Examination of Witnesses (Questions 747-759)
MR STEPHEN
TIMMS AND
MR JAMES
PARKER
10 FEBRUARY 2005
Q747 Chairman: Minister, welcome to this
final session on the cash machine inquiry. We will focus this
morning on transparency and financial exclusion. These are two
of the three themes that we have looked at in our inquiry so far.
Could you explain for me what public policy issues are involved
in ensuring that there exists sufficient access to free cash withdrawals?
We have heard evidence from the Post Office this morning that
75% of cash machines are now charging, so we are concerned about
the financial exclusion aspect.
Mr Timms: May I begin by saying
that I very much welcome the interest the Committee has been taking
in this subject. I have been following the reports of the Committee's
deliberations with a lot of interest. I have been encouraged by
I think some quite welcome announcements from the industry addressing
some of the concerns that have been raised during the course of
the Committee's proceedings. I think it is very important that
people should be able to obtain cash free of charge. I would be
very seriously concerned if there was evidence that people, particularly
those on low incomes, had no choice but to obtain their cash by
paying for it. That is a very important public policy concern.
It was built into the design of the arrangement for direct payment
of benefits that people should be able to obtain their benefit
cash free of charge. As far as I can see, at the moment, it is
possible for people to do that, and certainly the Department for
Work and Pensions tells me that it is satisfied that its customers
are not being required to pay to obtain their cash. Having said
that, it is possible to imagine that things might develop in the
future in a way that would cause us problems. At the moment, as
far as I can tell and as far as the DWP is concerned, people are
able to obtain their cash without paying.
Q748 Chairman: We had evidence this morning
from LINK which we put to the Post Office that in one Post Office
in Speke, which is a very deprived area, at least 38% of customers,
four in ten, withdrew their cash from the charging cash machine
despite the fact that they could have got free cash at the counter.
As I say, there are two conclusions to be drawn from that: one
is that the queues are too big at 15 to 20 minutes to wait for
that; the second is that there is not sufficiently clear signage
on these machines to indicate to people. Presumably, in the spirit
of financial inclusion, the Government would support this extra
signage on machines so that people can understand exactly if the
machine is charging or not charging. Would you agree with that?
Mr Timms: Yes. You have made the
point that the Committee has placed quite a lot of importance
on the question of transparency generally, and I entirely agree
with that. I think that is the key consideration here. It is important
that, wherever there are charges being levied, there should be
very clear signage so that people are aware of that as early as
possible, either before they get to the machine or, if some of
the information only becomes apparent during the transaction,
then it is drawn to their attention as soon as it is clear. As
you know, Chairman, I wrote to LINK about this general point in
November. I welcome the announcements that LINK then made in December,
including the commitment to sample compliance with their requirements.
Your specific point about Post Offices sounds to me like a helpful
one, and I agree it is important that people should recognise
that they can get their money free of charge over the Post Office
counter.
Q749 Chairman: The LINK people met on
14 December and made the new rule for 14 point print to be put
on machines. I do not want to test your eyes, but would you read
that, Minister? I think that is quite simple to read.
Mr Timms: It certainly is.
Q750 Chairman: You would support the
view that signage should be very clear so that people can get
an understanding. Is that correct?
Mr Timms: Yes, I think it should
be clear and readily understood. I would imagine that one would
normally be looking at that information from a bit closer than
I am to you. Nevertheless, I think anything that can be done to
make the information clearer and more legible I would very much
welcome.
Q751 Chairman: We are suggesting LINK
could go further than that. LINK rules on the clarity of charges
are determined at confidential meetings with secret votes, and
there does not appear to be any systematic enforcement of
those rules. Remembering that this is a £1.2 billion part
of the financial services industry used by consumers every day,
do you think we could have a more effective system here?
Mr Timms: First, on the point
of the private meeting, LINK is a commercial organisation, obviously,
and it works in the way commercial organisations normally do.
In terms of whether there is more that LINK could do to monitor
compliance, that was, I think, part of the announcement that LINK
made on 14 December, that they would introduce random sampling
of compliance with their rules. I welcome that. I think we will
need to see just how that unfolds over the next few months and
whether the sample proves effective and whether the extent of
it is up to the job. I do welcome the fact that LINK has introduced
a change on the monitoring side as well as to the rules themselves,
and I hope that will lead to substantial improvements.
Q752 Chairman: Last time, we had two
of the high street banks here, HBOS and RBS. In RBS's case, a
subsidiary of their company is Hanco, which is a charging machine
company. Whilst the RBS is subject to the provisions of the Banking
Code, Hanco is not. We asked both representatives if they would
agree to sign up to the Banking Code or support the proposition,
to which they said "yes". Do you not think, given that
the Banking Code is an independent operation and there was independent
evaluation from Elaine Kempson and others, that this is a good
model for this industry to follow and that signing up to the Banking
Code would be a progressive move?
