Banks: Cheques

Lord Hughes of Woodside Excerpts

Monday 6th June 2011 Lords Chamber

[Lord Sassoon]

My Lords, it is correct that the Payments Council is an industry body. It is the banks and the other industry players who pay for and maintain the payments system, but it is a body with a chairman and four other independent members, and the Bank of England is an observer on the board. Back in December 2009, the Government welcomed the commitment made by the Payments Council, which was clear that if it took a decision in 2016 to end the present system of cheque clearing in October 2018—and it will take that decision only in 2016 if it does so at all—it will do so only if there is an available, acceptable and widely adopted alternative system. The Government have been clear that that must include a paper-based system. We believe that it is appropriate to continue to work closely, as we do, with the Payments Council to make sure that it is held to the commitments that it has given. The council is consulting users widely and has another round of consultation running now, and it will I am sure continue to take note of the important views of all users of cheques.

[Lord Hughes of Woodside]

Is the Minister saying that the alternative would have to be a paper-based system? If so, why on earth is the Payments Council bothering? Is this not an example of a body to which responsibility has been handed over without any control or thought? How much is it all going to cost? Why do they not just abandon it now and be done with it?

[Lord Sassoon]

My Lords, the facts of the situation are that the number of cheques being used has declined dramatically in recent years. There were approximately 4 billion cheques in use in 1990 and by 2009 that had reduced to approximately 1 billion—and it is expected to reduce very significantly again over the next few years. The fact is that the system has declined in use and it will require a very expensive rewrite of the clearing systems if it is to continue in its present form. The last thing that the Government or users of cheques would want to see is charges being passed on to users of cheques if that was a result of banks having to put in place an expensive new system. So one has to be pragmatic about this and give them the time, which they are taking, to come up with an alternative, including a paper-based alternative, that is acceptable to small businesses, charities and other individuals.