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 15 APRIL 2006 1200-1230 BBC RADIO 4 LEWIS: Hello. In today’s programme the controversy over the new Home Information Packs that will be compulsory from June next year when you sell your home in England or Wales. Avoiding bankruptcy by doing a deal with your creditors. JANE: I do feel guilty, but to go out and spend that amount of money and then make no attempt to pay it back is cheating. LEWIS: How going green can save you money. And our reporter has a day out with the millionaire makers. AGENT MILLION: It is exciting. That person’s going to know they’re a millionaire by this time tonight. They’ve got no idea and I know it’s going to be them. LEWIS: But first, Home Information Packs. The government has now announced the timetable for testing the packs prior to their introduction on June 1st 2007. Everyone selling a home in England or Wales from that date will have to provide a pack at an average cost of more than £700. But cost isn’t the only controversial aspect of the new system. Although the pack will contain local authority searches about planning and building issues, the title to the property and a new home condition report, it will not include a valuation and there are fears that the other information will soon be out of date and may not be trusted by buyers or their lenders. I asked housing minister Yvette Cooper why the government remained committed to the change. COOPER: I don’t think the current process is working. We’ve got a million pounds wasted every day by consumers on sales that fall through, often because people just don’t have the facts that they need when they agree to buy or sell their home. That’s why consumer groups have been campaigning for HIPs for such a long time and really the only people who are opposing them are the people who make money out of the current system. You also of course have the added benefit that first time buyers will get information they currently have to pay for all for free. LEWIS: And how confident are you it will begin on 1st June 2007? COOPER: Well we set out a process to introduce Home Information Packs across the country from 1st June next year. We do need proper testing, but that testing has already started now with organisations across the country already providing Home Information Packs, and we need to keep on with that process to make sure that we get it right. But in the end, this is I think about making the system more efficient and about saving people money on what is such a costly process at the moment. LEWIS: Yvette Cooper. The Conservatives oppose the change. Michael Gove is their housing spokesman. GOVE: We think that the Home Information Pack is a bureaucratic, one size fits all way of trying to regulate the property market, which means more costs for sellers and potentially more costs therefore for buyers, and that it will actually contribute to a constriction of supply in the market. It won’t give buyers the confidence that they deserve and it also won’t give lenders what they demand in order to ensure that they can back up any transaction. So we’d get rid of them. LEWIS: Well two different political views there. And the house selling industry is also split. With me are Nick Salmon, an estate agent who represents Splinta – Sellers’ Pack Law Is Not The Answer; and Paul Broadhead is Deputy Director General at the Association of HIP providers. Paul Broadhead, isn’t this just a great money making machine for the Home Information Pack industry you represent? BROADHEAD: Absolutely not. This is legislation that was introduced for the benefit of the consumer to ensure that they had certainty earlier in the process, knew what they were buying and tried to make the process slicker and less stressful. LEWIS: Nick Salmon, the system doesn’t work - it is slow, it is wasteful, we all know that. Won’t this help to speed things up for customers? SALMON: It might surprise you to know that I’m actually very pro-pack. The problem that we’ve got is that the application of it, as the government sees it today, is impractical. The pack has no shelf life and we could have a situation where you come to me to buy a property that’s been on the market for let’s say 6 months, I give you a pack and apparently that’s all up to date and fine, and the reality is it isn’t. Would you rely upon a survey that had been done 6 months ago? LEWIS: And it’s not just relying on it because it’s old, is it Paul Broadhead? It’s also the fact that this pack is produced by the seller. The buyer must still beware as ever. BROADHEAD: You’re absolutely right, the home condition report in particular is commissioned by the seller. But it is actually done for the seller, the buyer and also the mortgage lender, so the three parties all have benefit of having the information up front. LEWIS: But it’s relying on it, isn’t it? Wouldn’t any solicitor say to me well really you’ve got to go and get your own survey done because you’re not quite sure how old that information is, whether it’s true? BROADHEAD: Absolutely not. The home condition report will be done by professionals and they’ll have the right of redress whether you are a seller of the property, a purchaser of the property or indeed the mortgage lender. LEWIS: But of course the lender isn’t going to rely on it. They’re going to do their own