THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS 
TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST.  THE 
NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC 
NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE 
THE ACCURACY OF THE INFORMATION HERE.

Tape Transcript by MAREE SHILLINGFORD

MONEY BOX

Presenter:	PAUL LEWIS


TRANSMISSION	6th MARCH 2004	12.00 – 12.30pm	RADIO 4
__________________________________________________________________

ANNOUNCER:	Now it’s four minutes past 12 and time for Money Box with 
Paul Lewis.

LEWIS:	Hello. In today’s programme, will the splits companies unite 
to compensate thousands of investors.  Is the government giving up on ISAs.  
Louise Greenwood’s with me today.

GREENWOOD:	Britain’s biggest insurer offers hope to homes in flood 
affected areas, but thousands will still miss out.

MAN:	I’m very concerned there will be some insurance companies 
pulling out of this market completely and will be many people up and down the 
country whose homes will be uninsurable.  

LEWIS:	Could a chat with your accountant land you on a terrorist 
database and second class service on post-dated cheques. But first, 21 financial 
companies who have lost investors up to 5 billion pounds were summoned to a 
meeting on Tuesday by the Financial Services Authority. The names of the 21 
companies is officially a secret but they were all involved in split capital 
investment trusts.  They were sold as low risk but when the stock market fell 
sharply, the interlocking deals often financed with loans unravelled.  That left tens 
of thousands of individual investors with huge losses.  The FSA has spent nearly 
two years examining hundreds of files and thousands of records and taped 
conversations.  So far, no action, but at Tuesday’s meeting it called on the 21 
companies to set up a voluntary compensation scheme.  Everyone is so twitchy 
about the legal niceties that FSA boss, John Tiner, said he could only read to us a 
prepared statement.

TINER:	The FSA’s objectives in conducting its investigations which 
are not yet been concluded have been secured adequate compensation for investors 
who have suffered financial loss and to assist in restoring market confidence in the 
investment trust sector.  He believes that these objectives will be best achieved if 
there was an early resolution of the investigations and has urged firms to give 
serious consideration to the merits of its proposal.  

LEWIS:	John Tiner gave the companies two weeks until March the 
16th to agree to his proposal, but they were warned that whether they agreed to pay 
compensation or not, disciplinary action could still follow. The companies have all 
been told not to comment and some of those we rang couldn’t even confirm they 
were there. With me is Daniel Godfrey, who’s director general of the Association 
of Investment Trust Companies representing these funds.  Daniel Godfrey, an 
unprecedented approach by the FSA, will compensation now be paid?

GODFREY:	I think it’s much more likely now than it was a week ago that 
many investors will receive some restitution for their losses.

LEWIS:	And how much might that be?

GODFREY:	Well it’s difficult to tell because a lot of people’s holdings 
are hidden behind nominee names and of course a lot of the money in the sector 
which is passed around from one fund to another.

LEWIS:	So those total losses of 5 billion are not all individuals?

GODFREY:	No, our best guess and it is a guess, is that probably about 
1½ billion is individuals and of that, probably only about 350 million is in what 
was sold as low-risk funds or low-risk shares, the zeros.  The other classes of 
shares were actually always sold as being higher risk.        

LEWIS:	Right so the fact they lost money doesn’t really matter to 
you?

GODFREY:	Well it does matter if there was wrong doing which has 
caused a further loss than they would have experienced just from the market going 
down and that will be the case.  But our best guess in total is that about 350 million 
of compensation may be due to people who own zeros and perhaps a billion in total 
for other classes of shares taken with the zeros together.

LEWIS:	And do you think all these companies will sign up and they 
will pay that much money?

GODFREY:	I think it’s very unlikely that they’ll all sign up. There are 
some companies who’ve got nothing to lose and others who may be completely 
convinced of their innocence who will want to fight this all the way.

LEWIS:	And I suppose some who might find paying the 
compensation could seriously damage their balance sheet.

GODFREY:	Possibly, but I think there will be a number who would very 
much like to draw a line under this and move on, even if it’s very expensive. So I 
think there is a chance that this will work.

