Money Box - 30 March 2002

THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

MONEY BOX

Presenter: Paul Lewis

TRANSMISSION 30TH March 2002 1200-1230 BBC RADIO 4

Barclays Payments Problem

Railtrack Shares

The Housing Market

Part-Timers' Pensions

Share Clubs

LEWIS: Hello. Welcome to Money Box, live as always this Easter and this weekend hundreds of thousands of people could face Easter without money after a bank's computers failed.

I ask the Chairman of Railtrack what this week's offer for the railways means for shareholders.

Housing - what hope for first-time buyers as prices continue to soar

Two banks do a deal on pensions for part-timers.

And how declining stock markets have taken the shine off share clubs.

MAN: We are a bit sick that we haven't made money in this club. It's ridiculous to go into something like this and not be disappointed that you haven't made money.

LEWIS: First though those problems at the bank. If you've tried to draw money from a cash machine this weekend and been refused you are not alone. Hundreds of thousands of people could face an Easter without cash after a computer problem at Barclays Bank halted salary payments for the employees of 20,000 business customers. Chris A'Court has more.

A'COURT: Yes Paul, it couldn't really have happened at a much worse time could it - Easter weekend. People affected are those who would normally expect their salary paid into their bank account on the 27th of the month, last Thursday. Most of the people affected will not be Barclays customers - it is their employer who will be a Barclays customer. Computer payments will not now be made until Tuesday. And that means as you've said that many people who were anticipating their salary would go in on Thursday could be left without any money all over Easter.

LEWIS: So what is Barclays doing - Chris?

A'COURT: Well the bank has tried to make arrangements with all the other banks so that people will not be denied money over this weekend - they should be able to draw cash from machines. But not all the banks have agreed to this - those that haven't include HSBC and Halifax Bank of Scotland. So if people are experiencing problems that could be the reason.

LEWIS: And access to cash is obviously important over Easter but what about costs, overdraft fees at one end and presumably loss of interest on money that's not been received on the other ?

A'COURT: Yes. Barclays has told Money Box that anyone who loses money in any way due to this error will be reimbursed. They should contact their own bank first but they may also have to write to Barclays explaining what they've lost and ask for compensation.

LEWIS: Well thanks Chris and details of how to do that are on our website and with the BBC action line....

Now it's quite hard to do a U-turn on a Railway. But the Transport Secretary Stephen Byers seems to have achieved that this week. Having said there would be no taxpayers money to help Railtrack shareholders he has now conjured up three hundred million pounds to help a new company Network Rail, buy the railways from Railtrack Group. The money will go to people with Railtrack shares, including of course the 250,000 small shareholders who saw their investment become virtually worthless overnight when the Government persuaded the courts to put Railtrack plc into administration last October. Shares were worth £2.80 then, now they are suspended and cannot be sold. But what exactly does this new money mean for shareholders? Joining me is the Chairman of Railtrack Group Geoffrey Howe. Geoffrey Howe explain how this offer from Network Rail will affect shareholders ?

HOWE: Well good afternoon. Since the company was put into administration the board of Railtrack Group has been fighting hard to get the Government to recognise the injustice that has been done to Railtrack shareholders. And this is the first sign that the Government recognises that and has agreed to make an offer for the shares in the rail operating company. That's the good news but there is still some way to go before we know exactly what that means in terms of how much money ultimately we will be able to return to Railtrack share holders.

LEWIS: So basically you're being offered money for the railways, the bit that is Railtrack Plc, that's the bit that you are now being offered a total of five hundred million pounds for. Is that fair value?

HOWE: That's something the board are still considering. We have to look at it in two ways, first of all we have to understand whether we believe that's the right price to sell the shares in the railways, but we also have to understand what it means in terms of the total amount of money we are going to be able to return to Railtrack shareholders. Because the threat which the company has made against the government is the threat of litigation and the government are insisting that as part of the deal for accepting the five hundred million pounds, if we were to do that, we would have to release all our claims for compensation against the government.

LEWIS: So it comes with pretty large strings attached

HOWE: Yes it does

LEWIS: I'll come back to you Geoffrey Howe but listening to us in Coventry is Andrew Chalklen, who's Chairman of the Railtrack Private Shareholders Action Group. Andrew - you represent small shareholders those who bought originally Railtrack employees of course... do you think this is a good deal for your members?

