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. Tape Transcript by JANE TEMPLE MONEY BOX Presenter: Paul Lewis TRANSMISSION 19 JUNE 2004 1200-1230 RADIO 4 ANNOUNCER: Now it’s time for MONEY BOX with Paul Lewis: LEWIS: Hello. In today’s programme one bank says it’ll close 46 high street branches. Others say though they’ll improve theirs. What is the future for your bank branch? Money Box’s Chris A’Court is out in London today: A’COURT: I’m at the scene of a major national demonstration about pensions. I’ll be talking to some of those who are here on the Embankment. LEWIS: Thanks Chris and back in the studio Louise Greenwood’s with me today: GREENWOOD: Yes, looking into new complaints about the high cost of doorstep lending. LEWIS: I’ll be asking how do we restore trust in the financial services industry and preventing crime or a marketing exercise? – 30 detailed questions before you can open a savings account. But first, do we need bank branches? Many people still use them but more and more of us do our banking on the phone and online. So will branches eventually disappear or will they reinvent themselves? Barclays announced two weeks ago it would put more staff back into its branches but this week one of our smaller banks Alliance & Leicester announced it would close 46 branches affecting 55,000 customers. More than 300 jobs will go. Andy Homer from the Alliance and Leicester explains why. HOMER: 80% of our customer transactions are now done through the Internet, telephone and ATMs and as a result branches are being visited less and less for transactions. So what we’re doing is responding to customers’ needs. Customers want more interaction with us on a direct basis. Our core four products are now available via the Internet, via the phone and that’s where customers are choosing to go. LEWIS: Our biggest bank HSBC though takes the opposite line. On Thursday it announced 3,500 job cuts – the third slice of a total of 9,000 losses over the last year. But the company said the changes would be used to improve rather than downgrade the branch network. HSBC’s chief operating officer John Doverig DOVERIG: This is a really good opportunity for us to have a fresh look at the kind of cost base we need to have to run our business and I guess we’re saying we believe we can run our business with less resources in support areas but with more resources in customer facing areas. LEWIS: Doverig Jones there. But that’s not how the unions see it. Rob O’Neill is national secretary of the banking union UNIFI. He says some of the jobs that are going will disappear abroad: O’NEILL: Staffing levels in the branch network are already overstretched and if you continue to take jobs out of the UK then the impact on customer service will be even more marked than it is now. It’s only UK staff who are dealing with the problems that are being created that are preventing this from becoming more of an issue in terms of customer service. LEWIS: So what is the future of the bank branch? Nick Sandall is a partner at business consultants Deloite and author of a report ‘Bring back the Branch’. Nick, are branches in danger of disappearing? SANDALL: No Paul. They’re not in danger of disappearing. Different institutions will invest in them in different ways and make relevant choices for them as to how the optimise the experience they want to give their customers at certain times. LEWIS: Optimise the experience of going into a branch. What does that mean? It’s not always a very pleasant experience is it? SANDALL: I think what that means is and you’ll have seen in it in terms of the refurbishment programme that’s going in branches and the additional recruiting – they will put enough people in the branches to make sure the queues are shorter, there is better advice available to you if you wish to buy a product and the look and feel of the branch actually makes it a more pleasant place than some of the branches that have been slightly decrepit. LEWIS: But is the key buying products? – HSBC admits that some of the new jobs in its branches will be there not to improve service and shorten queues but just to sell us financial products? SANDALL: I think that’s fair and they will be some of that – some of those staffing levels will be for them to sell them the products that they wish to sell to you. But they also will need to in a responsible way make sure they’re selling to you responsibly given all the pressures from the FSA. LEWIS: And bank branches then are going to become perhaps more like financial retailers like shops on the high street rather than somewhere just to pay in cheques and take out cash? SANDALL: Absolutely. You will see some branches that look more transactional in type and will be self service or staffed depending on the model as it evolves but at the simplest level there will be more people available to give better and practical advice on buying financial products. LEWIS: And how will they look? How will the experience of being there be made more pleasant than just queuing up in a bank? SANDALL: Well I think if you go to the Norwegian and Icelandic model there are a number of very innovative branches that have been created there which look and feel much more like high end retailing stores. If you go to some of the shopping malls in the Middle East you’ll find branches that move up and down the shopping mall that are very