LEWIS:	You set up a hardship fund some time ago for those investors 
who had lost money and were in real hardship as a result, and I know you’ve paid 
some money out, though the companies were fairly reluctant to join in, weren’t 
they?  Will those payments already made be affected by the compensation?

GODFREY:	No they won’t be affected.  We’ve secured enough money to 
meet all the valid claims that we’ve had, but of course once compensation is 
announced and available then our job will be over.

LEWIS:	Now also with me is Lord Dick Newby, a treasury 
spokesman for the Liberal Democrats.  Dick Newby, you’ve been calling for 
action.  Is this what you wanted?

NEWBY:	It’s certainly progress, I think.  One of the problems about 
the way the FSA works is that it’s very cumbersome, very long drawn out and we 
needed something really to break the log jam and this may be it.  

LEWIS:	Now is there a danger though that people will get 
compensation, if Daniel Godfrey’s right, but the people who made their fortunes 
out of this will get off scot-free, there won’t actually be any punishment involved.

NEWBY:	Well it’s slightly unclear at the moment. The FSA said at the 
beginning of the week that the collective action doesn’t affect individuals who are 
now under investigation. So it looks as though they may still be going after 
individuals who were at the bottom of it.

LEWIS:	Yes they certainly weren’t doing a deal were they, they 
weren’t saying pay compensation and you’ll get let off.  But on the other hand, if 
they’re not going to have any benefit from paying compensation, you wonder what 
the motivation is to pay it.

NEWBY:	I think there are different motivations in different firms.  
Some of them, like Aberdeen, have been under the spotlight and have suffered a lot 
in terms of adverse publicity. A lot of them have got away scot-free in terms of the 
publicity because they’ve just been sheltering.

LEWIS:	And the FSA keeps their name secret of course.

NEWBY:	And the FSA keeps their name secret and I think one of the 
important things would be to move to a situation where those companies who were 
under investigation were named and shamed.

LEWIS:	Do you think the FSA might be bluffing, it may not actually 
have the evidence for enforcement action?

NEWBY:	Well it’s impossible to tell. They’ve done a lot of work. It’s 
the biggest investigation they’ve done. One hopes that they’ve got enough 
intelligence to take action, whether or not this succeeds.  But, just don’t know.

LEWIS:	Daniel Godfrey’s shaking his head, Daniel.

GODREY:	They’re not bluffing. They’ve done an awful lot of work and 
they wouldn’t have called the firms in only to be blustering. They clearly believe 
they have sufficient evidence to bring charges of collusion and wrong doing 
against these firms. Now they may be wrong, they may not be able to secure 
convictions, but they clearly believe they have sufficient evidence.

LEWIS:	Daniel Godfrey, thanks very much and thanks very much to 
Lord Dick Newby from the Liberal Democrats.  Now Britain’s largest insurer 
announced this week that it’s throwing a life line to people living in homes 
threatened by flooding. Hundreds of thousands of people in flood planes can’t get 
house insurance or face huge rises in premiums after an agreement between the 
government and insurers ran out.  Now Norwich Union says it may be able to offer 
hope to some of those affected.  Louise Greenwood’s been investigating.

GREENWOOD:	The floods of 2000 brought chaos to many parts of the 
country and left the insurance industry with a bill for over a billion pounds.

MAN:	We’ve had double the average rainfall so no wonder we’ve 
got nearly….

LADY:	I’m devastated because we’re standing on an 8-foot flood 
bank, so I….

LADY:	But it’s a mess, isn’t it?

MAN:	It is a mess at the moment.  We’ll manage somehow, we’ll 
have to, won’t we?

GREENWOOD:	At the time many insurers threatened to pull out of the 
market completely, prompting the government to strike a deal with the industry 
guaranteeing cover for the 1.6 million homes affected.  That deal ran out two years 
ago.  Insurance companies agreed to continue covering their existing customers but 
turned down new business.  Now Norwich Union has become the first insurer to 
consider taking on new customers in flood-risk areas, using a system to assess risk 
more accurately. Instead of relying on post codes to work out premiums, it’s made 
a digital-aerial map showing exactly how high above a river or sea level a property 
is.  Nick Pearson is the company’s head of Public Affairs.





