Clause 5 — Functions etc of a reclaim fund

Orders of the Day – in the House of Commons at 5:30 pm on 3rd November 2008.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 5:30 pm, 3rd November 2008

I beg to move amendment No. 10, page 4, line 42, leave out subsection (4).

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

With this it will be convenient to discuss the following amendments: No. 12, page 5, line 1, at end insert—

'(4A) Where the Treasury gives a direction under subsection (4), that direction shall be published within 28 days of it being given.'.

No. 11, in schedule 1, page 16, line 32, at end insert—

'(ca) the name of each bank and building society listed in the FSA Register in respect of which no monies were transferred to the fund.'.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Two of the amendments in this group relate principally to the operation of the reclaim fund. In relation to the debate on how the fund will work, the Treasury has made it clear from the outset that this is a voluntary arrangement, and that the fund would be a private company set up by the British Bankers Association and the Building Societies Association to manage the transfer of money into the reclaim fund. It will also manage the reclaim process and determine how much money will be passed across from it to the Big Lottery Fund.

My concern is that, under clause 5(4), the Treasury will have the power to give a direction to the reclaim fund requiring it

"to give effect to any specified object that it has" or

"to comply with any specified obligation or prohibition imposed on it by a provision that its articles of association are required to make under Schedule 1."

In Committee, the Minister said that it would be the sole responsibility of the Financial Services Authority to regulate the reclaim fund for prudential purposes, and that the fund would be authorised by the FSA. That is fine, and we can understand the reasons for the limits on that involvement. However, there is still a requirement for the Treasury to give directions.

In Committee, we tabled an amendment proposing that, when such directions were given, they should be subject to parliamentary approval. The Government opposed that amendment, but we were reassured that these powers would be deployed only as a last resort. It is difficult, therefore, to work out why the Government were so reluctant to allow parliamentary scrutiny in this area. Indeed, when we pressed the Minister on the circumstances in which the power would be deployed, he said that the Government did not have any particular area specifically in mind, because they did not anticipate any problems.

So, we have a power that the Government do not believe will be used, and they do not believe that its use should be subject to parliamentary scrutiny. I could accept the power to give directions, if it were to be subject to parliamentary scrutiny, but I do not accept it without such scrutiny. This is an unsatisfactory situation. I have therefore tabled amendment No. 10, which proposes to omit subsection (4) of clause 5, which would make the measure more in keeping with the spirit of the legislation, namely that the reclaim fund is to be a private company established by the BBA and the BSA, and that it should operate as such, without Ministers having the power to give directions to the company to force it to act in a particular way.

Amendment No. 12 deals with this issue in a different way. It proposes that, when the Treasury gives a direction under clause 5(4), that direction should be published within 28 days of its being given. If there is to be no parliamentary scrutiny, and if these powers are to remain part of the Bill, there should at least be some publicity given to the direction. Accepting this amendment would not be a big step for the Government to take, if they believe that the powers are absolutely essential for them to have. They should not be afraid of publicising such directions. Indeed, elsewhere in the Bill, there are provisions for directions to be given to the Big Lottery Fund, and such directions will be publicised through the Big Lottery Fund's accounts. So there is a clear role for the publicising of directions.

Amendment No. 12 would provide a vehicle—although not as good a vehicle as a statutory instrument—for Parliament to scrutinise the Treasury's use of the power of direction. Members of Parliament would be able to ask questions, and the Treasury Select Committee would be able to investigate the Treasury's use of the power. A softer scrutiny element is therefore involved. The amendment is a perfectly reasonable proposal to achieve some level of parliamentary scrutiny, if the Government are so wedded to keeping on the statute book a power that, at the moment, they do not expect to use.

Amendment No. 11, which goes back to an issue that we discussed in Committee, concerns the level of publicity that should surround this part of the scheme. Schedule 1(3) contains a provision for the reclaim fund to publish certain information in its accounts. At the moment, that information is limited in four ways. The fund must publish its accounts and reports in accordance with the Companies Act 2006. It must publish

"the name of each bank and building society that transferred money to the fund in that year, and the amount transferred by each one".

It must publish

"the name of each bank and building society in respect of whose accounts payments were made from the fund in that year following repayment claims and, in relation to each of those banks and building societies, the total of the payments made".

It must also publish

"the total amount transferred in that year to the body or bodies for the time being specified in section 15(1)."

However, that does not include a requirement to name and shame, by saying which institutions have not contributed to the reclaim fund. As part of the series of measures that we need to take to ensure maximum scrutiny, and to ensure that we know that institutions are taking seriously their commitment to be part of this voluntary scheme, the reclaim fund should make it clear in its accounts which institutions have not contributed to it.

When we debated this in Committee, the Minister argued that it was not the job of the reclaim fund's horizon scan to find a list of banks and building societies, and to determine whether or not they had contributed. He said that the FSA had a register of such entities. I have learned a lesson from my previous drafting experience, which is why amendment No. 11 refers specifically to the list of banks and building societies that the FSA will hold in its register. The reclaim fund would therefore not have to do any horizon scanning; it would simply have to compare the list in the register with the banks and building societies listed under paragraph 3(1)(b). Those that were not so listed would be listed under proposed new paragraph 3(1)(ca), which would tell us exactly which had not contributed to the scheme. That measure would maintain keep the spotlight on those institutions that had not co-operated with the scheme.

These are three very reasonable amendments. Amendment No. 11 is about scrutinising who has not contributed to the scheme. Amendments Nos. 10 and 12 give the Minister some choice: either to take out the powers in the Bill or to require the Treasury to publish the direction within 28 days of publication. The Minister will have his own views, and I suspect that he is minded to reject both, but given that the Government rejected parliamentary scrutiny of the direction—in the Minister's words, it is the "ultimate sanction"—there needs to be some check on the Government. If they are not prepared to accept such a check, amendment No. 10 is the right road to go down.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office 6:00 pm, 3rd November 2008

Let me reverse the position of amendment No. 10 for a moment. If clause 5(4) were not in the Bill—precisely what the amendment is designed to achieve—and I moved an amendment to put the wording of subsection (4) back into the Bill, I suspect that the Government would respond by arguing that it was unnecessary and there was no need for it —[Interruption.] Mr. Hoban is looking puzzled; I am saying that if I attempted to insert that wording into the Bill, the Government would probably say, "We don't need it; it is redundant", as they often do in respect of amendments coming from both sides of the House. We are told that we do not understand and that there is no need for the amending provision.

If I ask what clause 5(4) does—if, as one anticipates, the Government resist amendment No. 10, which would remove that provision—the answer is that it gives the Treasury a power that I suspect it needs, because I cannot see anywhere else in the Bill where it defines who the members of the reclaim fund are. It will be a company, which has to have members—the shareholders—although I know that the Bill provides that they are not going to get dividends. It seems to me that clause 5(4) is needed on account of this lacuna, whereby the members of "the" or "a" reclaim fund are not specified.

I appreciate from paragraph 51 of the explanatory notes that the

"British Bankers' Association and Building Societies Association have committed to lead on the selection or establishment of a body to act as a reclaim fund."

