The end of free UK current accounts?

The end of free checking gathers pace.

On 24 May, Bank of England executive director for banking supervision Andrew Bailey said that the "myth" of free banking enjoyed by customers when not overdrawn made it hard to link costs to products and services received.  UK current account customers will not warm to his argument or its likely implications but the High Street banks will welcome the argument to end free checking if-in-credit.

It is a trend already being endured by customers in Ireland. If you think that the banking crisis was bad in the UK, spare a thought for customers across the Irish Sea. Following a sector wide crisis in 2008 – the cost to the Irish taxpayer so far is about €70bn, give or take - six Irish owned banks have become two so called ‘pillar banks’. The big two (pillar) banks left standing – Bank of Ireland and Allied Irish Banks - are now rewarding taxpayers for their support by ramping up fees for everyday banking for a sizeable proportion of the country.

Bank of Ireland kicked things off by raising fees affecting almost one-half of its 1m customers in March. AIB has come out in sympathy and will follow suit with the end of universal free checking from 28 May. Only Royal Bank of Scotland-owned Irish subsidiary, Ulster Bank, now offers universal free current accounts. It does not however rule out following Bank of Ireland and AIB.

Ulster Bank spokesperson Debbie McCaughey said:

"I can confirm that Ulster Bank does not charge a monthly fee on standard current accounts. As with all our products and services, we keep our current account offering under continual review."

So we now have the irony of the UK government bailed-out RBS Irish subsidiary standing to win over account switchers from the two Irish government-backed lenders, Bank of Ireland and AIB. There is one further irony. Bank of Ireland has not (at least not yet) ended universal free if in credit current accounts for its customers based in Northern Ireland.

In fairness to Bank of Ireland, a lot of its customers can get around the monthly current account charges. If, for example, they deposit at least €3,000 into their current account and make nine debit payments from that account using the telephone or online banking over a three month charging period, they will avoid charges. Students and customers aged over 60 are also exempt. In addition, customers who maintain a permanent credit balance of at least €3,000 (a relatively small percentage of clients) qualify for free banking. Customers not qualifying for free banking will pay €0.28 per transaction or a flat fee of €11.40 per quarter for up to 90 transactions with excess transactions charged at €0.28 each.

AIB’s fees strategy is worse – much worse. AIB spokesperson Helen Leonard told me that the fees change “is driven by the need to enhance cost recovery across all AIB businesses, including the provision of money transmission services, the cost of which is significant.” So from 28th May AIB will seek to recover some of the losses it incurred following the crash by imposing current fees for customers who do not maintain a minimum daily credit balance of €2,500 for the full fee quarter on a personal current account.That will take in 60 per cent of its current account customer base. The 40 per cent of exempt customers will, in the main, be the other exempt customer categories: students, recent graduates and clients aged over 60. The 60 per cent of AIB customers affected will be charged €0.20 per debit card transaction while writing a cheque or withdrawing cash at an AIB branch will cost €0.30 per transaction.

In a statement, Bernard Byrne, director of personal and business banking at AIB, said:

"Free banking offerings across the industry have changed significantly in recent times. While this was a difficult decision to make, nonetheless it is a necessary one if we are to continue to create the conditions in which we can become a strong and viable entity again."

The fees bombshell for Irish bank customers follows an incessant stream of bad news in the local banking sector. Around 6,000 banking staff in Ireland have left the industry in the past three years. Thousands more are set to follow with AIB looking to shed another 2,500 jobs; Bank of Ireland will let up to another 1,000 staff go under a voluntary redundancy scheme agreed with trades union The Irish Bank Officials Association.

Ulster Bank is also bloodletting and will lay off 950 staff in the short to medium term.UK High Street lenders will be watching intently to see if Bank of Ireland and AIB can make the current account fees stick.With such limited competition on the Irish Main Street, there is every chance that Irish customers –or at least those who do not switch to Ulster Bank - will just grin and bear it.

In the UK, there are already 10m chargeable current accounts, with customers paying an average of £185 in fees per year.That is already worth big bucks to UK banks: about £1.8bn in fees last year across the sector.But such accounts are termed packaged accounts (or added value accounts, as banks prefer to call them) and typically offer a bundled range of incentives such as mobile phone insurance and car insurance, other preferential financial services including overdraft, personal loan or mortgage, as well as non-financial products and services.

