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Welsh Development Agency Bill

Brought from the Commons; read a first time, and to be printed.

Lloyds TSB Bill [H.L.]

7.52 p.m.

Baroness Hooper: My Lords, I beg to move that this Bill be now read a second time.

The purpose of the Bill is to allow for reorganisation of the group of companies which are subsidiaries of the Lloyds TSB Group plc. I believe that all of us participating in this debate share a wider and a common interest; namely, the success of the UK financial services sector. As my right honourable friend the Chief Secretary to the Treasury said earlier this year:

As the Shadow Chief Secretary to the Treasury said at the end of last year at the Corporation of the City of London dinner:

    "Here we have a world-class financial centre ... nowhere else in Europe ... can rival it".

The City of London and the United Kingdom as a whole are at the core and cutting edge of the global financial services industry--an industry which generated a massive £20 billion in net overseas earnings in 1994, the equivalent of 3 per cent. of gross domestic product. It employs 920,000 people, which is almost a 25 per cent. increase in the numbers employed in the industry in the early 1980s.

The UK retail financial services environment has changed out of all recognition over the past 10 years. Two words encapsulate that change: competition and technology. The combination of the two is having a profound impact upon the structure of the financial services sector in the UK. All the major players in the sector are striving to use ever more sophisticated technology to tailor their distribution systems as well as their products and services to meet the changing and increasingly sophisticated needs of their customers as well as increasing their market share.

The promoters of the Bill want to be able to offer their customers a service which will allow them to look upon every branch of either brand anywhere in the country as their own branch. Through technology, access to an increasing range of banking services will become available to customers at a time of their own choosing. Cash dispensing machines, credit cards, telephone banking and even personal computer banking

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through the Internet have been taken up by customers at an astonishing rate. For instance, in 1996 electronic transaction volumes--by which I mean paperless transactions, which are quicker to process--for the first time exceeded paper volumes through the UK clearing system.

No longer does the customer need, or invariably expect, to go to his or her own bank. In future, the bank must go to the customer. The extraordinary recent advances in technology make that possible. Customers enjoy the benefits of 24-hour telephone banking. In fact, Lloyds TSB is itself the largest telephone banking network provider in the UK. Cash dispensing machines are situated in convenient locations, such as supermarkets and railway stations and, after cash, credit and debit cards are fast becoming the standard method of payment for goods and services.

Increased competition from outside the traditional banking sector has added another dimension to the financial services environment. For example, British Gas recently launched a MasterCard credit card and Sainsbury's has announced a free 24-hour banking service with a high interest bearing instant access savings account for its customers and a full branch network. In addition, the Abbey National, which in February teamed up with Safeway, has demutualised and become a bank. Other building societies are following suit. It is perhaps too early to predict the long-term success of those operations but, since 1995, telephone-based operations such as Virgin Direct Financial Services have added considerably to the diversity of the marketplace.

Similarly, the retail supermarket multiples are rapidly transforming themselves into one-stop shops, with chemists, newsagents and, now, banking services on the same site. These new entrants are playing a crucial role in transforming radically and irreversibly the landscape of the UK financial services sector. They represent a formidable challenge to the traditional providers of retail and financial services which themselves must respond--and respond effectively--if they are to continue to be as successful in the future as they have been in the past. All this follows the trend towards change set by the manufacturing sector in the 1980s.

Perhaps I may now turn to the merger between the TSB Group and Lloyds Bank which was announced by the boards of the two companies on 11th October 1995. It was subsequently approved by the shareholders, the High Court and the Bank of England and became effective on 28th December 1995. Perhaps it would provide a useful and certainly an interesting background to the Bill if I were to say something about the two companies, their respective backgrounds, experience and expertise.

The TSB movement was started in 1810 by the Reverend Henry Duncan in the small Dumfriesshire village of Ruthwell--I hope that I have pronounced that correctly but, if not, I stand to be corrected during the course of the debate--as a means of improving the financial position of what were then termed the "labouring classes". As a result, savings banks were established throughout the United Kingdom. From the

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1840s their funds were secured by the Government: hence the name trustee savings banks. During both world wars, the savings banks served a crucial role in mobilising personal savings in support of the war effort.

Although the savings banks began to explore the possibility of providing commercial banking services in the 1920s, it took over 50 years for the TSBs to come together to form a modern clearing bank in 1976. At flotation in 1986, there was a massive expansion of the company's equity base; indeed, small shareholders, including many staff, began to share in the benefits of the business. In fact, 25,910 staff and company pensioners applied for a staggering 97 million shares. By 1995 the TSB had grown to become one of the UK's leading bancassurers (an integrated banking, life assurance and general insurance business) with branches throughout Britain.

For its part, Lloyds Bank, or Taylors of Lloyds as it was then called, was founded in 1765 in Birmingham. By the 1880s, Lloyds had established itself as a major banking force in the Midlands and looked increasingly towards London. In fact, as long ago as 1771, the sons of the founding Birmingham partners had opened a bank in Lombard Street in the City of London. So it was that, in 1884, this business was combined with the mainstream bank and in 1911 the business took on an international dimension and expanded into France. That was followed by expansion to South America (an area which your Lordships know and have a considerable interest in) and the rest of the world. In 1995 the Cheltenham and Gloucester Building Society joined the group.

