[Relevant documents: The Eleventh Report from the Treasury Committee, Session 2006-07, Unclaimed assets within the financial system, HC 533, and the Government response, HC 1028, Session 2006-07 .]
Order for Second Reading read.
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I beg to move, That the Bill be now read a Second time.
I thank my hon. Friend Kitty Ussher, the former Economic Secretary, for all her hard work in developing the Bill and supporting its progress, and welcome to the Treasury Bench my hon. Friend Ian Pearson, the new Economic Secretary, who will be taking the Bill through Committee.
The Bill implements the commitment in the Labour party's 2005 manifesto to channel unclaimed financial assets back into the community. It has already been through the other place, where it received broad cross-party support as well as extensive debate, and I hope that we will see that cross-party support continued here. The purpose of the Bill is to enable what are effectively lost assets to be put to use in supporting the community while ensuring that, should their former owners discover them again, they can still get them back.
We begin our deliberations in this place in a rather different financial climate from that in which we started, and I am sure that the changing circumstances will form part of our deliberations here and in Committee. Mr. Maples has already raised this matter with the Chancellor today, in the course of the discussions on the statement. It is important to recognise that the Bill is not about tackling today's market conditions; it is about the future, and about laying the foundations for a scheme that will be in place in mid-2009 at the earliest. The scheme will be voluntary, and it has been brought forward with the full support of the industry.
The point that I was making earlier was that, although the Bill is well conceived—I have no objection to the idea of taking dormant deposits and spending them on good causes—it was, as the Chief Secretary has acknowledged, conceived in a very different banking environment. One of the problems that the Chancellor is trying to deal with is the capital adequacy of the banks, and there will probably be a need for some public sector injection in that regard. Between now and the Committee stage, will the Chief Secretary consider whether it would be sensible to allow this money to be used temporarily for that purpose, so that the reclaim fund would own shares—be they convertible notes or preference shares in the banks—that could buy capital for the banks? In due course, when the banks' situation has improved, the reclaim fund could then sell the securities or redeem them in order to use the money for good causes. In the meantime, however, I think that the public will find it odd that we are going to take £500 million off the banks to spend on good causes, when it could be used to bolster their balance sheets.
I hear the point that the hon. Gentleman is making. First, the Bill will not come into force until next year and it will obviously take time to set up the reclaim funds, so his proposals would not address the current market conditions that the banks are facing. Secondly, this will be a voluntary scheme, so it will be for the banks and building societies to choose to participate. In the discussions that we have had with the British Bankers Association and the Building Societies Association, they have made clear their continued support for the scheme, and said that they are continuing to encourage their members to participate and believe that they are keen to do so, even in the current market conditions. It is also important to recognise that the assets and liabilities will both be transferred to the reclaim fund, which will obviously have a rather different outcome in regard to the impact on the capital position. As I have already said, however, the changing climate and the credit crunch will obviously be part of our deliberations in Committee in regard to lessons that can be learned to ensure that we get the detailed legislation right.
I would also like to point out that, according to the banking sector, the banks estimate that their dormant assets represent less than 0.07 per cent. of the £535 billion held in retail banking and savings by the UK's nine largest groups. Although that is a small proportion of their retail banking, that money could make a real difference to projects in the community.
Will the Minister confirm that that figure is £5 billion, which is not chickenfeed? Can she tell us when she was given the advice by the banks that they were happy to proceed with this plan? Was it given in the past 24 hours, or is it two weeks old?
No, it is not £5 billion; that would be 1 per cent. of £535 billion. I was talking about 0.07 per cent., the figure in the banks' estimates. Also, may I again make it clear that this will be a voluntary scheme?
The banks estimate that they have between £250 million and £350 million in accounts that are lying dormant and have been untouched for more than 15 years, and sometimes much longer. The building societies estimate that they have a further £130 million in the same position. The evidence shows that some people forget about or lose track of often small deposits of money in bank or building society accounts—perhaps because they changed address or lost contact with their banks, or because the account holder has died without anyone being made aware of the money.
The Chief Secretary will be aware that many of these dormant accounts are, in fact, owned by charities, having been left to them through legacy. However, there are very few mechanisms for identifying the accounts and reclaiming the money. Will she bring in some structure that will enable them to do so under the legislation?
The hon. Lady is right that we should do everything possible to reunite the money with the original account holder, whether it be a charity, an individual or whatever. That is an important part of the legislation. Customers always have the right to reclaim their money, but we also think it important to make a concerted effort to reunite account holders with their lost money before the scheme comes into operation. We have encouraged the financial services to do that and we welcome the launch by the British Banking Association, the Building Societies Association and National Savings & Investments of the "mylostaccount" website in January this year. More than 175,000 people have already used this free cross-industry service to reunite themselves with tens of millions of pounds. It is an important part of the scheme.
My right hon. Friend has three times mentioned that the scheme will be voluntary. Is she aware that the National Council for Voluntary Organisations, the Treasury Select Committee and others have been very sceptical about the effectiveness of a voluntary scheme, given that the five or six such schemes already operating around the world are all done on a mandatory basis and they clearly produce a far higher return for good causes than would any voluntary scheme?
I recognise my hon. Friend's point, but the scheme that we are proposing has strong support from the industry and both banks and building societies have said that they intend to participate in it. That is encouraging, which is why we have set out the Bill in this way, but we will need to review the situation over time, to monitor the scheme's progress and to look into what further support may be needed.
Three principles have informed the Government's approach: first, that the preferred outcome should, where possible, be to reunite account holders with their money; secondly, that account holders must have the legal right to reclaim their money at any time; and thirdly, that the scheme should be designed to run effectively and efficiently in order to maximise the money available for reinvestment in the community.
The scheme will allow eligible banks and building societies to transfer money in accounts that have lain untouched for at least 15 years to a so-called reclaim fund. By making the transfer, the liability to repay the account holder will also pass from the bank to the reclaim fund. Any money that the reclaim fund does not need to meet the claims of customers will be passed over for reinvestment in the community via the Big Lottery Fund.
The scheme aims to capture genuinely lost accounts. That is why we have set the dormancy period at 15 years. Some people have argued that it is too long, but we still think that it is appropriate. We will, however, bring forward an amendment to enable this period to be made longer or shorter in future if the evidence shows it to be appropriate, as it is important to ensure proper protection for account holders.
How confident is the Minister in the figures provided by the British Bankers Association and the Building Societies Association, particularly given that The Times was reporting up to the end of 2006 that the amounts involved in dormant accounts could be up to £20 billion? Are the figures given by the Minister for a 15-year dormancy or is there an aged analysis of dormant accounts from a more recent period—perhaps with a three-year dormancy? These will effectively be brought in over time.
We have said that we view 15 years as the appropriate period, so it is not our intention to reduce the dormancy period. The reason for bringing forward an amendment is in order to respond to points made in the other place and as part of the consultation to the effect that there should be greater flexibility and no need to return to primary legislation if certain evidence arises. That will be a matter to discuss in Committee—as I have said, an amendment will be brought forward—but we believe that 15 years is the appropriate period.
The figures that I cited from the banks and building societies are obviously the best that we believe are available. Clearly, they are estimates and different ones will be put forward, but it is right to work on the basis of what we believe to be the best figures available. This will need to develop over time as the reclaim fund is established and it becomes clear what sorts of account can be transferred into the scheme. We will have to look at the evidence as things develop. That is why it is right that there should be some kind of review of the scheme as it progresses.
In the other place, the Bill was also amended to require banks and building societies to consider any customer-initiated activity, such as correspondence, telephone calls, voting at annual general meetings and so on, when determining whether an account is eligible for the scheme. We recognise the intention behind that amendment because, of course, we would expect banks and building societies to do exactly that, but we do not currently believe that it is necessary to legislate on that point.
I must declare an interest as a trustee of a number of charities. In particular, the People's Dispensary for Sick Animals, of which I am a long-standing trustee, has expressed concern about using the Big Lottery Fund to identify worthy causes, first, because it is an expensive mechanism and, secondly, because its record in choosing good causes is perhaps not as strong as it might be, given that, on occasion, it has been used for purposes that might otherwise have been funded by the Government. Will the Minister reconsider using the Big Lottery Fund?
We think that the Big Lottery Fund is the appropriate organisation. It is important that we use an existing body to do this, rather than create duplicate organisations, which would increase the cost of distributing the money when our priority should be to get the resources to local schemes and, in particular, the young people who could benefit from this proposal.
We think that the Big Lottery Fund has the capacity to distribute resources on a large scale. Obviously, the issue will be discussed further in Committee, but the Big Lottery Fund also has access to an extensive network of third sector and public sector delivery partners, ranging from the large national charities to local community groups. Therefore, we think that it represents the best way to distribute the money and to get the best value for it by using it effectively.
May I complete the point that I was halfway through when I took the intervention? On the issue of the amendments made in the other place, the ultimate safeguard for customers is that they will be able to get their money back at any point from the reclaim fund, via their own bank. We believe that there are also some drafting and legal difficulties with that amendment, which is why we shall seek to overturn it.
I am very supportive of the proposal in the Bill, not least because many of my constituents and organisations in south London see the opportunity for money to come in to help work with young people.
When a group of young people and their organisations came together the other day following the knife crimes that have happened in London, one of the questions that they asked me to ask is whether money can come in and whether it is the Government's plan not just to create new buildings, but to support existing organisations that could do with expansion or additional resources to do the good work in the community that the community needs them to carry out. If so, can we come to see somebody about that—which Minister is it?—to put the case for existing organisations to be supported, not just for new work to begin?
Treasury Ministers will be happy to meet the hon. Gentleman to discuss his point further. Obviously, some of those issues will be for the Big Lottery Fund to set out as part of its distribution, but it probably is important that during consideration of the Bill we have a good debate on how the resources should be distributed.
The hon. Gentleman would probably agree with me and any other Member of the House who has conducted any kind of local community consultation that one of the key issues on which we can get young and old alike to unite is the need for more facilities for young people and for more for them to do in local areas. That can have benefits not just for those young people, but right across the community. That is why it is so important that we should look to access and use those resources to build a stronger future for young people as well.
It is important not to double count in relation to the possible impact on charities in constituencies such as that of Simon Hughes. The figures suggest that the biggest 12 banks and building societies currently give more than £300 million a year in their own charitable donations. Does my right hon. Friend have any indication of the possible impact on that level of giving if banks and building societies lose control of and access to their dormant assets?
I do not believe that the measure will reduce the amount that banks and building societies can contribute to different charitable works. There are two things to consider. First, the Bill allows both assets and liabilities to be transferred. If the banks or building societies continue to hold the assets, they also continue to hold the liabilities on the dormant fund, which could limit what they can do as a result. Secondly, the scheme is voluntary. It is a way of ensuring that building societies and banks do what they think is right in terms of accessing the assets and putting them to good community use.
It is important to remember that the money does, or did, belong to someone and that some of it might have belonged to people who have died and left legacies. A group of charities has asked for a reserve power to be included in the Bill. The charities are worried that they cannot trace the money that they have been left in a legacy because it is too difficult under the current online registration scheme to know when people have changed names or houses. We should bear it in mind that they are asking for something not for today but for the future. If, in three years' time, Parliament considers that not enough progress has been made in attaching legacies to the relevant charities that would benefit from them, the Government will have to come back to the House with primary legislation. Will the right hon. Lady consider including a reserve power in the Bill so that we do not have to do that?
We have not so far seen the need to include additional support. Obviously, we are happy to consider further issues in Committee. This is a Bill that should command cross-party support. We are happy to continue to look at the issues. As has been said, this is about where possible reuniting the resources—the money and the assets—with those who originally put them in the account or, if they have died, respecting any legacies or wills that they might have set up. Clearly, that is an important part of the approach to the Bill, but equally we have to recognise the existence of dormant assets, which have often sat in accounts for many decades, and put them to good use.
The reclaim fund will receive money from dormant accounts. The Bill does not create a reclaim fund, but it sets out the requirements that a company must meet in order to operate as one and provides for its authorisation and regulation by the Financial Services Authority. The FSA will ensure that the reclaim fund has sufficient money to meet anticipated levels of claims for repayment and will set out a regulatory regime, which will of course be subject to full consultation as well. The Bill requires the fund to meet repayment claims, manage money prudently, and transfer surplus funds to the Big Lottery Fund for distribution. It also allows the fund to cover reasonable running costs.
The Bill was amended in the other place to make a reclaim fund accountable to Parliament. We strongly agree that the fund should function transparently and the Bill requires it to publish key information about its operations, but we do not believe that it is sensible for a private company to become accountable to Parliament in that specific way. Therefore, having considered the issue, we will propose further amendments in Committee to improve the transparency of the arrangements and to respond to some of the concerns raised in the other place.
The National Consumer Council has said that not enough effort is made by banks to reunite dormant accounts with their holders, and a major campaign is required in that respect. Is the right hon. Lady confident that enough is being done by the banks to ensure that that happens?
The banks set up the new "mylostaccount" website in January this year which has helped more than 100,000 people to get their money back. It is always important for us to urge banks and building societies to do more and to do whatever they can. However, the ultimate and hugely important safeguard for people is that they will also be able to get their money back from the reclaim fund.
The Chief Secretary spoke of reversal of the Lords amendment relating to the parliamentary accountability of the reclaim fund, but she forgets that the Treasury has power to give direction to the company that sets up the fund. In view of that, I think it important for there to be some parliamentary accountability.
Clearly the Treasury is always accountable to Parliament for the use of its powers, but I think we should bear in mind the complexities involved in an attempt to establish parliamentary oversight of a private company, as opposed to parliamentary oversight of the Treasury and its decisions. We will propose further amendments to respond to some of the points made in the other place. We do not think that the way in which the Bill currently deals with the issue is satisfactory.
Account holders will experience no practical difference in the way in which they are treated as a result of the scheme. Banks and building societies will act as the reclaim fund's agents, and on validation of their claims account holders will be repaid in full by their banks. That will include any interest that is due.
The case was made in the other place that the Bill should require a triennial review of the scheme. We feel that we must ensure that the scheme is working simply and fairly, and we think it right to review it once it is up and running; however, we do not think it right to require triennial reviews in perpetuity to be included in the Bill. That issue will also feature in the discussions in Committee.
As I said earlier, we need to ensure that the money raised is distributed fairly throughout the United Kingdom to deliver practical programmes that will bring about real change to neighbourhoods and benefit a diverse range of communities. As we said in the pre-Budget report, the Government intend the resources, in England, to be focused on youth services, financial capability and inclusion. Investment in young people is investment in the future of the whole community, while raising the levels of financial capability and inclusion across the population can help people to make the right financial choices to support themselves and their families. In addition, following consultation, we should like a proportion of the available assets in England to be invested in the long-term sustainability of the third sector, if resources permit such investment.
The spending areas in England are set out in the Bill. Following the model used for the national lottery, the Bill also empowers the Secretary of State to identify particular priorities within the spending areas that must be taken into account in the distribution of assets. We believe that the approach should follow the precedent of the national lottery spending directions, rather than some of the proposals made in the other place. Scotland, Wales and Northern Ireland will determine their own spending areas, which will reflect the needs of communities in each country.
I welcome the boost that the scheme will give youth services, but what many of those services need in particular is an asset base. A straight revenue grant will be of no use, because it will merely postpone some of the problems. Can we be creative in the way in which the lottery is asked to provide funds? Surely providing that asset base is the most appropriate use of the funds.
My hon. Friend is right. We need to ensure that the funds are used to provide sustainable support for young people in particular areas, rather than short-term support that cannot be replicated in the future. Further consultation and discussion will be needed on exactly how that should be done, and I hope that we can take my hon. Friend's points on board at that stage.
I am grateful to my right hon. Friend for giving way, and also for her answer to my hon. Friend Mr. Drew, but will she consider again how the help will be focused? Will the Big Lottery Fund be able to operate proactively in geographical terms? For instance, will it be able to target resources on areas where there is great need but little capacity for making bids, and where awareness of the fund may be low?
My hon. Friend makes an important point. We want to ensure that the resources are distributed fairly across the country and that those areas which might have less capacity or expertise to access the funds do not lose out unfairly as a result, so we would certainly be keen to take on board those points in terms of the way the distribution mechanism operates.
Finally, I wish to make the point that we have in the Bill introduced the provision that small financial institutions, particularly building societies, should be able to operate alternative arrangements where they play an important role in their local communities and want to be able to distribute dormant account money to local charities. These alternative arrangements will allow the reclaim fund resources to be returned to the bank or building society for distribution to local charities. We had originally proposed that in order to qualify for this alternative scheme an institution must have total assets of £7 billion or less. Amendment in the other place makes the option available to small banks and all building societies. In fact, the vast majority of building societies were covered by our arrangements. We have listened to the arguments for the inclusion of big building societies, but we do not believe that the expansion of the alternative scheme is desirable. We believe that the larger financial institutions serving wider communities across the country should take part in the main scheme to ensure that resources can be distributed fairly and strategically across the country to meet the priorities discussed in this House. Therefore, we will bring forward amendments in Committee to focus the alternative scheme on the ability of small institutions to support their local communities.
Is not the Chief Secretary being a little disingenuous when she talks about the vast majority of building societies being covered, because some 83 per cent. of the assets of the building society sector are with the big seven, so she is really talking about taking away the independence of those building societies to distribute the funds as they see fit?
I do not think this is remotely about taking away the independence of the building societies. The building societies have the ability to have their own charitable support schemes and programmes operating in their areas and to use their assets accordingly, and many of them do have such schemes. This is about using parliamentary legislation in order to be able to access dormant assets by allowing them to transfer the liability as well as the assets to a reclaim fund. The hon. Gentleman is right that there are a lot of resources in the large building societies, and those building societies should be part of the main scheme. What we are trying to do is help the smaller building societies—of which there are many across the country. Where they are very much embedded in a particular local area or community, that should continue to be supported. However, where the larger building societies can serve much wider communities, we believe they should be part of the wider scheme which involves the banks as well.
This Bill offers an historic opportunity to unleash the potential of the money in the dormant bank accounts in order to deliver social benefits. It does so while maintaining strong support for protection for consumers and for ensuring that they can continue to have their rights respected—and, where possible, for them to be able to get access to their money as well. This is a big opportunity, and a long-term programme to help support improved youth services and other social benefits across the country, and as such I commend it to the House.
