HBOS: Fraud Investigation

Lord Livermore Excerpts

Thursday 26th March 2026 Lords Chamber

[Lord Sikka]

To ask His Majesty’s Government what assessment they have made of the adequacy of Lloyds Bank’s investigation of fraud at HBOS; and when they expect Dame Linda Dobbs’s review of the fraud to be completed and published.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, in 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, which took place in the early 2000s, and to determine what it knew or should have known and whether it reported it appropriately to the regulatory authorities. The Government understand that drafting is under way, and the review’s findings will be shared with the Financial Conduct Authority once completed, which will then consider what actions are appropriate to take.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for his reply. It would be helpful to have a bit of background. Fraud at HBOS goes back to 2002. The regulators did little. In 2017, the Thames Valley Police and Crime Commissioner secured six criminal convictions. Still the FCA, SFO and the police did not fully investigate. The Government left it to Lloyds Bank, which owns HBOS and which then appointed Dame Linda Dobbs to investigate and prepare a report. There has been no report to date. Victims are still awaiting compensation, and many have died since. Does the Minister agree that it is a government duty to deliver justice to victims of bank fraud?

[Lord Livermore (Lab)]

The Government share the frustration at how long processes relating to this issue are taking to conclude. In 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, what it knew or should have known, and whether it reported it appropriately to the regulatory authorities. The noble Lord mentioned the FCA. The FCA has undertaken an investigation into this matter historically and has taken enforcement actions. The FCA previously investigated and, with the PRA, jointly reported on the failure of HBOS. There was a criminal investigation resulting in six convictions in 2017. The FCA investigated knowledge of these matters with HBOS and its communications with the FCA after the initial discovery of the misconduct. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested, and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate with Parliament. The Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude.

[Baroness Kramer (LD)]

My Lords, I am going to press the Minister to take a stronger position on this issue, which was £1 billion of criminal financial manipulation by HBOS Lloyds. The FCA spectacularly failed to investigate, initiating a report only under strenuous insistence from Vince Cable. It then misrepresented, to this House and others, the conclusions of that report—as was exposed when the original document was leaked to the Treasury Select Committee. Given all that, will the Government now back Dame Meg Hillier, who has demanded that when this report is completed, it is published in full and unredacted, which is not the position that Lloyds appears to be taking?

[Lord Livermore (Lab)]

As I said before, the Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament.

[Lord Tyrie (Non-Afl)]

Will the Government reconsider their decision not to publish the report in full? I fully support what the noble Baroness, Lady Kramer, has said. I chaired the Treasury Select Committee through a substantial period during which these issues developed. It really is wholly unacceptable, so long after the development and exposure of this fraud, that people are not receiving compensation. We now need the publication and full transparency of that report.

[Lord Livermore (Lab)]

As I have previously said, Lloyds Banking Group has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament. The noble Lord mentioned compensation. As I understand it, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and the Treasury, to determine the right level of compensation in individual cases. That review is independent. I understand that it has made its determinations and settled compensation for the majority of victims, but there are a few outstanding cases and I very much hope that this work will conclude in the near future.

[Lord Woodley (Lab)]

My Lords, can the Minister assure the House that the victims of this incredible £1 billion HBOS fraud will have the opportunity to challenge and correct the published version of the Dobbs review?

[Lord Livermore (Lab)]

I am afraid I do not know the answer to my noble friend’s question. I will very happily check and write to him in due course.

[Baroness Neville-Rolfe (Con)]

My Lords, the truth is that this was an appalling state of affairs, with many small and medium enterprises driven into insolvency as a result of the HBOS Reading fraud. Following the 2017 convictions which the Minister has mentioned, courts made several Proceeds of Crime Act confiscation orders—for example, a £10 million order against David and Alison Mills—yet their criminal benefit was assessed to be far higher, at around £69 million. Can the Minister tell us how much has been recovered and returned to victims to date? Will the Minister commit to a victim-first distribution plan for any further recoveries?

[Lord Livermore (Lab)]

As I said to the House previously, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and Treasury, to determine the right level of compensation in individual cases. As I said before, the review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are a few outstanding cases. I hope this work will be able to conclude in the near future.

[Lord Davies of Brixton (Lab)]

I speak as an officer of the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services. The Government have placed considerable reliance on developing financial services as an engine of growth in our economy. Does my noble friend the Minister agree that transparent and clear anti-fraud activity is an essential element and that any doubts about the effectiveness of our anti-fraud policy will weaken the opportunities open to us. As the noble Baroness, Lady Neville-Rolfe, said, the extent of the pain and problems caused by this fraud should not be underestimated. Somewhat oddly, it only really came to light because of the work of the Thames Valley Police. We really do need to get better on this.

[Lord Livermore (Lab)]

My noble friend is far more expert in these matters than me, and I think I agree with what he said. As I said, the Government share the frustration at how long processes related to this issue are taking to conclude. We very much hope that the findings of Dame Linda Dobbs’ review will be available very shortly. My noble friend mentioned the importance of the financial services sector, and I would like to reiterate that. The financial services sector is critical to the ambitions of our country; it is one of the largest and most productive sectors of the UK, worth around 9% of total economic output, employing 1.2 million people across the UK. So, I very much endorse what my noble friend says.

[Lord Stirrup (CB)]

Does the Minister accept that some of the difficult political challenges facing western societies today are a consequence of the destruction of the faith that people have in the effectiveness and fairness of the socio-political economic model following the financial crash of 2007 and the economic consequences? Therefore, issues such as the HBOS scandal are not just one-offs; they are not just a matter of dealing with certain financial consequences. If, as a society, we do not clearly address these things, the difficult political challenges that we currently see will continue and, indeed, get worse.

[Lord Livermore (Lab)]

It is very difficult to disagree with what the noble and gallant Lord says, and I am sure I agree with much of it. Substantial protections were put in place in terms of financial services after the financial crisis that he described, and those protections remain; that is, adherence to international standards, ensuring robust NRA remains in place, commitment to ring-fencing and the new FPC, FCA and PRA—that whole architecture. The reforms that were put in place post financial crisis are incredibly important in ensuring ongoing confidence in our financial services sector.

[Lord Hamilton of Epsom (Con)]

My Lords, can the Minister now answer the question from the Conservative Front Bench? How much money has been got back from the fraudsters and how much of that has ended up with the victims of this appalling crime?

[Lord Livermore (Lab)]

As I said before, that is a matter for the independent Foskett Panel, which was established by Lloyds Banking Group in 2020. The review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are, of course, a few outstanding cases. I hope this work will be able to conclude in the very near future.