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I wish to raise a few areas of concern, some of which have already been touched on, and some of which have received less careful examination over the past couple of hours. The first concern relates to the amount of money involved, and was mentioned by the hon. Member for Clwyd, South. The Chief Secretary to the Treasury was
talking about hundreds of millions of pounds—her estimate was about £350 million to £500 million—and such figures have been widely quoted. However, I have heard a huge number of other figures quoted, and there is a big disparity between them. I have heard estimates of £3 billion to £5 billion, which is 10 times the amount that the Government anticipate being realised through the scheme. As I understand it, when a similar initiative was introduced in Ireland, the amounts that accrued were far in excess of those anticipated by the Irish Government.
It would also be interesting to know how much money will be available year on year. There will be an initial hit, when the funds in all the accounts that have lain dormant for 15 years or more are realised—assuming that they can be uncovered—but the accounts that have currently been dormant for 14 years will presumably come on stream a year later, and those that have currently been dormant for 13 years will do so the year after that. The Government should provide a cash flow estimate, and it would be interesting to hear how much they anticipate becoming available year on year, after the original money has been realised, for the causes that they have identified.
A second area of concern is the rather convoluted way in which depositors will be able to get their money back. As I understand it, they will have to go to the bank in question, rather than to the reclaim fund. Will the Minister clarify the degree to which the bank and the reclaim fund will be able to exchange information that could make it easier for the person who deposited the money more than 15 years previously to track it down without the process becoming unnecessarily burdensome? For example, they should not need to be put through to people on the other end of telephone lines who cannot provide them with the relevant information due to confidentiality or other issues of that type. If that issue has been resolved to the Minister’s satisfaction, everyone will be very pleased, and I hope that he will touch on that point in his response to the debate.
A third area of concern is the status of England compared with the other parts of the United Kingdom. It is our intention to explore in greater detail in Committee the proposal that the money be restricted to youth investment, financial management and social investment. We need to determine whether the Government intend to stick to that restriction, or whether it is even desirable to do so. Some people will see this as another Olympic subsidy fund, but, as the hon. Member for Fareham (Mr. Hoban) pointed out, we have still not had a proper indication of the balance to be struck between those three uses for the funds. Obviously, dividing the money equally between them would have different implications from giving 95 per cent. to one area and 5 per cent. to the other two. I hope that the Minister will be able to spell this out in greater detail. Will he also tell us why the fund in England is to be restricted to those three areas, while Scotland, Wales and Northern Ireland will have total discretion over how the money is to be spent in those countries? For example, Wales could presumably choose to spend 100 per cent. of the money on youth investment, or none at all.
It would also be interesting to know about the proportions involved in the division of the money. Would the decisions be made roughly in proportion to the populations of the countries of the United Kingdom,
or would they depend on the bank deposits in those countries, which could give Scotland a better share of the money than if the decision were based on population figures? Or, as a Labour Back Bencher suggested earlier, would the decisions be made following an assessment of need? That could benefit some parts of the United Kingdom disproportionately, compared with others. It is still unclear to me, and perhaps other Members, how these matters are to be resolved.
Simon Hughes: These are important points to explore, but does my hon. Friend accept that the reason for the inclusion of the English provision in the Bill is presumably that there is not yet devolved government in England? Some of us wish that there was, and hope that there will be, but there is none yet. Secondly, would it not be unfortunate if the money that the Government had led people to believe would be used for youth provision were suddenly to be diverted from that area? This has been trailed for a very long time and there is no statutory guarantee of funds. I can assure my hon. Friend that many people and organisations firmly believe—the Bishop of Chelmsford made a good case for this in the other place—that revenue, as well as and probably more than capital funding, is needed to support good youth work, which is constrained because it does not have the funds to grow and deal with issues on the front line.
Mr. Browne: I am grateful for my hon. Friend’s intervention and I recognise the need to give discretion to Administrations in Scotland, Wales and Northern Ireland. I anticipate, however, that if no money were spent in Scotland on youth services, for example, a fuss would be made that the people of Scotland had been led to believe that the Bill would realise money for those purposes. It is a difficult balance to strike. My hon. Friend makes a fair point and I hope that the Minister will respond to it: the public have been given the impression—not misled—that the money will be devoted primarily to youth projects, and some will be concerned that if there is no indication as to what proportion of the money will be so directed, although it need not necessarily be on the face of the Bill, many campaigners on these issues might be disappointed.
