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 HERE. MONEY BOX Presenter: PAUL LEWIS TRANSMISSION 25 September 2004 1200-1230 BST RADIO 4 LEWIS: Hello. In today’s programme, pensioners say they’re being bullied into having their pension paid into a bank account. Marks and Spencer tells 300,000 small shareholders “if your shares don’t fit, bring them back for a refund.” A security lapse at a major bank sends thousands of customers e-mail addresses to thousands of other customers. BRAD: When I first got all of these e-mails, I thought it was a hoax and I was absolutely gobsmacked, and I really didn’t know what to do or who to talk to. LEWIS: New ideas to make housing more affordable and the pressure to sell, sell, sell at your high street bank. But, first, for nearly 60 years retirement pensions have been paid every week through a book of orders which people can take to the Post Office to get their weekly pension in cash. But, as we’re reported before on Money Box, the system is being ‘modernised’ and over the next few months the last order books will be sent out. Everyone who gets paid through an order book is being asked for details of their bank account, so the money can be paid straight into it. The trouble is many people don’t have a bank account and they’re worried about what’ll happen to the reliable weekly cash payments they’ve been used to. Kathleen is in her 80s and lives in Blackburn. KATHLEEN: I’m disabled. I’ve never had a banking account in me life and I’m not likely to get one. And I mean I can’t go into a bank because I’m frightened, so I’m keeping me book. But the Post Office I go to, they’re closing it down, so where do I go then? LEWIS: Figures released by the Government show that more than a million pensioners have still not provided any bank details despite getting letters like this. LETTER EXTRACT: Now it’s time for you to change to direct payment. Please don’t ignore this letter. Order books are being stopped, so you need to tell us which account you’d like your money paid into. Call us today. LEWIS: The tone of this letter and the fact that it offers no alternative to a bank account has upset many older people. The National Pensioners’ Convention now has more than 50,000 signatures on a petition to keep the old order books. It’s President, Rodney Bickerstaffe, is angry about the way older people are being treated. BICKERSTAFFE: Obviously the Government wants to be positive, but if you’re an older person at home and you get that sort of a letter, it is perceived as bullying. And you don’t need that. We’re supposed to be a caring society. So what we say to the Government over and over again is a) listen to what older people say, don’t tell them what’s good for them; and, secondly, a million out of the 6 million who’ve been targeted have still not changed over and, so far as we can tell, are unlikely to change over. Don’t force them. LEWIS: Well live now to Chris Pond, the minister in charge of reforming pension payments. Chris Pond, why don’t these letters you’re sending out tell people they do have a choice if they don’t have a bank account? POND: Well, Paul, if you’d read the rest of the letter out instead of the extract you did, you’d have had also the phrase ‘even if you don’t think direct payment is for you, you should still call us.’ And it goes on to say ‘we don’t want you to worry about getting your money. With direct payment you’ll still receive it as regularly as you do now.’ It’s not a threatening letter. And indeed although we’ve had the allegations that we’re somehow bullying pensioners and others, in fact the independent research that we’ve carried out, and which we published only a couple of days ago, shows that 9 out of 10 people who’ve made that change actually think it’s better for them. They’re very satisfied with it and very few want to go back to the order books once they’ve changed. LEWIS: Indeed. We’ll come to the research in a minute, but just to go back to the letter. The letter does not say, does it, that there is an alternative because if people don’t have a bank account or don’t get in touch with you, you will send them a cheque? At the moment though, they have to hold their nerve and just not answer you to have that option explained to them. POND: Well the point about the suggestion that a million people are holding out is also, I’m afraid, nonsense. This is a 2- year process of people moving across to different options, and there are still many of those million people who still have not come back to us with details but many of whom will in the weeks ahead. LEWIS: Well indeed, but your own target shows that 700 odd thousand won’t have moved to bank accounts by April. That’s 700,000 still without bank account details on your own targets. POND: Well that’s on a target which we now know we’re almost certain to exceed, so it’s going to be far fewer than that. And we have made sure that where people cannot operate an account, that there is a cheque-based method of payment that can be paid into either a bank account or cashed at the Post Office. And of course the great majority of people can cash still their money at the Post Office on a weekly basis even if they use many of the bank accounts available or the Post Office card account. But the option of the cheque-based method of payment is not going to be the best method for most people, as this research has shown. If people don’t give us the details, then we will pay them by cheque. But, frankly, I don’t want to encourage people to do that, Paul. It’s the only option for some people, but it’s certainly not the best option for most people. LEWIS: No, you don’t want to encourage people. I understand that and you and I might both agree a bank account is the most efficient and