Dormant Bank and Building Society Accounts Bill [HL]

My Lords, we have had a varied debate, which should at least put the Minister on notice that the Bill is not quite as straightforward as he might have hoped. But let me start on a positive note. Like other noble Lords, we agree with the proposition that unclaimed assets should be put to good use. The banks and the building societies thought that they had a rather good use for those assets as a bit of free capital to produce an additional income stream for their shareholders and members. But clearly there are other uses with wider societal benefits. We support the Bill to that extent, but that is the extent of our wholehearted agreement. Just as the banks were probably quite happy with the status quo, I imagine that the Government feel much the same way about the unclaimed assets in their own bailiwick; namely those in National Savings, to which other noble Lords have referred. We understand that there is just short of £1 billion of unclaimed accounts. I agree with the noble Lord, Lord Newby, that we need to look at that further. Will the Government say when they intend to take action to allow the value locked up in other unclaimed assets within the financial services sector, such as those in pensions or life assurance policies, to be liberated? We do not understand why the Bill is restricted to bank and building society accounts. It should be drawn much more widely in order to provide a way of using the value in other dormant financial assets, and we shall want to pursue that in Committee. I hope that the noble Lords, Lord Newby and Lord Shutt, will join us in that endeavour. Your Lordships’ House amended the most recent Pensions Bill to allow improved benefits to the 125,000 pensioners for whom the Government still do not provide adequate pensions, in defiance of the ombudsman. We sought to create a ““lifeboat”” funded by an unclaimed assets recovery agency which could have included dormant bank accounts. The Government overturned those amendments in another place. This Bill closes the door on using dormant bank account money for that purpose. We regret that and believe that the Bill should be widened in scope to allow it. I turn now to how much money is involved, because it is relevant to how widely the Bill should be drawn. The Explanatory Notes give no idea of how much money should be funnelled through the Bill, and the Minister said that he did not know. The summary at the beginning of the final impact assessment booklet says that costs and benefits are nil, but that is plainly nonsense. In fact, a footnote towards the end of the impact assessment states that dormant accounts could at present yield between £400 million and £500 million. Those estimates are given by the British Bankers’ Association and the Building Societies Association, but, as noble Lords have said, the evidence from a similar exercise in Ireland showed that initial estimates proved to be wild underestimates. If one listens to City chatter—I put it no higher than that—people are talking about very significantly larger sums being made available. The noble Lord, Lord Shutt of Greetland, referred to a figure in the tens of millions. I am not sure that I have heard a figure quite as high as that, but there could nevertheless be significantly more. The potential for higher sums being available means that we must ensure that the use of the money is drawn as widely as possible in the Bill. I have referred to supporting pensioners. There are other possibilities, including Liberal Democrat pet causes. We need to ensure that the Bill can deal with a wider range of expenditure and also remain flexible over time, because we do not wish to fix in stone the uses to which the money can be put. We need a broader concept built in. For today, let us assume that the scheme will raise the lower end of the amount estimated by the BBA and BSA—some £400 million. We then have to flow that through because not all of it will be available for distribution, because some has to be used for reserves. We do not know how much that is, and the Minister has already been asked to comment on the level of reserving policy covering how much would be top-sliced before the money could be made available. I look forward to his answer. Expenses will also accumulate as this money passes through the system. On industry estimates, we might be talking about some £300 million to £350 million being available at the outset. We shall be concerned to look at how the ““prescribed percentages”” provided for in Clause 16 will work. In particular, we will want to ensure that England gets its fair share. At the moment, England accounts for some 80 per cent of public expenditure. If we assume that England receives that as a minimum, we are talking of perhaps 80 per cent of £350 million—some £280 million—flowing into English activities. When the Prime Minister addressed the Labour Party conference in September, he said: "““so we will use unclaimed assets in dormant bank accounts to build new youth centres, and will invest over £670 million so that in every community there are places for young people to go””." The simple question for the Minister is why did the Prime Minister use the figure of £670 million? It is unlike any figure that has come out of the industry at any point during the consultation. If you flow that through into England and take off some reserving to get to my £280 million figure, the Prime Minister was overstating the figure by 2.5 times. I hope that the Minister can explain that. I want to look in a little more detail at the promise on youth centres in the Prime Minister’s speech. I should say that, like other noble Lords, we support spending money on youth facilities, but I want to clarify the Government’s intentions. The consultation issued in May claimed that the money, "““could allow over 700 new places for young people to be built””." So, the vision is clearly one based on bricks and mortar. I expect that the Prime Minister has some kind of memory from his own youth when teenagers were grateful for the opportunity to gather in youth clubs and listen to the latest chart-topping black discs. The Prime Minister