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16 Jan 2007 : Column 249WH—continued

12.20 pm

The Minister of State, Department of Health (Ms Rosie Winterton): I congratulate my hon. Friend the Member for Stockton, North (Frank Cook) on securing the debate. Obviously, the future of health services in Teesside is a concern for all my hon. Friends who are present, and they have closely reflected their constituents’ concerns. I was pleased to hear that my hon. Friend also has a connection with Hartlepool.

The debate has reflected the fact that the decisions that we are discussing are difficult and controversial, and strong feelings are expressed on all sides at local level. It is important to stress, however, that there are many reasons why we must look to the future provision of health services, including changing demographics and the ability to provide higher-quality services. Within that, however, there is also the need to consult local people during debates on those issues.

My hon. Friend referred to the inaccuracies in the stories that the Liberal Democrats have put about regarding the provision of health services, and I should add that there has also been a certain disdain for the actions of local people. I do not know whether the party of the hon. Member for Southport (Dr. Pugh) has any members on the joint overview and scrutiny committees, but I am sure that any such members would be pleased to hear that they are considered local appointees who take decisions with no consideration for local feeling.

Dr. Pugh: The Minister is perfectly well aware that overview and scrutiny committees do not make decisions about the reconfiguration of services.

Ms Winterton: The hon. Gentleman is incorrect. The reason why an independent review of local proposals is going on is that the joint overview and scrutiny committees made a referral. If that is not having an influence over the matter, I do not know what is. However, I am sure that committee members will be pleased to hear that he thinks that their contribution to the local situation is irrelevant and unimportant.

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The hon. Member for East Worthing and Shoreham (Tim Loughton) must recognise that reconfigurations are often carried out to improve local services. I would be surprised if the policy of his Front-Bench colleagues was to expect the NHS never to have to change to reflect local changes in demography or medical advances. I do not think that we could expect the NHS never to change, and it would be bad news for the NHS if he said that the issues that I mentioned would never be a consideration.

It is important to pay tribute to staff in the region, and I join Opposition Members and my hon. Friends in doing so. The staff have worked extremely hard to make real changes in the provision of health services in their area by reducing waiting times and promoting higher-quality services. It is important to stress that that has been achieved in partnership by combining the achievements of staff at local level and the increased investment that the Government have been able to provide. Primary care trusts in Teesside, for example, have received more than £568 million this year, and that will rise to £626 million next year, although the Opposition have consistently opposed our extra investment.

Ms Taylor: Does the Minister accept that we are not only seeing phenomenal investments in our health services, but fighting for better services? Nobody, but nobody, should blame us for doing that. In 1992-93, we fought to ensure that the previous Conservative Administration did not close North Tees general hospital.

Ms Winterton: My hon. Friend is right. All my hon. Friends referred to the fact that their region has some of the most deprived health areas in England. My hon. Friend the Member for Stockton, North touched on the growing population served by the different trusts. My hon. Friend the Member for Hartlepool (Mr. Wright) highlighted some of the health problems that have arisen because of industrialisation and particularly because of contact with hazardous materials. It is very much part of the Government’s policy to try to reduce health inequalities through a mixture of extra investment and new opportunities for NHS staff.

Let me deal briefly with some of the issues around the current reconfiguration proposals. My hon. Friends clearly set out the background and history to some of the changes, and hon. Members have touched on the different reviews that have taken place, culminating in the Darzi review, which proposed a number of changes. Given the diversity of views and the changes in services that have been proposed, it is not necessarily surprising that the joint overview and scrutiny committees wish the issue to be referred to an independent scrutiny panel.

Let me touch on our vision for maternity services, because it is important for a number of the issues that hon. Members raised. We want there to be three main drivers for the provision of maternity services: the maternity standard of the national service framework for children, young people and maternity services; our 2005 manifesto commitment to improving choice in maternity services; and the White Paper “Our health, our care, our say”. The White Paper emphasised my
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hon. Friends’ point about the importance of getting services into the community, and they highlighted what happened previously, when there was a reliance on hospital services. The issue is how we ensure that we have good services in the community, and the hon. Member for Southport referred to the standard that we have set out, which, in a sense, pulls together the Government’s vision for maternity services over the next 10 years. Women should have easy access to supportive, high-quality maternity services that are designed around their individual needs and those of their babies.

