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In 1997 an Inland Revenue study stated the figure to be a more conservative £2 billion to £4 billion. In its coverage of the 2005 pre-Budget report, the BBC placed the figure at £15 million. In 2006 Grant Thornton looked at the Irish model and its progress, and estimated that there might well be £5 billion in dormant bank accounts. We really do not know. In 2007 a sitting of the Commons Treasury Committee placed the figure at £500 million. The Commission on Unclaimed Assets said £400 million.
As the years have gone on, the figure appears to have got less and less. A potential £20 billion to £400 million is quite a shift in figures. Some have tried to explain this by looking at the period of 15 years enshrined in the Bill for an account to become dormant. The Bill sets a period of 15 years, whereas previously banks set their own internal definition, when they replied to me, of three to five years. It seems remarkable to me that even £5 billion can be turned into £500 million by removing just 10 years of dormant funds from a definition.
In 2004 I conducted my own private poll of major banks and building societies in the UK. One major bank, which must remain nameless because I said that it could, told me that it alone had around £400 million in dormant accounts. I had a conversation with one representative of that same bank recently, and it revised its figure to £50 million, so £350 million has disappeared. I cannot explain that, and I would be interested to know whether the Minister has asked the banks whether they can explain it.
The voluntary scheme clearly has its frailties. However, it could be made more likely to succeed by an increase in the information available to the public. Voluntary regulation tends to work best when those watching the scheme have adequate information by which to judge the participants’ performance. My understanding of the scheme is that banks would have to declare the amounts given to the reclaim fund, but that is not enough. We do not know the total sum in dormant accounts in order to measure levels of co-operation. We have the banks’ estimates, but that is all. It is my understanding that banks will be required to undergo an audit. Can the Minister confirm that that figure will be put into the public domain?
We cannot compare various banking contributions as we do not know which definitions of dormancy are used by them. Does the Minister accept the need for banks to publish the exact terms of their definitions of dormancy? At present we are faced with a very odd problem. If, under the current voluntary scheme, the money collected is less than expected, it will be difficult to decipher what that means. It could be a signal that the banking industry is reneging on its promises, or it could simply be a sign of a successfully run reuniting campaign. We just do not know.
MPs do not often say this, but we do not know enough. That is a confession, I suppose, but it is true. We do not know enough to judge the performance of the voluntary scheme. We have too little information; the banking industry has it all. I strongly suspect that, as in the case of the revenue from dormant accounts, we cannot hope that they will share it with us.
Miss Kirkbride:
Reflecting on what the hon. Gentleman has just said, surely the banks would be only too pleased to trumpet the fact that they were successful in reuniting
the money in the accounts with their rightful owners, so we would have some idea how much money had been disbursed in the process proposed.
Mr. Jones: The hon. Lady misses the point. We do not know how much the banks have, but they will trumpet how much they are giving out. They are already doing so. As we have heard today, some banks are successfully reuniting the accounts with their owners, and that is the best effect that the legislation will have. It will ensure that banks do their best to reunite owners of bank accounts with their accounts in the hope that they will hold on to them. Once the owners know that they account is there, they may well leave it with that bank. That is an incentive, which did not exist before.
The voluntary scheme runs the risk of being manipulated or ignored, as I said. Either way, or even in the unlikely event of full compliance, we will be wholly unable to discern which has taken place. It seems that the Bill will leave many in the House and many outside who are concerned about the matter feeling like Oedipus wandering blindly through the countryside. Unless we act to increase the amount of information in the public domain, our blindness, like that of Oedipus, will have been self-inflicted.
Will the Minister assure us today that if a voluntary scheme is pursued and the information provided is found wanting, she will at least offer the public greater information, so that there is a greater possibility that voluntary regulation may work? That would include a fuller definition of the term “dormant”, and a compulsory report by all banks of how much they give to the fund and whether that is the full amount of dormant funds that they hold under a preset wider definition. Lastly, the audit of dormant accounts in this country that will take place should be made public knowledge, to give some idea of the genuine amount of unclaimed assets held by British banks and building societies. For years banks have been the problem when it comes to utilising dormant funds. It seems prudent not to rely wholly on the problem being its own solution, but as it currently stands, that is exactly what the voluntary scheme is doing.
However, if the Chief Secretary feels that the provision of further information is not an appropriate course of action, I urge her again to consider adding a reserve power to the Bill to make the scheme mandatory at a later date without recourse to primary legislation. That view was supported by the Treasury Committee and is also supported by early-day motion 346—a cross-party motion with 92 signatories. As my hon. Friend the Member for High Peak (Tom Levitt) mentioned earlier, the proposal is also supported by the National Council for Voluntary Organisations, which has done a great deal of work on the Bill.
The Government rejected the idea of a reserve power, stating that they had no wish to grant themselves sweeping secondary powers that could be used on a whim. However, the Government frequently pass into legislation wider secondary powers than that. Will the Minister today recognise that such a power would not be unnecessarily large, but a wise precaution when ensuring the compliance of private interests, especially so in the light of recent revelations about the banking industry’s wholesale failure to invest in a manner that will safeguard public savings?