sensible way to do it. But if people want cheques, they should be given that choice. Are you telling us now that if they really want that, you will let them do it without any hindrance? POND: Oh if people insist that they’re not going to have a bank account and won’t give us any details, then we will pay them through the cheque-based method of payment. Now the research shows that out of 1500 people who were interviewed only 11 said that they would want to go back to the old order books. So most people must know what their options are, and that’s why this letter is intended to encourage people to call us, to get in touch with us so that we can talk through the options. If at the end of that process they say “don’t like any of those, send me the cheque”, that is what we will do. LEWIS: And the option of a cheque will be explained by those call centre people when they ring up? POND: Yes it is. And those calls are monitored. We make sure the people know the full range of their options. LEWIS: Chris Pond, minister in charge of payment reform at the Department for Work and Pensions, thanks for talking to us. And if you have questions about pensions – state pensions, company pensions or private pensions – you can call our phone-in Money Box Live on Monday afternoon with Vincent Duggleby. One of the UK’s biggest providers of loans and credit cards has admitted breaking the data protection act and distributing details of 2,600 customers to each other. HFC Bank, which is owned by the UK’s biggest bank HSBC, operates credit cards for Marbles and Vauxhall GM, as well as affinity cards for the Law Society and the Open University. On Tuesday, it sent e-mails to 3 groups of more than 800 customers each, asking them to call a helpline number urgently; but because of an error by the senior payment adviser who sent it, the e- mail addresses of all the customers who received it were sent to everyone else in that group. Brad from Essex was one of those who was contacted. BRAD: When I first got all of these e-mails, I thought it was a hoax and I was absolutely gobsmacked and I really didn’t know what to do or who to talk to. After wading through the hundreds of e- mails, I did finally discover that it was not a hoax and that it was HFC and it was totally serious, and I immediately thought to myself okay there’s going to be a few problems here. LEWIS: Brad is so annoyed, he’s set up a website for the people affected to share their stories and views … and they’re not very flattering about HFC. Many people share Brad’s concerns about the breach of security. BRAD: When this was sent out, some of the people had the auto reply on the e-mailing system switched on, so when the auto reply went out to the 800 odd customers it contained their pager numbers, their mobile numbers, their home phone numbers, and you know this is all information that people really don’t want to share. We’re now all open to fraud. It was a huge mess. LEWIS: Internet specialist Alan Stevens says it’s completely unacceptable for a bank to behave in this way. STEVENS: I think this is a very worrying precedent. The fact is e-mail is probably one of the most insecure methods to use to contact somebody because when you send somebody an e-mail, it doesn’t just go to them. All sorts of copies get left around the Internet. Scammers on line are very keen to get hold of people’s identities. If they can actually identify a real person, and moreover know what bank they bank with - quite a serious thing. LEWIS: So how does HFC Bank explain this breach and what will it do about it? Martin Rutland is its Director of Corporate Affairs. RUTLAND: I think there are times when you just have to put your hand up and say it was a human error. We’ve been sending e- mails out this way for well over a year. There’d never been a problem, but in this instance we made a mistake and we unreservedly apologise for it. LEWIS: This e-mail to me, when I first saw it, looked like one of these fishing e-mails where a crook is trying to get information from people. You shouldn’t really be sending unsecure e- mails to your customers, should you? RUTLAND: I too would have been upset if I’d have received an e-mail and seen 800 other names on that. I would have become far happier if the company had apologised to me, explained it, and, as we’ve done, offered £50 as a good will gesture and said that this can’t happen again. LEWIS: Well we’ll come to that, but on your website it says: ‘please note HFC Bank would never send e-mails asking for confidential or personal information. If you receive such an e-mail, delete it immediately’. RUTLAND: Well, Paul, you’ve confirmed the position. We did not ask customers to submit confidential details by e-mails. We merely asked them to give us a call. LEWIS: You must have seen the website that at least one group of these people have set up. They’re saying £50 is a joke. They want a lot more than that. RUTLAND: We think that £50 is a generous amount. Paul, if you were to get hold of my e-mail address, I think there’s very little you could do to me to cause me financial damage. LEWIS: The point that’s been made to us though is that these e-mails sometimes are sent to office addresses. They were replied to with an out of office auto reply, which did contain information like phone numbers, pager numbers, and those were circulated to everybody on the list. RUTLAND: We believe that there are no information about customers accounts have been circulated, which is the key thing here, Paul. LEWIS: Haven’t you really though just lost the trust of these customers? £50 is just not going to buy that back. RUTLAND: I think the test in situations like this is how quickly a company recovers and how they explain it to their customers, and I think we’ve done a