The two main banks plan to introduce bank charges for local authorities. This could cost local councils more than £2 million per annum, lead to increased service charges and threaten the jobs of some local authority workers. Bank of Ireland and Allied Irish Banks have threatened to close all local authority accounts from next June if the local authorities do not agree to the introduction of bank charges. I would ask the Minister for the Environment to make it clear to the banks that such threats are not acceptable.
The practice of not imposing bank charges on the local authorities has been in place for almost 70 years. It was an incentive offered by the banks in the twenties in order to attract local authority accounts. While it is an attractive arrangement for the local authorities there has also been a positive side for the banks who have benefited from the good will generated by these accounts and from the fact that it attracted additional business from local authority customers and employees.
The consequences of a change in policy would be very serious for local authorities who are already strapped for cash. Councillors are at present struggling with the estimates for next year and are facing a virtually impossible task in making ends meet. If they now have to budget for bank charges it will inevitably mean that they will have to raise the money in some other way, such as by increasing service charges or by cutting jobs or services. I do not believe that any of these options should be acceptable to boost the already substantial profits of the banks.
It is not as if the banks are hard up. Bank of Ireland and Allied Irish Banks earlier this month reported combined profits of more than £125 million for the six months ending September this year. This gives an annual profit rate of more than £250 million. The rate of tax that the banks pay on these profits is considerably lower than the rates of tax paid by most PAYE workers.
There is also the question of the two main banks acting as a cartel in order to impose these charges. Bank of Ireland and Allied Irish Banks control about 80 per cent of the retail banking market. I do not have the figure for the banks share of the local authority banking market but I suspect that it is higher than 80 per cent and probably nearer 100 per cent. The Government have repeatedly talked about the need for genuine competition in the business and services sector. Earlier this year we passed a competition Bill which we were told would prohibit companies coming together to agree on the imposition of a common level of fees or charges; yet, this is exactly what is happening in this case. It is very unlikely that any of the other banks operating in this country would have the branch network necessary to service local authority accounts. This would certainly be true outside of Dublin. Bank of Ireland and Allied Irish Banks are clearly taking advantage of their total dominance of the market in order to improve their profit level.
The threat by these two banks to unilaterally close all local authority accounts from next June unless they agree to the imposition of charges is particularly regrettable. This would mean that local authority employees, for example, could not even get their cheques cashed in some cases. The Government need to take a strong stand on this matter; they should tell the banks that if they insist on taking £2 million extra out of the pockets of the taxpayers the Government will seek to recoup it by increasing the levy or tax on the banks.
I understand that a committee of city and county managers are discussing this matter with the Department of the Environment and the banks at present. I ask the Minister for the Environment to ensure that a very strong stand is taken so that the banks do not get away with it and that £2 million is not taken out of the pockets of the taxpayers and local authorities who are already very hard up for money as the estimates debates in various council chambers now demonstrate.