There were approximately 54m active current accounts in the UK in 2011 and packaged current accounts made up about 17 per cent of the UK retail banking market. The number of charged for current accounts on offer in the UK (69) has more than doubled from the 33 on the market just five years ago and since late 2009 has exceed the number of free in-credit current accounts on the market. Thus far, no UK bank has gone for broke and made the decision to start charging for all current accounts for fear of losing market share. With encouraging noises off from Andrew Bailey – and a bank sector enthusiastic about finding new ways to charge for services currently not charged for - that day may not be far off.

Douglas Blakey is the editor of Retail Banker International.

Bank of Ireland: Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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The NS leader: Cold Britannia

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. 

Twenty years after the election of New Labour, for the left, it seems, things can only get worse. The polls suggest a series of grim election defeats across Britain: Labour is 10 points behind the Conservatives even in Wales, putting Theresa May’s party on course to win a majority of seats there for the first time in a century. Meanwhile, in Scotland, the psephologist John Curtice expects the resurgent Tories, under the “centrist” leadership of Ruth Davidson, to gain seats while Labour struggles to cling on to its single MP.

Where did it all go wrong? In this week’s cover essay, beginning on page 26, John Harris traces the roots of Labour’s present troubles back to the scene of one of its greatest triumphs, on 1 May 1997, when it returned 418 MPs to the Commons and ended 18 years of Conservative rule. “Most pop-culture waves turn out to have been the advance party for a new mutation of capitalism, and so it proved with this one,” Mr Harris, one of the contributors to our New Times series, writes. “If Cool Britannia boiled down to anything, it was the birth of a London that by the early Noughties was becoming stupidly expensive and far too full of itself.”

Jump forward two decades and London is indeed now far too dominant in the British economy, sucking in a disproportionate number of graduates and immigrants and then expecting them to pay £4 for a milky coffee and £636,777 for an average house. Tackling the resentment caused by London’s dominance must be an urgent project for the Labour Party. It is one that Mr Corbyn and his key allies, John McDonnell, Emily Thornberry and Diane Abbott, are not well placed to do (all four are ultra-liberals who represent
London constituencies).

Labour must also find a happy relationship with patriotism, which lies beneath many of the other gripes made against Mr Corbyn: his discomfort with the institutions of the British state, his peacenik tendencies, his dislike of Nato and military alliances, his natural inclination towards transnational or foreign liberation movements, rather than seeking to evolve a popular national politics.

New Labour certainly knew how to wave the flag, even if the results made many on the left uncomfortable: on page 33, we republish our Leader from 2 May 1997, which complained about the “bulldog imagery” of Labour’s election campaign. Yet those heady weeks that followed Labour’s landslide victory were a time of optimism and renewal, when it was possible for people on the left to feel proud of their country and to celebrate its achievements, rather than just apologise for its mistakes. Today, Labour has become too reliant on misty invocations of the NHS to demonstrate that it likes or even understands the country it seeks to govern. A new patriotism, distinct from nationalism, is vital to any Labour revival.

That Tony Blair and his government have many detractors hardly needs to be said. The mistakes were grave: the catastrophic invasion of Iraq, a lax attitude to regulating the financial sector, a too-eager embrace of free-market globalisation, and the failure to impose transitional controls on immigration when eastern European states joined the EU. All contributed to the anger and disillusionment that led to the election as Labour leader of first the hapless Ed Miliband and then Jeremy Corbyn, a long-time rebel backbencher.

However, 20 years after the victory of the New Labour government, we should also acknowledge its successes, not least the minimum wage, education reform, Sure Start, a huge fall in pensioner poverty and investment in public services. Things did get better. They can do so again.

The far right halted

For once, the polls were correct. On 23 April, the centrist Emmanuel Macron triumphed in the first round of the French election with 24 per cent of the vote. The Front National’s Marine Le Pen came second with 21.3 per cent in an election in which the two main parties were routed. The two candidates will now face off on 7 May, and with the mainstream candidates of both left and right falling in behind Mr Macron, he will surely be France’s next president.

“There’s a clear distinction to be made between a political adversary and an enemy of the republic,” said Benoît Hamon, the candidate of the governing Parti Socialiste, who had strongly criticised Mr Macron during the campaign. “This is deadly serious now.” He is correct. Mr Macron may be a centrist rather than of the left but he is a democratic politician. Ms Le Pen is a borderline fascist and a victory for her would herald a dark future not just for France but for all of Europe. It is to Donald Trump’s deep shame that he appeared to endorse her on the eve of the vote.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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