19/07/2012 Newsnight Scotland

Tonight on Newsnight Scotland: Lloyds TSB sells all its Scottish

branches to the Co-op. A bad deal for Lloyds and the taxpayers who

part own it, but could it be good for banking customers?

And the rising costs of childcare. How much of a deterrent is it to

women returning to work? Good evening. The behemoth that is

Lloyds, TSB, Halifax and Bank of Scotland will become just a little

bit smaller. It's being forced to sell over 600 branches across the

UK to the Co-operative Bank at a knock-down price. Here, that means

that while it will retain all Bank of Scotland branches, those branded

as Lloyds TSB will be handed to the Co-op along with all their accounts,

staff, computer systems and the TSB brand.

TSB, the bank that likes to say yes! Then name TSB will be above

the doors of the branches. For some the return of the TSB to the

Scottish high street will be a welcome down. It was started in

Dumfriesshire in 1810 and did is not just nostalgia that will make

that return welcome. Retail banking is dominated by five banks in

England, in Scotland it is just three. Increased competition is

seen as a good thing by the government. The British Government

has worked very hard to make this deal, bout. We had been on the

phone in recent months because we want new names on the high street,

to make sure we have more banks offering good deals to people, so

we think this is a good thing for the British economy. We will become

a real challenger to the big five banks and we are different. We are

owned and run by our customer members and that brings a whole new

dynamic into the boardroom. It is good good dynamic because it means

we don't take the kinds of risks that the other big banks have taken,

and look at where that has got the banking sector. The man from the

Co-op has a right to look pleased. This is a very good deal for them.

They are paying up to �750 million for the branches, about half their

original valuation, and all its is also handing over �1.5 billion

worth of capital, meaning it faces a loss of at least �750 million on

the sale. The Co-op Bang will operate using your its IT systems

and Lloyd's is providing that the management. Lloyd's has even agreed

to underwrite the debt to fund the deal. Why would Lloyds agree to

this? They had no choice. When its new team to take over the failing

HBOS in 2008, it was assured by the UK government that despite the

creation of the super-sized bank it would not be referred to the

competition authorities. However European regulators ruled that it

has to sell off some branches. Saving pounds! These are free, at

TSB! We are your bank to fix the loan, when you want a home!

I'm joined from Edinburgh by the financial journalist and blogger,

Ian Fraser, and by Ray Perman who has just finished a book on the

rise and fall of the Bank of Scotland. Is this a good deal and

who for? This is a deal with a tremendous opportunity involved. If

Co-op manages this correctly, it could build a new challenger brand

and catch the other banks on the back foot. They have rate rigging,

interest rates, people you -- PPI, and very serious issues to address,

so if Co-operative Bank can play this cleverly and skilfully, it

could represent good news for the consumer because it could be a real

challenger brand which offers something that the others are not

provide him. The other big advantage, without getting too

technical, as I understand it, the way this works is that the entire

loan book that will be transferred is backed by deposits from real

customers rather than short-term debt, which has been used by the

other banks and which led to so many problems. They have got a

terrific position. It is a great deal for the Co-op. They are

getting this balance sheet, then number of deposits will equal the

amount that is Lent. They are getting a branch network all across

the UK. In Scotland the Co-op only had one branch. They were forced to

rely on agency deals for building- society is. Suddenly they get 150.

A terrific deal for them and it creates a new force in British

banking. Just a brief nod to the taxpayer. It looks like a rotten

deal from their point of view. deal is at 20% of book value...

should remind ourselves that the taxpayer owns 40% of Lloyd's.

The taxpayer owns 43% of Lloyds Banking Group. They haven't done to

work out of this deal. The point was is that Co-op walked away from

the talks late last year because the price that Lloyd's was

demanding, which was 22.5 billion, the original asking price, was far

too high for Co-op to make a deal worthwhile. The Treasury intervened

and not a few heads together. From what I understand, this was not a

commercial deal at all. The Treasury basically Engineer this

deal and seems to have engineered the low-price, which is not

particularly attractive for the taxpayer, in so far as the taxpayer

owns 43% of Lloyd's. You have just written a book about the Bank of

Scotland. This is not one of their most glorious days? Of Bank of

Scotland? With hindsight, going into a marriage with Halifax was

the thing that sunk the Bank of Scotland. It is interesting that

Lloyd's had chosen to keep the Bank of Scotland branches and will

continue to trade in Scotland under that name and to get rid of the TSB

branches rather than the other way round, so they obviously see value

in the traditional bank of Scotland Business, which was heavy in small

business and commercial business as well, whereas TSB was almost

entirely retail, so we are not seeing an emergence of an

independent Bank of Scotland I'm afraid, but we are seeing the TSB

name revived, which I think can only be good for competition on the

high street. The TSB name is being revised but there seems to be

suggestion that that is more technical, that that will happen

until the businesses finally merge? One would have thought that given

its policy as an ethical investor, the Co-op might be a better brand

than the TSB? I think they are using it TSB as an interim stage. I

think they eventually want to rename it as the Co-operative Bank.

