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Yvette Cooper:
The banks set up the new “mylostaccount” website in January this year which has helped more than 100,000 people to get their money
back. It is always important for us to urge banks and building societies to do more and to do whatever they can. However, the ultimate and hugely important safeguard for people is that they will also be able to get their money back from the reclaim fund.
Mr. Mark Hoban (Fareham) (Con): The Chief Secretary spoke of reversal of the Lords amendment relating to the parliamentary accountability of the reclaim fund, but she forgets that the Treasury has power to give direction to the company that sets up the fund. In view of that, I think it important for there to be some parliamentary accountability.
Yvette Cooper: Clearly the Treasury is always accountable to Parliament for the use of its powers, but I think we should bear in mind the complexities involved in an attempt to establish parliamentary oversight of a private company, as opposed to parliamentary oversight of the Treasury and its decisions. We will propose further amendments to respond to some of the points made in the other place. We do not think that the way in which the Bill currently deals with the issue is satisfactory.
Account holders will experience no practical difference in the way in which they are treated as a result of the scheme. Banks and building societies will act as the reclaim fund’s agents, and on validation of their claims account holders will be repaid in full by their banks. That will include any interest that is due.
The case was made in the other place that the Bill should require a triennial review of the scheme. We feel that we must ensure that the scheme is working simply and fairly, and we think it right to review it once it is up and running; however, we do not think it right to require triennial reviews in perpetuity to be included in the Bill. That issue will also feature in the discussions in Committee.
As I said earlier, we need to ensure that the money raised is distributed fairly throughout the United Kingdom to deliver practical programmes that will bring about real change to neighbourhoods and benefit a diverse range of communities. As we said in the pre-Budget report, the Government intend the resources, in England, to be focused on youth services, financial capability and inclusion. Investment in young people is investment in the future of the whole community, while raising the levels of financial capability and inclusion across the population can help people to make the right financial choices to support themselves and their families. In addition, following consultation, we should like a proportion of the available assets in England to be invested in the long-term sustainability of the third sector, if resources permit such investment.
The spending areas in England are set out in the Bill. Following the model used for the national lottery, the Bill also empowers the Secretary of State to identify particular priorities within the spending areas that must be taken into account in the distribution of assets. We believe that the approach should follow the precedent of the national lottery spending directions, rather than some of the proposals made in the other place. Scotland, Wales and Northern Ireland will determine their own spending areas, which will reflect the needs of communities in each country.
Mr. David Drew (Stroud) (Lab/Co-op):
I welcome the boost that the scheme will give youth services, but what many of those services need in particular is an asset
base. A straight revenue grant will be of no use, because it will merely postpone some of the problems. Can we be creative in the way in which the lottery is asked to provide funds? Surely providing that asset base is the most appropriate use of the funds.
Yvette Cooper: My hon. Friend is right. We need to ensure that the funds are used to provide sustainable support for young people in particular areas, rather than short-term support that cannot be replicated in the future. Further consultation and discussion will be needed on exactly how that should be done, and I hope that we can take my hon. Friend’s points on board at that stage.
Tom Levitt: Will my right hon. Friend give way?
Yvette Cooper: I will, for the last time. I want other Members to have a chance to speak.
Tom Levitt: I am grateful to my right hon. Friend for giving way, and also for her answer to my hon. Friend the Member for Stroud (Mr. Drew), but will she consider again how the help will be focused? Will the Big Lottery Fund be able to operate proactively in geographical terms? For instance, will it be able to target resources on areas where there is great need but little capacity for making bids, and where awareness of the fund may be low?
Yvette Cooper: My hon. Friend makes an important point. We want to ensure that the resources are distributed fairly across the country and that those areas which might have less capacity or expertise to access the funds do not lose out unfairly as a result, so we would certainly be keen to take on board those points in terms of the way the distribution mechanism operates.
