‘When elephant steps on a trap, no more trap’
African Proverb
There's been much comment on the Autumn Statement over the past few days, and this week’s episodes of The Bigger Picture, This is Money and The Financial Outlook continue that theme: plus, we have the full unabridged Autumn Statement as delivered on 23 November. Bearing in mind the extraordinary level of over-consumption of public finances during the pandemic (£400 billion in the United Kingdom), it's not surprising, although disappointing, that the stealth strategy of freezing tax thresholds is continuing, notwithstanding the window-dressing of a cut in National Insurance.
Jeremy Hunt was, of course, a successful business person in his own right before entering Parliament, so it's not surprising that his principle focus was on getting business to invest for growth. Whether that succeeds or not is an open question, but it will certainly make the UK more attractive for businesses which don't pay out their profits to shareowners in the form of dividends.
At least he's left inheritance tax alone for the time being — that's encouraging, for those of us who believe in inter-generational rebalancing. And for retail investors, they can look forward to lots of fine-tuning for ISAs and the big NatWest flotation, if market conditions are right.
So this week, rather than continue to stir the Autumn Statement pot, this commentary looks at a couple of 21st Century elephant traps in everyday use, in the field of communication (e-mail) and payment (debit cards).
Communication: we all resort to e-mail these days as the first port of call for business or political contact. Does it work? I would suggest that it suffers several significant shortcomings which significantly impact productivity (something which should concern the Chancellor).
Unlike a connected telephone call, any reply to an e-mail is optional and delayed for an uncertain period of time if, indeed, it arrives at all. Productive action depends on dealing with issues when they are hot and pressing, when time is of the essence — waiting for an indeterminable period for an answer which may never come is no way to achieve results.
Of course, half the problem causing that indeterminable wait is the sheer volume of e-mails which flood the inbox of most recipients: hardly conducive to encouraging an attentive response. So how might we put checks on the vast quantity of mindless messages?
The answer could be to place a very small charge — as small as 1p - on each e-mail despatched to an individual addressee. It is estimated that 8.3 billion e-mails are sent each day in the United Kingdom, meaning that this tiny levy could raise up to £30 billion each year: enough to unfreeze those tax thresholds by requiring businesses to think harder about all that marketing which they currently splash out without incurring any costs.
However, if you really need an answer to your communication, there is still no substitute for a signed-for first class letter in the post. The Royal Mail confirmation of despatch and arrival ensures that the recipient is ‘on the spot’ for an answer: this is therefore a reliable way of getting a reply from those politicians!
Payment: the other elephant trap, which lies behind many of the scams and frauds in our electronic age, is the widespread use of debit cards, particularly when they are provided for continuous charging purposes: for example, for digital subscriptions.
Most people see little difference between providing debit card and direct debit authority, or indeed between the use of a debit as opposed to a credit card (aside from the temporary credit provided by the banking issuer for the latter, until settlement date).
However — beware!
There is a huge difference, in that cancellation of debit card authority given to an individual supplier Is virtually impossible. The only recourse open is to cancel your entire debit card, thus disrupting all the other relationships where you have given that authority. And, even by cancelling your debit card, it's not unknown for banks to continue to apply payments to their customer’s account, notwithstanding the FCA's regulations for UK banks.
This is because, whereas there is specific legislation applying to credit card services which requires the bank issuer to accept responsibility for cancellation, there is no corresponding legislation applying to debit cards.
And, whereas a direct debit authority is lodged and recorded first with your bank (note: not available with overseas suppliers), they retain no record of where you have provided debit card continuing authority to an external service supplier: the only recourse they can offer is to cancel the whole card when instructed, and some banks make that a difficult process.
This presents a huge open door for fraud and cavalier treatment of customers, particularly when the service supplier is overseas. Many digital services such as streaming are based on monthly, quarterly or annual subscriptions, and are unrestrained by the amount that can be charged. This liberal approach towards charging debit cards can therefore become a licence to behave fast and loose with customers. So please ensure that you provide debit card authorisation very sparingly, and preferably never for continuous charging authority.
It is estimated that 40% of all crime is now fraud, and police services are not good at clamping down on the miscreants, whether individual or corporate. So, beware this elephant trap which lurks in the shadows of our digital society.
If the Chancellor really wants UK business to operate more efficiently and productively, he needs to address some of these major issues with service delivery. Regulators and legislators have always been slow in keeping up to speed with technological change, but even before artificial intelligence rears its head too high, there are many challenges which need to be addressed.
Gavin Oldham OBE
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