Examination of Witnesses (Question Numbers
16 MARCH 2010
Q140 Mr Breed: Mr Smee, many of the
banks operate on a multinational basis and therefore have branches
and operations in other countries. Very many other countries in
the world have gone through the process of truncation, so they
have been perfectly happy to accept the truncation aspect in other
countries and indeed operate within it. Why have they refused
in some way, over 20 years now, to get to grips and deal with
it in the UK?
Mr Smee: I think there have been
many truncation projects, some of which have been more successful
than others; they have not been by any means a success in every
jurisdiction. I think if you look here, to come in with truncation
now when volumes are declining by 10% per annum would be the wrong
time, and I do not think it would particularly deliver benefit.
Q141 Mr Breed: But you have not produced
any evidence as one of the major alternatives.
Mr Smee: I think if you look at
the rate of decline and the time it would take to get a project
of this complexity and scale in you would be dealing with very
small numbers and truncation was introduced for really when cheques
were a very mass instrument, much more widely used than they are
Q142 Mr Breed: If you look at some
of the countries that actually operate on truncated systems now
they do not have anything like the cheque usage that other countries
have and they find it perfectly satisfactory.
Mr Smee: The key thing is the
timing. I would just point out that the OFT Task Force did investigate
truncation and said that it did not think that it would be an
appropriate way forward for the UK.
Q143 Mr Breed: Because there has
been a lot more discussion since your announcement and such in
the media and everything else, apart from the banks who else has
applauded this and cannot wait until they get rid of the cheques?
Mr Smee: We have had some very
positive comments from some Government departments.
Q144 Mr Breed: Government departments?
Mr Smee: Yes. I think we have
had some comments
Q145 Mr Breed: That is not to say
it is going to be terribly helpful to your case, but still! So
in terms of the broad thing who has said to you, "This is
a great idea, let us get rid of the cheques"?
Mr Smee: Significant percentage
of large businesses; people within the vendor community who are
developing other payments mechanisms. I think we have also had
from several of the witnesses you heard earlier a comment that
they would prefer to see the decline managed than left alone to
run its course.
Q146 Chair: If there is a choice
whether to have cheques or not, when you say they would prefer
to see the decline managed, you have not made up your mind on
that, have you? You will give people a choice whether they want
to keep cheques or not?
Mr Smee: As I said, in 2016
Q147 Chair: No, that is very important,
Paulvery important. Give people a chance to decide whether
they want cheques or not. If there is going to be a level playing
field here that is a very important and fundamental question.
Mr Smee: I think between now and
2016 we will have to be satisfied that the three triggers which
we announced have been satisfied.
Chair: You have not done any consumer
focus issues to really determine if the nation wants it. I can
tell you, as Chairman of the Treasury Committee, I want cheques
to be kept, okay. And I am sure if you go out and talk to people
they will tell you that they want cheques.
Q148 Sir Peter Viggers: I just wonder
whether you know that lawyers do not talk about death as being
caused but being accelerated. Have you come across that before?
Mr Smee: I have, yes.
Q149 Sir Peter Viggers: Because we
are all in terminal decline, the cheques are in terminal decline
but then you and I are in terminal decline as well and we would
not exactly welcome a programme which sets a target date for closing
us down, that is the important point I am seeking to make! Do
you accept that even on your figures if the use of cheques declines
by a further 47% by 2018 there will still be about £600 billion
of money being moved every year by cheques?
Mr Smee: I do accept that and
I believe that, if that was the position I doubt if the cheque
clearing would close. However, we are seeing people migrating
to more efficient ways of making payments. They are doing it;
they are not being forced into it. Our interest is to ensure that
whilst this is happening in most of the economy other groups are
not left out in what is happening as part of change.
Q150 Sir Peter Viggers: I see you
are tasked, according to your brief, to ensure that the UK payment
system and services meet the needs of users, payment service providers
and the wider economy, which indicates to me that your brief is
to be objective; yet further on, under the review process, you
say, 2014, "There must be significant progress in reducing
cheques in areas where alternatives are already available."
I wonder whether you do regard yourselves as being objective,
or whether you feel that you have made your mind up and are campaigning?
Mr Smee: No, I do not think we
are campaigning because I think the key issue by 2014 is to see
that, where there is an alternative, consumers are willingly using
it. So they are not being left in the lurch but they are moving
to a new form of payment instrument, which they may well find
more helpful and more efficient and more effective.
Q151 Chair: You say that people are
not being forced into it, but try paying utility bills by cheque,
Mr Smee: I think many utility
bills are paid by cheque.
Q152 Chair: A number are not.
Mr Smee: But that is not something
which we have driven.
Q153 Chair: We want to be precise
with the language. You are saying that you are not forcing people
into anything, but some people would say that you are limiting
their choice and that is a form of coercion.
Mr Smee: I think there are a lot
of people as well who are seeing the advantages of alternative
methods and disadvantages of cheques.
Q154 Chair: I thought this was going
to be a quiet session and I thought that you were going to have
the opportunity to laud exactly what the Payments Council were
doing but there are quite a lot of issues of real concern here,
Paul. Let me go over some of the things I have picked up this
morning. First of all, we are not convinced that cheques are in
terminal decline and I think you really have to reappraise that.
It is still the second largest means of payment and even by 2016
there will still be two million cheques each day issued. Your
cost benefit analysis appears to have all the benefits and none
of the costs, so therefore I want you to look at that cost benefit
analysis, subject it to independent scrutiny and share it with
this Committee in the future. What we have heard from previous
witnesses is that vulnerable groups, such as the elderly or housebound,
seem to be affected, as well as small businesses and charities.
So you really need to go and engage with these people to try and
understand what our concerns are. The issue of cheque fraudthe
one I had with Sandrathat is a small percentage of other
sorts of fraud that we have seen, despite the cheques' current
importance, and it shows from the figures that Sandra has given
that you can stop fraud with cheques and so that is a good way.
You talk about market forces; this looks to us like forcing the
market. Colin's point that the board is dominated by the industry
with 11 members and, as your colleague said, you have not used
votes yet so it does not seem a very democratic approach to it.
We would like that proper cost benefit analysis and we want to
know that consumer preferences will be respected. Lastly, can
I say that it is odd you have decided to move towards the end
of cheques before alternative payment methods are available? There
are a host of questions there and I would like to think that this
Committee, coming near to the end of this Parliament, has put
this on the agenda and we will invite you back to ensure that
there is going to be a meaningful consultation, we get this issue
right, that choice is a fundamental issue for the consumer and
the playing field is levelled between the consumer and the industry.
Mr Smee: Thank you, Chairman.
I never come to this Committee expecting a quiet session!
Chair: Thank you.