Examination of Witnesses (Questions 80
TUESDAY 15 MAY 2007
Q80 Jim Cousins: The National Savings
and Investment are suggesting that they are excluded from the
scheme. I wonder what view you have about that?
Mr Goodfellow: I wish I was as
creative as the National Savings and Investment for avoiding the
Q81 Jim Cousins: What is your view
about that, Mr Hayday?
Mr Hayday: I think we take the
view that if this scheme is to be applied to the financial services
sector it should be applied across as wide a range of the financial
services sector as possible; so that would include national savings,
it would include credit balances on credit cards, a whole range
Q82 Jim Cousins: But not necessarily
Mr Hayday: It should include insurance
Q83 Jim Cousins: So your view would
be that the attempted exclusion of National Savings and Investment
Mr Goodfellow: It is unfortunate.
I think if we are operating on the principle of unclaimed assets
should be transferred for the public good then it should apply
across the whole of the financial services on as wide a basis
as we can do it.
Q84 Jim Cousins: My next question
is more for Mr Clark and Mr Hayday. The previous witnesses have
just said that they regard the idea of leverage through a social
investment bank rather than actually giving grants directly where
you only get one on one benefit rather than maybe two on one,
three on one or possibly a great deal more, as being an attractive
feature. How do you view that?
Mr Hayday: We listened intently
to the evidence before and indeed we have had discussions with
the putative social investment banks' thinkers on this and I am
inclined to agree with the comment made by one of the witnesses
that there is room, given the amount involved, for a number of
particular models in this. A social investment bank would have
to be quite well defined. What an investment bank does is not
necessarily what a social investment bank would necessarily do.
May I also point out that the definition of a bank does not hinge
around what it does with its money, it is where the money comes
from. A bank is something which takes deposits and it would be
the difference, for example, in what experience we could bring
as a bank, where we do take deposits and we do lend them to charities,
which is more of a retail type of operation, than, for example,
a social investment bank that might use the funds in, for example,
venture capital, in lending, in grant making and in other forms
of risk, but they would not be taking deposits from the public.
So there are a number of models here, and we heard our colleagues
from Balance talking about grant making. So somewhere between
granting, lending and being more creative there are a number of
potential levels and in that they are not mutually exclusive in
Q85 Jim Cousins: Two points there.
One is that you have there suggested that this new vehicle, what
it might be, had a lending role, so that itself became involved
in retail banking activities in some form. Do you not think that
that raises some quite serious issues of probity?
Mr Clark: Just to clarify that,
our focus of attention clearly is on the reclaim fund. What we
are suggesting is that the reclaim fund might wish it to lend
to charities. It would not have to be a bank to do so, it might
want to come to the Charity Bank, the Social Investment Bank and
other people who have experience of that type of lending and that
type of investing, which is highly specialised and relatively
new. But it itself would not necessarily need to be a bank.
Q86 Jim Cousins: Whether it was a
bank or not if it itself, whatever it was, was involved in lending
activities that would require the acquisition of a whole new battery
of skills and a whole new battery of market considerations as
against other potential lenders.
Mr Clark: Indeed. May I ask to
give our thinking on this because we have had quite a close rapport?
Mr Hayday: The way we see the
Social Investment Bank is that it would act very much in a wholesale
capacity, bringing liquidity to other intermediaries in the market
place, so we would not necessarily see it as lending directly
to end beneficiary organisations. But I think there is also a
role for it in making small capacity building grants, as witnesses
from the Balance Foundation said earlier, because many organisations,
particularly in small, deprived communities, actually lack the
capacity to take advantage of these types of instruments at the
Q87 Jim Cousins: Let us be clear
about this. You are there suggesting that this new vehicle, whatever
it might be, should be involved in grant giving where it adds
to financial capacity or expertise. Are you suggesting that this
new vehicle, like the Balance Foundation arm, should just give
grants to anyone that was considered worthy?
Mr Hayday: No. I would suggest
that they are actually two very different skills and that you
do need two different sets of competences.
