Money Box - 4 May 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 Saturday 4 May 2002
1200-1230 BBC RADIO 4

Getting Credit

ITV Digital

Charity Trustees

Annuities

Childcard Vouchers

Barbara Castle

LEWIS: Hello. In today's programme...

People who move home may be unable to borrow money until December after government delays over privacy laws

Tax breaks for mums could cut child care costs by a tenth

Can ITV Digital customers get their money back as their programmes disappear?

Louise Greenwood is with me today¿Louise

GREENWOOD: Yes with a cautionary tale for anyone thinking about becoming a charity trustee¿

MAN: If I'd known then what I know now I wouldn't have done it, I certainly couldn't recommend it to anybody else, which seems very sad because I've enjoyed the voluntary work that I've done

LEWIS: And we recall Barbara Castle's radical plans to end poverty and the means test for pensioners. People who want to borrow money or take out a mortgage are being turned down because of Government delays in sorting out how lists of voters can be used by credit agencies. Every year the law compels all of us to reveal our name and address to the Electoral Registration officer so that lists of eligible voters can be drawn up. For nearly 20 years these lists have been used by credit reference agencies to establish that people really are living where they say. But a decision by the High Court last November blocked the sale of the lists for commercial purposes. And that has left thousands of honest citizens unable to get credit. Like Money Box listener Adrian Flude from Sheffield

FLUDE: We moved and put ourselves on the electoral role in May 2001, we made a mortgage application in October 2001 and the information supplied to the mortgage lender by the credit referencing agency stated we weren't actually on the electoral role. I think the credit referencing agency should have quite clearly stated that to the best of our knowledge this person could or couldn't be on the electoral role but we don't have access to the information to tell you. The government need to make it clear that this information is available or not available. If it's not available then the credit referencing agencies need to review how they present their information and who they obtain their information from.

LEWIS: The government promised to come up with a solution to this problem by the end of January. We're still waiting. Money Box has learned that the consultation document is now due out next week - six months after the court case. The minister responsible, Nick Raynsford, wouldn't come on Money Box but in a statement his department said¿

STATEMENT: This issue raises complex and difficult issues which ministers are considering carefully. We still intend to publish our policy paper and the draft regulations in time for them to be in place for this year's canvass of electors.

LEWIS: So it could be December before the new rules are fully in place and then it's not clear quite how they will work.

Barry Conroy is a director of Equifax, one of the two main credit reference agencies. Barry this seems to be causing huge problems for people like Adrian, what's happening ?

CONROY: Well I think we need to get it into context. The people that it really affects are those people that have moved home since September 2000 because the two agencies have actually got the electoral roll up to 2000, so the first thing is it doesn't affect everybody¿

LEWIS: But that's millions of people isn't it?

CONROY: It is indeed. Now since that time everybody that has moved may well be subject to having difficulties proving their identity. Both agencies have made clear to their clients and publicly that this data is missing. What's happened most recently both agencies again have updated their databases with, if you like, the previous electoral roll and brought that up to date and as at October 2001 we were collecting changes to the electoral roll from the councils so those have been put onto the databases so those people that have moved and we've identified are also, if you like, on the databases at an address.

LEWIS: But the fact you haven't got somebody like Adrian shouldn't really mean that they're denied credit. Surely as he said you should say , well we don't just know - this person may or may not be at this address they say because we haven't got up to date information.

CONROY: That's common information to all our clients who actually take the data and I think we need to point out that we don't actually make the decisions. We provide information, now each individual lender will have its own policy rules will respect to what it's prepared to accept in terms of identity verification or not and I would certainly hope on mortgages, which is quite a lengthy transaction, that these matters can be resolved fairly straightforwardly. It's more concerned I think with people who are looking for instant credit or smaller forms of credit

LEWIS: Well we've certainly had e-mails from people who have had problems with that. What is the government planning though because the court case means, as I understand it, that people will have to in some way agree to their electoral information being passed on to agencies like yours.

CONROY: Well I don't know what the government is actually going to say in the policy document. We've been in discussion with the Home Office from the previous government and then with the DTLR, as have others, and we're looking to hope that we will get what's called 'permitted purposes' for the electoral roll for very specific usage.