On the asymmetry of the scheme, the lack of enforcement and control procedures in the collection of funds appears to be paralleled only by the enormous amounts of regulation attached to the distribution of those funds. The asymmetry between the two halves of the scheme is worrying. The banking industry is trusted with a light-touch approach, but the Big Lottery Fund has strict mandates concerning to whom, how and when it must maintain and donate. The current Bill is an entity with two different sides. It is odd to see so little and so much regulation seated side by side.
Mr. Roger Williams (Brecon and Radnorshire) (LD): I commend the hon. Gentleman on his work on such matters. He mentioned the Big Lottery Fund. He will be aware that any funds going to Wales will be distributed on the basis of the Big Lottery Fund formula of 6.5 per cent., rather than on the Barnett formula of 5.85 per cent.—in other words, on the basis of a needs-based formula, rather than a per capita formula. Does he think that now is a good time for the Government to look into the Barnett formula again and to come round to the Big Lottery Fund formula, which is much more appropriate?
Mr. Jones: I am sure that you will not allow me to go down that line, Mr. Deputy Speaker. However, I agree with the hon. Gentleman’s other point that the distribution should be needs-based. However, as a Member from mid-Wales, he will know that there are problems with distribution even within Wales, and they must be closely watched.
I have discussed the regulation controlling the use of funds and observed the extreme juxtaposition of regulation in the Bill. I do not oppose the regulation of distribution. The task is difficult and the Government should be involved in the use of public money by an external agency to fulfil social goals. However, I cannot help but notice the contrast. It appears that the agencies distributing the money cannot be trusted to do their job without tight regulation, yet they are charities with a record of success, such as the Big Lottery Fund. On the other hand, it appears that the banking industry can function fine without regulation, despite its record of indifference in that area.
Let me move to an entirely separate aspect of the Bill: the definition of dormancy. As many of my hon. Friends will know, it was a matter of some discussion in the other place. I have looked into some of that debate and a few alternative definitions of dormancy have suggested themselves. When I refer to the definition of dormancy, I am referring to the time period over which an account has to be left untouched before it can be transferred from the bank’s revenue to the central reclaim fund. The Bill declares that period to be 15 years, as per clause 11(1)(a). I would like to ask the Minister why exactly a 15-year period was selected.
In the consultation, the Commission on Unclaimed Assets appeared to recognise that time period as provident, as
“it best recognised the accounts which were dormant”.
However, that explanation appears to be little more than a reformulation of the question, rather than a genuine answer to it; indeed, it is a tautology. A similar explanation was used by the Government in response to the Treasury Committee’s recommendation that 15 years
be reduced to 10 years. Can the Minister today shed any further light on those two explanations? I was pleased to hear that, as the Chief Secretary said, the Government will apparently support a possible change in the definition somewhere down the line. However, 15 years is too long, and can be proven to be too long now.
Given the protection of individual funds, which I praised so highly at the start of my speech, I am confused as to why we should need such a long definition when the money is not going to disappear. The money is there, and people who have the information can go to their bank and the reclaim fund and get their money back, regardless of the time period. I would have thought that there was a case for a differential definition, so that if we are talking about an investment account, the period should be 10 years, and if we are talking about a current account, the period should perhaps be three years. There are international precedents for using a sliding scale, which is one of the ways in which a dormant bank account is defined in the United States.
I have two further points—I am sorry that I am taking up so much of the House’s time, but as you can probably tell, Mr. Deputy Speaker, I have been looking into the issue for a long time. The first point is about the mechanism used to allow people to reclaim their dormant funds. The British Bankers Association and the Building Societies Association have set up a central tracking website, as well as a central tracking form. That request for information will then be circulated around various banks and building societies, which will check their records to see whether any names match, in the hope of locating any dormant accounts. That is a great move forward, although one that has happened only in the past few years—the banks and building societies seemed to be quite happy before the prospect of legislation. That view is echoed in early-day motion 1581, which stands in the name of my right hon. Friend the Member for West Dunbartonshire (John McFall), and the idea seems preferable in most respects.
Secondly, the Government have thus far rejected the notion of a central register, claiming that it would have vast repercussions for the bank-customer relationship. That point is not without merit and there is no doubt that we should act with caution before impacting on such a contractual arrangement. However, I would like the Chief Secretary to say exactly what she considers the danger of such a centrally held register to be. Surely it would be formed with a minimum of information. Names of account holders and funds would be the only two details originally required. If the reclaim fund is a secure database, I struggle to see what threat is posed by such a register. I am sure that other hon. Members will talk about the issue later and it is right that it should be covered in more depth. However, I felt that I should at least offer my support to the cause, as I believe it to be a good cause and one worthy of championing.
