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Mr. Hoban:
I think that the Government went through a consultation process. It will be interesting to see just how the Government consult on how they allocate the money from the reclaim fund to the three priorities. What sort of consultation process will they
expect to see? How will they gauge the amount to be allocated to each of the three priorities? What weight will they give to the fact that the person responsible will be the Secretary of State for Children, Schools and Families, one of whose main responsibilities is youth services? It is not clear how we will get a fair process lined up.
Of the three priorities in England, two—youth work and financial inclusion—are already supported by Government expenditure. The challenge facing the Government and the Big Lottery Fund will be how to demonstrate that money spent is additional to the money that the Government already intended to spend. That additionality is quite a difficult issue for the distributor to come to terms with. It is easier if the scheme is launched part-way through a comprehensive spending review period, but once a scheme is up and running there will always be concern that the spending priorities have been set in the knowledge that money is coming through from those sources.
Simon Hughes: I am sure that the hon. Gentleman will accept that although, of course, money is available from the Government—directly and indirectly—for activities for young people and for youth work, there is no statutory responsibility for such funding. That means that there is never any guaranteed money for that age group, and that is one reason why it might be a good first cause in England and why I hope that he will support its remaining the first cause in England.
Mr. Hoban: The hon. Gentleman may well be right that that funding is not a statutory responsibility, but in a way that gives the Government a bit of a let out by saying that they do not have to fund such activities—they know that X million pounds will be flowing through from the reclaim fund, so they feel that they can reduce expenditure. I think we all want to see additionality; the money should come on top of the amount of money that the Government intend to spend. One of the requirements that the Government will have to work hard at, together with the Big Lottery Fund, will be how to demonstrate that the funding is additional to existing Government expenditure rather than a substitute for it.
Another aspect of the legislation that we need to think about quite carefully is the fact that we are establishing a legal framework for a voluntary agreement by banks and building societies to transfer money from dormant accounts to a reclaim fund and for the surplus money to be used for the public good at the direction of a Government Minister. There is a hybridity in that process—I am aware that that word has a particular meaning in parliamentary terms, but what the Bill provides is very much a hybrid arrangement. We are talking about an essentially voluntary activity on the part of the banks and building societies, yet the money raised through that voluntary activity will be spent at the direction of the Government. That is why it is important that there is proper scrutiny of how the scheme works.
I have already touched on the need for scrutiny of the reclaim fund. In the other place, Baroness Noakes successfully moved an amendment introducing a triennial review of the scheme. I noted the
Government’s desire in Committee to remove the requirement in perpetuity for a triennial review. We need to ensure that the scheme is working properly, and I am not sure that simply saying that there will be a review in three years and that will be that is the right answer, given the particular and peculiar nature of the scheme that we are discussing today.
The review will help to shine a spotlight on how well banks perform and how well they reunite their customers with their funds. It will act as an incentive to banks and building societies to take appropriate steps to trace owners. It will also become apparent when we look at how much money is recovered from the reclaim fund by customers just how well or badly banks have done in that important preparatory work. It is important that that public scrutiny is undertaken.
The voluntary nature of the scheme, as well as requiring a particular degree of parliamentary scrutiny, has another benefit. It means that the cost of the scheme should be lower than that of a compulsory scheme, as it should have the benefit of reducing administrative costs and ensuring that much of the money that flows out of dormant accounts is available for distribution. It is therefore important that as few hands as possible dip into the funds and that any administration costs are kept under control. The Opposition certainly expressed concern in the other place in respect of the Big Lottery Fund’s administration costs and the costs that the Government could defray from the scheme, and we will return to that in Committee.
When the Bill completes its passage through Parliament, it will mark the end of the opening phase of how we deal with unclaimed assets. People will want to consider how the Bill works in practice and to discover what lessons can be learned for other categories of unclaimed assets. The Young review of the financial assistance scheme pointed out that there were many different classes of dormant assets sitting in pension accounts and on life assurance company balance sheets and that people had forgotten about premium bond winnings. Once the scheme has worked its way through the system, there will be pressure to consider what else should be included within its scope. Again, the clause on triennial review includes that likelihood.
The Bill is a test-bed. Its results will be scrutinised carefully to find out what lessons can be learned. The scheme will be scrutinised on its own merits, too, to discover how effectively it works to provide proper protection for consumers, by ensuring that they do not lose their right to money that has been put into a dormant account. People will want the scheme to be run efficiently at every stage, and they will want it to put the emphasis on consumer protection, as well as on releasing money for good causes. Financial institutions want the scheme to safeguard their obligations to their customers and members, too. Charities and voluntary groups want the scheme to deliver clear benefits for them, as well as support for the Government’s priorities. The Bill provides a framework for that to happen. It is now our task to ensure that it is improved, so that it meets the expectations of all the stakeholders involved in putting together the scheme.