However, when the Minister responds to the blandishments of the official Opposition on amendment No. 10, I hope that he can elucidate that and clarify whether I am right that clause 5(4) is necessary because the Bill does not specify who the members of a reclaim fund should be. It would be for the members of that fund to carry out enforcement if the directors failed to give effect to specified objects or to comply with the provisions in the memorandum of association and articles of the fund. Usually, one would expect the members of the company— with a limited guarantee or otherwise—to be responsible for enforcement. It is for them to say, "You are not complying with the rules of our organisation or company. As directors, you should be, so if necessary, we will take you to court to get you to comply". If one does not know who the members are, however, one cannot say that the watchdog power exists, which is why subsection (4) is necessary.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

If it were that simple, the Minister would have said that in Committee, but let me quote what he did say, as the hon. Gentleman did not have the pleasure of serving on it. The Minister said:

"We do not have particular areas specifically in mind because we do not anticipate any problems. This is a voluntary scheme. A private company is going to be set up in accordance with the legislation, and we have confidence that it will appoint people who will run the reclaim fund in an effective way." ——[ Official Report, Dormant Bank and Building Society Accounts Public Bill Committee, 14 October 2008; c. 17.]

The Minister clearly had confidence that the members would be correctly chosen by the British Bankers Association and the Building Societies Association, but even that obvious statement does not quite explain why this power is in the Bill.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

I am grateful to the hon. Gentleman for that helpful intervention, but taken as a whole—I name no individuals—the track record of British bankers over the past two years in running a tight ship within their organisations has not exactly been a stellar one. According to the Hansard excerpt which the hon. Gentleman helpfully read out, the British Bankers Association and the Building Societies Association will set up one or more reclaim funds that could—I stress the word "could"—become a cosy little club that does not regulate itself properly, does not comply with its memorandum or articles of association and does not comply with the objects of the reclaim company. In that case, clause 5(4) is therefore necessary and amendment No. 10 should be rejected.

If my analysis is correct, it raises the question why the legislation does not offer a little more clarity on who the members of a reclaim fund company should be. It also suggests that the Treasury should, in some guise, be a member—not the dominant member, but a member—of a reclaim fund so that in its role as a member, it could enforce compliance with the memorandum and articles of association were the directors to fail to comply.

I hope that the Minister will set my heart at rest as to why clause 5(4) is in the Bill and explain that, although it should not be part of the Bill, its inclusion is necessary because of the lacuna in respect of lack of enforcement that follows from our not knowing who the members are.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne

This is an interesting set of amendments. When the Bill becomes an Act, it will result in the establishment of a reclaim fund, which will be a limited company. If it is to carry the support of the public, the operation of the scheme must be transparent and its decisions, as well those participating in the scheme, must be subject to scrutiny. We will look into that in three years' time, but what we will really want to know is which banks and building societies are foot dragging and are choosing not to participate. If we know who they are and we can benchmark them against those who are participating, we could bring them before the Treasury Select Committee, for example, which could then ask them directly why they are not participating in the voluntary scheme.

It may be that banks and building societies have very good reasons not to participate, but equally it may be that they frankly cannot be bothered. Only through public scrutiny and public opprobrium can we bring them to the table. I say "only", but there is, of course, another mechanism: statutory regulation. In that case, after three years, the House says, "You organisations are not pulling your weight. We have tried the voluntary route, but we are now going to go down the compulsory route—and you will participate in this scheme." That would be a great shame, but it could happen.

As for the Treasury's direction of this limited company—the Treasury's right to direct it—it would be helpful if the Minister put some scenarios before the House to explain why or when the Treasury might wish to exercise such power. After all, having served in Committee, I believe I am right to believe that the Bill allows for the establishment of a limited company that would be regulated by the Financial Services Authority. Only extreme circumstances would allow the Treasury to start to interfere in day-to-day operations, but we know that such circumstances arise, as we have seen recently in the banking sector—I sincerely hope that this rather small organisation does not experience the same type of crisis in two or three years' time.

I listened to Rob Marris and I heard his concerns, so I think it would be helpful if the Minister brought us in on some of the conversations he has had with his civil servants on what circumstances might trigger a direct intervention from the Treasury. If nothing else, that would put our minds at rest.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I rise to say briefly that I agree with the hon. Members for Broxbourne (Mr. Walker) and for Fareham (Mr. Hoban) that amendments Nos. 10 and 12 propose a bit of an either/or provision. Speaking as one who wants the greatest degree of independence and transparency, however, I believe that going down one of the proposed paths would further those objectives. The public need to enjoy confidence in an organisation. They need to believe that it will not be unduly manipulated or directed by the Treasury, but will be able to operate with a bit more freedom of spirit.

As was said earlier, it would be helpful to know something about the composition of the group. I do not think that it should be seen as merely a wing of the Treasury. It would be helpful if the Treasury provided a direction, or even instructions, to the effect that the group should be open to scrutiny by Parliament and by the wider public, and we should be able to know the basis on which such orders were given. I consider that amendments Nos. 10 and 12 would further those objectives, and are laudable for that reason.

Amendment No. 11 is slightly different. It would name and shame those who chose not to participate. I instinctively take the view that schemes of this sort should be voluntary rather than compulsory, because I tend to regard compulsion as undesirable unless it is wholly necessary. However, as the hon. Member for Broxbourne pointed out, if a stage is reached when most banks and building societies are demonstrating good will—making it clear that they want the scheme to work and want to support, indirectly, the projects for young people on which it is envisaged that a large amount of the money will be spent—while others are not participating, not for good reasons but because they regard the scheme as burdensome, unnecessary and not part of their core business, it seems reasonable for us parliamentarians, and the public as a whole, to know which banks are entering into the spirit of the enterprise and which are not.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne

It is quite simple: a list of participants should be published, and if the name of a building society or bank does not appear on it, shareholders, Ministers and Back-Bench Members of Parliament should be able to ask questions about its absence.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Unless I have misunderstood it, the amendment proposes the publication of a list of banks and building societies that have not participated, rather than a list of those that have done so—although for those with a good knowledge of the sector, the end result would be the same.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Let me clarify the proposal for the benefit of the hon. Gentleman and my hon. Friend Mr. Walker. The amendment would ensure that the accounts of the reclaim fund listed those who had participated in terms of the amounts that they had transferred, but also listed those who had not participated.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

That is a helpful clarification. It would obviously be much easier for a member of the public to identify the offending banks—those that had not entered into the spirit of the legislation—if there were a list of banks that had not participated rather than a list of those that had, which would mean trying to work out which names were not on the list. This is difficult territory. It could be argued that if a scheme is made voluntary and huge moral pressure is then put on bodies to comply, it is voluntary in name only.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne

In essence, what my hon. Friend Mr. Hoban is rightly demanding is a factual demonstration of, and factual information on, the state of play.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Absolutely. We are not making a moral judgment about the names on the list, although others may seek to do so; we simply want factual information on whether the institution in question has chosen to participate in the scheme. The hon. Gentleman made a good point when he said that the Treasury Committee, for example, could invite non-participating institutions to appear before it and discuss why they did not wish to comply. They might, of course, have good reasons. The scheme might not be working as we expected it to when we passed the legislation. The group with most cause to reflect on why the institutions were not participating might be not the institutions themselves, but the Members of Parliament who had established rules that did not work as they had wished. That would, I hope, emerge in the review in three years' time, and might make the scheme more attractive to those who had not participated but did not object, in principle, to doing so.

I suspect, however, that other institutions would not have participated because they did not see participation as a core function of their organisation. I suppose that they would be right in that view, but nevertheless they would not have been willing to give up the time or effort to demonstrate the good will that would be part of complying with the scheme. They would see the benefits to society as a whole as conferring no immediate benefits to them, and would therefore regard participation as a waste of their time. That strikes me as a far less attractive reason for non-participation.

All that amendment No. 11 does is enable the information to be put before us. We should not automatically draw conclusions from the composition of the list, but it would enable us and the wider public to ask further questions that would be useful in revealing the motives of organisations that had sought not to participate.