much self service and very select little units- little pavilions that move up and down the floor during the day. LEWIS: So how does all this fit in with Alliance & Leicester’s move? – they’re actually cutting 46 branches? SANDALL: Well I think as your clip said, they’re also investing that money. They made it very clear, they’re investing the money they’ve freed up in branches as well so they’ve chosen some branches they want to make more like those that I was describing and investing in those branches and equally they’re recognising that their customers and their customers particularly don’t use the branches as much as they did for certain of their transactions – and so they’re changing that. LEWIS: Nick Sandall of Deloite thanks –the future of bank branches and the list of the 46 Alliance & Leicester branches due to close is on our website: bbc.co.uk/moneybox where you can also have your say on bank branches – are they important or a thing of the past? Well as we heard a national demonstration about pensions is taking place in London today. It’s been organised by the TUC as an opportunity for people from all over the country to show their support for a new deal on pensions and Money Box’s Chris A’Court is there: A’COURT: Hi Paul and I’m on the Embankment beside the Thames where people are now gathering before walking through the streets to a rally in Trafalgar Square. Now there are a variety of reasons why people are here – some for example simply don’t feel that the basic state pension is enough and want to have a say about that. And others are people whose company schemes have collapsed leaving them short of the pensions they expected and you’re hearing the sounds in the background – there’s a huge inflatable pig called Prudence which is going to be going through the streets along with thousands of pink balloons which have been blown up here already. Coachloads of people have been arriving and people of all ages as I said and one of the people with me today is Sophia Cock who comes from Weston Super Mare and she works in the all centre of a large insurance company that’s right isn’t it? COCK: Yes that’s right. A’COURT: So why come to a pensions demonstration at the age of just 23? COCK: Because I’m concerned about my future and everybody else’s future as well. I’m concerned that when I reach old age retirement I’m not going to have enough to fund my nice and comfortable living I should hope. A’COURT: What sort of pension provision are you and the firm you work for currently making? COCK: I have a money purchase scheme which means that at the end it’s the fund value and then I have to buy my annuity with that. I currently put in 1% - my employer pays 3% which equates to about £30 a month. A’COURT: That’s a start but it’s not a great deal of money for a pension for when you get to 65 or maybe older? COOK: Exactly. If you think about these days you need a retirement fund of around about £70-80,000 in order to get something that’s worthwhile, putting in £30 a month I don’t think is actually going to make that. A’COURT: So would you be happy if the government made you pay more into a pension because after all I imagine you’ve got lots of other things to think about at 23? COOK: Yes, if there was a compulsion on me having to pay for a pension I would be happy because I have to pay tax, I have to pay national insurance – I feel that pension is just equally as important as those two. A’COURT: And the main message that you’re here to give today? COOK: We want the government to sit up and wake up to what we’re saying here today – especially for young people. A’COURT: Sophia thank you very much – I’ll let you take your place on the march – just about to begin – Paul: LEWIS: Thanks Chris. Enjoy the march. Well leading that march behind the pay up for pensions banner will be the TUC general secretary Brendan Barber. Brendan, why are you marching today on pensions? BARBER: Well, we’re trying to send a wake up call. There’s a real crisis in our pensions system and we need to see major changes to tackle that. LEWIS: What changes? BARBER: Well we need to see improvements in our basic state pension. Of pensioners in Britain today something like 2 million are living below the poverty line and for a country as rich as ours that’s really not acceptable. But we need changes to our occupational pensions systems too. We’re seeing case after case of companies walking away from the promises that they’ve made and we need a framework in which every employer pays a fair share. LEWIS: So something like we heard from a few minutes ago – that employers and employees both have to pay into a pension by law? BARBER: Unless we make that change, then I think we’re just going to store up these huge problems for the future – millions and millions of people will face just real poverty when they come to retirement. LEWIS: You’re calling it pay up for pensions Brendon, but who is going to pay? BARBER: Well we all have to accept some responsibility. We see it as part of the government’s responsibility to deliver a basic state pension that provides a decent foundation but then with every employer and yes every individual too contributing to supplement that to enable people to have a decent standard of living when they reach their retirement age. LEWIS: But when you say the government to pay up of course you mean tax payers don’t you? They