Teresa Hunter: Labour on the skids in a car crash of a week

Published on Saturday 21 November 2009 14:16

IT'S time to reflect on a week of Labour car crashes. Deputy leader Harriet Harman is en route for court over her own prang with a parked car, accused of driving while holding a mobile phone. This follows a recent scrape in south London. She strongly denies the charge.

Meanwhile the government denies any suggestion that it has been driving the UK without due care and attention.

But that's not what the records show. First came the pile-up over plans to abolish tax relief on childcare vouchers, triggering 80,000 angry protests. I'd like to know what delinquent joyrider came up with that Lada.

The government buckled under pressure and promised a U-turn, before hitting a sleeping policeman and slowing down. Next it said it could only afford to reinstate the relief for basic rate taxpayers, not the 100,000 higher earners who also benefit. Finally, it confirmed plans to phase out the relief altogether. We shall have to wait until the Pre-Budget Report for the debris from this accident to be cleared away.

After that, we were treated to the magnificent spectacle of the engine of state carrying a convoy of bills to be read during the Queen's Speech. They were about as road-worthy as the carriage which carried Her Majesty to Westminster. A quick look under the bonnet and it was clear the main spark plug was missing, ie the bill which promised to clean up parliament itself.

On that front, the Tories had a train wreck all of their own, when David Curry resigned from the chairmanship of the Commons standards and privileges committee after the Daily Telegraph alleged he had claimed 30,000 for a second home in his Yorkshire constituency that his wife had banned him from using after an affair.

Finally, the government brought forward a bill to halve the public debt within four years, as borrowing for October topped a record 11 billion, the highest for this time of year since 1993. Looks like they're going for the burn.

Backwards for banks

MORE hairpins must be negotiated this week if the government hopes to avoid another nasty prang, not least on Wednesday when the outcome of the appeal over bank charges is announced.

Doubtless, there will be much revving with joy if the court agrees that bank charges should be subject to unfair contracts legislation. The banks have always argued that they were not.

I can already hear the bands tuning up for the celebrations to come. Bank customers with outstanding claims for compensation could soon be sharing payouts of up to 20bn.

This money won't come immediately. After Wednesday's ruling, months of work and court hearings will be required to establish what a "fair" penalty for dipping into the red should be.

Till then, enjoy the merrymaking, because the celebrations will soon be drowned out by head-splitting alarms. With banks in the mire, where will this money come from? The two taxpayer-supported banks, Lloyds and Royal Bank of Scotland, together have half of all current accounts.

You guessed it. Around 10bn of this redress will come straight out of our pockets. As someone who never pays bank charges, I object.

If they lose, the big institutions warn that the world of banking will be in for drastic change. I'd say they were a bit behind the curve with that prediction.

Ahead of the game, though, is Abbey, which last week launched a new charge-free current account with interest on overdrafts at a competitive 12.9 per cent. There will also be no charge for using cash dispensers worldwide, no foreign exchange loading, fee-free international debit card usage and a 6 per cent return on savings for a year. What's not to like?

Before rushing to your nearest branch, though, I should mention you can only qualify for an account if you have a mortgage with the bank. That way they may know you and like you because you will have already passed rigorous credit scoring tests.

Abbey is not the first to link good deals. HSBC and First Direct offer some loans to current account customers only.

This looks set to be the way forward, or rather backwards. A couple of decades ago, customers typically went to their bank for most financial requirements. Holding a credit card with a different issuer from your current account was almost unheard of. Similarly, your bank would be your first port of call for a mortgage.

How ironic if Which?, the consumer lobby group which fought the banks so hard over current account charges, won this battle only to lose the war. It has campaigned equally hard against another bte noire: packaged deals. It looks like the day has come for these highly profitable accounts.

Not so good for consumers, though. Choice will be throttled, and we'll be well and truly back in the slow lane. Those with chaotic finances can forget passing the necessary tests.