Central Bank’s €58m fee for holding State cash

THE Central Bank has charged the taxpayer more than €58m over the last three years simply to hold money on deposit, the chairman of the Public Accounts Committee Seán Fleming has revealed.

Since 2014, new European Central Bank deposit/negative interest rates of -0.4% have been imposed on certain savings across Europe.

Bank officials imposed the negative rate in an attempt to free up large amounts of cash held in deposit, so it would instead be used for investment to stimulate the economy.

Now correspondence between Mr Fleming and Central Bank governor Philip Lane has revealed that the taxpayer, who is still paying the cost of bailing out banks for foolish lending, has become one of the chief victims of this interest-rate policy.

In a letter to the PAC chairman, Mr Lane wrote that the Central Bank has been charging negative interest rates on cash deposits made by government departments for three years.

Speaking to the Irish Mail on Sunday, Mr Fleming warned that this meant ‘Government agencies are losing money on deposits with the Central Bank on a day-to-day basis’.

The loss to the Exchequer has steadily increased from €2.6m in 2014 to €19.6m in 2015 and €35.8m in 2016.

The main losers have been the National Treasury Management Agency, which essentially runs the Government’s current account.

The NTMA has lost more than €46m under the Central Bank’s new regime.

Nama has also lost more than €10.2m and even the Revenue Commissioners have been stung for €96,967.

Responding to Mr Fleming, Mr Lane claimed that since this money went to the banks, ‘the money therefore is not lost to the public sector as a whole’.

But Mr Fleming dismissed this argument.

He noted: ‘This impacts directly on public services as a number of departments deposit money with the Central Bank.’

For example, he said, ‘the Department of Education has been penalised by €523,571 since June 2014, while the figure for the Office of Public Works is €111,871 for the same period’.

‘This is money that should have been invested in education and flood defence works but instead has gone to swell the coffers of the Central Bank,’ the PAC chairman said.

‘I believe the Central Bank needs to reassess this practice; it is a stealth tax on schools and public services,’ Mr Fleming said.

‘The reality is that invisible financial cuts have been imposed on Government departments as a result of negative interest rates being used against them in respect of their deposits with the Central Bank.’

This, Mr Fleming added, ‘is the polar opposite of joined-up governance and, though invisible, has resulted in real cuts to public services’.