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Angus Newman
StormCats
Surnaig Farm
Surnaig House
Lagavulin
Isle of Islay
PA42 7DX

18th December 2009

Dear Mr Newman,

Thank you for your letter about the loss of the Business Relationship Manager on Islay which I received via email on 2nd December. I have also received an email forwarded by Jim Mather MSP on 1st December.

I appreciate you writing to me to outline your concerns with the Direct Bank model that has been put in place on Islay. The Direct Bank is not intended to reduce services to our customers on Islay. The service is being delivered in a different way, and I am sorry to hear that initial contact with you under this model has been far from satisfactory.

I can understand how unsettling it is when a new service is introduced and there is confusion over who it is that is supplying that service to you. I understand that all of your business interests are now being dealt with by Alan MacLeod and I hope this has gone some way to alleviating your concerns with the new model.

The model adopted on Islay has been in use for over five years in other parts of Scotland and our overwhelming experience is that the model works well for our SME customers.

I believe that the Direct Bank model will work well on Islay if it is given time. I will also personally keep a close watch on how it is operating.

Sincerely,

Susan Rice

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One is our analysis of the underlying situation behind our MSP, Jim Mather’s experience with Susan Rice (text posted by Gus Newman above) – http://forargyll.com/2009/12/mather-gets-no-change-out-of-rice-at-the-bank/

The other is on the recent fortunes of the less than stellar but still potent Ms Rice; a letter Jamie McGrigor MSP has written to her; and a mmotion unanimously accepted by Argyll and Bute Council on the matter, proposed by Councillor Robin Currie (text posted above) – http://forargyll.com/2009/12/mcgrigor-writes-to-demoted-rice-on-bank-of-scotlands-islay-debacle/

Robin Currie is to be congratulated for having got the Council to move on this. Its initial response when we approached it on what Islay businesses were facing was that it would not be getting involved as the matter was outside its responsibility – which was shamefully feeble. Good to see Mr Currie getting its corporate red corpuscles on the go.

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Susan Rice and also e mail her PA whose address is below

Susan Rice
Chief Executive
Lloyds Banking Group
The Mound
Edinburgh

Email of her PA is: Mary.Neilson@LloydsTSB.co.uk

Regards

Jim

Jim Mather MSP
Argyll & Bute

Minister for Enterprise, Energy & Tourism

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Dear Gus,

Apologies for the delay, I have only just got clear of the backlog of woek that piled up as a result of earlier meetings.

As discussed, I met Susan Rice – who had read all the bacground material and seen the Islay petition and was quick to state that she “didn’t want a degradation of service” for banking customers on Islay.

She was also at pains to say that this planned change was not about Islay or island communities but rather the development of a model that was working well elsewhere, where she claimed other customers were happy with the service.

She reiterated that they would assign a relationship manager to Islay business customers and while most interactions would be by phone and internet, there would be a presumption that the relationship manager could be regularly on Islay in response to customer needs.

Her objective was that the same service would be delivered in a smarter, slicker way, with face to face potential as required – with the caveat that she would react if it was felt that “anything was missing” and that the Bank was adamantly “not pulling out”.

In other words, she is saying she will keep a close eye on how this “new model” pans out and will listen to any issues that arise.

She also voiced an enthusiasm to work with Argyll & Bute to see if we could broker a tighter form of support from the ranks of the banks, accountants, lawyers, HIE, Argyll & Bute Council and the new Business Gateway service that shares premises with HIE in Kilmory.

We now have her attention and I suggest that we use this avenue of communication to keep her posted on the view from Islay.

Regards

Jim

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4.41 pm
Mr. Alan Reid (Argyll and Bute) (LD): The main theme of my speech will be a common theme today: the banks and the problems that many of their customers in small and medium-sized businesses face.

In a short space of time, the banks seem to have gone from one extreme to the other—from excessive risk-taking to excessive caution. We all have companies in our constituencies coming to us with the same story. They have a good sound business, a good track record and plenty of orders, but when they try to raise money from the banks to see themselves through the recession they are either turned down flat or, if money is offered, it is offered at a very high interest rate with a large arrangement fee and often demands for high levels of security for any loans that are offered.

