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Orders of the Day
Dormant Bank and Building Society Accounts Bill [Lords]
[Relevant documents: The Eleventh Report from the Treasury Committee, Session 2006-07, Unclaimed assets within the financial system, HC 533, and the Government response, HC 1028, Session 2006-07 .]
Order for Second Reading read.
4.38 pm
The Chief Secretary to the Treasury (Yvette Cooper): I beg to move, That the Bill be now read a Second time.
I thank my hon. Friend the Member for Burnley (Kitty Ussher), the former Economic Secretary, for all her hard work in developing the Bill and supporting its progress, and welcome to the Treasury Bench my hon. Friend the Member for Dudley, South (Ian Pearson), the new Economic Secretary, who will be taking the Bill through Committee.
The Bill implements the commitment in the Labour party’s 2005 manifesto to channel unclaimed financial assets back into the community. It has already been through the other place, where it received broad cross-party support as well as extensive debate, and I hope that we will see that cross-party support continued here. The purpose of the Bill is to enable what are effectively lost assets to be put to use in supporting the community while ensuring that, should their former owners discover them again, they can still get them back.
We begin our deliberations in this place in a rather different financial climate from that in which we started, and I am sure that the changing circumstances will form part of our deliberations here and in Committee. The hon. Member for Stratford-on-Avon (Mr. Maples) has already raised this matter with the Chancellor today, in the course of the discussions on the statement. It is important to recognise that the Bill is not about tackling today’s market conditions; it is about the future, and about laying the foundations for a scheme that will be in place in mid-2009 at the earliest. The scheme will be voluntary, and it has been brought forward with the full support of the industry.
Mr. John Maples (Stratford-on-Avon) (Con):
The point that I was making earlier was that, although the Bill is well conceived—I have no objection to the idea of taking dormant deposits and spending them on good causes—it was, as the Chief Secretary has acknowledged, conceived in a very different banking environment. One of the problems that the Chancellor is trying to deal with is the capital adequacy of the banks, and there will probably be a need for some public sector injection in that regard. Between now and the Committee stage, will the Chief Secretary consider whether it would be sensible to allow this money to be used temporarily for that purpose, so that the reclaim fund would own shares—be they convertible notes or preference shares in the banks—that could buy capital for the banks? In due course, when the banks’ situation has improved, the reclaim fund could then sell the securities or redeem them in order to use the money for good causes. In the meantime, however, I think that the public will find it odd that we
are going to take £500 million off the banks to spend on good causes, when it could be used to bolster their balance sheets.
Yvette Cooper: I hear the point that the hon. Gentleman is making. First, the Bill will not come into force until next year and it will obviously take time to set up the reclaim funds, so his proposals would not address the current market conditions that the banks are facing. Secondly, this will be a voluntary scheme, so it will be for the banks and building societies to choose to participate. In the discussions that we have had with the British Bankers Association and the Building Societies Association, they have made clear their continued support for the scheme, and said that they are continuing to encourage their members to participate and believe that they are keen to do so, even in the current market conditions. It is also important to recognise that the assets and liabilities will both be transferred to the reclaim fund, which will obviously have a rather different outcome in regard to the impact on the capital position. As I have already said, however, the changing climate and the credit crunch will obviously be part of our deliberations in Committee in regard to lessons that can be learned to ensure that we get the detailed legislation right.
I would also like to point out that, according to the banking sector, the banks estimate that their dormant assets represent less than 0.07 per cent. of the £535 billion held in retail banking and savings by the UK’s nine largest groups. Although that is a small proportion of their retail banking, that money could make a real difference to projects in the community.
Mr. Peter Bone (Wellingborough) (Con): Will the Minister confirm that that figure is £5 billion, which is not chickenfeed? Can she tell us when she was given the advice by the banks that they were happy to proceed with this plan? Was it given in the past 24 hours, or is it two weeks old?
Yvette Cooper: No, it is not £5 billion; that would be 1 per cent. of £535 billion. I was talking about 0.07 per cent., the figure in the banks’ estimates. Also, may I again make it clear that this will be a voluntary scheme?
The banks estimate that they have between £250 million and £350 million in accounts that are lying dormant and have been untouched for more than 15 years, and sometimes much longer. The building societies estimate that they have a further £130 million in the same position. The evidence shows that some people forget about or lose track of often small deposits of money in bank or building society accounts—perhaps because they changed address or lost contact with their banks, or because the account holder has died without anyone being made aware of the money.
Susan Kramer (Richmond Park) (LD): The Chief Secretary will be aware that many of these dormant accounts are, in fact, owned by charities, having been left to them through legacy. However, there are very few mechanisms for identifying the accounts and reclaiming the money. Will she bring in some structure that will enable them to do so under the legislation?