Having grown out of different banking traditions and backgrounds, this merger of TSB and Lloyds brings together their respective strengths and maximises the synergies between them. This natural fit is most apparent in a geographical context. TSB has a concentration of branches in Scotland and the north of England while Lloyds is strong in the south and west of England.

However, the logic behind the merger is not just one of geography. Lloyds has a long tradition of providing business services to small and medium-sized businesses, while TSB, with its tradition as a savings institution, has a particular expertise and strong presence in the personal account market. Lloyds is also a strong player in the retail mortgage market while TSB possesses a successful general insurance underwriting business.

Customers are rightly discerning about the quality and competitiveness of the products and services which are available to them. The merger means that Lloyds TSB Group will be a stronger force in the financial services market, providing its customers with an increasingly flexible and wide range of high quality, keenly priced products and services. The merger is not merely good news for Lloyds TSB and its existing customer base; it is also good news for the financial services sector and for consumers generally as it provides an important stimulus to the market as a whole.

The merger of Lloyds Bank and TSB took place in December 1995. Why, you may ask, do we need a Bill now? By the merger in 1995, shareholders in

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Lloyds Bank surrendered their shares in exchange for a 70 per cent. holding in the TSB holding company, which was renamed Lloyds TSB Group plc. By this means the two banks came into single ownership but the main banking businesses were carried on separately by TSB Bank and Lloyds Bank. They have continued as two separate banks with their own branch networks. It is only by means of a Bill such as the one before us that the two banks can be fused together in practice, operating with one board of directors, one management structure and one overall set of accounts.

The recognised way to unite two banking undertakings is to transfer one to the other. The need to have a Bill in these circumstances derives from the fact that a bank may not transfer a customer's money to another body without the consent of that customer. Therefore to unite TSB with Lloyds would require the written consent of most if not all TSB account holders. Parliament has always accepted that such an operation would be wholly impracticable and has therefore approved a number of such Bills over the years. A private Bill is also an extremely practical and cost-effective way of transferring all other legal relationships without any alteration of the terms or any break in their continuity. This includes, for example, transfer of all the employment contracts, although I must emphasise that the Bill does not seek to alter terms of employment.

The reason why TSB is transferring to Lloyds and not the other way round is that Lloyds has many more overseas operations. A transfer of Lloyds to TSB would have entailed the complication and expense of obtaining legal recognition of the process by all the overseas regulators concerned. In short, this Bill provides a mechanism for internal reorganisation and safeguards the rights of everyone affected by that process.

I understand that some of your Lordships may have been advised by the Banking Insurance and Finance Union (BIFU) that it is seeking an assurance on a continuing separate status for the bank in Scotland. Although this is an issue not even touched on by the Bill, I am nevertheless happy to provide comfort and clarity on that. The promoters of the Bill have confirmed to me that TSB Scotland's special and separate status, as provided for in the undertakings given to Parliament by the then TSB Group in 1985, will continue to be honoured in the future as in the past. As Sir Robin Ibbs, the then chairman, said at the first annual general meeting of the new group in Edinburgh in April 1996,

    "There will be no change in the status of TSB Bank Scotland. Its chairman will sit on the main group board. The TSB Bank Scotland will remain headquartered in Edinburgh and the Lloyds TSB Group will have its registered office in Scotland and will have its AGMs in Scotland".

Petitions have been lodged against the Bill by the two unions involved, BIFU, to which I have already referred, and the Lloyds TSB Union. The petitioners have raised a number of other issues not raised by the provisions of the Bill itself which are primarily industrial relations matters. The bank entirely understands the need properly and effectively to address the concerns which

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have been expressed. Many relate to matters which are already under discussion and would be discussed irrespective of the Bill.

Your Lordships will recognise that the petitioners will have every opportunity to argue their case directly with the promoters during the Committee stage of the Bill. It may be helpful, however, if I say a few words on some of the issues raised by the petitioners. On the matter of terms and conditions, Lloyds TSB's principal objective has been to bring together the practices of the two banks in a fair and balanced way. As part of this they have been able to give the staff in Lloyds and TSB Bank a 5 per cent. pay increase as a one-off settlement. This represents a pay increase which is approximately twice the rate of inflation. It will be interesting to see whether the other clearing banks can match this level of settlement. It proves, moreover, the importance which Lloyds TSB attaches to its staff as an important business resource.

On staffing levels the aim is to achieve any necessary reductions in jobs through natural wastage, redeployment and voluntary means wherever possible. Compulsory redundancy, which is referred to in one of the petitions, is very much a policy of last resort. Pensions, are of course, always a particularly sensitive issue and, we all recognise, a most important one. The promoters wish me to confirm that the benefits of the separate pensions schemes of TSB and Lloyds remain unaffected by the merger, nor are there any plans to change pensions benefits for existing staff. Both schemes have significant surpluses in assets over liabilities.

