Select Committee on Treasury Written Evidence


Memorandum submitted by Martyn Jones MP

  I write to submit my formal written evidence to the Treasury Select Committee's current Inquiry into "Unclaimed assets within the financial system".

  You may aware, I have campaigned for several years in Parliament to "liberate" dormant account money from banks, to enable such money to be used for the good of society—as in other countries, most notably Ireland.

  I was successful in persuading Gordon Brown to include my vision for using dormant money for charitable purposes, in the Labour Party's Manifesto in 2005.

  I therefore welcome the Government's commitment to addressing this important issue.

  However, I do have concerns around any suggestion of there being a voluntary nature to the involvement by the financial sector in releasing unclaimed assets for charitable purposes.

  During the early stages of my campaign, there was a huge reluctance by the British Banking Association (BBA), to even recognise that there was problem with unclaimed assets.

  Furthermore, there was no desire by the BBA to address issues such as the definition of a dormant account, nor to reveal publicly even an estimate as to the total amount of money residing in such accounts.

  As a result of the uncooperative, defensive and reluctant nature of the BBA to engage in an open debate on unclaimed assets, I was convinced from a very early stage, that a compulsory scheme was the only sensible way for the Government to make progress on this matter.

I believe it is paramount that there should be established—through statute—a compulsory scheme as introduced in Ireland, and this should be independently regulated.

  In my opinion, the present proposals for 15 year "cut-off" point are excessive, and allow banks to continue to hold onto vast amounts of dormant money, that could be otherwise used for charitable purposes.

  As I have always said throughout my campaign, any scheme must ensure that a fund should retain sufficient sums to enable bank customers, who can prove ownership of their account, to be re-united with their money.

  On the "delivery side" of dormant accounts, I also have concerns about the proposition put forward by the Commission on Unclaimed Assets, in relation to the establishment of a Social Investment Bank, as laid out in their consultation paper: "A Social Investment Bank".

  Indeed, the concept of "social investment" is gaining increasing support from the Government as indicated in its latest consultation document, "Unclaimed assets distribution mechanism: A Consultation".

  I believe that this approach is deeply flawed.

  On the surface, the Commission hold-out the seemingly attractive proposition of the "social investment bank" concept, with the main aim of the "bank" being to help "finance" the so-called third sector initiatives.

  However, the word "finance" causes me some concern.

  In the Commission's proposals, there is the possibility that dormant money may not go direct to those in most need.

  What is being proposed is merely a new financing body for investment.

  This is not how I envisaged dormant account money being used.

  Through the proposed mechanisms, I believe that far from helping the disadvantaged in society by direct means—as in Ireland and other countries- what the Commission proposes, is to use the money to attract other capital money and resources to "finance" projects.

  One has to question, where would such capital and resources emanate from?

  As a possible consequence of this proposal, it could mean that the banking sector would remain as the final arbiters of which projects are assisted, and which were not.

  Worse still, in my view, under the Commission's proposals, banks may actually profit from the funding such projects.

  If this is what is being proposed, then the Commission are in mind, heading in completely the wrong direction.

  My entire campaign has been based on the principle of divesting banks of control of dormant money, simply because they have failed for decades to address this issue with any seriousness.

  The Commission's proposals could mean that banks remain with some degree of control over how dormant money is used.

  This is totally unacceptable.

  I also completely disagree with their assertion that "using the assets as a traditional endowment or spending the capital over a shorter period would have little impact on disadvantaged communities".

  If this were true, then how does the Commission explain away the staggering success of Lottery funding in the UK?

  The proposals in the Commission's consultation paper will not help those people and communities, in real need of assistance in deprived areas of the UK.

  Furthermore, I believe the Commission's proposal of the "social investment bank", will merely create a new bank "on-the-block", which will attempt to fill the gap in financial service provision that does not currently exist in some poorer communities.

  This approach simply lets high-street banks "off-the-hook" in their failure to provide those much needed services at present.

  I have deep reservations about the direction that the Commission is heading on dormant accounts and their use.

  Furthermore, if the Government were to follow the Commission in this direction, it could mean that banks will not only continue to profit from dormant account money which is less than 15 years old, they could actually boost their profits from financing "social investment bank" projects.

  This proposal is not how dormant money should be used, and I believe this approach is deeply flawed and not in the public interest.

  The Commission's idea that dormant money should be used merely to encourage investment, entrepreneurship and financial competence, is a million miles away from what I wanted to see established. I also believe it is not what was envisaged in Labour's Manifesto commitment in 2005.

  The distribution of dormant account money for charitable purposes, should be made through an independent body, along the lines of the mechanism used for distributing Lottery money in UK.

  Finally I would urge the Government to extend the unclaimed assets scheme to include dormant life insurance at the earliest possible opportunity.

  Thank you for the opportunity to contribute to your inquiry.

June 2007





 
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