Another common theme is complaints from small businesses that the cuts in the base rate are not passed on by the banks to individuals or to business customers. Getting lending moving again at reasonable interest rates is important, because although we are, I hope, starting to come out of the recession, there will still be difficult times ahead for businesses. For example, the Government’s plans are to reverse the VAT cut shortly and many of the other schemes to help businesses will also come to an end.

I remind the Government that when they reduced VAT last year, two sectors did not benefit from that cut because fuel duty and alcohol duty were put up to cancel it out. Both sectors are of importance in my constituency. Fuel duty increases penalise my constituency because we must, out of necessity, drive long distances. I shall return to a theme that I have raised often in Finance Bill debates and urge the Treasury yet again to consider making use of the EU derogation that allows countries to levy lower rates of fuel duty in remote rural areas. If the Treasury could take advantage of that EU derogation and levy a lower rate of fuel duty at filling stations in the remote parts of the highlands and islands, that would contribute greatly to the local economy. It is important to remember that people in the highlands and islands face higher fuel costs as well as having to travel long distances, so the price of fuel is very important.

As far as alcohol duty is concerned, I much preferred the policy of the previous Chancellor to that of the present Chancellor. The previous Chancellor, during his long tenure in the post, had a policy of freezing the duty on spirits while allowing that on beers and wines to go up in line with inflation. The alcohol duty on spirits is far higher per unit of alcohol than that on beers and wines. Surely, if alcohol is taxed for health reasons, the only logic is that it should be taxed at the same rate per unit of alcohol. I urge the Chancellor to revert to the policy of his predecessor and freeze the duty on spirits. Whisky distilleries are major employers in my constituency, providing jobs on remote islands where other work is hard to find. I therefore hope that the Chancellor will listen to that advice.

As I said earlier, small businesses still face a difficult time. The banks that were bailed out by the taxpayer with eye-wateringly large sums of money should have a duty to help small businesses through these difficult times. Nationally owned banks should act in the national interest, and the Chancellor is the main shareholder in several banks, having a controlling interest in some and a substantial holding in others. When the Ministers sums up the debate, I hope that he will tell the House what instructions the Government have given to the banks in which they are the main shareholder.

I sincerely hope that those banks have not been told by the Government that their sole duty is to maximise their profits, and that they have also been given a duty to help solvent British businesses through the recession. I do not mean by that that they should encourage risky lending, but there are solvent companies with good prospects and good track records that need loans to help them through these difficult times. Banks with a substantial Government shareholding should consider the needs of the entire economy, and not just focus on maximising profits.

I shall give an example from my constituency that involves the Bank of Scotland, which is now part of Lloyds Banking Group and is 43 per cent. owned by the Government. The bank decided recently to withdraw all but one of the business relationship managers from its branches in my constituency, even though local managers living in the remote communities know them in a way that business management teams located in Edinburgh, for example, could never match.
One of the affected branches was on the island of Islay. The decision to remove the business manager there has caused great outrage and concern among the island’s business community, which will now be served by a manager in a business team based on the mainland. I am in full agreement with the members of that community that a manager and a team based on the mainland will never understand the special circumstances of Islay’s economy as well as a manager who lived there would, and I back their campaign to reinstate the post on the island.
To the bank’s credit, it has amended its plans in response to the campaign, and there will now be a dedicated team for business customers in the highlands and islands. That is a welcome step forward and an improvement on the original proposals, but I still think that the mainland-based team will not have the same knowledge of Islay’s economy as a manager living there would. That is an example of how banks with the taxpayer as their main shareholder should look to support local communities. I hope that Ministers will take this issue up with the Bank of Scotland and urge it to reinstate the post.

Another way for the Government to help both individuals and small businesses would be to establish a post bank, which would have 10,000 branches throughout the country. I was pleased with the announcement about the post bank that the Prime Minister made at the Labour party conference, but I have been disappointed with the slow progress since then.

