§ Order for Second Reading read.
§ 7 pm
§ Mr. Eric Illsley (Barnsley, Central)
I beg to move, That the Bill be now read a Second Time.
It may be appropriate to declare an interest. I contribute to an insurance policy with Abbey Life, which is now wholly owned by Lloyds, and my wife contributes to a pension scheme originally with Target Life which I think went under the control of Abbey Life. Other than that, I have no registrable interests in relation to Lloyds TSB.
In December 1995, two of the United Kingdom's oldest and best-known financial services groups, TSB group and Lloyds bank, merged, with the aim of providing their customers with the widest possible branch network of services that was available from any high street bank. It may seem strange to some hon. Members that, despite securing the necessary regulatory and shareholder approval at the time of the merger, Lloyds TSB group, as it is now called, is required to promote this measure in Parliament.
Before dealing with the Bill's provisions and its recent parliamentary history, it may help if I sketch the background of the United Kingdom's current financial services marketplace, which has changed beyond recognition in the past 15 years. Cash-dispensing machines, credit and debit cards and telephone and even personal computer banking are fast becoming features of many people's everyday lives. Customers no longer expect to have to go to their high street bank at a time that is convenient to the bank. They expect the bank to come to them, and do not invariably expect even to have to walk across the threshold of a bank branch. They want the ease and convenience of knowing that they can pick up and use a telephone on a local rate number any time of the day or night. The two words that encapsulate that change are competition and technology, and the combination of the two is having a profound impact on the shape and structure of the financial services sector in the United Kingdom.
All the major players in the sector are bringing on line ever more sophisticated technologies to tailor their distribution systems to meet the changing and ever more sophisticated needs of their customers. For example, the supermarket chains Sainsbury and Tesco have become significant competitors in the new financial services environment. Sainsbury's bank now has £1.4 billion in deposits from 650,000 customers. Virgin already has more than £1 billion under management through its personal equity plans and pensions business, and intends to enter the banking marketplace later this year.
It seems that scarcely a day goes by without another company announcing its plans to enter the financial services sector. BMW, British Airways and Daihatsu are the latest in a long line of companies declaring an interest in the sector. The new entrants are playing a crucial role in irreversibly transforming the landscape of the UK's financial services sector, as well as representing a challenge to the major providers of retail financial services. We may legitimately question how substantial or sustainable is the challenge. Most of the new entrants are cherry-picking customers from the clearing banks by offering them a narrow range of products and services— 538 and only those that they think will be highly profitable. It is not a universal service aimed at banking for all sections of the community, and nor do the new entrants intend that it should be. The new entrants are not able to offer the breadth of services and products or the specialised staff that traditional providers offer. They do not want to be saddled with the high infrastructure costs of providing an accessible and fully comprehensive banking service.
That naturally brings me to the sensitive issue of traditional fixed-branch networks. Footfall in branches—the number of customers using fixed branches—is falling year by year for all the major United Kingdom retail banks. As we know, the key drivers of that change are technological advances and increased competition.
In this new financial services climate, Lloyds TSB group, like its competitors, has needed to respond to rapidly changing customer preferences, and constantly needs to look at the shape of its branch network and at ways of delivering services to customers. One good example of that is that the bank has teamed up with Asda supermarkets, and the first Asda in-store bank providing the full range of TSB products opened in December. Six more pilots have since opened. However, Lloyds TSB is, and will remain, the most accessible bank in the United Kingdom. It has 2,700 branches nationwide—900 more than its nearest competitor. For TSB and Lloyds, the branch network is the bedrock of customer services.
§ Mr. John McWilliam (Blaydon)
I am listening with interest to my hon. Friend's explanation. Why did Lloyds close the only joint stock bank branch in Winlaton in the north-east where I live—a catchment area of some 12,000 potential customers—when there is no competition in the village? Was it just for profit?
§ Mr. Illsley
I appreciate my hon. Friend's concern. Perhaps when he has heard about the initiatives of which I shall speak shortly he will feel more comfortable with the Bill. Before becoming involved with the Bill, I met the banking unions and listened to their concerns about branch closures. Those concerns were addressed by Lloyds TSB to the unions' satisfaction. I shall shortly try to explain how Lloyds will address the issue of branch closures in areas where no other banks are available.
As I said, for TSB and Lloyds the branch network is the bedrock of customer service and the principal means of maintaining contact with customers in all parts of the United Kingdom. It is worth noting that, with just 500 branches each, competitors such as Sainsbury and Tesco fall short of offering the wide and well-balanced branch network that consumers value and that customers of TSB and Lloyds enjoy.
When Lloyds TSB has to close a branch, it goes the extra mile—unlike its competitors—to ensure that its customers continue to have easy access to basic money transaction facilities. Lloyds TSB attaches considerable importance to that, not just because it is a sound and commercially sensible judgment, but because it reflects the company's strongly held belief in corporate citizenship—the belief that social responsibility goes hand in hand with commercial success. The TSB movement, as I shall shortly explain, was founded with that principle at the heart of its business ethos.
In November 1997, Lloyds TSB announced an historic pilot project whereby its customers could cash cheques and withdraw money at selected post offices in their 539 locality. The scheme has been so successful that Lloyds TSB intends to roll it out to 500 post offices nationwide. I am sure that my hon. Friend the Member for Blaydon (Mr. Mc William) will take that point on board, and I will ask Lloyds TSB whether that pilot project will extend to his area.
§ Mr. Illsley
I am afraid that my hon. Friend has got me on that one. It seems that he will have some problems in the future.
The project is good news not only for TSB and Lloyds but for the continuance of the country's post offices—apart from in Blaydon, of course—and will help to secure the future of branches in rural areas, which will continue to play an important role right at the heart of community life.
Before explaining in detail the merger of Lloyds TSB, I want briefly to describe the two companies and to say something of their respective backgrounds. The TSB movement was started in 1810 by the Rev. Henry Duncan in the small Dumfriesshire village of Ruthwell, as a means of improving the financial position of what were then termed the labouring classes.
One might think that there was an element of 19th-century paternalist do-gooding in that, but Henry Duncan's motivation was straightforward and genuine enough. As a result of his and others' endeavours, savings banks were established throughout the United Kingdom, and an early precursor of the savings culture that the Government want to build today was created. From the 1840s onwards, the savings banks' funds were secured by the Government—hence the name Trustee Savings bank.
Although the savings banks began to explore the possibility of providing commercial services in the 1920s, it took more than 50 years for them 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, as small shareholders, including many staff, began to share in the benefits of the business: 25,910 staff and company pensioners applied for a staggering 97 million shares.
By 1995, the TSB had grown to become one of the United Kingdom's leading bancassurers—that is, an integrated banking, life assurance and general assurance business—with branches throughout Britain.
Lloyds bank, or Taylors and Lloyds, as it then was, was founded in 1765 in Birmingham. By the 1880s, Lloyds was 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, and in 1884 that business was combined with the mainstream bank. Recently, the group acquired Abbey Life and the Cheltenham and Gloucester building society.
Before I explain why the group needs a private Bill, I want to give the House a renewed assurance on the separate status for the TSB in Scotland. Lloyds TSB has asked me to confirm that TSB Scotland's separate and special status, as provided for in the undertakings given to Parliament by the then TSB group in 1985, will continue to be honoured.
540 At the first annual general meeting of the new Lloyds TSB group in Edinburgh on 11 April 1996, Sir Robin Ibbs, the group's former chairman, said:
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".The group is committed to employing about 4,000 staff in Scotland, and last year expanded its business operations by opening 13 TSB and three Lloyds business banking centres to service the needs of the Scottish small business community. Only last week, the group's annual general meeting was held in Glasgow. I hope that that will reassure Scottish Members that Lloyds TSB is committed to serving all its customers in Scotland.