Q88 Jim Cousins: So any grant-giving
role of this new vehicle should be limited to this area of raising
Mr Hayday: Yes.
Mr Clark: Chairman, may I just
add to that? In the way we have read the paper there are two elements
to the reclaim fund. One is the element that says there must be
enough money in there, accessible, prudently managed, to be able
to give back to the people who then legitimately arrive and say,
"Actually it is our money." The second element is the
re-distributive element of the reclaim fund, which is the second
phase of how to get money into the community, and what we are
hearing and what we are saying is that it might be through grant,
it might be through the sort of lending that we dowhich
is of a more micro level than would happen in a social investment
bankand indeed there is the Social Investment Bank. But
there is a range of options within that which actually would work
together once the market has gone into the reclaim fund, which
has those two very clear elements to it.
Q89 Peter Viggers: Charity Bank has
experience of the Unclaimed Assets Register and indeed was the
first bank to join that scheme. Would you explain how that works
and what caused you to join it?
Mr Hayday: Charity Bank was founded
on an absolute principle of transparency, and we thought, therefore,
right at the very beginning, that we needed to have systems in
place that fully protected customers and potential beneficiaries
of customers in time to come. So we decided to sign up with the
Unclaimed Assets Register to make it clear to any relative, if
you like, of an account holder, that in the event that somehow,
for one reason or another, they became divorced from the relationship
there was a form of access for them through the register that
would enable them to track whether or not their relative, estate
had an account with us. Although we are only five years old we
are just beginning to come to the point where a number of our
deposit holders are dying, so we are now getting a number of estates
contacting us and saying, "We understand that you have an
account", and it is working very efficiency.
Q90 Peter Viggers: What data transfer
is necessary under the scheme you are proposing to operate?
Mr Hayday: At this stage it is
really too early to be very specific about that, so I would not
try and come up with details that we have not yet worked through.
Q91 Peter Viggers: The Commission
on Unclaimed Assets has released proposals for a central register,
which would effectively combine the schemes run by the BBA, the
BSA and the NS&I, as well as having the flexibility to respond
to new kinds of assets being added. Do you support those proposals?
Have you discussed that proposal with the Unclaimed Assets Register?
Mr Hayday: I think we take the
view that there has to be improvement on what has gone on in the
past because in a way if there had been a perfect system how come
we have an unclaimed assets situation? We believe that the banks
and the building societies have taken steps to improve that but
we have not actually seen the fine detail.
Q92 Peter Viggers: Have you addressed
the issue of data privacy in relation to transfer of information?
Mr Hayday: Yes, we are signed
up to the Data Protection Act.
Q93 Peter Viggers: It has been suggested
that it might be better to transfer the bare minimum of information,
such as the number and value of dormant accounts being transferred,
as in the Irish scheme, thus minimising the running costs of the
central reclaim fund and worries about data privacy. Do you have
a view on that level of privacy?
Mr Clark: No, only in that sense
that we would agree that it must be done with minimum cost otherwise
it does not make sense. But then each individual institution's
experience will build up and they can get their own satisfaction,
but how the centre operates has to be something for general agreement.
Q94 Peter Viggers: Has your consideration
of these schemes in general led you to speculate about the amount
of unclaimed assets that might eventually be around?
Mr Clark: Led us to speculate
certainly, but to a conclusion definitely not. The amounts that
were mentioned in the earlier part of this hearing, whether it
is in the region of £400 or £500 or multiples of that
are less relevant to us than where we as Charity Bank might be
able to help working with other institutions. I think what I would
say to that, if I may, Chairman, is that the amount of money,
whatever it is, is a big amount of moneyit is a big amount
of money. The experience that we have had, particularly of lending
into charities and getting money into charities and communities,
that need it, is actually quite difficult. People are often reluctant
to take on debt finance and if an option for the reclaim fund
and what happens after the reclaim fund releases money for distributionif
that is an optionwork would need to be done with communities,
with charities, the particularly disadvantaged, to say, "This
money is here, this is how you might be able to use it."
