David Prosser: The real villains behind those ATM charges are the banks

John Mcfall, the Treasury Select Committee chairman, has every right to be proud of his reputation as a consumer champion.

John Mcfall, the Treasury Select Committee chairman, has every right to be proud of his reputation as a consumer champion. But his attack this week on operators of fee-charging cash machines was wide of the mark - the real villains are many of Britain's biggest banks, despite their insistence that they have no plans to introduce charges of their own. The committee pointed out that 37 per cent of automatic teller machines (ATMs) now charge for withdrawals - usually £1 or £1.50.

But the growth of fee-charging machines has mostly not been at the expense of free ATMs. In the past four years, independent operators such as Cardpoint, Moneybox and Bank Machine, have installed new machines in locations such as garages, small shops and post offices.

This network of convenience machines has made it easier for people to get their hands on cash. And since this is the firms' main business - they don't offer withdrawals as part of a wider banking service - there is nothing wrong with them charging a fee. In many locations, cash machines would not be economically viable without charges.

So, back to the big banks, which continue to crow about their network of thousands of free cash machines. What bank bosses are less vocal about is the underhand way in which many of them are making money from ATM fees.

Last year, the Halifax Bank of Scotland (HBOS) group, sold more than 800 of its cash machines to an independent operator. This company is now free to introduce fees on the machines. HBOS won't directly benefit if charges are introduced - and it will be able to continue saying its own machines are free - but it made £75m from the sale of the network. HBOS is not alone. Abbey has also sold part of its cash-machine network. NatWest has even bought one of the fee-charging ATM operators, whose profits will now feed into the banking giant's bottom line.

Meanwhile, several banks are making it tougher for customers to avoid fee-charging cash machines. For some time, the Post Office has offered free withdrawals to customers of banks that allow it to do so. The withdrawals must be made over post office counters, so the service is only available during working hours. Still, since 95 per cent of Britons live within a mile of a branch, this is an excellent initiative. Unfortunately, banks including HSBC, Royal Bank of Scotland, which owns NatWest, and HBOS have so far refused to join the scheme.

In other words, while the banks are publicly sticking to a deal agreed four years ago not to introduce fees, many are still finding a way to make money from ATMs. This is not to say there are no problems at all with fee-charging machines run by independent operators. Consumer group Which? says one in four people do not realise they will be charged for using a convenience machine.

That is far too high a figure, particularly since fee-charging ATMs are now often the only way for people to get their hands on cash in socially excluded areas. Residents of these areas, invariably those who can least afford to pay fees, need better guidance on which ATMs charge.

At the moment, there is no standard warning about charges on convenience machines. Some carry stickers, while others use on-screen messages. Getting operators to sign up to a standardised system would be an important advance.

* The Institute of Fiscal Studies says household incomes fell last year for the first time since the early Nineties. But one group of society is better off than ever: children have earned average pocket money rises of four times the rate of inflation over the past 12 months.

Halifax Bank says the average child now gets £8.37 a week, up 7 per cent on a year ago. The figure masks some notable regional variations: Welsh kids get an average of £13.51 a week, the bank says, while across the Severn estuary, children living in the South-west are on just £4.87.

Either way though, it's a serious load of gobstoppers. Some of the money would be better spent on long-term savings. The Government's Child Trust Fund for children born since September 2002 begins on Wednesday and there are lots of other savings plans available for kids of all ages. It's time to start using them.

Don't fall prey to the latest Isas sales push

With the end of the tax year just three days away, City fund managers have gone into overdrive in their efforts to sell individual savings accounts (ISAs).

Most have set up telephone hotlines and collection centres to enable investors to open ISAs right up until midnight on Tuesday.

But this annual drive to encourage people to invest simply to get a tax break is unhealthy.

Remember, ISAs are not investments in their own right - rather, they are shelters within which you may hold a range of assets to protect them from tax.

In fact, investing a few days before the end of each tax year is likely to produce poor results compared to making regular payments into the savings schemes most fund managers now offer, in or out of an ISA.

But the fundamental problem with ISAs is that they distract people. Savers get hung up on using their £7,000 tax-free allowance each year, rather than focusing on their portfolios as a whole.

Too many people buy the latest fashionable investment fund each year, rather than building a well-diversified spread of assets designed with their own specific financial objectives in mind.

If investing in a stock market fund, say, is the right move for you, doing so within a tax-free ISA has real merit.

But you can only make that decision in the context of all the other investments you have already made, your attitude to risk and your short and long-term savings goals.

d.prosser@independent.co.uk