PEARSON:	We can’t rely on the blanket approach of post code for 
flooding.  Previously flood-risk maps really had whole streets designated high risk, 
when we know from our mapping work that individual properties where there 
could be a difference of a metre or so can make all the difference to whether a 
property’s dry or wet.

GREENWOOD:	Norwich Union says it hopes to take on 600,000 new 
customers which it thinks are safe to insure.  However, some homes will be 
categorised as being riskier and these could see their premiums rise by an average 
of 15% over the next two years and there’ll still be 200,000 homes which cannot 
be insured because they flood on average more than once every seventy-five years 
and Norwich Union won’t contemplate covering them.

MAN:	Sadly, mapping doesn’t help those people, in the sense it 
doesn’t make flooding go away.  What it does do, is it really paints an accurate 
picture of the level of flood which we haven’t had before.  The industry wouldn’t 
call these people untouchable, the industry’s working very hard with environment 
agency to try and improve flood defences for vulnerable communities.

GREENWOOD:	But new flood defences may not protect against rising 
premiums because insurers say their effectiveness is untested and if Norwich 
Union won’t insure you, you may not find cover elsewhere.  Only two of the UK’s 
major insurance companies have told Money Box they would consider covering 
homes turned down by Norwich Union, More Than and Halifax admitted that if 
they did, premiums would be higher. That worries Henry Bellingham, MP for 
Norfolk, North West, one of the worst affected areas.

BELLINGHAM:	I’m very concerned there will be some insurance companies 
pulling out of this market completely and will be many people up and down the 
country whose homes will be uninsurable.  

GREENWOOD:	Mary Dhonau from the National Flood Forum says these 
home owners will be in an impossible situation.

DHONAU:	If they’re flooded they will be able to take out a loan and 
reinstate their homes on the first occasion.  What will happen if they’re flooded 
again and again? There’s a limit as to how much money people can actually put 
into this.

GREENWOOD:	But Jane Milne, head of Household and Property at the 
Association of British Insurers denies that her members are exploiting a captive 
market.

MILNE:	We would like to see competitive markets in place for as 
many people as possible.  Unfortunately, in very high risk areas that is very 
difficult to achieve. Norwich Union are doing just what all insurers want to do 
which is understand the risks that they cover.

GREENWOOD:	But in France they’ve solved this problem, there everyone 
gets insurance but homes in risky areas pay a premium of around 12% into a fund 
underwritten by the government.  Guillaume Rosenvald, Jane Milne’s opposite 
number at the French Federation of Insurance Companies, says without the state 
support, insurers would not get involved.

ROSENVALD:	I think that we will be in the same situation that the other 
European countries who don’t have such system.  People in the more risky zone, 
very near a river could not get insurance.





GREENWOOD:	But this week the Department for the Environment Food and 
Rural Affairs told Money Box it has no plans to introduce a similar scheme here.  
Meanwhile the advice to home owners in the very worst affected flood areas is to 
take every precaution to minimise flood damage as insurance payouts look 
increasingly unlikely.

LEWIS:	Thanks Louise, and if you have thoughts on floods and 
insurance you can have your say on our website, that’s www.bbc.co.uk/moneybox.  
It’s the time of year when financial companies are advertising in newspapers and 
on the hoardings to encourage us to put money into ISAs, but is there any point.  
We’re just four weeks away from the first of two major changes that will make tax 
free ISAs less tax free and less attractive and there are serious concerns in the 
industry that the government’s losing its enthusiasm for tax-free savings. This 
April the tax advantage of ISAs invested in shares will disappear for most people 
and in April 2006 the amount that can be invested in an ISA will be cut.  Both 
seem  backward steps when we’re all being told we must save and invest for our 
own future. Richard Saunders is chief executive of the investment management 
association and he’s concerned about the impact of these changes.

SAUNDERS:	The principle worry is the message they send about the 
government apparently losing interest in ISAs which have really, for some years 
now, been the flagship of their savings policy. As a result of these two changes, 
when they’ve gone through, people will be able to put less money in ISAs but also, 
for those investing in equity ISAs, will have the rather strange result that higher-
rate taxpayers will be getting greater benefit than basic-rate taxpayers. We think 
that’s almost certainly the wrong way round and certainly, in the government’s 
terms, it’s quite perverse to be giving incentives at the top end but not lower down. 

