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Plans to scrap cheques dropped

Plans to scrap the use of cheques from 2018 were dropped today after the UK Payments Council admitted there was no better paper alternative.

The body, which is made up of the major banks, said cheques will continue for as long as people need them and the target for possible closure of the cheque clearing system in 2018 has been cancelled.

The Council announced in 2009 that cheques would no longer be used by October 2018, as long as viable alternatives had been developed.

Work started last year on an alternative paper-based system, but today the Council said it has now decided that this is no longer the best option and "retaining the cheque is a better approach".

The decision to scrap cheques was met with a wave of criticism from small businesses, charities and pensioner lobby groups, who accused the banks of ignoring the needs of millions of vulnerable people.

Michelle Mitchell, charity director at Age UK, said: "We are delighted that the Payments Council has listened to the many people who said how difficult the loss of cheques would be for them. This is a vital first step that will help many older people."

Last month, Richard North, the head of the Payments Council, told the Treasury Select Committee: "There is no question of there being a closure of the cheque clearing system without there being alternatives in place which are widely in use."

Mr North said one of the alternatives to cheques was likely to be mobile phone payments, under which people could transfer money to another person just by knowing their mobile number.

He added that the other alternative would be paper-based and look and feel like a cheque, but would be processed more quickly and efficiently. This option was scrapped today.

Cheque usage has declined by 70% since 1990 and by 42% in the past five years, according to the Council, with usage expected to decline by a further 40% during the coming five years.

In a recent letter to Andrew Tyrie, the head of the Treasury Select Committee, Financial Secretary to the Treasury Mark Hoban said 1.1 billion cheques were issued in 2010 and this was a "significant volume" even if the use of cheques was in decline.

Mr Hoban said that the Government may intervene to protect vulnerable customers if no alternative to cheques was put in place before they were withdrawn.

In a statement today, taxpayer-owned bank Royal Bank of Scotland said: "This is a welcome move. RBS has been clear for some time that we don't support a fixed deadline and will continue to offer cheques as long as our customers need them."

Speaking after the decision today, Mr Hoban said: "I am glad that the Payments Council have listened to what we and others have said about the future of the cheque.

"This is a victory for those who continue to rely on this trusted form of payment - including charities, the elderly and small businesses.

"It would have been irresponsible for banks to abolish the cheque before a credible and coherent alternative had been developed."

Sarah Brooks, director of financial services at Consumer Focus, called for retailers who have stopped using cheques to reassess their decision, suggesting that with the withdrawal of guarantee cards last month it could otherwise mean an unmanaged decline in the use of cheques.

"The 2018 deadline may have gone but if the future of cheques is still uncertain, it is vital that the Payments Council continues to investigate alternatives that work for all consumers.

"Many retailers should now reconsider their decision to stop accepting cheques in the absence of workable alternatives for customers," she said.