To give you an example on that, the average size of our loan is
only around £100,000. We have much bigger ones and we have
much smaller ones, but in the context of hundreds of millions,
potentially, quite a lot of work needs to be done on the communities
themselves in terms of how they might want to access that money,
and I think that is most relevant in the size case.
Q95 Chairman: You mention a big amount
of money; at what level does it start becoming a big amount of
Mr Clark: To a charity a big amount
of money is when they have it to use what they want it for.
Q96 Mr Love: I wanted to ask you
a completely different question. I want to go back to Mr Goodfellow
and this issue of membership. In your submission you say that
we have to clarify, and you have indicated some of the areas we
need to clarify. I wanted to get a little more clarity from you
as a representative of a building society movement, and I am thinking
in particular about some of the changes that you have talked aboutthe
demutualisation phase, some of the changes that occurred subsequent
to demutualisation, in particular charitable assignment. How would
you see membership working where the sums were transferred and
presumably the membership was transferred but then the member
came out of the woodwork? Would they become a new member or would
they revert back to their older membership, which may carry more
benefits than new members?
Mr Goodfellow: If they came out
of the woodwork, using your phrase, they would revert to their
old membership. Most of the chargeable assignments, but not all,
are five years in terms. So to all intents and purposes the chargeable
assignment aspects would be lost in the 15 years to get to dormancy-type
situations, one period being longer than the other. I think what
is much more questioning in my mind, at the moment there is a
merger which is going through its various stages between Nationwide
and Portman and that involves payments to the Portman members.
If one of those accounts was dormant what would happen to that
payment? Would it actually be paid, would it be paid to the Unclaimed
Asset Fund? I do not know the answer to this, and these, I think,
are important questions that in a voluntary scheme it just compounds
the problem of getting the same consistent answer to them.
Q97 Mr Love: I pick up on that word
you used about consistent. On a voluntary scheme one would assume
that each building society would pass through rule change that
would be appropriate in the circumstances, and no doubt there
would be guidance. But if it is voluntary that guidance would
not be chosen. How important is consistency between building societies
and indeed demutualised and other banks?
Mr Goodfellow: I think it is vital
because where you do not get consistency and then someone feels
ill treated by the treatment of one particular society it is a
problem. We saw it in some of the demutualisations, those problems
created by inconsistency.
Q98 Chairman: On our visit to Dublin
we noticed that the building society issue had been dealt with
by their scheme, but we take the point that it is a complex issue,
particularly in a voluntary arrangement. In your submissions,
Mr Goodfellow, you mentioned the option of small financial institutions
being able to distribute monies in their own area. Do you want
to elaborate on that before we go? It ties up with George's point
Mr Goodfellow: I think one of
the reasons for us putting it in is we have done some testing
with our members to try and find out what our members think of
all this, because it seems to us that it is a voluntary scheme
and we have to try to find out what they think. There were two
interesting statistics that came out of it. Statistics are always
just statistics and I give you them as nothing more than statistics,
but in some way they are a surprise. Half our members were happy
about the unclaimed asset proposalswe thought it would
be a small proportion, but it was roughly fifty-fifty. There was
a majority against but it was only a small majority against. But
in terms of what should happen to the money 88% did not expect
it to go to the government, and that to me says it is a big issue
that we need to get very clear about what is happening to this
money, and there have to be some proposals that members can sign
up to. Anything, I think, that leaves it in local control and
the control of the institution, et cetera, will help to solve
Q99 Chairman: That is very helpful
to us. George's point about the national lottery going to certain
areas and maybe missing out in the low income areas, do you think
that your proposals of allowing small financial institutions to
distribute it could overcome the problems that George highlighted?
Mr Goodfellow: I think provided
that there was some mechanismand I think it was highlighting
the problem of people who are perhaps incapable even of asking
for helpsome process to get that help to them then, yes,
I think they can get the help, but this ability to ask for help
may not be there.