For all those reasons, I consider the amendments interesting and helpful, and I hope that the Government will view them with an open mind.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury 6:15 pm, 3rd November 2008

Clause 5(4) contains a direction-making power as an ultimate safeguard allowing the Treasury to take action to ensure that a reclaim fund complies with its company objects and articles of association. We discussed the clause in Committee, and I am grateful for the contributions that were made then. I emphasise that the direction does no more than require the reclaim fund to give effect to, or comply with, requirements to which it is already subject under the Bill, which place restrictions on its objects and articles of association, and which will have been approved by Parliament. In other words, the fund must comply with the law.

Let me explain why I believe the direction to be a necessary part of the Bill, and respond to what has been said by my hon. Friend Rob Marris and others. The Financial Services Authority will authorise the reclaim fund, and establish ongoing prudential regulation to ensure that it has enough money to repay customers. That is in keeping with its role as a financial regulator, and with its consumer protection role. However, the FSA is not expected to go beyond its statutory objectives and make rules governing other areas of the fund's operations.

The Government do not intend to use the direction-making power to involve themselves in the day-to-day running of the reclaim fund and the management of its money. That will be the sole responsibility of the FSA, which will regulate the reclaim fund for prudential purposes. This power is different: it is an ultimate sanction that the public will rightly expect us to have to ensure that the reclaim fund functions in accordance with our legislation in areas that the FSA will not regulate for prudential purposes.

Opposition Members invited me to be specific, so let me give two examples. The first concerns the requirements in schedule 1 relating to the publication of information by the reclaim fund. A private sector company might decide for some reason that it did not want to make public the information whose publication is required by the schedule. Such publication would not be part of ordinary prudential regulation, but would clearly be desirable in the interests of transparency. I have no reason to doubt that a company would want to publish its accounts, but I think it right for us to provide that ultimate safeguard as a back-up.

My second example involves the reclaim fund's use of money to cover reasonable running costs. That too might not be covered by an ordinary prudential regulation regime, and might therefore fall outwith the FSA's powers. If we considered that a company was acting unreasonably and in an excessive way, we would think it right to take action. That would not be covered in normal circumstances. I do not think that it is likely to happen, but I think that we should have powers to act in that unlikely event. I stress that the powers would enable us to act in wholly exceptional circumstances, when serious concerns arise about the behaviour of the reclaim fund which are not covered by the prudential regulatory regime, and when we believe that the Government are required to act.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

In my experience, we in this Chamber do not generally pass provisions in Bills that simply say, "Thou shalt comply with the law." Instead, we set out what the law is in our democracy, after which it passes through Parliament—and very often it includes sanctions to encourage people to comply with the law and to extract penalties if they fail to do so. Clause 5(4) is therefore a curious measure, because it simply says, in terms, "Thou shalt comply with the law", albeit the law and the rules of the company. This returns us to the question I put earlier, which I hope my hon. Friend might address: who are to be the members of the company?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I understand my hon. Friend's point, but let me explain what we are doing. We are setting up a reclaim fund which will be a private company. We have made it clear that it is not the Government's intention to appoint members of the reclaim fund, and clause 5(4) does not allow the Government to do that. As a private company, the reclaim fund will also have to comply with company law, and we would expect it to have the highest standards of corporate governance. There might be instances in which that is not the case, however, which is why we think these powers are needed as an ultimate sanction. We do not expect to use them, and let me emphasise again that day-to-day issues are matters for the company's directors and members.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne

I thank the Economic Secretary for the reassurances he gave me a few moments ago. Will it be for the company to set direct remuneration at the outset, or will it receive guidance from the Treasury?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

That will essentially be a matter for the company, because it is a private company. I imagine that discussions will be held between members of the Treasury and members of the reclaim fund, and that they will also include the Financial Services Authority, which has some overall responsibilities with regard to remuneration. Let me emphasise again that we expect the reclaim fund to be run in accordance with our legislation, FSA regulation and company law, and for it to meet the highest standards of corporate governance, but we need the power to ensure that that is the case, which is why we shall invite Members to reject amendment No. 10.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

My hon. Friend refers to clause 5(4) as being the ultimate sanction, but the provision itself simply refers to "a direction". Usually when the House talks about sanctions, they are specified, as with a fine of up to level 5 in a magistrates court, for example. A criminal penalty, or a mechanism for determining such a penalty, is usually specified in such Bills. That is what I regard as a sanction. I do not regard the phrase "give a direction" as a sanction, however. If we reject amendment No. 10, as I suspect we will, and retain clause 5(4), I shall be unsure what sanction would be imposed if a reclaim company failed to follow such a direction.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

It is my understanding that the normal parliamentary use of the word "sanction" is such that it can include a range of measures; there might be penalties and fines, but others might also apply. Perhaps I am using the word loosely in this circumstance, but the direction in question is clearly a power to direct a company to conform with its articles of association under the law.

Amendment No. 11 would add the requirement for the reclaim fund to include in its articles an obligation to publish the names of all banks and building societies on the FSA register in respect of which no moneys were transferred. As I said in Committee, I have reflected carefully on the debate about having a requirement to publish a list of non-participants, and I am grateful for the opportunity to address the point again today. We remain committed to doing everything we can to ensure that the scheme is transparent. Our scheme already places comprehensive requirements on the reclaim fund to publish information about how the scheme is working, including the following: a list of participating institutions; the amount of money that is going to be transferred into the scheme, by individual institution; the amount of money reclaimed by account holders post-transfer, by individual institution; and the amounts transferred to the Big Lottery Fund. The Government's amendments in Committee also require the reclaim fund to publish its annual accounts and company reports as soon as possible after the end of the financial year.

I hope that that demonstrates that we have listened to the debate and are seeking to reinforce the transparency of the scheme where it is possible to do so, but I remain of the view that we should not go further and require the reclaim fund to publish a list of non-participants drawn from the FSA online register of all FSA-authorised institutions. On one level, that would be unnecessary. The names of all banks and building societies operating in the UK are available from the FSA's website. The FSA currently publishes a bespoke list of banks, which is updated on a monthly basis, and a list of building societies is also accessible from its website via a simple search of its online register, which is updated every day. New requirements, in addition to the material published by the FSA, would place an unnecessary burden on the reclaim fund. If the reclaim fund were obliged to recreate or redesign the FSA's lists, it would effectively have to monitor the market, as the regulator currently does, for firms entering and exiting the market, and that is not its function.

On the amendment, I am concerned about the unintended consequences of naming and shaming institutions that appear on the FSA register but are not participating in the scheme, because some might be eligible to participate but not be in possession of dormant accounts to transfer into the scheme. Banks may be FSA-authorised to accept retail deposits, but may not currently undertake this activity, or they may not have a book going back as far as 15 years. More than 300 banks and building societies are authorised as deposit takers by the FSA. Among them, there may be institutions without dormant accounts. Such a requirement would not be useful for consumers or fair for the individual institutions. Requiring the reclaim fund to publish a more refined list of institutions would be an additional and unreasonable burden on it.

Before moving on to amendment No. 12, let me clarify the position I outlined on remuneration in response to a question from Mr. Walker. Expenses must be reasonable, as set out in schedule 1, and the reclaim fund will make this transparent. On the point about sanctions raised by my hon. Friend Rob Marris, if the reclaim fund failed to comply with legislation, the Government would have the power to seek an injunction from the court to ensure that that was rectified.