The promoters fully accept that the two unions have an important part to play and plan to work with both unions to conclude recognition agreements. The two unions have already been invited to make suggestions on the possible content of such agreements. However, I think we all accept that complexities arise as a result of the merger, including the need to harmonise some of the arrangements which currently differ between the two banks. Lloyds TSB has consulted the unions on a wide range of issues since the merger took effect over a year ago and has every intention of continuing to do so.

This may also be a good opportunity for me to point out that the merger, in creating a much larger company, has simultaneously enhanced the career opportunities within the group. As a result of the merger, Lloyds TSB Group now has almost 15 million customers in the United Kingdom, whom it serves through a wide and well-balanced network of branches. The group is the sixth largest company in the United Kingdom by market capitalisation. It is the third largest bank in the world outside Japan and by market capitalisation. Its total assets are £147 billion, or approximately 55 per cent. of the Government's control totals for 1997-98.

The group contributed an impressive £556 million to public finances last year by way of corporation tax. Outside the UK the group's international banking activities in Europe, Latin America and New Zealand returned a profit of £154 million, benefiting the Exchequer and shareholders alike by way of remittance

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of profit earned abroad. I am sure that many noble Lords will have seen that last month the group announced profits of £2,500 million. Results such as these where all stakeholders gain--and all eligible Lloyds TSB staff will receive an extra 10 per cent. of basic salary this year as their profit share--will be achieved only by continued success in a fiercely competitive marketplace.

I have spoken at some length in order to set the Bill in its proper context. I have no personal axe to grind but I believe that Lloyds TSB is a successful and responsible UK company, winning business globally, a major employer both at home and abroad and a company which also plays a valuable role in the community through the work of the Lloyds TSB Foundations. The Bill before your Lordships this evening is essentially a housekeeping measure which enables Lloyds TSB to get on with what it is good at doing: providing excellent prospects for its customers, staff and shareholders. I commend the Bill to the House.

Moved, That the Bill be now read a second time.--(Baroness Hooper.)

8.10 p.m.

Lord Dubs: My Lords, I thank the noble Baroness, Lady Hooper, for having explained the economic potential of this merger and for having given us some details as regards issues which certainly bothered me and some of my noble friends. Apart from giving the Bill a Second Reading, I understand that one of the benefits of such a debate is that we are able to suggest to the Committee matters which are important and which we hope, therefore, the Committee will take on board as points that it should investigate thoroughly. Unusually, in a sense, I am not using arguments to influence or persuade the Government, but a Committee which will be formed after the Second Reading debate has concluded. As I understand it, that means that the Government are unlikely to have a publicly stated view on the Bill; and the Minister is equally unlikely to feel able to take part in the debate. Therefore we are in the unusual position of not seeking to influence the Government. No doubt the Minister will be grateful for that.

On the other hand, this is a matter of major national importance. It is one of the most significant mergers and will result, as the noble Baroness said, in the establishment of a very large company indeed--one of the largest companies in the country. Without disrespect to the Minister present, I should have thought that the Minister for Trade and Industry might have been interested enough to listen to the debate because the outcome will certainly affect his responsibilities, at least for a few further weeks.

The key issue is not something on the face of the Bill but rather the consequences for the staff of both banks if the merger goes through fully. What is needed is a better understanding between the two banks and their respective staff. As the noble Baroness said, there are two unions involved. The Banking Insurance and Finance Union (BIFU) is a TUC affiliate, which has over 16,000 members at TSB and over 7,000 at Lloyds. BIFU has sole negotiating rights in TSB and joint negotiating rights with Lloyds TSB

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Group Union, formerly the Lloyds Group Union at Lloyds. I understand that that Union has 29,000 members although several thousands of them are pensioners and, therefore, not actively employed at present.

I thank the unions for their help in providing background information. I do not recall having received anything from the bank itself although I have in my hands a briefing paper. It came via a noble friend who obtained it from a shareholder. Unless I have made a mistake, and have received this document without noting it--my noble friends also say that they have not received it--I wonder why the bank did not bother to send us this document. Perhaps the bank has an answer. I should have thought that it would have been helpful to the debate, rather than realising when it was too late to read it that such a document was available.

The merger took place last year. A Private Bill is necessary to merge the two sets of branch networks and to put customer accounts together in one bank. There is a simple need. All that is wanted is an assurance from the new bank management regarding jobs, terms of conditions of employment and customer service, and a willingness by the management to discuss those matters properly and fairly with the unions concerned. That is all that is wanted. I believe that the unions would say that so far such assurances have not been forthcoming, and a willingness to talk and negotiate has not yet been seen.

I shall choose my next words carefully. I have had some experience in the other place of dealing with Private Bills. I know that in the less gentle atmosphere of the other place Members tend to have ways of debating Private Bills which we would not adopt. I have not discussed this with any of my friends in another place. There will certainly be more of them by the time this Bill reaches another place. However, perhaps I may say to the management of the bank that while we may be gentle in this Chamber, I cannot help thinking, on the basis of the way in which my friends have sometimes reacted to Private Bills when finding points of principle to which they objected, that the Bill will not have the easiest of passages in another place unless some agreement is reached.

Let me indicate briefly the issues which I believe the Committee might wish to consider as the result of the debate. First, the noble Baroness, Lady Hooper, has already said that the bank wishes to avoid compulsory redundancies but that those will be a matter of last resort. That is a matter on which there should be frank discussion. It is not for us to negotiate, but at least we can mention the issues on which possibly it would be useful for negotiation to take place.

