The National Productivity and Competitiveness Council ( NCPC) serves a useful role in trying to prod the Government into action on measures to increase competition to the benefit of consumers and businesses. Its latest review of its recommendations from 2020 to 2023 – and what action they led to – is perhaps too kind to the previous administration and the current one.
Much of what has been done could be defined as process – reports and studies completed, for example – which are important, but no substitute for action. And in other cases Ministers claim to have taken reports on board – such as those by the commissions on housing and on tax and welfare– but have not taken up the reform agendas outlined in any meaningful way. There have been areas of real progress, for example on personal injury claims, but they are sporadic.
One area which the NCPC has usefully put in focus is retail banking, where both businesses and households continue to pay higher borrowing rates than their EU counterparts. Lack of competition, resulting from the long shake out in the banking sector after the financial crash and the departure of Ulster Bank and KBC, is a key factor. As the report points out, earlier this year interest rates on SME loans averaged 5.66 per cent in Ireland, versus a euro area average of 3.97 per cent.
There has been a welcome influx of smaller and non-bank players in some parts of the market, but overall competition is lacking. And, as an official Retail Banking Review published in 2022 points out, smaller players, reliant on wholesale funding, can struggle to compete over the business cycle against the big institutions, which have a huge base of personal deposits.
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There is no quick answer here, but the review pointed out a range of areas where progress could be made to encourage competition. However, a suspicion remains, that, scarred by the crash, Government officials and the Central Bank still prefer to go softly-softly which lets the banks siphon excess profits out of the market, rather than pushing for value for customers.