valuation survey because there isn’t a valuation in the pack, is there? BROADHEAD: Well a number of lenders are actually working very hard and investing an awful lot of money at the moment to use the home condition report in their underwriting systems. The home condition report does give you the information on the condition of the property, enables you to use other tools such as automated valuation models which are getting more robust each day. SALMON: Hang on, Paul. You know as well as I do that in the United States where they’ve had automated valuation models for over a decade, they are still making physical inspections of over 40% of the properties that people apply for mortgages on. It’s going to be identical over here. LEWIS: And Nick, you say that you’re not against the pack per se. How would you do it if it was up to you? SALMON: Our argument has always been that you prepare the pack if it can be done as quickly as the government says it can … LEWIS: Which is what? SALMON: They’re talking in terms of five days eventually, but there is an awfully long way to go before that happens because the technologies are not in place. You won’t be able to put your property on the market for up to two weeks after you instruct the agent whilst the pack is being prepared. We say that’s a nonsense. It would be better to prepare the pack at the time that the buyer comes on the scene. The solicitors will rely on it, the mortgage lenders will be more inclined to rely on it, and most importantly the buyer can rely on it because it’s fresh. LEWIS: But of course if that buyer then said no thanks, wouldn’t you then have to do it all over again for the next buyer? SALMON: Well it’s possible, but I think you have to bear in mind that three quarters of failed transactions are due to something that the buyer does, not the seller. Buyers are very good at pulling out of deals and they do it for a whole host of human reasons. If I tell you that less than 4% of all failed transactions are due to an unexpected bad survey, you can see that the government is creating an enormous hammer to crack a very small nut. LEWIS: Paul, one of the concerns about the time it’s going to take is the number of inspectors. We’re going to need over 7,000 inspectors. The first 500 who took their exams, 200 of them failed and we’ve only got 15 months to get these people in post. That isn’t going to happen, is it? BROADHEAD: There are actually 4,000 home inspectors in training at the moment. There are a large number of chartered surveyors that having not registered for the training as yet are working hard to pull their portfolio together and they can be qualified as a home inspector once they’ve done that background work very, very quickly. LEWIS: And how do you react to Nick’s idea that we should do this pack not before you start selling it, but once there’s a buyer in place? BROADHEAD: I think what would happen there is that buyers will be committing to deals, as they are today, without the information upfront. They will then get the information later in the transaction. They will realise there is something wrong with the property. The transaction will fall down and we’re back to exactly square one. SALMON: Well hang on a minute, Paul; I can’t accept that. The government’s own statistic is that less than 4% of sales fall through due to an unexpected bad survey. The biggest factor in people pulling out of a deal is because they can’t find something they want to buy in the sellers case or the fact that they can’t get the job that they thought they were going to get - a whole host of human reasons. LEWIS: But in a word, is it going to happen on 1st June 2007? SALMON: No. LEWIS: Paul? BROADHEAD: Yes, absolutely it is going to happen on 1st June 2007. Those that are opposing it are those that tend to have their fees under threat. SALMON: No, that’s not true because the only time that an estate agent gets paid is when a deal goes through. If this was such a good idea, you would find the industry embracing it wholeheartedly. As it is, it doesn’t. LEWIS: Nick Salmon and Paul Broadhead. And we’d like to hear what you think about Home Information Packs, so why not join in the debate on our website: bbc.co.uk/moneybox. For people in severe financial difficulties, the thought of bankruptcy can be frightening. You risk losing your home and most of your possessions to repay what you can to creditors. But there is a less devastating alternative called an Individual Voluntary Arrangement, or IVA. The law’s changing to make them easier to set up, but there are concerns about the rapid growth in IVA’s as Louise Greenwood has been finding out. GREENWOOD: The number of people taking out an IVA as a way of getting out of debt has risen from 7,000 a year in 2003 to over 28,000 at the last count. Nick Hood of the insolvency practitioner Begbies Traynor, who sets up IVA’s, explains how they work. HOOD: Basically what you will do is go to the creditors and say I can’t pay you in full either at all or not now. I’m prepared to put a percentage of my income, whatever I have free, on the table, pay it to you over a period of time, and then maybe you’ll get 30%, 40%, 50% of your money back. And that’s really how it works. You’re saying to your creditors I’ve got a problem now, but I’d like to try and cut a deal with you. GREENWOOD: To take one