The need for a private Bill arises from the fact that a bank may not transfer a customer's money to another body without the customer's consent. Only through a private Bill can a bank's operations be merged without its going through the massive administrative task, and uncertainty, of seeking the agreement of each customer individually to a transfer of his or her account from one entity to another. In this way, 7 million TSB customers are also spared the accompanying inconvenience. That is the recognised way of dealing with bank mergers, and an average of one bank Bill each parliamentary Session testifies to that fact.
The Bill provides for the transfer to and vesting in Lloyds of the undertakings of TSB and Hill Samuel. Clause 3 allows the directors of Lloyds to name an appointed day on which those undertakings will be transferred to Lloyds and to name different days for each undertaking and for different parts of each undertaking. Clause 4 provides that, on the appointed day for an undertaking, it will transfer to and vest in Lloyds, which will in effect step into the shoes of TSB and Hill Samuel.
The rest of the Bill is designed to ensure that the transfer is effective, so that, once TSB and Hill Samuel have been transferred to Lloyds, Lloyds will be in the same position vis-a-vis third parties as TSB or Hill Samuel were before the transfer. By the same token, third parties that have dealings with TSB or Hill Samuel before the transfer will be no better and no worse off in their dealings with Lloyds.
Clause 6 contains supplementary provisions, including subsection (5), to the effect that any account between a customer and TSB or Hill Samuel will become an account between that customer and Lloyds after the appointed day. Clause 7 provides for contracts of employment, notably ensuring that, following the transfer, any contract of employment with TSB or Hill Samuel becomes a contract with Lloyds, as if the employment were a single, continuing employment.
Clause 8 relates to retirement benefit schemes, although it should be noted that it has no effect on the TSB group pension scheme, which is not part of the business or undertaking of Hill Samuel or TSB that is being transferred into Lloyds.
The Bill made steady progress through the other place. It received its First Reading in January 1997 and its Second Reading in March 1997. Following the general election and the summer recess, it went to the Committee on Unopposed Bills in November 1997, and received its Third Reading on 19 January this year.
As some hon. Members are aware, Lloyds TSB undertook exhaustive and free-ranging discussions about its future relationship with the Banking, Insurance and 541 Finance Union, BIFU, and the Lloyds TSB Union, LTU, as soon as the merger was announced. It successfully concluded agreements with both unions, to each party's satisfaction, during last year's summer recess.
The most significant features of the agreements were: equal recognition rights for BIFU and LTU in both the TSB and Lloyds banks; compulsory redundancy continuing to be a policy of last resort, with any necessary reductions in jobs coming from natural turnover, redeployment and voluntary means whenever possible; improvements when harmonising terms and conditions and guarantees on how the new terms will apply to new members of staff; and an agreed process for proposed branch reductions, whereby both unions are notified six months before any such closure.
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
Can my hon. Friend give us any assurance about what the agreed programme of closures might be in the short to medium term?
§ Mr. Illsley
I am sorry that I am unable to assist my hon. Friend in that matter now, but I am sure that I will be able to do so in correspondence. As far as I am aware, there will be closures, but Lloyds TSB has agreed the procedures with the banking unions. I also met the unions to discuss the issue and ensure that they were satisfied with what Lloyds TSB had proposed. Both the banking unions were happy with the suggested procedures for branch closures. Perhaps my hon. Friend can seek the unions' assurances.
§ Mr. Cousins
I am grateful to my hon. Friend, but he will recognise that, as representatives, we must be concerned—like my hon. Friend the Member for Blaydon (Mr. McWilliam)—about the impact on the services to our constituents and constituencies of a programme of branch closures. That is an entirely separate issue from whatever assurances may have passed between the banking unions and, now, their employers.
§ Mr. Illsley
I share my hon. Friend's concern. In my constituency, a TSB and a Lloyds branch are in close proximity. Obviously, it would make sense for the merged company to merge the two branches, closing one. However, we are talking about a de facto merger that took place two years ago. The Bill would simply give it legal status.
As I said, Lloyds has piloted a scheme to provide banks within branches of the Asda supermarket chain, and with the Post Office, to widen as far as possible access to the services that my hon. Friend's constituents desire through the widest possible network.
§ Mr. Cousins
I am grateful to my hon. Friend for giving way again; it may be best for us to proceed by means of a dialogue, rather than by making speeches. My hon. Friend briefly referred to the acquisition of the Cheltenham and Gloucester building society. Can he give the House some assurance about what the attitude of Lloyds TSB will be to the future of mutual institutions and to the employment and assets locked up in them?
§ Mr. Illsley
That matter is not affected by the Bill. The acquisition of the Cheltenham and Gloucester building society was based on the premise that it had a cost-income ratio of 26 per cent., making it the cheapest and most 542 efficient building society in the United Kingdom—hence the interest of Lloyds TSB. In comparison, at the time of demutualisation the Halifax building society had a cost-income ratio approaching 50 per cent. One can therefore see the advantages of buying the Cheltenham and Gloucester.
The point was to have that mortgage service—perhaps the most efficient of any building society—available to Lloyds TSB branches throughout the country; ultimately, it might then be available through supermarket branches and post offices. The acquisition was intended to make efficient, low-cost mortgages available to Lloyds TSB customers. As far as I am aware, at present demutualisation of the Cheltenham and Gloucester is not a policy. I may be able to reassure my hon. Friend further on that point in correspondence.
As I was saying, the relevant features of the agreements include an agreed process for proposed branch reductions, whereby both unions are notified six months before any proposed closure, and a reaffirmation of the assurances previously given regarding the TSB in Scotland. Against the background of the agreements reached with the unions and the assurances given to them, the unions withdrew their petitions after Second Reading in the other place.
During that period, pensions were discussed with the unions, and the Lloyds TSB group assured both unions that the benefits of the separate Lloyds and TSB pension schemes would remain unaffected by the Bill. The non-contributory elements of the schemes are some of the best funded in the United Kingdom and they provide an excellent package of benefits to pensioners. In addition to the strength of funding, the schemes—as one would expect from a major financial service provider—enjoy a comprehensive framework of statutory, regulatory and fiduciary safeguards for their beneficiaries.
The natural fit between TSB and Lloyds is multiplied 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 was not merely one of geographical reach. Lloyds has a long tradition of providing business services for small and medium businesses, while TSB, with its tradition as a savings institution, has a particular expertise and strong presence in the personal account market.
§ Sir Raymond Whitney (Wycombe)
The hon. Gentleman referred to the pension arrangements and, as I understood it, said that those were satisfactory. Can he explain why there is such widespread concern about the pension arrangements of Hill Samuel TSB former employees? We are talking about a company that now has a massive revenue—£.3 billion, I think?—with £1 billion in its pension fund and a tax holiday until at least 2015 for current employees, yet many of us have been told that former employees of Hill Samuel TSB are having to apply for welfare benefits.
§ Mr. Illsley
I hope to be able to deal with that issue later, but I can tell the hon. Gentleman that meetings have taken place as recently as this lunchtime and this afternoon at which the concerns of the Hill Samuel action group, which numbers about 200 people, were addressed by Lloyds TSB. The action group proposed the use of the Hill Samuel pension surplus. Those pensions are unaffected by the Bill and are not part of the assets that 543 are being transferred, but a separate entity. The action group asked to use about £500 million of the surplus available in the Hill Samuel scheme.
A few years ago, I requested from the Opposition side that the surplus from the mineworkers pension scheme be used for the benefit of former mineworkers who were on low pensions and had not been able to earn sufficient from the pensions scheme, which started in 1961, to live well. As the hon. Member for Wycombe (Sir R. Whitney) may recall, the previous Government refused that request. On privatisation of the coal industry, the surplus went straight into the Government's hands.
This issue is similar, and it is the one with which Goode committee dealt a few years ago. That committee was set up after the Maxwell pensions affair. Its recommendation was simply that a surplus in a pension scheme should be notionally owned by the organisation that supports the deficit; in other words, if the employer has to make good the deficit on any pension scheme, he takes responsibility for the surplus.
