Confessions of a Political Animal

September 2, 2008

When the market doesn’t work – #1

Filed under: London Politics,Market failures,Poverty — Political Animal @ 3:48 pm
Tags: , ,

The map above shows East India & Lansbury ward in the borough of Tower Hamlets, probably the most deprived ward in London (fascinating GLA deprivation statistics here). Green markers on the map show ATMs that allow for free withdrawals: red markers are those that charge, with the price of a withdrawal ranging from £1.50 to £3.00 within this one area.

The Animal is fortunate to live in a moderately well off area: whilst the nearest cash machine will charge me, I can walk a couple of minutes and access my own money without being charged for the privilege. If I lived in East India & Lansbury, there is a good chance that wouldn’t be a possibility, simply because the banks have decided it wouldn’t be profitable to provide my low-income neighbourhood with a cash machine. And whilst I wince at being charged £3.00 for a withdrawal, at least it doesn’t amount to more than half an hour’s pre-tax salary as it would if I was subsisting on the minimum wage. 

Not that this problem is limited to areas of urban deprivation. The map below shows the group of villages to the north of Merthyr Tydfil in the South Wales Valleys, an areas of high post-industrial unemployment.

This demonstrates clearly that whole villages, some with populations well into four figures are reliant on a single, charging ATM and which are literally a bus ride away from a free cash withdrawal. And overall, the average charges in remote areas are even higher than in urban areas. People who already suffer from low service provision and economic isolation find themselves yet further penalised. Concern about the effects of the growth of charging ATMs is nothing new – in 2005, the Citizens Advice Bureau estimated that 20,000 of the UK’s 53,000 ATMs charged and suggested that the growth of charging ATMs was being driven by bank branch closures.

How do we end up in the situation whereby the decision as to who has free access to their money is decided solely by the forces of the market? Given that a degree of regulation and state intervention is accepted within the banking sector, there is surely a strong case for action to rectify this small, but important piece of inequality and injustice. As household budgets become increasingly squeezed, the ever-rising costs of charging ATMs will represent a greater slice of those budgets.

A couple of simple suggestions: the government owns a bank – oh alright, two banks. At a relatively small cost, National Savings could begin to run ATMs in the easily identifiable deserts for free ATMs. Whilst likely to be loss-making, but this could be limited by charging for issuing statements or for withdrawals over, say, £50. Locations where a free ATM proved profitable could eventually be rented or sold to a high street bank. In particular, such ATMs should be provided at those Post Offices currently without a free ATM, plugging gaps in the network and driving custom towards economically marginal Post Offices, helping to secure those services into the bargain.

As a means of reducing social exclusion and tackling poverty, this small investment by the government would, I believe, be more than repaid.

No-one complained when government intervened to provide an almost certainly unprofitable Docklands Light Rail station in the middle of East India & Lansbury ward: quite rightly that was considered an acceptable deviation from the free market in order to provide improved transport links for a deprived area. So why not provide a free ATM as well? I can guarantee it would cost less.

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