out you must appoint a licensed insolvency practitioner to act for you and the majority of creditors must agree that it’s the right way forward. They’ll do this if they think they’ll get more money back from giving you an IVA than making you bankrupt, so the creditors get a proportion of their money back and the debtor gets to keep their home and car. IVA’s cover debts of up to £75,000 and run for about 5 years, after which the slate is automatically wiped clean. Jane from Dorset fell into debt in her twenties when her relationship broke up and she became a single parent. JANE: I was using the credit card to support us on shopping and normal day to day living, not realising really that it was racking up and racking up. And then finally I kind of sat down and thought hang on a minute, I can’t even afford to make the minimum payments on my daily living let alone the minimum payments on the debts I’ve got. GREENWOOD: Jane took out an Individual Voluntary Arrangement with a debt management firm and now hopes to clear most of her £20,000 debt. But there is a downside to getting an IVA: your credit rating is affected although you can still have a bank account, get a mortgage and borrow money – all things that bankrupts find very difficult. Jane believes it’s a more honest route out of debt than bankruptcy. JANE: I do feel guilty. I feel that you know I’ve taken the mickey a bit. But to go out and spend that amount of money and then make no attempt to pay it back is cheating, as far as I’m concerned, and that’s another reason that I didn’t want to declare myself bankrupt. GREENWOOD: But here at the headquarters of Citizens Advice, staff are unhappy about the sudden popularity of IVA’s. They can be expensive. An insolvency practitioner will charge a fee to set one up, which can be anything from £1500 to over £5,000, which can be charged upfront or rolled over into the debt. Because of the money to be made, there are claims that some debt management firms are selling IVA’s to people who’d actually be better off going bankrupt. Peter Tutton, Social Policy Officer at Citizens Advice, says they’re being sold to people on very low incomes and even to those on benefits. TUTTON: The evidence we get is they’ve seen an advert, been encouraged into it because they have a debt problem, and it’s just not appropriate for them and they don’t find out till it’s too late. They enter into it and they’re told this is what you’ll have to pay. They make efforts to pay that. It puts such a strain on their budget that actually it collapses and then their debt problem’s worse. GREENWOOD: That’s because default on repayments and your creditors can still file for a bankruptcy order against you. Well more debtors could end up in this position if, as is predicted, even more of them take out an IVA when the government introduces a new streamlined version late next year. Under the so-called simplified IVA, fewer creditors will need to approve an application, but plans to put a cap on charges have been abandoned. Nick Hood of Begbies Traynor warns this new and potentially lucrative market could be exploited. HOOD: There is a concern that this move will pull in people who are looking at this as a profit making exercise. With a running rate of 28,000 IVA’s now, with a simplified IVA those numbers must rise. Now where are the people coming from to handle these cases because there is a limit to how many people at this stage who have sufficient skill? LEWIS: Insolvency practitioner Nick Hood ending that report by Louise Greenwood. And if you think an IVA may be right for you, consult one of the free debt counselling services first. Details of how to do that on our website and with the help line. 23 million people have premium bonds in the hope of winning a prize from the monthly draw. If you do win, you’ll normally be told by letter, but if you hit the million pound jackpot it won’t be the postman who delivers the good news, as Jessica Laugharne’s been finding out. LAUGHARNE: Today I’m in Nottingham to meet a mysterious woman. I can’t tell you her real name or describe what she looks like, but if she knocked on your door I’m sure you’d be glad to meet her. AGENT MILLION: Hello, my name’s Agent Million and I’m in my hotel room in the city of Nottingham and I’m just about to go and tell someone they’ve won £1 million on the premium bond prize draw. I’ve been doing this job for 5 years now and it is exciting. You know you’re driving along and you’re thinking well it’s about a quarter past, half past nine in the morning. Somebody’s going to be eating their breakfast and that person’s going to know they’re a millionaire by this time tonight, and they’ve got no idea and I know it’s going to be them. LAUGHARNE: Each of the 154 premium bond millionaires has been told the good news in person, but delivering it can be harder than you’d think. Agent Million can only explain who she is to the actual winner, which is awkward if they’re not the person who answers the door. AGENT MILLION: One lady has actually shouted at her husband that some woman’s stood at the door and “she won’t tell me what it’s about, but you’d better tell me what it’s about”, so that was quite embarrassing. It was interesting afterwards. We were best of friends and you know she was very apologetic, but I wouldn’t let a lady speak to my husband and