I don't quite understand why they have chosen to use this as an

interim name. It does have some resonance maybe because it was a

Scottish brand originally and it was a brand that was basically

built around the needs of its customers, unlike what most banks

are nowadays, so they probably believe it has some merit as a

short tram stop gap. -- short-term stop-gap measure, but I don't quite

understand the logic of doing that short-term and changing it to the

Co-op. There is a disconnect as far as I can see. Scotland seems to be

disadvantaged in terms of bank competition because of Barclays and

HSBC, who do not have an extensive branch network here, although of

course we have the Clydesdale. Do you think this is enough? We have

already had RBS having to divest some branches. Or is this the first

step in a big shake-up of British banking that affects some of these

monster banks we still have left quotes a man I hope it is the first

step in a much bigger shake-up. Over my banking lifetime, since I

was at work and opened my first bank account, the number of banks

in the UK has shrunk dramatically, so it shows that consumer has

shrunk dramatically, too, and the banks have really got far too

confident, far too arrogant. They have got themselves in all sorts of

trouble. The rate rigging scandal and so on. We need much more

competition and I hope that this is a step to reviving more competition,

more names on the high street, more choice for the consumer, and we can

get back to good, honest, basic banking that we had a couple of

decades ago. We should stress, or we are talking about breaking up

retail banks. The idea of separating casino banking from

retail banks is a different issue. But realistically, this idea of

encouraging new entrantss, is it really going to work or with it

read huge organisations like RBS and Lloyd's to be split up further?

I think there is a real danger to pinning your hopes on one

challenger brand because we saw this in 2001 when HBOS was created

and it positioned itself very much as a consumer champion, offering

low interest rates on mortgages and higher rates on deposit accounts,

but unfortunately what happened was the Bank basically were so

desperate to grow its market share that it became totally out of

control, became a sales obsessed organisation, which then became

wholly unethical and destroyed itself. There is a danger that when

you get a new challenger brand, as we are seeing with the Co-op,

Cheltenham and Gloucester, Britannia, tsp combined, that at

the end of the day they used their ethical value and start chasing

market share for its own sake, -- they lose their ethical value. If

they do that, it would be disastrous. But we need a massive

cultural shift in the British banking industry. It has very

definitely become corrupted and Al root-and-branch overhaul of every

bank is needed, and I don't know quite how that will be achieved.

Breaking them up might be one solution. Thank you.

Now. It won't have escaped your notice that the summer holidays are

well under way. Working parents across the country can be caught

between a rock and a hard place. They can keep their jobs and pay

spiralling costs to have the children looked after. Or stay at

home, lose vital income and face the wrath of Iain Duncan Smith, who

is determined to get parents back to work. Sally McNair reports on

the parent trap. For an action-packed few weeks in

the summer, this privately-run company in Glasgow has been a hit

for kids and parents alike. �110 a week buys all their child care,

meals and today the services of the British taekwondo champion. It was

set up three years ago by a parent and teacher, who realised that kids

get considerably but more holidays than their parents. We need more

options for the kids. Seven weeks is a long time. For kids to be

interested and active and learn new things in the summer holidays. It

can be a very expensive time for parents to keep the kids active and

enjoying themselves and to avoid sitting inside being bought and

playing computer Games every day. Of a survey of local authorities by

the day-care Trust has found that in Scotland it costs an average

�100 a week to pay for a week's holiday childcare. Considerably

Here, local authority funded or maintained childcare costs have

risen by 22% and the last year. One in five council say that their

budget has been cut. And it is even worse if you live in the country or

your child as it disability. One perk of low income parents have

had to turn down work because they cannot afford the chair care

payments. -- one third. In the summer holidays that becomes

exacerbated, has brought sharply into focus.

Children's charities and organisations speak with one voice.

With the consultation process on the Scottish Government's children

and young people spell on going until December, there has never

been a better opportunity to make provision for affordable quality

kale chair. -- childcare. If the Government are serious about

tackling child poverty in getting payments and to work they would

prioritise this. Especially for families on are the lowest incomes.

