New Clause 2
Dormant Bank and Building Society Accounts Bill [Lords]
9:15 am
Martyn Jones (Clwyd South, Labour)
I certainly agree with the hon. Gentleman’s idea about regular reviews. I hoped that the Minister’s promise was sufficient in that regard. If one of my amendments, which was not selected, had been accepted, it would have given teeth to the triennial review, including the idea of a mandatory fall-back position if the voluntary nature of the scheme did not to deliver the goods.
I should like to echo the supportive words of my hon. Friend the Member for High Peak when he spoke about creating a purpose to the review that we were all so strenuously in favour of yesterday, when dealing with the triennial report in what was formerly clause 12. We all believe that the project should be scrutinised, especially as the Bill is a novel concept to the British banking system, and even more so as it is the first voluntary regulatory system in the world. My hon. Friend rightly stated that the scrutiny required teeth. Such teeth would be undoubtedly present if the Government had a fall-back option in a mandatory scheme.
If such a report was to condemn the voluntary nature of the scheme in three years’ time, the Government would have an easy recourse. In that sense, the new clause is less of a major shift than a work of minor dentistry in restoring the Government’s teeth. Installing a mandatory scheme is the ultimate deterrent to the banks’ non-compliance with the voluntary scheme.
I am not alone in the view that we require some sort of mandatory threat to underline the voluntary scheme. In that view, I am joined by the National Council for Voluntary Organisations and the cross-party Treasury Committee, which stated
“we are unconvinced that the Government is correct to pursue a voluntary approach. A compulsory scheme has the overwhelming advantage of guaranteeing fairness and consistency between institutions. We urge the Government to reconsider the voluntary basis of its proposals. If the Government is still minded to continue with a voluntary scheme, we recommend that the forthcoming legislation be prepared so as to include reserve powers for Ministers to establish a compulsory scheme at a later date without recourse to further primary legislation, should a voluntary scheme prove unsuccessful”.
All that new clause 2 seeks to do is to give powers to the Government in the future.
I want to address the issue of fairness. Why should some banks contribute and others not? In about 2001, I wrote to all banking institutions and sent over 100 letters. Not that many banks have closed in that time. However, the British Bankers Association says that only 11 banks have pledged to take part, and some of those have disappeared in the past few weeks. There is a disparity, and that sentiment is echoed in my early-day motion, which had the support of nearly 100 hon. Members, including the current Treasury spokesman for the Liberal Democrats.
Yesterday, the Minister seemed to suggest that too much bureaucracy was entailed in inserting such a proposal into the Bill and that such a clause was too wide ranging. In an attempt to pre-empt the Minister from taking such a line of logic, I ask him to name any of the bureaucratic challenges that such a clause would pose.
The Bill has already more than ably created a reclaim fund, a distribution network and a report system. A body already exists in the Financial Services Authority capable of market regulation. In the unlikely event that the clause should ever need to be activated, little else seems to be required. The banks would be legally compelled to do that which is already perfectly consistent for them to do voluntarily.
I say to the Minister that concerns about the potential technicalities of the new clause when activated are not worthy of consideration, for the nature and existence of the new clause in the Bill as a threat should mean that it would never need to be activated. The shadow of a mandatory scheme, rather than a mandatory scheme itself, would ensure total compliance with the voluntary scheme.
Throughout these debates, the Minister has assured us of the banks’ co-operation with the Bill and the future voluntary scheme. Such a view should not create any opposition to the new clause’s insertion. If the banks co-operate fully, the voluntary scheme will work—a report will say so—and there will be no need to activate the new clause. Following the Minister’s line of logic, the worst that the new clause can ever be is slightly redundant.
Many of us have been sceptical from the outset about the voluntary scheme and the banks’ co-operation with it. However, the Minister has largely brought us round to the idea of banking co-operation. I confess that I still am sceptical about the numbers adding up and about how £400 million can change into £50 million overnight in response to the loss of just 10 years’ worth of dormant funds. However, I am willing to accept the flexibility and the less regulatory benefits of a voluntary scheme. I have come half way; I ask the Minister to come the other half of the distance, by agreeing to the new clause, so that we can meet in the middle.
The apposite words of my hon. Friend the Member for High Peak seem to echo throughout these debates. One should not try to smash a nut with a sledgehammer—I have no desire to do so—but inserting some shadow of enforcement to the regulatory scheme will ensure that we are not smashing a nut with a feather either. The new clause is fit for purpose if it ever needs to be enacted. However, most importantly, its dormant presence in the Bill would provide a perfect deterrent to ensure compliance with the voluntary scheme. The worst that it could ever be is an unused power. I do not see that as something to fear, and I hope that the Minister will support this change to the legislation.