Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 62 - 79)



  Q62  Chairman: Good morning and welcome. Can you introduce yourselves for the record, please?

  Ms Davidson: Gill Davidson, Secretary and General Manager of Skipton Building Society.

  Mr Goodfellow: John Goodfellow, Chief Executive, Skipton Building Society.

  Mr Clark: I am David Clark and I am Chairman of Charity Bank.

  Mr Hayday: Malcolm Hayday, Chief Executive of Charity Bank.

  Q63  Chairman: We have 30 minutes to get through this. What is your view of the proposed unclaimed assets scheme laid out in the consultation paper by the Treasury? If we start with Skipton, please?

  Mr Goodfellow: I guess we were driven to submit evidence to the Committee because the difficulty we feel—and it seems to be a very pertinent one and it has been touched on already this morning—there is a huge difference between someone who has a bank account with a bank and someone who has an investment account with a building society, and that difference is membership and ownership and all the rights that attach to the membership and ownership. Of course, it is quite incongruous that the 15 years term that has been chosen will take you back to the mid-90s when there was a large number of building society demutualisations. To me it is absolutely crazy that the account that is now dormant with the Halifax, say, will be captured by the scheme but the shares that were granted to the person who had the account at the time the Halifax converted will not be captured by the scheme and it just seems to me absolutely pointless to have a scheme which does that.

  Q64  Chairman: So we should get the shares captured as well?

  Mr Goodfellow: Why not? Absolutely why not because you are capturing mutual members, shares, because that is in effect what you are doing, but you are not capturing plc shareholders.

  Q65  Chairman: Mr Goodfellow, we are doing nothing; we are just taking evidence!

  Mr Goodfellow: I am merely making a point. It is the first time I have ever heard you say you do nothing!

  Q66  Chairman: David?

  Mr Clark: We come from the rather privileged angle that once all the problems we have been discussing this morning are solved in how to identify the assets and put them into a fund it is then perhaps our experience in Charity Bank that may be of assistance. We do not have the experience of knowing how to identify where the funds and the assets might be; what we have experience of is managing charity funds and, most of all, lending to charities. We are both a bank and we are a charity. There are three particular missions which relate partly to depositors and investors, but our key mission is to lend to not for profit organisations, which means charities, and we lend money into the community, and we are attracted to having the details come out of this scheme for the potential opportunity that we have to be able to help you with identifying where and how the monies may go and be invested into the community.

  Q67  Mr Fallon: Mr Goodfellow, the Halifax Building Society has already started an exercise to try to reunify people with their forgotten accounts. Are you going to do the same sort of thing before this scheme gets going?

  Mr Goodfellow: Firstly I have to point out that the Halifax Building Society does not exist; Halifax plc exists. In the interests of our members—this is not driven by any interest on our part or indeed interest on the part of the scheme—we try to find them. These are people who have, for whatever reason, lost contact with us. They are generally not on the voters' roll because that is the most obvious and easiest way to find someone in this country, so, yes, we will continue to try. But how successful we will be I have no view.

  Q68  Mr Fallon: I want to be clear, is that part of your normal work?

  Mr Goodfellow: That is part of our normal work.

  Q69  Mr Fallon: You are not mounting any special initiative prior, the scheme itself coming into operation?

  Mr Goodfellow: Assuming the scheme comes in to operation we would expect to redo all the ones that we have done in the past to see if we can find them yet again; I think that is all we can do.

  Q70  Mr Fallon: Do you use third party agents?

  Mr Goodfellow: Yes, we do.

  Q71  John Thurso: Can I go back to the point you made about mutuals because I would like to clear that up so that I have an exact understanding of it? The Halifax demutualised, I had an account at the time, I get some shares, I maintain the account. The account becomes dormant but meanwhile I have the shares and because they are mine and I have sold them all, or whatever, therefore that split. But the point with an existing mutual such as yourself is that the share and the investment in the bank are one and the same thing.

  Mr Goodfellow: Are one and the same.

  Q72  John Thurso: Therefore by, if you like, taking the dormant account you are actually removing my property interest as a shareowner in the mutual?

  Mr Goodfellow: I think the best way to understand it is that it raises the whole question of are you still a member of the mutual if the account is transferred? There is a belief at the moment, I think the popular theory is that, yes, you will retain your membership, but that will need a change to the rules of all the mutuals.

  Q73  John Thurso: In your submission I think you said that the principle of utilising unclaimed assets proposed by the Treasury is accepted, so what you are looking for, if I get this straight, from whatever comes forth from the Treasury is a formula that takes account of that, that either clarifies it in law or exempts the mutuals?

  Mr Goodfellow: That recognises the difficulties that a mutual is in compared to a bank.

  Q74  John Thurso: Thank you for clarifying that. Under the current proposals do any of you envisage any inconvenience or cost for the dormant account holder when they eventually come to reactivate their account?

  Mr Goodfellow: I do not really think it is any different from the current situation. Someone will appear with the passbook and say, "I have found this, it was my mother's, who has died," or whatever. There is a process to calculate actually what the sub-balance is in the account and pay it. It is not painful and it does not particularly take time. It is not difficult and I do not see it being any more difficult in the future.

  Q75  John Thurso: Is there any way in which customers could be told or informed that their accounts have been transferred to the central fund? Presumably not because if you could find them—

  Mr Goodfellow: If we could find them they would be dealt with. It is one of the difficulties.

  Q76  John Thurso: I am answering my own question! We will get a long way quickly at this rate! Let me ask you one last question: how will the institutions maintain customer records? Will it be a system of memorandum accounts running a shadow book of accrued interest, or will you just carry on running the thing as normal with a flag on saying that it has gone dormant? Are you going to have problems there?

  Mr Goodfellow: We do not generally run the accounting side of it, the financial side of it but we will run the membership side, so the last known name and address, et cetera, side, so that you can start the proof of ownership, if it turns up.

  Q77  Chairman: To take the point that John just mentioned about the shares. You want people to remain members of the building society but building societies vary in terms of the amount of money that has to be there to retain being a member—from, say, £1 to £100. Is there not a way through the Treasury, if this scheme comes into vogue, that you could say, "Let us transfer money to the central fund where we can keep sufficient in to retain their membership"?

  Mr Goodfellow: I think it is the recognition that membership is an issue which mutuals have, which the banks do not have. As a voluntary scheme the change of rules needs to be placed before the members by the board—who can say the board will all want to do that? Secondly, the members, of course, have to approve it, and where is a mutual placed if the members say, "No, we do not agree with this voluntary scheme"? I think it could be quite difficult.

  Q78  Jim Cousins: Just on this specific point. Some mutuals do not allow membership accession rights on death. I do not know what your own practice is but that has the tendency to create apparently dormant accounts which are held notionally by the executors of the previous member.

  Mr Goodfellow: When a member dies the account is in theory held by his estate, however his estate is represented, whether it be executors or the will has been proven. There is no concept of transferring membership—membership is an individual thing, it belongs to an individual and when you die it ceases. There is no concept as far as I know of transferring members.

  Q79  Jim Cousins: Exactly, so you will have a number of dormant accounts which are held notionally by executors, who wish to maintain the concept of membership.

  Mr Goodfellow: Once they are run by executors they would not normally go dormant of course, if they have been resurrected almost. The reason for the dormancy may well have been the person's death but once an executor is appointed it is no longer dormant.

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