CHALKLEN: It's certainly not a good deal, we welcome that the government has finally recognised our claim but it's not a fair deal - no.

LEWIS: But how can you get any more - I mean this is the offer you're not going to be able to get anymore out of them- are you ?

CHALKLEN: Well I think there are possibilities there obviously we are still taking legal advice on that and that will not become clearer until Geoffrey has been through and decided what to do. Although the company may renounce its legal claim that does not mean the individual share holders have to renounce their legal claim.

LEWIS: So even if Railtrack group accepts this - individual shareholders could still go to court. Is that right Geoffrey Howe ?

HOWE: I think legally that's still a possibility. The Company still has - the board still have a lot of work to do before we can decide whether or not this is something we are prepared to recommend to our shareholders. Because as Andrew points out this is not a generous offer and although some shareholders have already indicated it's an offer they may wish to accept, the board is very conscious that there is a number of other shareholders particularly the private shareholders who do not consider it a fair offer.

LEWIS: But there is also .........

HOWE: This is a matter that the board has to consider very carefully.

LEWIS: So you're going to be considering this offer and at some point you will either be recommending to shareholders that they accept it or reject it.

HOWE: Correct.

LEWIS: And if they accept it - if it is accepted that's not the only money is it because you have other assets, which will be eventually returned to shareholders . How will those stack up - what's the total shareholders might expect to get back?

HOWE: Well the figure which has been put into the public domain, not by us I hasten to add is approximately 250p per share. But that does depend on our being able to realise good value for our other assets which are principally the first phase of the Channel Tunnel Rail link and our property portfolio.

LEWIS: So you have to sell those to realise that money.

HOWE: Yes. To realise the full value we would have to sell those assets too so I'm afraid it would be still some considerable time before the board would be in a position even if the offer from the government were to be accepted to return considerable any significant amounts of money to shareholders.

LEWIS: Andrew Chalklen certainly we have had a lot of Money Box listeners e-mailing us saying well share go down, they go up. Many people have lost money in other companies the government isn't bailing them out - why should your members get this three hundred million pounds from the government ?

CHALKLEN: Well this has been asked many times and of course the answer is that it was the government that did this in the first place they had no reason to put the company into administration and we've lost out specifically because of their action.

LEWIS: So you're saying because the government's done it you should be compensated by the government. And Geoffrey Howe just let me ask you finally - obviously you've got a lot of considering to do when could shareholders expect to hear anything from you on this deal.

HOWE: We would hope to be in a position to send a circular to our shareholders with full detailed information I would think at the present time table we think four to six weeks. So we would hope the early part of May we would be able to send something to our shareholders.

LEWIS: And this is the time table Railtrack will stick to.

HOWE: We will do our best.

LEWIS: Geoffrey Howe thank you very much we also heard from Andrew Chalklen Chairman of Railtrack Private Shareholders Action Group

Now Easter is the traditional time to look for a new home. With prices still rising - 15% last year and by 1.5% in February alone - can the boom continue? Money Box has talked to estate agents around the country. First, London...

WOMAN: The story in the first quarter of this year is that activity has very definitely picked up the prices that fell by average of 4.5% we have seen grow by 5% so they're back up. A two bedroom terrace, the average price in Greater London is £206,000. The average price of semi-detached houses in Greater London is about £225,000 if you found it in the very central areas of Westminster or Kensington and Chelsea it is easily going to be over a million.

MAN: In Pembrokeshire this year prices seem to be going through the roof. Vendors are really pushing prices up significantly and in some instances they're absolutely silly. Certainly first time buyers have almost been priced out of the market in many areas. A standard terrace house in the county town would be around £55,000 and a semi-detached house approximately £85,000 or so.

MAN 2: In North Yorkshire the market is still very buoyant partly because there's a shortage of property . Last week we took 6 houses on and we arranged to have them advertised in the paper the following week by the time the paper came out they were all sold. Typical two bedroom terraced house in nice condition is generally achieving a figure of £75,000 to £80,000. A three bedroom semi varies from about a £100,000 for a typical estate type house to possibly £130,000 to £135,000 for a nice pre-war semi.

LEWIS: Well listening to that round up of house prices around the country is Hugh Dunsmore-Hardy of the National Association of Estate Agents and Professor Andrew Henley from the University of Wales at Aberystwyth, Professor of Economics. Hugh Dunsmore-Hardy a different picture in the sense of different prices around the country but the same things, big rises, houses selling in days and first time buyers being priced out. Is that how you see it ?