The action group's request for £500 million was unrealistic and against the recommendations of the Goode committee. The pensions of Hill Samuel pensioners are on average £12,000 per annum compared with the UK average of £4,700. I think that the Lloyds average pension payment is about £7,000 per annum. Those average payments show that the Hill Samuel pensioners are perhaps not as low-paid as the hon. Gentleman suggests. The hon. Member for Aldershot (Mr. Howarth)—who I see wants to intervene—and the hon. Member for Arundel and South Downs (Mr. Flight) today met the deputy chief executive and members of Lloyds TSB. They have been sent a letter that deals with many of the concerns of the Hill Samuel action group.
The letter refers to the position of pensioners on low incomes. Lloyds TSB maintains that it shares the concern that exists. In fact, the company makes ex gratia payments, not out of the pension scheme but out of its funding, to pensioners on poorer pensions—those over 75 with more than 10 years' service. The payments come out of the bank's profit and loss account and not the pensions scheme, which is not reduced by them.
Lloyds TSB states in the letter that it is "sympathetic", that it is
seeking to improve the position of such pensioners",that it wants to ensure that any additional payments are not affected by the removal of social security benefits on a pound-for-pound basis, and that it will
undertake a comprehensive review to examine the position of such pensioners in order to determine how their pensions can be increased within Inland Revenue guidelines and without reducing their Social Security entitlements … We anticipate that the review will take approximately six months to complete.
§ Mr. Gerald Howarth (Aldershot)
The hon. Gentleman accurately said that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) and I had a very long meeting with senior executives of the bank. It needs to be put firmly on the record that, although the action group suggested that a substantial part of the pension fund surplus should be used to ameliorate the position of poorly paid pensioners, that was an opening gambit to try to get the bank to talk and resolve the issue 544 as quickly as possible. The bank's ex gratia payments averaged about £460. We are not talking about a huge sum. I believe that that was a lump sum.
§ Mr. Illsley
It is more than the mineworkers get. We asked for their pension fund surplus to be used to provide better benefits for mineworkers. They did not get ex gratia payments at all.
We must consider what the action group is asking for in context. The whole matter was debated at the time of the Goode committee. In opposition, I called for the previous Government to divvy up the surplus in the mineworkers pension scheme for the betterment of the lower-paid pensioners. My request was refused by the Government whom the hon. Gentleman supported.
§ Mr. Howarth
In my previous incarnation, I represented a number of mineworkers. I think that I would have supported the hon. Gentleman.
§ Mr. Illsley
I am sure that the hon. Gentleman would have spoken well in support of the mineworkers in his previous incarnation.
§ Mr. Peter Brooke (Cities of London and Westminster)
Can the hon. Gentleman say whether the negotiations with my hon. Friends the Members for Arundel and South Downs (Mr. Flight) and for Aldershot (Mr. Howarth) are part of the statement issued by the promoters, or a new development resulting from the blocking motion?
§ Mr. Illsley
They are not a result of the blocking motion. There have been some half a dozen meetings between Lloyds TSB and the Hill Samuel action group. I think that the last took place on 16 April. Lloyds TSB has tried to meet the action group and identify the issues that it wants to raise. The hon. Members for Arundel and South Downs and for Aldershot raised concerns as recently as today. The negotiations are not a consequence of the blocking motion, because the meetings took place before it was tabled.
§ Mr. Brooke
I see no specific allusion to the continuing negotiations in the statement issued on behalf of the promoters in support of the Second Reading of the Bill. The hon. Gentleman is moving Second Reading, so I do not think that this matter should be dealt with in a winding-up speech.
§ Mr. Illsley
The Hill Samuel action group and the Hill Samuel pensions are not part of the Bill, and therefore cannot be part of the statement. The negotiations took place alongside the passage of the Bill but, because they are not part of the Bill, they are not in the statement. The assets transferred under clause 8 are the assets of the Hill Samuel bank and the TSB bank, not the pension schemes, which stand alone and remain so within the group. I hope that that answers the right hon. Gentleman's point.
§ Mr. Cousins
I have been following the discussion closely. Does my hon. Friend agree that the presentation of the issues in paragraph 22 of the statement is less full than it should have been in these circumstances, and that it would lead hon. Members to conclude that those issues were irrelevant or had been completely resolved, when they were still under negotiation?
§ Mr. Illsley
I believe that the statement was put together last week in preparation for this debate. It was 545 sent to the Vote Office to be ready and available for hon. Members this evening. The negotiations continued as recently as today. I have a copy of the letter sent to the hon. Members for Arundel and South Downs and for Aldershot. With their agreement, a copy can be made available to my hon. Friend. It met many of the concerns of hon. Members who supported the action group.
§ Mr. McWilliam
Some hon. Members are worried that the explanation that we have been given seems to fly in the face of the realities of the fiduciary duties of pension scheme trustees. As a former chairman of a pension scheme, I am well aware of them. Paragraph 15 states:
The assets do not form part of the assets of either TSB or Hill Samuel.Such assets are not allowed to do so under the law of the land. The trustees should control the assets for the benefit of the beneficiaries of the schemes and not for the benefit of anyone else. Given the statement and what we have heard so far, I believe that there is concern that that may not necessarily happen.
§ Mr. Illsley
I reassure my hon. Friend that the pension assets are not transferred by the Bill. They are not in the Bill. He is right to say that the trustees of the schemes are responsible for the pension scheme and have those duties. The scheme that is the subject of the action group is not in the Bill. As I tried to point out, Lloyds TSB Group has tried as far as possible to accommodate the concerns of the action group and of hon. Members who have added their names to the blocking motion. The letter sent today to the hon. Members for Arundel and South Downs and for Aldershot reflects the outcome of their long meeting with Lloyds TSB's deputy chief executive, and can be made available. That letter addresses those anxieties.
Pensioners on low incomes are the concern of the action group. The letter from the deputy chief executive refers to
a comprehensive review to examine the position of such pensioners in order to determine how their pensions can be increased within Inland Revenue guidelines … We anticipate that the review will take approximately six months to complete".On security of pension schemes, the letter says that Lloyds TSB is
concerned to ensure that the position of pensioners remains fully protected in all circumstances. As you know, there is a comprehensive framework of statutory, fiduciary and fiscal protections in place for members of all of our pension schemes, for the benefit of scheme members.It is all in the letter, and reflects the meeting this lunchtime.
§ Mr. McWilliam
My hon. Friend does not understand. There are two problems. First, if the Bill becomes law, the company trustees on the pension scheme, who will form a majority, will be appointed by the new company. Secondly, the company contributions to those schemes could be adjusted. That has happened before. British Telecom took a pensions holiday instead of transferring the benefits to the beneficiaries. That could easily happen in this case. There is nothing in the Bill to prevent that or to prevent the management from appointing the chief executive, who may be a member of the scheme, and giving him a massive salary the year before he retires; suddenly, he will have raided the scheme. There are no safeguards. My hon. Friend must address those points.
§ Mr. Illsley
With the best will in the world, I am trying to address them. The pension schemes are not in the Bill. 546 They are unaffected; before and after the Bill, they remain the same. Lloyds has given the assurance that the pension schemes will remain unaffected. The fears voiced by my hon. Friend, although legitimate, are not real.
To address the point that was the subject of the blocking motion, Lloyds is trying to deal with the issues raised by the action group, such as the problem of low-paid pensioners under the Hill Samuel, Target Life and other pension schemes. Lloyds is very conscious of pensions issues. That was shown by the meetings over the past few weeks—as late as this lunchtime—and by the letter that has been made available. I have gone as far as I can to reassure hon. Members that the pensions remain unchanged.
§ Sir Raymond Whitney
The hon. Gentleman is resting much of his case on the fact that the £1 billion-plus pension scheme is distinct from and not part of the Bill, and we accept that technical point. However, when the House considers the ramifications of the new development, it is entirely germane for us to take account of the fact that the present employees of Lloyds TSB are to give themselves a tax holiday until at least 2015; at the same time, we are informed that several former employees of Hill Samuel and TSB are suffering to the point where they have to have recourse to social security benefits to supplement an extremely meagre pension; and that is happening against a background where, for example, the chief executive and senior executives of the former Hill Samuel were awarded significant pension and salary increases. The technicality of the pension fund not being part of the Bill is not enough to satisfy the concerns that have been expressed and echoed by hon. Members on both sides of the House this evening.
