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Lord Clark of Kempston: My Lords, the noble Lord is wrong. If there is a surplus on a contributory pension fund the employer will have a one-year holiday in paying the contributions. It has nothing to do with shareholders. In no way could one take a surplus from a pension fund and distribute it as a dividend. The noble Lord is wrong.

Lord Monkswell: My Lords, from a sedentary position my noble friend Lord Peston points out that it adds to the value of the business and therefore feeds in directly to shareholders. However, rather than engage in a long debate on that element of the subject under discussion, I wish to put down as a marker that it is an area of business activity where the trade union movement has some experience. I would hope that the employees and the unions involved will welcome advice and share the information that other unions have on how to deal with some of the problems that are emerging.

The experience of the noble Lord, Lord Dixon-Smith, regarding redundancy in the southern part of England may be rather different from mine in the northern part of England. Redundancies and restructuring can decimate whole communities and consign them to poverty and degradation. We need to be aware that significant large

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redundancies in a specific area can have an effect on local communities. There is a need for the company and the workforce to discuss what is happening with leaders of the local community to ensure the best way forward.

There is another difference. The TSB Lloyds group provides retail services to the community. In that sense it is rather different from most manufacturing industries which do not provide a direct retail service. I hope that the Committee dealing with the Bill takes on board the need to ensure that services for particular communities which may not contribute much to the bank's income and profits are not lost.

It may be possible to move amendments to the Bill to ensure recognition of unions and to ensure that there must be negotiations when there are significant changes to the business, but that may not be the road Parliament chooses to take. I hope that as a result of this and other debates the management of Lloyds TSB and representatives of the employees will sit down and negotiate sensible resolutions of any problems that may emerge.

9.3 p.m.

Lord Taylor of Gryfe: My Lords, I declare an interest. I am a very happy shareholder in Lloyds Bank. I was formerly a happy shareholder in the TSB Bank before it was privatised, if that is the word.

We have spread ourselves over a fairly wide range on this matter, which I hope will be satisfactorily resolved by good sense on the part of the bank and the other contending parties. I associate myself completely with what has been said from these Benches not because it is a party matter but simply because it is right that the House should be concerned about the social implications of the matter before us. The social implications in terms of the employment of people and service to people are important. The noble Lord, Lord Clark, seemed to suggest that any consideration in these matters affecting employees would somehow undermine the position of London as a great financial centre. The noble Lord should recollect the experience of Barings, NatWest and Morgan Grenfell, my former employer, in these matters. There is a great deal more than this minuscule matter of good relations in the new merged bank.

I have always believed that successful companies, companies that are going to survive in business, and profitable companies are ones that have good industrial relations. That is important and it is basic to good management. Therefore, I hope that when looking at the matter in the light of the debate the directors of Lloyds TSB will take to heart some of the things that have been said and that the bank will not only survive but will prosper on the basis of good industrial relations. All that is being asked for is trade union recognition, concern about redundancies and so on.

It has been suggested that I might say a few words about Scotland. I propose to do so. In anticipation of this debate, I looked back to a date in 1985, to a debate in a thinly attended House--not unlike the atmosphere in which we are discussing this matter today. It concerned the passing of the TSB, from its somewhat unusual structure, into a bank. I moved an

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amendment on that date and suggested that TSB (Scotland) should be taken out of the Bill. I carried that amendment by 67 votes to 54. I was immediately summoned by the Leader of the House, the noble Viscount, Lord Whitelaw, and the representative of the Department of Trade and Industry in this House, the noble Earl, Lord Gowrie, to meet them the next day. They said, "Do you realise that that amendment of yours means that the Bill will be lost? We have done four years' work on this Bill and you are going to undermine it and make it impossible". I knew in fact that the Bill might be taken back to the House of Commons and the process would continue, but time was running on. The Leader of the House said, "You are preventing the TSB becoming a bank".

I did not persist, but I got certain concessions. The noble Viscount, Lord Whitelaw, said that the merchant bank advisers and the TSB would meet me in my office in Edinburgh the next day to try to hammer out a compromise concerning the future structure of the TSB. There was no time to incorporate the amendment which I had secured into the Bill, but by means of a Written Answer dated 4th July 1985 certain concessions were agreed. I should be glad if the noble Baroness, Lady Hooper, would confirm that all the items referred to in the compromise agreement will be observed in the new arrangements which we are discussing tonight. She has already acknowledged the first item that,

    "TSB Scotland can, should and will continue to function as an independently managed Scottish bank".

I presume that she confirms that condition.

The agreement went on to establish that community interests would be recognised on the board of the TSB Scotland because the TSB in Scotland had very deep roots in the community. One in every four households in Scotland had an account with the TSB. It had accumulated very large reserves. I spoke to the noble Lord, Lord Lawson, today who was Chancellor of the Exchequer at the time. He said, "My problem at that time was that I did not know who belonged to TSB Scotland". It was not a mutual, it was not a limited company. He had some difficulty.

Anyway, TSB Scotland became a bank under the new arrangements. It would continue to have deep roots in the community. In addition, it would pass 5 per cent. of its share capital into a charitable foundation, which was a point raised by the noble Lord, Lord Lyell. That has accumulated a fair amount of money. Perhaps the noble Baroness, Lady Hooper, would confirm not only that the structure of TSB Scotland will be preserved, but also that its social obligations will be observed. The agreement continues:

    "The directors of each banking company [TSB and Lloyds] will be under a responsibility to take into account not only the interests of its shareholders, but also the interests of its customers and staff".

