Lloyds Banking Group has done what it should have done last week. It has said it will appoint an independent outsider to consider compensation payments to those small businesses who were victims of the fraudulent activities of Lynden Scourfield, the disgraced former head of HBOS’s impaired loans operation in Reading.
From the moment last Thursday when Scourfield and five associates received combined jail sentences of 47-and-a-half years, it was obvious that Lloyds would have to take this step. Last week’s response was too airy. It promised to “review any new concerns on a case-by-case basis taking into account any relevant new information from the trial” but it didn’t commit to two essential ingredients of a solid compensation scheme – oversight by an independent third party and the involvement of the regulator, the Financial Conduct Authority.
Those shortcomings have now been rectified. But the delay will encourage the impression that Lloyds has been too keen to think of itself of the primary victim in a scam whereby heavy debts and fees were loaded on to struggling businesses with the help of Scourfield’s co-conspirators at Quayside Corporate Services, a defunct advisory firm.
It is true, of course, that Lloyds was a victim: the fraud ran to £245m, the court was told, and it took place before it bought HBOS in 2007. But the bank was not a victim in the same sense as the HBOS borrowers. An unshakeable principle in takeovers is that you assume the responsibilities of the business you are buying, including nasties you didn’t know about.
The trial lasted several months, so Lloyds had time to get its response right first time. In the circumstances, you can’t blame concerned MPs for thinking the initial reaction was half-hearted. If Lloyds chief executive António Horta-Osório feels the characterisation is unfair, he now has a chance to demonstrate his bank’s generosity in the form of hard cash, delivered speedily to the true victims.
Not so long ago, the communities secretary, Sajid Javid, sounded like the scourge of the big housebuilders as he complained that current rates of housebuilding were “not good enough”. His white paper on housing upgraded the rhetoric to describe the market as “broken” but it would be hard to conclude the fix-it plan will make life uncomfortable for the likes of Barratt, Persimmon and Taylor Wimpey.
The stick that Javid has chosen to beat the big boys looks more like a twig. Developers will be forced to build on land within two years of gaining planning permission. That is a reduction from the current cut-off of three years but, given that most developers tell us they start building almost as soon they receive permission, the switch may be barely noticed.
At a push, one might say government assistance for small housebuilders could inject more competition. But, if the sight of profit margins at 20%-plus across the sector hasn’t brought forth a rush of new rivals, the problem may go deeper than a lack of official encouragement for the smaller brigades.
Javid’s greater focus seems to be funding more “affordable” homes, to be delivered chiefly by housing associations and local authorities. Since the big boys tend to be uninterested in the affordable end, they’ll be happy to let others get on with the job. Share prices across the sector rose gently, and one can understand why. The big boys can continue building at their current steady rate and their special dividends can keep flowing.