§ Mr. Illsley
I take on board the hon. Gentleman's point; however, it is not a technicality but a fact of life that the pension schemes do not fall within the Bill and are not affected by it—they remain as they are. There will be a pensions holiday, as there are in many well-funded pension schemes—in the case of the mineworkers pension scheme, British Coal took both a pensions holiday and the surplus from the scheme. It is not unknown for there to be surpluses in pension schemes.
The point which I am trying to make is that the pension schemes are unaffected, but the concerns that have been raised by the Hill Samuel action group have been taken into account by Lloyds as far as possible. Lloyds has repeatedly asked the Hill Samuel action group to provide details of the anomalies referred to in the letters circulated to hon. Members, but, as recently as today, the action group has not come forward with a single example. Lloyds has repeatedly asked for information on those anomalies.
The hon. Member for Aldershot is holding up a piece of paper, but why does he not send it to Lloyds? Why did he not give it to Lloyds today? Why has information on the anomalies not been made available? Hon. Members have had the opportunity to raise those issues with Lloyds, as has the action group, but at a meeting on 16 April, those anomalies were not presented.
I am trying to get the message through that Lloyds is addressing the issues. Conservative Members have received a letter from Mike Fairey, the deputy chief executive of Lloyds. Lloyds is trying to address the issues, which are in a sense separate from the pension scheme, 547 which is unaffected by the Bill. The Hill Samuel action group is using the passage of the Bill to try to address its members' concerns about their pensions, but the Hill Samuel pension scheme does not come within the Bill. As I have pointed out, the average Hill Samuel pension is £12,000 per annum, compared with a national average occupational pension of £4,700. When the Hill Samuel action group comes forward with some concrete examples as part of the review offered by Lloyds, I am sure that they will be taken into account.
I have digressed a little from my speech, but in doing so I hope that I have addressed the concerns of my hon. Friends and Opposition Members. I was talking about the geographical and business set-up of Lloyds TSB and the merger. The TSB, with its tradition as a savings institution, has particular expertise and a strong presence in the personal account market; Lloyds is a strong player in the retail mortgage market after the Cheltenham and Gloucester acquisition; and TSB possesses a successful general insurance underwriting business. The natural synergies between the two banks have turned Lloyds TSB into the most successful financial services group in the European Union.
Generally, the group's staff have seen their job prospects improve as there are broader career opportunities for those working within a stronger organisation. They have also gained through the rising share price of the company: 70,000 members of the group staff and pensioners are members of the company's save-as-you-earn scheme for buying shares.
Lloyds TSB's 15 million customers have also gained significantly from the merger. They now enjoy access to the largest branch and cash-dispensing machine network in the United Kingdom: Lloyds TSB has 2,700 branches—30 per cent. more than its nearest competitor—and 4,220 cash-dispensing machines. Customers have the use of both TSB and Lloyds cash machines without charge and access to Cheltenham and Gloucester building society mortgages in both Lloyds and TSB branches.
For business customers, the group's combined spread of business centres will enhance the service provided to business users, especially small businesses. In parts of the country where TSB is under-represented, TSB small business managers will work from Lloyds bank branches offering small business services to TSB customers; previously, that service was not generally available.
Lloyds TSB's business is rooted in local communities throughout the United Kingdom, and it believes that it has a responsibility to help the communities it also serves as a business. If communities are affected by economic and social deprivation, so too is the health of Lloyds TSB's business. Lloyds TSB foundation will this year distribute £21.1 million, making it the largest grant-making body in the UK after the Diana Princess of Wales fund. The work of the foundation focuses on supporting charities, especially small, local grass-roots charities, which enable people—especially disadvantaged and disabled people—to play a fuller role in society.
That support ranges from pensioners clubs in Newnham to a disabled access co-ordinator at the British museum. In 1997, more than 3,300 local charities received support from the foundations. The group also positively encourages staff fundraising through a matched giving scheme. From sponsored sheep shearing to bed races, the 548 group matches staff fund-raising activities pound for pound; in 1997, £900,000 was raised for the community in that way.
Lloyds TSB has been working closely with the Department for Education and Employment since the end of 1996, having seconded members of its staff to the DfEE, to ensure that new deal applicants have every possible opportunity to work for Lloyds TSB. Lloyds TSB plays a significant role in supporting the education system: 600 members of its staff are school governors, so it is not surprising to hear that the group is developing a qualification for school governors in partnership with Essex county council's governor development team.
In addition to all that, Lloyds TSB is promoting excellence in schools through its "quality in education" programme. The business excellence model used extensively with Lloyds TSB has been adapted for use in 300 schools and colleges through a pilot programme. Lloyds TSB has worked in partnership with more than 30 local education authorities to increase excellence in schools. In another move to promote a progressive approach in pursuit of academic excellence, Lloyds bank has initiated an education service "next steps" pack aimed at 16 to 18-year-olds in school. It combines traditional student notes with an interactive CD-ROM designed to prepare students for university life.
It is not only in pursuit of broadening and deepening the skill base that Lloyds TSB makes its mark; the group is also active on the rugby field and has recently begun a three-year sponsorship of rugby union. As part of that programme, the group is supporting rugby's development in Welsh schools and, in the near future, that programme will be rolled out to include England and Scotland as well.
Lloyds TSB is one of the largest companies in the United Kingdom, and is also one of Britain's world-beating companies. Its support for grass-roots community-based projects is unrivalled by any other UK company. It leads the City in its support for the Government's welfare-to-work initiative. It is creating wealth for the country—more than £500 million in tax went to the Treasury this year-for its staff, for its customers and for its shareholders, 70,000 of whom are members of staff.
The merger between Lloyds and TSB is supported by more than 80,000 staff, 15 million customers, 1 million shareholders, the Bank of England and both staff unions—the Banking, Insurance and Finance Union and the Lloyds TSB Union. By anyone's standards, that adds up to overwhelming public support for the merger, and I look to the House to allow 15 million stakeholders to gain from the merger of Lloyds and TSB.
Several hon. Members rose—
§ Mr. Deputy Speaker (Mr. Michael Lord)
Before I call the next speaker, I remind the House that, although I have allowed a number of lengthy interventions on the question of pensions, pensions are not the principal subject of tonight's debate, which is the Second Reading of a different matter.
§ Mr. Howard Flight (Arundel and South Downs)
As the hon. Member for Barnsley, Central (Mr. Illsley) explained at length, the Bill's purpose is to complete the merger between Lloyds and TSB and, as I understand the position, it especially concerns the use of premises, the 549 rationalisation of premises, and the ability of staff from either side to operate mutually from either Lloyds or TSB premises. I believe that, for reasons best known to Parliament, banking is the only industry for which a private Act of Parliament is required in the event of a merger.
I crave your indulgence a little, Mr. Deputy Speaker, to explain how my involvement came about. A constituent is one of the main parties leading the TSB Hill Samuel action group. I became involved in supporting the blocking motion as a result of an investigation of the points raised by the group.
I believe that there is a technical issue as to whether there is a locus standi in relation to the Bill. I read out the advice of an eminent law firm, to the effect that the purpose of clause 8(2) of the Bill is indeed
to rationalise the pension schemes of Lloyds and TSB with the logical consequence that all schemes be merged at a future date.Therefore, although there is legal controversy as to what clause 8 is about and its precise relevance, there is a legal case that part of this merger Bill touches on the arrangements relating to the pension schemes—and the ability to merge the pension schemes. When merging two significant businesses, it is good practice—in terms of corporate governance, if nothing else—to study the pension schemes and ensure that the arrangements are satisfactory. If one does not do so, one is bound to receive complaints later when, inevitably, the pension schemes are merged.