LEWIS: That's a difficult legal problem though in light of the judgement. Meanwhile though what can people do Barry, if they have difficulties what should they do?

CONROY: Right, Ok. Well the first thing is if they're going to become credit active get a copy of their credit file either from Experian or from ourselves, Equifax; because most people become credit active not instantly but they know they're going to do so..see what's on there. If you're not on the electoral roll you've several options at this stage. You can get a certificate from the local council which says you are on the electoral roll and send it to the agencies, some of the councils are actually charging money for that. Alternatively if you have evidence, for instance in the form of estate agent's or rent book correspondence or solicitor's letters that you're living at an address and that's dated as to where you are at that address send that to the agencies and they will load your data into the database.

LEWIS: Barry Conroy, from Equifax, thanks

TELEPHONE MESSAGE: "Thank you for calling ITV Digital - at this stage pay TV services are no longer available - we apologise for any inconvenience caused"

LEWIS: The message on the ITV Digital helpline to more than a million customers who're out of pocket this week. The digital television channels that they have already paid for were turned off on Tuesday. The free digital channels from the BBC and ITV continue to be broadcast for the time being, though it was announced this weekend that ITV Sport will close next Saturday. People paid as much as £20 a month or more for a service they no longer get so can they get refunds and should they cancel their direct debits? The administrators of ITV Digital, Deloite and Touche wouldn't come onto Money Box to explain what's happening or what people should do but with me is Alan Stevens from the Consumers Association who's been following the story..

Alan we've had a lot of e-mails about this, let's look first at people who have paid in advance, two hundred thousand of them, can they get a refund?

STEVENS: It's very unlikely that they will. When a company gets into difficulty the poor consumer stands at the back of the queue. The only people who are likely to get money are those people who paid up after March 27th this year when the company got into difficulties.

LEWIS: And what about those who paid by credit card, can they look to the credit card company to get money back?

STEVENS: They can if they paid more than £100. Annual subs might qualify, if it's more than a hundred pounds then the Consumer Credit Act means that the credit card company can be claimed against instead of ITV Digital.

LEWIS: That's helpful. Certainly Barclaycard and AMEX, which isn't of course a credit card, confirmed that to us. What about the rest though because the majority of people paid every month, normally by direct debit, they will be paying money now possibly, should they cancel their direct debit?

STEVENS: They certainly should, that would be our advice. I mean the terms and conditions of your contract mean that you probably shouldn't do that ideally but you're not getting the service therefore you shouldn't pay for it. I've heard of people having direct debits taken last night for example, which is quite outrageous.

LEWIS: So contact your bank or your building society, cancel the direct debit. What about getting refunds of money you have paid that has been taken by mistake?

STEVENS: If it's taken by mistake then the direct debit guarantee should mean you get money back, so if people are having money taken now they should get that refunded but if it has gone in the past sadly they're unlikely to see that again.

LEWIS: They'll join the long list of creditors as you say, finally, briefly Alan, the set-top box, the black box. Can you bin that?

STEVENS: No you can't. It's the property of the administrators so you have to hang on to that. You're still getting free-to-air services but unfortunately it's not your property so you can't dispose of it, you need to hang on to it.

LEWIS: You've got to wait and see what happens..

STEVENS: I'm afraid so

LEWIS: Alan Stevens from the Consumers Association, thanks very much for talking to us and there's more information on our website, both links to the Consumers Association and some useful questions and answers.

Now the government is encouraging all of us to get involved in causes we believe in and every month more than a hundred and sixty new charities come into existence. But this week Louise Greenwood has the story of one Money Box listener who's voluntary work has left him facing a debt of thousands of pounds.

GREENWOOD: David started working with a small local charity two years ago when he was a student, helping out during holidays and at weekends. Because of the difficulties it's now facing he's asked us not to name it. The organisation aimed to help disadvantaged youngsters by running after school clubs and training programmes to get them off the streets and learning new skills. Soon his responsibilities grew to the point where he was asked to take on a more active role in the group

DAVID: I was asked to become a trustee in 2000. It was quite flattering really so I said 'yes - I'd like to do that'. But when I became a trustee the understanding I had of it was that we'd be meeting maybe six weeks to discuss the general policies and direction the organisation was going in, that there was an overview of finance but also where we wanted to go next, which projects we wanted to be taking forward and that sort of thing.