On amendment No. 12, I am inching towards what Mr. Hoban had to say. The amendment would require the Treasury to publish its direction-making powers. This provision was set out in the memorandum to the Delegated Powers and Regulatory Reform Committee, which did not comment on it in its report. We therefore do not feel that there is any particular reason to include in legislation a requirement that any direction be published. As I have said, although we do not expect to use this power, I am not aware of any likely reasons why, if we were to do so, it should not be made public to the House in the form of a written or oral statement, without having put a requirement in the Bill for it to be published. We could return to this matter in the other place, but I do not think it is a substantive issue, because we do not expect to use this power, and if we were to do so, we would want to be clear about why we were using it and make statements in the usual way.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

May I deal with some of the comments that the Minister made? Amendment No. 11 proposes the publication of the names of the banks and building societies that have not contributed to the reclaim fund. I do not mind if they have to explain to the public why they have not contributed. If their argument is that they do not have dormant accounts or retail deposits, that is a fine explanation. I am more interested in those that have dormant retail accounts and do not make transfers to the reclaim fund. It should be easy for people to identify those institutions, and that is why I tabled the amendment.

On amendments Nos. 10 and 11, we are in the curious position of having a power that the Government do not expect to use. It is very difficult for the Minister to define when they would use it. When challenged by my hon. Friend Mr. Walker on remuneration, the Minister pointed out that schedule 1 requires the fund to incur only reasonable expenses and said that the FSA could look after remuneration. I am not sure that the FSA's responsibilities in respect of prudential supervision flow as far as board directors' remuneration.

There is a gap, because the Bill contains powers that the Minister is not prepared to submit to parliamentary scrutiny through the statutory instrument process; he does not know when those powers will be used; there may be other people who can exercise those powers; and, as he said in response to the intervention by Rob Marris, there are other ways, such as through an injunction, in which the Government could take action against a company that breaches its articles of association. The sanctions are available through a different route if the Government need to take action against the company.

I do not think that the Minister has made a persuasive case for the powers to be in the Bill. He would have made a more persuasive case if he had decided that they needed to be subject to parliamentary scrutiny, and on that basis, I urge my colleagues to vote in favour of amendment No. 10.

Question put, That the amendment be made:—

The House proceeded to a Division.

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The House having divided: Ayes 173, Noes 236.

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Division number 308 Orders of the Day — Clause 5 — Functions etc of a reclaim fund

Aye: 173 MPs

No: 236 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

Clause 16

Apportionment of dormant account money

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

I beg to move amendment No. 8, page 9, line 17, after 'State', insert

'no later than 1st March in the preceding financial year'.

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Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss the following amendments: No. 5, in Clause 17, page 9, line 31, after 'meeting', insert 'revenue or capital'.

No. 6, page 9, line 31, after 'of', insert 'existing or new'.

No. 7, page 9, line 38 , at end insert—

'(1A) At least three-quarters of the dormant account money for meeting English expenditure distributed in each financial year shall be distributed for the purposes set out in (1)(a) above.'.

No. 1, in Clause 18, page 10, line 5, at end insert—

'(1A) Any order made under this section shall ensure that at least half of the distribution of dormant account money for meeting Welsh expenditure must be made for meeting revenue or capital expenditure on or connected with the provision of existing or new services, facilities or opportunities to meet the needs of young people.'.

No. 2, in Clause 19, page 10, line 15, at end insert—

'(1A) Any order made under this section shall ensure that at least half of the distribution of dormant account money for meeting Scottish expenditure must be made for meeting revenue or capital expenditure on or connected with the provision of existing or new services, facilities or opportunities to meet the needs of young people.'.

No. 3, in Clause 20, page 10, line 25, at end insert—

'(1A) Any order made under this section shall ensure that at least half of the distribution of dormant account money for meeting Northern Ireland expenditure must be made for meeting revenue or capital expenditure on or connected with the provision of existing or new services, facilities or opportunities to meet the needs of young people.'.

No. 13, in Schedule 3, page 19, line 13, at end insert—

'(2A) The strategic plan for England must have regard to the likely level of the funds transferred to the Big Lottery Fund from the Reclaim Fund and shall set out the allocation of these funds between the priorities set out in section 17(1).'.

No. 14, page 19, line 27 , after '(3)(b)', insert

'and the priorities for spending set out in section 17(1).'.

No. 4, page 24, line 26, at end insert—

'Estimates

9A The Big Lottery Fund shall no later than one month before the end of each financial year publish an estimate of the apportionable income which it expects to have available for the following financial year.'.

No. 15, page 24, line 32 , at end insert 'which shall include—

(i) the amount distributed in the year in—

(a) England,(b) Wales,(c) Scotland, and(d) Northern Ireland;

(ii) the amount of expenses defrayed in the year in accordance with subsections (1) and (2) of section 25;

(iii) the amount paid to the Consolidated Fund in accordance with subsections (3)(a) and (b) of section 25.'.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

All the amendments in this group are in my name, except for amendments Nos. 13, 14 and 15 which were tabled by Mr. Hoban. They deal not with how the money gets into the pot but with how it is distributed, and they follow our helpful Second Reading and Committee debates.

I tabled these amendments to encourage the Government to be more specific about their general commitments. Amendment No. 8 tests the Government on the time scale for implementation. Ministers have been very helpful; indeed, I have been offered a meeting later this month with the Financial Secretary, which I intend to take up to discuss how soon money can be forthcoming, particularly for youth projects, about which I wish to speak in particular. Earlier this year, Ministers indicated that some of the money that they anticipate coming from dormant bank and building society accounts could, so to speak, be advanced against the expectation. Does that offer remain on the table or will we definitely have to wait for money to be collected, identified and transferred to the Big Lottery Fund before it can be distributed?

Amendments Nos. 5 and 7 seek to probe the Government's intentions about how much of the money in the kitty can go to services for young people and to test the sort of funds and projects that can be linked. I shall come back to that issue in a second.

Amendment No. 7 identifies a minimum percentage of the total. As colleagues will know, there are three identified projects for England, one of which is youth services. Ministers have been helpful in indicating that they intend that, in England, most of the money could go to youth services and I have heard reports that the proportion might be up to four fifths of the total. I would be keen to hear whether that suggestion can be tied down.

Amendments Nos. 1 to 3 relate to Wales, Scotland and Northern Ireland. I hesitate to trespass in that area, because Ministers have said that they will leave that entirely to the devolved legislatures. However, I have picked up very positive messages about the keenness of people in Scotland and Wales—I have not tested this in Northern Ireland—to spend the money on youth services there. I want to see whether the Government would be willing to encourage that to happen elsewhere in the devolved Administrations.

Amendment No. 4 is about Big Lottery Fund procedures, and seeks to ensure that people know in advance what will come down the track in their direction.

Two weeks ago, Mr. Speaker was kind enough to select youth crime in Greater London as the subject for an Adjournment debate in Westminster Hall. It was a well-attended debate, involving colleagues from both sides of the House. It was very positive. People said that a huge number of very good initiatives in the communities in all the 33 local authorities were doing well, had done well and could do well. The burden of most people's song in that debate, and certainly the burden of mine, was that rather than seeking to reinvent the wheel and to obtain money through public processes and the Big Lottery Fund for a new project or a capital project, we should seek to support existing projects and to build them up. Many colleagues, when they talk about different issues to do with the voluntary sector, make the case that the trouble is often that groups can apply for money for a new capital project but cannot necessarily apply for money to continue the revenue spend on a project that is already up and running.

