The government will consider bringing the Payments Council under a system of financial regulation following what the Treasury Select Committee classified as the “cheque debacle”.

The development was revealed today with the release of a new Treasury Select Committee report into the future of cheques. This new report is a follow-up to August's ‘The Future of Cheques’ also produced by the Committee, and features government and Payments Council responses to previous report's recommendations that the Council be properly regulated and the government commit to protecting cheques.

Financial Secretary to the Treasury Mark Hoban,  representing the government, said that the government will explore how it can extend regulation to the Payments Council in a consultation which will open early next year. He writes that Treasury should include a provision to bring the Payments Council within the financial regulation system in discussions on the forthcoming Financial Services Bill.

The Treasury Select Committee’s latest report, released this morning, says: "Bringing the Payments Council within the scope of financial regulation is needed to ensure there is never again a repetition of the cheques debacle. The Payments Council was able to take decisions affecting millions of people at its own initiative without any effective scrutiny by a regulatory body."

Treasury Select Committee chairman Andrew Tyrie welcomed the government's support for the committee's earlier report. "The government's acceptance of our recommendations to bring the Payments Council within the scope of financial regulation is good news for  millions of people who want to keep their cheque books," said Tyrie.

Government bodies refusing cheques

But some damage may already have been done. After the Payments Council announced plans to abolish cheques some government bodies may have begun refusing cheque payments, Hoban revealed, but the minister insisted that all government organisations are still required to take cheque payments.

Reinstate cheque guarantee or substitute

The August report into the future of cheques included the demand that the Council conduct research into the impact of the removal of the cheque guarantee card scheme, the system which ended in June this year and which guarantees payments made by cheque.

The Payments Council, in its response, has said that robust independent research is underway and will be released before the end of the year, but the Treasury Select Committee called on the Council to be more transparent about the nature of the research and how it will act on the research conclusions.

The Treasury Select Committee said there is "a good case" for the cheque guarantee card scheme “or an alternative mechanism” to be reinstated. “Without such a scheme there is a risk that more and more shops and other bodies will refuse to accept cheques; the cheque would wither on the vine,” today’s report read.

“An increasing number of shops and other organisations are refusing to accept cheques as a result of the abolition of the guarantee card.”

Fundraisers welcome government response

The Institute of Fundraising, which has long been campaigning against the proposal to abolish cheques for fear of the impact it could have on charities which reply on and accept donations by cheque, welcomed the latest Select Committee report.

Louise Richards, director of policy and campaigns at the Institute, particularly welcomed the suggestion to reinstate the cheque guarantee card scheme and the review of the regulation of the Payments Council as a whole. 

“It was never right for the planned phasing out of the cheque to be allowed to progress so far without taking into account the legitimate concerns of key stakeholders, such as charities and charity donors. This is an issue with many far-reaching implications, which needs careful consideration," she said. 

“In order to determine the future of the cheque, an independent regulator ought to be appointed. This body must ensure the right decision is made, which suits all relevant sections of society, and not just the powerful financial institutions.”