Lloyds' charity cuts ruin TSB bicentenary

When the bank took over TSB, it agreed to support the charity set up by its new subsidiary. No longer

Lloyds Banking Group has dropped its support for the Scottish charity set up by its TSB subsidiary, just as it prepares to celebrate the 200th anniversary of TSB's creation.

Mary Craig, the chief executive of the Lloyds TSB Foundation for Scotland, accused the bank of "determined vandalism" after it served notice to terminate its contributions of up to £10m a year.

When TSB was floated on the stock market in 1985, it set up four charitable foundations, and covenanted to give them 1 per cent of its profits, averaged over three years. The arrangement continued after Lloyds merged with TSB; but with the group reporting a £6.3bn loss on Friday, it has sought to cut its commitment.

The foundations covering other parts of the British Isles have accepted the cut, but the Scottish charity has not.

Lloyds said last week that it will terminate the covenant and refused to approve the reappointment of businesswoman Christine Lenihan as the Scottish foundation's chairman. It also demanded a say in the charity's grants.

The row is especially embarrassing for Scotland's largest bank because of TSB's imminent bicentenary. The trustee savings bank movement began in May 1810 when Henry Duncan, a Dumfriesshire minister, formed the first savings bank. Lloyds' registered office is Henry Duncan House in Edinburgh.

Lloyds, which also owns Bank of Scotland and Scottish Widows, is the charity's sole source of revenue. The grants programme, which had handed out £85m spread across 12,000 awards and was funding a drugs initiative with the Scottish government, has now been suspended.

Craig, a former senior manager with the bank, said: "Lloyds has disowned its heritage. Henry Duncan must be turning in his grave. In a normal year, we'd have built a grants programme to mark the anniversary."

She suggested Lloyds provide a loan to allow the charity to keep operating, but claims that there was a point blank refusal to discuss it.

Lloyds' annual donation is less than it paid its board before the credit crunch and is dwarfed by the bonuses still paid to staff.

The Scottish foundation borrowed money to buy shares in last year's rights issue and plans to sell these at a profit to provide temporary funding.

Lloyds' termination notice takes effect in 2019 and Craig believes the bank will return to profit long before then.

She also claims that blocking Lenihan's chairmanship and demanding that grants align with the bank's corporate giving priorities undermines the charity's independence. "It is in keeping with the bullying and aggressive behaviour displayed by the bank's representatives," she says.

Lloyds, 41 per cent state-owned, plans to make charitable contributions through a new Bank of Scotland Foundation from 2019. It must sell the 185 Scottish TSB branches and the brand as a condition of accepting state aid.