Peter Jackson column

Feb 22 2007 By Peter Jackson, The Journal

In public relations, as with so much else in life, timing is everything.

So it is strange that Nationwide Building Society's incoming chief executive Graham Beale should have chosen this week to declare that charging for current accounts would be a "fairer proposition" than free banking.

Of course, there's never a good time to propose charging people for that which was free, but for a banker to suggest another income stream for banks the day before Barclays announced record pre-tax profits is particularly courageous.

And, to make matters worse, Mr Beale delivered himself of his opinion on the same day as the chairman of the UK's largest provider of recovery programmes for the indebted lambasted the banks for irresponsible lending.

Debt Free Direct chairman Mike Blackburn, himself a former chief executive of the Halifax, blamed the soaring level of personal insolvencies on irresponsible lending by the banks.

To be fair to Mr Beale, he does, at first sight, have a case. Charges reflect the fact that a network of hundreds of branches, paying rent, rates and the salaries of thousands of staff is a highly expensive way to raise money, compared say, to going to a City merchant bank and borrowing it.

Except that a merchant bank would charge interest, which we current account holders don't do. It is important for everyone, including Mr Beale, to remember that banks are not so much providing us with a service as borrowing our money, and they are doing so interest free.

And the fact remains that they are doing extremely well out of it. Not only has Barclays announced pre-tax profits of £7.14bn, up 35% on the previous year, the other big banks are expected to follow suit.

The top UK banks are forecast to report combined profits of £38bn, up from £33bn last year, with Royal Bank of Scotland, Lloyds TSB and Halifax Bank of Scotland expected to report profits of about £9.1bn, £3.6bn and £5.4bn respectively.

Against this background, leading bankers must have winced at Mr Beale's intervention. Particularly as David Cameron's Conservative Party and what will soon be Gordon Brown's Labour Party will be casting round for policies and painless ways to fund them.