Let me make one final point—again, it has already been made, but it is worth repeating. The Bill is a good start. It is not, as an infamous US politician once declared, a case of “mission accomplished”. Instead, the Bill is the moment when the mission really begins. The fight to stop private interests from writing off billions of pounds of assets into their profit margins has now been taken up in the limited instance of bank accounts, but it has yet to find a legislative champion when the practice rears its ugly head in different forms,
some of which have already been mentioned. To name just three, unclaimed insurance policies, unclaimed pension policies and unclaimed gambling winnings are examples of where private interests are winning out. The Bill is not the right place for those issues; I mention them to remind the Minister of the continuing work and legislation still required in this field, which I am sure she will acknowledge.
5.58 pm
Mr. Jeremy Browne (Taunton) (LD): I pay tribute to the hon. Member for Clwyd, South (Mr. Jones), both for his long-standing interest in the subject and for his heroic but seemingly futile attempts to save the Labour party from bankruptcy.
When the business was originally scheduled for 6 October, our first day back, no one could have anticipated how much water would flow under the economic and political bridge. The then Chief Whip, who presumably originally scheduled the business, has moved on to a different role. Half the Treasury Ministers have also moved on, although I welcome the part-time Economic Secretary to his post. Furthermore, concern about dormant bank accounts has been overtaken in many quarters by concerns about dormant banks. However, the Prime Minister deserves some congratulations on reawakening the dormant career of Peter Mandelson, which is one of the finest developments of the past few days.
It might help the House if I provide a little background. In the current phase, the issue was first brought to light in the 2005 pre-Budget report, which stated that where dormant accounts could not be reunited with their owners the money should be reinvested in the community, and specifically in youth services, financial education and social investment. I shall come to those three fields of spending in due course.
The Government undertook two consultations on the proposed scheme: first, “A UK Unclaimed Asset Scheme: a consultation”, which was published in March 2007, and, secondly, “Unclaimed assets distribution mechanism: a consultation”, which was published in May 2007. In August 2007, the Treasury Select Committee published its report, “Unclaimed assets within the financial system”, and the Government’s response was published in October 2007. We welcome this considered approach to legislation, although it has not always typified the way in which the Government have addressed these matters. However, this process has been drawn out over such a long period that one wonders whether some of the accounts in question were new deposits when the Government first turned their mind to the matter.
The Bill provides a framework designed to balance the rights of owners with action designed to benefit communities, and that is an important balance to strike. If this were simply a matter of the state being seen to confiscate the funds of private individuals, it would clearly raise considerable concern. The Bill is divided into three parts. Part 1, comprising clauses 1 to 16, deals with transferring liability and money to the reclaim fund. Part 2 deals with the distribution of funds, and there are some final provisions in part 3. Money in dormant bank and building society accounts of 15 years or older will be transferred to the reclaim fund, but it will be reasonable for us to discuss during our deliberations this evening and in Committee whether 15 years is the most appropriate time span.
My party supports the principles of the Bill, as it did in the other place, and we support the improvements made to it in the House of Lords, although there have been some interesting developments in the interim, as the hon. Member for Stratford-on-Avon (Mr. Maples) pointed out to the Chancellor a few hours ago. He asked whether the current banking crisis raised new issues that we need to address during the passage of the Bill, not least because there seems to be an assumption in some quarters that the money sitting in the banks at the moment is gathering dust on a shelf and not being used for any purpose at all, and that it could therefore be utilised for good causes without any other consequences. That might seem increasingly like a less safe assumption to make, if indeed it was ever safe.
I give my thanks to Lord Shutt and Lord Newby, who led for the Liberal Democrats on the Bill in the House of Lords. It has already been considered at some length in the other place, and that will inform our deliberations throughout. In the House of Lords, the Liberal Democrats supported all the cross-party amendments that were pressed to a Division—jointly, in most cases, with the Conservatives—and the Government were defeated on four of them, the first of which, tabled by Lord Shutt, dealt with the £7 billion cut-off point. There is an important discussion to be had on the overall merits of the scheme on a national basis, and the degree to which individual banks and building societies should be able to take a more local approach to projects that they have supported for a considerable period.
Another amendment on which the Government were defeated proposed the introduction of a statutory requirement for all annual accounts, reports and directions received from the Treasury by the reclaim fund to be laid before Parliament. We supported two further Conservative amendments that were passed: one introduced the requirement for a tri-annual report to be laid before Parliament on the running of the scheme; the other related to the technical definition of the word “dormant”. Given the cross-party approach to the Bill as a whole, and because we do not anticipate any Divisions this evening, I urge the Minister not to dismiss out of hand the amendments that were passed in the other place. They were not partisan amendments tabled by the Conservatives and Liberal Democrats in order to be divisive. We were seeking to strengthen the Bill, and the Labour Government might see merit in the proposals that were made, if they could only put to the back of their mind the authorship of the amendments.
Some other amendments that were proposed in the House of Lords were defeated—one Conservative amendment would have required the use of the affirmative resolution procedure, but it was defeated by 130 votes to 107—and others were withdrawn. It would be worth the Government’s while to revisit some of those proposals, because it does not necessarily follow from the numerical superiority in the House of Lords that the proposals were without merit.
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