first class job in that area. LEWIS: First class is not a word I’ve seen on the website these people have set up, I have to say. What if they want to take it further? RUTLAND: If someone can prove that by having their e- mail address sent to another customer has caused them financial loss, then they should contact us and make an appropriate claim. The advice we give is like all financial institutions: never, ever give details of your account out over the Internet. LEWIS: Well or indeed never send 800 e-mails of customers to everyone else. RUTLAND: Well, as I said, that wasn’t planned. It was an honest mistake, Paul, which we’ve apologised for. LEWIS: Martin Rutland. And the Information Commissioner’s Office has confirmed that HFC did break data protection laws but told Money Box “it won’t take action on this occasion”. HFC says 2,600 customer accounts have now been credited with that £50. More bad news this week from Britain’s favourite retailer. NEWS BULLETIN: Marks and Spencer has again reported a sharp drop in sales in the 10 weeks since the entrepreneur Phillip Green tried to buy out the company. LEWIS: Well that news took the shine off an invitation by Marks and Spencer this week to its 300,000 individual shareholders. It offered to buy back the shares they own if they want to sell. The price isn’t fixed; it’ll be somewhere between £3.32 and £3.80 per share. Now it’s just 10 weeks since the board of Marks and Spencer rejected an offer by the entrepreneur Phillip Green to buy the company for £4 a share, so why is the buy back price so much less? And, indeed, should shareholders be tempted? With me is Tony Craze from stockbrokers tonycraze.com. Tony, this buy back – just explain how it works first. CRAZE: Well basically, Paul, what will happen is that people that want to tender for their shares will fill in the blue form that will be sent to them by the company. They can tender for all or just some of their shares and it’s going to be at £3.32 to £3.80, as you say. Now what happens is that on 22nd October, subject to how many shares have actually been tendered, they will then say okay we’ve got 2.3 billion pounds available here. They divide the 2.3 billion into the number of shares that have been tendered and they will come up with a price. LEWIS: And that’s the price you have to accept? CRAZE: That’s what they call the strike price, yes. LEWIS: And if you wanted to sell them for higher than that, they won’t buy them? CRAZE: They won’t. LEWIS: If it was lower, that’s the price you’ll get? CRAZE: Absolutely right, yes. LEWIS: Okay, well that doesn’t sound as complicated as I feared actually. But why is that price so much less than the £4 which Phillip Green offered in July, which of course shareholders weren’t even allowed to vote on? The board said it wasn’t enough. CRAZE: You’re absolutely right. I don’t understand. It’s a bit cheeky, I think. When you look at Paul Myners and Stewart Rose, they’ve said all along that we’re going to return 2.3 billion to shareholders. LEWIS: These are the current bosses at Marks and Spencer? CRAZE: That’s right, yeah. Now that was some form of inducement, if you like, to vote against – not that they got the opportunity to vote for, incidentally – but to vote against Phillip Green acquiring their company, and a lot of them stood by that. Now there’s no question in my mind that it should have started with a 4 and not a 3, this tender offer. It’s a bit of a cheeky bid because the object was not to buy back shares as cheaply as they could. It was to say thank you for supporting us. LEWIS: There are 300,000 of these shareholders – I think the biggest private shareholding outside the privatised industries. What should they do? CRAZE: Well it’s interesting. Let me tell you what the Marks and Spencer directors are going to do. They’re not tendering their shares. I’ve spoken to Marks and Spencer’s and all of the directors are not tendering for their shares, so they obviously believe that this is a cheeky bid themselves. So my suggestion to shareholders would be that they should do likewise and not tender their shares because if you believe that Stewart Rose is going to turn this company round, then quite frankly they’re saying it’s going to be worth more than £4 a share. And we’re talking short-term. But when you look at the trading statement that came out last week, there’s absolutely no indication at all that he’s doing that. LEWIS: Okay, so sit tight is the advice from Tony Craze of tonycraze.com. Thanks very much for that, Tony. Now there are concerns this week about changes in the way two major banks pay staff who deal with customers and sell them financial products. Bradford and Bingley are scrapping its commitment, which is unique among the banks, to independent financial advice. Soon its advisers will only sell financial products from a limited range of companies. At the same time, it’s telling sales staff they must sell a certain quota of insurance and other products, alongside mortgages, to earn their commission. And in a couple of months Bradford and Bingley’s high street rival, Abbey, is also expected to change the way it pays sales staff. The Spanish bank, Santander, is poised to buy Abbey and says if its bid is successful, it will … SPOKESPERSON: Change the balance of staff remuneration to include a higher variable element. LEWIS: In other words, sales staff will earn their salary and more commission. And there’ll be more of them out front in the branches, using what Santander calls … SPOKESPERSON: More sophisticated customer targeting based on predictive analysis of the propensity to buy additional products. LEWIS: I think that means selling us more stuff. And this change of approach, which is happening all along the high street