BIFU has identified 650 bank branches which are at risk due to their close proximity, and possibly up to 10,000 jobs which could be lost as a result of the merger. Since the merger, about 1,000 jobs have already either gone or their imminent loss has been announced. I could indicate other job losses, either actual or potential. Therefore the 10,000 figure is a real danger. It may be that those staff who are not declared redundant or do not have to become redundant in some way will

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find the new set up beneficial in terms of their future careers. I very much hope so. But I am concerned about job losses.

Secondly, I hope that the Committee will ensure that there is proper local consultation over any proposals to close branches. A report of the National Consumer Council published in February this year finds that the axing of bank branches throughout the banking system generally has left some people with no access to savings facilities. One in five adults are without a current account. Consequently they miss out on the best savings and investment offers which require payments by cheque or direct debit. The NCC report claims that some technological developments in banking may discriminate against people on low incomes because telephone and electronic services may exclude them.

Other studies have indicated that businesses are less likely to locate in an area without a bank branch. A study in London found that the rate of branch closures is highest in the most deprived wards of the capital. Other studies have demonstrated that the restructuring of the banking sector has resulted in poorer people getting less access to the formal financial system at precisely the time when it is becoming more important for them in terms of discounts on utility bills or in terms of pay.

I believe that what is needed is a proper system of consultation with the union, customers, local businesses and local authorities before closures take place. In the United States it is not so easy for closures to take place without some agreements being reached with consumer and community groups.

My third main point concerns the stated intention that the bank will choose the best from both organisations. By that I hope that it means the best terms and conditions, including scales of remuneration and pension arrangements from either bank to apply to all staff. The intention to have the best from both organisations was stated by the chairman of the Lloyds TSB Group in the Annual Report 1995. I should have thought that that concept should apply also to terms and conditions for employees. There are certainly doubts as to whether that has applied so far; and in a number of respects there may well have been a deterioration in conditions since 1st January this year.

Fourthly, there should be full trade union recognition throughout the new merged bank. The noble Baroness said that there was a plan by the management to talk to the unions. This merger has been in the pipeline for a long time. I should have thought that the management should have started talking to the unions long ago. Why wait until there is a debate in this House before saying that the bank will talk to the unions. I should have thought that full trade union recognition is an issue which could have been discussed long ago.

I very much welcome the assurance given by the noble Baroness, Lady Hooper, about the continuing separate status for TSB in Scotland. I shall say no more about that.

This is a very significant merger. I am sure it will increase the profitability of the new merged bank. I very

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much hope that it will not do so at the expense of its employees. I therefore hope that, when the Committee comes to examine this debate and consider its responsibilities, it will pay attention to my remarks and those of my noble friends. In that way I hope that the situation for the staff will be significantly improved and that the necessary assurances will be given.

8.20 p.m.

Lord Cobbold: My Lords, I, too, thank the noble Baroness, Lady Hooper, for her detailed explanation of the background to the Bill and for stressing the importance to this country of the financial services industry.

The merger between Lloyds and TSB has clearly been in the best interests of shareholders. It is also very likely that it will prove to be in the best interests of customers of the two banks. However, it is not necessarily in the best interests of all the staff, as the noble Lord, Lord Dubs, pointed out, or indeed of all the pensioners.

In her remarks the noble Baroness alluded to the pension schemes of the two banks. I am grateful for what she said. However, I wish to say a few words on behalf of TSB pensioners and those of Hill Samuel, which was part of the TSB group. Before doing so, I should declare that during my career I have been an employee of TSB and Hill Samuel, and also of the Bank of London and South America (BOLSA), which is now a part of the Lloyds Bank group. However, I am not a member of either of their pension schemes, having contracted out of both.

Former colleagues at TSB and Hill Samuel have pointed out that the TSB pension scheme has a substantial surplus. Indeed, in the accounts of 31st October 1995 the actuarial report notes that no further contributions from the employer will be required until 2009. Given the performance of the stock market since that report, together with the decline in membership of the scheme as a result of branch closures and redundancies, the surplus is likely to have grown considerably larger as of today. The concern of TSB and Hill Samuel pensioners is that, over time, they may lose the security of that surplus as a result of the merger.

Turning to the Bill, I am concerned with Clause 8, which deals with retirement benefit schemes. Subsection (2) provides for the substitution of Lloyds as the principal employer under the TSB pension scheme, without the need for prior agreement of the TSB pension fund trustees. Such agreement is required by Rule 80 of the trust deed of the TSB pension scheme. It is possible that such agreement has been obtained; but if it has, that fact has not so far been communicated to members of the scheme.

The trustees of the TSB pension scheme have a responsibility to protect the interests of members of the scheme. That responsibility appears to be overruled by Clause 8(2) of the Bill. I hope that the noble Baroness will note that point and that at Committee stage the interests of members of the TSB pension scheme may be taken into account so that their protection can be ensured. If necessary, Clause 8(2) might be amended to require the agreement of the trustees of the scheme in line with the requirement of Rule 80 of the trust deed.

