Dormant Bank and Building Society Accounts Bill [HL]

My Lords, we had intensive debates on these issues in Committee, as both the noble Lord, Lord Shutt, and the noble Baroness, Lady Noakes, indicated. Their arguments have not changed a great deal. We have thought about the issue carefully, and I will demonstrate more effectively than I was perhaps able to in Committee why the Government think that these two amendments are unnecessary. However, we are of course not against the objectives behind the amendments. Because the operation of this scheme—which I hasten to add is a private one—is directed towards public purposes and Ministers have a role to play in it, it must be accountable and transparent. We want to meet the objectives which noble Lords opposite have identified, but have gone about it in a different way. I shall explain why, and why our system and proposals will work. I first make it absolutely clear that the reclaim fund is not a government body. The legislation defines the reclaim fund and sets out a clearly defined set of conditions to which the fund is subject, including matters that it must include in its articles of association, but it is a private institution. The issues of parliamentary scrutiny and accountability for a private body are different from those for a public one, which would be directly answerable in the public domain. Of course we have a different approach from any non-departmental public body or other institution which the Government have set up. This is a private scheme. In this private scheme, banks and building societies may cancel their liabilities to customers only if they transfer their assets to the reclaim fund. Of course, the reclaim fund will be established in compliance with the conditions set out in this legislation, and will be authorised and supervised by the Financial Services Authority. The industry, which will set up the reclaim fund, published on 8 November a timetable for selecting candidates and having interviews later this year. We await further updates on the running of the reclaim fund and how it will be constituted, but it will operate within the constraints of this legislation. I therefore cannot say now who will be running the reclaim fund. That will depend on the selection process of these private institutions for this private body. Of course, if a suitable candidate does not come forward to apply for FSA authorisation at the end of the process, the industry representatives will have to establish a reclaim fund themselves. They have made a public commitment to that action of last resort. Once it is established under the provisions of the Bill, the reclaim fund will be entirely independent of government. The Government will not make appointments to the board or membership; nor do we feel it necessary or appropriate to do so. The expertise for managing the reclaim fund lies within the private sector, not government. We do not want to place controls over the reclaim fund in this way. Rather, we set out in legislation what we regard as sufficient checks and balances on a private institution to ensure that it will have a clear purpose from which it will not depart and that the requirements in legislation are enforceable in the highly unlikely circumstances that it would be necessary to take any action. However, the reclaim fund is not a public body. I maintain that the Opposition are putting forward proposals for parliamentary scrutiny that are applicable only to a public body. This is manifestly not one. In other circumstances, they would be only too eager to emphasise how government should regulate with a light hand. If I have stood at this Dispatch Box once, I have stood here a hundred times, and heard of the bonfire of regulations that is necessary for a light touch with all sorts of institutions. The reclaim fund is a private institution and we are proposing to regulate it with a light touch. The noble Lord, Lord Shutt, and the noble Baroness, Lady Noakes, are seeking the heavy hand of parliamentary regulation as if the reclaim fund were some kind of direct public body. I ask them to consider whether they really have a commitment to dealing with this body in this form. Have they in mind a precedent for a private company or institution being required to report directly to government or to Parliament in the way that their amendment contends? We have taken an innovative approach in the Bill to this interesting—I shall not say unique—institution, the reclaim fund. That is the nature of our task because we are introducing an unclaimed assets scheme that is about private property being reclaimed at best by those who have the right to own it, with the reclaim fund being only the residual position when attempts to restore funds to private citizens have failed. Then the money goes to the reclaim fund. The reclaim fund is a product of the work of the private institutions which are committed to this legislation. The other factor we must bear in mind is that these commitments are made by private institutions—the banks and building societies—to tackle the problem of moneys that have been placed with them for keeping which they cannot return to the proper owners. Those moneys will go to a reclaim fund that they will institute and be responsible for. That could not be further from a regulated public body. Clause 5 sets out the three purposes that the reclaim fund must have: it must meet repayment claims; it must manage money prudently; and it must transfer surplus funds to the Big Lottery Fund for distribution. Those are the three constraints on it. That is where public policy comes into play. The law defines this private institution, but the Bill sets out clear ways in which the fund fulfils the obligation. First, with regard to customer repayment, let me make the obvious point: the banks and building societies are making strenuous efforts to ensure, as best they can, that they reacquaint customers with their resources. A customer has a statutory right to repayment. If the money has gone to the fund because the account has been dormant for 15 years or more, the individual’s right to claim that money is still there, and the fund must have a process for how it can be claimed. That is public policy and is a constraint built into this legislation. However, that is not the same thing as parliamentary scrutiny. Secondly, the reclaim fund has to manage its money prudently. It will take control of significant assets, and we would all want to be absolutely assured that it maintains sufficient resources to meet any future claims from customers. Otherwise it will miss the principle on which we are operating. Individual customers have the right to their assets if they can establish a claim, even after 15 years or a multiple of 15 years. If the money is in the reclaim fund and it is theirs, the reclaim fund must repay it. That is specified in the Bill. The body will be subject to the Financial Services Authority—prudential regulation of such an institution. Thirdly, the reclaim fund is obliged to transfer its surplus to Big. It must on the one hand calculate how much money it needs to protect its undeniable duty to meet future claims, and on the other transfer the surplus money so that distribution can occur. We cannot specify these amounts of money. We do not know the original totals which will occur, let alone what this fund will look like as times goes on. Yet Schedule 1 to the Bill is absolutely clear on how the reclaim fund will operate. The legislation also states clearly that the reclaim fund may use the money it receives to defray its operating expenses as long as they are reasonable. Again, the body is prescribed in law—if this Bill becomes an Act. I emphasise that the reclaim fund has to be transparent. That is absolutely crucial to this dormant account scheme. The scheme will not work if it is not operating with full public awareness of what it is doing. We are all united in this House on this necessity for transparency. Schedule 1 requires the reclaim fund to publish annually a list of institutions participating in the scheme, the amount of money transferred into the scheme at individual institution level, the amount of money reclaimed by consumers also at individual institution level, and the aggregate amount of money that they pass on to Big. This information will be available for public scrutiny. It will be in the public domain, so this body has to be accountable. The issue identified by the noble Lord and the noble Baroness with their amendment is that this is not good enough and that we need parliamentary scrutiny of its operations. Of course if Parliament wishes to scrutinise or debate any specific figure or point of detail in any work of the reclaim fund, among us in this place we have the expertise to subject to public scrutiny a body which is fulfilling a public purpose but is a private institution. If there is any doubt that we might lack the expertise to do that, I do not doubt our capacity for that for one instant. The other place is scarcely going to let any malpractice occur without Members of Parliament finding many conceivable ways of drawing public attention to any misuse of that body’s rights and powers. I appreciate the intentions behind Amendment No. 17—that parliamentary scrutiny of the directions to Big is required. But we have clear transparency of operations. Establishing a role for Parliament in the issuing of directions regarding Big’s expenditure in England is a pretty heavy-handed way of controlling this position. Of course the Government are bound to say that this is excessively heavy handed, but the Delegated Powers Committee, which reported last November, noted that the approach set out in the Bill follows the model that functions under the National Lottery Act, and is satisfied that it meets its requirements for parliamentary scrutiny. We are not building afresh here; we are following a model that already operates.