Three separate issues regarding the pension arrangements worry me. The first is that of poor pensioners, who are drawing social security when the pension scheme has a surplus of about £850 million. The second is to what extent the TSB pension scheme is effectively ring-fenced in future; and the third is the extent to which there are anomalous cases, within the TSB scheme, where treatment had differed among categories of staff who had either had their employment transferred or who were deferred pensioners because they had been made redundant.
The letter that my hon. Friend the Member for Aldershot (Mr. Howarth) and I have received, following a further meeting this morning, goes a reasonable way to addressing those issues. Looking beyond that, it also raises quite an important point for the House, because among the crucial issues is the extent to which pension schemes can address the issue of poor pensioners within the Inland Revenue rules.
Practices appear to differ somewhat—depending on which Inland Revenue officers the arrangements are being discussed with—as to the extent to which the implications of the two-thirds rule can be waived when people are on a very low income. However, I confirm that the Lloyds TSB management have—to my mind, in good faith—carried out a full investigation and undertaken, in good faith, to negotiate, as best they can, with the Revenue to the advantage of pension scheme members, in order to address the issue of poor pensioners within the pension scheme.
Similarly, the law already goes a long way to protect the interests of one group—in this case, TSB pensioners—but there is in that letter an undertaking that we had requested. It makes a proposal that is healthy and correct in relation to a business that is likely to have many deferred pensioners. The proposal is that Lloyds TSB should consider appointing a trustee who represents 550 deferred pensioners, so that the board of trustees and of the pension scheme is more fully representative of all participants in that scheme.
§ Mr. Cousins
I am extremely interested in what the hon. Gentleman is saying. Is he in a position, as a result of the discussions that he has had, to give the House an assurance that there will be such a trustee, or is that still to be negotiated and agreed?
§ Mr. Flight
I am certainly not in a position to give such an undertaking—I am not part of the management of Lloyds TSB. However, to that suggestion, the response by Lloyds TSB has been:
we will also consider the possibility of the appointment of a deferred pensioner to the board of the TSB pension schemein the light of a suggestion that we made. I should like to think that, when the Bill passes into Committee, Lloyds TSB can make a firmer commitment, having at this stage undertaken to consider the proposal. I believe that the response was in good faith, and that the point was seen that the business has very many deferred pensioners, and that it is appropriate that they should be represented on the board of trustees.
Anomalies appear to exist between people who have been made redundant at similar levels of seniority and among people whose employment has been transferred. There is a further issue as to whether women employees have been treated on an equal basis to male employees. The undertaking by Lloyds is that the TSB Hill Samuel action group will be invited, with its support, to invite anyone who feels that they are an anomaly—that they have not been treated fairly—to present their case to Lloyds TSB. Lloyds TSB will appoint a specific officer suitable in terms of actuarial expertise and knowledge of the pension fund to prepare the material and to look into such cases, and the management have also said that they will undertake to furnish full evidence to the pensions ombudsman if internal agreement cannot be reached.
I am not entirely clear whether the pension ombudsman is the ideal party to be the ultimate referee in such a matter, or whether it would be more appropriate to have an independent actuary. However, those are the three key issues relating to the position of TSB pensioners that arise because, although the major purpose of the Bill is the merging of premises and operations, beneath it, and to some extent included in it, are measures for the merger of the pension schemes.
The objectives of the TSB Hill Samuel action group were to address three specific problems: poor pensioners; anomalies; and ring-fencing protection. The responses from Lloyds TSB go a long way, and probably about as far as one can go practically, for the reasons given by the hon. Member for Barnsley, Central. In Committee, I hope that we shall be able to monitor progress. Lloyds has undertaken to advise my hon. Friend the Member for Aldershot and me of the anomalies that come up and how they have been dealt with.
The most important reasons behind my initiation of the blocking motion have, at the very last hour, been dealt with reasonably by Lloyds TSB. Therefore, I have no wish to stand in the way of the wider rationalisation of the business that is the essential purpose of the Bill. Still, I hope that the House will have the opportunity to review progress on some aspects of what has been promised when the Bill reaches Committee.
§ 8 pm
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
I declare an interest as a customer of the Trustee Savings bank of more than 30 years. I also draw to the attention of the House the fact that the Manufacturing, Science and Finance Union supports my constituency. I am not aware of any involvement by that organisation in Lloyds TSB, nor have I received any representations from it. I merely draw attention to the fact in the interests of openness.
The House rarely gets an opportunity to discuss the rapidly developing nitty-gritty of our financial services. I hope that, as Government legislation proceeds in this Session and the next, we may have other opportunities to return to those matters. It is sometimes necessary for hon. Members to use opportunities such as this to bring before the House matters that can appear arcane; indeed, the whole procedure might be described as a contrivance. Be that as it may, if this is the only opportunity we have, then we must use it.
My hon. Friend the Member for Barnsley, Central (Mr. Illsley) and the hon. Member for Arundel and South Downs (Mr. Flight) have already mentioned the importance of the Lloyds TSB merger. It is a significant financial institution, not just to this country but across the world. In this House, we have all too few opportunities to discuss those great financial institutions. The Bill comes before us at a time when global financial services are exploding, and there is a great deal of volatility and uncertainty around. It is thus entirely proper that hon. Members should raise the concerns of particular communities, constituencies and individuals in the context of such spectacular institutional developments.
In the light of the discussions that I have had with my hon. Friend the Member for Barnsley, Central and of the information that the hon. Member for Arundel and South Downs has given us, I do not feel the need to go into the subject in any great detail; I simply register the point that it is entirely proper that Members should use these opportunities to force some discussion.
This is by no means a trivial matter. In the context of the emergence of a single group of employees and the amalgamation of property, it is quite understandable that hon. Members should wish to discuss the importance of branch networks to their communities—not to mention the employment created by those networks and the services that they represent. It is beyond dispute that Lloyds and TSB branches sit side by side, so we are entitled to seek an assurance from the promoters that employment will not be lost as a result of the Bill.
What we have been told tonight, and common sense, shows us that some employment will be lost as a result of the merger. We are entitled to press the case of the employees, and to make the point that any reduction in those networks, and in the services they represent and the employment they create, should be kept to an absolute minimum—especially at a time when the Government are proposing imaginative developments in an area of financial services in which Lloyds TSB may want to play a part. I hope that, by the time that the Bill returns to us, there will be a general outline of the assurances we seek.
My hon. Friend the Member for Barnsley, Central referred to the acquisition of the Cheltenham and Gloucester building society. Many Members are extremely worried about the integrity of the remaining insurance and building society mutual institutions. What 552 will be the likely attitude of this huge merged institution to the acquisition of such mutual institutions? What will be the general strategy of the merged institution to the integrity and independence of the remaining mutuals? We need some answers before the Bill enters Committee.
Of course, one can see the financial advantages to Lloyds TSB of being able to acquire a building society; that enables it to offer a wider range of services, including mortgages. We are nevertheless entitled to ask the promoters about their longer-term intentions to the acquisition of mutual institutions, whether in the insurance or the building society sectors. We have been given some welcome signs of the intentions of the merged institution this evening—for instance, the creation of a pilot scheme allowing access to savings and financial services through the Post Office. We are entitled to ask for more information of that kind: how does the scheme fit in with some of the Government's proposals to extend the habit of saving to parts of the population that have no net financial assets at all? Again, I hope to have some information about the attitude of Lloyds TSB to those issues before the Bill returns to us in Committee.
During the past week, the Government have made some welcome proposals in Newcastle for health action zones and education action zones—this in a city with a long history of commitment to the TSB and the trustee savings bank movement. I am entitled to press the case for some specific commitments on the part of Lloyds TSB to those Government initiatives, both in my city and on Tyneside generally. I hope that my hon. Friend the Member for Barnsley, Central and the promoters of the Bill will take due note of my remarks.