would have to pay more to put the state pension up? BARBER: Well of course. But as I say we are a rich country. We spend a smaller proportion of our gross domestic product on providing retirement incomes for our elderly. We could afford to make some changes and some real improvements. LEWIS: Your symbol is Prudence, your large, pink, flying pig. I mean some people might say that’s very appropriate – pigs might fly before you’ll get the government to cough up more and every employer to cough up more? BARBER: You’re not the first to say that Paul but it actually symbolises a piggy bank and it’s actually making the case in a light hearted way – look we all between us as a community need to find ways of all saving more if we’re going to have decent pensions in the future. LEWIS: So we all have to contribute now to live better later. The government of course has its own plans in the pensions bill. Briefly, will those changes help achieve your objective? BARBER: Some of them certainly will. The pensions protection fund is a very important achievement I think. So that we won’t in the future see workers lose everything if their firms go bust and of course we were pressing too for the new fund to provide some compensation to the workers who’ve lost out in those circumstances. So those are positive moves. But the big change we need is this new framework in which every employer contributes and it is this commission Adair Turner is leading that’s going to produce a first report in a couple of months time. I hope that points the way to this new framework we need. LEWIS: Brendan Barber thanks. And we’ll be reporting on that of course on Money Box when it happens. Now just when we need to be saving more for our retirement and our future, trust in the financial services industry has been falling away. That of course makes it less likely that we will save more. 20 senior people from the financial services industry have spent two years looking at this loss of trust and how it can be restored. Their report ‘Restoring Trust – Investment in the 21st Century’ – was published this week by the business think tank Tomorrow’s Company. I spoke earlier to its director Mark Goyder and asked him what the evidence was for the lack of trust: GOYDER: We found that only one in eight investors really felt safe putting their money into equities. We found that something like 60% of investors in personal pensions didn’t really trust either the government or their pension provider or their employer that their pensions were safe. And of course the distribution structure, the way it’s all done on a commission based selling is a big part of the problem. LEWIS: So did you recommend an end to commission in your report? GOYDER: A much better solution is for the industry actually to show some leadership – first of all to accept that the customer has not been put first, to say the culture needs to change and to do something about it. And we have ideas on how they might do it but in the end it’s got to be their initiative. LEWIS: But the Association of British Insurers that represents very many of the companies involved wouldn’t even co- operate would they and they certainly have been very cool about the report when it was published? GOYDER: And I think they don’t represent the views of many people who have spoken to me who privately say there is a big problem here. We know there’s a problem here and I think in the month and certainly years ahead it may take more scandals that the industry will have to respond or one of two things will happen: the government will come in with I worry a headline grabbing initiative which won’t help and the alternative is that people will actually shy away from the investment that they need to make in their future because they have such a low level of trust and because that trust is not going to be inspired by a defensive reaction from the industry. I think for government the message is don’t move the goalposts. I think for the industry the message is –let’s have much more openness and transparency about charges and I think for companies and their relationships with investors, the message is we do need to actually get back to much more vigilant standards of ownership and accountability. LEWIS: And 10 years from now – how will it be different for customers when they want to buy a pension or invest some money? GOYDER: 10 years from now we would envisage first of all a customer who’s been better prepared for the conversation because they have from even finance education in schools started to learn about how to analyse what your financial needs are. We will see a sales process that is not driven by commission. We will see full transparency of charges. We will see a clarity about conflicts of interest right through the system so somebody’s making a gain from making a particular biased recommendation, you’ll know about it and we’ll see companies having much more interest shown in their longer term performance because we’ll have seen much more co-operation between investors. LEWIS: Mark Goyder with his vision of tomorrow’s financial services. In April Money Box investigated the high cost of borrowing money from doorstep lenders. These companies send their representatives around housing estates offering loans to low income people but at very high rates of interest. Now one of the country’s biggest consumer groups has