My fourth area of concern is the lack of a national register, which was raised earlier in respect of wills, legacies and other funds that are not readily accessed without such a register. My fifth concern, which I hope the Minister will address, is with the mutuality of building societies, the £7 billion asset threshold and the discretion accorded to some but not other institutions. I look forward to hearing the Minister’s comments on that.
My final concern is the voluntary nature of the scheme. I assume that it is voluntary because the Government are nervous about appearing to compel financial institutions to act under the diktat of the state. In the last few months, of course, these considerations have altered somewhat, but I assume that the motivation reflected the Government’s sensitivity on this area. We are left in the strange position whereby Ministers tell us that the scheme is entirely voluntary, but that they anticipate that every bank will wish to participate. The scheme appears to be a form of voluntary coercion, if it is possible for us to understand such a concept. I do not understand what incentive the banks have to sign up to the scheme. If it is voluntary, why should the banks
support it? Much depends on their being seen to do the right thing and not incur the wrath—or at least the bad will—of the Government. It may be, however, that struggling banks will now regard that as a lesser priority than when the legislation was initially conceived.
In Committee, we intend to explore the following issues in more detail. First, we want to include a reserve power to create a mandatory dormant account register so legacies can be rightly reunited with their legal owners. Secondly, we want to include a reserve power to turn the scheme mandatory if participation is insufficient. It will depend on market circumstances, but it will be useful to have such a power. Thirdly, we want to support the triennial review, as advocated in the House of Lords, as we view that proposal as having merit. Fourthly, we want to support the removal of the £7 billion asset threshold for building societies, and, fifthly, to ascertain the percentage split apportioned to each UK country. One can understand why there should be some discretion, but the Minister’s clarification of how much will go to youth services, financial education and social investment would be helpful. A firmer indication of how much will go respectively to England, Scotland, Wales and Northern Ireland would also be helpful.
Finally, I would like the Minister to clarify why the Secretary of State for Children, Schools and Families is taking the lead on distributing the funds. One can assume only that the emphasis put on youth services will be greater than that on financial education and social investment. That seems a reasonable assumption: many will welcome it, but others who want more money spent on financial education and social investment will not. It remains a mystery to me why the Department for Children, Schools and Families is taking the lead role unless the emphasis is going to be on youth services. The Department’s remit is exclusive to England— [Interruption]—so it will not have a useful role in investing money elsewhere in the UK. I am rightly corrected by a sedentary intervention to the effect that the Department is not wholly English in its concerns, but it is largely concerned with English matters.
My conclusion is that the new Economic Secretary should consider an early power-grab and see whether the Treasury—or, indeed, the Department for Business, Enterprise and Regulatory Reform, in which he is also a Minister—should take the lead on this matter. If not, why is the Treasury forfeiting its usual role? Is the Minister confident that the Secretary of State for Children, Schools and Families will distribute the money in the most appropriate way?
6.16 pm
Mr. Mark Todd (South Derbyshire) (Lab): I rise to speak as a member of the Treasury Committee, whose report has already been the subject of a number of remarks. More of us would have been present today, but the Committee is absent on a visit. I particularly pass on the apologies of our Chairman, my right hon. Friend the Member for West Dunbartonshire (John McFall), who I know would have wished to contribute to the debate.
I support the intentions behind the Bill. Dormant accounts undoubtedly offer potential for beneficial use, but I emphasise straight away—some have already done so to a greater extent than others—that these remain
private assets, so it is necessary to reinforce the tangential relationship of the state to this issue. I believe that the state should be there to enable solutions to be found in respect of the distribution of private unclaimed assets rather than to adopt an overly controlling approach to the management of the assets or their eventual distribution to any good cause.
That is why I particularly welcome the work already done by some banks and building societies to locate people who have unclaimed assets. It is particularly impressive, I must admit, that HBOS, with all its troubles, has devoted a good deal of time and effort to tracking down what it regards as unclaimed assets. About a third of those dormant assets have been reunited with their owners, which is extremely commendable.
When the Select Committee considered the Government’s proposals last year, a number of objections were raised about the voluntary nature of the scheme—I shall touch on it, as have others—the definition and identification of dormant accounts, the scheme’s scope and the options for disbursement. Many of our concerns were echoed in the other place by speakers from all political parties when the Bill was considered there.