Mr Timms: I think the Banking
Code is an excellent example of self-regulation. I agree with
you that Elaine Kempson has done an excellent job. I think everybody
who looked at it said that it has worked very well as a self-regulatory
model. I welcome what RBS and Hanco have said about complying
with the code for their ATM operations. The Banking Code is, of
course, much broader than ATMs in its coverage, so there may well
be some issues there about what exactly it would mean for purely
an ATM operator to sign up to the Banking Code, but in principle
it sounds to me like a welcome step. If there is a way of doing
it which makes sense, given the breadth of the code, I would welcome
that. I would also make the point that in some respects the LINK
rules do go rather further than the Banking Code. I would want
to make sure that that is not being lost if there is a way of
doing it successfully.
Q753 Chairman: I think it would be false
to present the LINK code as superior to the Banking Code as it
is not in any way. Generally people do not see that but there
may be one or two aspects to it. You would agree with signing
up to the Banking Code so that you get the main provisions of
transparency and other things covered by the Banking Code?
Mr Timms: I would. My point is
that there is more detail.
Q754 Mr Fallon: Minister, I just want
to be clear how much you think should be left to the market. Some
of the banks have told us in their evidence that they are finding
the marketplace for machines competitive; they are being forced
out of providing free machines by the new independent ATM firms,
or indeed by retailers. Do you see that trend continuing?
Mr Timms: I think one needs to
look at what has happened in the ATM market over the last five
years. In 2000, there were 33,000 ATMs altogether in the UK. I
think all of us can remember that if you went to an ATM operated
by a bank other than your own, then the chances were you had to
pay. Today, there are well over 33,000 completely free ATMs in
the UK and that number is continuing to rise. In addition to those,
we have seen the introduction over that period of surcharging
ATMs and they now account for a significant proportion of the
total number of ATMs, although still a very small proportion of
the total transactions. If you look at the picture overall, we
are seeing a continuing increase in the number of free ATMs alongside
the ability now to obtain cash in locations where in the past
it was not possible to do so, and that seems to me to be an example
of the market working reasonably satisfactorily and in the way
that the Cruickshank Report envisaged it should.
Q755 Mr Fallon: You are quite happy to
leave this to the market?
Mr Timms: I think the Committee
is absolutely right to be taking an interest in this.
Q756 Mr Fallon: I want your view as a
minister. There is nothing in your submission here, the paper
you sent us, that indicates there would be any point at which
the proportion of charging machines would worry the Government.
Mr Timms: I would not agree with
that. I think it is possible to envisage a scenario from here
where, in a few years' time, there might be some problems. I think
that is a concern that has given rise to the Committee's interest
in this, and that seems to me entirely proper. I would think,
though, that as things stand currently, it does seem to me that
the market is working satisfactorily and there have been quite
a number of gains from a customer point of view as a result of
the developments over the last five years.
Q757 Mr Fallon: What I am trying to be
clear about is what share of the market and what the independent
or charging ATMs have to have for ministers to be concerned?
Mr Timms: The key thing for me
is that people on low incomes should be able to obtain their cash
free of charge. As long as they can do that without undue difficulty,
then I do not envisage too many problems. In terms of the share
of withdrawals that will come from charging machines, at the moment,
I think the latest figure is about 3.6%. That figure is continuing
to grow, although the rate at which it is growing seems to be
tailing off somewhat. I am told by people in the industry that
they would expect the proportion to stabilise at somewhere between
5 and 10%. I do not know exactly where it is going to be. That
figure seems to me to be not inconsistent with a satisfactory
state of affairs, but we will need to keep an eye on developments,
and we will.
Q758 Mr Fallon: It is not inconsistent
with a satisfactory state of affairs? What about the organisations
that you do have some influence over: would you be happy to see
London Underground or Network Rail start to negotiate contracts
with charging operators?
Mr Timms: I think it is important
just to make the point that there is not at the moment any significant
sign that I can see of large-scale switching to charging. Between
October 2003 and October 2004 it was the case that 111 free ATMs
became charging ATMs, but, in the same period 100 charging ATMs
became free ATMs. After that, there was the HBOS sale of Cardpoint
and 250 were converted to charging at the end of last year; there
may be some more resulting from that change. On the other hand,
again last year RBS introduced 480 new, completely free ATMs and
Lloyds TSB 300. I do not see, at the moment, signs of substantial
switching from free machines to charging machines.
Q759 Mr Fallon: What is the answer to
my question? Would you be happy to see London Underground or Network
Rail start to negotiate contracts with charging operators?
Mr Timms: I am aware there has
been one railway station where there has been a change.
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