There is an old Gaelic Proverb which says that “in order to know where you are going it is sometimes necessary to know where you have come from”.
Lloyds TSB Foundation for Scotland owes it existence to The Rev'd Henry Duncan, who founded the Trustee Savings Bank in Ruthwell, Dumfriesshire in 1810. He started the Bank so that everyone, regardless of wealth or position, could benefit from a savings bank.
In 1985, the Trustee Savings Bank Group chose to set up four independent charitable trusts (Scotland, England & Wales, Northern Ireland, Channel Islands) to distribute 1% of pre-tax profits according to the spirit and principles of Henry Duncan. The Foundation for Scotland receives almost 20% of this amount.
In 1995, the merger between TSB Group and Lloyds Bank significantly increased the Foundation’s income. To date, Lloyds TSB Foundation for Scotland has received over £82 million from Lloyds Banking Group plc, and this money has improved the lives of hundreds of thousands of people across Scotland and, more recently, overseas through Scottish Charities working abroad.
2009 was a very difficult year for the Foundation. The losses made by Lloyds Banking Group meant that the Foundation would receive virtually no money in 2010. In return for short term funding Lloyds Banking Group wanted to reduce the Foundation’s share of pre-tax profits by half. The Banking Group also wanted the Foundation to align a significant portion of its funds to the Group’s business priorities, and to be able to appoint senior Bank staff as Trustees. The Foundation’s Board refused to accept this proposal as it was not in the best interests of the Foundation or the charities it supports. So, in October 2009 the Foundation took the difficult decision to suspend its grantmaking.
Despite the Foundation offering the Banking Group an alternative way forward that would be cost neutral to both the Banking Group and the taxpayer, Lloyds Banking Group chose to serve notice on the Foundation’s historic covenant. The Foundation is now in a nine year notice period, after which the 15.7m limited voting shares it owns will become ordinary shares, providing the Foundation with a long term income to enable it to continue its grantmaking work.
Money raised from selling shares bought in Lloyds Banking Group’s capitalisation and rights issues in 2009, from which the Group wrongly tried to exclude the Foundation, provided the funds to enable the Foundation to re-start its grantmaking.
2010 was the 200th anniversary of the very first Trustee Savings Bank set up by The Reverend Henry Duncan, and the Foundation re-named its main grant programme in his honour.
We were delighted to start 2012 with the news of a court decision ordering Lloyds Banking Group to pay the Foundation over £3.5 million. This is money due to the Foundation for 2010, and was great news for Scotland's hard-pressed charities at a time when many are struggling.
The Foundation had raised an action in the Court of Session against the Lloyds Banking Group, following a dispute over the money it was due from the group under the terms of a covenant entitling it to a share of the group’s pre-tax profits. The group had claimed the Foundation was due £38,920 in 2010, while the Foundation maintained the correct sum was more than £3.5 million.
After the first hearing a judge – Lord Glennie – ruled against the Foundation, but following an appeal hearing in November three appeal judges overturned that decision on 29 December and ordered Lloyds Banking Group to pay £3.5m to the Foundation for 2010. This clarity on the way our money is calculated also meant that we were due a payment of £1.75m for 2011.
The decision in favour of the Foundation was taken by Scotland's senior judge, the Lord President, Lord Hamilton, sitting with Lord Carloway and Lord Kingarth.
The court's decision was extremely welcome and shows that the Foundation's Trustees were right not to accept the original finding. The money we were due to receive would have helped us carry on with our work supporting charities throughout Scotland which are clearly focused on improving the quality of life for people who are disadvantaged or at risk of becoming so.
However, Lloyds Banking Group has chosen to appeal this decision. The appeal hearing will be heard in the Surpeme Court in London, causing another delay to the Foundation receiving the money it is owed.