All hon. Members said that it is important to consult clinicians, and I absolutely back that view, because it is important that we can do that. Following the review of maternity and paediatric services in Hartlepool and Teesside, two scrutiny bodies chose to refer the maternity and paediatric elements of the proposals to the Secretary of State. In response to the inquiry from my hon. Friend the Member for Stockton, North, let me say that the report on the issue will be published on 19 January. In view of that, it is not possible for me to comment further on the detailed points that have arisen, except to say that I agree that it is time that there was some certainty about services. The reviews have gone on for many years, and I am sure that local people and clinicians want that certainty.

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Bank Penalty Charges

12.30 pm

Matthew Taylor (Truro and St. Austell) (LD): I think that everyone will be familiar with banks’ charging system. I do not know whether the Minister has been subject to any penalty charges, but the fines are incurred when there is a lack of funds in the account to cover payments out, such as direct debits, bounced cheques and exceeding the overdraft limit. What may not be realised is that every year about one in four bank customers suffers penalty charges, that a single charge can be anything up to £38—they average about £30—and that the charges can be applied on every occasion when someone goes over the overdraft limit, for every cheque or direct debit at that point. Last year the top six high street banks therefore pulled in an estimated £4.5 billion in such charges.

I am raising the matter today because I believe that it is a major contributor to the UK’s debt crisis and to social exclusion. Perhaps most important of all, those bank penalty charges are more than inconvenient and unfair—they are illegal. The fact that they continue to be levied in such large sums leads one to conclude that the Office of Fair Trading is failing and the Government are turning a blind eye. What may be a minor inconvenience to a person on a good regular income becomes a spiral of debt to the bank for those who are less well-off.

At my travelling surgery this year, as I was researching the issue and becoming more aware of it, I started to ask constituents who came to me with other problems—such problems were often, I might add, caused by government, and delayed payment of pensions, tax credits or benefits, or delays with the Child Support Agency—about the bank charges that they might be facing. I have yet to find a single case of somebody in such circumstances who does not tell me that they had been hit by bank charges. The problems are often caused through no fault of their own, and result from Government inefficiency and late or non-existent benefit payments, which are payable to the people in question only because they are already hard up. They are then mugged by their bank not with just one charge, but with numerous charges, since one penalty causes another and another. The people involved, who are at the bottom of the income scale and who depend on support for one or another reason—it may be a pension or disability benefit—find it impossible to extricate themselves from the excess on the overdraft limit. They continue, therefore, to be hit by penalty charges.

Numerous constituents have experienced that snowball effect. They are hit by hundreds or thousands of pounds of bank penalty charges, either because of someone else’s mistake or because they have made a small error themselves, such as assuming that a cheque has been processed by the bank more quickly than it has. The worst hit are low-income families, single parents, the elderly, the disabled, people who are out of work, students and young people who are starting out—the very people whom the Government say they were elected to defend and whom they want to prioritise.

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An example is when a late pension payment leads to a charge for a bounced direct debit. The pension payment finally arrives, but the pensioner is still over the limit because of the previous penalty charge, so another penalty charge is levied, and then another—charge after charge. A real example concerned Miss R., a student from St. Austell, who had an account with the Alliance and Leicester, but moved most of the money into another bank account, leaving just a few pounds behind, and instructing all the organisations with which she had a direct debit mandate to use the new account. An insurance company mistakenly issued a direct debit request on her old account and the Alliance and Leicester bounced it and charged Miss R. a penalty charge. She went overdrawn, which meant she then incurred another charge. In three months she had received £300 in penalties. Despite the fact that she wrote three times to explain that it was not her fault, Alliance and Leicester refused to refund her anything.

What of cases in which people are considered at fault? When I raise this issue I am often told that people should be more careful with their accounts. An example of such a person is Mrs. V., a working mum in Truro, whose husband paid a cheque into her account but did not realise that because of the bank’s clearing cycle it would take a few days to clear. Direct debits bounced, and in one month she was charged £380. As a result, she was over the limit the next month. More direct debits bounced: that was another £405. That comes to nearly £1,000 in just two months. In the end she was charged well over £1,000.

