Lloyds slashes cash for Scottish charities

The move has raised fears some charities will face closure, job losses or a drastic scaling-down of their services.

Hundreds of voluntary groups will be affected after the Lloyds TSB Foundation for Scotland closed its doors to new applications for grants for the foreseeable future.

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Sources at the foundation said it was inevitable some charities would be forced to withdraw key services.

"Hundreds of charities will be affected," the source said. "Some would have to make people redundant and could scale back their services.

"A lot of the funding goes towards salaries and, without that, the job can't be maintained. Hundreds of them will have to make cuts and lose staff."

The charities have found themselves at the centre of an acrimonious dispute between the foundation and Lloyds Banking Group, which wants to cut its contributions.

Negotiations between the two broke down recently, amid claims the bank wanted a say in where the money was spent – effectively challenging the foundation's independence.

The foundation says that if the new terms were accepted, Scots charities would lose out to the tune of 22m over the next nine years.

Mary Craig, chief executive of the foundation, said: "They're trying to tell us where to put the money, when our trustees in Scotland are best-placed to say where the money should be spent.

"We're not going to be bullied into accepting this deal. They're trying to turn us into a corporate organisation.

"If we accept this 0.5 per cent reduction in contributions, Scotland will lose 22m over nine years. They want to break the covenant, halving the contributions and compromising the independence of the foundation. They want control."

Since the foundation was established in 1985, more than 12,000 awards, totalling nearly 85m, have been made to charities working with disadvantaged communities and people across Scotland.

Those benefiting have ranged from the well known, such as Children 1st, to small individual community groups that receive a few hundred pounds for local projects. Since 1997, the foundation has allocated some 30m to support salaries – and therefore jobs – in the charitable sector.

The Moira Anderson Foundation, a Scottish charity working with victims of sexual abuse, received 10,000 from the Lloyds foundation in recent years. Sandra Brown, who runs the charity, said dozens of voluntary groups could go under if the grants were withdrawn.

"Unfortunately, we will see the loss of some charities in Scotland," she said. "I have no doubt that this will ensure new charities don't start up.

"I would be devastated if the grants stop. We would never have been able to get off the ground as a charity without them. We were planning to ask for another grant for other projects. "The bigger charities will come through, but smaller ones will really struggle."

Anne Houston, chief executive of Children 1st, said the charity was deeply concerned about future funding.

She said: "While we understand that our existing projects are secure, today's news is extremely worrying for future support of services for Scotland's most vulnerable citizens.

"We all know that this is a time of increased financial pressure – therefore any loss of funding is doubly concerning, given the increased need."

The Lloyds TSB Foundation for Scotland is an independent body and one of the leading charitable funders in Scotland.

It operates to a covenant which dictates that the organisation, and three other autonomous foundations that cover the rest of the UK, receive a share of 1 per cent of the Lloyds Banking Group's pre-tax profits each year.

However, the losses predicted by the bank mean there is virtually no cash due to the foundation in the coming year, which has forced trustees to close the door to new applications indefinitely.

Over the past nine months, negotiations between Lloyds Banking Group in London and the foundation have stalled amid claims that the bank wants to reduce its contributions. Insiders say the row strikes at the very heart of the foundation's independence, bringing an unwelcome "corporate face" to charitable donations in Scotland.

The foundation is to honour existing commitments to charities and will make final awards in December as planned.

Last night, Lloyds Banking Group said the foundation – whose trustees include

main bank board director Susan Rice – had declined to take part in talks aimed at finding a solution.

It said: "We are disappointed that the Scottish foundation has chosen not to participate in these collective discussions, despite a number of invitations for them to do so over a period of months.

"The group wishes to continue its significant commitment to Scottish communities and the valuable work undertaken by the group and the foundation in Scotland. Our intention is to agree with all four foundations a mutually satisfactory accommodation which is realistic, fair and durable."

Scottish Labour leader Iain Gray said he was seeking "urgent" meetings with the foundation and Lloyds, to encourage the bank to reach a "reasonable" agreement.

A spokesman for the Scottish Government said: "Today's news is very disappointing."

This latest blow to Scotland's charities comes in the wake of public sector spending cuts and a loss of lottery cash that will leave thousands of vulnerable people without help. Recent figures show an average of ten charities a week are going under.

Family charity at risk if essential funding is lost

CIRCLE, an Edinburgh-based charity working with families affected by drugs and alcohol abuse, sends staff into homes to make sure children are properly looked after.

Liz Dahl, the chief executive, says the threat to funding could affect work in Edinburgh, West Lothian and North and South Lanarkshire, and these projects could close down.

"This would be devastating for families," she says. "With a recession under way, the need for our services go up because more families are getting into financial difficulties and turning to drugs and getting into debt.

"Our workers provide a range of practical and emotional support. This can be getting children to school in the mornings, making sure there is food in the kitchen, that there is enough bedding or even a bed, and making sure parents get to hospital or social work appointments.

"At the moment, our funding from Lloyds TSB is matched by funding from local authorities. But with councils having to cut their own services, they are more likely to put them first than to continue to support us.

Circle has received over 1 million for Lloyds TSB since 1992, with annual funding grants varying from 48,000 in 2007 to 133,000 this year. The money has helped Circle to employ 40 workers, each with a caseload of about ten families.

With workers' salaries paid by a combination of the charity's income and local authority funding, many of these jobs could be at risk.