banks, worries Dai Davis from the banking trade union Unifi. DAVIS: We think this is a dangerous ploy, and we’ve seen it for a number of years now. First of all, it increases the stress on the advisers to sell products to people who may or may not want them, and those customers may just walk to another provider. And that’ll have a huge impact on the sales advisers because of course they won’t be generating the sales lead, they won’t be having the targets that they’re being set; and not only are people being penalised through their salary packages, they’re also being penalised potentially through dismissal for not achieving certain sales targets. LEWIS: Well Bradford and Bingley wouldn’t come on Money Box to talk about its new policy and of course Santander and Abbey can say very little while their deal is going through. But I’m joined by Mick McAteer from the Consumers’ Association. Mick, Bradford and Bingley have told Money Box that these changes won’t compromise the advice staff give and its first priority is to offer customers the best advice. So will it really make a difference? Should customers be worried? MCATEER: I don’t think this is good news at all. I mean if you think about it, as most people will know the financial services market is characterised by high pressure sales, complex products, hidden terms and conditions and so on. But I think one of the biggest causes of detriment in the past has been these business models where the big financial institutions reward their staff according to how much they sell rather than the quality of sales. And what I’m concerned about now is a kind of an arms race developing amongst the big financial institutions. You know once the rivals see Banco Santander and Bradford and Bingley move towards this more aggressive sales policy, they’ll feel they’ll have to follow suit, and before you know it all these costs will be passed onto consumers. LEWIS: But of course financial products have always been sold on commission, haven’t they? That is just the way they’re sold. MCATEER: I think indeed and one of the main reasons we’ve had so much mis selling and so much detriment I think has been that reliance on that commission driven model. I think it encourages people to sell volumes of products rather than actually look after the consumer interests. In many cases, you know it may have been better not to recommend a product at all. You know the best advice may have been no sale. But of course you know if your livelihood depends on you selling products, then you know, human nature being what it is, you’ll be incentivised to sell a product. LEWIS: Or, as we’ve often said, the best advice might be to pay off debt rather than to save. MCATEER: Indeed. LEWIS: But what can be done about it? What can the Financial Services Authority do? Can it really interfere with that sales process to make it better? MCATEER: I really think that the time has come for the Financial Services Authority to look really hard and fast at the way commission influences sales, and what I’d like to see happen is for the FSA to bring in a rule which says that any of these remuneration strategies should not conflict with the duty that firms have to treat customers fairly. LEWIS: And that’s an overriding duty, isn’t it, under financial services law? MCATEER: I think it ought to be, but at the moment the FSA’s working on this high level principles approach to regulation where it’s delegating authority to the directors to ensure that customers are treated fairly. But, again, when it comes to the point of sale, when people are sitting in a high pressurised sales environment, until someone actually provides some kind of constraint on their behaviour, I think we’re going to see mis selling continue. LEWIS: I suppose though you could say that if you are mis sold, you could then complain and get compensation as many, many people have? MCATEER: I think always you know prevention’s better than a cure. You know I would rather see you know the sales practices change so that people are sold quality products rather than just products for the sake of it. I’d rather see that happening than to have yet another financial scandal because the last thing the industry needs is another financial scandal given you know the collapse in confidence in the market. LEWIS: Mick McAteer from Consumers’ Association, thanks very much. Well it’s the time of year when the political parties take a week out by the seaside to discuss their policies. The Liberal Democrats started it off this week in Bournemouth. Next week it’s Labour, and the week after the Conservatives. It’s also the time that pressure groups try to influence those policies by holding their own fringe meetings around the conference. Well this year the Building Societies Association is trying to get politicians thinking about making houses more affordable after the huge price rises of the last few years. I attended the first of their meetings at the Lib-Dem conference this week. The speakers included Sue Reagan who’s Policy Director of the housing charity Shelter. REAGAN: The affordability crisis is affecting everyone throughout society, and it’s hitting those at the bottom worst. It’s clearly important that people on low and moderate incomes aren’t priced out of the housing market. The Government needs a long-term strategy to rebalance the housing market and at the moment the level of investment and the number of social houses that are being built are extremely low. LEWIS: Well that’s the problem. What’s the answer? Speaking for the Liberal Democrats was Ed Davey. He’s MP for Kingston and Surbiton and in charge of Liberal Democrat policy on housing and planning. So after the meeting, I asked him exactly what his party is proposing. DAVEY: We’re developing