Yvette Cooper:
The hon. Lady is right that we should do everything possible to reunite the money with the original account holder, whether it be a charity, an individual or whatever. That is an important part of the
legislation. Customers always have the right to reclaim their money, but we also think it important to make a concerted effort to reunite account holders with their lost money before the scheme comes into operation. We have encouraged the financial services to do that and we welcome the launch by the British Banking Association, the Building Societies Association and National Savings & Investments of the “mylostaccount” website in January this year. More than 175,000 people have already used this free cross-industry service to reunite themselves with tens of millions of pounds. It is an important part of the scheme.
Tom Levitt (High Peak) (Lab): My right hon. Friend has three times mentioned that the scheme will be voluntary. Is she aware that the National Council for Voluntary Organisations, the Treasury Select Committee and others have been very sceptical about the effectiveness of a voluntary scheme, given that the five or six such schemes already operating around the world are all done on a mandatory basis and they clearly produce a far higher return for good causes than would any voluntary scheme?
Yvette Cooper: I recognise my hon. Friend’s point, but the scheme that we are proposing has strong support from the industry and both banks and building societies have said that they intend to participate in it. That is encouraging, which is why we have set out the Bill in this way, but we will need to review the situation over time, to monitor the scheme’s progress and to look into what further support may be needed.
Three principles have informed the Government’s approach: first, that the preferred outcome should, where possible, be to reunite account holders with their money; secondly, that account holders must have the legal right to reclaim their money at any time; and thirdly, that the scheme should be designed to run effectively and efficiently in order to maximise the money available for reinvestment in the community.
The scheme will allow eligible banks and building societies to transfer money in accounts that have lain untouched for at least 15 years to a so-called reclaim fund. By making the transfer, the liability to repay the account holder will also pass from the bank to the reclaim fund. Any money that the reclaim fund does not need to meet the claims of customers will be passed over for reinvestment in the community via the Big Lottery Fund.
The scheme aims to capture genuinely lost accounts. That is why we have set the dormancy period at 15 years. Some people have argued that it is too long, but we still think that it is appropriate. We will, however, bring forward an amendment to enable this period to be made longer or shorter in future if the evidence shows it to be appropriate, as it is important to ensure proper protection for account holders.
James Duddridge (Rochford and Southend, East) (Con): How confident is the Minister in the figures provided by the British Bankers Association and the Building Societies Association, particularly given that The Times was reporting up to the end of 2006 that the amounts involved in dormant accounts could be up to £20 billion? Are the figures given by the Minister for a 15-year dormancy or is there an aged analysis of dormant accounts from a more recent period—perhaps with a three-year dormancy? These will effectively be brought in over time.
Yvette Cooper: We have said that we view 15 years as the appropriate period, so it is not our intention to reduce the dormancy period. The reason for bringing forward an amendment is in order to respond to points made in the other place and as part of the consultation to the effect that there should be greater flexibility and no need to return to primary legislation if certain evidence arises. That will be a matter to discuss in Committee—as I have said, an amendment will be brought forward—but we believe that 15 years is the appropriate period.
The figures that I cited from the banks and building societies are obviously the best that we believe are available. Clearly, they are estimates and different ones will be put forward, but it is right to work on the basis of what we believe to be the best figures available. This will need to develop over time as the reclaim fund is established and it becomes clear what sorts of account can be transferred into the scheme. We will have to look at the evidence as things develop. That is why it is right that there should be some kind of review of the scheme as it progresses.
In the other place, the Bill was also amended to require banks and building societies to consider any customer-initiated activity, such as correspondence, telephone calls, voting at annual general meetings and so on, when determining whether an account is eligible for the scheme. We recognise the intention behind that amendment because, of course, we would expect banks and building societies to do exactly that, but we do not currently believe that it is necessary to legislate on that point.
Sir John Butterfill (Bournemouth, West) (Con): I must declare an interest as a trustee of a number of charities. In particular, the People’s Dispensary for Sick Animals, of which I am a long-standing trustee, has expressed concern about using the Big Lottery Fund to identify worthy causes, first, because it is an expensive mechanism and, secondly, because its record in choosing good causes is perhaps not as strong as it might be, given that, on occasion, it has been used for purposes that might otherwise have been funded by the Government. Will the Minister reconsider using the Big Lottery Fund?
Yvette Cooper: We think that the Big Lottery Fund is the appropriate organisation. It is important that we use an existing body to do this, rather than create duplicate organisations, which would increase the cost of distributing the money when our priority should be to get the resources to local schemes and, in particular, the young people who could benefit from this proposal.
We think that the Big Lottery Fund has the capacity to distribute resources on a large scale. Obviously, the issue will be discussed further in Committee, but the Big Lottery Fund also has access to an extensive network of third sector and public sector delivery partners, ranging from the large national charities to local community groups. Therefore, we think that it represents the best way to distribute the money and to get the best value for it by using it effectively.