not know about it either so I can understand where she was coming from. LAUGHARNE: National Savings protects its winners’ privacy. So while Agent Million went off to find the lucky Nottingham winner, I asked some shoppers in the town what they’d do with a million pounds. WOMAN: I think I’d definitely give up work because so many people say that it won’t change them and they’ll keep working, but I’d give up the day job as soon as possible and go shopping. MAN: I think I’d probably cover it up and not tell anyone. Probably a car and a holiday. I’d certainly enjoy thinking about it. MAN 2: The first thing I’d do is retire and have some long lie-ins. LAUGHARNE: Anything else? What would you do with the money? MAN 2: Well I’d keep so much for myself and the rest would go to my family. LAUGHARNE: By the end of the afternoon Agent Million had managed to speak to the winner but, like a lot of others before him, he took some convincing. AGENT MILLION: He was quite suspicious and quite rightly so. I showed him my evidence of identity and eventually he did let me in. But, yeah, he was quite cautious and he did actually say, “Is this an April fool?” LAUGHARNE: The winner who has the maximum amount you can hold invested in premium bonds – that’s £30,000 – couldn’t quite believe he’d scooped the top prize, but his family were delighted. AGENT MILLION: His wife was probably more excited than he was. And they do hold a joint account, which is very fortunate, and he did say you know “What’s mine is hers as well”, so they will obviously be sharing it, so she was very pleased. LAUGHARNE: I’m walking along the seafront in Blackpool, home to the famous tower and Pleasure Beach, but also home to the headquarters of National Savings and Investments. And it’s here that the Nottingham winner’s lucky numbers came up. AGENT MILLION 2: Hello, Jessica. LAUGHARNE: Hi, nice to meet you. AGENT MILLION 2: Welcome to National Savings and Investments Blackpool. LAUGHARNE: That’s Agent Million No. 2. Last year National Savings created a second monthly millionaire winner and it’s his job to visit them, but today he was introducing me to someone else. AGENT MILLION 2: Well this is Ernie. He’s essentially a little black box about 1 ft by 1½ ft. And he’s quite a busy little chap. He’ll churn out a million numbers an hour once a month for about 3½ hours. LAUGHARNE: Steeped in security at National Savings is Ernie – or, to give him his full name, The Electronic Random Number Indicator Equipment. His job is to generate a series of random numbers every month – one for each premium bond prize that gets paid out. The first two numbers are for the million pound jackpots; the next few for other high value prizes; and so on down to the many £50 prizes. Although he’s kept under lock and key now, in the past he was quite popular with tourists. AGENT MILLION 2: Ernie was one of the major attractions in the Blackpool area. We used to get coach loads of people coming to see him and we used to do a demonstration draw and people used to ask questions and we used to do a presentation, show them a video of how we actually do the draw, and it was all quite entertaining. LAUGHARNE: The odds of winning the £1 million jackpot in April were around 15 billion to 1, but the odds of winning any prize are better. They’re set at 24,000 to 1. Many believe only newer bonds or those people with the full £30,000 invested ever win, but Agent Million No. 2 says every bond is equal. AGENT MILLION 2: I can guarantee you now every single bond that’s in the system now has the same chance of winning as any other bond. I mean we have had people who have low value bonds winning higher value prizes and vice versa as well. The reason you don’t see a lot of the old ones winning any more is because there’s not a lot of them left in the system. LAUGHARNE: But not satisfied with this, some premium bond holders try and influence Ernie directly. AGENT MILLION 2: He does get quite a large amount of mail each month ranging from poems to thank you letters to ‘please can I win’ letters. We’ve even had one gentleman write an actual song to music. LAUGHARNE: A song to Ernie? AGENT MILLION 2: Yeah, an ode to Ernie. But he’s totally impervious and totally random, so we can’t sway Ernie in any way whatsoever. LAUGHARNE: Elsewhere in the building a team of staff try to track down the winners who’ve moved house and can’t be found because although there are no million pound jackpots outstanding, as National Savings John Foster explains there’s plenty of money waiting to be collected. FOSTER: There’s currently 430,000 prizes that are unclaimed, worth approximately £25 million in total. People tend to inform the banks and the building societies and the people that they owe money to, but when we want to give them money we find out that they’ve moved away and not let us know their latest recorded address. The biggest prize that’s unclaimed up to date is £25,000. That money will remain in our coffers until we can actually make contact and we do keep trying. When they do eventually come in, we’ll pay the £25,000 to them quite gladly. LEWIS: John Foster ending that report from Jessica Laugharne. And there’s no time limit on claiming premium bond prizes. Details of how to check your numbers on our website and with the help line. The latest must have accessory for