Victims of the punitive charges system are also made to feel that they have done something wrong. The partner of a nursery worker, Miss W., from Grampound in my constituency, came to my travelling surgery to tell me about their problems with tax credits. I looked into the matter and helped to sort out the tax credit problem, but in the meantime I asked whether they had been hit by bank charges. It turned out that the problem with bank charges was bigger than the tax credit problem that it resulted from. The couple accrued £500 in charges. We helped Miss W. to take the matter to court. As a result, Nationwide paid out in a matter of weeks, to pre-empt a court case. However, in an act of retribution, despite the repayment, Nationwide issued a letter giving Miss W. 30 days to close her account. It has now been closed, and that of course has caused her even greater stress and inconvenience.

Not everyone is willing or able to take their bank to court about such matters, or even knows that they can. The volunteers who help, such as the one who helped with Miss W.’s case, cannot help everyone. Since the announcement of the debate my phone has been ringing constantly and my e-mail inbox has been full with messages of support and information about other cases from around the UK.

This problem arises from the banks using poverty as a source of profit—a great deal of profit. The bank commission of BBC 2’s “The Money Programme”, which included eminent business academics and a former senior NatWest executive, concluded that the absolute maximum administrative cost to a bank of
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processing a bounced cheque—the most labour-intensive of the processes in question—is £4.50. For all other items, such as unauthorised overdrafts or bounced direct debits, the commission concluded that the absolute maximum, in this electronic age where everything is done automatically through a computer, is £2.50. However, the average charge is approximately £30. Some are as high as £38, and they are charged every time people make what the banks consider to be an unauthorised transaction. That is a substantial profit for the banks, which rake in some £4.5 billion, without even taking account of the similar examples that the Federation of Small Businesses found in business banking accounts.

Almost all of what is charged is profit, not costs. It is profit at the expense of hard-up customers. It is the biggest bank robbery in Britain, and it involves the banks robbing their own customers, especially their poorest ones. A common response when the practice is described is that there should be a law against it; but there is a law, or there are laws. First, under common law, disproportionate and punitive charges have always been illegal. In layman’s terms, if a consumer breaks the contract the other party—the bank, in this case—cannot impose a charge greater than the reasonable estimate of its loss. That common law has been unchanged for 100 years, and numerous cases in the higher courts have confirmed it. However, we can go further. The rights in question are protected by statutory instrument. The Unfair Terms in Consumer Contracts Regulations 1999 made that clear.

I am no lawyer, and it might be argued that my interpretation is wrong. I hope that the Minister can tell us what he believes Parliament intended the law to provide on this matter. However, it appears that the banks know perfectly well that they are acting against the law, contrary to what they told the Office of Fair Trading. Why do I say that they know? Because I have helped constituents to regain thousands of pounds by threatening to take the matter to court. So have others. My former constituency researcher, Bob Egerton, has helped dozens more on a voluntary basis, which has made him famous in The Sun as “Bob the Bankbuster”. If people want more information on that, they should go to, but there are similar sites that advise people on how to get their money back.

Every time court action is threatened, the banks refuse to defend themselves, and there is only one possible reason for that. They know that they will lose and that if they lose a test case they will forfeit this multi-billion pound source of illegal profit for ever. Millions of people still pay illegal charges because they believe that if the banks say that they are legitimate and show tariffs of what they intend to charge, they must be legitimate. The banks claim that the charges are legal, but they will not face the courts. They know that it is an illegal rip-off of trusting and often impoverished customers. They are mugging their customers, and the OFT and the Government are letting them get away with it. If a backstreet lender were doing the same, the OFT would close it down within weeks, so what is being done?

The OFT looked into penalty charges on credit cards, but that took two years. It decided that £12 is a fair charge, although I argue that that is still way in
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excess of what is fair, but it then took what it described as a “novel approach” to this issue. It got no undertakings, but issued a statement calling on the industry to comply as a matter of priority. In its letter to me of 3 January, it could say only:

There has been no action to force repayments to people who have been ripped off in the past. Despite what the OFT says, given that it has the power to threaten sanctions against its consumer credit licences, I believe that it has the power to make banks do that.