In my closing remarks, I return to the subject of pensions. I am conscious of your advice, Mr. Deputy Speaker, that they do not directly and explicitly form part of the topic of the Bill, and I shall not dwell on them unduly. As my hon. Friend the Member for Barnsley, Central made clear in his appropriate and general riposte to Opposition Members, there is a principle behind the specific proposals: that pension funds are not simply financial assets to be deployed by their owners in any way that may be chosen. They are the deferred income of the contributors.
That is the principle that we established in the Goode Committee report. That is the principle, to which my hon. Friend correctly referred, that was at issue in the mineworkers pension scheme changes that he so much, and in my view properly, regrets. That is the principle that we must preserve. If it produces some apparent peculiarities—there may be pension funds that are asset-rich—so be it, but the principle must be preserved, because it means so much not just for the employees of Hill Samuel and Lloyds TSB, but for pensioners everywhere. Hon. Members should not take the matter lightly or pass up an opportunity to register the point.
A particularly significant aspect of the proposals is the need to respect the rights and interests of deferred pensioners. In today's flexible labour market, deferred pensioners are becoming an ever-growing client body of pension schemes whose proper interests are too little recognised and too often ignored. The sign that there may be a specific representative of the interests of deferred pensioners on the trustee bodies of the pension scheme is important. I hope that that will happen.
553 In my attitude to Second Reading, I shall be guided by the remarks of the hon. Member for Arundel and South Downs. I shall bear in mind the account that he gave of his discussions today with Lloyds TSB. That will greatly influence my actions tonight.
The subject matter that forms part of the Bill is not some arid technical detail. There are important human principles involved that matter to many hon. Members. If the debate has given hon. Members on both sides an opportunity to raise those matters and to register those points with a great financial institution, the House of Commons will indeed have been doing its duty.
§ Dr. Vincent Cable (Twickenham)
Like several hon. Members, I was drawn to the debate by the concerns of the action group, and its members in my constituency and in the constituencies of my parliamentary colleagues. It has become clear from the debate, especially from the effective contribution that we have just heard from the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins), that there is a wider context that we must address—the merger process in the banking sector, and its implications.
Some of the forces driving that process are inevitable or desirable, and we should endorse those factors. An enormous process of technological change is clearly under way, and it is altering the face of retail banking. I have in my constituency the multimedia centre of one of the big banks that is developing internet banking, which will make much of the face-to-face contact in retail banking superfluous in years to come. In addition, as the hon. Member for Newcastle upon Tyne, Central described, an international process is taking place. What used to be a national industry is becoming international. That helps to explain the logic behind the Bill coming before the House.
We should not be deceived into taking such matters on the nod. There is undoubtedly a purely financial phenomenon taking place. There is at present a shareholder bubble in the financial sector which has driven bank shares up to extremely high and probably unsustainable levels, in the process making shareholders very well off, but fuelling the merger mania that surrounds the financial sector, often with questionable benefit.
It has been suggested that the House has a unique constitutional role in looking at merger activity in the financial services sector. No one has explained to me as a new Member how that originated, but it seems to me to be a valuable part of the scrutiny process, and we should take advantage of it.
It seems a little odd that, in such a major merger, the only legal considerations that have been entered into hitherto are the interests of the shareholders and the directors. It is a good discipline to ask whether customers benefit. The House is effectively being asked to deliver the customers, and we should act for them. It is not entirely clear that bank customers have benefited from merger activity in the past. Customers have often experienced slipshod services and rising costs, and that should be questioned. That is part of the scrutiny process in the House tonight.
The hon. Member for Arundel and South Downs (Mr. Flight) and others have dealt well with the pensions issue. The hon. Gentleman made a useful distinction 554 between the concerns of the present—concerns about past disparities between different groups of pensioners in the TSB Hill Samuel fund and the poor pensioners, and the ring-fencing problem.
There is a little more to be said about the ring-fencing issue. There will be serious challenges to the trustees of the pension fund in future from two directions in particular. First, if this bank merger proceeds like most others, waves of redundancy will follow. Many current bank employees will be made redundant. The issue of deferred pensions and the need to protect them will be important.
The second issue, which the hon. Gentleman did not mention, is that this is probably not the end of mergers and acquisitions in the retail banking sector. There is already a good deal of speculation in the City about the possibility of mergers between one or other of the big four, involving possibly Lloyds TSB and Barclays, National Westminster or Hongkong and Shanghai Banking Corporation. That could well happen, and we need to be assured that the pension arrangements contained in the Bill will be protected in any future change of ownership arrangements.
In the course that we now take, we are guided by those who have been negotiating on behalf of the action group. I welcome the opportunity to put on the record the interests of the action group and the wider concerns about where this financial amalgamation is leading.
§ Mr. Gerald Howarth (Aldershot)
This is proving to be a useful and interesting debate. I am reinforced in my conviction that I was right in the first place to join my hon. Friend the Member for Arundel and South Downs (Mr. Flight) in adding my name to the blocking motion, so that the matter could be aired and the issues arising from the merger could be considered in greater detail than the House is usually able to do.
I make it clear from the outset that it was never my intention to stand in the way of a commercial decision by the shareholders of the relevant institutions to join forces. I have a background in the City. Before I entered the House, I spent my last two and a half years in the City working for a merged bank, which was called Standard Chartered bank. I am aware that even today, there are those in the Standard Chartered bank who are the Standard bank people and those who are the Chartered bank people. I wish Lloyds TSB every success in merging, but I dare say that for a long time to come, there will be TSB people and Lloyds people.
It is not the role of the House to second-guess the commercial judgment about whether the shareholders were right to make that decision. However, it is right that we should have the opportunity of debating these issues. I was drawn to the debate because one of the leading lights in the TSB Hill Samuel action group, a chap called Billy James who was at Hill Samuel when I was at Standard Chartered, and who took me through the intricate business of interest swap deals, raised the issues with me.
I do not for a moment claim to be a pensions expert, but I understand something about the politics of the issue, which has caused concern throughout the House and among former employees of some of the constituent parts of the proposed merged group.
555 I do not think that the bank has addressed the politics of the move properly or effectively. Dismissing the action group as simply representing 200 people and questioning its motives are not favourable grounds for launching an assault on that group's case. In large measure, the action group comprises former senior executives of the bank. The former chairman of Hill Samuel bank, Sir Robert Clark, is chairman of the action group, and he is not a man to be dismissed lightly. I do not think that it is good politics to question the motives of people such as him. He and his colleagues have been anxious to draw to the attention of the House the difficulties experienced by poorer pensioners.
The politics seems fairly straightforward: a pension fund had almost £1,000 million in surplus and the employer declared a contributions holiday not for three, five or 10 years, but for nearly 20 years. That is a long time. I have been told that pensioners belonging to the pension fund of the world's most profitable bank—Lloyds bank—were claiming or were eligible for income support. That is something of an affront, and the problem should be addressed.
It is not sufficient for the bank to say, "We were constrained by rules that apply to other pension funds." The House cannot ignore that situation, and clause 8 addresses the question of pension funds. It is not sensible politics for poorer pensioners to claim income support when there are huge top-ups to the pension funds of former and existing directors. The Bill's sponsor, the hon. Member for Barnsley, Central (Mr. Illsley), has told us that £460 is being made available to poorer pensioners. I do not think that the politics of that decision is favourable.
The hon. Member for Barnsley, Central was correct in saying that the action group has sought to use the passage of the Bill through the House to draw attention to its concerns. It has made no secret of that fact: that is precisely what it is doing. It is unfortunate from the point of view of the bank, its employees and shareholders that, unlike other commercial amalgamations, the procedure is subject to the approval of this place. The hon. Gentleman explained very lucidly—I must confess that it was the first time I had heard it—exactly why the banks must do it this way. In a sense, that is bad luck for the bank concerned.
One of my constituents is a senior executive of the bank, and he appreciates the rationale underlying the merger. We do not wish to impair the effectiveness of our financial institutions or the City. They make a tremendous contribution to the British economy and we do not want them to be constrained. My constituent believes that it is unfair that pension anomalies or the problems of the pensions industry should be resolved on the back of this Bill. I understand his point of view, but we cannot ignore what is before us.
