Clause 18 - Fee for payment of duty by credit card

Part of Finance Bill – in a Public Bill Committee at 4:00 pm on 6 May 2004.

Alert me about debates like this

Photo of Andrew Tyrie Andrew Tyrie Shadow Financial Secretary 4:00, 6 May 2004

We are again straying well away from the clause. The short answer is that other countries run a perfectly acceptable insurance disc display system. People display the insurance certificate or its equivalent, which can be obtained through the post, on their windscreen. There are many practical answers to the hon. Gentleman's point, but I am not going to stray any further from the clause.

What is nasty is that the Government are telling users that they have to pay what is euphemistically described as a ''convenience charge''. More than 20 years ago, retailers on forecourts and at petrol pumps decided to try to pass on the costs that they had to pay to the credit card companies, and there was a great deal of aggravation and trouble. In the end, to cut short a very long story involving the Monopolies and Mergers Commission, the Office of Fair Trading and various other organisations, that attempt largely collapsed.

As a consequence, legislation that is conceivably relevant to this clause was put on to the statute book. I want to ask the Economic Secretary about the Price Indications (Method of Payment) Regulations 1991,

which enable retailers to vary the amount that they charge customers, provided that they make that clear, in order to collect a payment that has to be made. I wonder why the Government are not using those regulations. Perhaps there is a technical reason that can be explained to me. The reason why very few retailers use the power is exactly the same as the reason why the Government do not need to introduce this measure.

I have a number of questions. The first is about the 1991 regulations. Secondly, do the Government intend to allow payment by debit as well as credit card? Thirdly, and importantly, will the Government charge only the net external costs for collecting the charge, or will they adjust the charge downwards to take account of the evident saving that they will make by not having to handle cash?

Similarly, will the Government take account of the increase in early payment that is likely to be the consequence of changing to a credit card system? Retailers do not, on the whole, use the 1991 regulations and recoup the full 2.5 per cent. because they gain by letting customers use credit cards. They handle less cash, which would carry the risk of theft and is costly in one way or another—paying Securicor to collect it, or installing safety measures in the shop, for example—and payment is certain to be received and arrives earlier. In most cases, the 2.5 per cent. cost is more than offset by the benefit. That is why retailers do not even bother to try to collect it, even though they may do so by law.

The Government could well go down the same route. If they introduce payment by credit card without introducing an accompanying charge, I suspect that they will cover all or part of the cost of paying credit card companies. However, will the Economic Secretary clarify whether, if they do not recoup all the cost, they will reduce the charge to take account of the savings that they will make? Will they charge only the net external cost and take account of the behavioural effect—receiving more payments, earlier? If the Government cannot give that commitment, this is a tax by the back door. They will increase the total take from vehicle excise duty without having to increase the rate. Far from being a convenience measure, this will be a form of surrogate self-tax.