Clause 2
Dormant Bank and Building Society Accounts Bill [Lords]
10:45 am
Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
The amendments intend to bring the Bill back to the state in which it was originally introduced. It is right to have a significant debate on the objectives of the small and local schemes. I would like to remind the Committee about the objective of the Bill, which is to facilitate fair and efficient distribution of funds in dormant accounts for the benefit of society.
We recognise that small banks and building societies often play a key role in supporting and engaging with our local communities. It has always been clear that small, locally based institutions should be able to focus dormant account assets on needs in their local communities. That was announced as far back as the pre-Budget report of 2005. In consultation with the bank and building society sector, we have identified £7 billion as a credible threshold to define small and locally based institutions. The Building Societies Association advised us that of those building societies with less than that amount in total assets, more than 90 per cent. have all their branches within 70 miles of their head office. We consulted on the suitability of that threshold for identifying small, locally based institutions, and the majority of respondents who expressed a view believed the limit to be appropriate. The Government are fully committed to supporting mutual organisations and recognise the many benefits that such organisations bring to society and communities across the United Kingdom. We recently introduced new legislation to support the sector, including improving the rights relating to member shares and improving procedures involved in transferring business to the subsidiary of another mutual.
The vast majority of building societies will be eligible for the alternative scheme. The BSA advises that 50 out of their 59 members—nearly 85 per cent.—will be eligible. On Second Reading, it was helpfully pointed out that building societies which will not be eligible hold a large proportion of the dormant account funds in that sector. To be precise, the BSA has estimated that £100 million of the £130 million in dormant accounts in the sector lie in the larger institutions. I am aware of the views that have been regularly expressed by Nationwide building society. Much has been said of the great need in the areas to which spending priorities in the scheme have been directed, particularly the need for youth facilities and for improving financial capability and inclusion. One of the key messages on Second Reading was the strong support across the House for investment in youth facilities and in matters of financial capability and inclusion.
One of the reasons behind the scheme is that, if the larger building societies do not take part in the main scheme, the funds for the spending priorities will be heavily impacted on. We are aware that banks and building societies support a variety of good causes in different communities and, of course, we fully support such laudable objectives. However, are banks and buildings societies really in the best position to consider consistently the needs of wider communities throughout the United Kingdom? We have identified the good causes following an extensive consultation exercise in England, and other Administrations have similarly consulted. We think that it is right to proceed with the scheme. If we were to allow all dormant account money to be administered through multiple individual foundations, it would inevitably lead to significant overlaps and potentially large gaps in provision. It is in the interests of a fair and efficient distribution of funds to have a centralised national distribution scheme.