LEWIS:	That’s Richard Saunders.  Well Mark Dampier is research 
director at Independent Financial Advisers Hargreaves Lansdowne in Bristol.  
Mark, what are we losing exactly this April?

DAMPIER:	Well you’re losing the dividend on your shares, on your 
equity ISAs. So at the moment you could actually claim half of it back. The 
government did reduce it five years ago. Now from April they’re going to take it 
away entirely. So it will be just like as an ordinary, outside the ISA you would just 
see the deduction completely of basic-rate tax.

LEWIS: 	So as Richard Saunders said, this will favour the 3 million 
higher rate taxpayers, but for the rest of us there’ll be no real advantage in having 
out any shares held in an ISA?

DAMPIER:	Well this is where it’s started to get complicated because 
that’s not entirely true. First of all, ISAs are capital gains tax free. Now people 
have forgotten about capital gains tax because we’ve had a three-year bear market.

LEWIS:	Yea but only 100,000 people pay that, don’t they?

DAMPIER:	Well if you manage to do ISAs every year, if you’re one of 
the lucky people who could afford to do ISAs up to near the limits every year, it 
doesn’t take long to have quite a sizeable portfolio which will be capital gains tax 
free and that actually does make a difference. But I completely agree, it’s not a 
great message to send out to people trying to save.

LEWIS:	No and these are called equity ISAs. Some of them are 
invested in shares but some are invested in other things, do these changes affect 
them?




DAMPIER:	Well no, here we go again.  Corporate Bonds i.e. fixed 
interest, the payments of that is known as an interest rather than a dividend, so they 
will carry on being totally tax free.  So the income that you derive from a corporate 
bond of 6% or 7% will be totally tax free.  So you’ve now got a message of sort of 
saying to people, well maybe we should go into fixed interest and not equities, 
which is not necessarily the right message and of course you’re making a tax 
decision rather than an investment decision.

LEWIS:	Which you shouldn’t really do, should you? No wonder 
people are going off these things because they’re so complicated. But then in 2006 
there are cuts actually in how much we can invest.   

DAMPIER:	Well from 2006 of course the limit goes from £7,000 down 
to £5,000. Now these things were all announced years ago but unfortunately this 
chancellor has a habit of continually announcing things. I have to say we have a 
help desk and we have had quite literally hundreds of calls over the last three or 
four months with people asking us what’s going on. In fact many people think 
they’re being abolished altogether.  So there’s a very confusing message out there 
and it’s not good for intermediaries or obviously the public.

LEWIS:	No, it sounds as though you’re doing the government’s job 
for them with your help desk.  Is the government giving up on ISAs in your view, 
on tax-free savings?

DAMPIER:	Well I think the government’s long on talk but short on 
actual action. So everything it’s done since it’s come into power has been to reduce 
savings rather than anything else and I think ISAs are just parts of one of those 
things.

LEWIS:	Yeah some might say though, mightn’t they, that why do we 
subsidise savings, we don’t subsidise other things, why should people get a bonus 
for saving their own money?

DAMPIER:	Well I suppose the government’s trying to encourage people 
or should be encouraging people to save so they don’t go on to the benefit system. 
But in fact the complicated credit and tax system we have now would probably 
suggest that you’re right, that actually for lower earners it’s not worth saving 
anything at all which seems a completely crazy message.

LEWIS:	And do you think finally that the chancellor might change his 
mind, have some fresh announcement in his budget a week on Wednesday?

DAMPIER:	Well if only, but at the moment I’m just seeing the pigs fly 
out the window, so I just don’t see it I’m afraid.