5.31 pm
Mr. Martyn Jones (Clwyd, South) (Lab): I congratulate the Chief Secretary on introducing the Bill to the House. As someone who has been campaigning on the subject of dormant accounts for many years, I am delighted that the Bill has reached this stage today. The issue is technical, and a great deal of consultation and discussion with the banking industry has taken place. It is a credit to the Government that we now have an opportunity to legislate. Having made speeches, launched more early-day motions than I can remember and lobbied the Government for nearly a decade, I was half afraid that I would become dormant before seeing the introduction of the Bill.
The Bill is important, despite its less than stimulating name, because it will have the potential to pour considerable resources into our national economy and to prevent unused resources from languishing hopelessly in the coffers of private companies. It may pave the way to fund community projects across the country, thereby strengthening Britain’s social fabric and altering the lives of a great many people. To that extent, it matters a great deal.
People are supposed to check their bank accounts every so often, and I first came across the issue of dormant bank accounts when I decided to look through my standing orders, direct debits and so on. I found a £1 direct debit going into a building society that I had never had any contact with in my life, as far as I was aware. I thought that I would stop paying it, but I then decided to find out more about it. I was going into town the next day, so I took the reference number and popped into the building society. I found that the money was going into a fundraising account for the Labour party that had been closed about 10 years previously, apparently. [ Interruption. ] Opposition Members may say that the account should remain dormant. The party got my money eventually, but it thought that it had closed the account. That is the point, and I wondered what would have happened if I had not stopped my direct debit. The building society could have used that money to loan to other people to generate money. Essentially, it would never have had to give it up to anyone.
As luck would have it, Ireland was starting to legislate for the same thing at that time, so I looked around the world at other countries that had introduced such legislation, and quite a lot of countries have done so. I thought, “Well, what can I do about it?” I wrote to every bank and building society in the United Kingdom to ask them three questions: what was their definition of a dormant bank account; how many did they have; and how much money was in them? Not surprisingly, not many of them told me the answers, but some did. A sufficient number answered to enable me to work out that there was a great deal of money sitting doing nothing—or at least doing nothing but making profit for the banks and building societies.
I wrote to the British Bankers Association, but it seemed quite happy with its scheme, which consisted of one person in the BBA offices distributing forms to people who wanted to know where their bank account had gone. It took me two years to get a meeting with its then chief executive, Ian Mullen; after showing a great deal of reluctance, he eventually met me. He, too, thought it quite acceptable to continue to have only one person meeting the needs of people who had lost contact with their bank accounts.
The problem has had a very slight impact on my personal life, but for countless others, the impact is great, and will continue to get greater. The reasons for dormancy are many and varied, and we have heard some of them. They include death and intestacy; small, overlooked standing orders; and simple forgetfulness. No matter what the reason for the dormancy of the account, all people with a dormant account have one thing in common: the right to regain the money to which they are entitled. The Bill has at its heart the objective of reuniting people with their money, and I salute the lengths to which the Government have gone to protect that right in the Bill. It is just and fair that the rightful owner be placed at the heart of the legislation, as they have been.
I suspect that some in the press, and perhaps in the House, will attempt to scaremonger and pander to cheap media criticism of the Bill. Even in 2004, The Daily Telegraph referred to the Government’s “dormant accounts grab”. I urge Members of all parties to steer clear of that line of attack, because the effort, skill and consultation that has gone into protecting individual citizens’ finances is laudable. Any accusation that the scheme is theft from private bank accounts is wholly without substance.
I pay tribute to the provisions of the Bill that ensure a perpetual right of reclaim, to the provisions that mean that a member of the public need not deal directly with the central reclaim fund but can always deal with their own bank, and to the Government’s continued efforts to lead a public information campaign to reunite people with their lost funds. I hope that the Economic Secretary to the Treasury can assure us that the provisions will be acted on fully, and that the Government will continue with their public information campaign aimed at allowing people to reconnect with their lost funds.
The Bill is not about moving funds from citizens’ bank accounts to the Government’s. It is about reconnecting people with their lost funds. Where that is not possible, the Bill is a means of using unclaimed and lost funds to achieve social goals in the community, and preventing those funds from padding out the profit margins of the banking industry. The Bill’s goal is highly commendable. It raises the amount of money available for the furtherance of good causes and lowers the risk that any British bank account can be lost for ever without a right to reclaim.
I have praised the Bill, but I have concerns about the voluntary nature of the scheme; that subject has already been raised. At present, no bank will have to contribute to the scheme if they do not want to do so, and if they commit to the scheme, they are under no compulsion to do so fully. That, obviously, is what is meant by a “voluntary” scheme. Recent times have perhaps shown that the free market, and in particular banking lobbies, cannot be trusted to act in the public interest of their own volition. Stronger regulation over recent years could have gone some way to protecting us from the current credit crunch, but I will not dwell on that.