Two days after the debate in Westminster Hall, and just over the river in the Royal Festival Hall, there was the launch of a campaign by a coalition of organisations, principally in Lewisham, Southwark and Lambeth. It is called "Enough! Make Youth Violence History" and seeks to bring together organisations that are doing very good work to deter young people from knife crime, gun crime and violence, and to give them positive and alternative role models. The message from that successful event was that some very good organisations work with young people in the front line and that they should be supported and built up.

One of the aims of the event was to say to the Government that they should recognise what good work those organisations do. Ministers in the Home Office were helpful and supportive. As it happened, they could not attend that evening, but I know that they have been positive towards the initiative. The other message of that evening was that when people ask, "What can I do to help deter people from violence, gun crime and knife crime?", those groups should say, "Come and volunteer with us." Many organisations are looking for volunteers, so it is a matter of matching the corporate sector volunteer or the private individual volunteer with those organisations.

Given that there is no statutory obligation in England—or anywhere across the UK—to provide youth services, this Bill is the only place in the current legislative programme where campaigns for developing existing youth organisations tie into the Government's programme for being helpful and putting more money in the kitty. That is a welcome proposition.

Amendment No. 8 would amend clause 16, and would seek to ensure that the amount was prescribed in good time every year for it to be really useful. The proposal in the amendment is that the Government should prescribe the amount by 1 March every year, ahead of the new financial year, so that there is clear notice of what the total amount will be. That will mean that everybody will know in good time what the total sum will be for which people can bid.

The next few amendments are very clear, and I want to ensure that the Government are also clear that the intention behind the amendments is to put on the face of the Bill the fact that the money could go both to revenue spend and capital projects. I hope that the Government will be helpful and will say, "Yes, there will be no barrier to people bidding for money from the Big Lottery Fund for revenue projects."

In my constituency, a state-of-the-art youth centre—one of the best in the country—is about to be opened. Ministers have been very helpful and supportive, particularly the Minister for Children, Young People and Families. It is called the Salmon youth centre in Bermondsey, and it is a fantastic state-of-the-art project. We also have other good smaller projects, as we all do in our constituencies. They are not looking for new buildings, but for money to support additional workers.

Let me give two examples. A project called XLP works across the south London boroughs and takes a double-decker bus out to estates to offer young people positive things to do. However, it does not yet have the personnel to do that all the time. It would like to, but it needs a bit more revenue funding. It goes into schools with a very good show called "Gunz Down", which takes an hour and plays to the third, fourth and fifth years in secondary schools. It could do more if it had more revenue funding.

Another good youth project, funded by Oasis, runs just over the bridge from us here, on the Lambeth-Southwark borders. It has a radio project for young people, which teaches them skills in presenting and so on. The project, like the youth clubs, is open certain nights of the week but it cannot open every night because it does not have the funds. There is not much money to fund such youth work. The plea from such groups is, "Please allow us to have the money for revenue not just for capital."

Amendment No. 6 says, "Please will you confirm, O Government, that we can have the money for existing projects, not just new projects?" I think that that is the case—I have heard nothing to suggest that it is not—but it would be very helpful if that could be confirmed.

Amendment No. 7 seeks to test how much money the Government envisage will go to the first of the three categories that they have set out. They have set out three purposes. The first is

"the provision of services, facilities or opportunities to meet the needs of young people".

The second is

"expenditure on or connected with...the development of individuals' ability to manage their finances, or...the improvement of access to personal financial services".

That is obviously important. The third is that such payments should be

"made to a social investment wholesaler."

There are three identified projects in England. The Government have said that they intend that the bulk of the money will go to youth services. Amendment No. 7 asks whether we should have a bottom line that says that at least three quarters of the funds should go to that cause, whether that is a reasonable line to draw and whether the Government are willing to make that commitment. If not, can we hear from the Minister what the bottom line is intended to be?

Amendments Nos. 1, 2, and 3 are intended to test whether the Government are willing at least to say that half the money going to Scotland, Wales and Northern Ireland should be for youth facilities. I hope that the Government will be encouraging the devolved Administrations even if they are unwilling to be prescriptive. That would be welcome in Scotland and Wales, as I know from all the conversations that I have had. If the Bill is to be seen to have a purpose, a very good purpose across the four countries of the United Kingdom would be to spend the money on youth facilities.

Amendment No. 4 is a plea that the Big Lottery Fund should publish no later than a month before the end of one financial year an estimate of the money that it expects to distribute in the following year. That is intended to help the planning of the voluntary sector and to help people to know exactly what should be expected. The Big Lottery Fund is well established as an organisation. I am perfectly content—others might be slightly less content—about the fact that it is the distributor. It has the credibility to do that, but the most helpful thing is that people should know in advance how much money will come and how much they can bid for.

I hope that these amendments are seen to be pertinent and appropriate. They are obviously probing amendments. If the Minister is helpful, I will call off the hounds. If he is really unhelpful, the troops will be summoned. I hope that we can do this in a spirit of consensus and that we will have a positive outcome that will reassure some very good projects.

This is a welcome Bill. The money will be very well used, and I emphasise that those organisations do not expect to depend entirely on this money or entirely on money that comes from the Government to the Big Lottery Fund. Many of those organisations are very willing to raise their own money, to go to the private sector to raise money and to apply to charities and so on. They see this money as welcome support. The House has recently said that it is united in making it clear that the majority of young people are good citizens. They want to be good citizens, and the more opportunities that we can give them, the better.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 7:00 pm, 3rd November 2008

I shall start by saying a few words about the amendments tabled by Simon Hughes. He will find, as we found in Committee, that the Government's main priority is expenditure on youth services. That has been a recurrent theme, and it is clear from debates in the House and the other place that that is where the bulk of the money will go. Although he might not get commitments to absolute percentages, he is pushing at an open door. Amendment No. 4 is sensible; people will need some idea of how much money will be available for those causes.

I want to continue the theme of the distribution of money and to pick up the final spending priority identified for England: the social investment wholesaler. I tabled amendment No. 13 to deal with that, and I shall spend a short time talking about it. It is fair to say that people who work in social enterprise and social investment had expected that the unclaimed assets would be used to help to fund a social investment wholesaler. Certainly, there has been a great deal of debate about that. The Commission on Unclaimed Assets, chaired by Sir Ronald Cohen, considered the amounts that would flow from dormant bank and building society accounts as the way in which a social investment wholesaler could be set up. Subsequent to its report, it did some work in trying to set up the appropriate framework into which moneys could be transferred.

As I suggested earlier, however, it is clear that the Government's order of priority for spending is very much that set out in the Bill. Spending on youth services comes first, followed by financial inclusion, and the social investment bank comes very much at the bottom of the list. The Minister said in Committee that the social investment bank would receive resources to get off the ground if resources permit. It was clear to me that the amount of money available could be relatively small. That will disappoint the people in that sector who saw this as an opportunity to receive investment in social enterprise. In evidence given to the Treasury Select Committee, it was suggested that about £330 million over five years would be required to set up a social investment wholesaler. At the moment, it is not clear how much money will be available, not just to that cause but to the other two causes. Again, the Minister said that there is still great uncertainty about the quantum of resources available to the Big Lottery Fund. We touched on that on Second Reading and in Committee.

In amendment No. 13, I ask the Government, when looking at the Big Lottery Fund's pattern of expenditure during the next few years, to recognise that transfers into the BLF are likely to be of a lumpy nature. We expect that, in the first year, significant moneys will be released from banks to the reclaim fund and the BLF. In effect, the money accumulated in dormant accounts over a long period will be released to the BLF in the very early stages of the process. That significant lump sum will create the opportunity for money to be put into a social investment bank, the investment profile of which will be front-loaded. It needs a large injection of capital up front, followed by top-ups at a later stage.