The first issue is whether the scheme should be voluntary or compulsory. The Select Committee took the view that it should be compulsory, and I see the arguments in favour of that. I remind hon. Members of my earlier remarks, which perhaps suggested sympathy for that opinion, where others did to a different extent. Members of Select Committees—I have been one for a long time—seek to arrive at consensual conclusions, but one obviously has more or less enthusiasm for certain opinions that are expressed. However, I shall represent here some of the arguments in favour of a rather firmer approach to this scheme. One is undoubtedly that it relies entirely on voluntary commitment.
There is no international precedent for a voluntary scheme and such schemes as exist elsewhere are all compulsory. We have heard from the British Bankers Association and the Building Societies Association that all financial institutions are keen to participate. The dormant accounts scheme will be self-regulated by the banking code. The banking code itself is voluntary, so we will have a voluntary scheme regulated through a voluntary code, which means that we will be relying incredibly heavily for delivery of our expectations of the Bill on the good will of the businesses that participate.
Simon Hughes: I understand the dilemma involving the voluntary and the non-voluntary option, but is not one argument for a compulsory option that we would have much more certainty about the funding over the medium and long terms? Bluntly, it will be difficult to achieve predictability with a voluntary scheme.
Mr. Todd: I shall come to that and suggest some other problems that undoubtedly arise.
The Committee struggled to see what incentives a bank will have to participate fully in the scheme. Another speaker also questioned what incentives might be in place. There is, to some extent, an incentive in the disclosure mechanisms that lie within the proposals in that the reclaim fund will publish the details of contributions made to it. Therefore, by definition, those who have
been less enthusiastic participants will be exposed, although there may be reasons why their contribution might be lesser. They might be more effective in tracing links to unclaimed funds, for example. Such information will probably not be a particularly strong enforcer of participation.
A refusal might also, particularly in current circumstances, be considered by shareholders in the institution one of the lesser faults of that institution, if I may put it that way. This matter will not be a high priority among most shareholders or, for that matter, among the executive management team. We can be pretty sure that it will not be a bonusable objective in banking to distribute unclaimed assets as rapidly as possible to a reclaim fund. Other means than something of this kind will be sought to motivate senior executive teams, so there clearly is an issue of how to ensure that the proposal delivers something like the objectives that we all have for it.
I do not think that there is a risk of banks and building societies refusing to participate because, once people have become aware of these matters, that represents open defiance of the genuine public will and of Parliament. Nevertheless, we should consider the commitment of resources to the task that participation involves. This is not a trivial activity. From what I can tell, the average size of such accounts is between £100 and £200, and in many cases the costs involved in tracking down individuals to reunite them with those accounts will probably exceed the sum involved. Therefore, one can hardly say that a financial institution will be unwise to think carefully about how to prioritise its resources to achieve the objectives of the Bill.
Without a compulsory framework, one can see considerable difficulties. For that reason, the correct balance is probably struck here in terms of facilitating a voluntary approach first and then reviewing the mechanism established by the Bill to see how it is working. We will then be able to see whether rather firmer statutory enforcement is required. I am sure that we will discuss that further in Committee, although I would wish that it were not necessary. I hope that this would be a task committed to by the financial sector with some enthusiasm, but one has to say that that is a counter-intuitive thought in current circumstances and in relation to the mechanisms in place to reward bank staff for achievement of particular goals.
I note, for example, that my noble Friend Lord Bach said in the other place that
“prestige is likely to be attached to participation”.—[ Official Report, House of Lords, 29 January 2008; Vol. 698, c. 568.]
I have a lot of respect for his opinion and I know him well, but I must admit that I am not sure that that will be a substantial motivation for people to press ahead with the scheme.
I hope that the Minister will suggest some more powerful mechanisms to prevent lip-service participation by businesses that are committed to taking part in the scheme. It is fair to say that at the margins—much of banking is a low-margin activity—there will be a temptation for companies to exercise some competitive advantage in this area by the efforts that they put in, because the steps that are taken will undoubtedly and obviously have some effect on removing cash from the institution concerned.
There is an argument about how much the balance sheet will be weakened. After all, both sides of the balance sheet—assets and liabilities—are involved. These proposals will certainly remove a cash resource from institutions and, as I have said, there is a cost attached to the activity itself. Some institutions might decide to spend less money and time on it and observe with some enthusiasm how others spend rather more time and effort on it. The competitive nature of the industry might persuade some to put in fewer resources than they should.