DUNSMORE -HARDY: Yes absolutely . If you ignore the price differentials which are obvious because of regional variations, the message is pretty consistant that the market is on a roll at the moment and I think we are likely to see that continue certainly during the first half of this year.

LEWIS: And what is causing it - I mean one of those estate agents saying vendors were being silly they were pushing prices up.

DUNSMORE-HARDY: Well yes vendors pushing prices up, but of course what they're doing is they're only pushing prices up in response to what buyers are prepared to pay. I think what we have of course is an inbalance, a very serious inbalance, between supply and demand and that again is a fairly consistent message that we're getting from our members. In other words not enough properties coming on to the market to meet the demand from buyers to purchase so for every property that's coming on you've got several people willing to chase and where that happens prices are being forced up.

LEWIS: Do you think your members play a part in that though because people only fix the price in consultation with local estate agents?

DUNSMORE -HARDY: Yes absolutely but of course the estate agent is acting in the interest of the seller and the agent has got to interpret the market and what people are prepared to pay . Go in and suggest to someone that they should put it on for less than they know they can get frankly they are not fulfilling their role.

LEWIS: Andrew Henley is this simply supply and demand - is it that basic economics we are looking at here.

HENLEY: Well at its roots - Yes it is just basic supply and demand. Of course one of the attractive features of houses, at least perceived attractive features, is that they're perceived as an investment asset as well.

LEWIS: Well there perhaps at the moment as the one investment asset that goes up but never down - is that true ?

HENLEY: Well in a sense that is a very short sighted view because we only have to look back over the last fifteen years and see that when they do go up, they do go up very fast and then they come crashing back down again. Certainly a health warning might be needed that the value of your house can go down as well as up.

LEWIS: We are in a sort of a golden age though aren't we in one sense - employment's high, pay is rising, interest rates are as low as they've been for more than a generation.

HENLEY: What we're starting to see is the phenomenon of housing equity withdraw, people starting to spend their housing wealth.

LEWIS: So they're borrowing money against the value of their property to spend on holidays, cars , short term things.

HENLEY: That's right. And they're reducing their savings because they feel richer and that in a sense is bad news particularly given what's happening to pension wealth, rates of return in the stock market at the moment. We observed this phenomenon in the late 1980s and it ended in tears and there is a chance the same might happen again this time.

LEWIS: And Hugh Dunsmore-Hardy, you said a minute ago you saw it continuing do you see any signs that the house price rise is slowing down.

DUNSMORE-HARDY: Well I don't see any sign of it slowing down at the moment. I think we certainly feel it will slow down in the second half of the year. I think what we've got to remember is that price will only go so far. We've heard contributors from around the country suggesting that first time buyers are being frozen out of the market once that starts to happen and they look elsewhere perhaps to rent a property in the short term, then of course the whole buying process becomes affected, because it is a chain reaction and you need to look at what's happening at the bottom of the market and that will have the natural effect of slowing down. If there is an increase in interest rates of course if the bank decide to raise base rate, although that takes sometime to filter through the effects of that nevertheless that will perhaps send out a bit of a cautionary note.

LEWIS: Andrew Henley we've seen interest rates very flat. We've seen the Bank of England reluctant to raise them - do you think there's a case to say the bank should raise them ?

HENLEY: I think a modest increase sooner will be much more effective than leaving things too late and then having a lot of pain to deal with because the housing market in effect is out of control as it was towards the end on the 1980s.

LEWIS: Professor Andrew Henley of University of Wales and Hugh Dunsmore-Hardy from the Estate Agents Association .

Tens of thousands of people, mainly women, could get better pensions after two High Street banks settled a long-running dispute over part-timers. HSBC and Barclays have come to agreements which mean that part-timers can backdate their membership of the banks' pension scheme - sometimes to 1976. Well since 1995 all part-timers have had to be given equal access to the pension scheme. But it has taken several court cases to get those rights backdated. The latest deal may set an example for other employers. It was negotiated by Linda Gregory at the banking union Unifi and I asked her exactly who would benefit from these agreements

GREGORY: Part-time staff or ex part-time staff from Barclays and HSBC can be very optimistic about the possibility of getting their pensions back-dated for any service since April 1976.

LEWIS: Doesn't that mean they have to pay money into it themselves?