It has been six years since the Government first raised the prospect of using money from dormant accounts for good causes. Since the Government published their consultation paper on the Bill, we have had three Economic Secretaries—I am glad to see that the third is in his place—and it has been eight months since the Bill had its First Reading in the Commons, and I suspect that even now it will be at least a year, if not longer, before the money will start to flow. However, in that time, the scheme has changed so that now, rather than charities benefiting directly, the money will be spent at the direction of the Government in line with the priorities they set out in the Bill and, as a number of interventions have indicated, the amounts involved have shrunk. The unclaimed assets register suggested there was about £8 billion split between bank accounts and National Savings & Investments. The current estimate from the Building Societies Association and the British Bankers Association is that there is about £400 million to £500 million from banks and building societies to be used in the scheme. Clearly, the effectiveness of the operations to reunite customers and their accounts will reduce those amounts, so, although the amounts involved are still significant, the scaling down of the estimates does lead, as I shall mention later, to some difficult issues regarding the distribution of the assets.
However, an important prior step to the process set out in the Bill is to ensure that banks and building societies take action to clean up their records, and try as far as possible to reunite customers and their dormant accounts. I am aware from my conversations with the sector that banks and building societies are taking steps to do that. For example, Lloyds TSB announced in June that it is appointing a company to help trace the holders of dormant bank accounts. HBOS has united £18 million sitting in dormant accounts with its customers, with another £29 million left to trace through. According to the BBA, some £50 million has already been reunited with its rightful owners.
In addition to the efforts of individual institutions, there has been a collective effort through the website mylostaccount.org.uk, which provides bank, building society and National Savings & Investments customers with a single point of contact for tracing accounts. Since its launch on
I want to address the concerns that a number of Members have expressed about charities. Charities represented by the Unclaimed Assets Charity Coalition have set out a very important case—they believe that they would be unable to unlock money sitting in dormant accounts where they are the residuary legatee. They have argued for a central register of accounts that they could use to identify accounts that they believe belong to them, and that a reserve power should be included in the Bill. I can understand their arguments and have some sympathy with them, but such a power goes beyond the voluntary approach that forms the basis of the Bill. However, clause 12 provides them with an important safeguard, as the triennial review explicitly refers to the right of a charity to receive money due to it under the terms of a will. That is an important safeguard, and I hope that that transparency will encourage banks and charities to work closely together on making sure that they have access to those dormant accounts. However, it will be interesting to see how the debate plays itself out in Committee.
It is imperative that, within the constraints of the scheme, there is a robust exercise to reunite customers with their money. If the process is robust, there will be much greater certainty that money transferred across to the reclaim fund relates to genuinely dormant accounts and is therefore less likely to be subject to a reclaim. The Bill before us sets out a legal framework for a voluntary scheme to enable money sitting in dormant accounts to be used for the public good, while ensuring that those who rightly own those assets are able to recover them. The Bill has four essential components: one relates to the question of how we know when an account is dormant, the second extinguishes the liability on the bank's or building society's balance sheet when the asset is transferred to the reclaim fund, the third establishes the proper legal framework for the reclaim fund and its functions, and the fourth relates to the allocation of amounts transferred from the reclaim fund to the Big Lottery Fund and to the spending priorities identified in the Bill. However, I want to explore some issues that flow from those steps.
Although there has been a great deal of discussion in recent years about the use to which unclaimed assets in a range of categories can be put, those assets are there to meet liabilities—there is a debt due to a customer, a pension to be paid out or a life assurance policy to mature—so in any scheme it is vital that the record of liability be retained, even if the liability itself is legally removed from the institution's balance sheet. It is therefore important that, once that liability has been extinguished from the balance sheet, there is a reserve in the reclaim fund to pay out to customers who come forward to reclaim their money.
One of the fund's priorities is to build up sufficient reserves to cover future claims, yet there is a countervailing pressure to transfer as much money as possible from the reclaim fund to the Big Lottery Fund for distribution. Too few reserves will leave the fund and potential claimants exposed. In the event of a fund's being unable to meet all its claims, customers will be covered by the financial services compensation scheme, but that is not a green light for the reclaim fund to be imprudent in how it operates. I am also conscious of the fact that if too little money is distributed to the Big Lottery Fund and to the spending priorities, there would be pressure from the potential beneficiaries, and perhaps the Government, for more to be distributed.
I come back to my intervention on the Chief Secretary, because the Bill gives the Treasury the right to give directions to the reclaim fund. I would be grateful if the Economic Secretary's response could explain how those powers might be used, because a conflict of interest is involved: the Treasury has a role not only with regard to the reclaim fund, but as one of the departmental sponsors of one of the spending priorities—financial inclusion. How does he believe the Treasury will help the fund to strike the right balance between protecting the interests of customers and ensuring that the right moneys flow through to the spending priorities?
Given the important role of the reclaim fund and the need for public confidence in its work, we support the amendments tabled in the Lords to require the accounts of the reclaim fund to be laid before Parliament. I am sorry to hear that Ministers are seeking to remove those provisions in Committee. We will clearly have a debate about that, because it is important to recognise that although the reclaim fund is a private body in terms of its constitution, it is clearly not just a private body. The Bill provides for the Treasury to give direction to it and, as such, one would expect the levels of transparency and accountability to go beyond those applicable to a conventional limited company.
Once proper protection for customers has been established, the next stage is how to use the money. As the Chief Secretary has said, the Bill distinguishes between two sources of these funds: building societies and small banks, and large banks. The money from large banks will go to the Big Lottery Fund, and I shall return to that matter in a moment. The Bill, as drafted, allows for building societies and small banks to allocate the amount from dormant accounts, over and above that needed for the reclaim fund to protect its customers, to be allocated through their own charitable foundations, reflecting the strong links that exist between building societies and the communities that they represent.
The hon. Gentleman has mentioned that two sources of dormant assets may produce the financial flows that we have heard described today, but there are also comparable sums of dormant assets in insurance policies and, in particular, in NS&I. The Treasury Committee recommended that, in respect of equity, NS&I assets should be treated in the same way as those of banks and building societies. The Government have refuted that by saying that NS&I's unclaimed assets are used for the community benefit anyway, but as a quid pro quo for not having its dormant assets liable for this type of activity should not NS&I at least invest much more activity in promoting the existence of arrangements for people to identify whether there are NS&I unclaimed assets to which they might be entitled?
The hon. Gentleman makes two important points, the second of which I shall deal with first. NS&I has made some progress in reuniting customers with their assets—that is an important step for it to take. We put pressure on banks and building societies to do that, so we want NS&I to undertake the same process of ensuring that customers to whom this money belongs are reunited with their assets.
The hon. Gentleman's first point was about the Bill's scope, which is narrow; it focuses primarily on banks and building societies. The Treasury Committee put forward a clear argument for including NS&I in the Bill, and I was not entirely convinced by the Treasury's arguments as to why NS&I should be excluded from its scope. The suggestion was almost made that NS&I customers should not take their money out of NS&I savings products at all because that would force the Government to find new customers for those products. I did not think that it was the most robust argument that we have heard from the Government as to why NS&I should be excluded from this process. Clearly, NS&I customers are entitled to the same degree of support in identifying their assets as customers of banks and building societies. We would expect a public body to be as good as, if not better than, banks and building societies in that respect.
The Chief Secretary made an argument about the exclusion of large building societies from the scope of the Bill. Many of them have strong local ties, but they are also mutuals. We are not talking only about money from their customers, but about money from their members. Some of the larger institutions feel that the Government have overlooked that element of their mutuality in trying to reverse the amendment made in the House of Lords. Account holders have a different relationship to their building societies from that which bank account customers have with commercial banks. I expect that we will have a long and healthy debate about whether that approach is appropriate.
Once money from large banks has been transferred to the reclaim fund, and reserves have been put to one side for reclaims, the Big Lottery Fund will be the distributor to the three causes identified in England—youth services, financial inclusion capability and social investment—and the devolved Administrations will decide their own priorities for their share. We welcome the priorities set for England, but the Bill is silent on how those priorities will be ranked. I would be grateful if the Economic Secretary, when he winds up, could explain a little more about how the money from the reclaim fund will be used and how the priorities will be set. Will a fixed proportion of the funds go to each of the three causes? Does the order in the Bill reflect the order of priorities? Will a fixed monetary sum, rather than a proportion, be allocated to each cause? Who will determine the allocation between the various priorities? The Bill makes frequent reference to the Secretary of State, but given that the priorities cover three Departments—the Department for Children, Schools and Families, the Treasury and the Cabinet Office—and the Big Lottery Fund itself is accountable to the Department for Culture, Media and Sport, to which Secretary of State does the Bill refer? We need some clarity—[ Interruption.] The Economic Secretary says that the DCSF is the lead Department, but how can people who are operating in the area of financial inclusion, or social investment wholesalers, be sure that their priorities are getting a proper hearing from the Secretary of State for Children, Schools and Families? We need to bear in mind that co-ordination issue, and it is odd that a Secretary of State with a particular interest in one of the priorities should take the lead. We will need to explore that.
On the issue of the causes, we must express some sympathy for Sir Ronald Cohen and the Commission on Unclaimed Assets. It must have thought that when Sir Ronald, the chairman of commission, who was so close to the then Chancellor—now Prime Minister—suggested that money from unclaimed assets should go to a social investment bank, the recommendation would have been accepted. However, that was until the then Economic Secretary—now Secretary of State for Children, Schools and Families and an even closer ally of the Prime Minister—pulled rank and put two of his own pet projects in the list of priorities. He added youth services, in a nod to his future job, and financial inclusion, which was one of his priorities as Economic Secretary. That means that it is not clear whether sufficient funds will be available from this exercise to provide the sort of contribution to a social investment bank that the commission thought was necessary. It said, in its initial report, that there should be initial capital of £250 million and an annual income of £20 million for the next four years. Given the way in which the funds available for distribution appear to have been scaled down over time, it is not clear whether that ambition can be met.
Would the hon. Gentleman like to congratulate the Scottish Government on the way in which they approached that very issue, and the £40 million of funding that we will secure? We consulted widely with the entire voluntary sector and engaged the Scottish Council for Voluntary Organisations, and together they identified the priorities. Is that the way in which that should be done in England? Perhaps England should follow suit.
I think that the Government went through a consultation process. It will be interesting to see just how the Government consult on how they allocate the money from the reclaim fund to the three priorities. What sort of consultation process will they expect to see? How will they gauge the amount to be allocated to each of the three priorities? What weight will they give to the fact that the person responsible will be the Secretary of State for Children, Schools and Families, one of whose main responsibilities is youth services? It is not clear how we will get a fair process lined up.
Of the three priorities in England, two—youth work and financial inclusion—are already supported by Government expenditure. The challenge facing the Government and the Big Lottery Fund will be how to demonstrate that money spent is additional to the money that the Government already intended to spend. That additionality is quite a difficult issue for the distributor to come to terms with. It is easier if the scheme is launched part-way through a comprehensive spending review period, but once a scheme is up and running there will always be concern that the spending priorities have been set in the knowledge that money is coming through from those sources.
I am sure that the hon. Gentleman will accept that although, of course, money is available from the Government—directly and indirectly—for activities for young people and for youth work, there is no statutory responsibility for such funding. That means that there is never any guaranteed money for that age group, and that is one reason why it might be a good first cause in England and why I hope that he will support its remaining the first cause in England.
The hon. Gentleman may well be right that that funding is not a statutory responsibility, but in a way that gives the Government a bit of a let out by saying that they do not have to fund such activities—they know that X million pounds will be flowing through from the reclaim fund, so they feel that they can reduce expenditure. I think we all want to see additionality; the money should come on top of the amount of money that the Government intend to spend. One of the requirements that the Government will have to work hard at, together with the Big Lottery Fund, will be how to demonstrate that the funding is additional to existing Government expenditure rather than a substitute for it.
Another aspect of the legislation that we need to think about quite carefully is the fact that we are establishing a legal framework for a voluntary agreement by banks and building societies to transfer money from dormant accounts to a reclaim fund and for the surplus money to be used for the public good at the direction of a Government Minister. There is a hybridity in that process—I am aware that that word has a particular meaning in parliamentary terms, but what the Bill provides is very much a hybrid arrangement. We are talking about an essentially voluntary activity on the part of the banks and building societies, yet the money raised through that voluntary activity will be spent at the direction of the Government. That is why it is important that there is proper scrutiny of how the scheme works.
I have already touched on the need for scrutiny of the reclaim fund. In the other place, Baroness Noakes successfully moved an amendment introducing a triennial review of the scheme. I noted the Government's desire in Committee to remove the requirement in perpetuity for a triennial review. We need to ensure that the scheme is working properly, and I am not sure that simply saying that there will be a review in three years and that will be that is the right answer, given the particular and peculiar nature of the scheme that we are discussing today.
The review will help to shine a spotlight on how well banks perform and how well they reunite their customers with their funds. It will act as an incentive to banks and building societies to take appropriate steps to trace owners. It will also become apparent when we look at how much money is recovered from the reclaim fund by customers just how well or badly banks have done in that important preparatory work. It is important that that public scrutiny is undertaken.
The voluntary nature of the scheme, as well as requiring a particular degree of parliamentary scrutiny, has another benefit. It means that the cost of the scheme should be lower than that of a compulsory scheme, as it should have the benefit of reducing administrative costs and ensuring that much of the money that flows out of dormant accounts is available for distribution. It is therefore important that as few hands as possible dip into the funds and that any administration costs are kept under control. The Opposition certainly expressed concern in the other place in respect of the Big Lottery Fund's administration costs and the costs that the Government could defray from the scheme, and we will return to that in Committee.
When the Bill completes its passage through Parliament, it will mark the end of the opening phase of how we deal with unclaimed assets. People will want to consider how the Bill works in practice and to discover what lessons can be learned for other categories of unclaimed assets. The Young review of the financial assistance scheme pointed out that there were many different classes of dormant assets sitting in pension accounts and on life assurance company balance sheets and that people had forgotten about premium bond winnings. Once the scheme has worked its way through the system, there will be pressure to consider what else should be included within its scope. Again, the clause on triennial review includes that likelihood.
The Bill is a test-bed. Its results will be scrutinised carefully to find out what lessons can be learned. The scheme will be scrutinised on its own merits, too, to discover how effectively it works to provide proper protection for consumers, by ensuring that they do not lose their right to money that has been put into a dormant account. People will want the scheme to be run efficiently at every stage, and they will want it to put the emphasis on consumer protection, as well as on releasing money for good causes. Financial institutions want the scheme to safeguard their obligations to their customers and members, too. Charities and voluntary groups want the scheme to deliver clear benefits for them, as well as support for the Government's priorities. The Bill provides a framework for that to happen. It is now our task to ensure that it is improved, so that it meets the expectations of all the stakeholders involved in putting together the scheme.
I congratulate the Chief Secretary on introducing the Bill to the House. As someone who has been campaigning on the subject of dormant accounts for many years, I am delighted that the Bill has reached this stage today. The issue is technical, and a great deal of consultation and discussion with the banking industry has taken place. It is a credit to the Government that we now have an opportunity to legislate. Having made speeches, launched more early-day motions than I can remember and lobbied the Government for nearly a decade, I was half afraid that I would become dormant before seeing the introduction of the Bill.
The Bill is important, despite its less than stimulating name, because it will have the potential to pour considerable resources into our national economy and to prevent unused resources from languishing hopelessly in the coffers of private companies. It may pave the way to fund community projects across the country, thereby strengthening Britain's social fabric and altering the lives of a great many people. To that extent, it matters a great deal.
People are supposed to check their bank accounts every so often, and I first came across the issue of dormant bank accounts when I decided to look through my standing orders, direct debits and so on. I found a £1 direct debit going into a building society that I had never had any contact with in my life, as far as I was aware. I thought that I would stop paying it, but I then decided to find out more about it. I was going into town the next day, so I took the reference number and popped into the building society. I found that the money was going into a fundraising account for the Labour party that had been closed about 10 years previously, apparently. [ Interruption. ] Opposition Members may say that the account should remain dormant. The party got my money eventually, but it thought that it had closed the account. That is the point, and I wondered what would have happened if I had not stopped my direct debit. The building society could have used that money to loan to other people to generate money. Essentially, it would never have had to give it up to anyone.
As luck would have it, Ireland was starting to legislate for the same thing at that time, so I looked around the world at other countries that had introduced such legislation, and quite a lot of countries have done so. I thought, "Well, what can I do about it?" I wrote to every bank and building society in the United Kingdom to ask them three questions: what was their definition of a dormant bank account; how many did they have; and how much money was in them? Not surprisingly, not many of them told me the answers, but some did. A sufficient number answered to enable me to work out that there was a great deal of money sitting doing nothing—or at least doing nothing but making profit for the banks and building societies.
I wrote to the British Bankers Association, but it seemed quite happy with its scheme, which consisted of one person in the BBA offices distributing forms to people who wanted to know where their bank account had gone. It took me two years to get a meeting with its then chief executive, Ian Mullen; after showing a great deal of reluctance, he eventually met me. He, too, thought it quite acceptable to continue to have only one person meeting the needs of people who had lost contact with their bank accounts.
The problem has had a very slight impact on my personal life, but for countless others, the impact is great, and will continue to get greater. The reasons for dormancy are many and varied, and we have heard some of them. They include death and intestacy; small, overlooked standing orders; and simple forgetfulness. No matter what the reason for the dormancy of the account, all people with a dormant account have one thing in common: the right to regain the money to which they are entitled. The Bill has at its heart the objective of reuniting people with their money, and I salute the lengths to which the Government have gone to protect that right in the Bill. It is just and fair that the rightful owner be placed at the heart of the legislation, as they have been.
I suspect that some in the press, and perhaps in the House, will attempt to scaremonger and pander to cheap media criticism of the Bill. Even in 2004, The Daily Telegraph referred to the Government's "dormant accounts grab". I urge Members of all parties to steer clear of that line of attack, because the effort, skill and consultation that has gone into protecting individual citizens' finances is laudable. Any accusation that the scheme is theft from private bank accounts is wholly without substance.
I pay tribute to the provisions of the Bill that ensure a perpetual right of reclaim, to the provisions that mean that a member of the public need not deal directly with the central reclaim fund but can always deal with their own bank, and to the Government's continued efforts to lead a public information campaign to reunite people with their lost funds. I hope that the Economic Secretary to the Treasury can assure us that the provisions will be acted on fully, and that the Government will continue with their public information campaign aimed at allowing people to reconnect with their lost funds.
