Five questions answered on Lloyds’ announcement on increasing PPI provisions

Will it affect the groups’ profits?

Lloyds Banking Group today announced it is to increase its provision for the mis-selling of payment protection insurance (PPI). We answer five questions on the bank's announcement.

By how much is the bank increasing its PPI provisions?

The group said it will increase the fund by another £1.8bn, bringing the total to nearly £10bn. It said this extra provision reflects an increase in successful claims.

Has this affected the group's profits?

The banking group also announced that its underlying profits for 2013 would be £6.2bn, which is nearly double what analysts have been expecting. As a result, the bank has said it could restart dividend payments this year. Lloyds has not paid any dividends to shareholders since 2008.

What is the total cost of the PPI scandal expected to be for all banks?

The bill for all banks is expected to be around £20bn.

What else has Lloyds said?

Antonio Horta-Osorio, chief executive of Lloyds, said: "Our profitability, despite legacy issues, is testament to the strength of our business model and the commitment of our people, and has enabled the UK government to start to return the bank to full private ownership.”

The bank also announced it will be setting aside another £130m to cover the cost of compensation payments to SMEs mis-sold interest rate hedging products.

Does the government still have shares in the Lloyds bank?

Yes, the UK government still owns 32.7 per cent of the bank's shares. However, it hopes to sell these, most likely in April, because it wants the bank to return to private ownership by the next general election.

The Lloyds building in London. Photograph: Getty Images.

Heidi Vella is a features writer for Nridigital.com

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.