LEWIS:	Mark Dampier, thanks very much, and if you’ve got more 
questions on ISAs we did them on Money Box Live last Monday. You can read a 
transcript of that programme or listen to it on our website.  Mark Dampier, thanks 
very much.  Now people who have a confidential little chat with their accountant 
could end up being reported to the National Criminal Intelligence Service NCIS, 
but they’ll never know. Tough new rules came into force this week which will 
force tax advisers to report any suspicion of criminal activity including tax evasion 
to NCIS or face five years in jail and it’s the same sentence for telling the client 
that you’ve done it.  The rules are designed to stop people profiting from the 
proceeds of organised crime and to prevent money laundering, that’s turning illegal 
cash into legitimate property, but whether it’s ten grand in used tenners or wrongly 
claiming a 60 pence bus fare as a business expense, they will all have to be 
reported to NCIS. Jonathan Freedman, an accountant in London, explained his 
concerns.

FREEDMAN:	Money laundering is now tax evasion as well. Therefore any 
under declaration of income or over claim of expenses falls within the scope of 
money laundering. If we are suspicious that there could have been tax evasion, we 
are bound under the law to make a report to the National Criminal Intelligence 
Service and there is no de minimus, there is no minimum level.  So it doesn’t 
matter if it’s a pound or a million pounds.  

LEWIS:	So what’s happened to client confidentiality?

FREEDMAN:	Basically this has taken away client confidentiality. Most 
clients can expect to go to their doctor, solicitor or accountant and expected to be 
treated in confidence. This is no longer the case with tax evasion.  If we suspect or 
believe there has been tax evasion, we have to report without telling our clients 
that we have done so, otherwise we could be subject to a term of imprisonment of 
up to five years.

LEWIS:	Well that was Jonathan Freedman.  With me is Felicity 
Banks who’s head of Business Law at the Institute of Chartered Accountants of 
England and Wales.  Felicity Banks, no one disagrees with catching big criminals 
or terrorists but is this going too far?

BANKS:	It’s a problem for a lot of our members, certainly the changes 
in the client confidentiality has caused concern. But the legislation is still about 
catching criminals and only about catching criminals.

LEWIS:	But tax evasion is a crime so it is about catching people who 
try and evade even the smallest amount of tax illegally.



BANKS:	Yes but it’s only tax evasion if you intend to evade taxes.  
Small mistakes are certainly not tax evasion, nor is making a mess and having to 
have an assistant from an accountant to sort out your affairs, and voluntary 
disclosures, even where you know you’ve underpaid your tax and you go to an 
accountant to sort out your affairs will not be treated as criminal.

LEWIS:	Is Jonathan Freedman right, you mentioned a problem with 
confidentiality. He says it will be an end to client confidentiality.

BANKS:	Only if your client has broken the law, intended to break the 
law and for bus fares, nobody really is going to begin to try and work out whether 
you did it on purpose to save the tax on 60p or not.

LEWIS:	No, no I must say I put that to NCIS yesterday and they did 
seem to think it could be covered in the strictest sense of the word.  But you have 
two forms of reporting too don’t you, that the really serious stuff like the £10,000 
in used ten pound notes, you have one way of reporting, but if it is a number of 
small things, there are concessions on how those are reported.

BANKS:	For tax evasion, I think it’s going to be more a question of 
deciding whether it was intentional, a pattern of deceit of the Revenue. For small 
matters you probably won’t have to report at all because you won’t suspect intent 
on the part of the tax payer.

LEWIS:	And how about those discussions that I’m sure many people 
have with their accountants trying to minimise the tax they pay, which after all is 
one of the jobs you do. Is there any problem about having those discussions if I do 
this, if I do that, that can’t trigger a suspicion or report?



BANKS:	None at all. For years now our own ethical requirements on 
chartered accountants has been that they will only act on the basis of full disclosure 
to the tax authorities.  So you discuss what you intend to do and if there is any 
question that the tax authorities may treat it one way or another, you disclose the 
way you were treating it to the tax authorities with your arguments for it being 
within the law.

LEWIS:	This is all going to put a burden on accountants though 
undoubtedly. Is that going to put up costs involved bigger legal departments, in the 
end make us all pay more for accountancy services?

BANKS:	This is where the dual system of reporting does help a lot.  
The huge amount of costs we were expecting when we were expecting every 
offence that an accountant came across to have a large report form that had to be 
filled in. So if you think about auditors, especially, come across umpteen instances 
of shoplifting. 

