Julian Knight: It's right to investigate airlines' levy on credit cards, but it'll cost us

The cost to the airline Monarch of ditching debit-card fees could be higher than you'd think.

The carrier has decided to break ranks with the industry and do away with the levy in favour of a one-off charge on credit-card users.

Monarch's move has been welcomed by consumer groups and comes as the Office of Fair Trading (OFT) investigates the levying of booking fees on debit and credit card payments by the airlines. These fees, so often charged by the airlines, as well as entertainment venues, are completely over the top. A card transaction that in reality costs no more than a matter of pence is passed on to the purchaser in multiples of pounds. The OFT's investigation of this routine fleecing is long overdue.

However, what many people haven't picked up on is the potentially massive hole any OFT action against these fees will create in the airline industry's profits if card fees are banned or reformed so that they represent the true cost of the transaction.

I have been doing some back-of-the-envelope figures on this. Say a budget airline, lets call it Rilleyair, charges a card fee of £6 per ticket and flies some 70 million passengers a year. Now being ultra conservative, let's presume that 50 per cent of tickets come with a £6 fee attached, that's around £200m of extra income.

Now considering that nearly every penny of these charges – particularly for debit cards – is pure profit, at a stroke Rilleyair will lose a massive revenue stream. And in order to replace this £200m in profit, it will have to somehow increase its revenues by a couple of billion a year at least.

Personally, I don't care for Rilleyair's profits, particularly when they are in part built on excessive card charges. However, where I may come to care is when the airlines – and not just Rilleyair, they're nearly all as bad as each other – look to repair this huge hole, which I estimate could be as high as £1bn, in their profits. As with the banks, we will see the "waterbed" effect in action – basically, when you push down on profits in one area it pops up somewhere else.

Of course, the OFT shouldn't concern itself with this in its investigation, it needs to look at the arguments for and against independently, but if consumer groups get what they want it probably won't be long before passengers are hit with yet another unfair charge.

Co-operative care homes

At long last BBC's Panorama has abandoned its idiotic habit of having its programmes fronted by celebs – Peter Andre reports on Fukushima looked for a while a dead cert. It has got back to proper journalism and its programme on the abuses in a privately run residential hospital made difficult watching and rightly sparked a national debate.

It came in the same week as the financial mess at care home group Southern Cross finally hit the front pages. According to some reports, private equity took over the group and sold the freeholds of its properties – a favourite tactic of private equity – then rented the homes back using money received from local authorities for placing elderly people with them. But Southern Cross management got their numbers badly wrong and the group can no longer afford to pay its rent.

The two stories, although very different, are nevertheless linked by the ingress of the private sector into caring and regardless of what happens at Southern Cross or the residential hospital, this will not stop, in fact it's going to become more apparent.

The demographics are such – population growth and ageing combined – that there is no way that the public sector will be able to care for all. Millions of us will need long-term care and this will be in the private sector. And as most things in life, the quality and choice in the care you receive will be directly related to how much it costs. This underlines once again how important it is to save for what may seem a distant future as early as possible, unless you want to be left to the vagaries of the local authority.

One idea that friends of mine have discussed is to form a co-operative care home for the future. Basically, put away money to buy a place and then manage it until it's time to become a resident, so carers become their employees – rather than some faceless private equity company. It will be expensive, and no doubt a major challenge to set up, but it's surely better than being at the whim of companies such as Southern Cross.

Olympic-size debt

I'm not sure what Stephen Hunt's bosses made of him running up an £11,000 debt in order to get his hands on some prime Olympic Games tickets and then going onto the Today programme to brag about it, bearing in mind that he is an insolvency practitioner. Nevertheless, Mr Hunt is undaunted, saying he's happy in the red in order to witness the London 2012 Games in all its glory.

It could have been worse for him – or better depending on whether or not you're his credit card company – he actually ordered £36,000 worth of tickets. I am only jealous of his chutzpah. I put in for £600 worth of tickets, for what I thought were less popular events, and didn't get a single one.

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