GREENWOOD: But earlier this year it became clear that the charity had serious cash problems. The group was facing insolvency with debts of over twenty five thousand pounds. Only at that stage did David and the other trustees realise that they could personally be held liable for the debt, a far cry from the role he thought he was taking on. As a recent graduate with no assets to his name David's response was unsurprising

DAVID: Panic really, very sort of scared about what this could involve and worry what potential impact on me individually would be six months down the line or whatever when people start wanting money. The implication is there I suppose of potential bankruptcy.

GREENWOOD: The problem is that like many small charities David's group had a simple constitution that didn't protect its trustees in the event of a collapse like many larger organisations that register as a limited company. James Sinclair Taylor is a senior partner with a west London law firm that advises charities on how to do business. He has seen many cases like this where well meaning volunteers have ended up facing ruin

SINCLAIR TAYLOR: One of the problems is that people think that charities are all of a piece. You can choose all types of different types of constitution for a charity. If you choose the simple sort, a trust or an unincorporated association, that's fine for a small charity - but it doesn't protect you from the liabilities of the charity and that's what this young man has suffered. You're taking big responsibilities when you become a trustee, you don't have to be a company for all charities but if you see risks and liabilities, and there are a lot these days, then you should be asking for the charity to become a charity limited by guarantee.

GREENWOOD: The National Council of Voluntary Organisations advises charities of all sizes across the country. It estimates that there are over three quarters of a million trustees in the UK who often perform a vital role in the group they run. Ben Kernigan of NCVO says it's important people understand what they're taking on

KERNIGAN: The legal responsibilities for the trustee mean that they do take the ultimate responsibility for what happens in that organisation and it's important that they recruit good people and it's also important that they have good systems and that they're aware of what the roles and responsibilities are of a trustee

GREENWOOD: However that advice has come too late for David who says becoming a trustee is an experience that he now bitterly regrets

DAVID: If I'd known then what I know now I wouldn't have done it. I think it's very, very onerous responsibility. I certainly couldn't recommend it to anybody else which seems very sad because, you know, I've enjoyed the voluntary work that I've done for this organisation and others.

LEWIS: So Louise, what can David and the other trustees do?

GREENWOOD: Sadly there's nothing they can do. If the charity does become insolvent because it has no assets David and the other trustees can be pursued individually for the debts for up to six years. Ironically the only point in his favour at the moment is that he has no assets either.

LEWIS: Thanks Louise, and I suppose the message is that if you are involved with a charity, however small, make sure it's registered as a company limited by guarantee or your good work could cost you everything.

Money Box reported last week on how thousands of people lost money when they retired because they didn't look for the best return from their pension fund. Most simply let the company they've saved their pension fund with give them an annuity - a pension for life - even though the best deals are normally found by moving your fund to a rival company. Well now the Financial Services Authority says it'll make companies distribute a leaflet setting out the choices people have - and that moving their fund could make them better off. The changes will start in September and the woman behind these plans is Christine Farnish, the FSA's Consumer Director, who is in Cambridge. Christine, what exactly are you going to make these companies do?

FARNISH: Well all pension providers are going to have to write in a very clear way to their customers about four months before retirement in future and set out very clearly the fact that people can shop around, they don't have to buy an annuity from them, they can buy it from somebody else, and to enclose a copy of our factsheet which is in development at the moment and we're just doing user testing of it to make sure it's very clear and understandable which really does set out the options for people.

LEWIS: But will it have to say, 'warning if you don't move your fund you could lose money for the rest of your life'?

FARNISH: That's the sort of language that it probably will need to include, yes because this is a very important transition for people and in future more and more people are going to be coming up to retirement with pension pots and you could lose out quite a chunk of money if you don't shop around and really try and get the best rate for you.