politicians seems to be a wind turbine on their home. Energy Minister Malcolm Wicks and Tory leader David Cameron are both putting in planning applications for them. The government’s now allocated a total of £18 million to subsidise what is called micro generation. Earlier I spoke to energy and climate change specialist Liz Reason who lives in a home she planned herself to be one of the most energy efficient in the UK. She explained how the new cash will be used. REASON: That money is going to be available for putting what we might call the renewable technologies into people’s homes. It’s windmills, it’s solar hot water heating from your roof, it’s photovoltaic generation from your roof. LEWIS: Photovoltaics is when the sunlight falls on the tiles and it actually generates electricity rather than just heats up the water? REASON: That’s right, so we talk about solar water heating and PV, photovoltaics. LEWIS: These are all quite expensive things though, aren’t they? They’re going to knock you back a few thousand pounds if you go in for them. REASON: Yes, most of them are very expensive. The government is actually looking at this as a way of saving carbon, which is carbon dioxide which is the climate change gases, and they’re saying this is a holistic programme. They do not want to give grants to people whose first thought is to invest in something very expensive and they will only let you have a grant once you’ve done all the cheaper things. Your roof must be insulated to a depth of 12 inches, your cavity wall must be insulated and you must have all low energy lighting. LEWIS: So you’re not going to be allowed to do the sort of high tech sexy things unless you’ve done the basics first. If you’ve done those though, what kind of percentage of the expensive stuff will you get paid by these grants? REASON: It varies. Some of them it’s 20%, some of it is 30%, and photovoltaics it’s 50%. So the government of course can say up to 50% and we all get excited, but actually the 50% is only for the photovoltaics. LEWIS: And do the sums add up on these things in terms of what you might save on your electricity bill? REASON: Well the ones that add up are the very cheap things because you pay back what you’ve spent extremely quickly. Let’s say the average house emits five tonnes of CO2 every year and you want to save a tonne of it. If you do the cheapest measures – that would be draught-proofing, that only costs you a few tens of pounds and will instantly make you feel warmer, believe me, or wall insulation or loft insulation or change your light bulbs, for heaven’s sake, the low energy light bulbs are so much better than they used to be – then that’s going to cost you in the region of £10 a tonne. Whereas if you want to invest in some of these other technologies, you’ll be spending £1200 a tonne. So what’s the economically rational thing to do there? LEWIS: And we heard earlier in the programme, Liz, about these new Home Information Packs. Part of that, as I understand it, is going to be an energy efficiency label. What will that say? REASON: They look like the A to G label that you’ve seen on fridges and other kinds of appliance. My house might get an A, but I don’t think there’ll be very many other homes that get A’s. And the label’s going to tell you two things – not only what your home is costing to run, and you’ll have to be able to supply your energy bills to demonstrate that – but also how much it could cost to run if you were running it more efficiently. So people are going to know perhaps that you’ve got an F house that could actually be a D house or even a C house. So I think the idea is the incentive will be on you to make it a C house in the first instance before you try selling it. LEWIS: Liz Reason. And Jennifer Clarke’s with me. Jennifer, a big fine this week for Royal Liver Assurance. CLARKE: Yes, the Financial Services Authority fined Royal Liver £550,000 for mis-selling with-profit savings policies to 2500 customers aged 60 or more. Royal Liver’s agreed to pay them £2.5 million in compensation. The FSA said the product was unsuitable for people who didn’t require the life insurance it offered and that some customers would get back less than the premiums paid in. LEWIS: And more news from Standard Life as it continues to prepare for its proposed stock market flotation. CLARKE: Yes, on Tuesday we’ll get some important numbers - the likely range of the share price if the flotation happens and details about the size of the average windfall. The company will also start sending details of individual share allocations to qualifying members. One weekend press report says those letters will also contain disappointing news of multi-million pound losses on investment policies sold in 2004. LEWIS: Thanks, Jennifer. And that’s it for today. You can find out more from the BBC Action Line – 0800 044 044 – and of course our website, bbc.co.uk/moneybox where you can contact us and listen to the programme again and of course join those already having their say on Home Information Packs. Pretty much balanced for and against so far. You can also e-mail us your mortgage questions for our phone-in Money Box Live on Easter Monday. I’m back with Money Box same time next week. Today the reporters were Louise Greenwood and Jennifer Laugharne, the producer Jennifer Clarke, and I’m Paul Lewis.