LEWIS:	So a bit more expensive but perhaps not that much. Felicity 
Banks, thanks very much for talking to us.  Now have you ever written a post-
dated cheque in the belief it can’t be used until the date you’ve written on it.  One 
Money Box listener, Stephen, thought that’s how it worked.  When he found it 
didn’t, he sent us this email.

STEPHEN:	I recently wrote two cheques to pay for a training course. 
One cheque was cashable now, the other in September. A week after sending the 
cheques I checked my bank account and found that both cheques had been cashed.  
When did banks stop accepting post-dated cheques and how was my post-dated 
cheque processed through the banking system?   



LEWIS:	Stephen’s bank is Halifax which confirms to Money Box it 
doesn’t take any notice of the date on a cheque and it’s not alone. Barclays, HSBC, 
Lloyds, TSB and NatWest all told Money Box they do the same.  The British 
Bankers Association told us the terms and conditions of bank accounts should 
advise customers not to write post-dated cheques but Stewart Cliff from the 
National Association of bank customers says that message is not getting through.

CLIFF:	You can date a cheque for any time and you give it to 
somebody else and that other person can then put it into their account when the 
date comes due.  But in this modern day and age I’m afraid if you give somebody a 
post-dated cheque they’re liable to bank it straight away and the bank will process 
it straight away which means the money comes out of your account now and not in 
a month’s time.

LEWIS:	But why, a cheque is a legal document?  So surely the bank 
should obey our instructions.  We still write 6 million cheques a day in the UK and 
they’re all handled by the cheque and credit clearing company, part of APACS.  
Spokeswoman, Jemma Smith says, “their equipment is simply not programmed to 
read dates.”  So what exactly does it do?

SMITH:	It reads all of the encoded information on your cheque, it will 
read the amount in words and the amount in figures and check that those are the 
same and it will look at the signature.  But it doesn’t look at the date and that’s 
why we would recommend don’t write a post-dated cheque as a way of stalling 
payment.

LEWIS:	But Stewart Cliff says, there’s no need to panic. Nowadays 
there are better ways to defer payment than writing an old-fashioned cheque.


CLIFF:	Well there are many other ways of making payments. You 
can ring your bank and just ask for them to transfer money into another account.  
You can go on line and use your computer banking to move money around or you 
can set up a direct debit or make a standing order from your own bank branch.  
There are lots of other different ways other than giving out a cheque. 

LEWIS:	And all those instructions can be set for a date in the future 
which some banks say can be up to twelve months in advance.  The joys of 
technology. Louise, Money Box’s coverage of delays in state pensions was 
discussed in the House of Lords this week.

GREENWOOD:	Yes, the government was challenged over the delays which 
affect thousands of people waiting for their state pension.  Baroness Hollis, the 
minister for Work and Pensions in the Lords acknowledged the problems we 
highlighted two weeks ago and confirmed that the government would and was 
making interim payments to people forced to wait for their pensions.

LEWIS:	Details of how to claim those payments are with the help line 
and on our website and Louise after much delay, we finally have a date for the long 
awaited Penrose Report into Equitable Life.

GREENWOOD:	We do indeed. The chancellor announced on Friday that the 
Penrose Report will be published in full on Monday, that’s more than two months 
after it was handed to the Treasury.






LEWIS:	Thanks Louise and full coverage of course of Penrose on 
next week’s programme but that’s all we have time for today. You can follow up 
all the stories on our website where there’s further information and details of how 
to contact the programme.  You can also listen to Money Box again or bits of it at 
any time www.bbc.co.uk/moneybox and don’t forget to have your say on house 
insurance in flood plains, some of you are already I see.  There’s also information 
with the BBC Action Line, that’s 0800 044 044.  Vincent Duggleby’s here on 
Monday with our phone in Money Box Live looking at renting and letting 
property.  Working Lunch has personal finance stories each week day, 12.30 
BBC2.  I’m back here next weekend with Money Box as usual.  Today the 
Reporter was Louise Greenwood, the Producer was Jennifer Clarke and I’m Paul 
Lewis.

Programme:  Money Box 		18