My hon. Friend the Member for Arundel and South Downs and I are grateful to the senior management of Lloyds TSB for sparing considerable time today—they spoke to my hon. Friend last week as well—attempting to address the concerns that we relayed on behalf of the action group. The management made several very fair points, not least of which is that this pension fund is only one of about 14. This pension fund is significant because it is in substantial surplus.
556 The only other fund in a comparable position is the Lloyds bank pension fund, which I believe is in surplus to the tune of £1.1 billion. However, that pension fund has more members than the TSB Hill Samuel fund. There is a pension holiday in that fund as well. Senior management pointed out that any treatment of anomalies or improvements in the lot of those on small pensions in the TSB Hill Samuel fund would, in equity, have to be dealt with across the range of other pensions in the enlarged group. I understand that argument.
As my hon. Friend said, we obtained certain undertakings today, for which we are grateful, and we received a letter from the bank, which has been referred to frequently this evening. Although that letter was sent to my hon. Friend and me—it is marked "strictly private and confidential"—I am glad that the hon. Member for Barnsley, Central was able to read it into the record. I am sure that he was right to do so. We are invited to accept those undertakings in good faith, but I believe that they should also be given to Parliament, as the legislation is before the House. I invite the hon. Member for Barnsley, Central to agree with senior people at Lloyds TSB that the undertakings given to my hon. Friend and me should be made specifically to the House. That would be extremely helpful.
My hon. Friend the Member for Arundel and South Downs mentioned the key issues as far as we are concerned. We understand that the fund cannot be ring-fenced. I am grateful to Mike Fairey, the deputy chief executive of Lloyds TSB, for pointing out that the bank would not contemplate using the assets of one fund—particularly this one—to bolster another less healthy fund. We seek some assurance that the bank does not envisage having to seize part of that surplus in the foreseeable future to bolster a weaker pension fund. Such an assurance would go a long way towards meeting the concerns of the action group.
I am conscious of the fact that the fund is not the property of the members: it comprises contributions from the bank over the years. As we are invited to understand from the advertisements on Classic FM and elsewhere, investments can fall as well as rise. The fund is enjoying a substantial surplus at present, in part because of the state of the market.
However, it is worth reinforcing the point made by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) that these pension funds represent the deferred incomes of employees. In exchange for accepting a lower salary when they joined the bank—many TSB employees were on low salaries compared with those offered by other banks—the deal was that they had jolly good pension arrangements. One could argue that those pension arrangements may have influenced people's decisions to join that institution.
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) and my hon. Friend the Member for Wycombe (Sir R. Whitney) made the point that, although the scheme is not being transferred—it remains intact—the trustees will be appointed by the bank. Perhaps the hon. Member for Barnsley, Central can assist me on this point. Once the legislation is passed and the merger is completed, the bank will be able to nominate its people to serve on the board of trustees. Although they will not be in the majority, they will nevertheless enjoy parity with the chairman and other members who will constitute the board, as we discussed before lunch today.
557 The power of the new, merged bank to appoint its nominated trustees would clearly move from TSB Hill Samuel to the new bank of Lloyds TSB. If the hon. Member for Barnsley, Central can give us an undertaking that the bank will make clear its intentions vis-a-vis the fund to the House rather than to my hon. Friend the Member for Arundel and South Downs and me, that would be welcome.
The hon. Member for Barnsley, Central said that ex gratia payments were made to a number of low-paid pensioners. However, these payments were not hugely significant. I have some examples of inequalities, which were sent by Billy James to Lloyds TSB on Friday. The paper that I was waving earlier was in the hands of Lloyds TSB, and I quoted part of it this morning. If a former secretary aged 70 with about 15 years of service is receiving £102 a month, how does that sit with someone like Hugh Friedberg, who picks up £650,000 of enhancement to his pension? There must be some equity. The concern of some of us that there is not equity has brought us to question the passage of the Bill.
We are told that a pensioner with 29 years of service, now aged 83, is too proud to disclose her exact pension, but admits that it is well below the poverty line. The pension scheme representatives suggested that she should approach the bank's benevolent fund to pay for her hearing aid. Come off it! We are talking about the richest or most successful bank in the world, so we are told. Such issues must be seriously addressed because they represent poor politics.
I do not claim to understand all the intricacies of the Inland Revenue rules. However, I know that the National Association of Pension Funds has suggested that the rulebook, containing about 1,300 rules, should be burned and thrown away, and that life might be much better thereafter. The bank, in good faith, should deal with the anomalies that have arisen.
There has been discrimination against women. I understand that one of the corporate financiers transferred to Close Brothers—she was transferred from the Hill Samuel corporate finance department—discovered that a male colleague of equivalent rank and length of service was being offered a deferred pension entitlement about 30 per cent. more than that offered to her. Inquiries were made and the relevant actuary admitted that as on average the promotion prospects of women were less good than those of men, female executives were offered lower deferred pension entitlements than their male equivalents. That is not fair, and the issue should be addressed. I hope that the hon. Member for Barnsley, Central will be able to do so.
My hon. Friend the Member for Arundel and South Downs referred to the suggestion that he made to the bank today that it should appoint a deferred pensioner to sit with the trustees of the fund. The bank has said that it will consider that. I invite the hon. Member for Barnsley, Central to consult the bank and ask it whether it will give a clear-cut assurance that it will appoint such a pensioner, rather than saying that it will consider so doing. It would not be a great commitment to give; indeed, it is one that the bank should be able readily to give. I ask the hon. Gentleman whether he will so consult the bank.
My hon. Friend the Member for Arundel and South Downs and I are relying quite substantially—I think that the House is looking to us to some extent because we are 558 in possession of information which, I may add, I saw only at 6 pm, through no fault of the promoter, because I was otherwise engaged—on the good faith of the bank in terms of what it has undertaken to do. I think that the bank should agree to the appointment of an independent assessor. The pensions ombudsman will not be too keen to act as a court of appeal. It would be better if an independent actuary were appointed, with the agreement of both sides, so that he or she could take up anomalies and the position of lower-paid pensioners. If that were done, there would be a considerable improvement.
The House has raised some important questions, and it is important to understand that there is real concern outside the House. I think that the bank is now aware of that concern and is anxious to resolve problems. It has demonstrated its good faith to us. If it can give the assurances to the House that my hon. Friend and I have received from it, enhanced as I have suggested to the House, the Bill is likely to have a swift passage.
§ Mr. Peter Brooke (Cities of London and Westminster)
It is a pleasure to be called after my hon. Friend the Member for Aldershot (Mr. Howarth). I shall come on to what he said, with which I broadly agreed, in a moment. The blocking motion tabled by my hon. Friends the Members for Aldershot and for Arundel and South Downs (Mr. Flight) is of considerable benefit to the House, in that it has provided us with the occasion for the debate.
I must declare a series of brief and fairly minor interests. About 30 years ago I was a consultant to Hill Samuel when it was an independent company. My wife is a shareholder in Lloyds TSB in a general personal equity plan, and I must say that it has done her very well. The corporate headquarters of Lloyds TSB is within my constituency. The bank has not sought to make any representations to me in a constituency capacity, other than those represented by the general vehicle of the statement issued on behalf of the promoters of the Bill, which was placed in the Vote Office. One of the senior Lloyds TSB executives, who is referred to in the Hill Samuel action group briefing, is one of my oldest friends. Finally, I am the chairman of the building societies' ombudsman council, which has not been without its passages of arms with the Cheltenham and Gloucester building society.
I came to the issue that is before the House, as have other hon. Members, including some of my hon. Friends, as a consequence of correspondence from constituents. The hon. Member for Barnsley, Central (Mr. Illsley) referred to the action group as consisting of only 200 people; indeed, the promoters' statement does likewise. I know that no one intended to be derogatory by quoting that figure, but those constituents who wrote to me were, in their day, household names in corporate finance. It seemed significant that they were writing, as much as on behalf of anybody, on behalf of the 600 or 700 pensioners who were being looked after under the present TSB arrangements.