The Bill is not about moving funds from citizens' bank accounts to the Government's. It is about reconnecting people with their lost funds. Where that is not possible, the Bill is a means of using unclaimed and lost funds to achieve social goals in the community, and preventing those funds from padding out the profit margins of the banking industry. The Bill's goal is highly commendable. It raises the amount of money available for the furtherance of good causes and lowers the risk that any British bank account can be lost for ever without a right to reclaim.
I have praised the Bill, but I have concerns about the voluntary nature of the scheme; that subject has already been raised. At present, no bank will have to contribute to the scheme if they do not want to do so, and if they commit to the scheme, they are under no compulsion to do so fully. That, obviously, is what is meant by a "voluntary" scheme. Recent times have perhaps shown that the free market, and in particular banking lobbies, cannot be trusted to act in the public interest of their own volition. Stronger regulation over recent years could have gone some way to protecting us from the current credit crunch, but I will not dwell on that.
I am not alone in expressing fears about the opt-in scheme; I am joined by the Treasury Committee, which respectfully urges the Government to reconsider a compulsory scheme. It should be noted that not a single developed nation with dormant bank accounts legislation has chosen anything but a compulsory scheme. Such schemes are found in Ireland, the USA, Canada and New Zealand. A compulsory scheme would guarantee not only a level playing field for all concerned, but a single unified banking commitment and fidelity to the legislation. I understand the Government's desire for soft-touch regulation but I cannot align myself fully with that desire. Regulation is not burdensome when it is necessary. As I say, I have concerns about the voluntary approach. The first such concern is simply that the banks will not participate at all, especially as they can currently use the credit crunch as an excuse for non-participation.
On the basis that this is a voluntary scheme, does the hon. Gentleman believe that the bank Santander, for instance, will voluntarily put what would originally have been dormant accounts in Bradford & Bingley into the pot, or does it perhaps think that the period of time has been refreshed, and that there is another period before those accounts become dormant?
There is a distinct possibility that that is happening, and not just with Santander. I will not mention the names of the banks involved, but there are a number of areas in which that may be happening, and I shall touch on that. I am concerned about the total pot of money, precisely because of what the hon. Gentleman said. As I said, it is possible that people might not participate at all. A voluntary scheme creates a stark choice for a bank: either donate money to the reclaim fund, or keep it in its own funds.
My apologies to the House for the fact that other business has kept me from the Chamber on and off this afternoon. Are my hon. Friend's concerns about the willingness or otherwise of banks and building societies to engage a result of his experience in trying to gain information? Will he enlighten the House on that point?
As I said, I will touch on one or two issues of that nature.
The banks were extremely reluctant to give me any information about dormant bank accounts. Initially, the British Bankers Association was extremely reluctant to come out with anything. Not surprisingly, it was happy with the existing situation. I confess that I am not a banker, but if one puts oneself in a banker's shoes, which option would be the most appealing—giving money to good causes, or hanging on to it, particularly in a situation such as the one that applies at the moment?
In the Government's response to the consultation by the Commission on Unclaimed Assets it was stated that the proposed legislation's legal release of financial institutions from financial liability to repay dormant account holders was an incentive for banks to comply with the voluntary scheme. May I ask the Minister exactly how that is an incentive, because banks frequently accept liability to repay money to their clients for a return? That is their business. I suggest instead that a bank never surrendered a penny it did not have to surrender, and that that may well outweigh any eagerness on their part to expunge long-held liabilities which they will almost certainly never be asked to pay back.
Absolutely. I am delighted to do so, but there are two separate things that should not be confused. First, banks' charitable giving: most major corporations give out of their profits— [I nterruption. ] I am talking about money on their balance sheets that they do not want to give up. They were reluctant even to tell me about the amount on their balance sheets, so those are two different things. I am sure that Barclaycard and many other banks give money, but we could be talking about a great deal more than the amount of charitable giving.
Banks are granted plenty of leeway in the definition in the Bill of a dormant account. The Bill does not state whether the 15 years without customer contact is a time without contact by way of withdrawal, or by way of failure to pay in funds or to write to the bank. The banks have the luxury of interpreting that for themselves, and I suggest that they will do so in such a manner that is to the advantage of no one but themselves. In short, they will frame a definition of dormancy that involves minimal payment.
The banks are seemingly granted leeway in the definition of a dormant account with regard to the start date of such an account. The point made by Mr. Breed is relevant here. The notion of dormant accounts remaining always the property of the owner was only formally introduced in the banking procedural code in 1992. Will banks now apply that regulation to all accounts, or will they apply the regulation more favourably to themselves and state that only those accounts that became dormant post-1992, after the introduction of the code, count as truly dormant and should therefore be transferred to the reclaim fund? I hope that the Minister can offer guidance on such a practice and say whether she would discourage it.
There is a real risk that banks may very well place a minimum-amount standard in their definition of dormancy. For example, an account can be classified as dormant only if it contains a sum greater than £100. Several banks and building societies have applied such criteria when it came to contacting customers with dormant funds. That is fair enough in the case of someone with the dormant sum of £1 lying in their account, as it costs £1.50 to contact them. However, that is not the situation in this case. I hope banks will not apply the same contact definition to the definition of dormancy required for a transfer of accounts to the reclaim fund. There should be no minimum amount standard. As I suspect that a large proportion of dormant accounts contain small deposits, that is important. Will the Minister agree to clarify the situation regarding a minimum-amount standard?
There is mounting evidence to suggest that some definition-based abuse of the voluntary scheme may well be taking place. One need only look at the changing estimates for how much return the public can expect to see from dormant bank accounts. Estimates have always varied as to how much money there is in dormant accounts. High estimates have stated that there is more than £20 billion in dormant accounts.
In 1997 an Inland Revenue study stated the figure to be a more conservative £2 billion to £4 billion. In its coverage of the 2005 pre-Budget report, the BBC placed the figure at £15 million. In 2006 Grant Thornton looked at the Irish model and its progress, and estimated that there might well be £5 billion in dormant bank accounts. We really do not know. In 2007 a sitting of the Commons Treasury Committee placed the figure at £500 million. The Commission on Unclaimed Assets said £400 million.
As the years have gone on, the figure appears to have got less and less. A potential £20 billion to £400 million is quite a shift in figures. Some have tried to explain this by looking at the period of 15 years enshrined in the Bill for an account to become dormant. The Bill sets a period of 15 years, whereas previously banks set their own internal definition, when they replied to me, of three to five years. It seems remarkable to me that even £5 billion can be turned into £500 million by removing just 10 years of dormant funds from a definition.
In 2004 I conducted my own private poll of major banks and building societies in the UK. One major bank, which must remain nameless because I said that it could, told me that it alone had around £400 million in dormant accounts. I had a conversation with one representative of that same bank recently, and it revised its figure to £50 million, so £350 million has disappeared. I cannot explain that, and I would be interested to know whether the Minister has asked the banks whether they can explain it.
The voluntary scheme clearly has its frailties. However, it could be made more likely to succeed by an increase in the information available to the public. Voluntary regulation tends to work best when those watching the scheme have adequate information by which to judge the participants' performance. My understanding of the scheme is that banks would have to declare the amounts given to the reclaim fund, but that is not enough. We do not know the total sum in dormant accounts in order to measure levels of co-operation. We have the banks' estimates, but that is all. It is my understanding that banks will be required to undergo an audit. Can the Minister confirm that that figure will be put into the public domain?
We cannot compare various banking contributions as we do not know which definitions of dormancy are used by them. Does the Minister accept the need for banks to publish the exact terms of their definitions of dormancy? At present we are faced with a very odd problem. If, under the current voluntary scheme, the money collected is less than expected, it will be difficult to decipher what that means. It could be a signal that the banking industry is reneging on its promises, or it could simply be a sign of a successfully run reuniting campaign. We just do not know.
MPs do not often say this, but we do not know enough. That is a confession, I suppose, but it is true. We do not know enough to judge the performance of the voluntary scheme. We have too little information; the banking industry has it all. I strongly suspect that, as in the case of the revenue from dormant accounts, we cannot hope that they will share it with us.
Reflecting on what the hon. Gentleman has just said, surely the banks would be only too pleased to trumpet the fact that they were successful in reuniting the money in the accounts with their rightful owners, so we would have some idea how much money had been disbursed in the process proposed.
The hon. Lady misses the point. We do not know how much the banks have, but they will trumpet how much they are giving out. They are already doing so. As we have heard today, some banks are successfully reuniting the accounts with their owners, and that is the best effect that the legislation will have. It will ensure that banks do their best to reunite owners of bank accounts with their accounts in the hope that they will hold on to them. Once the owners know that they account is there, they may well leave it with that bank. That is an incentive, which did not exist before.
The voluntary scheme runs the risk of being manipulated or ignored, as I said. Either way, or even in the unlikely event of full compliance, we will be wholly unable to discern which has taken place. It seems that the Bill will leave many in the House and many outside who are concerned about the matter feeling like Oedipus wandering blindly through the countryside. Unless we act to increase the amount of information in the public domain, our blindness, like that of Oedipus, will have been self-inflicted.
Will the Minister assure us today that if a voluntary scheme is pursued and the information provided is found wanting, she will at least offer the public greater information, so that there is a greater possibility that voluntary regulation may work? That would include a fuller definition of the term "dormant", and a compulsory report by all banks of how much they give to the fund and whether that is the full amount of dormant funds that they hold under a preset wider definition. Lastly, the audit of dormant accounts in this country that will take place should be made public knowledge, to give some idea of the genuine amount of unclaimed assets held by British banks and building societies. For years banks have been the problem when it comes to utilising dormant funds. It seems prudent not to rely wholly on the problem being its own solution, but as it currently stands, that is exactly what the voluntary scheme is doing.
However, if the Chief Secretary feels that the provision of further information is not an appropriate course of action, I urge her again to consider adding a reserve power to the Bill to make the scheme mandatory at a later date without recourse to primary legislation. That view was supported by the Treasury Committee and is also supported by early-day motion 346—a cross-party motion with 92 signatories. As my hon. Friend Tom Levitt mentioned earlier, the proposal is also supported by the National Council for Voluntary Organisations, which has done a great deal of work on the Bill.
The Government rejected the idea of a reserve power, stating that they had no wish to grant themselves sweeping secondary powers that could be used on a whim. However, the Government frequently pass into legislation wider secondary powers than that. Will the Minister today recognise that such a power would not be unnecessarily large, but a wise precaution when ensuring the compliance of private interests, especially so in the light of recent revelations about the banking industry's wholesale failure to invest in a manner that will safeguard public savings?
On the asymmetry of the scheme, the lack of enforcement and control procedures in the collection of funds appears to be paralleled only by the enormous amounts of regulation attached to the distribution of those funds. The asymmetry between the two halves of the scheme is worrying. The banking industry is trusted with a light-touch approach, but the Big Lottery Fund has strict mandates concerning to whom, how and when it must maintain and donate. The current Bill is an entity with two different sides. It is odd to see so little and so much regulation seated side by side.
I commend the hon. Gentleman on his work on such matters. He mentioned the Big Lottery Fund. He will be aware that any funds going to Wales will be distributed on the basis of the Big Lottery Fund formula of 6.5 per cent., rather than on the Barnett formula of 5.85 per cent.—in other words, on the basis of a needs-based formula, rather than a per capita formula. Does he think that now is a good time for the Government to look into the Barnett formula again and to come round to the Big Lottery Fund formula, which is much more appropriate?
I am sure that you will not allow me to go down that line, Mr. Deputy Speaker. However, I agree with the hon. Gentleman's other point that the distribution should be needs-based. However, as a Member from mid-Wales, he will know that there are problems with distribution even within Wales, and they must be closely watched.
I have discussed the regulation controlling the use of funds and observed the extreme juxtaposition of regulation in the Bill. I do not oppose the regulation of distribution. The task is difficult and the Government should be involved in the use of public money by an external agency to fulfil social goals. However, I cannot help but notice the contrast. It appears that the agencies distributing the money cannot be trusted to do their job without tight regulation, yet they are charities with a record of success, such as the Big Lottery Fund. On the other hand, it appears that the banking industry can function fine without regulation, despite its record of indifference in that area.
Let me move to an entirely separate aspect of the Bill: the definition of dormancy. As many of my hon. Friends will know, it was a matter of some discussion in the other place. I have looked into some of that debate and a few alternative definitions of dormancy have suggested themselves. When I refer to the definition of dormancy, I am referring to the time period over which an account has to be left untouched before it can be transferred from the bank's revenue to the central reclaim fund. The Bill declares that period to be 15 years, as per clause 11(1)(a). I would like to ask the Minister why exactly a 15-year period was selected.
In the consultation, the Commission on Unclaimed Assets appeared to recognise that time period as provident, as
"it best recognised the accounts which were dormant".
However, that explanation appears to be little more than a reformulation of the question, rather than a genuine answer to it; indeed, it is a tautology. A similar explanation was used by the Government in response to the Treasury Committee's recommendation that 15 years be reduced to 10 years. Can the Minister today shed any further light on those two explanations? I was pleased to hear that, as the Chief Secretary said, the Government will apparently support a possible change in the definition somewhere down the line. However, 15 years is too long, and can be proven to be too long now.
Given the protection of individual funds, which I praised so highly at the start of my speech, I am confused as to why we should need such a long definition when the money is not going to disappear. The money is there, and people who have the information can go to their bank and the reclaim fund and get their money back, regardless of the time period. I would have thought that there was a case for a differential definition, so that if we are talking about an investment account, the period should be 10 years, and if we are talking about a current account, the period should perhaps be three years. There are international precedents for using a sliding scale, which is one of the ways in which a dormant bank account is defined in the United States.
I have two further points—I am sorry that I am taking up so much of the House's time, but as you can probably tell, Mr. Deputy Speaker, I have been looking into the issue for a long time. The first point is about the mechanism used to allow people to reclaim their dormant funds. The British Bankers Association and the Building Societies Association have set up a central tracking website, as well as a central tracking form. That request for information will then be circulated around various banks and building societies, which will check their records to see whether any names match, in the hope of locating any dormant accounts. That is a great move forward, although one that has happened only in the past few years—the banks and building societies seemed to be quite happy before the prospect of legislation. That view is echoed in early-day motion 1581, which stands in the name of my right hon. Friend John McFall, and the idea seems preferable in most respects.
Secondly, the Government have thus far rejected the notion of a central register, claiming that it would have vast repercussions for the bank-customer relationship. That point is not without merit and there is no doubt that we should act with caution before impacting on such a contractual arrangement. However, I would like the Chief Secretary to say exactly what she considers the danger of such a centrally held register to be. Surely it would be formed with a minimum of information. Names of account holders and funds would be the only two details originally required. If the reclaim fund is a secure database, I struggle to see what threat is posed by such a register. I am sure that other hon. Members will talk about the issue later and it is right that it should be covered in more depth. However, I felt that I should at least offer my support to the cause, as I believe it to be a good cause and one worthy of championing.
Let me make one final point—again, it has already been made, but it is worth repeating. The Bill is a good start. It is not, as an infamous US politician once declared, a case of "mission accomplished". Instead, the Bill is the moment when the mission really begins. The fight to stop private interests from writing off billions of pounds of assets into their profit margins has now been taken up in the limited instance of bank accounts, but it has yet to find a legislative champion when the practice rears its ugly head in different forms, some of which have already been mentioned. To name just three, unclaimed insurance policies, unclaimed pension policies and unclaimed gambling winnings are examples of where private interests are winning out. The Bill is not the right place for those issues; I mention them to remind the Minister of the continuing work and legislation still required in this field, which I am sure she will acknowledge.
I pay tribute to Mr. Jones, both for his long-standing interest in the subject and for his heroic but seemingly futile attempts to save the Labour party from bankruptcy.
When the business was originally scheduled for
It might help the House if I provide a little background. In the current phase, the issue was first brought to light in the 2005 pre-Budget report, which stated that where dormant accounts could not be reunited with their owners the money should be reinvested in the community, and specifically in youth services, financial education and social investment. I shall come to those three fields of spending in due course.
The Government undertook two consultations on the proposed scheme: first, "A UK Unclaimed Asset Scheme: a consultation", which was published in March 2007, and, secondly, "Unclaimed assets distribution mechanism: a consultation", which was published in May 2007. In August 2007, the Treasury Select Committee published its report, "Unclaimed assets within the financial system", and the Government's response was published in October 2007. We welcome this considered approach to legislation, although it has not always typified the way in which the Government have addressed these matters. However, this process has been drawn out over such a long period that one wonders whether some of the accounts in question were new deposits when the Government first turned their mind to the matter.
The Bill provides a framework designed to balance the rights of owners with action designed to benefit communities, and that is an important balance to strike. If this were simply a matter of the state being seen to confiscate the funds of private individuals, it would clearly raise considerable concern. The Bill is divided into three parts. Part 1, comprising clauses 1 to 16, deals with transferring liability and money to the reclaim fund. Part 2 deals with the distribution of funds, and there are some final provisions in part 3. Money in dormant bank and building society accounts of 15 years or older will be transferred to the reclaim fund, but it will be reasonable for us to discuss during our deliberations this evening and in Committee whether 15 years is the most appropriate time span.
My party supports the principles of the Bill, as it did in the other place, and we support the improvements made to it in the House of Lords, although there have been some interesting developments in the interim, as Mr. Maples pointed out to the Chancellor a few hours ago. He asked whether the current banking crisis raised new issues that we need to address during the passage of the Bill, not least because there seems to be an assumption in some quarters that the money sitting in the banks at the moment is gathering dust on a shelf and not being used for any purpose at all, and that it could therefore be utilised for good causes without any other consequences. That might seem increasingly like a less safe assumption to make, if indeed it was ever safe.
I give my thanks to Lord Shutt and Lord Newby, who led for the Liberal Democrats on the Bill in the House of Lords. It has already been considered at some length in the other place, and that will inform our deliberations throughout. In the House of Lords, the Liberal Democrats supported all the cross-party amendments that were pressed to a Division—jointly, in most cases, with the Conservatives—and the Government were defeated on four of them, the first of which, tabled by Lord Shutt, dealt with the £7 billion cut-off point. There is an important discussion to be had on the overall merits of the scheme on a national basis, and the degree to which individual banks and building societies should be able to take a more local approach to projects that they have supported for a considerable period.
Another amendment on which the Government were defeated proposed the introduction of a statutory requirement for all annual accounts, reports and directions received from the Treasury by the reclaim fund to be laid before Parliament. We supported two further Conservative amendments that were passed: one introduced the requirement for a tri-annual report to be laid before Parliament on the running of the scheme; the other related to the technical definition of the word "dormant". Given the cross-party approach to the Bill as a whole, and because we do not anticipate any Divisions this evening, I urge the Minister not to dismiss out of hand the amendments that were passed in the other place. They were not partisan amendments tabled by the Conservatives and Liberal Democrats in order to be divisive. We were seeking to strengthen the Bill, and the Labour Government might see merit in the proposals that were made, if they could only put to the back of their mind the authorship of the amendments.