Finally, I wish to make the point that we have in the Bill introduced the provision that small financial institutions, particularly building societies, should be able to operate alternative arrangements where they play an important role in their local communities and want to be able to distribute dormant account money to local charities. These alternative arrangements will allow the reclaim fund resources to be returned to the bank or building society for distribution to local charities. We had originally proposed that in order to qualify for this alternative scheme an institution must have total assets of £7 billion or less. Amendment in the other place makes the option available to small banks and all building societies. In fact, the vast majority of building societies were covered by our arrangements. We have listened to the arguments for the inclusion of big building societies, but we do not believe that the expansion of the alternative scheme is desirable. We believe that the larger financial institutions serving wider communities across the country should take part in the main scheme to ensure that resources can be distributed fairly and strategically across the country to meet the priorities discussed in this House. Therefore, we will bring forward amendments in Committee to focus the alternative scheme on the ability of small institutions to support their local communities.
Martin Horwood (Cheltenham) (LD): Is not the Chief Secretary being a little disingenuous when she talks about the vast majority of building societies being covered, because some 83 per cent. of the assets of the building society sector are with the big seven, so she is really talking about taking away the independence of those building societies to distribute the funds as they see fit?
Yvette Cooper: I do not think this is remotely about taking away the independence of the building societies. The building societies have the ability to have their own charitable support schemes and programmes operating in their areas and to use their assets accordingly, and many of them do have such schemes. This is about using parliamentary legislation in order to be able to access dormant assets by allowing them to transfer the liability as well as the assets to a reclaim fund. The hon. Gentleman is right that there are a lot of resources in the large building societies, and those building societies should be part of the main scheme. What we are trying to do is help the smaller building societies—of which there are many across the country. Where they are very much embedded in a particular local area or community, that should continue to be supported. However, where the larger building societies can serve much wider communities, we believe they should be part of the wider scheme which involves the banks as well.
This Bill offers an historic opportunity to unleash the potential of the money in the dormant bank accounts in order to deliver social benefits. It does so while maintaining strong support for protection for consumers and for ensuring that they can continue to have their rights respected—and, where possible, for them to be able to get access to their money as well. This is a big opportunity, and a long-term programme to help support improved youth services and other social benefits across the country, and as such I commend it to the House.
5.8 pm
Mr. Mark Hoban (Fareham) (Con): It has been six years since the Government first raised the prospect of using money from dormant accounts for good causes. Since the Government published their consultation paper on the Bill, we have had three Economic Secretaries—I am glad to see that the third is in his place—and it has been eight months since the Bill had its First Reading in the Commons, and I suspect that even now it will be at least a year, if not longer, before the money will start to flow. However, in that time, the scheme has changed so that now, rather than charities benefiting directly, the money will be spent at the direction of the Government in line with the priorities they set out in the Bill and, as a number of interventions have indicated, the amounts involved have shrunk. The unclaimed assets register suggested there was about £8 billion split between bank accounts and National Savings & Investments. The current estimate from the Building Societies Association and the British Bankers Association is that there is about £400 million to £500 million from banks and building societies to be used in the scheme. Clearly, the effectiveness of the operations to reunite customers and their accounts will reduce those amounts, so, although the amounts involved are still significant, the scaling down of the estimates does lead, as I shall mention later, to some difficult issues regarding the distribution of the assets.
However, an important prior step to the process set out in the Bill is to ensure that banks and building societies take action to clean up their records, and try as far as possible to reunite customers and their dormant accounts. I am aware from my conversations with the sector that banks and building societies are taking steps to do that. For example, Lloyds TSB
announced in June that it is appointing a company to help trace the holders of dormant bank accounts. HBOS has united £18 million sitting in dormant accounts with its customers, with another £29 million left to trace through. According to the BBA, some £50 million has already been reunited with its rightful owners.
In addition to the efforts of individual institutions, there has been a collective effort through the website mylostaccount.org.uk, which provides bank, building society and National Savings & Investments customers with a single point of contact for tracing accounts. Since its launch on 30 January 2008, more than 140,000 people have submitted search forms for money left unclaimed in dormant accounts. That compares with 44,000 claims in 2007 via the separate tracing services for the BBA, the BSA and NS&I. That demonstrates that the focus on reuniting has led to an increase in interest in the matter, and more customers clearly are trying to track down their unclaimed assets.
