Paul Lewis: How can we clean up charging structures?

Paul Lewis Peach Index pic

I bought a washing machine the other day. An LG. £799. I know, I know, it was expensive but it gave me a lot of choice and had very good performance reviews. I rang a local plumber to fit it, who asked me the make and model and quoted me £279.65.

“That seems a lot,” I said. “The pipework is all there and there is no old machine to disconnect.” “That doesn’t matter,” he replied. “It’s a fixed price.”

When I expressed my surprise at such a specific fixed price to fit a washing machine to existing pipework, he informed me it was in fact 35 per cent of the list price “plus VAT of course, as you didn’t buy it through me”.

“So if I had bought a £250 Hotpoint it would have cost me £87.50?” I asked.

It was the same pipes, under the same worktop, yet he was charging me more than three times as much.

“Hmm. It’s called an ad valorem price, you see. The more valuable the machine the more we have to charge. It’s to do with customer care, insurance and so on. I think that’s what ad valorem means anyway. I didn’t do Greek at school.”

He went on: “To be completely honest with you, on a Hotpoint I lose money. But I make a bit on yours so it all evens out. Without that there wouldn’t be a plumber to fit it at all. And you wouldn’t like that would you?”

I thought the washing machine market had gone a bit odd a few days earlier when I went into the local electrical shop to buy it. There was a man on the door who kindly asked whether he could help. After telling him what I was after he said: “I’m sure we can help, sir. That will be £20 please. Initial charge, sir. A clear, fair and not misleading flat fee of £20.”

Inside, an unctuous young man listened to my needs, asked about my attitude to dirt, how I defined hot water, wrote down the details of my children (3) and wife (1), where I lived, what floor the machine would be on, how much dry cleaning I did and whether I or anyone close to me had any allergies. He said he would send me a “fact find” about my needs in a few days, Meanwhile, here was the address of a launderette. I insisted he printed out the fact find now, as I needed to decide today or my wife (1) and children (3) would not be happy. Half an hour later he produced it (94 pages) and watched as I signed to confirm I had read it (I had not) and agreed it was a fair summary of our chat.

We looked at several machines he thought would suit me. He gave me lots of charts showing how each had performed in the past on energy use, cleanliness and fastness of colours. Each had a note in bold – “Past performance is no guide to the future. Your clothes may come out less clean or smaller than they went in.” – but assured me with a wink that would never happen.

I chose the LG as the charts impressed me. He said I could pay the £799 over a year at £66.58 a month. But when I looked at the bill it was for £82.62 a month. He explained: “That’s the payment for the hour I have spent selling the machine to you. It was £192 but most people prefer to add £16 to the monthly fee. Don’t notice it as much.”

We shook hands. As I left, the man on the door touched his cap as he watched me trying to open it. “That’ll be £50, sir,” he said. “£50? For what?” I asked.

“Exit fee. It pays for the costs of running the shop – heat, light, toilets – while you have been here. We used to charge a percentage of what you spent but now it’s a time charge. Fairer because you have had the benefit of them for an hour.”

My dismay at the fact I had not even used the toilet facilities did not deter him.

“It’s not a charge for use, sir,” he smiled. “It’s a charge for making the facility available.”

I nearly went back to use it. But he already had his entry charge book out again. So I paid the £50 and left through the opening door.

Fast-forward to my kitchen again and the plumber had taken about 30 minutes to fit the thing, including drinking a cup of tea. I looked at his bill. Instead of the £279.65 plus £55.93 VAT (£335.58) he had led me to expect it would be, it was in fact £363.55.

“Sorry,” I said. “I think this bill is too much. It should be…” He was smiling already. “Stop,” he said, holding up a hand. “I’ve included your annual fee in the price. To be honest most don’t even notice.”

“Annual fee? For what exactly?” “Ongoing advice. We charge £27.97 a year, 10 per cent of the installation price. If ever you need to ask a question about the machine, its use or performance that is included. And we keep your serial number on file in case we have to email you about a safety recall or a change in the partner washing powder.”

Altogether the washing machine had cost me £1424.55. I complained to the Fair Cleaning Association – otherwise known as the FCA – but was told prices were not something it regulated as long as they were clear, fair and not misleading. My clothes are coming out cleaner. But there must be a better way to pay. Mustn’t there?

Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programme. Follow him on twitter @paullewismoney