used new powers to ask the Office of Fair Trading to examine this business which is worth more than 2 billion pounds a year. Louise Greenwood’s been following this: GREENWOOD: Yes Paul. Doorstep lending companies are the main source of credit for millions of people living on low incomes. To them it’s an essential service because they’re excluded from mainstream borrowing usually because they have a poor credit rating, live on benefits or don’t have a bank account. The National Consumer Council has been researching the biggest doorstep lenders and has concluded the way that they operate has a damaging impact on their customers. It says the market is controlled by a few companies charging very high interest and it wants the Office of Fair Trading to investigate. Speaking at the launch of the so called super complaint earlier this week, the NCC’s chief executive Ed Mayo said he’s concerned that other companies find it too hard to compete with the established lenders. MAYO: Other companies are not coming in because it’s a very difficult market to enter. If you’re going to be lending on a doorstep basis across the country you’ve got to build up a network of lenders. That you can’t do overnight. And the evidence suggests that those companies that have come in find it takes a long, long time to build that network and really get in. So as a result what we have is a market that’s dominated by four big companies. GREENWOOD: According to research those four companies are Provident Financial, Cattles, S & U and London & Scottish. The OFT will be looking into practices like charging for the early repayment of loans, rolling over loans that arat e much higher rate of interest and the fact that repaying a debt in full, on time, doesn’t improve your credit rating. The NCC doesn’t want a complete ban on doorstep lending saying customers find it convenient and getting rid of home credit could mean a rise in illegal loan sharking. The largest home credit company Provident Financial controls almost half of the market and typically charges interest on its loans at 177% APR. But chief executive Robin Ashton told Money Box that he completely rejects the NCC’s findings: ASHTON: I think that the NCC has acknowledged that customers like the service and that it’s a valuable source of credit but I don’t think that they’ve understood properly the increasingly competitive nature of the market for small sums of credit. Our own research is that firstly customers are aware of the alternative forms of credit. More than half of them do shop around and over 70% of our customers use another source of credit as well as home credit. So these are not captive customers. GREENWOOD: The NCC’s super complaint has attracted criticism even from those unhappy about doorstep lending who think there should be a legal limit on what interest lenders can charge. In Parliament this week MP Adam Price called for a flexible ceiling on interest rates depending on the size of the loan. PRICE: Well you need a flexibility – you need a range of ceilings covering a range of different scenarios but we do absolutely need I think is some level of statutory regulation which doesn’t prevent a reasonable profit but does prevent companies from taking advantage. GREENWOOD: Damon Gibbons is from the campaign group Debt on our Doorstep which also wants a legal limit put on the cost of borrowing. He says regardless of the outcome of the OFT investigation it’s vital that action is taken against these lenders and hopes it’ll lead to a closer overall examination of the home credit market: GIBBONS: It’s absolutely critical. I mean we’re talking about a market here of around 3 million people who are on very low incomes. The OFT certainly is responding to the first super complaint that it’s received so it’ll be important to see what their initial response to this is and whether they’re prepared to go down the line of a full enquiry into the market with no remedies ruled out. GREENWOOD: Damon Gibbons and the OFT has until 10th September to respond to the NCC’s super complaint. It can decide to launch a full investigation. It can refer the matter to the competition commission or it could simply decide that there is no case to answer. LEWIS: Thanks Louise. Well if you’ve opened a bank account or taken out a new ISA in the last year you’ll know it’s getting harder. Before you can open even the simplest savings account you have to prove who you are in duplicate and give other information. Banks blame tough new laws on money laundering and financial crime. But one Money Box listener isn’t convinced. Caroline tried to open a Cheltenham & Gloucester cash ISA but she balked when she saw that the application form demanded more than 30 pieces of information: CAROLINE: It says to help us in fulfilling our responsibility to prevent financial crime please provide the details asked for below. They wanted to know whether I was employed, retired or a student, when they could contact me at home, was my telephone number ex directory, was the money going to come from salary or wages or investments or a pension? The chances of me putting down that you know I’d obtained the money from drug dealing or any other illegal activity’s highly unlikely so therefore I think the questions posed were totally unnecessary. I think that the company’s market research really is being done under the guise of this