I want to address the concerns that a number of Members have expressed about charities. Charities represented by the Unclaimed Assets Charity Coalition have set out a very important case—they believe that they would be unable to unlock money sitting in dormant accounts where they are the residuary legatee. They have argued for a central register of accounts that they could use to identify accounts that they believe belong to them, and that a reserve power should be included in the Bill. I can understand their arguments and have some sympathy with them, but such a power goes beyond the voluntary approach that forms the basis of the Bill. However, clause 12 provides them with an important safeguard, as the triennial review explicitly refers to the right of a charity to receive money due to it under the terms of a will. That is an important safeguard, and I hope that that transparency will encourage banks and charities to work closely together on making sure that they have access to those dormant accounts. However, it will be interesting to see how the debate plays itself out in Committee.
It is imperative that, within the constraints of the scheme, there is a robust exercise to reunite customers with their money. If the process is robust, there will be much greater certainty that money transferred across to the reclaim fund relates to genuinely dormant accounts and is therefore less likely to be subject to a reclaim. The Bill before us sets out a legal framework for a voluntary scheme to enable money sitting in dormant accounts to be used for the public good, while ensuring that those who rightly own those assets are able to recover them. The Bill has four essential components: one relates to the question of how we know when an account is dormant, the second extinguishes the liability on the bank’s or building society’s balance sheet when the asset is transferred to the reclaim fund, the third establishes the proper legal framework for the reclaim fund and its functions, and the fourth relates to the allocation of amounts transferred from the reclaim fund to the Big Lottery Fund and to the spending priorities identified in the Bill. However, I want to explore some issues that flow from those steps.
Although there has been a great deal of discussion in recent years about the use to which unclaimed assets in a range of categories can be put, those assets are there
to meet liabilities—there is a debt due to a customer, a pension to be paid out or a life assurance policy to mature—so in any scheme it is vital that the record of liability be retained, even if the liability itself is legally removed from the institution’s balance sheet. It is therefore important that, once that liability has been extinguished from the balance sheet, there is a reserve in the reclaim fund to pay out to customers who come forward to reclaim their money.
One of the fund’s priorities is to build up sufficient reserves to cover future claims, yet there is a countervailing pressure to transfer as much money as possible from the reclaim fund to the Big Lottery Fund for distribution. Too few reserves will leave the fund and potential claimants exposed. In the event of a fund’s being unable to meet all its claims, customers will be covered by the financial services compensation scheme, but that is not a green light for the reclaim fund to be imprudent in how it operates. I am also conscious of the fact that if too little money is distributed to the Big Lottery Fund and to the spending priorities, there would be pressure from the potential beneficiaries, and perhaps the Government, for more to be distributed.
I come back to my intervention on the Chief Secretary, because the Bill gives the Treasury the right to give directions to the reclaim fund. I would be grateful if the Economic Secretary’s response could explain how those powers might be used, because a conflict of interest is involved: the Treasury has a role not only with regard to the reclaim fund, but as one of the departmental sponsors of one of the spending priorities—financial inclusion. How does he believe the Treasury will help the fund to strike the right balance between protecting the interests of customers and ensuring that the right moneys flow through to the spending priorities?
Given the important role of the reclaim fund and the need for public confidence in its work, we support the amendments tabled in the Lords to require the accounts of the reclaim fund to be laid before Parliament. I am sorry to hear that Ministers are seeking to remove those provisions in Committee. We will clearly have a debate about that, because it is important to recognise that although the reclaim fund is a private body in terms of its constitution, it is clearly not just a private body. The Bill provides for the Treasury to give direction to it and, as such, one would expect the levels of transparency and accountability to go beyond those applicable to a conventional limited company.
Once proper protection for customers has been established, the next stage is how to use the money. As the Chief Secretary has said, the Bill distinguishes between two sources of these funds: building societies and small banks, and large banks. The money from large banks will go to the Big Lottery Fund, and I shall return to that matter in a moment. The Bill, as drafted, allows for building societies and small banks to allocate the amount from dormant accounts, over and above that needed for the reclaim fund to protect its customers, to be allocated through their own charitable foundations, reflecting the strong links that exist between building societies and the communities that they represent.
David Taylor: The hon. Gentleman has mentioned that two sources of dormant assets may produce the financial flows that we have heard described today, but there are also comparable sums of dormant assets in insurance policies and, in particular, in NS&I. The Treasury Committee recommended that, in respect of equity, NS&I assets should be treated in the same way as those of banks and building societies. The Government have refuted that by saying that NS&I’s unclaimed assets are used for the community benefit anyway, but as a quid pro quo for not having its dormant assets liable for this type of activity should not NS&I at least invest much more activity in promoting the existence of arrangements for people to identify whether there are NS&I unclaimed assets to which they might be entitled?