GREGORY: Well many of the employers that we are negotiating with operate schemes that are non- contributory , so no money is required at all from the claimants. Of course in other cases it's true that there were contributory schemes and we are in discussions with employers there about how we can deal with it and there are some early indication that some employers may be prepared to waive contributions altogether.

LEWIS: And what do the individuals themselves have to do or have to have done to register a claim?

GREGORY: Well the law is very strict on this. In order to have a valid claim you must lodge an employment Tribunal Application within six months of leaving the employer, so if you're still employed then that's fine you can lodge at any time. But if you're leaving or retiring soon make sure you get that claim in.

LEWIS: So people who didn't lodge such a claim and left more than six months ago it's too late.

GREGORY: Yes that's right although again in some of our negotiations the employers have been more generous. HSBC for example is prepared to accept claims that have been made not to the employment tribunals but either to the bank or the union.

LEWIS: Linda Gregory form Unifi with some good news for some bank workers. With me is Carolyn Saunders head of pensions and a partner with lawyers Taylor Joynson Garrett. Carolyn how does this affect other workers? That's good news for bank workers but there are many other part-timers aren't there?

SAUNDERS: There are many other part-timers. There are 60,000 potential part-time cases out there which have been lodged with the Industrial Tribunals. And in particular part-time working is a big issue not just in the banking sector but also in the retail sector and in the public sector. And there are test cases currently going through in all of those areas.

LEWIS: So still test cases going through despite judgements by the European Court of Justice and the House of Lords more than a year ago. Why is it still taking so long ?

SAUNDERS: The legal process takes a very long time anyway but a lot of employers are resisting the claims. As we have seen from the recent settlement it is extremely expensive for employers to admit part-timers into schemes retrospectively. And not all employers are going to be willing to make the sort of settlements that we've seen with HSBC and Barclays.

LEWIS: So individuals who don't have the help of the union or a staff association are going to have to fight their claim, prove discrimination , register with a tribunal, have done that already in most cases, and fight it themselves - are they really going to succeed ?

SAUNDERS: It's going to be a very difficult claim to prove particularly where individuals are trying to claim membership back as far as 1976, because the employment records in many cases are just not going to be there to enable them to do that.

LEWIS: Now this is extra time - people are looking to get extra time in the pension scheme. What will this actually mean to them in terms of money eventually?

SAUNDERS: What that will do is give them additional pension benefits when they retire. Where the scheme is a contributory scheme, in other words one to which the employee should have contributed, then they will also have to in order to get that extra benefit they will have to put in an additional contributions.

LEWIS: So it could cost them money as well?

SAUNDERS: It could - Yes.

LEWIS: Carolyn Saunders from Taylor Joynson Garrett thanks very much.

LEWIS: Now It doesn't seem that long ago that share investment clubs were all the rage. Not anymore though as declining stock markets have taken the gloss off some of the success stories and some of the groups of people who banded together to form share clubs are either nursing their losses, losing heart or giving up altogether. Chris A'Court has been to visit one formerly high-flying share club in Essex. Chris ....

A'COURT: Yes Paul we reported two years ago in March 2000 on the fortunes of the Brass Monkeys share club, formed by a group of drinking pals at the Ship Inn at Leigh on Sea. Now they've been regularly stumping up £25 each every month which was then pooled to buy shares. Two years ago hi-tech shares were doing well. But as the dot com bubble burst their share values declined to virtually nothing. Now they've kept going though so when I met the club members again in the Ship recently I asked them to look back and tell us how things stand now ?

GOODSON: At that time I mean to be fair any investor you didn't want to be out of the market . You couldn't afford to be out of the market it was an education. We are never in our lifetime likely to see anything like that that techno run again

MOORCROFT: If it had all gone down in a month we'd have been calling it the great crash of 2000 wouldn't we?

A'COURT: What did your portfolio stand at in March 2000 and what's happened since?

GOODSON: Our highest valuation date was the March valuation which was sixty seven thousand and something and I can remember it and I thought it just doesn't get better than this and it was phenomenal..

LAKE: And it didn't!

GOODSON: You're right it didn't get any better than that at all!

A'COURT: Well what happened?

GOODSON: Right, well at that date in March our technology portfolio was over sixty thousand and now it would be less than a thousand.

A'COURT: So looking at the calculations, and I presume you must do this, do you know how much you've collectively put in and how much you would stand to take out if you closed tomorrow?