LEWIS: So it will be very clear, it will, your leaflet will say in big letters if you don't move your fund you really could be worse off for life

FARNISH: Yes it will

LEWIS: And last week we heard from the Labour Mp Frank Field that companies should actually be putting figures in, in their own letter they should say this is what we'll give you, the best three alternatives would give you this, that and the other. Why not make them do that?

FARNISH: Well, that is one possible option obviously but the other thing we're working on that should be a very helpful tool for consumers and advisors is including annuities and annuity rates in our comparative tables and we want to get annuity tables up and running and available as soon as we possibly can for the most commonly bought annuities.

LEWIS: I seem to recall reading in your statement though that they wouldn't be available for almost another year, Spring 2003, which is a lot longer than the leaflet will start being sent out

FARNISH: Well we've got to do this job thoroughly and properly, we've got to make sure we include all the providers in the market, some of whom are very reluctant to put their data forward because their rates are rather poor so we've got a job to do there. We've also got to build quite a sophisticated database actually because even with just using and having tables on the most commonly bought products there are sixty providers in the market and for each of those providers we need to collect something like three thousand bits of data. All of that will obviously be hidden to the consumer because it will be very easy for them to use, but we've got to design the tables so they are easy to use.

LEWIS: Yes, and will they be up to date, they'll be in real time so that you'll see what you'll be paid today?

FARNISH: They'll be up to date indicative quotes, they won't be absolute today values, yet anyway. In due course the software and the systems should enable us to do that but people should always get a final absolute quote when they've decided what they want to do, it'll be indicative.

LEWIS: Now you're relying on this leaflet you're sending out and obviously these tables if people go away and look at them, is there a danger that because of the leaflet the letter that will be sent individually will be weaker even than it is now?

FARNISH: No there isn't. We're working very closely with the Association of British Insurers who already have a draft letter and we're in discussion with them to make sure that the letter and the leaflet really do sit well together.

LEWIS: Now if all that works and people really do have this choice right in front of them at the crucial moment some of them will be very disappointed won't they, because unless you've got at least ten thousand pounds it's very hard to exercise this choice because companies just don't want you

FARNISH: It's hard but not impossible. I think one of the things we will want to do is have some further discussions with the industry to make sure that all consumers get a reasonable choice.

LEWIS: So you'll actually be pressing them to take smaller amounts than they do at the moment?

FARNISH: We'll want to look quite carefully I think at some of the transfer charges and make sure they're reasonable.

LEWIS: Christine Farnish from the Financial Services Authority thanks

Working parents with young children could save money by persuading their employer to pay them partly in child care vouchers instead of money. Although these vouchers are taxable they are not liable to National Insurance - effectively cutting 10% off the cost of childcare and even more next year when the Chancellor's 1% rise in National Insurance begins.

Amanda Spink works for Boots in Nottingham, she's one of the growing number of parents to take advantage of childcare vouchers' provided in her case by a company called Busy Bees

AMANDA: I work four days a week, my daughter Anna she goes to a private nursery, that nursery care costs me £420 which I actually pay using these Busy Bee Corporate Nursery vouchers and by using those I actually save money on the National Insurance contribution. That's ten per cent so out of my £420 I sort of save £42 per month, which I'm very pleased about, I'd definitely recommend it for the people to do, if the saving is there they might as well take it.

LEWIS: Well the vouchers can be used for all sorts of childcare for children of all ages, including holiday schemes for older children and even childcare by your sister or your mum. To explain how it works let's go live to Birmingham to talk to John Woodward who's managing director of Busy Bees. John, how exactly does this scheme work?

WOODWARD: Employees can opt to take part of their salary in childcare vouchers and the vouchers are exempt both from employees National Insurance and Employers National Insurance.

LEWIS: So if somebody earns say £20000 and their childcare costs them £5000 a year they can say give me £15000 and £5000 worth of vouchers

WOODWARD: Yes they can do that and the saving will be for them and for their employer.