Mr. Hoban: The hon. Gentleman makes two important points, the second of which I shall deal with first. NS&I has made some progress in reuniting customers with their assets—that is an important step for it to take. We put pressure on banks and building societies to do that, so we want NS&I to undertake the same process of ensuring that customers to whom this money belongs are reunited with their assets.
The hon. Gentleman’s first point was about the Bill’s scope, which is narrow; it focuses primarily on banks and building societies. The Treasury Committee put forward a clear argument for including NS&I in the Bill, and I was not entirely convinced by the Treasury’s arguments as to why NS&I should be excluded from its scope. The suggestion was almost made that NS&I customers should not take their money out of NS&I savings products at all because that would force the Government to find new customers for those products. I did not think that it was the most robust argument that we have heard from the Government as to why NS&I should be excluded from this process. Clearly, NS&I customers are entitled to the same degree of support in identifying their assets as customers of banks and building societies. We would expect a public body to be as good as, if not better than, banks and building societies in that respect.
The Chief Secretary made an argument about the exclusion of large building societies from the scope of the Bill. Many of them have strong local ties, but they are also mutuals. We are not talking only about money from their customers, but about money from their members. Some of the larger institutions feel that the Government have overlooked that element of their mutuality in trying to reverse the amendment made in the House of Lords. Account holders have a different relationship to their building societies from that which bank account customers have with commercial banks. I expect that we will have a long and healthy debate about whether that approach is appropriate.
Once money from large banks has been transferred to the reclaim fund, and reserves have been put to one side for reclaims, the Big Lottery Fund will be the distributor to the three causes identified in England—youth services, financial inclusion capability and social investment—and the devolved Administrations will decide their own priorities for their share. We welcome the priorities set for England, but the Bill is silent on how those priorities will be ranked. I would be grateful if the Economic Secretary, when he winds up, could
explain a little more about how the money from the reclaim fund will be used and how the priorities will be set. Will a fixed proportion of the funds go to each of the three causes? Does the order in the Bill reflect the order of priorities? Will a fixed monetary sum, rather than a proportion, be allocated to each cause? Who will determine the allocation between the various priorities? The Bill makes frequent reference to the Secretary of State, but given that the priorities cover three Departments—the Department for Children, Schools and Families, the Treasury and the Cabinet Office—and the Big Lottery Fund itself is accountable to the Department for Culture, Media and Sport, to which Secretary of State does the Bill refer? We need some clarity—[ Interruption.] The Economic Secretary says that the DCSF is the lead Department, but how can people who are operating in the area of financial inclusion, or social investment wholesalers, be sure that their priorities are getting a proper hearing from the Secretary of State for Children, Schools and Families? We need to bear in mind that co-ordination issue, and it is odd that a Secretary of State with a particular interest in one of the priorities should take the lead. We will need to explore that.
On the issue of the causes, we must express some sympathy for Sir Ronald Cohen and the Commission on Unclaimed Assets. It must have thought that when Sir Ronald, the chairman of commission, who was so close to the then Chancellor—now Prime Minister—suggested that money from unclaimed assets should go to a social investment bank, the recommendation would have been accepted. However, that was until the then Economic Secretary—now Secretary of State for Children, Schools and Families and an even closer ally of the Prime Minister—pulled rank and put two of his own pet projects in the list of priorities. He added youth services, in a nod to his future job, and financial inclusion, which was one of his priorities as Economic Secretary. That means that it is not clear whether sufficient funds will be available from this exercise to provide the sort of contribution to a social investment bank that the commission thought was necessary. It said, in its initial report, that there should be initial capital of £250 million and an annual income of £20 million for the next four years. Given the way in which the funds available for distribution appear to have been scaled down over time, it is not clear whether that ambition can be met.
Pete Wishart (Perth and North Perthshire) (SNP): Would the hon. Gentleman like to congratulate the Scottish Government on the way in which they approached that very issue, and the £40 million of funding that we will secure? We consulted widely with the entire voluntary sector and engaged the Scottish Council for Voluntary Organisations, and together they identified the priorities. Is that the way in which that should be done in England? Perhaps England should follow suit.
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