Royal Bank of Scotland, Northern Rock and Lloyds Banking Group - Treasury Contents

Examination of Witness (Question Numbers 135-139)


12 JANUARY 2010

  Q135 Chairman: Mr Daniels, welcome to this evidence session. Can you introduce yourself for the shorthand writer, please?

  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 understanding—and it could be a faulty understanding, certainly—was 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 of that.

  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.

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