Decision to abolish cheques attacked by MPs

18 March 2010

Moves to phase out cheque payments by 2018 have been criticised by the House of Commons Treasury Select Committee.

The Payments Council, a board that advises on payment methods, announced in December its decision to scrap cheques by 2018.

The Council had set the abolition date well in advance so that alternative forms of payment could be developed.

But the MPs, taking evidence from charities, and consumer and business groups, heard that abolishing cheques as a payment system could have an adverse impact on small businesses and other users.

Geoff Holland of the British Cheque and Credit Association told the committee that many smaller firms rely on cheques, believing them to be a convenient and cost-effective way of processing and making payments.

Concerns were also expressed that small businesses may end up facing increased bank charges under any replacement system.

The use of cheques has been falling since the beginning of the 1990s, the last five years seeing a decline of 40 per cent.

However, cheques still constitute a widely embraced method of settling bills and invoices. In 2008, cheques accounted for transactions worth £1.4 trillion and were still the second most common form of payment after automated credits.

John McFall, the committee's chairman, pointed out that even if the use of cheques were to decline by another 40 per cent between now and 2018, some 600 billion would still be written each year.

Mr McFall questioned whether the end of the cheque was indeed inevitable, and the Payments Council was urged to produce figures that would quantify the cost of abolition.

The MPs also called on the Council to work closely with the banks to devise a viable alternative payment method.

In response, Paul Smee, the Council's chief executive, argued that setting such a distant date for scrapping cheques would promote innovation: "We have said that alternatives to cheques must be available and actually being used before the end of the cheque."