I acknowledge the benefits that flow from rationalisation in the financial sector. The present stock market is considerably influenced in an era of price stability by the gains that can be made from the proposed rationalisation. I believe that, until the recent price fall, 559 Lloyds TSB had the greatest market value of any bank in the world. I recognise the need for the Bill. The hon. Member for Barnsley, Central spoke eloquently to its advantages and what would flow from it.
I recall that, in 1992, one of the factors that was thought to handicap Lloyds in making a bid for the Midland bank when the Hongkong and Shanghai Banking Corporation made its bid was that it would have to go through just such a Bill as the one that is before us, and would not be able to realise the benefits from the merger as quickly as the Hongkong and Shanghai would do from outside.
In addition to the impact on market behaviour, there will be an effect on customers in such circumstances, as the hon. Member for Twickenham (Dr. Cable) said. I have previously quoted in the House C. S. Lewis's observation that, if one hears of someone doing good to others, one
can always tell the others by their hunted expression.When banks write to me about the benefits that will flow to me as their customer from a reorganisation of their affairs, I find that that is not always the case to the last iota, although I salute the TSB Foundation, which has done remarkable work and is a friend to hon. Members.
The pensions issue which has driven much of the debate comes back to old arguments about risk against reward. For a long time, commercial banking on either side of the Atlantic—I am looking back to before and after the war—was an industry in which people did not expect to be especially well rewarded, but were certain of a job for life. Market circumstances in the 1970s and early 1980s changed that. What was effectively an unspoken contract between employees and the banking industry—I am talking about the clearing banks—was inevitably disturbed and overturned. Ructions have subsequently flowed from that. Those observations apply obviously and particularly to TSB. Hill Samuel was in a different business where risks were greater but so were rewards, and there were pension differences, to which the hon. Member for Barnsley, Central referred.
Hon. Members have quoted material put out by the Hill Samuel action group about discrimination and fair treatment. The speed of events has created a gap in the briefing of the hon. Member for Barnsley, Central about what the action group has provided to Lloyds TSB in the past week. I do not hold that against him in any way, but there should be a sense of transparency and a perception that people are being fairly treated, especially in the climate of concern about pensions which the Government have clearly and directly reinforced.
Although it is alleged that the Bill has nothing to do with pensions, the sponsor of the Bill referred to pensions and clause 8 deals with retirement benefits schemes. There has been continuing activity and negotiation, but there was no reference to that in the statement that was put in the Vote Office. In the words of Sherlock Holmes, I am not left thinking, "These are deep waters, Watson," but they seem a little deeper than on first impression from the information that we were vouchsafed. My hon. Friend the Member for Arundel and South Downs says that there is a connection between the recent flurry of negotiations and the blocking motion, although the hon. Member for Barnsley, Central says that there is not.
I acknowledge the virtues of the Bill; given the current climate and perceptions, however, hon. Members would be failing in their scrutiny of such legislation if they took 560 everything on trust. That applies as much to the network, to which the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) referred, as to the pensioners. The hon. Member for Barnsley, Central should deal with an issue to which my hon. Friends and other hon. Members have alluded. In the Hill Samuel Action Group briefing, there is a parenthesis in the section that refers to the pension scheme surplus, which states:
Lloyds TSB appear to have told friendly current employees that the TSB Group Pension Scheme is already ring fenced, which it is not and which Lloyds TSB categorically refuse to do.My hon. Friend the Member for Aldershot told us what the deputy chief executive said to him. It is not totally clear from that sentence in the briefing where truth lies. A specific contradiction of evidence is involved, so the hon. Member for Barnsley, Central would do the House a service if he dissected the sentence and said precisely where truth lies and why. We should find out what has been said to give that contrary impression.
I thank my hon. Friend the Member for Arundel and South Downs for his diligence in dealing with Lloyds TSB. As he said, we can return to the matter on Third Reading. I hope that, by then, Lloyds TSB will have concluded its consideration of whether to have a pensioner trustee, so that we shall know one way or another.
§ Mr. Illsley
With the leave of the House, Mr. Deputy Speaker, I shall address the concerns that have been raised: we have had a frank and open exchange of views; whether it has been generated by the blocking motion remains to be seen.
The hon. Member for Arundel and South Downs (Mr. Flight) was gracious in his comments about the meetings, and referred to issues in the letter, which should be taken at face value and in the spirit in which it was offered. I am sure that Lloyds TSB will honour assurances given in it.
I take on board the point made by the hon. Member for Aldershot (Mr. Howarth) that the letter was marked "strictly private and confidential". I have referred to it at length and apologise for that, but those references have contributed to the debate. I am sure that the assurances given by Lloyds TSB to hon. Members will count and that it will stand by them.
I agree with my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) that private Bills can be an obscure method of achieving an outcome, and could be described as a contrivance. Perhaps the procedure will be improved in the fulness of time. I also agree that the issues are not trivial and that interesting matters have been raised. I take on board what he said about employment issues. As a Member of Parliament, I have always defended employment and jobs, and would not have agreed to sponsor the Bill had I not been reassured on closures and jobs.
My hon. Friend the Member for Newcastle upon Tyne, Central mentioned the Cheltenham and Gloucester building society, which was given five years' autonomy and independence at the time of the acquisition. It is now part of Lloyds, but I have been assured that there is no plan to change its status as a consequence of the merger or of any other issue. As far as I am aware, it will remain 561 independent. I undertake to give my hon. Friend any information that is available from Lloyds TSB about the post office initiative.
The hon. Member for Twickenham (Dr. Cable) questioned the benefits to customers. I listed some of them earlier, and will not bore hon. Members by repeating them. His remarks about internet banking in his constituency reinforces my point about footfall in branches: people with access to the internet and direct banking prefer that system to going to branches. He also referred to a further acquisition, but in view of the problems that I have had getting the Bill through the House, I hope that it is a long way down the line.
I agree with the hon. Member for Aldershot that this is a good opportunity to debate the issues. Without wishing to be derogatory to any of its members, I said that the Hill Samuel action group had only 200 members and mentioned in the same breath the number of shareholders, customers and people who want the House to approve the de facto merger.
The hon. Member for Aldershot also graciously referred to meetings with Lloyds over the past few days, and asked for further undertakings about the deferred pensioner trustee. I cannot go further than the letter that has been sent to him, but Lloyds will have taken his remarks on board. I shall ask Lloyds TSB to consider whether the assurance can be reinforced and made more concrete. However, I am sure that Lloyds will genuinely and sincerely consider what has been said in the debate. It will study the speeches closely and try to deal with those as far as it can.
562 I take on board what the hon. Gentleman has said about differences in pensions, particularly in relation to male and female employees. I have always supported equal opportunities and, if what he says is true, obviously that is a cause for concern. Again, I am sure that Lloyds TSB will address that in future meetings, either with Conservative Members or with the action group.
The hon. Gentleman asked for a clear-cut assurance on an independent assessor. Again, I will put that to the bank. It has taken on board what has been said. If it can go further than what is in the letter about an independent assessor and pensions ombudsman, I am sure that it will wish to accommodate the action group's wishes and those of Conservative Members.
I take on board what the right hon. Member for Cities of London and Westminster (Mr. Brooke) said about the membership of the Hill Samuel action group, but I still think that that has to be weighed against the number of customers and shareholders who have voted for the merger to go ahead. I thank him for his comments regarding the TSB Foundation, of which he is obviously aware in view of his constituency interest.
I take on board what the right hon. Gentleman said about the decreasing levels of pensions, the steps by the present Government to deal with that and the pension reviews that are taking place. On the assurance about ring fencing, which appears in the Hill Samuel action group briefing material, I can only refer the right hon. Gentleman to what was said at the meeting with his two colleagues and the deputy chief executive. I am sure that the deputy chief executive will stand by that and by what was said as recently as this lunchtime.
§ Question put and agreed to.
§ Bill accordingly read a Second time, and committed.