ideas to see whether we can take land out of the equation because it’s high land prices that create the high property prices. And we’ve got ideas for forming land trusts using public sector land which is owned by the Ministry of Defence or the National Health Service and then you could have housing associations building the houses on the top and people will buy shares in the houses, not having to pay for the land and that would be one step up the housing ladder. Moreover, we have this other idea which we’ve called ‘community land auctions’ where the council will enable local landowners to sell the land to the council – land that hasn’t yet got planning permission; but thus the council will get hold of cheap land and use the value that it creates through planning permission to be able to stimulate the building of affordable housing for the local community. LEWIS: Doesn’t that require altruistic landowners though because if you own the land, surely you’d hang on to it in the hope the council would have to give it planning permission to build the houses we need anyway? DAVEY: No, the idea is the council would pay a small premium over and above the price of the land at the moment, in its current status, whether it was zoned for industrial or agricultural land. So it would still be incentive for the landowners, but the value that’s created through the community’s planning permission would come to the community and not to the landowner. LEWIS: This is going to take a long time. What are the Liberal Democrat policies on the unaffordability of housing for many, many young people? DAVEY: Well we’ve got short-term solutions as well. We believe the scandal of empty homes is something that the Government should be addressing. When we tabled amendments in the House of Commons to tackle the empty homes scandal, the Government said we were talking nonsense. When the housing bill went through to the Lords, they changed their mind. LEWIS: So where are these empty homes? DAVEY: The empty homes are not just in low demand areas. They’re in high demand areas. I have streets in my constituency where there are empty homes that could be housing people who are in temporary accommodation or who are homeless. And it’s an absolute scandal that in areas of high demand, we’re not using these empty homes. LEWIS: hy are these homes empty? With houses worth on average a couple of hundred thousand pounds, why do people leave them empty? DAVEY: People who own these homes either are absentee very wealthy people for whom the house is a very small part of their portfolio, or they’re very elderly and need some support and don’t want the hassle of renting out homes. So what we’re saying is the local authority should in a very sympathetic way, sensitive way, work with these people, persuade them to voluntarily rent these empty homes out. But if ultimately the landlord refuses to do that, the local authority has to have some back stop powers to force leasing. LEWIS: It sounds a bit though like confiscating people’s property just because they want to leave it empty. Surely that’s a police state? DAVEY: This is not compulsory purchase, which is already in the system of course. This is compulsory leasing. And moreover, the way that we believe the Government should implement this is to ensure that the property owner a) got their asset back after a short period, maybe 3 years, but also benefited from the income stream that that asset generates in the meantime. LEWIS: Ed Davey, Liberal Democrat housing spokesman. And you can have your say about how to make housing more affordable on our website: bbc.co.uk/moneybox. Well last week Money Box broadcast a special programme all about the state pension and lots of listeners have asked us for more information about something we mentioned. It’s a pension for people over 80 and it could mean more money for some older pensioners. Money Box’ Jennifer Clarke’s got more. Jen, what’s the problem? CLARKE: It’s called a ‘category d’ pension and it’s a special state pension for people who’ve not made enough contributions to get the full state pension. As soon as they reach 80, whatever their contribution history, they’re entitled to the money as long as they’ve lived in the UK for 10 of the last 20 years. LEWIS: And how much is it worth? CLARKE: It’s about 60% of the basic state pension, so currently around £46 a week. But I should stress, Paul, this is not paid on top of the normal state pension. Anyone – man or woman, married or single – who has no state pension or gets a state pension of less than £46 a week – will be able to get it topped up to that level. LEWIS: And how many people can get it? CLARKE: Not very many at the moment. Only around 23,000 get it, but it could be that more just don’t know about it. LEWIS: Thanks, Jen. And you can hear that pension programme or read a transcript on our website: bbc.co.uk/moneybox. And Jen, while you’re here, the weekend papers are full of speculation about Conservative plans to cut inheritance tax. CLARKE: Yes, long on speculation; short on detail. The party has said it’s considering raising the threshold at which inheritance tax becomes payable. Critics argue it’s currently far too low. Now the Tories are being careful not to promise a cut, but the idea will be discussed at the party conference next month - although no confirmation of what the new threshold might be or how the tax cut might be funded. LEWIS: Thanks, Jen. And that’s it for today. You can find out more from the BBC Action Line 0800 044 044 or of course our website. There’s personal finance stories on Working Lunch, BBC2 weekday lunchtimes. I’m back next weekend with Money Box as usual. The website is bbc.co.uk/moneybox. Today the producer was Jennifer Clarke and I’m Paul Lewis.