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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Junior doctors’ strikes: the greatest union failure in a generation

The first wave of junior doctor contract impositions began this week. Here’s how the BMA union failed junior doctors.

In Robert Tressell’s novel, The Ragged-Trousered Philanthropists, the author ridicules the notion of work as a virtuous end per se:

“And when you are all dragging out a miserable existence, gasping for breath or dying for want of air, if one of your number suggests smashing a hole in the side of one of the gasometers, you will all fall upon him in the name of law and order.”

Tressell’s characters are subdued and eroded by the daily disgraces of working life; casualised labour, poor working conditions, debt and poverty.

Although the Junior Doctors’ dispute is a far cry from the Edwardian working-poor, the eruption of fervour from Junior Doctors during the dispute channelled similar overtones of dire working standards, systemic abuse, and a spiralling accrual of discontent at the notion of “noble” work as a reward in itself. 

While the days of union activity precipitating governmental collapse are long over, the BMA (British Medical Association) mandate for industrial action occurred in a favourable context that the trade union movement has not witnessed in decades. 

Not only did members vote overwhelmingly for industrial action with the confidence of a wider public, but as a representative of an ostensibly middle-class profession with an irreplaceable skillset, the BMA had the necessary cultural capital to make its case regularly in media print and TV – a privilege routinely denied to almost all other striking workers.

Even the Labour party, which displays parliamentary reluctance in supporting outright strike action, had key members of the leadership join protests in a spectacle inconceivable just a few years earlier under the leadership of “Red Ed”.

Despite these advantageous circumstances, the first wave of contract impositions began this week. The great failures of the BMA are entirely self-inflicted: its deference to conservative narratives, an overestimation of its own method, and woeful ignorance of the difference between a trade dispute and moralising conundrums.

These right-wing discourses have assumed various metamorphoses, but at their core rest charges of immorality and betrayal – to themselves, to the profession, and ultimately to the country. These narratives have been successfully deployed since as far back as the First World War to delegitimise strikes as immoral and “un-British” – something that has remarkably haunted mainstream left-wing and union politics for over 100 years.

Unfortunately, the BMA has inherited this doubt and suspicion. Tellingly, a direct missive from the state machinery that the BMA was “trying to topple the government” helped reinforce the same historic fears of betrayal and unpatriotic behaviour that somehow crossed a sentient threshold.

Often this led to abstract and cynical theorising such as whether doctors would return to work in the face of fantastical terrorist attacks, distracting the BMA from the trade dispute at hand.

In time, with much complicity from the BMA, direct action is slowly substituted for direct inaction with no real purpose and focus ever-shifting from the contract. The health service is superficially lamented as under-resourced and underfunded, yes, but certainly no serious plan or comment on how political factors and ideologies have contributed to its present condition.

There is little to be said by the BMA for how responsibility for welfare provision lay with government rather than individual doctors; virtually nothing on the role of austerity policies; and total silence on how neoliberal policies act as a system of corporate welfare, eliciting government action when in the direct interests of corporatism.

In place of safeguards demanded by the grassroots, there are instead vague quick-fixes. Indeed, there can be no protections for whistleblowers without recourse to definable and tested legal safeguards. There are limited incentives for compliance by employers because of atomised union representation and there can be no exposure of a failing system when workers are treated as passive objects requiring ever-greater regulation.

In many ways, the BMA exists as the archetypal “union for a union’s sake”, whose material and functional interest is largely self-intuitive. The preservation of the union as an entity is an end in itself.

Addressing conflict in a manner consistent with corporate and business frameworks, there remains at all times overarching emphasis on stability (“the BMA is the only union for doctors”), controlled compromise (“this is the best deal we can get”) and appeasement to “greater” interests (“think of the patients”). These are reiterated even when diametrically opposed to its own members or irrelevant to the trade dispute.

With great chutzpah, the BMA often moves from one impasse to the next, framing defeats as somehow in the interests of the membership. Channels of communication between hierarchy and members remain opaque, allowing decisions such as revocation of the democratic mandate for industrial action to be made with frightening informality.

Pointedly, although the BMA often appears to be doing nothing, the hierarchy is in fact continually defining the scope of choice available to members – silence equals facilitation and de facto acceptance of imposition. You don’t get a sense of cumulative unionism ready to inspire its members towards a swift and decisive victory.

The BMA has woefully wasted the potential for direct action. It has encouraged a passive and pessimistic malaise among its remaining membership and presided over the most spectacular failure of union representation in a generation.

Ahmed Wakas Khan is a junior doctor, freelance journalist and editorials lead at The Platform. He tweets @SireAhmed.