Post offices are still closing, and two have shut in my constituency since the end of the planned closure programme. As well as helping individuals and small businesses with their banking, a post bank would also help to rescue the rural post office network. I hope that the Minister summing up the debate will have progress to report on the post bank proposal.

As well as supporting businesses through the recession, the Government should also be looking at investing in the infrastructure that the country needs so badly. Infrastructure investment is needed in school buildings, public transport, broadband provision, the national grid and so on. We need a mechanism for reducing the cost of capital through Government guarantees, while at the same time tapping into private savers’ demands for long-term investment. That is why I support a UK national infrastructure bank, and I hope that that it is an idea that the Government will also support.

I was very disappointed by the Supreme Court decision yesterday that the banking practice of imposing unfair overdraft charges on individuals was within the law. I was disappointed that the court sided with the banks in that judgment and I hope that the Government will soon introduce legislation to outlaw those unfair charges.

I endorse what the Chairman of the Business, Innovation and Skills Committee said earlier about the need for a supermarket ombudsman. Such a post is badly needed to help small businesses and consumers, particularly in the dairy industry where there is a huge gap between the farm-gate price for milk and the price the consumer pays at the supermarket. I hope the Government will accept the Competition Commission recommendation and set up the post as soon as possible.

I look forward to the Minister’s response. I hope he will tell us what instructions the Government have given the banks in which they have a major shareholding, so that banks can help British businesses through the recession, rather than simply maximising profits.

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That Argyll and Bute Council resolves to contact the Bank of Scotland as a matter of urgency regarding proposals to remove Business Banking Advisors from remote and rural branches in Argyll and Bute, recognising that any such removal will have a detrimental effect on small businesses in those communities, with a subsequent negative impact on already fragile economies, and that the Council requests that any such proposals be urgently re-considered in light of these expressed concerns.

I also attach letter I sent last week.

Robin Currie <>

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Paragraph 2 to 7 are identical to a letter Alan Reid MP dated 9 November 2009. The same letter was sent again to Alan Reid MP on 17 November 2009. Hm…It seems that the Mr Kerr now has a standard response to every letter he recives about this matter?

We had a meeting with our new Business Relationship Manager last Thursday. He is plesant enough chap. It did not fill me with confidence; he will not be making any decisions about our banking needs which will still be done by a faceless and nameless person sat in front of a computer in an office somewhere far away from where the action is.

The conversation also revealed a number of clear contradictions in the statements issued by Mr Kerr and those made by our new BRM. Not sure they are even in the same church, let alone singing the same hymn.

We will certainly be raising these queries with Mr Kerr who promised to telephone us either last Monday or Tuesday. He has not yet done so, but we hope he will call us today.

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I found them still to be in a difficult place, worried about the conflicting signals they are geeting from Westminster in terms of simultaneously being asked to lend and support business and at the same time restor their own balance sheets.

In the light of this – and the potential we identified today, I will make a new overture to Susan Rice and Archie Kane re the Ileach situation which is replicated in other placed on the West Coast.

Regards

Jim

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Thank you for your letter of the 20th of November replying to my letter to the CE in respect of banking concerns on the island of Islay which is one of the many inhabited islands within my region of the Highlands & Islands.

With great respect, I feel that Islay and similar islands off the west of Scotland are different from mainland communities. You emphasise that you are listening to the concerns expressed by me and my constituents and are currently assessing whether any further support is appropriate for the Highlands and Islands, I do not feel that a broad brush solution is appropriate to an area with so many communities of different kinds. If you cannot meet your bank manager in Islay face to face it requires a journey to the mainland which is extremely costly. Will the Bank be paying its customers’ fares in this respect? It is also time consuming. Local knowledge is very important as is the feeling that loyal bank customers are being listened to. It does not appear that many, if indeed any, Islay SMEs were questioned by the organisers of the survey used to arrive at conclusions which are obviously not acceptable to constituents on Islay. Had you done a survey in Islay I think the number of complaints would certainly not have been very small but judging by my postbag, very large. As I have said before I suspect this island, with its nine distilleries, generates more income for the UK Treasury than any other island in Scotland and possibly the UK. It seems absurd that those who live and work there cannot have the services of a local bank manager. I hope I am not being obtuse but that is the way I see it and I have to tell you that the Bank is building up bad feeling and losing the respect of many of its loyal customers. I understand the current difficulties faced by the Bank and the wish to put the bank back into a position to pay dividends to its share holders but I entreat you to look at reversing your plans to leave Islay without a local manager of the Bank of Scotland.