Let me turn to the issue of data, about which most people in the House care pretty strongly. One must presume that at least some details of individual assets and their presumed owners will be transferred to the reclaim fund for ongoing pursuit, so it is worth the Minister setting out some reassurances on the transfer of what we must recognise are data about individuals and their financial circumstances, whether they are still alive or not, and whether or not, for some reason or other, they have no wish to be identified with their assets. These matters might be very personal to them, so we need to be sure of the security of the transfer of personal data.
I also presume that, should a bank or building society cease to be active, tracing an individual’s account back to him will become an obligation of the reclaim fund. Therefore, the data that are transferred must be sufficiently full to make it possible to establish such linkage at some future stage. We must always recognise that, however old some of these accounts are, someone may indeed have some claim on them, and they have every right to that claim.
We have also touched on the participation of National Savings & Investments, and here I firmly side with the Select Committee. I felt that the Government’s answer on the reason for the exclusion of NS&I from the scheme was rather thin and that it implied that if they gave this money away they would have to find the same amount somewhere else. Yes indeed, but this is someone else’s money. In some ways, it could be argued that that is true of everything that the Government have, but that is an over-philosophical argument to have at this time of night.
However, we are talking about savings which, by an individual deliberate act, have been placed in the care of the Government to bring some return. That is different from the receipt of money from all of us as taxpayers. My personal view is that NS&I ought to participate in the scheme on the same basis as banks and building societies. I hope that the Minister will be able to explain with more rigour than the Government mustered in their response to the Select Committee report why that should not be true.
My anxiety about the disbursement mechanism in no way reflects any ill-will towards the good causes identified by the Government. They are all sensible and we can debate the precise balance of the spending between them this evening and in Committee. However, I am concerned that we are dealing with other people’s money, held by private institutions. I would have preferred a more inclusive mechanism for deciding how the resources should be distributed than simply saying that we will give them to the Big Lottery Fund and setting out the broad objectives that we have in mind. To go back to my earlier remarks, that takes us a little further into the
state’s role in the matter than I would optimally have preferred. Even at this late stage, I would prefer more consultation so that stakeholders can have a greater say.
A good example of that is the role of charities. It is undoubtedly true that a significant proportion of the money may well be attributable to charities on the basis that they are the beneficiaries of a will. Although the voluntary sector should not have the exclusive say, I would have welcomed some participation by it in the process to decide whether the priorities are right and perhaps to answer some of the questions on proportionality as it relates to the good causes named so far.
Simon Hughes: In the hon. Gentleman’s work on the Select Committee or elsewhere, did he come to the conclusion that one reason why the Government are so specific about the English priority is because although it has long been argued that there should be money for youth services, it has never been a statutory requirement? Everything else is—children’s services and older people’s services, for example—but this is the Cinderella service. Making it a priority could be a surrogate way of giving it a bit of solidarity and respectability.
Mr. Todd: The hon. Gentleman is absolutely right, but the service is still a surrogate. I do not think that there is a clear link between the purpose of supporting youth services, which I agree with, and the precise mechanism for collecting the money for it. I certainly do not dissent from the measure and will not vote against the Bill. I, too, want more youth services in my area. It is undoubtedly a needy sector of public services. However, bearing in mind my view of the legislation as a whole, I am uncomfortable about the non-inclusive way in which the decisions have been made. It would have been helpful to have had a more rounded approach, as the Select Committee said, incidentally. It firmly shared my view.
On local disbursement and the activities of smaller banks and building societies, the figure of £7 billion seems about right, but there is no rational basis for saying that a smaller institution is defined by an asset base of £7 billion.
Mr. Breed: As a member of the Select Committee, I share the hon. Gentleman’s views. We came to similar conclusions and the report was good. I am interested in the cut-off point of £7 billion. On a bank’s balance sheets, the assets are the loans. Current accounts and dormant accounts are the liabilities. Do we mean assets on a bank’s balance sheets when we talk about liabilities?
Mr. Todd: That is a fair point. The hon. Gentleman is an ex-banker, although he does not shout about that quite so much at the moment. I apologise if I inaccurately referred accounts as both assets and liabilities. There is, however, a technical point to be answered on defining the asset base.
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