Clearly, if the Government want to give some money to a social investment bank, recognising the fact that the flow into the fund will mirror the large amount at the outset and that smaller amounts will come every year thereafter, as a new year's worth of dormant bank accounts become available for transfer to the reclaim fund, the opportunity might perhaps arise at the start of the process for significant investment in a social investment wholesaler. It is much less likely, as the unclaimed assets process continues, that sufficient money will be available to set up a social investment wholesaler of sufficient magnitude to make a difference to the third sector.

I ask the Government to think about the flow of funds into the BLF and how it might be used to support a wholesaler. Of course, we must also bear in mind the fact that a social investment wholesaler could use its funds to support initiatives for financial inclusion and youth services, so there could be a flow back to the spending priorities.

I want to touch briefly on amendment No. 14. I want to ensure that the BLF's consultation on its strategy includes the three causes referred to in the Bill: youth services, financial inclusion and the social investment wholesaler. There seems to be a gap in the consultation process; it should go back to those three causes and look at needs in that context.

Amendment No. 15 is intended to probe the Government's thinking on the information that will be published by the BLF in its accounts, to ensure transparency about the amounts distributed to England, Wales, Scotland and Northern Ireland and much more clarity about the expenses defrayed, not only those of the BLF but those that will be reimbursed to the consolidated fund from the BLF. One of the reasons why we tabled that amendment was to ensure clarity about the amounts allocated to England, Wales, Scotland and Northern Ireland. We debated the issue in Committee, where it became apparent that the Barnett formula would be used as the basis for that, but that is not stated in the Bill, as is the Government's custom. Amendment No. 14 would ensure transparency in that respect.

Concern has been expressed, particularly in the other place and to a lesser extent during our proceedings in Committee, about the cost of the BLF, whether it will ensure that its expenses are proportionate to the amounts that it distributes and whether it will spend that money wisely. As I said in an earlier debate, every pound spent on administration is a pound not available to the good causes.

In Committee, the Minister argued that we should make sure that we do not spend too little on administration so that the money was targeted at the right places. However, it is important that there is transparency in the accounts of the BLF, or the reclaim fund element of it, about the amount spent. We have to ensure that the BLF knows that people will not lose sight of the amount spent.

There is another area that needs clarity. The Bill makes provision for the BLF to reimburse expenditure incurred by the Secretary of State—and from our discussions in Committee, we know that it will be the Secretary of State for Children, Schools and Families. Given the maxim that we need transparency about how money is spent, so we can be sure that we have the best value for money, it is important that we make certain that the amounts repaid to the Secretary of State are published.

In essence, there are two elements to this group of amendments. First, it allows us to air issues to do with the social investment bank, and to make sure that it does not drop off the end of the list of priorities. If resources permit, perhaps some money will be devoted to it, particularly given that money will have to be allocated up front to ensure that it is viable. Secondly, we must ensure transparency in how the money is spent. That relates to the amounts awarded to the different nations of the United Kingdom, and to ensuring that we do not lose sight of the money spent on expenses.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I rise briefly to echo a few of the themes that have already been touched on, and to ask the Minister for clarification on one or two other matters. First, I should like to mention the point made in the previous contribution about how the Government intend to allocate money between the parts of the United Kingdom. Representations have been made to me by people in Wales, who express concern about the fact that the Barnett formula gives 5.84 per cent. of spending to Wales, whereas the Big Lottery Fund, using a needs-based formula, gives Wales 6.5 per cent. That is not a huge difference, but if we are talking about reasonably significant amounts of money, it is obviously a difference that will interest people in Wales—and, of course, by implication, the other three parts of the United Kingdom, because there is only so much money in the pot, and the more that goes to one part, the less there will be for others.

It would be useful if the Minister indicated precisely how the allocations will be made. As we discussed in Committee, one could make a case for many different bases. One could, straightforwardly, allocate the funds according to population, or according to some sort of assessment of need. One could even use as a basis the number, or indeed the value, of dormant bank accounts in each part of the United Kingdom. It would be reasonable to have some sense of the basis on which the decision will be made.

My hon. Friend Simon Hughes touched on the percentage of money that will go to youth services, as we did in Committee. I suppose the Minister may slightly feel that he is being pulled in different directions, because in Committee we discussed whether the Government ought to seek greater flexibility. At a later date, way beyond the period that we are envisaging—perhaps 20, 30 or 40 years from now—the Government may wish to redirect the spending to a cause that is particularly fashionable or important at the time. Of course, the Bill does not provide for that; the Government would have to introduce new legislation. They may wish to consider that.

More immediately, a reasonable concern has been expressed about what percentage will go to each of the three causes identified. That is a legitimate point, because if 90 per cent. were to go to youth services, and only 5 per cent. to each of the other two interest areas, there would obviously be a very different impact on youth services than if a third went to each of the interest areas. The Government could do a little better than just saying what the three areas are. I agree with the Conservative spokesman, Mr. Hoban, that all the mood music seems to suggest that, for the Government, youth services will be the priority. My hon. Friend the Member for North Southwark and Bermondsey mentioned 75 per cent. of the funding going to the first of the three priorities, youth services. From everything that I have heard, and from debates in which I have participated, my hunch is that that is roughly the sort of percentage allocation that the Government are considering, but the Minister may be able to be more helpful and give the House a steer on what is envisaged.

My hon. Friend made a reasonable point: there ought not to be a division or a difference made between revenue spending and capital spending. We are all familiar with projects in our constituencies that have got up and running but struggle to sustain themselves, because most of their costs are ongoing revenue costs. That is a particularly relevant consideration in this legislation, because we are expecting a big hit of initial money, as we will be dealing with all the accounts that have been dormant for 15 years or more in the banks and building societies that choose to participate in the scheme. That may afford a perfect opportunity for one-off capital projects. Of course, in all subsequent years, there will only be the money that becomes available in that 12-month period, so in year 2 we will be talking about only those accounts that have, at present, been dormant for between 14 and 15 years, and which will suddenly fall into the dormant category. There may well be an initial opportunity for quite an ambitious programme of capital spending, but the emphasis will move more to revenue spending in subsequent years. The Minister may well not be able to shed further light on the possible way forward, but he may wish to comment on the subject when he replies.

I share the view of my hon. Friend the Member for North Southwark and Bermondsey that there is no particular reason why we should seek to distinguish between existing and new projects. Sometimes, sustaining an existing project is as valuable, if not more valuable, than trying to come up with a new initiative, even though it is less headline-capturing; people are always seduced by the new, rather than by a reiteration of what has already been done. However, that does not necessarily mean that new projects have greater merit.

Finally, and again picking up a point made by my hon. Friend, we are in a slightly strange position, as we are not able—and do not wish—to direct the devolved Administrations, but we nevertheless know that people in Scotland, Wales and Northern Ireland, inasmuch as they are following the proceedings of the Bill, expect that youth facilities in those countries will benefit from the Bill's passing into law. It is extremely unlikely, but somebody in the Scottish borders could find out that large amounts of money—75 or 80 per cent.—were going to youth projects in Northumberland, while the Scottish Administration decided to spend nothing on youth projects at all, and allocated the money to something completely different. People in the Scottish borders would say, "Wait a second; what about all the youth facilities being made available in Northumberland? We expected to have extra youth facilities across the border in Scotland."