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8.23 p.m.

Lord Dixon-Smith: My Lords, we are indebted to the noble Baroness, Lady Hooper, for setting out so fully the background to the Bill. I am the more grateful to her since it means that I do not have to make some of the remarks that I might otherwise have made. However, I am rather inclined to take my own line across country. I read the Bill with a great deal of interest. I find it a part of the continuing process of change in which mankind indulges as a result of his intellectual curiosity, ingenuity and constant determination to do things better. It provides a constant stimulus that keeps us all going. Life would be awfully boring without it.

We have heard how banking is changing and becoming more and more competitive. We have all watched the building societies increasingly provide a wider range of financial services. We have seen cashpoints become entirely normal and universally accepted. We have seen the same happen with telephone banking. Supermarkets are climbing into the act and expect to take an increasing share of banking business. The Internet makes it possible to bank in New York or Sydney, Australia, if that is our wish. The world is changing. The banks know that, and know that they have to change or be swamped by the tide of events.

Lloyds plc, together with TSB Bank plc and Hill Samuel Bank Limited, have agreed to unify their business. Their shareholders agreed and have approved a plan of action. That is all in the past. The difficult part of the process as I see it, having read the papers, is how they can individually renew all their contractual arrangements with the new bank's 15.8 million customers. The Bill does that for them. That, it seems, is its main purpose. I must say at this point that I hope the Government receive a suitable facilitation fee for making all of this possible. I am absolutely certain that the bank itself would charge a very large fee if the roles were reversed.

Clauses 7 and 8 of the Bill contain provision for the transfer of employment contracts and retirement benefit schemes relating to the staff of the various businesses. I have to suppose that it is the presence of those clauses that gave rise to the two petitions on the Bill. They are similar in tone and content, dealing as they do for the main part with what I call industrial relations matters. I had not thought that I should see an attempt to use this House to determine a matter that is properly the subject of negotiation between employer and employee. I caution this House against any temptation to follow such a course of action. Such matters can only be dealt with across the table. A third party, particularly one with such power as we have at our disposal, would almost certainly get things wrong, prejudicing the position of one or other party and possibly putting at risk the whole enterprise. In any event, since both petitioners appear to have ambitions to represent all the staff of the new Lloyds TSB enterprise, we could only wholly satisfy one petition at the expense of the other.

That is not to belittle in any way the very real industrial relations problems that are raised in the petitions, and I have no wish to do so. It is merely that

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I do not believe them to be appropriate to this debate. They can be settled only by agreement between Lloyds TSB and their staff and staff representatives. There is no way that we in this House could develop the knowledge required to decide matters that are vital to the individuals concerned. It will inevitably have to depend on the method chosen to bring together disparate past history into a new and unified single enterprise.

I welcome the Bill. It will help the new Lloyds TSB to go forward in a way that is consistent with what I regard as the proper use of the powers of Parliament. To those who are concerned that the merger may lead to unfortunate consequences such as the rationalisation of branches with the possibilities of redundancy, I say two things. I once had in my life the unfortunate and unpleasant task of declaring a man compulsorily redundant. I did not enjoy it. I met the man about a year later and asked him how he was getting on. He looked at me with a broad grin on his face and said: "I have a much better job now; you have done me the best favour that you could have done".

Going back to the point about the clerical branches, I also recall meeting a leader of a council of a southern Midlands town where the main industry was closing down, removing about half the town's employment base. Understandably, he was a very angry man. When I met him again 10 years later, I asked him how he was getting on and again the response was enthusiastic. The town, no longer reliant on a single large employer, now had a diversified economy that was flourishing and at the same time much less vulnerable to the vagaries of the economic cycle.

We should not fear change. This Bill should be passed because without it the future of Lloyds TSB will be less certain.

8.30 p.m.

Baroness Turner of Camden: My Lords, I too should like to thank the noble Baroness, Lady Hooper, for the way in which she introduced this Bill and the explanation that she gave.

Last year saw the merger of Lloyds Bank and TSB to create Lloyds TSB. The bank requires the passing of a private parliamentary Bill in order to reorganise the two sets of branch networks and put customer accounts together into one new bank.

We do not customarily oppose Bills, even private Bills, at Second Reading in this House. However, I must say to your Lordships that I have very grave concerns about this merger. We have seen a number of mergers in the financial services industry in the past couple of years. All of them have resulted in substantial job losses and increasing insecurity for the staff who continue to work in the industry. Your Lordships will recall that I have on a number of occasions sought to draw attention to this development and its anti-social implications. A large and important industry which at one time provided stable and secure employment for whole generations of white-collar employees, many of whom I think probably voted Conservative--whether they will continue to do so is another matter--has been undergoing what amounts to a revolution. We are

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constantly told, as if it were a welcome development, that there are no longer jobs for life, almost as though there were something indecent in expecting any such thing. The widespread feelings of insecurity that have been generated are, more than anything, the reason for the lack of the feel-good factor.

I sat through the previous debate on the economy. Listening to the contribution of the noble Lord, Lord Mackay of Ardbrecknish, in particular, I wondered whether we were inhabiting the same world. My experience is that large numbers of people in employment, whether or not they are facing redundancy, constantly fear that they may face redundancy and unemployment.

