Dormant Bank and Building Society Accounts Bill [HL]

My Lords, like other noble Lords who have spoken this evening, I welcome the Government’s proposals to put dormant assets to positive use. I particularly welcome a number of the Bill’s features. The concept of the reclaim fund is clever and the plan on how to make it work has much to recommend it. In particular, the fact that depositors will still have access to their funds beyond the 15-year period is crucial, and the Bill deals elegantly with the point. Like my noble friend Lord Shutt, I strongly agree with the special provisions for smaller banks and building societies. I know that the Government have undertaken consultation on the Bill but fear that, at least in certain respects, this consultation has followed the pattern of Treasury consultation down the ages, which is to put out proposals for consultation and then completely ignore what people have said. The fact that the Government have almost entirely repudiated the Treasury Select Committee’s comments and suggestions is extremely unfortunate because those comments were in most cases extremely sensible. We on these Benches will, as we have heard, wish to examine in Committee a number of issues regarding the operation of the reclaim fund and the distribution to good causes. There are a number of general issues, but I will raise just a few. The first is the importance of trying to reunite assets with their owners before the assets reach the fund. It is much better for the owners of the assets to use them as they wish rather than for someone else, whether it is the Big Lottery Fund or anyone else, to use them on their behalf. One interesting issue is what scope there is for reuniting people with their assets. According to evidence that I have seen from an organisation called Heirtrace, some 80 per cent of currently dormant assets can be reunited with their owners if sufficient effort is put into it. Although that figure seems high, even if it is only 50 per cent it would be worth making a considerable effort to try to reunite people with their assets or to ensure, as the Unclaimed Assets Charity Coalition is at pains to point out, that assets which may be dormant at the time of someone’s death and might be allocated to a charity can find their way to the charity specified in the will. Some of the proposals—at least the ones on a one-stop-shop for information—go some way to addressing that issue. I am not clear whether that can best be dealt with by including additional provision in the Bill or whether those are administrative provisions that are best dealt with by the banks, building societies and the reclaim fund. However, we need to be satisfied that, whatever provisions we put in place, maximum effort is expended to reunite people with their assets. I am not sure that I agree with the Unclaimed Assets Charity Coalition about 15 years being too long. It seems to me that you must pick an arbitrary figure, and it is probably about right. The next issue is whether membership of the scheme should be voluntary or compulsory. I am very far from convinced by the Government’s arguments for voluntary involvement. If the idea is so important, why should any bank or building society be able to avoid it? The Government’s answers on this point in their response to the Treasury Select Committee are pretty thin. They argue: "““A voluntary approach enables the use of private sector expertise … A voluntary approach means that it will be the private sector that takes responsibility … The voluntary approach brings added flexibility ... A voluntary scheme also takes account of better regulation principles””." All those are highly questionable assertions which I will examine in Committee. The next issue, raised by a number of speakers, is whether the Bill is correct in limiting its scope to banks and building societies. Again, I greatly enjoyed reading the Government’s response on why National Savings & Investments should not be included in the scope of the Bill. They explained that it was completely unnecessary because that money is, "““used to fund public services””," and therefore is ““already benefiting the community””. I wonder whether the Government could explain how they came to that conclusion and whether the unclaimed assets from National Savings & Investments might, at the very least in future, be identified in some way in government accounts so that we would know exactly how they were ““benefiting the community””. There is also the issue of whether we should extend the scope to other sorts of assets, including insurance policies. My inclination at this stage would be to follow the precedent in the Financial Services and Markets Act, in which additional categories of financial activity can, by order, be brought within the remit of the FSA. It seems to me at this stage that bringing banks and building societies into the scope of the Bill to start off with is a good idea. Bringing additional classes of asset in at a later stage might be an equally good idea, and it may be possible to amend the Bill to allow that to happen relatively easily. My noble friend Lord Shutt mentioned the situation of overseas banks, which again raises the issue of voluntary versus compulsion. The logical situation is that any bank account held in the UK should be subject to the Bill. I take the point made by the noble Lord, Lord Monson, about people who bring assets into the UK with no intention of using them for a considerable time. I would have thought that there are two mechanisms that might give him some reassurance. First, the bank will maintain the life of the asset by occasionally contacting the person who has deposited it so that it does not become technically dormant. Secondly, under the reclaim fund people could come back at any point and reclaim their assets. There is also a technical issue regarding interest on balances held in the reclaim fund. Clause 8 says that the balance is, "““the amount owing to the person … after the appropriate adjustments have been made for such things as interest due””." Given that the reclaim fund will, as I understand it, be a fund that will contain assets coming from a large variety of accounts, how does one determine what interest is due? Some will be from non-interest varying accounts and some from different accounts. Is each amount, or a proportion of each amount, going to be allocated a separate interest rate? That seems almost inconceivable, both conceptually and in practice. In the absence of such a complicated scheme, will a composite interest rate be applied to all the assets and, if so, what will that interest rate be? There is no indication in the Bill. That is the business of gathering the money together; we now come to the question of spending it. As for who should have overall responsibility, given the scope and purposes of the expenditure, there has to be a single national body. At least until I heard my noble friend Lord Tope, it seemed to me that the Big Lottery Fund was the logical national body. If not it, who will it be? Given that one of the aims must surely be to get this out of the clutches of central government, it is equally possible that local strategic partnerships could, in theory, bid for funds from the Big Lottery Fund from this account. There is no reason either under the Bill as drafted or as it might be amended why local strategic partnerships could not have a big say on how at least the youth strand is funded. When it comes to financial inclusion and the social investment wholesaler, there is not necessarily similar local involvement and national schemes may be necessary. Equally, although we may need ““a body”” responsible for overseeing how the money is spent—the Big Lottery Fund might be the logical choice—the money could in theory be used for anything. I know that this is unusual for the Lib Dems, but we have had a tendency to want to spend such money on everything and to spend it many times over. We had a strong lobby in our party that such money should be used for overseas development. It seems to me that, with the exception of financial literacy, where there is an obvious link, you could in theory spend the money on anything. The two other causes are perfectly sensible. We can always beneficially spend more on youth affairs and young people. I therefore do not have any huge problems with the Bill’s definition of where the money should be spent. I have an issue about what a ““social investment wholesaler”” is. First, I have never heard the phrase, and I have been involved in this area for some time. I had never seen it until I read it in the Bill. The Bill does not define what I thought the Government were seeking to achieve. I thought that the Government were seeking to establish a social investment bank. The Bill says something completely different, which is much less prescriptive of what the wholesaler could do. It says that it is, "““a body that exists to assist or enable other bodies to give financial or other support to third sector organisations””." It therefore seems that the NCVO is a social investment wholesaler, because that is exactly what the NCVO does. It exists to give support to third sector organisations. As a member of the NCVO advisory board, in which I declare an interest, I can see some advantage in the NCVO getting some of this money; but I did not think that the Government wanted that. I thought that the Government were talking about a single new social investment bank and that there was a suggestion that it had to have several hundred million pounds in it to be worth while. I am pleased that the Minister has confirmed that the money will not be used to substitute for existing government expenditure and that additionality will apply. In terms of its broad usage, I would be grateful if he could confirm that the Government envisage that the money could be used for both capital and current expenditure and would not be limited to one. There is no doubt that we will want to deal with many other issues in Committee. I hope that I have dealt with some of the main ones, but we look forward to the Committee stage and to seeing the Bill through.