The government says ‘cash is here to stay’ – but I wouldn’t bank on it

There must be a general election looming. Suddenly, the Tories announce new rules on free access to cash withdrawals.

What’s wrong with that, you might think – seems sensible enough. The trouble is it does not stand up to scrutiny. It’s been rushed and not thought through – seemingly designed to make them look good and caring. But peer under the booster headline and it soon falls apart.

People living in urban areas must be able to withdraw cash from an ATM or face-to-face within one mile; in rural districts, the limit is three miles.

According to the Treasury these distances were chosen to maintain the current level of coverage. Really? I can think of plenty of places in the countryside that are more than three miles away from an ATM or bank counter.

Banks will face fines if they fail to adhere to the restrictions. Quite how this will be policed is not clear. Prepare for a battle royale as they lobby like mad to get the moves watered down.

It seems arbitrary, the numbers appear picked out of the sky, which is always dangerous, and they will be picked apart by the banks’ clever lawyers, as they surely should be.

Banks have been closing branches at a steady pace in recent years. Since 2015, an average of more than 50 UK branches have shut each month. This year so far, more than 1,000 have gone. The banks point to a drop in usage as increasing numbers of customers switch to online and cease handling cash. I’ve had a £20 note that has stayed in my wallet for weeks now as I pay with a card or via my phone; on many occasions I’ve gone out, leaving my wallet behind, preferring to use the phone.

Andrew Griffith, economic secretary to the Treasury, unwittingly confirmed the trend, when heralding the new policy. After claiming “cash is here to stay” he went on to say, “People shouldn’t have to trek for hours to withdraw a tenner to put in someone’s birthday card – nor should businesses have to travel large distances to deposit cash takings.”

These were hardly well-chosen examples. And you have to say that if they represent the best he can come up with, then cash is definitely not here to stay, or rather, it is no surprise that so many bank branches are going.

The number of people seeking to put tenners in greeting cards is not enough to underpin an ATM or bank branch. Likewise, it’s precisely the experience of being in a queue, as the person in front counts out the takings from their small business, that has driven people away – me included – and towards online.

Still, each to their own and there is no doubt that for some people cash will always remain king. A recent Age UK survey found that among those who were uncomfortable with digital banking, the key problems were fraud and scams, a lack of trust in online banking services and a lack of computer skills.

“These are measures which benefit everyone who uses cash but particularly those living in rural areas, the elderly and those with disabilities,” said Griffith.

It’s taking a hammer to crack a nut and it won’t work. Banks will point to ever-growing numbers abandoning cash; the total relying on it will become ever smaller. Their case for bypassing the new rules will become ever stronger.

While it makes for good copy and will no doubt please the Tories’ core shire supporters and small business owners, a more subtle, carefully formulated approach might achieve a better result.

Ordering a commercial sector to do anything it regards as unprofitable and nonsensical if you’re the government is always difficult. It will kick up.

While beating up the banks and bossing them around will receive popular approval, the government already possesses a ready-made solution of its own. Since 2007, the Post Office must ensure that 99 per cent of the population have a branch within three miles and that 90 per cent only have to travel one mile. Instead of hitting the banks, the government could beef up the post office network, so that each branch has an ATM and is able to take deposits. This would also help the decline in trade experienced by post offices as letter usage continues to fall.

At the same time, the government could be encouraging the banks to establish “hubs” – spaces shared by different high street banks.

So far, only seven have opened across the UK. Another 10 leases have been signed and more than 100 will open over the next few years. This remains a tiny number, versus the amount of branch closures. A concerted drive here – which would also see new life breathed into our shopping streets – would reap dividends. It might also be more acceptable to the banks than ordering them to keep branches open that are not paying their way, are underused and appear increasingly forlorn and tired.

There is too, a contradiction in the government’s move. This is the same administration that is pushing for the closure of railway ticket offices, arguing no one uses cash to buy a train ticket and that passengers can use a card in the ticket machine or via their mobile.

It doesn’t add up. But there are votes to be won, so expect more of the same.