may not have noticed that that is not the aspiration of today’s teenagers, nor does it reflect the lives that they lead, including the way that technology changes the way that young people interact. Will the Minister explain in more detail what the Government envisage the money will be spent on and how they will avoid spending it on things that young people do not actually want in the modern age? Lastly, it is clear that the Government see the use of this money in terms of capital projects. The noble Lord, Lord Newby, asked whether it could be used also for revenue projects, but it is clear from everything that the Government have written that their vision is that the money is for capital projects. The Minister will be aware that the public sector is littered with many well intentioned capital projects that struggle to find ongoing revenue funding. Will he say how the Government think these youth centres will be financed on an ongoing basis? The amount of money available from dormant accounts is bound to fall sharply after the initial catch-up period, when a backlog is dealt with. Where is the money coming from? It sounds like another hit on council tax is coming down the line. I have dwelt on spending on youth because that is what the Prime Minister has focused on. However, as we have heard, Clause 17 has two other objects: financial inclusion and social investment. The Government have made it pretty clear that they are still keen on financial inclusion but they seem, at best, lukewarm about a social investment bank, even though that is what their own Commission on Unclaimed Assets recommended, with, by its calculations, a price tag of anything up to £330 million over five years. Will the Minister explain how the Government see those two additional objects being funded? There is the £670 million to which the Prime Minister referred. That may sound like a lot but, if it is to provide for the 8 million or so teenagers, it could be spread extremely thinly. Do the Government have a view on how much ultimately needs to be spent on these youth facilities? How much will be spent on youth before the other two objects get a crack at the money? Will youth spending stop at £670 million or will the Government have a higher figure in mind before they are happy to see money going into either of the other two concepts? It is important that we understand what the Government intend from the Bill. Staying loosely with my money theme, there is no information in the papers about the amount to be raised and no information about the costs. As we have heard, the money is to be processed through a reclaim fund and then distributed via the Big Lottery Fund. Overall, that seems to be a recipe for job creation with two layers involved. When will we be told the costs of processing this money? What will the upfront costs and the annual running costs be? How, in the longer term, will the annual running costs compare with the estimated annual flow from dormant accounts? As I said earlier, once the initial amounts have been gathered, we have to expect the annual flow to drop down to a relatively low level, and we have to query whether the Government have designed a value-for-money solution. The Government’s chosen conduit is the Big Lottery Fund. My noble friends Lord Astor and Lord Eccles raised some very important points on that and I share their concerns. There are concerns about the use of the Big Lottery Fund, the issue of additionality, or indeed the lack of it, and the impact of the huge sums being diverted to the Olympics on all the lottery distribution funds, including those concerned with the arts. We will look at those very carefully in Committee. As has already been pointed out this evening, the Bill does not guarantee that a single penny of dormant bank and building society account money will flow to good causes. It merely permits the banks and building societies to transfer the money but it does not compel them to do so. What will the Government do if the amounts of money transferred through the scheme are quite low? If the banks get better at contacting their former customers and if those with entitlements, such as the charities which benefit from legacies, manage to track more down, there may well be considerably less money available. We think that those two activities are important and we will be looking at whether the Bill needs to be strengthened to reinforce their importance, but those activities are likely to diminish the amount of money that is available. How will the Government tell whether the banks and building societies have transferred all the money that they could do? I cannot see where in the Bill there is an incentive for banks or financial institutions to transfer money; nor do there appear to be any inspection or audit functions attached to whether they do so. As has already been said, banks and other financial institutions with head offices outside the UK may well take the view that they have no particular interest in supporting the issues that the British Government have set out for them in the Bill. There are other aspects of the Bill that my noble friend Lord Howard of Rising and I shall want to explore further in Committee. We shall want to look at the role of Treasury powers—as usual, we find the hand of the Treasury written all over this Bill. We shall want to look at the fact that English money has some very specific objects set out for it but nothing at all is prescribed in respect of the other countries which will get the money. We shall also want to look at the definition of a dormant account in Clause 10 because we are aware that it may raise practical difficulties. The noble Lord, Lord Monson, raised some important points this evening which we should think about. Like the Liberal Democrat Benches, we also want to look again at the scheme for smaller institutions to opt out of the central arrangements and to see whether they can be made more widely available. Lastly, we shall look very closely at the accountability arrangements. In short, we shall subject this Bill to very detailed scrutiny and we hope to see a number of significant changes to it. I look forward to our Committee stage.