Target of the help of where it is needed most. So that they require

less support in the longer term from the government but different

types of public support. Today, as the Westminster

government Child Care Commission follows on from ministers at

Holyrood by launching a consultation on improving childcare,

the Riverside museum was full of pay and taking time out to

entertain at their youngsters. We do not get summer holidays. We

just have to work it between us. If there were no grandparents there

would be problems. You know what it is like nowadays, very tough to

earn a living. I only work part-time. Child care

is so expensive. If I worked full- time and pay for childcare I think

I would come away with only �50 extra. I would rather spend the

time with my kids. Child care is a problem for working

parents the whole year round but it has brought more sharply into focus

during the summer holidays. At juggling act is required, using

extended family and friends to mind the kids. Or paying for expensive

childcare if and when they can find it. Parents have to choose between

paid work and staying at home to look after their children. Local

authorities facing brother cuts are forced to make tough spending

decisions. That UK and Scottish governments, who want to see

parents contributing to the economy, and coming off benefits to, for

them it is all a question of priorities.

I enjoy now than a chief-executive of children in Scotland, an

umbrella organisation. -- I am joined now. Can we get the facts

Clear? There has been a rise in the charges local authorities make for

childcare. But has there been a cut in the element of tax credits

supposed to cover childcare? That is right. At double whammy. A

cut of around 10% in which local authorities can subsidise out-of-

school childcare. Similarly, the tax cuts that enable parents to

receive support for childcare have also been dramatically cut.

For an average family, what is that, �500 per year?

At least that. Together with the cuts in subsidise care and the

increased cost of out-of-school provision, holiday clubs, etc. That

babies but as you will have seen in your report they are also

increasing by an average of 10%. -- Iain Duncan Smith wants to get

Iain Duncan Smith wants to get paint back to work. On the other

hand, if they're being hit by a combination of benefit cuts and

price increases, it makes it increasingly difficult.

We want parents to be able to choose to move back into work and

to be financially better off making that decision. That is what are all

set of government reforms have been about. -- a whole set. You must

also take into account the rising cost of childcare. That is a rising

concern. -- major concern. One way of looking at it is the amount of

money the government spends on subsidising the cost of childcare

but you must also look fundamentally at why childcare

costs so much in this country in the first place.

Her why does it cost so much then? We spend more than any other

country except extremely unsubsidised and child care. But

the amount of parents having to pay out of their own pocket are well

above the international average. If you look at those two facts it

would suggest that there is some inefficiency in the system. You

need to look at why the costs of childcare are so high.

Why do you think that is? I have looked at some of the Packers and

the cost of childcare is extremely high. -- looked at some of the

figures. As was said, we do not seem to get more than other

countries back out of it. It is a complex picture. Local

authorities are extremely important. In Scotland a tremendous amount of

childcare is subsidised by local authorities. Particularly in pre-

school provision. On average, a local authority nursery place is

�25 cheaper than in the private sector. Because of the scale of

provision. But the point made was a more

general one. We spend a fortune on childcare yet everybody is saying

it is terrible because the costs are so high. If we spend a fortune

on public subsidy why do not have a more efficient sector which would

make the prices charged more comparable with other countries? I

hope I am not misrepresenting, but the thing that was the point.

K that is exactly why the Scottish Government consultation is so

welcome. We are spending many millions on the cost of childcare.

Both from central and local government. We have very good, high

quality care in many areas, but it is ad-hoc Bentley is not flexible,

not accessible to many parents. -- it is at hawk and it is not

flexible. Some of the regulation around childcare simply is not good

enough. There is an issue here. It would be

unfair to say that you are Iain Duncan Smith's Institute but you

where associated with him when you were set up. Are you thinking of

doing more work in this regard? We are. The Government launched its

affordable childcare Commission about a month ago. We're looking at

answering that question, why is childcare so expensive? We are

starting by asking questions about flexibility - if people are working

flexible hours can they get access childcare at the right time? Can

schools be open? What will happen to the extent schools programme we

have from a new vox pop? -- that we heard from in the your fox pop?

Should get the more schools doing that? If not, why not? What is the

cost base of childminders? Their costs of looking after two or three

children are still quite high and difficult for people to afford. Why

are there not more childminders on a voluntary register? That is a

particularly onerous way for people to register. We need to make sure

there are more childminders available locally. That might

improve flexibility and availability if not necessarily

cost. Even if you do not agree with

everything it appears that you do both do your research. Thank you

very much. Tomorrow's front pages, starting with the Scotsman. The