Some other amendments that were proposed in the House of Lords were defeated—one Conservative amendment would have required the use of the affirmative resolution procedure, but it was defeated by 130 votes to 107—and others were withdrawn. It would be worth the Government's while to revisit some of those proposals, because it does not necessarily follow from the numerical superiority in the House of Lords that the proposals were without merit.
I wish to raise a few areas of concern, some of which have already been touched on, and some of which have received less careful examination over the past couple of hours. The first concern relates to the amount of money involved, and was mentioned by the hon. Member for Clwyd, South. The Chief Secretary to the Treasury was talking about hundreds of millions of pounds—her estimate was about £350 million to £500 million—and such figures have been widely quoted. However, I have heard a huge number of other figures quoted, and there is a big disparity between them. I have heard estimates of £3 billion to £5 billion, which is 10 times the amount that the Government anticipate being realised through the scheme. As I understand it, when a similar initiative was introduced in Ireland, the amounts that accrued were far in excess of those anticipated by the Irish Government.
It would also be interesting to know how much money will be available year on year. There will be an initial hit, when the funds in all the accounts that have lain dormant for 15 years or more are realised—assuming that they can be uncovered—but the accounts that have currently been dormant for 14 years will presumably come on stream a year later, and those that have currently been dormant for 13 years will do so the year after that. The Government should provide a cash flow estimate, and it would be interesting to hear how much they anticipate becoming available year on year, after the original money has been realised, for the causes that they have identified.
A second area of concern is the rather convoluted way in which depositors will be able to get their money back. As I understand it, they will have to go to the bank in question, rather than to the reclaim fund. Will the Minister clarify the degree to which the bank and the reclaim fund will be able to exchange information that could make it easier for the person who deposited the money more than 15 years previously to track it down without the process becoming unnecessarily burdensome? For example, they should not need to be put through to people on the other end of telephone lines who cannot provide them with the relevant information due to confidentiality or other issues of that type. If that issue has been resolved to the Minister's satisfaction, everyone will be very pleased, and I hope that he will touch on that point in his response to the debate.
A third area of concern is the status of England compared with the other parts of the United Kingdom. It is our intention to explore in greater detail in Committee the proposal that the money be restricted to youth investment, financial management and social investment. We need to determine whether the Government intend to stick to that restriction, or whether it is even desirable to do so. Some people will see this as another Olympic subsidy fund, but, as Mr. Hoban pointed out, we have still not had a proper indication of the balance to be struck between those three uses for the funds. Obviously, dividing the money equally between them would have different implications from giving 95 per cent. to one area and 5 per cent. to the other two. I hope that the Minister will be able to spell this out in greater detail. Will he also tell us why the fund in England is to be restricted to those three areas, while Scotland, Wales and Northern Ireland will have total discretion over how the money is to be spent in those countries? For example, Wales could presumably choose to spend 100 per cent. of the money on youth investment, or none at all.
It would also be interesting to know about the proportions involved in the division of the money. Would the decisions be made roughly in proportion to the populations of the countries of the United Kingdom, or would they depend on the bank deposits in those countries, which could give Scotland a better share of the money than if the decision were based on population figures? Or, as a Labour Back Bencher suggested earlier, would the decisions be made following an assessment of need? That could benefit some parts of the United Kingdom disproportionately, compared with others. It is still unclear to me, and perhaps other Members, how these matters are to be resolved.
These are important points to explore, but does my hon. Friend accept that the reason for the inclusion of the English provision in the Bill is presumably that there is not yet devolved government in England? Some of us wish that there was, and hope that there will be, but there is none yet. Secondly, would it not be unfortunate if the money that the Government had led people to believe would be used for youth provision were suddenly to be diverted from that area? This has been trailed for a very long time and there is no statutory guarantee of funds. I can assure my hon. Friend that many people and organisations firmly believe—the Bishop of Chelmsford made a good case for this in the other place—that revenue, as well as and probably more than capital funding, is needed to support good youth work, which is constrained because it does not have the funds to grow and deal with issues on the front line.
I am grateful for my hon. Friend's intervention and I recognise the need to give discretion to Administrations in Scotland, Wales and Northern Ireland. I anticipate, however, that if no money were spent in Scotland on youth services, for example, a fuss would be made that the people of Scotland had been led to believe that the Bill would realise money for those purposes. It is a difficult balance to strike. My hon. Friend makes a fair point and I hope that the Minister will respond to it: the public have been given the impression—not misled—that the money will be devoted primarily to youth projects, and some will be concerned that if there is no indication as to what proportion of the money will be so directed, although it need not necessarily be on the face of the Bill, many campaigners on these issues might be disappointed.
My fourth area of concern is the lack of a national register, which was raised earlier in respect of wills, legacies and other funds that are not readily accessed without such a register. My fifth concern, which I hope the Minister will address, is with the mutuality of building societies, the £7 billion asset threshold and the discretion accorded to some but not other institutions. I look forward to hearing the Minister's comments on that.
My final concern is the voluntary nature of the scheme. I assume that it is voluntary because the Government are nervous about appearing to compel financial institutions to act under the diktat of the state. In the last few months, of course, these considerations have altered somewhat, but I assume that the motivation reflected the Government's sensitivity on this area. We are left in the strange position whereby Ministers tell us that the scheme is entirely voluntary, but that they anticipate that every bank will wish to participate. The scheme appears to be a form of voluntary coercion, if it is possible for us to understand such a concept. I do not understand what incentive the banks have to sign up to the scheme. If it is voluntary, why should the banks support it? Much depends on their being seen to do the right thing and not incur the wrath—or at least the bad will—of the Government. It may be, however, that struggling banks will now regard that as a lesser priority than when the legislation was initially conceived.
In Committee, we intend to explore the following issues in more detail. First, we want to include a reserve power to create a mandatory dormant account register so legacies can be rightly reunited with their legal owners. Secondly, we want to include a reserve power to turn the scheme mandatory if participation is insufficient. It will depend on market circumstances, but it will be useful to have such a power. Thirdly, we want to support the triennial review, as advocated in the House of Lords, as we view that proposal as having merit. Fourthly, we want to support the removal of the £7 billion asset threshold for building societies, and, fifthly, to ascertain the percentage split apportioned to each UK country. One can understand why there should be some discretion, but the Minister's clarification of how much will go to youth services, financial education and social investment would be helpful. A firmer indication of how much will go respectively to England, Scotland, Wales and Northern Ireland would also be helpful.
Finally, I would like the Minister to clarify why the Secretary of State for Children, Schools and Families is taking the lead on distributing the funds. One can assume only that the emphasis put on youth services will be greater than that on financial education and social investment. That seems a reasonable assumption: many will welcome it, but others who want more money spent on financial education and social investment will not. It remains a mystery to me why the Department for Children, Schools and Families is taking the lead role unless the emphasis is going to be on youth services. The Department's remit is exclusive to England— [Interruption]—so it will not have a useful role in investing money elsewhere in the UK. I am rightly corrected by a sedentary intervention to the effect that the Department is not wholly English in its concerns, but it is largely concerned with English matters.
My conclusion is that the new Economic Secretary should consider an early power-grab and see whether the Treasury—or, indeed, the Department for Business, Enterprise and Regulatory Reform, in which he is also a Minister—should take the lead on this matter. If not, why is the Treasury forfeiting its usual role? Is the Minister confident that the Secretary of State for Children, Schools and Families will distribute the money in the most appropriate way?
I rise to speak as a member of the Treasury Committee, whose report has already been the subject of a number of remarks. More of us would have been present today, but the Committee is absent on a visit. I particularly pass on the apologies of our Chairman, my right hon. Friend John McFall, who I know would have wished to contribute to the debate.
I support the intentions behind the Bill. Dormant accounts undoubtedly offer potential for beneficial use, but I emphasise straight away—some have already done so to a greater extent than others—that these remain private assets, so it is necessary to reinforce the tangential relationship of the state to this issue. I believe that the state should be there to enable solutions to be found in respect of the distribution of private unclaimed assets rather than to adopt an overly controlling approach to the management of the assets or their eventual distribution to any good cause.
That is why I particularly welcome the work already done by some banks and building societies to locate people who have unclaimed assets. It is particularly impressive, I must admit, that HBOS, with all its troubles, has devoted a good deal of time and effort to tracking down what it regards as unclaimed assets. About a third of those dormant assets have been reunited with their owners, which is extremely commendable.
When the Select Committee considered the Government's proposals last year, a number of objections were raised about the voluntary nature of the scheme—I shall touch on it, as have others—the definition and identification of dormant accounts, the scheme's scope and the options for disbursement. Many of our concerns were echoed in the other place by speakers from all political parties when the Bill was considered there.
The first issue is whether the scheme should be voluntary or compulsory. The Select Committee took the view that it should be compulsory, and I see the arguments in favour of that. I remind hon. Members of my earlier remarks, which perhaps suggested sympathy for that opinion, where others did to a different extent. Members of Select Committees—I have been one for a long time—seek to arrive at consensual conclusions, but one obviously has more or less enthusiasm for certain opinions that are expressed. However, I shall represent here some of the arguments in favour of a rather firmer approach to this scheme. One is undoubtedly that it relies entirely on voluntary commitment.
There is no international precedent for a voluntary scheme and such schemes as exist elsewhere are all compulsory. We have heard from the British Bankers Association and the Building Societies Association that all financial institutions are keen to participate. The dormant accounts scheme will be self-regulated by the banking code. The banking code itself is voluntary, so we will have a voluntary scheme regulated through a voluntary code, which means that we will be relying incredibly heavily for delivery of our expectations of the Bill on the good will of the businesses that participate.
I understand the dilemma involving the voluntary and the non-voluntary option, but is not one argument for a compulsory option that we would have much more certainty about the funding over the medium and long terms? Bluntly, it will be difficult to achieve predictability with a voluntary scheme.
I shall come to that and suggest some other problems that undoubtedly arise.
The Committee struggled to see what incentives a bank will have to participate fully in the scheme. Another speaker also questioned what incentives might be in place. There is, to some extent, an incentive in the disclosure mechanisms that lie within the proposals in that the reclaim fund will publish the details of contributions made to it. Therefore, by definition, those who have been less enthusiastic participants will be exposed, although there may be reasons why their contribution might be lesser. They might be more effective in tracing links to unclaimed funds, for example. Such information will probably not be a particularly strong enforcer of participation.
A refusal might also, particularly in current circumstances, be considered by shareholders in the institution one of the lesser faults of that institution, if I may put it that way. This matter will not be a high priority among most shareholders or, for that matter, among the executive management team. We can be pretty sure that it will not be a bonusable objective in banking to distribute unclaimed assets as rapidly as possible to a reclaim fund. Other means than something of this kind will be sought to motivate senior executive teams, so there clearly is an issue of how to ensure that the proposal delivers something like the objectives that we all have for it.
I do not think that there is a risk of banks and building societies refusing to participate because, once people have become aware of these matters, that represents open defiance of the genuine public will and of Parliament. Nevertheless, we should consider the commitment of resources to the task that participation involves. This is not a trivial activity. From what I can tell, the average size of such accounts is between £100 and £200, and in many cases the costs involved in tracking down individuals to reunite them with those accounts will probably exceed the sum involved. Therefore, one can hardly say that a financial institution will be unwise to think carefully about how to prioritise its resources to achieve the objectives of the Bill.
Without a compulsory framework, one can see considerable difficulties. For that reason, the correct balance is probably struck here in terms of facilitating a voluntary approach first and then reviewing the mechanism established by the Bill to see how it is working. We will then be able to see whether rather firmer statutory enforcement is required. I am sure that we will discuss that further in Committee, although I would wish that it were not necessary. I hope that this would be a task committed to by the financial sector with some enthusiasm, but one has to say that that is a counter-intuitive thought in current circumstances and in relation to the mechanisms in place to reward bank staff for achievement of particular goals.
I note, for example, that my noble Friend Lord Bach said in the other place that
"prestige is likely to be attached to participation".—[ Hansard, House of Lords, 29 January 2008; Vol. 698, c. 568.]
I have a lot of respect for his opinion and I know him well, but I must admit that I am not sure that that will be a substantial motivation for people to press ahead with the scheme.
I hope that the Minister will suggest some more powerful mechanisms to prevent lip-service participation by businesses that are committed to taking part in the scheme. It is fair to say that at the margins—much of banking is a low-margin activity—there will be a temptation for companies to exercise some competitive advantage in this area by the efforts that they put in, because the steps that are taken will undoubtedly and obviously have some effect on removing cash from the institution concerned.
There is an argument about how much the balance sheet will be weakened. After all, both sides of the balance sheet—assets and liabilities—are involved. These proposals will certainly remove a cash resource from institutions and, as I have said, there is a cost attached to the activity itself. Some institutions might decide to spend less money and time on it and observe with some enthusiasm how others spend rather more time and effort on it. The competitive nature of the industry might persuade some to put in fewer resources than they should.
Let me turn to the issue of data, about which most people in the House care pretty strongly. One must presume that at least some details of individual assets and their presumed owners will be transferred to the reclaim fund for ongoing pursuit, so it is worth the Minister setting out some reassurances on the transfer of what we must recognise are data about individuals and their financial circumstances, whether they are still alive or not, and whether or not, for some reason or other, they have no wish to be identified with their assets. These matters might be very personal to them, so we need to be sure of the security of the transfer of personal data.
I also presume that, should a bank or building society cease to be active, tracing an individual's account back to him will become an obligation of the reclaim fund. Therefore, the data that are transferred must be sufficiently full to make it possible to establish such linkage at some future stage. We must always recognise that, however old some of these accounts are, someone may indeed have some claim on them, and they have every right to that claim.
We have also touched on the participation of National Savings & Investments, and here I firmly side with the Select Committee. I felt that the Government's answer on the reason for the exclusion of NS&I from the scheme was rather thin and that it implied that if they gave this money away they would have to find the same amount somewhere else. Yes indeed, but this is someone else's money. In some ways, it could be argued that that is true of everything that the Government have, but that is an over-philosophical argument to have at this time of night.
However, we are talking about savings which, by an individual deliberate act, have been placed in the care of the Government to bring some return. That is different from the receipt of money from all of us as taxpayers. My personal view is that NS&I ought to participate in the scheme on the same basis as banks and building societies. I hope that the Minister will be able to explain with more rigour than the Government mustered in their response to the Select Committee report why that should not be true.
My anxiety about the disbursement mechanism in no way reflects any ill-will towards the good causes identified by the Government. They are all sensible and we can debate the precise balance of the spending between them this evening and in Committee. However, I am concerned that we are dealing with other people's money, held by private institutions. I would have preferred a more inclusive mechanism for deciding how the resources should be distributed than simply saying that we will give them to the Big Lottery Fund and setting out the broad objectives that we have in mind. To go back to my earlier remarks, that takes us a little further into the state's role in the matter than I would optimally have preferred. Even at this late stage, I would prefer more consultation so that stakeholders can have a greater say.
A good example of that is the role of charities. It is undoubtedly true that a significant proportion of the money may well be attributable to charities on the basis that they are the beneficiaries of a will. Although the voluntary sector should not have the exclusive say, I would have welcomed some participation by it in the process to decide whether the priorities are right and perhaps to answer some of the questions on proportionality as it relates to the good causes named so far.
In the hon. Gentleman's work on the Select Committee or elsewhere, did he come to the conclusion that one reason why the Government are so specific about the English priority is because although it has long been argued that there should be money for youth services, it has never been a statutory requirement? Everything else is—children's services and older people's services, for example—but this is the Cinderella service. Making it a priority could be a surrogate way of giving it a bit of solidarity and respectability.
The hon. Gentleman is absolutely right, but the service is still a surrogate. I do not think that there is a clear link between the purpose of supporting youth services, which I agree with, and the precise mechanism for collecting the money for it. I certainly do not dissent from the measure and will not vote against the Bill. I, too, want more youth services in my area. It is undoubtedly a needy sector of public services. However, bearing in mind my view of the legislation as a whole, I am uncomfortable about the non-inclusive way in which the decisions have been made. It would have been helpful to have had a more rounded approach, as the Select Committee said, incidentally. It firmly shared my view.
On local disbursement and the activities of smaller banks and building societies, the figure of £7 billion seems about right, but there is no rational basis for saying that a smaller institution is defined by an asset base of £7 billion.
As a member of the Select Committee, I share the hon. Gentleman's views. We came to similar conclusions and the report was good. I am interested in the cut-off point of £7 billion. On a bank's balance sheets, the assets are the loans. Current accounts and dormant accounts are the liabilities. Do we mean assets on a bank's balance sheets when we talk about liabilities?
That is a fair point. The hon. Gentleman is an ex-banker, although he does not shout about that quite so much at the moment. I apologise if I inaccurately referred accounts as both assets and liabilities. There is, however, a technical point to be answered on defining the asset base.
My view is that the better test is whether the institution is capable of supporting a local framework of delivery. Some institutions are, but many are not. Some small local building societies would undoubtedly be able to make judgments in their own area, where their customer base still largely is, but it is also true that some institutions—the Nationwide, for instance, has received plaudits for this—are active distributors to the voluntary sector across their nationwide networks. The Nationwide has just absorbed my building society, the Derbyshire, which covers a large chunk of businesses in Derbyshire. It qualifies as a society that is well equipped for carrying out such distribution through its own means.
Again, I welcomed the Chief Secretary's justification of the precise cut-off point in monetary terms rather than in capacity terms, which relates to whether an institution is capable of making such a distribution for itself and whether it would wish to. Many banks and building societies would rather pool the money with others and have the distribution carried out by an institution or expert in such matters. However, some would want to make their own judgments about that but would not qualify under the size qualification.
I want to raise a small number of technical points. Customers' rights are preserved on the insolvency of a business, which in theory places someone with an unclaimed asset in a better position than any other customer of that financial institution. It is not a major point, but it is worth giving a bit more thought to how that degree of protection can be applied to a tiny minority of account holders of a society, and those whom we do not know, and whether that presents anomalies in the general protection of accounts that is offered under the financial services compensation scheme.
It is also worth knowing how the mechanism identified in the Bill will work. Under the proposed arrangements, on transferring dormant accounts to the reclaimed fund, the bank has its liability to repay the customer extinguished. It enters into an agency agreement with the fund to carry out that duty on its behalf. If the institution becomes insolvent, how is that action to take place?