I am not alone in expressing fears about the opt-in scheme; I am joined by the Treasury Committee, which respectfully urges the Government to reconsider a compulsory scheme. It should be noted that not a single developed nation with dormant bank accounts legislation has chosen anything but a compulsory scheme. Such
schemes are found in Ireland, the USA, Canada and New Zealand. A compulsory scheme would guarantee not only a level playing field for all concerned, but a single unified banking commitment and fidelity to the legislation. I understand the Government’s desire for soft-touch regulation but I cannot align myself fully with that desire. Regulation is not burdensome when it is necessary. As I say, I have concerns about the voluntary approach. The first such concern is simply that the banks will not participate at all, especially as they can currently use the credit crunch as an excuse for non-participation.
Mr. Colin Breed (South-East Cornwall) (LD): On the basis that this is a voluntary scheme, does the hon. Gentleman believe that the bank Santander, for instance, will voluntarily put what would originally have been dormant accounts in Bradford & Bingley into the pot, or does it perhaps think that the period of time has been refreshed, and that there is another period before those accounts become dormant?
Mr. Jones: There is a distinct possibility that that is happening, and not just with Santander. I will not mention the names of the banks involved, but there are a number of areas in which that may be happening, and I shall touch on that. I am concerned about the total pot of money, precisely because of what the hon. Gentleman said. As I said, it is possible that people might not participate at all. A voluntary scheme creates a stark choice for a bank: either donate money to the reclaim fund, or keep it in its own funds.
Mr. Robert Flello (Stoke-on-Trent, South) (Lab): My apologies to the House for the fact that other business has kept me from the Chamber on and off this afternoon. Are my hon. Friend’s concerns about the willingness or otherwise of banks and building societies to engage a result of his experience in trying to gain information? Will he enlighten the House on that point?
Mr. Jones: As I said, I will touch on one or two issues of that nature.
The banks were extremely reluctant to give me any information about dormant bank accounts. Initially, the British Bankers Association was extremely reluctant to come out with anything. Not surprisingly, it was happy with the existing situation. I confess that I am not a banker, but if one puts oneself in a banker’s shoes, which option would be the most appealing—giving money to good causes, or hanging on to it, particularly in a situation such as the one that applies at the moment?
In the Government’s response to the consultation by the Commission on Unclaimed Assets it was stated that the proposed legislation’s legal release of financial institutions from financial liability to repay dormant account holders was an incentive for banks to comply with the voluntary scheme. May I ask the Minister exactly how that is an incentive, because banks frequently accept liability to repay money to their clients for a return? That is their business. I suggest instead that a bank never surrendered a penny it did not have to surrender, and that that may well outweigh any eagerness on their part to expunge long-held liabilities which they will almost certainly never be asked to pay back.
Mr. Brian Binley (Northampton, South) (Con): Barclaycard, I am happy to say, is based in my constituency. Its record on charitable giving, particularly giving to enhance society, is immense, and I am sure that the hon. Gentleman would want to pay tribute to that.
Mr. Jones: Absolutely. I am delighted to do so, but there are two separate things that should not be confused. First, banks’ charitable giving: most major corporations give out of their profits— [I nterruption. ] I am talking about money on their balance sheets that they do not want to give up. They were reluctant even to tell me about the amount on their balance sheets, so those are two different things. I am sure that Barclaycard and many other banks give money, but we could be talking about a great deal more than the amount of charitable giving.
Banks are granted plenty of leeway in the definition in the Bill of a dormant account. The Bill does not state whether the 15 years without customer contact is a time without contact by way of withdrawal, or by way of failure to pay in funds or to write to the bank. The banks have the luxury of interpreting that for themselves, and I suggest that they will do so in such a manner that is to the advantage of no one but themselves. In short, they will frame a definition of dormancy that involves minimal payment.
The banks are seemingly granted leeway in the definition of a dormant account with regard to the start date of such an account. The point made by the hon. Member for South-East Cornwall (Mr. Breed) is relevant here. The notion of dormant accounts remaining always the property of the owner was only formally introduced in the banking procedural code in 1992. Will banks now apply that regulation to all accounts, or will they apply the regulation more favourably to themselves and state that only those accounts that became dormant post-1992, after the introduction of the code, count as truly dormant and should therefore be transferred to the reclaim fund? I hope that the Minister can offer guidance on such a practice and say whether she would discourage it.
There is a real risk that banks may very well place a minimum-amount standard in their definition of dormancy. For example, an account can be classified as dormant only if it contains a sum greater than £100. Several banks and building societies have applied such criteria when it came to contacting customers with dormant funds. That is fair enough in the case of someone with the dormant sum of £1 lying in their account, as it costs £1.50 to contact them. However, that is not the situation in this case. I hope banks will not apply the same contact definition to the definition of dormancy required for a transfer of accounts to the reclaim fund. There should be no minimum amount standard. As I suspect that a large proportion of dormant accounts contain small deposits, that is important. Will the Minister agree to clarify the situation regarding a minimum-amount standard?
There is mounting evidence to suggest that some definition-based abuse of the voluntary scheme may well be taking place. One need only look at the changing estimates for how much return the public can expect to see from dormant bank accounts. Estimates have always varied as to how much money there is in dormant accounts. High estimates have stated that there is more than £20 billion in dormant accounts.
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