Examination of Witness (Question Numbers
12 JANUARY 2010
Q135 Chairman: Mr Daniels, welcome to
this evidence session. Can you introduce yourself for the shorthand
Mr Daniels: I am Eric Daniels.
I am the CEO for the Lloyds Banking Group.
Q136 Chairman: The Lloyds merger.
It appears that you and Sir Victor acted as a team in this area.
Sir Victor has now gone and you are still standing. Should you
not have offered your resignation at the same time as Sir Victor
so that there could be a clean start?
Mr Daniels: Thank you for the
question, Chairman. I do believe that the HBOS acquisition by
Lloyds will prove to be very good value for all of our stakeholders
over the medium term. I think we are making very good progress
on the synergies, on bringing the two organisations together.
I believe that the scale that the combined entity will have will
benefit both our customers, as they will be able to invest more;
our employees, as they will be able to build broader careers;
and our shareholders, as hopefully we make good returns for them.
So I believe it will be a good deal.
Q137 Chairman: As you know, I have
been involved in communication with the Lloyds TSB Foundation
for Scotland, and they have been communicating with you. Their
grievance is that the share of profits for the charitable foundation
has been cut from 1% to 0.5% and they feel that charities in Scotland
will suffer as a result of that. I am keen for everyone to get
round the table and indeed, I have just received a letter from
the Chairman of the Foundation, Christine Lenihan, saying that
they are happy to get all the trustees round the table and conduct
a meeting in the spirit of openness. Can we be assured that that
is going to take place so that we get a satisfactory solution
and we do not penalise charities in Scotland and impede the good
work that has been going on for years in that area?
Mr Daniels: Chairman, we share
the desire to reach a speedy conclusion with the foundations in
Scotland. If I may, I will give you a couple of seconds of background
on this. As you know, Lloyds TSB before the creation of the Lloyds
Banking Group was one of the largest contributors to charity in
the UK. We are very proud of that record. We believe that contributing
to the communities that we have branches in, that we do banking
in, is terribly important. This has been a covenant that has been
important to us. Part of that is that we pay a percentage of our
profits to the foundations and then they in turn use that for
the charities. Very clearly, as profitability has declined, it
has meant that our contributions to those foundations has declined,
but what we have offered with the merger to the foundations is
that in fact we would support them at similar levels, or even
higher levels, during this period of lower profitability, but
we also have to recognise that we are a different entity now as
the Lloyds Banking Group than we were as Lloyds TSB, and it is
worthwhile having a review of the terms and conditions that we
signed up to many years ago. We have reached agreement with the
three other foundations, which represent 80% of the total foundation
giving. Scotland is the only one where we have not yet been able
to reach a satisfactory conclusion. We would be very happy to
sit down with them.
Q138 John Thurso: Can I just follow
up on that and can I say that, certainly in my part of Scotland
and I am sure throughout Scotland, the efforts of the charity
and what they have done have been great, and compliments for that.
My understanding is that there is actually a legal difference
between Scotland and the other three home nations deriving out
of the way in which the original foundation was set up when the
TSB was demutualised, because of course originally that was rejected
and it was created as in part a sweetener. My understanding is
that the Scottish foundation has legal advice advising them that
it would be wrong to give up their long-term rights in exchange
for short-term support. Can you comment on that because it would
be very helpful for us to know why there is this divergence between
what is happening in Scotland and what has happened with the other
three home nations?
Mr Daniels: I am unaware that
there is a legal difference. My understandingand it could
be a faulty understanding, certainlywas that when the foundations
were set up, they were set up on equivalent terms. So I believe
that when we sat down to negotiate with the four separate foundations,
our desire certainly was to agree with them all collectively as
well as individually. I believe that the terms that were offered
were equal to all and certainly the terms under which we operated
the foundations and the grants in the past was absolutely the
same for all. There may be a difference but I am certainly unaware
Q139 John Thurso: I would be very
grateful if that could be established because clearly, if the
trustees are operating on one set of assumptions and you are operating
on a different set, the chances of coming to an agreement are
somewhat more remote. I would be grateful for that.
Mr Daniels: I would completely
agree with you. Let me assure you that we will look into that.
John Thurso: Thank you.
Chairman: We will get this meeting with
all the trustees. That is fine. Thanks very much.