Others have mentioned their concern about the ability of charities to go back to a source to check their entitlement to proceeds from a will. I share that concern and am a signatory to the early-day motion on that. The mechanism devised in other countries to find a name seems to work pretty well. The website here, which has received justifiable praise, requires prior knowledge, such as whether someone had an account in Derbyshire, which people are unlikely to have. In many cases, it will not be known where the accounts have been held. The mechanism needs to be much more name-based than institution-based. A reserve power, defined in the Bill, should make it possible to establish a register of the assets enabling individual charities, and others, to make claims more intuitively and effectively.
As a strong supporter of mutuality, I think it important to ensure that individuals' membership rights are protected when an asset is transferred. If someone who holds an account in a building society—as I do—loses touch with it, that does not involve losing touch with a membership right that grants benefits other than merely holding the account and gaining a return from it. Although the Government's response to the Select Committee stated that the membership rights would not be changed, a little more thought is needed about what that really means. The response implies that if the details of the account are transferred to the reclaim fund, along with the task of managing it, the society must nevertheless maintain a member register with a tag relating it to an unclaimed asset that has been transferred from its balance sheet.
I would welcome the Minister's assurances and explanations in relation to a number of the points that I have made, but I believe that the Bill deserves all our support, and I shall be surprised if it does not receive it, at least in qualified terms.
I apologise for not having been able to be present for all of the debate so far. Parliamentary business took me away, causing me to miss what I am sure was an excellent contribution from my hon. Friend Mr. Hoban, with which I would no doubt have strongly agreed. I apologise to him, in his absence. Since then, however, I have heard contributions from other Members, including the Chief Secretary, who not only made a very good speech in support of her Bill but displayed open-mindedness over the potential of the Committee stage in respect of a number of the issues that have been raised. I think that the House will welcome that; I certainly welcome her attitude.
I returned in time to hear Mr. Jones express his well-thought-out objections to the Bill. I must say that while none of us want to be friends of bankers nowadays, I do not take his dim view of the banking industry, so I did not entirely agree with many of his observations. I thought that Mr. Browne made a very good speech about the pinch points that remain in the Bill, which I am sure will be raised in Committee. Mr. Todd gave an excellent presentation of his experience on the Select Committee. I strongly agree—and I wish to make this the thrust of my own speech—that if we are to have the proposed register, it should be based much more on names than on institutions if it is to have a realistic prospect of reuniting people with their assets.
I support the Bill and its intentions. I think that it proposes a very good use of money that is lying dormant in bank accounts. Bearing in mind the statement that we heard earlier, however, I worry slightly about whether now is the moment to introduce such legislation. Perhaps we shall return to that issue in Committee. As was observed by my hon. Friend Mr. Maples, if we face such a dire situation in the banking industry, it may be worth considering a delay in the implementation date of what is nevertheless a worthy Bill.
I am sure that we can all argue about whether 15 years is long enough for assets to lie dormant, and about whether the Big Lottery Fund is the right body to distribute the money. I share reservations that other Members may feel about that, and no doubt views will differ on whether the Government have identified the right organisations to benefit. I respect their mandate to decide such issues, however, so I shall set my reservations aside and agree to agree with them in that regard.
I wish merely to make an appeal on behalf of charities that have contacted me. Enthusiasm for the good causes that will benefit from the Bill may make it easy to lose sight of the fact that this money belongs to someone. It may belong to someone who is alive, or it may once have belonged to someone who is now dead and who will almost certainly have left a will expressing intentions about how the money should be used.
One in seven of those who leave wills bequeath money to a charitable organisation, amounting to about 5 per cent. of their estates. Whether we are talking about £500 million or billions of pounds—for we do not know how much the Bill will liberate—we are talking about an awful lot of money that could go to the charitable sector. The wishes of the money's owner could be respected if it were given to, for instance, Cancer Research UK, which has contacted me, the British Heart Foundation, which receives some 47 per cent. of its funding through legacies, or a range of other charities, all of which do fantastic work and rely heavily on legacies to maintain their core funding, their fundraising activities being in addition to that.
I think it behoves Parliament to consider charities' worries about the inadequacies that they see in the Bill at present. They want to be sure of being able to identify and claim their assets. I am sure that the Minister has seen early-day motion 1581, which refers to the Unclaimed Assets Charity Coalition. I think that its request is modest and reasonable. It suggests that we should see whether a voluntary scheme works, but also take the precaution of stating in the Bill that if a case can be put in the triennial review that it has not been seen to work, the Bill will provide for the establishment of a different kind of register that will enable charities to claim their assets much more effectively. That would not bind the present Parliament, and would not impose an excessively bureaucratic burden on banks—which I understand is what worries Conservative Front Benchers, and we can all understand that at the moment. It would, however, mean that we would not need to have recourse to primary legislation again if we wanted to devise a more robust system. Powers in the Bill could be activated on the advice of a future Parliament.
As was suggested by the hon. Member for South Derbyshire, the online traceability scheme relies on knowledge of the name of an institution that might hold assets that a charity might feel belonged to it. As we all know, perhaps from our own experience but certainly from the experiences of friends and family, it is easy to forget about small amounts of money in a bank account. We may change our name or address, we may lose the paperwork, the box may be in the attic; but it is easy to lose track of small amounts if, for certain reasons, we have opened a variety of bank accounts. Without a name with which to trace someone—people's lives change: they may get married, change their names for other reasons, or move house—it is easy to lose sight of bank accounts. That is particularly true when someone dies, and the relatives must perform the horrible business of clearing up that person's life and financial accounts.
I completely understand that there are concerns about fraud, but successful schemes that have brought forth a much easier way of tracing people's accounts and assets already exist in America and Ireland. The ambition of the Unclaimed Assets Charity Coalition, which comprises 60 charities, is modest; all it is asking is for the legislation to include a chance to revisit this issue if the Government's good intentions set out in the Bill are not as successful as they might be.
I welcome the Economic Secretary to his new role at the Treasury, alongside his other responsibilities elsewhere in Government, and I look forward to hearing what he has to say later.
It is a pleasure to follow Miss Kirkbride, who began in the style of someone making a winding-up speech, to the extent that I suddenly wondered whether I was going to be called to speak at all. She told us that someone who is dead is someone who is not alive but, in what was a good and consensual speech, she made the important point that this is our one chance to get the legislation right. We will not revisit this issue through primary legislation because the Labour Government of 2011 will be too busy, and we owe it to everyone involved, whether bankers or the communities who will benefit from this, to get the legislation right first time. There are a number of issues about that which I shall address later.
I take, rather than declare, an interest in this issue as chair of both the Community Development Foundation and the all-party group on the community and voluntary sector. Until this Bill came along, I had not realised that in one important respect the banking industry is part of the voluntary sector, and I will return to the issue of whether the banks will volunteer to take part in the dormant accounts proposals.
I was interested to think about the nature of the funding that will come out of this legislation—as well as the quantity, which is also important. Is what we are talking about a windfall, or will there be an ongoing stream of funds as more and more current live accounts become dormant in the future? My guess is that, in the future, as awareness of dormant accounts rises increasingly through the reunite process and other means, there will be fewer dormant accounts reaching maturity. Also, as people have more control over their accounts, through internet banking and so forth, there might be less chance of them losing control of those accounts in the future. Therefore, there is a worry that what we are talking about might, in effect, be a windfall—that it might be a source of income that peaks over the first two or three years as the backlog of dormant accounts gets cleared but that then rapidly falls. If we believe the British Bankers Association, we are talking about the sum of £500 million. That is a lot of money in some respects, but over how many years will it be spent, and will it get topped up as the years pass?
As the Chief Secretary told us at the beginning of the debate, that £500 million equates to 0.07 per cent. of banks' assets. In other words, the size and impact of this scheme, were it to be taken up 100 per cent. by the banks, is a pinprick. It will not make a difference to the stability of the banks, and while I understand the sensitivity in the current circumstances, which could not have been predicted weeks ago, let alone months ago or when this issue was prioritised, we should enact the legislation. We possibly should talk later on in Committee about implementation dates, but even in these circumstances it is right only to tolerate months of delay, not years of delay. We need to know how much money we are talking about and, as has been said, the BBA estimate is at the bottom end of the estimates. Regardless of whether we end up with a voluntary or a mandatory scheme, we need to find a way of being clear about how much money is involved and the time scale governing that money.
I agree with what has been said about the reunite process. It is absolutely right that people should be reunited with what are, after all, their own possessions. Like other Members, I have had the e-mail from Halifax Bank of Scotland telling me how it is getting on, with £18 million of dormant funds already allocated and £29 million still to be allocated. It also told me that 83 per cent. of accounts left to be reunited hold less than £100. For that reason, I would be wary of the suggestion reported to us by my hon. Friend Mr. Jones that there should be a £100 de minimis sum, because if we are talking about 83 per cent. of all these accounts, lots of those £100s make up a lot of money, and they should be included.
HBOS went on to tell me that 244 dormant accounts had been identified in my constituency. I found that a bit odd, because either it is extrapolating, in which case on average there should be 244 accounts per constituency, or it knows the postcodes of the people who own these accounts and who it is seeking to reunite with them. I would be interested to know from HBOS whether those 244 accounts are an extrapolation or that is the right figure.
That is interesting, and it does not reflect well on the people of the northern part of Derbyshire who are obviously more careless than the people in the southern part of Derbyshire—I hope that does not get reported. Taking the figure of 244 such accounts in my constituency as an average—which might be an overestimate—given that it is said that the average sum per account is £316, there is about £50 million over the country as a whole from HBOS alone that should be available for this scheme. That figure must then be multiplied by the sums for the other banks and building societies as well, so we are talking about a lot of money.
I want to talk about the issue of whether this scheme should be mandatory or voluntary, on which I made an intervention earlier in the debate. When my hon. Friend the Economic Secretary sums up, I would like him to make a point—he might write this down now in capital letters—of listing for us all the Treasury regulations that are voluntary. Which of the current regulations can financial institutions opt in or out of as they choose? I think that will be a very short list. I do not see what the point is of having optional regulations. As has been said, Ireland, Australia, New Zealand, Canada, the United States of America and Spain all have dormant account recovery schemes and none of them has gone for the voluntary approach, because they realise they cannot get as much social value and investment coming from those dormant accounts through voluntary means; my hon. Friend the Member for South Derbyshire articulated that point well. A mandatory scheme would be equitable because it would treat every financial institution involved in exactly the same way. At the very least, I urge my hon. Friend the Economic Secretary that we must have, as the hon. Member for Bromsgrove said, a reserve power so that we do not have to return to this House when we find in a few years' time that the voluntary approach has produced very good results from some institutions and negligible results from others, because that is the way it will work.
I take on board the Chief Secretary's point at the beginning of the debate that a triennial report is probably more important in the early years of the working of the scheme, and I think that after one or two years we would probably know how successful the scheme is, so I am willing to go along with her on that to some extent. However, I think there needs to be at least one triennial report to review the effectiveness of the scheme and to examine how much money banks and building societies have transferred for reinvestment. I am agnostic about whether 15 years is the right length of time after which to declare an account dormant. I am fighting the case of a constituent whose dormant account is 10 years old and appears to have disappeared completely already. Fifteen years is probably a bit on the long side, but such a period does indicate that control of and interest in an account has been lost.
Finally, I want to look at the distribution mechanism. The National Lottery Act 2006 gave the Big Lottery Fund the power and authority to handle non-lottery as well as lottery funding. The Arts Council and Sport England also have the same powers, as I understand it. More than 80 per cent. of those who took part in the consultation on who should be the distributor of unclaimed assets said that the Big Lottery Fund was the correct organisation to do it. It is already responsible for delivering half the funding raised through the national lottery to projects across the UK concerning health, education, the environment and charitable purposes. The themes that we have heard about so far as the Bill and the focus of this money are concerned are totally appropriate for that.
I find it a bit odd that the issue of additionality was brought up by Mr. Hoban earlier. Additionality was one of the sticks with which the Conservative party used to beat the Big Lottery Fund and its predecessors. However, the Big Lottery Fund won the argument over the years, and we have not had an argument for three or four years about additionality. Although there may be grey areas and areas where funding is complementary, we accept that the taxpayer, through the Government, has certain obligations, but that complementary funding from other sources is wholly appropriate. What is more, the Big Lottery Fund has won the trust of the people for being fair in the way that it delivers, and it certainly has the experience. The young people project, through the Young People's Fund and YouthBank UK, was a lottery project that gave young people themselves direct input into decision-making projects regarding who should benefit from the funding. I hope that that practice will be taken up again in this instance. The Big Lottery Fund has experience of individual financial management and access to personal financial services through the advice plus programme, through which it awarded more than £11 million to projects for financing and fundraising across the UK. As a social investment wholesaler, it knows that partnership is the key to delivering projects, avoiding duplication and making effective use of funding. The £50 million "fair share" programme, for example, operated in 77 areas of the UK, working in collaboration with the Community Foundation Network—a much underestimated body—to get money to where it really works: inside our communities.
I very much welcome the fact that we are talking not just about grants so far as distribution is concerned—another Member touched on this issue—but about loans and endowments being made through this funding. All of that helps to create a much more sustainable form of funding, whether or not it is within the life of the funding stream, in so far as it goes.
There is therefore no need to debate who the distributor should be—the Big Lottery Fund has won that argument. It has a record of appropriate funding, and of openness and transparency and accountability to Parliament. It has well-established offices in Scotland, Wales and Northern Ireland and in the English regions. On financial efficiency, according to the National Audit Office, its overheads, at 9.1 per cent., are lower than any of the other lottery distributors', so it is an obvious and satisfactory choice of distributor.
We will have some interesting debates in Committee, and I hope that there will be some movement on the mandatory versus voluntary issue, because that is the only way that the provision can be made reliable, as well as sustainable.
It is very good to follow Tom Levitt. There is clearly a particular Derbyshire interest in this subject. I also congratulate Ian Pearson on his new role at the Treasury. I think that he combines it with his role at the Department for Business, Enterprise and Regulatory Reform, where I suspect, on balance, he will have more fun. However, we welcome him to his new role.
Like the rest of my hon. Friends, I fully support the motivation behind the Bill and I certainly welcome the spirit in which the Chief Secretary to the Treasury spoke about her approach to considering possible amendments in Committee. That is good for the purposes that lie behind this legislation. I wholeheartedly believe that allowing money in dormant accounts to be used to help good causes or to be reinvested in the community is completely the right thing to do, and it certainly has my full support.
The Bill follows a long period of consultation and discussion, which we heard about, between the Government and the banking sector, as well as with the Treasury Committee and the Commission on Unclaimed Assets, chaired by Sir Ronnie Cohen. There was much discussion during the Select Committee's proceedings as to how the money should be directed, and there were a number of suggestions. It is worth looking at some of those that were put forward. Mr. Field and Derek Wyatt suggested that the first claim on the unclaimed assets should be given to the victims of the wind-up of occupational pensions. The Prince's Initiative for Mature Enterprise called for a focus on microfinance for the over-50s to enable more of that generation to start up businesses. Although many worthwhile ideas have been floated, I welcome and support the allocation of the unclaimed assets to improving youth services in particular, and to tackling financial inclusion and boosting social investment.
However, my hon. Friend Mr. Hoban talked persuasively about the issue of additionality, which was at the heart of what the original lottery legislation was all about. The point is that these areas are already funded by Government expenditure, and I should like the Minister to tell the House how this money will be spent differently from money already spent by the Government on new services. This is an important point, and we come back to the additionality factor.
When the Bill was debated in Committee by Members in the other place, Lord Howard of Rising mentioned that the Economic Secretary admitted in his evidence to the Treasury Committee that youth services had been underfunded for years—a point that I think is generally accepted throughout this House. However, that raises some question marks over the ability to guarantee that the revenue from dormant accounts will not be substituted for normal Government spending. I come back to the point that it is crucial that we all understand what the Government have to say about this issue. Can the Minister therefore tell the House what proportion of money in dormant bank accounts will be transferred to the Big Lottery Fund? If he cannot answer that question, is it wise to make specific commitments about the use of funds, such as those made on youth centres? I look forward to his reply.
Before this money is given to help these good causes, it is vital that there are robust measures in place to reunite owners with their unclaimed assets—a point that has been powerfully made by a number of Members today. I very much welcome the banking industry's efforts to achieve that, which I believe to be absolutely genuine. That is all the more essential as this is a time when many families are under great economic stress, and the situation is getting worse. It is also crucial that once the liability is off the bank's balance sheet, there is reserve in the reclaim fund so that it can still pay out to customers who come forward in future to claim their assets. That possibility has to be considered. The Government must continue to give an assurance that a balance will be struck between funding good causes and protecting the customer.
The British Bankers Association believes—we have heard many estimates—that that there is between £250 million and £350 million in dormant bank accounts. The Building Societies Association estimates that there is some £150 million in dormant building society accounts. Taking those figures together, we are talking about £400 million to £500 million in UK dormant accounts.
I would be interested to hear whether the Government agree with the Treasury Committee that banks' estimates of funds in dormant accounts are more likely to be underestimates than overestimates. The Chief Secretary touched on that, but it would be interesting to learn a bit more about the Government's evaluation of this matter after their consultations with the banking industry and the building societies. The House of Commons Library agrees with that assessment, because it believes that the scale of unclaimed assets
"is staggering, but, the estimates vary hugely and reliable sourcing of any estimate is very difficult."
The Halifax alone has £700,000 of unclaimed money for customers located in the east of England, some of which undoubtedly belongs to my constituents.
I am glad that many banks and building societies are now focusing their efforts on becoming more proactive in reuniting customers with their accounts. To take up the point that the hon. Member for High Peak made, this voluntary activity—the framework of this legislation—will work only if such a process materially takes place. We must monitor the situation to see whether a more statutory basis is warranted in future.
Last month, HSBC started to send out letters to its 17,000 customers who have unclaimed money in dormant bank accounts; the average amount in their forgotten accounts is £1,400. In the same spirit, Lloyds TSB announced earlier this year that it had brought in a search agency to track down the holders of 120,000 dormant savings accounts. A number of hon. Members have mentioned the website that provides a free service to help to trace lost accounts and savings. That website, which I have visited, brings together the three tracing schemes of the British Bankers Association, the Building Societies Association and NS&I into a single website, meaning that anyone who has a dormant or lost account with a bank or building society or NS&I, or with all three, can initiate a search simply by visiting the website. It is free to use, it averages more than 760 claims a day and I find it easy to access. I am encouraged by the progress that has been made in accelerating the process of finding the owners of dormant accounts. Following the consultations, I believe that the banks and building societies understand the importance of getting this issue right, and the House will welcome the fact that there seems to have been movement in that direction.