Now we have this Lloyds TSB Bill. There is no doubt at all that it threatens the jobs of some people who work in the bank. Quite clearly, attempts will be made to close branches. Six hundred and fifty such branches have already been identified by the union as being at risk, as my noble friend Lord Dubs said. I understand that 500 job losses have already been announced in Birmingham and Bristol and a further 80 in London; in September 1996 the bank confirmed the closure of some 150 branches.

The unions, as we have heard, have sought assurances from the bank that it will protect jobs, terms and conditions of employment and customer services. It is quite right that they should seek to do so; they are seeking to protect the interests of their members. However, I am told that the bank's response has been negative and dismissive.

There are other considerations apart from those affecting staff. There is the matter of consumer services, to which my noble friend Lord Dubs referred. Much of the way in which the financial services industry has developed over the past 10 years has resulted in poorer people having less access to the formal financial system. Moreover, unfortunately, the public image of the financial services industry is not at all good, and everyone in the industry knows that that is the situation.

Many companies are withdrawing from the home-service market in insurance because it is no longer felt to be profitable enough. If local branches close, that will further reduce the access of poorer people to such services. Without easily available facilities, poorer people may, more often than not, turn to loan sharks, who further exploit them. A local bank branch with skilled, trained people available is a vital community service and should not be withdrawn without the fullest local consultation and investigation.

As we have heard, the bank has said that it is its intention to draw on the best features of both organisations. Cannot that philosophy be clearly applied as far as the staff are concerned? The financial services industry is a people business. Skilled, trained staff are vital to success. Lloyds TSB has announced a 52 per cent. rise in pre-tax profits of £2.5 billion for the year to December 1996. However, the bank lost 4,206 staff last year and, as we have heard, other jobs may very well go.

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It is quite true, as the noble Baroness, Lady Hooper, said, that Lloyds TSB has recently instituted a pay increase of 5 per cent. for the remaining staff; and I believe I read somewhere that there may also be bonuses. The unions have naturally welcomed the deal. However, they regard it as to some extent simply sweetening the pill for other measures, such as mass redundancies, which are bound to be a great deal less welcome and should be a matter of anxiety to all of us on all sides of the House who are concerned about unemployment and view with scepticism some of the claims made by the Government in that regard and who, like me, are deeply concerned at the growth of low pay and insecurity affecting a large section of the workforce.

Working in an environment where there has been a merger and restructuring, which everyone knows will produce job losses, downgrading and--to use that awful word--"downsizing" is not a happy situation. A sense of security is essential for good team working, as most personnel managers know. We have yet another situation here where problems are being endured by another group of our fellow citizens. I believe that we in this House are right to demand that before the merger proceeds assurances should be obtained from Lloyds TSB about its future posture relative to its staff and its customers and that the staff should have proper protection, including, as my noble friend Lord Dubs said, the right of representation by their unions, with the right of recognition protected as well.

I believe that a separate situation applies in Scotland, to which the noble Baroness, Lady Hooper, referred. I am glad to hear her assurances in that regard. My noble friend Lord Taylor of Gryfe, who is familiar with the Scottish situation, may well deal with that.

I confirm what has already been said from this side of the House. We regard this matter as an important social question, apart from the issue of the employment of people in Lloyds TSB. This is a major merger, creating a very large financial services complex. We must all be concerned about what happens to the staff and to the customers.

8.38 p.m.

Lord Clark of Kempston: My Lords, perhaps I may add my congratulations and thanks to my noble friend Lady Hooper for giving an excellent resume of what this Bill seeks to do.

From my experience in the City, the points raised seem to me a tremendous storm in a teacup. The merger has been agreed and approved by the High Court, the Bank of England and all the regulatory authorities. With that all behind them, we are talking here of some £147 billion of assets, over 15 million customers and many staff. BIFU has said that there have been redundancies, and one accepts that: 500 jobs in Birmingham and 80 in London have been lost. It has suggested that another 10,000 people will be unemployed, but it has not explained how that will happen. The present staff of the amalgamated banks is something like 87,000 people.

With regard to pensions, I well understand what noble Lords think following the machinations of the Maxwell case. However, we are here talking about

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two banks, the TSB and Lloyds, whose integrity is unparalleled. There is no way that the amalgamated bank would do anything about reducing what the pensioners should have. Obviously, pension funds, whether the amalgamated bank's pension fund or that of any other large organisation, have sometimes a surplus and sometimes a deficit. In this case apparently there is a surplus. I do not believe that there is any possibility or danger of the amalgamated bank reneging on whatever the pensioners should receive.

We must remember that in the financial world a domestic amalgamation cannot be isolated without taking into account its overseas competitiveness. Overseas competitiveness, particularly in the banking world, is tremendous, as I am sure your Lordships will appreciate. For example, Frankfurt is envious of the London financial centre, which still leads the world. Consequently, the amalgamation of these two banks will mean that we shall in fact retain our competitive position on the international scene.

As for the customers, because of a technicality and the cross-transactions between the TSB and Lloyds there used to be a 1½ per cent. fee and that will disappear. So the emerging bank will in fact gain some advantages not only for itself but also for its customers.