LEWIS: So they all gain all round

WOODWARD: The important bit for that as well is that the carers get exactly the same amount of money so there's no charge to carers

LEWIS: So why are vouchers exempt from National Insurance but not from tax

WOODWARD: Well there was a lot of discussion in the early nineties about childcare as a non-taxable benefit and the government policy at that time was to only make non-taxable benefits available where childcare was really only part of work-place provision and provided on top of salary

LEWIS: So it's a quite deliberate move by the government, there's no danger it'll be a concession that'll be taken away

WOODWARD: Well in the previous budget it was clearly identified in the press releases that this was government policy and it fitted in with what the long term childcare strategy was.

LEWIS: And what do parents do with the vouchers once they've got them

WOODWARD: The parents simply pass on the vouchers to their carers just like they would a cheque. The carers send the vouchers to us in a pre-paid envelope and we transfer the money to their bank accounts through BACS

LEWIS: So they obviously have to be registered with you. Now do all these have to be officially designated and registered carers?

WOODWARD: They have to be registered carers, now under OFSTED, apart from close family members who don't have to be registered

LEWIS: So as I said earlier, your mum or your sister or your gran, perhaps not a friend, but certainly a close family relative can look after the children and get paid with all these tax advantages

WOODWARD. Absolutely. But ninety odd per cent of the provision is registered, it's childminders, playgroups and day nurseries.

LEWIS: Sure. And how does Busy Bees make its money? You're acting a bit like a bank here aren't you?

WOODWARD: Well the company was originally formed by the current directors to provide childcare for their own children. Vouchers were then introduced to help parents make that childcare more affordable, we cover our costs in terms of administration by making a charge to the employer but that charge is around the six to seven per cent compared to the employer saving of around twelve per cent.

LEWIS: Right, so although they do have to pay you it's still cheaper because they save on the National Insurance.

WOODWARD: Well absolutely

LEWIS: John Woodward from Busy Bees thanks very much for talking to us.

Barbara Castle, who died on Friday at the age of 91, was Secretary of State for Health and Social Services for less than three years in the 1970's. But in that short time she put plans in place to transform the state pension to provide a decent income for everyone in retirement. Through her State Earnings-Related Pension Scheme, SERPS, people would be paid a pension as good as anything the private sector then had to offer and it would rise in line with earnings so retired people shared in rising prosperity of the country. Even before the new scheme began her own Labour colleagues cut it back and Conservative governments reduced it still further. SERPS was finally scrapped by the present government just four weeks ago. In July 1997, talking on our sister programme Inside Money she explained to me what she had tried to do..

CASTLE: We compelled the government by law to uprate that pension annually in line with prices or the movement of average earnings, whichever was the more favourable. The second step was to say a flat rate pension didn't do enough to make people feel that retirement wasn't a horrid hole into which they fell, so we introduced a second state insurance scheme called the State Earnings Related Pension Scheme which provided that everybody must by law contribute to a second pension which was a percentage of their earnings and these two pensions together were designed to make pensioners free of the humiliating means test.

LEWIS: Baroness Castle of Blackburn who died on Friday. And you can hear the whole of that 1997 programme on our website shortly.

And you can find our website in a new way from today. A new service was launched this week to make it easier to access all the BBC's money and business websites from just one place - it's www.bbc.co.uk\business

The editor of the new site, Guy Dresser, told me what it offers

DRESSER: It's a very exciting development, I think the big problem for listeners and viewers is that they're not fully aware of everything else that the BBC does. One of the surprising things that I found when I started the project was that the BBC actually has more than twenty five business and personal finance programmes and I'm sure that Money Box listeners probably didn't know all that either. You'll be able to get access to all those programme sites and all the information that's available on them.

LEWIS: Guy Dresser. And all that is on www.bbc.co.uk\business and you can find our website there or go direct to www.bbc.co.uk\moneybox where you'll find more information about today's programme including important news for Barclays shareholders and of course that Barbara Castle programme. You can ring the BBC actionline 0800 044 044, calls are free 0800 044 044

That is all we have time for today but I'm back on Bank Holiday Monday with our phone-in Money Box Live about investing in things. If you're afraid of the stock market or disappointed by interest rates, - why not invest in something you enjoy - will they grow in value? That's Money Box Live on Monday.

Our email address is [e-mail].

Today, the reporter was Louise Greenwood , the producer, Jennifer Clarke and I'm Paul Lewis.