It is so important that the process of reuniting lost accounts and savings with their owners is kept under review and works effectively. It is essential that the effectiveness of the scheme and the amount that the banks have transferred for investment is constantly examined. If we are to have a statutory scheme, it is imperative that it is accountable to Parliament. Such a provision had been missing, so I was pleased that in the other place the Conservative party successfully amended the Bill to ensure that the reclaim fund sends specified information to the Treasury, which must then lay it before Parliament. I was also pleased that their lordships voted in favour of another amendment, which was sponsored by Baroness Noakes, to provide for a triennial review of the scheme's operations.
It is also vital that the money passed on to good causes remains entirely separate from and additional to normal Government spend. As I mentioned at the beginning of my speech, the Bill's objectives are entirely admirable, yet I am worried that the Big Lottery Fund has increasingly become insufficiently independent of Government. For example, the BLF has awarded about £1 billion in grants to statutory bodies such as schools, local councils and national health service trusts since 2004. In a March 2005 press release entitled "Healthy Food in Schools—Transforming School Meals" the then Education Secretary, Ruth Kelly, unveiled a £280 million package to transform the quality of school meals. Despite the fact that more than a fifth—£60 million—of the money was coming from the BLF, the Government seemed happy to take the credit for that decision 36 days before the 2005 general election. That is not at all the spirit in which the lottery was founded or in which it should operate. Unclaimed assets should be used solely for the benefit of society; they should not be used to solve, even by implication, any short-term problem or to achieve what is considered desirable politically by any Government.
I would like the Minister to assure the House that all money given to the BLF from dormant accounts will go only to projects in the voluntary and community sectors, where it should really go. If the money is to be spent differently, what measures will be in place to ensure that the BLF does not duplicate Government spending? I simply cannot see how additionality will stay intact. Given the choice, no Minister will choose to spend money that comes from his own budget over money that will come from the BLF. I am afraid that such has been the pattern for a number of years. That is why money that has not come as a result of general taxation must be accountable to an independent body.
In passing, let us consider the composition of the BLF. There is an argument as to whether it should be the distribution body that implements the legislation. Over the years, a number of questions have been raised about the role of the lottery. If there is a change of Government after the next general election, we will introduce a national lottery independence Bill to free the national lottery from political interference by making the National Lottery Commission and the distribution bodies accountable to Parliament.
I have a lot of sympathy for what the hon. Gentleman is saying, because I recall exactly the same points being made two or three years ago during the passage of the National Lottery Bill. It was designed to do precisely what he is describing: to give the Big Lottery Fund much more independence from Government. I think that that Bill addressed that quite successfully, so there may be no need for any additional Bill. Does he agree that the problem is that the Bill before us tends to undermine that approach by, once again, giving Government the power to set strategic priorities for the BLF?
I am grateful to the hon. Gentleman for making that point, and I am glad that he agrees with me. People need to be assured that there is proper and discernable distance in these matters, and I return to the point of the national lottery's creation. I was the shadow Minister when the national lottery's purpose and function was changed after the 1997 general election. That had the effect of taking money away from the original good causes and, in retrospect, it was a mistake.
The assets under discussion in this Bill are clearly not Government money, so I see no reason why they should be distributed through a body that enjoys close relations with the Government. Another reason why I am concerned that the Government are proposing to give unclaimed money from dormant accounts to the BLF is that I fear the amount of money that can be passed on will be diminished by the BLF's significant operational costs. This money should be going straight to charities, but instead of going to worthwhile causes, a proportion of the money—too much, in my view—will go towards paying salaries and administration costs. I would like the Minister to tell the House what proportion of these unclaimed assets will be diverted to administration rather then to helping young people and so on?
Towards the end of my contribution I pointed out that the BLF's overheads are about 9.1 per cent., which makes it the leanest of all the lottery distributors. The hon. Gentleman cannot get around the fact that even if the Government or the banking industry were to do the distribution, there would be overhead costs. The evidence suggests that the BLF is the leanest distributor and, therefore, perhaps the most efficient and the best for carrying out this purpose.
The costs of salaries, administration and all the rest are too high, irrespective of what the hon. Gentleman says about the BLF. As the costs are high, we must consider whether there is a more efficacious way of distributing the money to the people whom we wish to help.
Lord Howard of Rising tabled an amendment in the other House to stop the BLF spending more than 10 per cent. of the funds it receives on administration, and this argument is most definitely worth examining. The national lottery distribution fund's income for 2006-07 was more than £1.2 billion, 17.6 per cent. of which will never find its way to good causes—instead, it is used to fund the quangos that run the lottery. Administration costs for the national lottery distributors totalled £204 million in 2006-07 and the Big Lottery Fund spent the highest total amount—just under £77 million—on its operating costs. That represents more than 12 per cent. of the total value of grants awarded, according to my figures. In comparison, Scope and Children in Need spend 2 per cent. and 4.4 per cent. respectively, so this may not be the best way to proceed. The Big Lottery Fund employs 1,103 members of staff, compared with the Treasury which employs 1,170. The BLF distributes £630 million annually, but the Treasury distributes 500 times that amount, and—I have to say—it grows every day.
I support the Bill, but we need to consider whether the mechanism for distribution is the correct way forward. It is a substantial amount of money, which we may have underestimated, and Government spending may become more restricted. Our communities will demonstrate increasing need because of the economic situation, and we must ensure that the money will reach the causes that it is meant to reach in the most efficacious way possible.
May I welcome the Minister to his new position? I hope that we do not burden him too much on his first outing. I look forward to seeing him appear before the Business, Enterprise and Regulatory Reform Committee, and I wish him well with his joint commission. It is good to see.
Like many others, I generally welcome this Bill. It will create a real opportunity to provide additional help in several areas that need greater attention, of which youth services are a particularly good example. I am happy to give it my general support, but—as Tom Levitt said—we have to get it right. The big belt will come early on, because money will be collected from dormant accounts in which it has built up over a long time, and the amount that can be expected thereafter will diminish. That is one of my concerns, and I am sure that the Economic Secretary will wish to address it later.
Many of my other concerns have already been mentioned, but I hope to make some novel points. I am concerned about the administration of the scheme and its associated costs. The Bill does not help us very much with that concern, and I would like to know more. I am especially concerned about how the money will be distributed. Lack of scrutiny is also a concern. The Big Lottery Fund has come more and more under Government control, and we need to ensure that scrutiny is transparent and open to the general public. I am not sure that we have been told how that will be achieved. On the basis of the law of diminishing returns, the question is whether enough money will be available to meet the objectives laid down by the Government and to meet the promises that we might make about future funding to people who receive moneys early on.
The final concern is exactly how much money is lying in dormant accounts. The Secretary of State has rightly said that estimates vary massively. The British Bankers Association estimates the value of dormant accounts at between £400 million and £500 million. The Sun—and I leave it to the Economic Secretary's discretion whether to believe its figures—says that the value is £1 billion. The spectrum seems to grow daily.
I rarely congratulate the banks, but they deserve our congratulations in one respect. Since the launch of the mylostaccount.org.uk website, many people have been rightfully reunited with the money in their dormant accounts. The number of people claiming for lost accounts has trebled since the website went online, with 760 claims being made a day. To date, 140,000 people have been helped, which is a sizeable effort by the banks. A cost argument was made by Mr. Todd, who is no longer in his place, but that is not my point. My point is that that figure was achieved through use of a website, which is not the most costly form of distributing information. Perhaps we should ask why the banks did not do this before. The Economic Secretary might be able to tell me what conversations he has had in that respect and whether there is a case for the banks to answer.
NS&I has had more than 25,000 successful traces, amounting to £41 million of restored assets, and to date Halifax Bank of Scotland has reunited people with more than £18 million of dormant funds. HSBC has also made sizeable efforts to return funds. The banks are to be commended, but their efforts will detract from the amount that will be available in future years.
The success in tracing dormant accounts will have an impact on the estimates of the revenue that will be raised, and the Government have already said that money is to be earmarked primarily for youth services, among other projects. They also want to use the money for financial capability and inclusion services. My golly, if there was ever a good time to think about financial capability and inclusion, especially for bankers and the City, this is it. Given that, more money will need to be spent on the Government's objectives.
I especially welcome the boost for the third sector. Incidentally, I hate calling it the third sector; it sounds like something out of "Star Trek". I prefer to call it the voluntary sector. We are promising a sizeable amount of money for some sizeable projects. At a fringe event at the Labour party conference, the Minister of State, Home Department, Mr. Woolas, who was then Minister with responsibility for the third sector, confirmed that a financial institution to channel those funds "is going to happen". That will involve further sizeable cost.
Under an amendment in the other place, building societies and banks with group assets of less than £7 billion would be able to distribute some of the money through their own community schemes. There are 59 building societies in the UK, many of them capable of taking up that offer, and many smaller banks will want to do the same, although pray God they survive the present conflagration of banks. The money will therefore add up to a sizeable amount. We must ask how much money will be available to meet the expectations that have been raised in the fields to which we have referred.
I am also concerned about the proportion of money that will be issued by the Minister, as I understand it, to England, Scotland, Wales and Northern Ireland. I hope that I will be forgiven if I say that I am concerned that the Government have that matter under their control through the Minister. I am sure that the present Minister is a most honourable person; I have no doubt about that at all. However, when I consider the way in which the revenue support grant has been used for political ends and the way in which the Government have shifted money to those areas that they consider their priority—it is not unnoticeable that many of those areas are where Labour Members sit, but I would not cast any aspersions about that—it raises concerns. It is fair to ask questions about the possible creation of greater concern about the proportionality of the distribution of the money. I believe that the Government should make a statement on the issue before the Bill is passed—I hope that we will hear something tonight.
I have talked about the money being considerably less than was expected, and I wonder whether the Government are not promising more than they can deliver. What percentage of the funds would be channelled into new projects such as those mentioned by many people tonight? Into what other areas might the money go? I am concerned about the differential between England, Scotland, Wales and Northern Ireland. I recognise the point about devolved government, but that is no reason to diminish our rights in the country of my birth and infant nurture, England. I fear that we might miss out again, and I do not think that my constituents would be overly happy about that. I could go on about many other issues, but they have been raised by other Members tonight and I would not want to test your patience, Madam Deputy Speaker, by referring to issues that have already been well rehearsed.
My major point of concern is the Government having their hands on money on which they should not have their hands. Like many people in my home county of Northamptonshire, I have a healthy fear of the Government's ability to spend my money and their money. I therefore want perfect clarity and transparency in how that money is to be spent. I fear that when Government projects go over budget—we all know that they regularly do—there is a temptation to find ways to ease money out of other sectors from which it perhaps should not be eased and to place it into areas that are, in truth, the Government's responsibility.
I do not want to dwell too much on the Olympic games, but they are a particularly good example of how moneys that were not meant to be spent on such projects are now being spent in large sums. We were originally told that the Olympic games would cost £3.4 billion with a further £738 million coming from the private sector. That has grown to £9.325 billion with only—
I am grateful that you should direct me in that manner, Madam Deputy Speaker. The final statement that I was about to make was about the amount of money coming from the Big Lottery Fund to support the Olympic games. That is why the two earlier figures were relevant. It is estimated that 20 per cent. of the Big Lottery Fund's money from between 2007 and 2013 will be spent on the Olympic games. I and many of my constituents certainly believe that that is an improper use of lottery fund money.
I raise that point in the hope that we will not see such behaviour with regard to the dormant funds of many honest and good people who have forgotten about them, died or moved elsewhere, leaving behind the money in the bank accounts that we need to take in this way. I call on the Minister to reassure us that that money will not be spent to prop up Government expenditure over the next three, four or five years, when the Government will be stretched.
I come to the end of my remarks, but I have one final plea. Enough comment has been made and enough concerns have been expressed tonight to make us wary and—to support the comments made by the hon. Member for High Peak—to make us dedicated to getting this right. I know the Minister to be an honest and fair man and that he will want to achieve the same outcome. I hope that he will tell us as he sums up how he might achieve that and how the Government might act in Committee to meet many of the concerns that have been raised this evening and to prove conclusively to the British people that the measure will be a fair and honest way of spending money from dormant accounts and to use it rightly for good ends, rather than to support the Government at a time when their own financial concerns are under immense stress.
It is wonderful to be back after a long summer recess, and thank God we are back. Let us look at what happens when the House goes into recess for 10 weeks: Russia goes to war, there is a global banking crisis, stock markets are routed and inflation hits 5 per cent. The nation can breathe more easily now, because we are back. Parliament is back and those troubles will be quickly put behind us.
Let me make a serious point. When we started the debate a number of people asked whether, given the problems in the financial and banking sectors, this was the right time to have the debate and whether we should not focus on more important and pressing matters. On reflection, this probably is the right time to have the debate. We cannot allow the ongoing banking crisis to dominate everything we do in our political lives, because the world goes on. I am more than happy to have this debate today.
The fact that we have to raise such concerns about whether we should be having the debate is testament to the fact that we have an incompetent banking sector that has overextended itself in a number of ways with other people's money—a bit like the Government, in fact, although it would be churlish to continue down that line. Every cloud has a silver lining, though. When I left here in July, as a politician I belonged to the most hated profession in the country. I came back as a member of the second most hated profession in the country, because we have been replaced by investment bankers. I am slightly grateful for that.
Let me be serious. It is important to recognise that the money that we are discussing does not belong to the banks. It is deposited in banks at the moment but it belongs to people who have forgotten that it belongs to them, who have died or who have simply failed to use their bank account for a number of years. I recall at least one building society account and one bank account from my early teens that I no longer use. One is with Barclays and one with the Chelsea building society, but there is not a lot of money in either—there was, I think, about £10 in each one when I last looked 30 years ago.
We need to discuss sensible measures for the long-term use of this money. I have been slightly confused by the numbers discussed today. Some people have said that the figure is £500 million, while my hon. Friend Mr. Binley told us that The Sun had scandalously said that it could be £1 billion. My researcher said that it is somewhere between £15 billion and £20 billion, according to the unclaimed assets register in 2007. I am sure that he has a great future as an investment banker, taking £1 and leveraging it 30 or 40 times. However, a vast sum is involved, and perhaps a lot of the money on the unclaimed asset register lies in different places outside people's bank accounts.
There is a good argument to return the money to the community. I am sure that local communities can put it to better use than the banks can. My word, if they could not do that, they would be in trouble. With the greatest respect, they can probably put it to better use than the Government can. As one of my hon. Friends pointed out, the Government spend £500 billion or £600 billion a year, so even if the sum is £1 billion or £2 billion at the high end, it is but a fraction of what the Government spend. Nevertheless, it is still an enormous sum that can make a great deal of difference to a huge number of people.
Of course, I would very much like young people to benefit from that cash. We have a number of issues with youngsters, many of whom are absolutely wonderful members of the community, but many of whom need a good deal more time and care spent on them to ensure that they have the opportunity to live out happy years as youngsters and to grow up into productive members of society. Many organisations—the Sea Scouts, the Scouts, the cadet forces and so on—do wonderful things with young people and have a proven template that works, and they could put the money to good use. Many community facilities could receive investment. Young people have lots of energy that they want to get rid of, and that energy needs to be channelled. A number of boxing clubs around the country struggle for funding, year on year, but they are very good at diverting youngsters from the street and possibly from a life of crime. All those things are good.
A number of hon. Members have also pointed out that charities have some claim to the money. It would be fantastic if some of the money went to hard-pressed charities. After all, about one in seven people make a bequest to charity in their wills. Of course, the cancer charities, such as Cancer Research UK, do a fantastic job. They help tens of thousands of families, and they raise tens of millions of pounds to alleviate suffering and find new cures. However, on the whole, cancer charities are well funded; they have high levels of public awareness. Now, in the run-up to world mental health day, it would be wonderful if some of the less glamorous charities that struggle to secure funding could find a way to access the money. I leave that with the Minister to reflect on.
I served on the Committee that considered the National Lottery Bill and went for the Big Lottery Fund. I have met representatives of the Big Lottery Fund, which is full of bright, capable people, but I am not sure whether "big" is the right word to use; it is a sort of slightly smaller and ever-shrinking lottery fund. Trade descriptions officers would probably have a few concerns about the use of the word "big". It is a bit like buying cereal at discount retailer. It is very cheap, but it is called luxury cereal to make it look attractive. The Big Lottery Fund is being rather over-egged as a vehicle to deliver the money. Too much of what the fund does involves replacing expenditure that should come from the Government.
I would be extremely concerned if the money just went to fund more things that should be funded by central Government. My constituents in Broxbourne, like those of my hon. Friend the Member for Northampton, South, would be very concerned to think that money, which could make a once-in-a-generation difference to young people in their community and to charities that serve their community, was somehow siphoned off to fund expenditure and projects that most people think the Government should fund. Again, I have tried to raise that issue in a non-partisan way, and I hope that the Government will take that concern on board.
I should just like to have a little dig at the banks—why not? I would be foolish to let this opportunity pass, to be honest. To be fair, we have heard a lot of Members say today, quite rightly, that the banks have been good at tracking down the people whose accounts have fallen into disuse and repatriating the money to the original depositors, but it took the banks rather a long time to get to that stage. We wonder what they have been doing for the previous 20 or 30 years.
I might have heard wrong, but I understand that some of the money may go towards making people financially literate—educating them about bank accounts and borrowing—and the banks have a lot to fear from that. They have made a huge sum over the past 10 years by playing off people's lack of financial literacy. They have ruthlessly pushed self-certification mortgages and people borrowing far more than they can pay back—five or six times their earnings—and they should hang their heads in shame. Of course, we must all take responsibility when we borrow money, but the banks have been pretty shabby in their behaviour.
Finally—I hope that this point does not take me out of the bounds of the Bill, Madam Deputy Speaker—the banks simply refuse to serve many communities. They have no interest in serving them, because they do not believe that there is any profit in doing so. We have heard that banking is a low-margin business. Banking is not a low-margin business. The margins in banking are very good, and one has only to look at the banks' profits to realise that that is the case. The reason investment banks are in trouble is that they got very greedy, and a number of retail banks got very greedy as well. If the money goes towards educating people about the risks of over-extending themselves, that is a good thing. If that has an impact on the banks' ability to make profits from the most vulnerable people in our society, that is an even better thing.