The noble Lord, Lord Dubs, mentioned the profitability of Lloyds. I do not go along with the noble Lord on many matters, but I do so in this case. When there are profitable organisations, whether they are the TSB/Lloyds amalgamation or whatever, any increase in profitability means that the Chancellor of the Exchequer, and therefore the taxpayer, receives more money from dividends or by way of corporation tax.

I agreed with the noble Baroness, Lady Turner, when she spoke about staff. But we cannot have a job creation economy. We are too exposed to competition from overseas, with which we must keep up. We cannot take a Luddite approach. We cannot ignore computerisation and "hole in the wall" banking. There is no question but that electronic advances have meant that we can now conduct our financial transactions by computer rather than manually. Telephone banking, for instance, will increase tremendously.

Consequently, if the UK is to remain the financial centre of the world, as it certainly is at the moment, it would be folly to throw away the advantages of advanced technology. Whether we like it or not, our competitors will accept and introduce that technology. It would put at risk our position as the world's financial centre. As I said earlier, I believe that there is danger of a storm in a teacup. I am absolutely convinced that the Bill should go through.

8.45 p.m.

Lord Whitty: My Lords, I shall speak only briefly because many points have already been covered from this side of the House. I want to put down a few markers. First, I declare an interest in that for many decades I have been a customer of Lloyds Bank, which has looked after my overdraft extremely well. I also benefited greatly from the foresight of the TSB in the 1970s when it was prepared, ahead of many other

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organisations, to give a credit card to someone with no assets. I was, therefore, a great beneficiary of competition between the two organisations.

However, I must say that I do not have the blind faith of the noble Lord, Lord Clark, in the integrity of such organisations, particularly in respect of their staff but also in relation to their customers. There is a wider concern--and I am not ashamed to admit that I have a wider concern as a trade unionist and a consumer. As the noble Baroness helpfully pointed out, there have been massive changes in the financial sector. My noble friend Lady Turner pointed out the downside, both in terms of staff and customer service.

I am glad that we heard some history at the beginning of the debate. In its origins, the Trustee Savings Bank, although not quite the same as a friendly society or a building society, nevertheless came from the same era--an era of mutuality and self-organisation, not one of huge profit-driven corporations. For many decades--in fact, right up to the present day in Scotland and many other industrial and city areas of our country--it was in effect the workers' bank. It was a community bank. It was built up on the savings of £1 or 10 bob a week from apprentices and low paid workers with young families.

It may be argued that that era came to an end in 1985 when Parliament and this House allowed the transformation into what became the TSB. Your Lordships' House had misgivings at that time, some of which are recorded in the debates. The noble Baroness dealt with a particular misgiving about the situation in Scotland and I am glad to accept her assurances on that matter. But at the time it was assumed that another Private Bill would be necessary to undo the assurances that were then given. I should like this Chamber to look at the situation of the assurances that have been given on this occasion.

We may well be in a new era of streamlined banking, direct banking, telephone banking and new technology. I accept that there will be many advantages from the merger. But I cannot accept the closure of branches, particularly local branches in small, less prosperous communities and possibly the loss of thousands of jobs. That must affect the customer service and therefore the very competitiveness of which some noble Lords have spoken. It must reduce access to banks in those communities and diminish personal contact and the flexibility between the bank and its customers. I am not confident that the promises of increased efficiency, even in its crudest sense, outweigh those things.

Other noble Lords cited the studies of the National Consumer Council and other bodies which underline the link between the number of outlets and customer service. They also emphasise that it is poorer people who suffer from a decline in accessibility. Therefore, I argue that the trade union interest and the customer interest in this respect are often as one. But also I am not ashamed of making the trade union case on its own. Even in terms of personnel management and good industrial relations, should we in fact be facilitating moves by this merged bank--we do not oppose the merger as such; it has happened--which destroy jobs,

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fail to give adequate compensation to loyal staff of the two organisations and, according to the trade unions involved, undermine recognised terms and conditions?

I accept what the noble Lord, Lord Dixon-Smith, said. These issues should be settled across a table. I do not accept his philosophy of industrial change but I accept that these issues should be negotiated and change is part of the industrial relations scene. I also welcome the statements by the noble Baroness, Lady Hooper, on recognition and consultation. I hope that they will be reflected in the discussion at Committee stage.

I simply put down some markers this evening. I hope that some of them can be addressed at Committee stage. I support the procedural amendment of my noble friend Lord Dubs and hope that at least its spirit will be accepted by this House and lead to further consideration of these issues in Committee.

8.50 p.m.

Lord Lyell: My Lords, I am glad to follow the noble Lord, Lord Whitty. First, I am grateful to my noble friend Lady Hooper for alerting me to this Bill. I have no interest to declare; I am neither a client of Lloyds nor of the Trustee Savings Bank. The noble Lord, Lord Taylor, will be interested to know that the Trustee Savings Bank has been a staunch pillar of the community in Kirriemuir, which he knows so well, for many years--certainly all of my life.

