Alternatives to cheques must include a paper-based system, says Treasury minister

Lord Sassoon says Payments Council has been told that if cheques go in 2018, alternatives must be acceptable to small business and charities

House of Lords debated phasing out of cheques this week
House of Lords debated phasing out of cheques this week

The government has told the Payments Council that if cheques are abolished it must introduce a paper-based replacement for them, according to Lord Sassoon, the commercial secretary at the Treasury.

The Payments Council, the industry body that sets the strategy for UK payment systems, has proposed phasing out cheques from 2018.

In a House of Lords debate this week, Sassoon said: "Back in December 2009, the government welcomed the commitment made by the Payments Council, which was clear that if it took a decision to end the present system of cheque clearing in October 2018, it would do so only if there is an available, acceptable and widely adopted alternative system. The government have been clear that that must include a paper-based system."

In response, the Labour peer Lord Hughes of Woodside said: "Is the minister saying that the alternative would have to be a paper-based system? If so, why on earth is the Payments Council bothering? Why do they not just abandon it now and be done with it?"

Sassoon said the use of cheques was declining rapidly. "The fact is that the system has declined in use and it will require a very expensive rewrite of the clearing systems if it is to continue in its present form," he said.

Sassoon said the paper replacement for cheques must be "acceptable to small businesses, charities and other individuals".

Louise Richards, director of policy and campaigns at the Institute of Fundraising, told Third Sector: "Our response to the government on this will be that if it is looking at a paper-based alternative, why abolish cheques?

"The only reason these proposals have been taken on board is that they will save the banks money. But charities are very worried about it. Many receive as much as 80 per cent of their donations in the form of cheques."

It was announced in April that MPs would reopen an inquiry into the abolition of cheques in response to public concern about the proposal. The Treasury select committee is due to hold oral hearings on the issue in mid-June, but a date for these has not been announced.

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