We are not in a position to direct the devolved Administrations, and as I say, it is not our wish or intention to do so, but it might be interesting if the Minister gave an indication of his feel for the way in which the Administrations and devolved Parliaments are looking at the issue. Perhaps he can say whether he feels that, in consultation with them, it would be appropriate to announce that extra youth facilities would be made available across the United Kingdom, even if the percentage split was left to the discretion of those with responsibility for the matter.

The amendments are useful because they allow us to discuss the point of greatest interest to our constituents, which is who will get the money, and what sort of schemes will benefit. I realise that some flexibility is appropriate, but it would be helpful and interesting if the Minister shed further light on the subject.

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Photo of Tom Levitt Tom Levitt Labour, High Peak 7:15 pm, 3rd November 2008

I planned to intervene on my hon. Friend the Minister when he responded on this group of amendments, but the issue that I wanted to raise was mentioned by Mr. Browne. I realised that my question would probably be so long, Mr. Deputy Speaker, that you would take a dim view of it as an intervention, so I thought that I would make a contribution instead.

First, I accept that Simon Hughes has tabled perfectly legitimate probing amendments; I have every confidence that my hon. Friend the Minister will respond to them in a way that allows them to be withdrawn.

In Committee, I tried to get my head around the issue of the size of the entire pot, but did not manage to do so. I am not talking about the figure. Clearly we do not know the exact figure and there is much speculation, covering a wide range of numbers, about what it might be, but does my hon. Friend expect a huge splurge at the start with all the backlog being distributed in one go? Presumably the size of the pot would tail off pretty quickly over future years, coming down to a fairly minimal level in the not-too-distant future when the entire backlog had been spent and when, because people were more aware of the issue, fewer people were allowing their accounts to become dormant. Or does he expect a degree of housekeeping, whereby not all the backlog would be spent in year 1? Perhaps there would be a build-up over two or three years and a gradual reduction after that. Or does he expect that as far as possible the fund would be distributed at a fairly constant level over a number of years? The way in which applications are made will be influenced by the spending profile of the pot over the future years. I do not think that the answers to my questions will influence hon. Members should the matter go to a vote, but they would provide a useful context in which to see these perfectly legitimate probing amendments on which I am confident that we shall not have to vote.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I very much appreciate the probing nature of the amendments tabled by the hon. Members for North Southwark and Bermondsey (Simon Hughes) and for Fareham (Mr. Hoban). The legislation defines the basic architecture for the operation of the reclaim scheme, how it will transfer funds to the Big Lottery Fund and the general principles surrounding how those funds will be allocated. As has been noted, and as my hon. Friend Tom Levitt just mentioned, there is significant uncertainty about what funds will be transferred and when, so it is difficult to be precise in response to a number of the amendments, but I hope to be able to give sufficient clarification of some of the general themes in order to give the House the assurances that it naturally wants. We are all keen to get on with this and to see money going to the good causes that are specified in the Bill.

It will be for the banks and the reclaim fund to decide the speed with which they transfer dormant assets in the first instance. It is likely that that will occur in a number of tranches, but although we do not know whether the original figure of £400 million to £500 million will be the actual figure, it will be built up over a relatively short period of time, and then we expect a steady funding to the tune of some tens of millions of pounds once the initial quantum of money has been transferred.

This offers a number of opportunities to discuss issues such as that raised by the hon. Member for Fareham as to whether this provides an opportunity to have an up-front capitalisation for what the Bill terms a social investment wholesaler, and that is something that we would want to discuss. As has been made clear on a number of occasions, the funding priority overall in relation to dormant accounts has always been youth provision, and that remains the case.

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Photo of Tom Levitt Tom Levitt Labour, High Peak

I am happy with the model that my hon. Friend has just described, but it seems to suggest that a lot of money will be going into the fund but will not be distributed straight away and, given the quantities that we are talking about, there might be a period in which a significant amount of interest would be earned. Would that interest be added to the fund and be available for distribution?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

It is one matter to decide how much money goes from banks and building societies into the reclaim fund and over what period—I have tried to give some indication as to how it would be likely to operate—and there is another set of decisions in terms of the transfer of funds from the reclaim fund to the BLF. We would expect the reclaim fund initially to take a relatively cautious approach about the amount of claims that are likely to be put upon it as a result of wanting to reunite people with their money. That will be a judgment for it to make and we would expect it to do so in a reasonable way, but to transfer funds to the BLF in accordance with directions that will be provided by Government. Exactly what stance the reclaim fund takes in terms of the amount of the balance that it needs to hold in reserve in case of future repatriation is an issue that adds further uncertainty to deciding how much should go to the good causes and over what period of time.

Amendment No. 8 seeks to ensure that the Secretary of State makes orders apportioning available sums between the four countries at least one month before the new financial year. I understand that it seeks, along with a number of others, to try to tease out the Government's intentions on timing, and we fully recognise the need for advance planning when it comes to the voluntary sector. We have often been in the situation where the voluntary sector has not had sufficient advance warning, making it difficult to operate efficiently.

It is the Government's intention that apportionment orders will be made in such a way as to ensure that each country is aware of the likely sums that will be available, and can therefore draw up directions or revise existing directions on the relative priorities for spending in good time so that the BLF has sufficient time to plan distribution programmes in accordance with such directions.

We do not see the need to specify in legislation a date by which an apportionment order will be made. The issue of apportionment will be kept under review in consultation with the devolved Administrations, but we do not anticipate that apportionment orders will be made on an annual basis. We envisage an initial order when the scheme is live, but no immediate or annual review. That is not to say that the formula will not be reviewed, merely that we do not intend that it would necessarily be updated at a fixed annual date.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

That is helpful. Certainty over a two, three or four-year period is obviously better than not knowing from one year to the next, but I reinforce the point that when announcements are made, I assume that 1 March would be the latest possible date and that it would be the Government's intention in any year when they make an apportionment decision that they will seek to make it much earlier in the preceding financial year.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

We would always seek to act in as good time as we could in such matters.

Amendment No. 5 seeks to clarify that English expenditure on youth can be revenue or capital. I understand its probing nature and would simply argue that it is unnecessary because clause 17 is wide enough to enable the BLF to direct resources to either revenue or capital spending without the need for the clarification or qualification proposed.

Our ambition is for all young people to have access to high-quality, attractive and safe places to go. These should offer a wide range of exciting positive activities to support young people to reach their full potential, but also to help improve relations between young people and the wider community. We therefore intend for unclaimed assets in England to be invested in new and improved youth facilities in every constituency, allowing ever more young people to participate and to benefit. Our vision is for unclaimed assets funding that is primarily intended to support investment in youth facilities, not to meet ongoing costs. We recognise, however, that some time-limited resource funding may help to ensure the viability of capital projects—for example, to support project management and delivery costs. I anticipate that, where appropriate, the spending directions may enable such resource spending, and we are clear that, as drafted, the legislation allows us to do so. I hope that that gives hon. Members a clear indication both of our thinking in that area, and of why we think that amendment No. 5 would be unnecessary.