I am curious about the Bill, not just the merger. As the noble Lord, Lord Whitty, my noble friend and other noble Lords have said, it is a merger of many interests, not least England and Scotland. Lloyds Bank has a tradition of being a commercial bank in England and Wales--not least in the south of England--especially geared and targeted towards one-man businesses. The noble Lord, Lord Whitty, kindly pointed out the Scottish history and roots of the Trustee Savings Bank, which has been directed to what I would call the "couthy" individuals north of the Tweed and north of the Solway.

I had something of a scare six or seven years ago when I went to an institution known and much loved by my noble friend Lady Hooper and myself, only to discover that it had transferred all its financial interests to the Trustee Savings Bank. That institution--in which I declare an interest--had the great motto, "Only the best will do". It started as a fairly small bank and rose to be a top competitive bank, now joining in a merger with Lloyds.

The merger appears to me to be a first-class balance. It gives the customers of the two banks an even wider choice. I understand that there are over 15 million customers involved. The services involve not just drawing money out or paying it in, but what is also referred to as "bank assurance". When one visits the Trustee Savings Bank one visits a bank which has probably given one's family, one's parents and perhaps even one's grandparents an enormous amount of advice on all kinds of financial services. The merger with Lloyds will increase the spread of those services.

I bank in the old way, using cheques--though I find singular difficulty in cashing them these days. Of course, we in this House should declare an interest in

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that not 50 yards from here we can cash cheques easily. But now there are things called "ATMs"--automatic teller machines. I distrust them since I had to have a PIN number and quite often it did not work. The use of those machines has risen by 12 per cent. in the past calendar year. Again, one of the additional services provided by the merger, even in small places like Kirriemuir, will be the installation of ATMs. That will be of enormous help to customers.

I believe that the changes are desired by the customer. The noble Lord, Lord Whitty, referred to "tele" banking and other changes. They are forms of progress wanted by people much younger than me who will continue to use them. The changes in the Bill are not draconian, even for Scotland and for the Trustee Savings Bank. They should be encouraged.

Perhaps my noble friend can give me some guidance. The noble Baroness, Lady Turner, and the noble Lords, Lord Whitty and Lord Dubs, pointed out that there will be a reduction in the number of people employed by the bank. Is that out of line with what has happened in other bank mergers that have taken place over the past 20 years? I suspect not. I suspect that there may be a number of what are called "compulsory" redundancies, but nothing out of line with other similar bank mergers. I believe that there is a constant turnover of staff and, if there are reductions in staff numbers, it will be in accordance with the normal process of turnover.

In relation to the Bill, I was delighted to find enormous safeguards in Clause 7 both for the staff and for the customers of the bank. My noble friend may be able to advise me on one further point. I understand that the Trustee Savings Bank is unique among financial institutions in that it has a large charitable foundation. Apparently a fair sum of money is provided for charities in Scotland and elsewhere, in the region of £10 million a year and increasing. Perhaps my noble friend will be able at some stage to let me have some information on that point. It will alleviate my curiosity.

I apologise to your Lordships for taking up time this evening, especially when I know that the noble Lords, Lord Taylor and Lord Peston, are pining for further information. I shall provide it if I can; but I wish the Bill well.

8.55 p.m.

Lord Monkswell: My Lords, I too thank the noble Baroness, Lady Hooper, for her comprehensive introduction to this debate. I can assure her that we are all engaged in seeking the success of the British financial services industry.

The noble Baroness highlighted the effects of new technology, and there is a general recognition that the financial services industry is restructuring and rationalising. If we walk down virtually any high street we can see the proliferation of banks and building societies that have converted and realise that there is an over-supply in that element of the industry. We are lucky to have the opportunity of a parliamentary debate on this subject. A lot of the restructuring takes place outside of parliamentary scrutiny. In that sense we are lucky to be able to make contributions and points as to how we feel the restructuring should be handled.

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I was interested in the comparison made by the noble Baroness, Lady Hooper, in relation to the rationalisation of the manufacturing sector during the 1980s. As someone who experienced it in the frontline, I know that it was not a pleasant experience. I have a great deal of sympathy for people working in the financial services industry who are effectively in the throes of the restructuring that is taking place, like that which happened in the manufacturing sector in the 1980s. That is something from which I hope we can all learn. I declare an interest as a member of MSF--the Manufacturing, Science and Finance Union. We can take the experience that we gained in manufacturing as a trade union in relation to the restructuring and, one hopes, use it in the finance sector.

I was interested to hear the contribution of the noble Lord, Lord Cobbold, when he pointed out the implications for the pension schemes of the companies involved. That struck a resonance with me. It is the same sort of situation that applied to many pension schemes in manufacturing companies where, because of changes in the stock market and large-scale redundancies, pension schemes ended up with surpluses. Those surpluses were dealt with differently by different companies. However, predominantly it was the shareholders who benefited from those surpluses and not necessarily the members of the pension scheme who had contributed to them. That is a lesson we can all learn.

I was interested in the contribution of the noble Lord, Lord Clark of Kempston, who pointed out the difficulties of the Maxwell scenario. The intriguing element of that was that Maxwell was using pension fund money to try to keep the companies in his empire going, whereas many people running companies with pension fund surpluses paid those surpluses directly to shareholders and did not invest and contribute to the companies themselves.

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