May I complete the point that I was halfway through when I took the intervention? On the issue of the amendments made in the other place, the ultimate safeguard for customers is that they will be able to get their money back at any point from the reclaim fund,
via their own bank. We believe that there are also some drafting and legal difficulties with that amendment, which is why we shall seek to overturn it.
Simon Hughes (North Southwark and Bermondsey) (LD): I am very supportive of the proposal in the Bill, not least because many of my constituents and organisations in south London see the opportunity for money to come in to help work with young people.
When a group of young people and their organisations came together the other day following the knife crimes that have happened in London, one of the questions that they asked me to ask is whether money can come in and whether it is the Government’s plan not just to create new buildings, but to support existing organisations that could do with expansion or additional resources to do the good work in the community that the community needs them to carry out. If so, can we come to see somebody about that—which Minister is it?—to put the case for existing organisations to be supported, not just for new work to begin?
Yvette Cooper: Treasury Ministers will be happy to meet the hon. Gentleman to discuss his point further. Obviously, some of those issues will be for the Big Lottery Fund to set out as part of its distribution, but it probably is important that during consideration of the Bill we have a good debate on how the resources should be distributed.
The hon. Gentleman would probably agree with me and any other Member of the House who has conducted any kind of local community consultation that one of the key issues on which we can get young and old alike to unite is the need for more facilities for young people and for more for them to do in local areas. That can have benefits not just for those young people, but right across the community. That is why it is so important that we should look to access and use those resources to build a stronger future for young people as well.
David Taylor (North-West Leicestershire) (Lab/Co-op): It is important not to double count in relation to the possible impact on charities in constituencies such as that of the hon. Member for North Southwark and Bermondsey (Simon Hughes). The figures suggest that the biggest 12 banks and building societies currently give more than £300 million a year in their own charitable donations. Does my right hon. Friend have any indication of the possible impact on that level of giving if banks and building societies lose control of and access to their dormant assets?
Yvette Cooper: I do not believe that the measure will reduce the amount that banks and building societies can contribute to different charitable works. There are two things to consider. First, the Bill allows both assets and liabilities to be transferred. If the banks or building societies continue to hold the assets, they also continue to hold the liabilities on the dormant fund, which could limit what they can do as a result. Secondly, the scheme is voluntary. It is a way of ensuring that building societies and banks do what they think is right in terms of accessing the assets and putting them to good community use.
Miss Julie Kirkbride (Bromsgrove) (Con): It is important to remember that the money does, or did, belong to someone and that some of it might have belonged to people who have died and left legacies. A group of charities has asked for a reserve power to be included in the Bill. The charities are worried that they cannot trace the money that they have been left in a legacy because it is too difficult under the current online registration scheme to know when people have changed names or houses. We should bear it in mind that they are asking for something not for today but for the future. If, in three years’ time, Parliament considers that not enough progress has been made in attaching legacies to the relevant charities that would benefit from them, the Government will have to come back to the House with primary legislation. Will the right hon. Lady consider including a reserve power in the Bill so that we do not have to do that?
Yvette Cooper: We have not so far seen the need to include additional support. Obviously, we are happy to consider further issues in Committee. This is a Bill that should command cross-party support. We are happy to continue to look at the issues. As has been said, this is about where possible reuniting the resources—the money and the assets—with those who originally put them in the account or, if they have died, respecting any legacies or wills that they might have set up. Clearly, that is an important part of the approach to the Bill, but equally we have to recognise the existence of dormant assets, which have often sat in accounts for many decades, and put them to good use.
The reclaim fund will receive money from dormant accounts. The Bill does not create a reclaim fund, but it sets out the requirements that a company must meet in order to operate as one and provides for its authorisation and regulation by the Financial Services Authority. The FSA will ensure that the reclaim fund has sufficient money to meet anticipated levels of claims for repayment and will set out a regulatory regime, which will of course be subject to full consultation as well. The Bill requires the fund to meet repayment claims, manage money prudently, and transfer surplus funds to the Big Lottery Fund for distribution. It also allows the fund to cover reasonable running costs.
The Bill was amended in the other place to make a reclaim fund accountable to Parliament. We strongly agree that the fund should function transparently and the Bill requires it to publish key information about its operations, but we do not believe that it is sensible for a private company to become accountable to Parliament in that specific way. Therefore, having considered the issue, we will propose further amendments in Committee to improve the transparency of the arrangements and to respond to some of the concerns raised in the other place.
Mr. Graham Stuart (Beverley and Holderness) (Con): The National Consumer Council has said that not enough effort is made by banks to reunite dormant accounts with their holders, and a major campaign is required in that respect. Is the right hon. Lady confident that enough is being done by the banks to ensure that that happens?
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