Amendment No. 6 would spell out that spending under the English youth provision must be spent on either new or existing facilities, services or opportunities. Again, we agree with the thinking behind clause 17 but argue that the amendment would not be necessary, because the clause is already drafted widely enough. It is important to add that a demonstration of financial sustainability will be the key to the Big Lottery Fund releasing dormant accounts for youth projects, just as it currently scrutinises the viability of bids under its lottery and non-lottery programmes. So, we want the money to be genuinely additional, as I have tried to say. We had debates in Committee about the meaning of additionality, and we see it as being primarily capital-based, but allowing for some time-limited resource funding. We want to ensure that the projects that the Big Lottery Fund supports, using dormant accounts money, are sustainable because they take into account the long-term funding requirements on the revenue side, which could be met from other sources.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats 7:30 pm, 3rd November 2008

I should like to clarify two points. First, will the Minister confirm that, if the legislation is passed as drafted, Government policy will not prevent the Big Lottery Fund from interpreting existing and new revenue and capital widely, as the implication appears to be, and that the BLF will be free to make that choice? Secondly, will he confirm that, often, a judgment of sustainability should be made on what has been happening? If a project has been going for 10 years and going well, that is often much better evidence of sustainability than a new project, whose sustainability nobody, with the best will in the world, can guarantee.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I agree strongly with the latter point. On the former, obviously the BLF has to operate within the legislative framework in the Bill and in accordance with the Government's directions. I shall talk in a minute about the strategic plan, which I hope will provide even more clarification.

Amendment No. 7 is unnecessarily prescriptive in its attempt to specify a fixed proportion of dormant accounts funding to be directed at youth spending. I understand the spirit in which the amendment was tabled, but we have made it clear that our spending priorities will be for youth, financial inclusion and, as resources and state aid permit, the social investment wholesaler. It would be unnecessarily constraining to include in the legislation a specific percentage figure.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

I understand why the Minister has been very, very careful on that amendment, in which I sought to push him on a percentage, but are my hon. Friend Mr. Browne, Mr. Hoban and all of us right in thinking that, in England, the Government intend most of the funds at any one time to be used for the first intention, youth services and facilities, rather than for either or both of the other two priorities? Is that the clear policy intention?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

The Government's clear policy intention has always been that youth spending in England should be the priority, but there are other considerations, particularly with regard to the build-up of the fund, as I mentioned earlier. If the Government were minded to support and take forward the social investment wholesaler, it might need up-front capitalisation, but over time we have been very clear that youth funding is very much the priority.

I appreciate that amendments Nos. 1 to 3 are probing ones, but one principle of the scheme is that it is rightly and properly the responsibility of the devolved Administrations to determine their own spending areas within their respective countries, so that they identify priorities that best reflect the needs of their communities. That was spelt out in the Treasury's May 2007 consultation, which also recognised that the priorities in those countries might change over time. Although the hon. Member for North Southwark and Bermondsey invites us to be prescriptive, I must reject his invitation and say that, in the spirit of devolution, we believe it right to ensure that the devolved Administrations are free to determine their own spending areas. On the spending formula, as we have said in Committee and on previous occasions, the Barnett formula is the most appropriate way of allocating funds. We discussed the matter with the devolved Administrations, and they agree with the approach, so I invite hon. Members to reject amendments Nos. 1 to 3.

Amendment No. 13 would require the BLF to set out in its strategic plan for England how it has regard to the likely levels of funds that it will receive from the reclaim fund. I mentioned earlier to the hon. Member for Fareham, when discussing the way in which the reclaim fund would be capitalised through dormant accounts, that it gives us an opportunity to consider the social investment wholesaler, so I assure him that it will not be forgotten. It was one of his key points.

Amendment No. 14 would require the BLF, when consulting to identify spending needs while drawing up the strategic plan, to take into account the priorities for the three spending areas for England. Again, that would be unnecessary, because the identification of the overall needs for England is, in essence, the delivery of the requirements of the spending direction, and they set out the priority to be accorded to each spending area. That brings me on to talk about drawing up the strategic plan on the Secretary of State's instruction, and why it has been included in the Bill. We are concerned to ensure that we enable the BLF to take a strategic approach to distributing funding in England within the parameters of the spending directions. It is right that, within the general framework for directions, on which we will insist, the BLF has responsibility for drawing up its strategic plan, and that, as part of the plan, it gives advance notice to voluntary organisations of its funding priorities in the directions.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

Assuming that the Bill receives its Third Reading tonight and, as we all hope, a speedy Royal Assent, will the Minister sketch out—this touches on the next amendment, the final one in the group—the timetable from now to the end? What is the timetable for the directions, for the strategic plan and for the first money to come through the system?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

If I may, I shall say more about that when I turn to the next amendment, because it is probably more convenient to do so then. However, I should point out that there are certain issues in respect of the Financial Services Authority and regulatory approval of the reclaim fund, and they will limit the speed with which we can do some of those things.

Amendment No. 4 would require the BLF to publish one month before the financial year-end an estimate of the amount of money available for apportionment in the following year. I presume that the intention would be to make the funding flows between the reclaim fund and the BLF more transparent and, perhaps, to enable distribution in every respective country, and I appreciate the desire to do so. The Bill already makes the necessary provisions to document the funding flows between the reclaim fund and the BLF. The fund is required to publish the total amount that it has transferred to the BLF in any one year and the BLF's apportioning of that funding between the countries of the UK will be determined by the apportionment order issued by the Secretary of State under clause 16.

I appreciate that amendment No. 4 has been tabled for the purposes of probing, but the problem with it is that providing estimates of the amounts available for distribution the following year is likely to be difficult—for a couple of reasons at least. First, the BLF relies on the reclaim fund to identify the sums that it does not need to retain to meet anticipated repayment claims and its own costs for the following year. Secondly, the amendment imposes a forecasting requirement on the BLF, but it would be up to the reclaim fund to decide when it is appropriate for those sums to be released for distribution. We anticipate that the BLF and the reclaim fund will plan the way ahead. Trying to specify that in legislation rather than allowing for a normal and constructive working relationship would be difficult, and we have no reason to believe that the reclaim fund and the BLF will not work constructively together.

Amendment No. 15 would require the BLF to record in its annual accounts the amounts that it had distributed in each of the countries of the UK and the expenses that it had defrayed out of its dormant account income, in respect of the BLF's own expenses and those incurred by the Government in the administration of the scheme. Under clause 21, the Secretary of State already has the power to make financial directions to the BLF, including directions in relation to the form of accounts or methods and principles for the preparation of the accounts. We anticipate that the nature of the directions issued will follow the form of directions given to the BLF by the Department for Culture, Media and Sport under the lottery legislation. It makes sense for the accounting requirements to be similar. When we discussed those issues in Committee, there was a general feeling that there should be procedures similar to those now operated by the Department for Culture, Media and Sport, although the Secretary of State for Children, Schools and Families will be offering the guidance. The regulatory framework will be essentially the same. Amendment No. 15 is therefore unnecessary and we oppose it.

I apologise for how long I have taken to cover the amendments, but it is right to put on the record some points of clarification that emerged from discussion of the probing amendments.

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Photo of Simon Hughes Simon Hughes Shadow Leader of the House of Commons, Party Chair, Liberal Democrats

Colleagues can be released, and the dogs can be taken off; hon. Members can have an early evening and get ready for the fray tomorrow. I am grateful for the Minister's helpful response. I have taken on board what he has said. People in the voluntary sector, particularly those with an obvious interest in the three categories set out for England and those who work in projects supporting young people, will want to have inputs into the strategic plan and the continuing discussions between the reclaim fund and the Big Lottery Fund. I hope that that will be facilitated.

Everybody is interested in speeding things up, and I want to make clear that the purpose has been to get the message across that good, high-quality work, involving excellent individuals, is being done with young people. We must make sure that this new opportunity does not seek to reinvent the wheel only for the purposes of erecting new buildings, but that it builds on the good practice, experience and activities that exist anyway. I hope that there will be collaborative efforts and I appreciate the Minister's good will. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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