and awareness of what we do, and that is still the case.


I just wanted to try and see if ABCUL could give an overarching perspective, because of course I know the work that you do locally, which is good, but we know that credit unions, as you said earlier, are different sizes and shapes, and some would like to be able to do more, but can't because of those restrictions. Is there some sort of analysis that you're making as to what more could be done to help the credit unions to be able to then go out and do more of this type of work?

I think, in terms of Welsh Government support, I would concur with Steve and Julie that that support has been very valuable. I also agree that there has been a shift from revenue subsidy—income subsidy—to more project funding and more strategic funding. One example of one of these areas is that there's a consortium of some credit unions that, together with help from Welsh Government, are developing an online lending platform and a mobile app for their members. So that sort of investment in credit unions is quite crucial to making them more robust businesses in future. I think other areas that could be looked at in Wales and elsewhere in the UK are perhaps strategic mergers of credit unions, where credit unions are merging from a position of strength rather than from a position of financial weakness. So, I think there are a couple of areas. We have, for quite a long time, been very large proponents of capital investment rather than revenue subsidy. We feel that revenue subsidy over the years has created distorted business models in credit unions, so therefore we feel that the shift to capital investment from Welsh Government and others has been quite a positive change.

But why do you think there's still—my last question—a difference between the credit union in Wales and other parts of the UK? It's going down, but I know that the stats are higher in Northern Ireland and Scotland. Is there something that can be done? We're looking at innovative ideas, because we're going to talk about community banking later, but how to be innovative in the credit union sector is something that really needs to be looked at as well, isn't it? How can we do that?

Absolutely, I agree. I think there needs to be some investment in skills in terms of developing credit unions' digital offering for members. I think that's the area where credit unions are going to find the most growth. I would say I think Northern Ireland and Scotland have their own challenges. Northern Ireland has much higher penetration than anywhere in Great Britain—roughly 30 per cent or 40 per cent. We don't represent Northern Ireland, by the way; we represent England, Scotland and Wales. But because of their ties with the Republic of Ireland, which has had credit unions for a much longer period of time, the penetration is much higher in Northern Ireland. But they do have their own challenges around lending enough money, which is a challenge in Great Britain, but not quite as challenging as it is in Northern Ireland currently. So let's say, really, credit unions, if they want to grow, if they want to become more robust businesses, if they want to offer better services for their members, they need to keep in touch with the digitalisation of the UK.

Could you just provide us with an overview of your relationship with the Post Office?

Not a lot, if I'm honest. We'd like to have been consulted more about what the Post Office were proposing to do, and there's evidence that has been provided previously, I understand, to this committee. We have not been involved in any kind of consultation with the Post Office, and I understand the Post Office may be going a different way. You've got further information on this, Julie.


Well, as we know, a lot of rural post offices aren't there anymore. Mainline high-street post offices are increasingly moving into retail premises. In Swansea, we had a very large post office in Swansea, and that's now on the first floor in WHSmith, as is the post office in Neath. Port Talbot still has post office premises—I don't know for how much longer that will remain. 

Many credit unions are not cash credit unions. We are, and the cost of providing that cash is a whole other debate, but we still think cash is a very important aspect of our offering and we will continue to do that, but many credit unions will issue members with a cheque, which they then cash in the post office. There are no private facilities in these post offices, so if post offices are going to be providing banking services, how are they going to do that? Are there going to be private facilities for people to discuss financial matters?

Yes. Are there going to be—? Is there going to be an appetite, actually? Because without putting too fine a point on it, some of the members that we deal with can be quite challenging and I'm not sure post offices are set up to deal with those challenges. We have a lot of people who are financially excluded because of other aspects in their lives: they may be struggling with drug and alcohol problems, or mental health problems. We work with the probation service to provide access to their money when they are released from custody, for example, and with homeless charities for people who would struggle to provide identification that a bank would require. So, is the post office going to want this sort of business?

So, when the post office told us that they extended the banking framework to credit unions, you're not impressed by that, and you don't think it's going to actually enable credit unions to—

If I'm being brutally honest, no.

We partner with—

Oh, sorry.

I'd like to give Daniel a say, but finish what you were going to say first.

We partner with a company called The Change Account, which provides a pre-paid debit card for us, and The Change Account has a relationship with the post office for people to access their money through The Change Account when the POCA—the post office card account—closed. So, there is a tenuous link, if you like, that we have, and we don't know whether it's possible to develop that, but we've had no direct contact from the post office.

Daniel Arrowsmith, it was a few weeks ago now that the post office came in, and I seem to remember them being quite positive about their relationship with credit unions.

Yes, I'm probably not quite as pessimistic as Steve and Julie, to be honest—

It's helpful to have more than one point of view from witnesses.

Yes, they do have some very strong aspects to them in their offering. There are more post offices than there are bank branches. So, their bricks-and-mortar business thing is already there. Credit unions could tap into that—

But what it seems to be—sorry to interrupt you, but I want to get to this point—and without losing what Julie Mallinson said, is that there doesn't seem to be a relationship. So, there are all good ideas coming, as you say, and they've got the presence on the high street, but there doesn't seem to be a relationship with credit unions on which to build.

I think, historically, the missing piece has always been technology. So, there are some relationships, and, UK-wide, there is some small-scale collaboration between credit unions and post offices. That does exist, but there's never really been a way to integrate credit union systems with the post offices. There are a couple of developments in this area in terms of one of the predominant IT providers for credit union co-banking services—that's being taken over by a much larger group and they do have ambitions to work with the post office and to integrate with the post office. There is also a fintech with similar ambitions. So, whilst I understand the challenges, I think it's still an option that credit unions should look at and consider in terms of how they could potentially collaborate with post offices—maybe not to the full extent of the personal relationship that credit unions have with people. But in terms of getting access to the cash and things like that directly from their membership account, I don't see why that couldn't be an option.


Julie Mallinson, do you feel reassured by what Daniel Arrowsmith just said?

I think perhaps that might have been possible in the past when we had high-street post offices. If I can just use an example to illustrate what I'm trying to say, perhaps. The schemes that we run in schools—we train children to run their own mini credit union, so the school will collect the savings, the children will go through the process, and that money has to be banked. Many of these schools are in areas where there is no high-street post office anymore and it's moved into the local SPAR or WHSmith or something like that. There is a level of mistrust I have experienced in speaking to school staff who are not comfortable with that set-up. Where you have sub-post offices that have been there for years, that's better, but there's one community just outside Port Talbot where it's moved into a local corner shop and there is no confidence in the privacy, the level of experience of the staff—

It's not the same thing as a post office. That would be my worry.

Okay. There are alternatives, but that's not my line of questioning, so I'll hand back to the Chair. 

Thank you, Chair. I'd like to explore some ideas around the community bank of Wales with you. You'll be aware that the First Minister, in his leadership manifesto, has included this, and one of the strands of our inquiry is to see how it's developing. So, firstly, looking at Wales as a whole rather than at the credit union sector, what do you think could be the potential benefits and challenges involving the establishment of a community bank?

Do you want me to go first? I think it's beset with problems, myself. That is the opinion of my board as well. There are issues—