money laundering legislation. LEWIS: Caroline was so annoyed she didn’t open the ISA. So why did Cheltenham & Gloucester ask for so much detail? Peter Mounty is its head of communications. I asked him if Caroline was right to say this was market research being done under the guise of tackling financial crime? MOUNTY: No, it certainly isn’t that at all. They’re really to do with our approach to the proceeds of crime act. LEWIS: Does this information get passed to your marketing department? MOUNTY: No it doesn’t. This information is there to try and safeguard staff that are opening accounts from future potential judicial action if we’ve not been diligent in finding out about the customer and where the proceeds of money have come from and indeed to what use they’re being put. LEWIS: If somebody says they want to use it for savings, household expenses, retirement, house purchase, children’s education, specific event or other – which of those rings an alarm bell about financial crime? MOUNTY: None of them do. LEWIS: Possibly “other- terrorism”. That would presumably. MOUNTY: No – anyone that is a terrorist is not going to put down that this is money laundering. LEWIS: So people who are criminals won’t put down what you need to know, you’ll just annoy everybody who doesn’t see why the person they save with should know what they’re going to use the money for? MOUNTY: Well you say we annoy them but this has been in our forms since November of 2003 and all the customers apart from the lady that has been on your programme have been very happy to play their part in answering those questions because they too believe that there is a social and moral imperative to try and prevent financial crime. I can’t understand why it is you seem to be wanting to make an issue of something which is so patently in the public interest to protect. LEWIS: Because you haven’t indicated to me once how any of these answers can be used to prevent financial crime? MOUNTY: None of them will prevent financial crime – all of them will help or potentially could help to identify where the proceeds of financial crime are placed into accounts. LEWIS: How? MOUNTY: Because if a large chunk of money LEWIS: Well it can’t be more than £3,000 can it? – because it’s a cash ISA so it can’t be more than £3,000? MOUNTY: In fairness I suppose in terms of the ISA form I would have to say that the questions that we ask are generic questions that appear on all of our forms. LEWIS: So you haven’t really thought about the difference with an ISA where it’s only £3,000? MOUNTY: Well the ISA difference I have to say does make the issue a little less germane. LEWIS: But you’re not going to change it? MOUNTY: No we’re not because I think it has a very clear message – that Cheltenham & Gloucester is concerned about fighting financial crime. LEWIS: And let me just ask you once more – just to be absolutely clear – that information “purpose of account” is not and never will be passed on to your marketing department? MOUNTY: That information is not for marketing purposes. LEWIS: No that’s not what I asked you. Peter, will it ever be passed on to your marketing department? MOUNTY: There is a place on the form where the customer can specifically say any information on this form does not have to be passed to the marketing department. LEWIS: Right so if they don’t tick that it will be passed on to the marketing department? MOUNTY: If they don’t tick an opt-out all of the information that we gather from customers can be looked at in a marketing capacity. But this particular information is not gathered for that purpose. LEWIS: Peter Mounty. And Louise, there’s new hope on cutting the time it takes money to move from one bank account to another? GREENWOOD: Yes, Money Box has reported regularly on how the UK is among the worst when it comes to the time it takes for payments to clear between accounts – typically four days but sometimes much longer. This week the governor of the Bank of England said that’s too long. The comments came in his speech to a City audience at Mansion House: KING: It is disappointing that the UK now takes longer to clear payments whether cheques or electronic payment than almost any other member of the G10. So together with other members of the OFT taskforce the bank will actively explore ways in which that performance can be improved. LEWIS: Mervyn King. And Louise, new help from this week for people seeking out the best savings rates? GREENWOOD: The financial regulator the FSA has launched a new service on the Internet where people can find the best of over a thousand savings products and it promises to update it daily so if interest rates change on savings accounts you’ll be able to spot it there. The FSA says about 80% of the savings market is covered by the tables. LEWIS: Thanks Louise and there’s a link to those tables on our website together with lots of other information on bbc.co.uk/moneybox where you can also contact the programme. That’s all we have time for today. All that information is with the BBC Action Line on 0800 044 044. There are personal finance stories on Working Lunch BBC-2 weekday lunchtimes. I’m back on Monday with our phone-in MONEY BOX LIVE this week looking at mortgage endowments, and I’m back next weekend with MONEY BOX as usual. Today the producer was Robert McKenzie, the reporter Louise Greenwood and I’m Paul Lewis.