OPERATING EXPENSES

12 Months Ended

Dec. 31, 2017

Disclosure of expenses [text block] [Abstract]

Disclosure of expenses [text block]

NOTE 11: OPERATING EXPENSES

	2017 £m		2016 £m		2015 £m
Staff costs:
Salaries		2,679		2,750		2,808
Performance-based compensation		473		475		409
Social security costs		361		363		349
Pensions and other post-retirement benefit schemes (note 35)		625		555		548
Restructuring costs		24		241		104
Other staff costs		448		433		459
		4,610		4,817		4,677
Premises and equipment:
Rent and rates		365		365		368
Repairs and maintenance		231		187		173
Other		134		120		174
		730		672		715
Other expenses:
Communications and data processing		882		848		893
Advertising and promotion		208		198		253
Professional fees		328		265		262
UK bank levy		231		200		270
TSB disposal		–		–		665
Other		814		873		703
		2,463		2,384		3,046
Depreciation and amortisation:
Depreciation of property, plant and equipment (note 26)		1,944		1,761		1,534
Amortisation of acquired value of in-force non-participating investment contracts (note 24)		34		37		41
Amortisation of other intangible assets (note 25)		392		582		537
		2,370		2,380		2,112
Goodwill impairment (note 23)		8		–		–
Total operating expenses, excluding regulatory provisions		10,181		10,253		10,550
Regulatory provisions:
Payment protection insurance provision (note 37)		1,300		1,350		4,000
Other regulatory provisions1 (note 37)		865		1,024		837
		2,165		2,374		4,837
Total operating expenses		12,346		12,627		15,387

1 In 2016, regulatory provisions of £61 million were charged against income.

Performance-based compensation

The table below analyses the Group’s performance-based compensation costs between those relating to the current performance year and those relating to earlier years.

	2017		2016		2015
		£m		£m		£m
Performance-based compensation expense comprises:
Awards made in respect of the year ended 31 December		334		312		280
Awards made in respect of earlier years		139		163		129
		473		475		409
Performance-based compensation expense deferred until later years comprises:
Awards made in respect of the year ended 31 December		127		123		114
Awards made in respect of earlier years		35		41		56
		162		164		170

Performance-based awards expensed in 2017 include cash awards amounting to £102 million (2016: £116 million; 2015: £96 million).

Average headcount

The average number of persons on a headcount basis employed by the Group during the year was as follows:

	2017		2016		2015
UK		75,150		79,606		84,922
Overseas		794		812		781
Total		75,944		80,418		85,703

Fees payable to the auditors

Fees payable to the Company’s auditors by the Group are as follows:

	2017	2016	2015
	£m	£m	£m
Fees payable for the audit of the Company’s current year annual report	1.5	1.5	1.2
Fees payable for other services:
Audit of the Company’s subsidiaries pursuant to legislation	18.6	14.7	14.9
Other services supplied pursuant to legislation	3.0	3.1	2.2
Total audit fees	23.1	19.3	18.3
Other services – audit related fees	1.2	3.1	3.2
Total audit and audit related fees	24.3	22.4	21.5
Services relating to taxation:
Taxation compliance services	–	0.2	0.2
All other taxation advisory services	–	0.1	0.1
	–	0.3	0.3
Other non-audit fees:
Services relating to corporate finance transactions	1.2	0.1	0.2
Other services	2.4	1.5	2.3
Total other non-audit fees	3.6	1.6	2.5
Total fees payable to the Company’s auditors by the Group	27.9	24.3	24.3

The following types of services are included in the categories listed above:

Audit fees: This category includes fees in respect of the audit of the Group’s annual financial statements and other services in connection with regulatory filings. Other services supplied pursuant to legislation relate primarily to the costs associated with the Sarbanes-Oxley Act audit requirements together with the cost of the audit of the Group’s Form 20-F filing.

Audit related fees: This category includes fees in respect of services for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements, for example acting as reporting accountants in respect of debt prospectuses required by the listing rules.

Services relating to taxation: Following a change in policy, the Group’s auditors are not engaged to provide tax services except in exceptional circumstances and where permitted by applicable guidance.

Other non-audit fees: This category includes due diligence relating to corporate finance, including venture capital transactions and other assurance and advisory services.

It is the Group’s policy to use the auditors on assignments in cases where their knowledge of the Group means that it is neither efficient nor cost effective to employ another firm of accountants. Such assignments typically relate to assistance in transactions involving the acquisition and disposal of businesses and accounting advice.

The Group has procedures that are designed to ensure auditor independence, including prohibiting certain non-audit services. All statutory audit work as well as most non-audit assignments must be pre-approved by the audit committee on an individual engagement basis; for certain types of non-audit engagements where the fee is ‘de minimis’ the audit committee has pre-approved all assignments subject to confirmation by management. On a quarterly basis, the audit committee receives and reviews a report detailing all pre-approved services and amounts paid to the auditors for such pre-approved services.

During the year, the auditors also earned fees payable by entities outside the consolidated Lloyds Banking Group in respect of the following:

	2017	2016	2015
	£m	£m	£m
Audits of Group pension schemes	0.1	0.3	0.3
Audits of the unconsolidated Open Ended Investment Companies managed by the Group	0.3	0.4	0.4
Reviews of the financial position of corporate and other borrowers	–	1.2	3.1
Acquisition due diligence and other work performed in respect of potential venture capital investments	0.1	1.0	1.2