I rise to defend the good name and judgment of mutual building societies and, in particular, the Lords amendments that seek to allow the largest of those building societies to exercise their judgment and to follow the priorities of their members, rather than those of the Government, in distributing some of the funds that we are discussing tonight.
I claim two qualifications for speaking this evening. As Member of Parliament for Cheltenham, I am, perhaps slightly unexpectedly, the local MP for the Chelsea building society's headquarters. I could not speculate about why it went up-market and ended up in Cheltenham, but I am glad that it did so, as it has been a welcome contributor to the community in Cheltenham and a responsible and ethical presence in our community. I am one of the few hon. Members who has successfully won funding by applying to the national lottery funds and bank and building society foundations in my earlier career as a director of fundraising for a national charity. So I have had experience of the funding processes of both sides, and I shall return to some of that experience later in my remarks.
It is rather a topical time to debate these issues, particularly the status of the mutual building societies. It is all very well for Mr. Walker and other Conservative Members to decry the greed and irresponsibility of the banks, but the Conservative party is rather a fickle partner in that respect, since it has been absolutely in love with the banking sector and some of the more exciting practices of, for instance, the demutualised building societies for many years. It obviously encouraged that process when in government. It is telling to note that we have now witnessed the final demise of all the demutualised building societies. They have all either crashed or been swallowed or nationalised. We have none left, but we have a relatively healthy mutual building society sector, which, thankfully, is still with us. The mutuals still have tens of millions of members and £150 billion-worth of assets, and they are one of the healthiest sectors of the financial services industry, with loans overwhelmingly backed by retail savings.
We ought to listen to the large mutual building societies. They have concerns about the direction of the legislation, and those concerns were reflected in the Lords amendments. In the Bill, there is a £7 billion threshold above which banks and building societies would lose control of the funds. Funds above the threshold would be handed to a reclaim fund that would be administered, ultimately, by the Big Lottery Fund. The amendments proposed in the Lords removed that threshold for building societies and allowed larger building societies, but not banks, to administer those fund through their own charitable foundations. That was a good thing. I am afraid that I was disappointed by the Chief Secretary to the Treasury's opening remarks, in which she suggested that the Government would try to overturn those amendments. I hope that the Economic Secretary to the Treasury and his colleagues will think twice before fighting that battle, because they would be quite wrong to do so.
After all, what is the difference in principle between a building society that has more than £7 billion-worth of assets and one that has less than £7 billion-worth of assets? There is no difference apart from size. Both are mutual organisations that exist for the benefit of their members and that have exercised good judgment in doing so; £7 billion is a completely arbitrary figure to choose. As I pointed out in an intervention, the Chief Secretary to the Treasury rather misleadingly implied in her opening remarks that we were talking about the stratospheric, top layer of the building society market, and that most building societies would still be able to administer their own funds. Of course, that is true in numerical terms, but in terms of the assets, the 80-20 rule applies. Some 83 per cent. of all building society assets are controlled by the seven top building societies.
We need to examine the Government's rationale for trying to remove the right of building societies to administer funds that are made available from dormant accounts. That will tell us a lot about the Bill. Perhaps the Government think that the Big Lottery Fund will be a more efficient, more expert and more supportive funder than the building societies' own foundations. I have to say, from my experience as a charity fundraiser, that the reverse is true. The lottery funders, through no real fault of their own—it was more the fault of the way in which the original legislation was designed—had to administer a pretty bureaucratic, awkward system, from which most charities found it a bit of a nightmare to extract money. In contrast, bank and building society foundations such as the Lloyds TSB and the Nationwide and Chelsea building societies foundations have extremely good reputations in the voluntary sector. They are able to administer funds wisely, and as hon. Members have said, the fact that they look to some of the less popular, more difficult causes earns them a lot of praise in the voluntary sector.
Perhaps the Government thought that there was a higher rate of dormancy among large building societies. Again, I am afraid that the reverse is true; building societies generally have higher average balances and therefore a lower rate of dormancy overall. The statement might apply to the large banks, but it certainly does not apply to large building societies.
Perhaps the Government thought that they are better judges of how the money should be spent, because of their strategic plans. That brings us back to the issue of independence and additionality. I am really disappointed by the fatal words in clause 23(3), which do a lot to undermine the good work that the Government did—I am happy to give them credit—during the passage of the National Lottery Bill only three years ago. That Bill sought to address the issue of the mistreatment of some of the lottery funds. That mistreatment had given lottery funders quite a bad reputation. One need only think of the way in which the New Opportunities Fund was set up; on one notorious occasion, funding announcements were made by a Minister at a Labour party conference. There was the school meals episode, in which the Government awarded hundreds of millions of pounds not from their funds, but from lottery funds. Those are examples of exactly the kind of practices that the National Lottery Bill was designed to prevent. It was a good piece of legislation that enjoyed all-party support. It should have tackled the issue and made unlikely any further Government intervention. However, clause 23, entitled "Directions to Big Lottery Fund", has the fatal phrase:
"Subject to subsection (6), the power to give a direction under this section is exercisable by the Secretary of State."
It is sad to read those words in the legislation. They begin once again to undermine the independence of the lottery funders. The funds are no more the Government's than any other lottery funds ever were.
In the case of banks, money from dormant accounts is, in a sense, the property of the original bank account holders, but in the case of building societies, it is certainly the property of the members of the building society. It is unfortunate that the Government should seek to exercise their control by means of strategic plans on how the money should be spent. I am perfectly happy to accept that youth services, for instance, are underfunded; they have perhaps been neglected in previous years. However, that does not make it right for the Government to start rewriting the rulebook on how lottery money is spent.
Perhaps the Government thought that there was no difference in kind between banks and building societies. However, the legislation accepts that there are different kinds of accounts. Perhaps the Economic Secretary would like to explain why National Savings & Investments is exempt from both the £7 billion rule and the legislation as a whole. It is regarded as different and special. I would say that the mutual building societies are different and special, in that they have an obligation to serve their members. The money is, in a real sense, not the company's property but the property of its members. It has a duty to its members, and not to any shareholders who could be suspected of ulterior motives by the Government. There is an important difference in kind, which is rightly reflected in the Lords amendments.
Perhaps the Government think that the big building societies are somehow less able to manage, account for and distribute funds than the Big Lottery Fund or the Government. Once again, the reverse is true; almost all the large building societies have already set up an infrastructure that has a very strong reputation when it comes to accounting for, recording and reporting the use of charitable funds. Their established charitable foundations are a well-established, highly respected set of bodies that are very good at administering charitable funds.
We are left with only one obvious explanation why the Government should seek to apply the £7 billion threshold to building societies as well as banks: the Government must have some political reason for bolstering the Big Lottery Fund. Perhaps there is embarrassment about the underfunding of youth and other services that they now seek to support. Perhaps they are embarrassed about the use of lottery funds to subsidise the Olympics. However, I urge them to resist their command-and-control tendencies and those slightly Stalinist inclinations that have characterised so much new Labour legislation. I ask them to step back and recognise the importance of the independence of the mutual building societies, and of the Big Lottery Fund, and to trust those bodies to stand up to political interference and to administer funds wisely, as they have done with regard to many hundreds of millions of pounds over decades. The Government should take this opportunity to dispel any suspicions. I very much hope that the Lords amendments will stand, and will not be removed by the Government. If the Government take the path that I suggest they take, they will have my full support.
Martin Horwood makes a powerful case on behalf of mutuals, but his case is sometimes somewhat weakened by ill-judged comments elsewhere in his speech. He would be better off sticking to substance, which he does very well, than making cheap party political points that are badly placed, badly timed and badly delivered. I welcome the Economic Secretary to the Treasury to his new role. Mr. Jones, who has long campaigned on the issue, made an excellent speech.
For as long as I can remember, this has been a live issue. In fact, the money that might be raised has been spent several times over in party political pamphlets, debates and so forth. Our debating the issue today is horrendous timing, but at least the measures are finally forthcoming. I say "horrendous" because we are taking money out of the banking sector today only to put it back in next week. I am sure that the accountants will say that the money is both an asset and a liability, and therefore does not affect the capital adequacy ratios, but that misses the point somewhat. It is relevant to the point about liquidity: it is cash in the bank, and the capital adequacy ratios are designed only to measure liquidity—they are not the fundamental themselves.
It is right that the Government have gone down the voluntary route, rather than that taken in places such as US, Ireland, Australia, New Zealand, Spain and Canada of a more compulsory system. Listening to the debate, I detected a massive amount of confusion. If I received £1 every time a different figure was mentioned for the amount in dormant bank accounts, I would be a very rich man. My experience, both in this debate and outside the House in preparation for it, shows that where there is a compulsory system, the amount of money brought in is much larger than anticipated. The figure of £20 billion is the highest number that I have heard of, and it appeared in an article in The Times in late 2006.
For a long time, the banks were under pressure to give up all that money. They thought it might be mandatory to do so, and that it would be expensive to administer the process. I probed the Chief Secretary to the Treasury at the beginning of our debate, because the numbers cited by the British Bankers Association and the Building Societies Association were low, and historically, were pushed down by the banks to depress both the amount of money they would have to give over and the administration involved in doing so.
Turning to the 15 years rule, Mr. Browne made a good point about asking the Treasury for a cash flow of likely moneys. If we obtain that information before Committee, we will be able to tease out some of the numbers involved. What will be the one-off hit in year one, next year, and so on as the money comes out? The Economic Secretary is shrugging his shoulders, but it would be useful to have such an indication. Clearly, we will not have exact figures, as it would be quite complicated for the banks to provide them, but there are basic assumptions at which the Minister and his civil servants could look. I am sure that, deep in the Minister's briefing pack, is information on phase 2 of "Know your customer" and information about money laundering for banks. The focus in that process on money laundering compelled the banks to contact many of those customers, even if the accounts were dormant. As a result of "Know your customer", either the banks will fail in not observing the money laundering regulation or they will indeed have codes against each account and each connection of accounts, even if that is across a number of financial instruments or, indeed, geographic locations, that will say that they tried to contact those customers, particularly about the large amounts, but were unable to do so.
Clause 12 deals with the triennial report to Parliament. Subsection (2)(f) deals with a report on the operation of the dormant account arrangements, including
"the desirability and practicality of establishing similar schemes for other categories of assets" which may have become dormant. I am deeply concerned about what that may include, and throughout the debate, I have grown increasingly concerned. My list of three or four issues has developed into a list of 10 across a range of financial instruments, including physical assets associated with proxy financial holdings such as gold and things such as safe deposit boxes. Why, if someone went to HSBC and deposited £100 in an account 16 years ago, should that sum be taken away and considered dormant because there has been no contact? However, if they put £100 in an HSBC deposit box 16 years ago, the Government are not suggesting that that should fall within the realms of the measure. In a number of banks, there are safe deposit boxes containing a large number of assets, some of which would be considered dormant under the definitions in the Bill. Alongside those boxes are share certificates and bearer bonds without any name. Taking that to an extreme, the wording in the Bill does not include unused assets, which some people would consider financial assets such as, for example, a buy-to-let house or a house that used to be rented that has fallen into disrepair. I would imagine that in most parliamentary constituencies there is a house that blights a corner of a particular street: no one is quite sure who owns it, and it has fallen into disrepair. Would that be included in the measure?
The Bill will have a major impact on a number of industries. Hon. Members have spoken about people not collecting gambling revenues. If someone won several hundred pounds on the horses, they would know about it: they would follow the race, and they would be likely to collect their winnings. However, if they bought a raffle ticket in the lottery, they would be less likely to know about a win. Who owns that unclaimed asset? If someone has made a purchase for a small amount—£1—perhaps they do not value the ticket as they would if they made a large deposit. However, sitting behind that ticket may be a large revenue or income stream. There is a broader issue, too, about insurance policies.
I am reminded of a business that I read about that sold travellers cheques. The main revenue from that business did not have anything to do with the selling of travellers cheques; it was the revenue that was left in a bank account for everyone who lost their travellers cheques but did not exchange them for cash. Who owns that money? A number of businesses will be concerned that their fundamental business model will be wiped away in that three-year report and by the picking-up of disused funds.
A number of Members have spoken fluently about wanting a clearer definition of dormancy, and I was superficially persuaded early in the debate that that was a good idea, but I very much fear that, given that this is a voluntary system, there will be banks and building societies that want to hand the money over, but are concerned about how they do so under the definition of dormancy. They may get it wrong or go into a scheme and not pick up some accounts as a result of the Government's definition of dormancy. If there is a voluntary system, it is probably better not to have that definition.
Turning to the Big Lottery Fund, I ought to exercise caution, given that it is coming to Southend next week to show us some of the good works that it has undertaken. My experience to date, however, is that big donors seem to get bigger, and the money is tied up in bureaucracy and administration. People try to get the money out of the lottery. I have visited many community groups that want help to fill in forms to get money, but it eventually transpires that they are not eligible for such money or do not fit into a category. That is the complete opposite of one or two other funds that I know such as the Essex Community Foundation and the Southend Fund, which touch a number of charities, and donate small amounts—£1,000 or £2,000. I cannot help but think that the Government have missed a trick by going to the Big Lottery Fund. [ Interruption.] My hon. Friend Mr. Walker says that it is not big by national standards, but at a local level it is still millions of pounds, and perhaps organisations that deliver small packages of thousands of pounds would be a more effective distribution channel. Perhaps we should focus on microfinance, particularly social enterprise.
I now understand what my hon. Friend is saying. He is not trying to say that it is not the Big Lottery Fund or a little lottery fund—it is simply a diminishing lottery fund. I have now got the point.
As for the issue of taking the money out of the banks, the Government have missed a trick. The old-fashioned bank manager who knew the local community could be an asset for the Government because, rather than investing in normal loans for commercial profit, such banks could be allowed to retain some of that money and to lend either to social enterprise as part of their community support function, and follow that enterprise through or, indeed, go down the line of microcredit to pump-prime capital for microfinance and microcredit in the UK—a system that has been successful in developing countries elsewhere.
Finally, I should like to probe the Minister further about the differential treatment of dormant bank accounts. There is clearly a major difference between accounts that have £5, £50 or £50,000 in them, yet by my reading of it, the Bill deals with such accounts in very similar ways. I am not entirely sure that that is appropriate.
It is a pleasure to wind up this Second Reading debate, but before I deal with the points raised during it, I should first declare an interest as a non-executive director of an institution that takes deposits, albeit one that has only recently been licensed to do so and is therefore unlikely to have any dormant bank accounts for some years.
Secondly, and perhaps more importantly, I should welcome Ian Pearson to his new post as Economic Secretary to the Treasury. I recognise that he will be dividing his time between being a Treasury Minister and being a Minister in the Department for Business, Enterprise and Regulatory Reform. I am not sure whether his brief is, on behalf of the Treasury, to keep an eye on the new Secretary of State for Business, or to keep an eye on the Treasury on behalf of the Secretary of State for Business, but either way, I wish him well in his new post. He may well be forgiven for questioning the timing of the debate. After all, the Bill left the other place in February this year, and he may consider it somewhat unfortunate that we are debating it in this place within about 24 hours of his appointment. However, I am sure he will have mastered the details of the Bill for his winding-up speech.
We began our debate from the Back Benches with a useful contribution from Mr. Jones who clearly has a long-standing interest in the matter, which appeared to be provoked by his discovery that he was paying a direct debit to the funds of the Labour party, of which he knew nothing. There is nothing unusual about that. It probably applies to thousands of trade unionists most of the time, the difference being that it turned out that the bank account to which the funds were going was dormant. It might have been best to let sleeping dogs lie, but that was not how the hon. Gentleman approached it. He has played a significant role in the development of the debate.
As I run through the issues that we debated, I shall address some of the concerns raised by other hon. Members. The Opposition are broadly sympathetic with the details of the Bill and we will support it this evening. The first part of the Bill relates to the raising of funds from the dormant accounts. The second part deals with how those funds are distributed. We are sympathetic to the structure of the first part. It is right that financial institutions are encouraged to reunite deposit holders with their assets—a point made by my hon. Friend Mr. Spring—and we acknowledge the steps taken by a number of financial institutions to do that.
We support the principle of a voluntary scheme. The hon. Members for High Peak (Tom Levitt) and for Clwyd, South, Mr. Todd, speaking in his role as the emissary of the Treasury Committee, and my hon. Friend Miss Kirkbride questioned whether a compulsory scheme would be better, or whether we should keep the option open and include provisions for a compulsory scheme at a later date, should a voluntary scheme be found not to work.
We share the Government's approach. We think it would be useful to use the expertise of the private sector in a voluntary scheme. It would be cheaper and more efficient, and therefore a better way of raising funds for good causes. It would be a fundamental change in the nature of the Bill were it to contain reserve powers for a compulsory scheme at a later date. If there is a switch to such a scheme, Parliament should consider it closely and properly and have the opportunity once again to debate the matter in the form of primary legislation.
We also share the Government's caution—I think that that would be a fair word—about the definition of dormant. We do not want to adopt an aggressive approach and we think 15 years is an appropriate length of time before an account is considered dormant. We also support the idea, which was advocated by the noble Baroness Noakes, that banks or building societies must use their knowledge of the account, the account holder or any other relevant matters in determining whether an account is dormant. We do not want funds to be paid out, only to be followed by significant numbers of claims on dormant accounts that are no longer dormant. We understand the Government's caution in respect of the 15-year limit.
It is essential that deposit holders are able to reclaim their funds, notwithstanding the fact that the account has been dormant for some time. It is vital that such confidence exists, so that there is no basis for the criticism that is sometimes made that the Bill is a grab for other people's assets. Again, we share the Government's approach on the fundamentals, but there are differences, particularly on the scope of the assets covered. As the hon. Member for South Derbyshire observed, the Treasury Committee considered the issue and questioned why, for example, pension and life assurance funds could not be included in the scheme. It would helpful if the Minister could address that.
In particular, it is worth considering National Savings & Investments. The hon. Member for South Derbyshire described as somewhat thin the Government's arguments for not including that. It is notable that in the debate in the other place the Government argued that that would result in an extra tax burden or increase Government borrowing or Government debt. That does not make sense. A dormant account with NS&I, were it to be closed, would be a reduction in debt in one respect and, transferred elsewhere, would be a creation of debt somewhere else. For balance sheet purposes, it would have no implications, so I do not see what the Government's defence is. If they are saying that it is for taxpayers' benefit not to include NS&I, we need to understand why.