MOORCROFT: I know how much I've lost!

GOODSON: We do it on a monthly basis and someone who's actually put in every month will have put in £1900 and their current value of their holding is £933 - so they've lost half.

A'COURT: Which wasn't the idea..

GOODSON: No, not at all. To be honest, hand on heart, I didn't think that after five years we'd be losers buy, you know, they say shares can go down as well as up. We've actually learnt that they can go down as well as plummet.

A'COURT: What should you not do then in your opinion now?

GOODSON: One of the biggest lessons that I've learnt, I like to think I've learnt, is when buying a share have a reason why you're buying it, be clear as to why you want to own the share, don't just own the share because it has gone up in the last month or because Bill down the road says it's a good buy or because the fundamentals look good - you've got to have an aim. Otherwise you end up holding and holding and forgetting why you've held it..

LAKE: Which is what happened in a lot of our cases..

GOODSON: and then just buying and selling for the sake of it.

MOORCROFT: I think also though we learnt never take tips too seriously. We've had some that we thought were rather close to the company, or the source was close to the company we were going to invest in, and we were still let down so beware of tips!

A'COURT: You take it very well, knowing the heady heights that you had reached in March 2000, is the secret to regard it all as a bit of fun?

LAKE: Definitely, yeah. It wasn't real money either was it? Unless you actually cashed it in on the day and whacked that sixty seven grand in the bank and sat there smiling it wasn't real money, because you didn't have it in the first place - it was a paper profit. If you look at what you've lost it was half of your twenty five quid a month for the last five years, ok it's a reasonable chunk of money if you look at it in isolation but if you see that fella over there on that fruit machine I'm sure he does a lot more than that and I think we've had better value even losing money because we've learnt - it's taught us something and we'll be better next time.

GOODSON: We've lost money but we will keep going, at the end of the day we've got a night down the pub ..

LAKE: Can't be all bad!

A'COURT: So there they are, still putting a brave face on it, Mark Goodson, Barry Lake and Graham Moorcroft of the Brass Monkey's share club. They've been going nearly five years now Paul and each member's investment of £1,900, as you heard there, presently worth just over £900.

LEWIS: Thanks Chris. Well joining me now is Diane Hay, Chief Executive of Proshare - an organisation which promotes share ownership and publishes a manual on how to set up investment clubs. Diane you've encouraged many people to set up clubs, are the Brass Monkeys' experiences typical?

HAY: Well a lot of clubs have lost money over the last twelve months but the majority are still there and still enthusiastic and I think what we heard in that piece there was that they'd learned a lot of lessons and that's what investment clubs are all about.

LEWIS: Yes, they've learned lessons but does that actually help money? Or should you just say 'It's twenty five quid a month, a bit of fun down the pub, like putting it in a slot machine'?

HAY: I think that's right, it's a fun no-risk way to learn about investing in shares. It's great if you make some money at the end of it but it's really about learning to invest in shares, not with your pension fund, not with your life-long savings, with the money you would have spent down the pub.

LEWIS: And what figures have you got for the sort of success and failure and how well these clubs do?

HAY: Well last year was a bad year for clubs but it was a bad year for everybody and overall clubs lost about fifteen per cent of their portfolio, so I'm afraid the Brass Monkeys were well below average on that.

LEWIS: Yes and that fifteen per cent is slightly a bigger loss than if you'd just put it straight into an index tracker fund for example and track the index. You wouldn't have made any money but you'd have lost less.

HAY: Perhaps a little less but you wouldn't have had the fun doing it I don't think

LEWIS: And in retrospect looking at what people have lost over the last few years do you regret promoting share ownership and these clubs as much as you have?

HAY: Not at all. We introduced hundreds of thousands of people to share ownership the right way, they've made their mistakes with money they can afford to lose and they've gone on to become successful investors in their own right.

Diane Hay of ProShare thanks.

That's all we have time for today. But don't forget, the tax year ends on Friday so if you want to put money into an Individual Savings Account in the stock market using this year's tax-free limit, you must act this week. Lots of information on ISAs and all the items on today's programme on our website - which is www.bbc.co.uk/moneybox - bit of a makeover so it's better than ever and well worth checking out or you can call our Actionline 0800 044 044, that's 0800 044 044. No Money Box Live on Easter Monday, I'm back with Money Box at the same time next week, from producer Chris A'Court and me Paul Lewis, have a very good Easter!