The business - Patrick Hosking adds up our losses to the bank

The banks slow down the processing of payments to a pace at which they can mug us: the loss of inter

I hope our competition authorities aren't having the wool pulled over their eyes by the banks. The latest official report on the UK payments system - the plumbing through which cheques, direct debits, standing orders and other payments are processed - is hardly encouraging. After three months of crunching the numbers, the Office of Fair Trading has announced that the cost to customers of the interminable time it takes to clear cheques is . . . cue drum roll, trumpet blast, etc . . . er, too difficult to calculate. There are just too many different types of bank account, the OFT explains lamely.

It does, however, come up with a figure for the annual loss of interest to consumers who use standing orders. This is just £30m, the OFT claims. I would contend this grotesquely understates the true cost in lost interest. It also plays into the hands of the banks, which are determined to defend their cartel.

The problem is the OFT's methodology. It restricts its definition of lost interest to the costs of what it calls "float". Float occurs when money reaches the payee's account some time after it leaves the payer's account. During this period, the banks have use of the money for free.

But float, surprisingly enough, is relatively small. In most transactions, the debiting of the payer's account occurs simultaneously with the crediting of the beneficiary's account. No float arises, ergo customers have not forgone interest.

This is a ludicrously narrow way of measuring lost interest. The snail's pace of our payments system ensures that vast amounts of money have to linger in current accounts, corporate or personal, while transfers are processed. For days, sometimes weeks, the money for every non-cash transaction is stuck in a current account earning 0.1 per cent, when it could be in a savings account earning 4 per cent or used to repay debt that costs 5, 10 or 20 per cent. That it then moves instantaneously, probably to another current account earning 0.1 per cent, is neither here nor there.

In effect, the banks slow down the money traffic to a speed at which they can mug us. The sums are staggering. The amount of money sent from one account to another in Britain each year is £86trn, according to the banks' own processing organisation, Apacs. Now suppose the payments system was speeded up a little so that the money in every non-cash transaction spent one day less in current accounts. Suppose, too, that the difference in interest rates between current accounts on the one hand and savings accounts or loan accounts on the other is 5 per cent - again, a conservative estimate.

The reduction in lost interest would amount to £11.8bn. This is back-of-the-envelope stuff, but I would contend that it is a good guesstimate of the sort of cost to bank customers of our murky, monopolistic payments system.

The Cruickshank report into UK banking three years ago recommended the creation of a special regulator to police the payments system. Instead, the government has chosen to hand over responsibility for its supervision to the OFT, which so far has failed to sink its teeth into the problem.

The OFT is winning plaudits as the consumers' champion because of its investigation into rip-off prices for replica football shirts. It has clobbered the Football Association and the shirt-makers and retailers with fines of £100m. Yet the shirts cartel, while an irritation to fans, is but a pimple compared to our mountainously malign clearing system.

Ben Elton used to do a stand-up routine about how the worst job in the world must be that of the actress who has to admit she plays the dancing, singing "Shake n' Vac" mum in the TV commercials.

Playing Ronald McDonald sounds pretty dire, too, according to a story in the Wall Street Journal.

The burger chain, which publicly claims there is only one Ronald, actually has an army of 250 whose job it is to visit the restaurants to entertain children. They tend to be actors, clowns and teachers, and make about $40,000 a year. McDonald's applies the same rules of mass production to its Ronalds as it does to its food. There are precise guidelines on hair colour, make-up and how to behave around children ("Never initiate a hug").

Off-duty Ronalds are categorically forbidden to say what they do. Ronalds have schedulers, chauffeurs and - these days - bodyguards, says the Wall Street Journal, which tracked down one ex-Ronald, Jeff McMullen of Appleton, Wisconsin, who seems to have had a bad experience. "Kids would throw rocks from the parking lot. Sometimes you would get protesters. Ronald can't handle that."

Maybe the Shake n' Vac gig isn't so bad after all.

Patrick Hosking is deputy City editor of the London Evening Standard

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