When the OFT said that the same principles that apply to credit card charges apply to bank charges, the banks simply said that they did not agree. Instead of enforcing its view, the OFT is to review the issue for up to another six months before deciding whether to launch an investigation. Given that it took the OFT two years to investigate credit card charges, which are worth only £300 million a year compared with £4.5 billion in bank charges for the top six high street banks, it seems that the banks will be able to make even more illegal penal charges, worth almost £10 billion, before there is any likelihood of an outcome from the OFT. That is a novel approach indeed, especially given that it has taken firm action against at least three commercial companies regarding penalty charges in their contracts, all of which were reported in its 2002 case bulletin. Why not take the same approach with the big banks? What is the OFT afraid of?

For at least 18 months, consumers have been asking the OFT to look into this issue, and there is no reason why it could not have been investigated at the same time as credit cards. Even the OFT has said how similar the issues are. Given that the Government are effectively forcing people into the hands of big banks by encouraging them to receive benefit and pension payments through banks, and by closing post offices, there is an even bigger impetus and moral duty on the Government to make banking responsible and to ensure that those to whom they pay benefits are not landed with outrageous charges.

The first thing that I hope will come out this debate is that the OFT speeds up its investigation and moves from simply reviewing the matter to conducting a full investigation. I hope that it will then produce a fair maximum charge according to law.

Mr. Jim McGovern (Dundee, West) (Lab): I congratulate the hon. Gentleman on securing the debate. I am often contacted by constituents who are distressed at the level of bank charges levied on them. The worst cases are those in which multiple charges stem from one mistake. People try to cover the bank charge, end up missing other direct debits and go into a spiral of debt. Does he agree that we should at the very least be looking for banks to charge a maximum of one charge a month, rather than multiple charges, so that bank charges are not a cause of debt?

Matthew Taylor: I share the hon. Gentleman’s concern and agree that his proposal would be a step in the right direction. The truth is that with modern electronic banking, there is basically no cost to banks because it is their decision whether to allow money to be drawn, and they can do that automatically.

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The key issue is that banks should not make unreasonable charges. It is clearly unreasonable that charges can mount up to hundreds of pounds in a month, as in some of the examples I gave, possibly before customers are even aware that they are being charged. If the Minister or I called our banks in such circumstances and moaned at them, they would probably waive the charges, but most people do not know that they can do that. Also, they are customers whom the bank is not as keen to keep as they might be to keep a Member of Parliament or someone on a good salary. I have no doubt that if the Minister rang up—he has some responsibility for the banks—he could get his charges waived without a problem, but that is not the case for people at the lowest end of the scale. Also, people assume, not unreasonably, that the bank charges are legitimate. Why would they not do so, given that the banks tell them that they are?

Most importantly, if it is to take such a long time for the OFT to resolve the matter, and if the Government are to allow it to take so long, they ought to make it clear to the banks that now that the OFT has made a ruling—it has said that the same principle applies to bank charges as to credit card charges—they will expect banks to repay customers for any charges in excess of what is reasonable that have been levied since then. If that were made clear, these charges would end overnight, because the banks know that they will lose. Meanwhile, Ministers should step in.

In 2000, the Cruickshank report, which was a Government report, established that banks are fundamentally different from other companies because of their social responsibilities, to which I have referred, and called for them to be treated as such, particularly regarding their high excess profits. Yet the Government have singularly sat on the report and failed to implement it. Will the Minister clarify the position and what he believes the intention of Parliament to have been? Will he publicise the issue so that people know not to pay the charges?

The Government should start providing more consumer advice on how people can get these charges back rather than them having to rely on individuals such as Mr. Egerton. The Government could also chase the OFT for action, particularly to ensure that people get unfair charges back if the OFT concludes, as it should, that they should be stopped.

I reiterate that the penalty charges are crippling people on low incomes. I believe that they are clearly illegal, and that if there was any doubt about that the banks would have the courage to fight a single case in the courts, which they do not. The banks are dodging the courts and the Government appear to be turning a blind eye. I hope that the Minister can reassure me otherwise.

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