That again is one of the conditions laid down in that agreement. It is quite consistent with the concern for the welfare of the staff that my noble friends on these Benches have indicated their attitude to the future proceedings on this Bill.

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9.12 p.m.

Lord Peston: My Lords, in making some general comments from this Bench, perhaps I may say that, like some noble Lords, I am not one of the 15 million customers and I am not a shareholder of Lloyds or TSB. But I have an interest to declare; namely, that I sat in the TSB box at Highbury earlier this season and had the great pleasure of seeing Arsenal beat Sheffield Wednesday 3:1.

Some remarks have been made about the future of the financial services industry, its economics and technology. These are matters which I am greatly interested in, but I do not wish to weary your Lordships with them tonight. Indeed, I am not at all clear why any of them have been raised, since we are meant to be discussing a Bill. My honourable friends will be in charge of these matters after 1st May and that will give me my full opportunity to get involved in the financial services industry.

Perhaps I may also say by way of a general remark that your Lordships' House is a House of Parliament. I am surprised at one or two of the remarks made, notably by the noble Lord, Lord Dixon-Smith. This is a Bill before a House of Parliament. Your Lordships are rightly sensitive to our rights and privileges. I believe that the points made by my noble friends are not merely proper, but that we have an obligation to examine all these matters in their entirety. It is not a misuse of this House. Quite the contrary; it is a perfectly correct use of the House. When the matter goes to the other place, it will be a perfectly correct use of the other place to examine matters further.

My noble friend Lord Dubs raised what I thought were the relevant matters. It is not a case of rubber-stamping a Bill like this. If Lloyds TSB wanted a rubber stamp, they should have carried this out without a Bill. This is a Bill and it needs to be examined. My noble friend raised certain matters and earlier in the week he put down an instruction to the Committee. For reasons completely beyond me, that instruction has now disappeared from your Lordships' proceedings, but nevertheless he has done his job properly. That job is to indicate to the Committee the considerations we feel it ought to look at. Those considerations are not of the "Let's not help the financial services industry to be prosperous" kind. They are not: "Let's prevent the Lloyds TSB merger succeeding". Quite the contrary. Those of us who are concerned about the staff of the merged business are well aware that central to the welfare of the staff is that the business should be successful. There is nothing that we wish to say to undermine that. But it is quite a distance from the points raised by my noble friends and someone has to raise them.

The noble Lord, Lord Dixon-Smith, is right that we do not wish to become involved in industrial relations here. We want your Lordships' Committee to be aware of our concerns, we want Lloyds TSB to be aware of our anxieties and we wish to see an effective end to what appears at the moment not to be an entirely satisfactory state of affairs. I say to the noble Lord, Lord Clark of Kempston, that I do not believe it is a

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storm in a teacup. I am sometimes troubled by how frivolously noble Lords opposite treat the question of redundancies and such matters. As a university professor, I can say that I have had a job for life all my life and I would never make remarks critical of those who would like the same, but who are told: "You must take your chances and lose your jobs as and when it happens". To me, job security matters a great deal, it is why I went into my line of business. One ought not to make frivolous remarks or engage in "ad hockery". Many men and women in this country over the past few years, perhaps in the interests of economic advance, have lost their jobs. It was not trivial for them--far from it. That is why it is right for us to say how important the problem is.

On the detail of the Bill, our concern is partly about union recognition. The point was made several times and there is a legal side to it of which noble Lords are aware. Secondly, the subject of pensions was raised. Thirdly, the point which I mentioned was made about redundancies and job security. I hope that that is something which Lloyds TSB will deal with. I say to the noble Baroness, Lady Hooper, that, although she introduced the Bill in an excellent fashion, for the record she ought to know that she did not reassure me about any of those three matters. There seemed to me too many blurred edges to what she said about them, edges which in my judgment do not have to be blurred.

One could say in terms--and I hope that it will be said to the Committee--first, that the unions will be recognised; secondly, that it is not merely a matter of saying, "We will try not to have compulsory redundancies", but something much closer to: "We'll do all we can and quantify this voluntarily". Thirdly, I should be interested to know whether other noble Lords have seen the appropriate documentation, because I need to see a more definite statement on the position concerning pensions. As someone who is now beginning to draw his pension, I do not take them as a minor matter, nor do I feel that it does not matter whether one loses £1,000 a year here or there. In my case it did matter and I did not lose the £1,000 but I would not criticise any employee of the merged business or those who have retired who are worried about it.

My hope is that these are purely a matter of worry. What bothers me tonight is that I did not hear from the noble Baroness, Lady Hooper, a strong enough statement suggesting that the relevant people should not be worried.

I end by saying that all we are doing is airing a range of matters. We look forward to the Committee of your Lordships' House meeting. I think evidence ought to be presented to it to give all those who are worried total assurance. To go back to the storm in a teacup analogy, I should like to see it retrospectively as a storm in a teacup and to say it was quite all right. I should like to be able to tell my friends in another place when the Bill reaches them eventually that it is now all right. I try to keep my mind as open as I can, but at the moment I still have doubts and I look for a stronger statement now from the noble Baroness or, even more likely, when the matter is put before your Lordships' Committee.

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