Thank you for your time in this matter and look forward to your reply.

Kind regards,

Jamie McGrigor MSP

—–

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Gus,
Many thanks for this – it is much appreciated.
I have had such a response from Donald Kerr and have now escalated the issue to Susan Rice – who has yet to reply.

I am seeing the whole banking sector in Scotland on Tuesday – and in the meantime, I am sharing this with Douglas Cowan in HIE, who has told me of similar issues in Lochaber and Skye.

For me there is an issue of Corporate Social Responsibility here and my belief that our banking sector has an obligation to provide banking services ( as a sector ) to all parts of our economy.

We will keep the pressure up and see where that takes us.
Regards
Jim

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This will only get worse, as you say experience of a call centre approach is never satisfactory, before I moved to Islay my business banking with Lloyds resulted in a “new” business relations manager every time I called.

Lets hope we get some action and they see Islay as being more important than an extension of Oban.
Dave Protherough – Project Manager Re-JIG, Islay’s Recycling Charity

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Please see Jamie’s reply to Andy MacIver:

Dear Andy,

Thank you for getting back to me about the situation on Islay. You are quite right that your letter is not the answer which I or my constituents desired and I find it very disappointing that the Bank has already made up its mind to remove their local bank manager from Islay.

Since this will send shudders through the local economies of many smaller remoter regions of the UK and especially Scotland, can you tell me what size the local economy has to be to support a local manager. It appears to me that nothing on Islay has changed; what has changed is the attitude of the Bank of Scotland, the Bank which I remember liked to say yes!

I realise that the Bank wishes to get back to a position where it can actually pay dividends to its many shareholders but I would have thought that dismemberment of the infrastructure will be an option which will only make people inclined to take their custom elsewhere. I have given you the other arguments for the importance of Islay including the fact that it provides such an enormous amount for the UK Treasury and entreat you once again to reconsider your decision in this case.

Andy, thank you for your time and I look forward to a reply from yourself and the Chief Executive.

Kind regards,

Jamie.

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Donald Kerr, Commercial Banking Director, Scotland
Bank of Scotland

“There’s no doubt that today’s trading conditions are turbulent for businesses – we have first hand experience of having to deal with that. The economic downturn is posing significant challenges for companies of all shapes and sizes – many of whom may find it difficult to see a way through the current climate.

The purpose of this website is to provide support and guidance to help businesses navigate a course through the financial turbulence. Here you will find dedicated guides, expert guidance and real life business stories that give many examples of the support we can provide, including several new initiatives which could prove invaluable to you in these difficult times.

That specialist support is not something new for Bank of Scotland. Building long-term, through-the-cycle relationships is at the heart of our strategy. What is new is that we can now provide that support with the unprecedented power of the Lloyds Banking Group behind us.

That strength allows us to play a powerful role in helping businesses to prosper through the downturn and emerge stronger for the upturn. We are working to ensure we have the capacity and expertise to respond to business needs in tough times.

Our Relationship Managers are the face of Bank of Scotland and take the responsibility that comes with that very seriously. As always, the support they provide is driven by the needs of our customers. That’s why we want to work more closely with businesses like yours, to make sure that we understand the risks you face and help you to manage them.

In turn, we want you to be open about those challenges so that together we can build solutions that work. Your success is the basis for everything we want to achieve. I firmly believe that it is businesses like yours that will play a key role in reversing the recession.

At Bank of Scotland we are delighted to be able to go back to banking again and using that expertise to play a valuable supporting you.”

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