It is worth making a parallel with one financial institution that will presumably be affected by the legislation—Northern Rock. Will the Minister confirm whether Northern Rock will participate in the scheme? It is, of course, a voluntary scheme, but the arguments made for NS&I could apply to Northern Rock. I would be grateful for the Minister's thoughts on that.
We support the principles underpinning the Bill, but we want to see how it will work. That is the purpose of the triennial review provided for in clause 12. That will enable Parliament to see how the scheme is working and to examine the arguments about whether it should be extended. It would be helpful for the process to take place not just once, but on an ongoing basis, although clearly it is important, three years after the Bill has come into force, to see how the process is working, given the accumulation of dormant accounts. We therefore hope that the Government will not seek to amend or repeal clause 12 or the provisions relating to ongoing triennial reviews.
We also think that parliamentary accountability is important. We have already discussed the reclaim fund in today's debate. The Chief Secretary referred to the fact that the reclaim fund is very much a private scheme, but we must remember what it is there to do. It serves a public end, having the purpose of providing funds for good causes, but it must make a judgment about what can be distributed safely and what will need to be held back in the event of any subsequent reclaims.
Parliament will want to be able to take a view on how the reclaim fund is performing. We must also remember that the reclaim fund is subject to direction from the Treasury, under clause 5(4). The fund is very much a public body. Notwithstanding the fact that it is a private scheme created by the BBA and the BSA, it performs a public role and Parliament is therefore entitled to take a view.
The second issue is how money will be distributed. That provoked a great deal of comment from Conservative Members. Concerns about the efficiency of the Big Lottery Fund were raised by my hon. Friends the Members for Broxbourne (Mr. Walker), for West Suffolk and for Rochford and Southend, East (James Duddridge). Concerns were also raised about the lack of clarity about the objectives. In a sense, there are three objectives: youth services, financial inclusion and the social investment bank.
However, as my hon. Friend Mr. Hoban made clear in his opening speech, it is not clear what proportion will go to which objective, what the priority will be or who will allocate. As far as we can see, the Secretary of State for Children, Schools and Families will have that role, although he is responsible only for youth services, not the other two objectives. Does that mean that youth services will be seen as the most important? It might be right for them to be seen as the most important, but we have not had that clarity from the Government. Again, I would be grateful for some clarification from the Minister.
A number of hon. Members mentioned additionality. My hon. Friends the Members for West Suffolk, for Northampton, South (Mr. Binley) and for Broxbourne all raised concerns about whether the expenditure resulting from the Bill would go on things that the Government already intended spending money on anyway, or on things that would be funded by the lottery but which the lottery cannot fund because the funding is going to the Olympics. That raises a concern about the involvement of the Big Lottery Fund, in that there could be a lack of clarity about where such sums are coming from.
That brings me to one of the most important issues, on which Martin Horwood spoke very authoritatively—namely whether banks and building societies should be able to use their own charitable trusts for funds created as a consequence of dormant accounts or whether everything should go through the reclaim fund and the Big Lottery Fund. The particular area of dispute concerns the larger building societies. There is an agreement on the part of the Government that smaller building societies should be able to use their own charitable trusts because they have strong links with local communities. There is no argument that large banks or banks as a whole should be able to use their own charitable trusts, although it is worth noting that the Government recognise that large charitable trusts can play a valuable role in particular communities.
Again, it is worth considering the example of the Northern Rock Foundation, which, although Northern Rock has been nationalised, the Government still fund with something like £15 million a year, to be spent in a particular part of the country. If that is an appropriate approach, one wonders why the Government cannot look into the issue more broadly in the context of this Bill.
The Government recognise that small building societies may distribute funds through their own charitable trusts, but remain resistant to allowing bigger building societies to do so. However, the larger building societies dominate the market. There might be only seven or eight building societies that exceed the £7 billion asset barrier, but their assets constitute some 83 per cent. of all assets. They are still mutual societies, working in particular areas and rooted in communities. I urge the Government, in the current spirit of bipartisan co-operation, to look into the issue again.
We will support the Bill this evening. It serves a valuable purpose, and it has been improved by amendments during the course of proceedings in the other place. We urge the Government not to reverse those amendments. In its present form, the Bill addresses the main concerns while allowing some flexibility for the larger building societies. It provides sufficient—or, at least, adequate—parliamentary accountability, and we urge the Government not to seek to take it back to its position when it first went to the other place.
This has been an interesting and wide-ranging debate covering many significant matters in the Bill, and, indeed, some that are outside of it. I am grateful to all hon. Members for their contributions, and for the generally constructive way in which they made their points. As has been said, the purpose of the Bill is to enable money in dormant bank and building society accounts to be reinvested for the benefit of the wider community, while at the same time ensuring that consumers are protected, and I am delighted to welcome the unanimous support of all those who spoke in the debate today.
In addition to those who speak for the Opposition on these matters, we also heard three very impressive contributions from my hon. Friends the Members for Clwyd, South (Mr. Jones), for South Derbyshire (Mr. Todd) and for High Peak (Tom Levitt). My hon. Friend the Member for Clwyd, South is a long-standing and passionate champion of using dormant accounts for good causes, and he made a number of important points. Likewise, my hon. Friend the Member for South Derbyshire, who has looked at these issues extensively, raised a number of points, and I shall try to address the key arguments that he put. Similarly, my hon. Friend the Member for High Peak raised a number of significant issues concerning the nature of the funding, which I hope to address in due course.
We also had a number of probing contributions from the hon. Members for Bromsgrove (Miss Kirkbride), for Northampton, South (Mr. Binley), for Broxbourne (Mr. Walker), for Rochford and Southend, East (James Duddridge), for Cheltenham (Martin Horwood) and for West Suffolk (Mr. Spring).
I will indeed clear that matter up in due course.
I reiterate the welcome for the constructive spirit of openness that was expressed by my right hon. Friend the Chief Secretary to the Treasury in her opening remarks, and I am sure that the Members who have spoken today will be interested in discussing these issues in detail in Committee.
This scheme will be simple for consumers. Mr. Browne called it "convoluted", but, on the contrary, the consumer experience will remain the same. The intention is that consumers would still use their bank or building society, which would maintain their account records. The consumer would retain the right to payment, and if they wished to reclaim their dormant assets, the process should be as simple as marching into a bank or building society—or writing to it—and demonstrating proof of identity. The consumer would then get the money that was rightfully theirs. There is nothing in the legislation that should prevent that.
I also want to stress that we believe that a voluntary scheme will work. The industry is publicly committed to it, and in the past few days has reiterated its commitment through comments from the British Bankers Association and the Building Societies Association. It is important to recognise that only a small fraction—seven hundredths of 1 per cent.—of the total banking assets are going to be transferred. Nevertheless, that is a significant sum in total, and it is right that we should deploy it to good causes. I shall say more about the calculation of that figure in a few moments.
I also want to stress the importance of the reuniting process that has been going on and to welcome the launch of "mylostaccount" in January this year. More than 175,000 people have submitted search forms on the site, and banks and building societies have reunited people with about £50 million since its launch.
A number of amendments were made in the other place and I want to stress that the Government have listened to the points that were raised there. We recognise the need for greater transparency over the operation of the reclaim fund. We will table amendments to that end. We agree that reviewing the operation of the reclaim fund is important, but we do not accept the need for a triennial review in statute in perpetuity—an issue that we will want to discuss further in Committee.
Some hon. Members made detailed points about the absence of a central register. Let me point out in response that mylostaccount.org.uk allows searching by name as well as by institution and it is possible to search multiple institutions. I reiterate the success of that initiative over the current period. We welcome all constructive proposals on how further to improve the reuniting arrangements, but our current view is that a central register would be expensive and would place a significant administrative burden on the scheme. That is why legislating for a central register is neither necessary nor proportionate. Unlike with "mylostaccount", a central register would involve the transfer of significant amounts of personal data from banks to the register operator. It is important that financial institutions treat customers' confidential data appropriately and, in addition, within the confines of the Data Protection Act 1998.
The Bill allows banks to transfer customer information to a reclaim fund to deal with repayments. Of course, banks will generally act as agents of the reclaim fund and handle the reclaims, so it should be as simple as possible for customers to get the money that is rightfully theirs. There should be no need for routine transfers of information to the reclaim fund, but that would be very different if there were a central register. That is one of the reasons we do not favour that proposal.
Mr. Hoban asked how the Treasury will engage with the reclaim fund. I believe that the framework is very clear: consumer protection will be enshrined in the legislation and consumers will reclaim money from their banks just as I have stressed now—with the banks acting as agents of the reclaim fund. The hon. Gentleman also asked whether the reclaim fund should be accountable to Parliament. The issue was also raised by other Members, but let me say in reply that the reclaim fund is not a public sector body. It will be set up by the industry independently of the Government. It will be a Financial Services Authority-regulated company incorporated in the UK and subject to company law.
Comments were made about the Treasury's power of direction, but let me stress that we view that as an ultimate sanction and we do not anticipate needing to implement it. It is highly unlikely that we would use that power, but we will ensure transparency by publishing on our website any concerns about the matter.
We are very clear that we want the reclaim fund to be a success. It will be for the reclaim fund to produce its own business plan and to strike the balance that we have discussed between the need to protect the consumer and meet any future claims and the need to distribute money to good causes. It will, as I say, be regulated by the FSA, which will obviously want to look closely to ensure that it is financially solvent.
We have powers that can be used in exceptional circumstances.
I am happy to return to this matter in Committee, but it is important to recognise that the scheme is voluntary and that it will be up to banks and building societies to decide whether they wish to participate. All the indications in the public statements that they have made are that they want to do so. The scheme will be privately run and will produce its own accounts, which will be published openly and transparently. It is important that that happens.
A number of hon. Members asked about the principles for distribution. The Government consulted on that in May 2007, when they set out their intended spending areas for England, which have been discussed during this debate. I stress that feedback broadly supported the Government's proposals for distribution with a majority of respondents supportive of the principles, the use of the Big Lottery as a UK-wide distributor and the Government's intended spending areas. We specified those areas for England, but, as was made clear by the Chief Secretary, it is a matter for Wales, Northern Ireland and Scotland to set out their own priorities. We heard one contribution on the consultation process in Scotland.
The Government, supported by the consultation, hold that the spending areas identified in England represent a worthwhile investment of community resources, now and in the future. We will determine the relative allocation for each year in relation to the spending areas for England through a cross-Government working group, which will draw up the spending directions to the Big Lottery. I am sure that we will come back to that in Committee, but it is important to recognise that we have been through a consultation process on the general areas. In determining the relative priorities, we will consider whether further consultation is needed.
The Big Lottery Fund is a Government-controlled body, but it is a non-departmental public body, independent of Government. A number of hon. Members made some injudicious comments in suggesting that it is an arm of Government and that we are trying to use it to fund normal Government expenditure. That is clearly not the case. It is very much the Government's intention that those lottery funds should be additional public expenditure.
According to the National Lottery Act 2006, the Minister should be quite right in condemning some hon. Members for implying that the Big Lottery Fund is run by the Government, but his remark that it is a Government-controlled body rather plays into those hands. Would he like to rephrase and perhaps clarify that expression?
I was clear, I hope, that the Big Lottery is a non-departmental public body, independent of Government. The accusation that it is a Government-controlled body that takes the people's money and spends it as it chooses is something that I wholly regret. I thank the hon. Gentleman for allowing me to clarify those comments.
I re-emphasise that in clause 23 it is proposed that directions to the Big Lottery Fund will be given by the Secretary of State for Children, Schools and Families. The clause has been deliberately written so that it is broadly similar to wording in the 2006 Act, which relates to the strategic guidance given by the Secretary of State for Culture, Media and Sport. It is right that the Government should give broad, strategic directions for the Big Lottery Fund.
We have been clear that spending must be additional to Government provision. Unclaimed assets are in effect community resources. They are not a substitute for Government funding. It is right that they should be seen to be used to develop and strengthen communities.
On the proportion of funds that are likely to go to the Big Lottery Fund, I stress that the reclaimed fund must hold back sufficient funds to repay potential customers. That is crucial. It will manage money on the basis of the FSA's prudential regulation regime. The FSA will consult on that regime and publish a cost-benefit analysis in the usual way. It is not possible at this stage to say what proportion of funds will be passed on to the Big Lottery Fund. That is a decision for the reclaim fund. It will be under a statutory obligation to transfer to the Big Lottery Fund sums that are not needed for reclaim or expenses.
My hon. Friend the Member for Clwyd, South raised a number of issues in his powerful contribution. Again, I stress that we believe that a voluntary scheme will work. It has the support of banks and building societies. It will be highly transparent, so the basis on which they are participating will be clear.
My hon. Friend asked about the definition of dormancy and how confident we are about the industry's figures. The industry has provided us with an estimate that after 15 years, 80 per cent. of dormant accounts are genuinely lost by the customer. That level of accuracy in identifying dormant accounts is important to minimise the ultimate level of the reclaim fund and hence overheads. The Government have listened to concerns about the time limit that were identified and discussed in the other place. We plan to introduce a power to amend the limit in the light of suitable evidence that a reduction or increase is advisable. We are reliant on the industry for the estimates, and they are the best estimates available. Of course, we would welcome it if more money were ultimately transferred into the scheme.
My hon. Friend also asked whether banks will publish their dormant account policies. Again, that is an important issue. My understanding is that the answer is definitely yes. Banks are committed to doing that under the banking code. There will be transparency about how banks are participating, along with the other specific disclosure requirements in the Bill. The flexibility of the proposed scheme is one of its main strengths. It will allow banks to take a wide range of factors into account in identifying dormant assets, which will minimise the possibility of misidentification and, in doing so, help to reduce the costs of administering the scheme.
A number of hon. Members asked how we will know whether banks are engaging the scheme and in particular whether there will be independent audits. The reclaim fund will publish amounts transferred into the scheme by individual institutions. Banks are committed to publishing their policies on how they are participating in the scheme. They are expected to subject transfers to independent audit as well.
Hon. Members also mentioned National Savings & Investments and its potential participation in the reclaim fund. NS&I has played an active role in reuniting funds with their owners. It has operated a free tracing service since 2001, and is a committed member of "mylostaccount" in the context of operation and advertising. Since 2001, it has reunited £109 million with 93,000 customers.
Having examined the issue carefully, the Government concluded that it would not be appropriate to transfer NS&I dormant accounts to the scheme, but NS&I is fully committed to reuniting owners with dormant accounts. I should make the crucial point that NS&I differs from banks and building societies in that its only function is to borrow money for the Government, which is then used to fund public spending. That means that money deposited with it is already doing public good, and including it in the scheme would mean diverting money that would have been spent on public services to the charity sector. We do not believe that that would constitute a prudent use of public funds.
My hon. Friend the Member for South Derbyshire asked whether members of building societies would lose their membership rights if their dormant assets were transferred. I think he was the only Member to raise that concern, but I can tell him that the proposed scheme will not affect building society membership rights. In a statement made in October this year, the Building Societies Association supported the Bill's provisions concerning the safeguarding of the rights of building society members. The Bill provides that when a building society transfers a dormant account to the scheme, any membership rights attached to that account will continue to have effect as though the account had not been transferred.
Given that the Government designed the scheme to enable spending decisions to be devolved, I think it follows logically that a population-based formula should be used for allocation. That is why we suggested that the Barnett principles offered an established method of apportionment. The Big Lottery Fund will be required, within the spending directions, to achieve a fair and equitable distribution of funds in England. It has been chosen as the principal distributor because it has a track record of achieving a fair regional and local spread of funding, and because of its work distributing funds to revive communities.
I am sure that we shall be able to return to some of the points made today in Committee.
The last point with which I shall deal this evening concerns the provisions on small locally based financial institutions. The purpose of the alternative scheme for such institutions is to provide a balance between recognition of the special role that some small institutions play in their local communities, and ensuring that enough resources are available for the national scheme to facilitate an overall efficient and strategic approach to distribution.
The Government acknowledge the arguments advanced in the other place, and the important role that mutual organisations play. However, while we welcome in particular the commitment of Nationwide and the other major building societies to participating in the scheme as ultimately constituted, we believe that the amendment widening the option to encompass all mutuals is not desirable. I can give three reasons for that.
First, the Government consulted on an asset threshold of £7 billion applying to both banks and building societies, and as the proposal received broad support during the consultation, we believe that that is what most respondents want us to do. Secondly, the amendment would significantly reduce the amount of assets available to the national scheme through the Big Lottery Fund, and thereby the strategic opportunity to make a significant difference in the areas identified as priorities for spending. Thirdly, there would be a lack of coherence in national distribution.
Nationwide and its partners have stated clearly that they will support the English priorities, which is welcome. However, a whole series of different foundations distributing in parallel to the same causes is inefficient and fails to maximise the opportunity of the dormant accounts scheme. It is for these reasons that we do not believe it would be right to maintain the current amendment passed in the other place, but we will come back to this in Committee.
I do not have the figures immediately to hand, but they certainly are significant. The hon. Member for Cheltenham made the point that although a significant number of building societies will be excluded under the £7 billion figure, some of the big building societies will participate in the reclaim fund, and we think it is right and proper that they should do so.
My hon. Friend said he had dealt with the last point he raised, but I think the elephant in the room is the voluntary nature of the proposals. There has been scepticism across the House about whether a voluntary scheme can work given that no other voluntary scheme is operating in the world. Will he at this late stage undertake to come to Committee with an amendment that would allow reserve powers to be in the Bill such that at the first triennial review the scheme can be made mandatory if the voluntary system is not working?
I am certainly happy to debate the issue in Committee. Although what the UK is proposing in terms of the voluntary scheme has not been adopted in other countries, we have had extensive discussions with the banks and building societies and they have all indicated a strong willingness to participate, so we have no reason to doubt the commitment of these organisations to participate.
I am sure the Economic Secretary is right that the building societies support the principle of the Bill, but they have fairly consistently objected to the £7 billion threshold applying to them whereas banks have not. Therefore, can he remind us of this: why £7 billion?
Well, some building societies have, but others have not, and my understanding is that the figure of £7 billion was arrived at in discussion with banks and building societies and put in the original consultation documents. We consulted on that £7 billion figure applying to both banks and building societies, and it is a proposal that received broad support during the consultation.
A number of further points have been raised, but I think we can return to them in Committee. I am pleased to be able to say that the Bill has cross-party support. We want to get it right. We recognise that there is the opportunity to scrutinise the detail in Committee, and I look forward to engaging further with Members in all parts of the House as we look to take the Bill forward.
Question put and agreed to.
Bill accordingly read a Second time.
Motion made, and Question put forthwith, pursuant to