Little credit for feel-good factor

NOTHING better illustrates the continued absence of a feel-good factor in the minds of UK consumers and investors than the simultaneous decision by both Barclaycard and TSB to launch a hair-shirt credit card with limited credit facilities, high repayment rates and a total absence of incentives to overspend. It is designed to "appeal" - if that is the right word - to an estimated 12 million people, many of them young and afraid of being lured into unmanageable debt.

Unlike the older generation, who have not taken to plastic cards of any kind, the younger generation are happy with the technology but prefer to use debit cards that bill their bank accounts at once rather than credit cards.

It might be a tribute to their responsible upbringing, but it is much more likely to demonstrate the extent to which they have been browbeaten by six years of recession and rising job insecurity, topped off by tax increases and static real incomes.

At the same time, Barclaycard and American Express are launching credit cards designed to persuade the affluent few to spend more. But Barclaycard admits that only 10 per cent of the eligible adult population can be considered confident enough to pay a £30 annual fee for a card that offers them increased credit and slightly cheaper interest rates if they do not repay their balance every month.

In the same week, Marks and Spencer has launched its long-awaited move into the marketing of investment, pension and insurance products, with a strong emphasis on caution and simplicity a world away from the confident and complex products that the financial services industry offered punters in the 1980s.

The Family Protection Plan provides life cover; the Serious Illness Plan meets a need that used to be covered by the Health Service and the Department of Social Security.

The Savings and Protection Plan makes no pretence of offering special skills. The contributions are invested simply to follow the top 100 UK shares, and even the income is reinvested to support the plan in the event of a stock market slump rather than the standard practice of rolling up and adding to the funds invested.

The mood is very much in keeping with the attitudes of many investors mindful of the mis-selling of personal pensions to hundreds of thousands of people who were obviously better off staying in their occupational pension schemes. These attracted contributions from their employers and promised pensions directly related to the certainty of final salaries rather than the unpredictable performance of the stock market.

In retrospect, the problem was the inevitable result of over-enthusiastic and under-trained salesmen seeking high commissions, and competition between the insurance companies for a slice of the best new bit of business created for a generation. It was abetted by a government happy to use taxpayers' cash to provide rebates to anyone opting out of state and company schemes. Some of us actually said so at the time.

New entrants to the financial services business such as Marks and Spencer, Virgin and the new generation of telephone-based direct sales outfits are well placed to capitalise on the resulting mistrust of established players in the market. But a new set of players is no substitute for the continued shortage of qualified salesmen and advisers on whose expertise the customers can depend, or for the absence of a feel-good factor.

The one positive factor in last week's news has been the odds against an interest rate rise strengthening perceptibly in spite of the continued weakness of the pound against the mark. The case for a rise in rates is diminishing as the economy shows increasing signs of cooling down, and the dollar is closer to the firing line in currency markets than the pound.