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My view is that the better test is whether the institution is capable of supporting a local framework of delivery. Some institutions are, but many are not. Some small local building societies would undoubtedly be able to make judgments in their own area, where their customer base still largely is, but it is also true that some institutions—the Nationwide, for instance, has received plaudits for this—are active distributors to the voluntary
sector across their nationwide networks. The Nationwide has just absorbed my building society, the Derbyshire, which covers a large chunk of businesses in Derbyshire. It qualifies as a society that is well equipped for carrying out such distribution through its own means.
Again, I welcomed the Chief Secretary’s justification of the precise cut-off point in monetary terms rather than in capacity terms, which relates to whether an institution is capable of making such a distribution for itself and whether it would wish to. Many banks and building societies would rather pool the money with others and have the distribution carried out by an institution or expert in such matters. However, some would want to make their own judgments about that but would not qualify under the size qualification.
I want to raise a small number of technical points. Customers’ rights are preserved on the insolvency of a business, which in theory places someone with an unclaimed asset in a better position than any other customer of that financial institution. It is not a major point, but it is worth giving a bit more thought to how that degree of protection can be applied to a tiny minority of account holders of a society, and those whom we do not know, and whether that presents anomalies in the general protection of accounts that is offered under the financial services compensation scheme.
It is also worth knowing how the mechanism identified in the Bill will work. Under the proposed arrangements, on transferring dormant accounts to the reclaimed fund, the bank has its liability to repay the customer extinguished. It enters into an agency agreement with the fund to carry out that duty on its behalf. If the institution becomes insolvent, how is that action to take place?
Others have mentioned their concern about the ability of charities to go back to a source to check their entitlement to proceeds from a will. I share that concern and am a signatory to the early-day motion on that. The mechanism devised in other countries to find a name seems to work pretty well. The website here, which has received justifiable praise, requires prior knowledge, such as whether someone had an account in Derbyshire, which people are unlikely to have. In many cases, it will not be known where the accounts have been held. The mechanism needs to be much more name-based than institution-based. A reserve power, defined in the Bill, should make it possible to establish a register of the assets enabling individual charities, and others, to make claims more intuitively and effectively.
As a strong supporter of mutuality, I think it important to ensure that individuals’ membership rights are protected when an asset is transferred. If someone who holds an account in a building society—as I do—loses touch with it, that does not involve losing touch with a membership right that grants benefits other than merely holding the account and gaining a return from it. Although the Government’s response to the Select Committee stated that the membership rights would not be changed, a little more thought is needed about what that really means. The response implies that if the details of the account are transferred to the reclaim fund, along with the task of managing it, the society must nevertheless maintain a member register with a tag relating it to an unclaimed asset that has been transferred from its balance sheet.
I would welcome the Minister’s assurances and explanations in relation to a number of the points that I have made, but I believe that the Bill deserves all our support, and I shall be surprised if it does not receive it, at least in qualified terms.
6.41 pm
Miss Julie Kirkbride (Bromsgrove) (Con): I apologise for not having been able to be present for all of the debate so far. Parliamentary business took me away, causing me to miss what I am sure was an excellent contribution from my hon. Friend the Member for Fareham (Mr. Hoban), with which I would no doubt have strongly agreed. I apologise to him, in his absence. Since then, however, I have heard contributions from other Members, including the Chief Secretary, who not only made a very good speech in support of her Bill but displayed open-mindedness over the potential of the Committee stage in respect of a number of the issues that have been raised. I think that the House will welcome that; I certainly welcome her attitude.
I returned in time to hear the hon. Member for Clwyd, South (Mr. Jones) express his well-thought-out objections to the Bill. I must say that while none of us want to be friends of bankers nowadays, I do not take his dim view of the banking industry, so I did not entirely agree with many of his observations. I thought that the hon. Member for Taunton (Mr. Browne) made a very good speech about the pinch points that remain in the Bill, which I am sure will be raised in Committee. The hon. Member for South Derbyshire (Mr. Todd) gave an excellent presentation of his experience on the Select Committee. I strongly agree—and I wish to make this the thrust of my own speech—that if we are to have the proposed register, it should be based much more on names than on institutions if it is to have a realistic prospect of reuniting people with their assets.
I support the Bill and its intentions. I think that it proposes a very good use of money that is lying dormant in bank accounts. Bearing in mind the statement that we heard earlier, however, I worry slightly about whether now is the moment to introduce such legislation. Perhaps we shall return to that issue in Committee. As was observed by my hon. Friend the Member for Stratford-on-Avon (Mr. Maples), if we face such a dire situation in the banking industry, it may be worth considering a delay in the implementation date of what is nevertheless a worthy Bill.
I am sure that we can all argue about whether 15 years is long enough for assets to lie dormant, and about whether the Big Lottery Fund is the right body to distribute the money. I share reservations that other Members may feel about that, and no doubt views will differ on whether the Government have identified the right organisations to benefit. I respect their mandate to decide such issues, however, so I shall set my reservations aside and agree to agree with them in that regard.
I wish merely to make an appeal on behalf of charities that have contacted me. Enthusiasm for the good causes that will benefit from the Bill may make it easy to lose sight of the fact that this money belongs to someone. It may belong to someone who is alive, or it may once have belonged to someone who is now dead and who will almost certainly have left a will expressing intentions about how the money should be used.
One in seven of those who leave wills bequeath money to a charitable organisation, amounting to about 5 per cent. of their estates. Whether we are talking about £500 million or billions of pounds—for we do not know how much the Bill will liberate—we are talking about an awful lot of money that could go to the charitable sector. The wishes of the money’s owner could be respected if it were given to, for instance, Cancer Research UK, which has contacted me, the British Heart Foundation, which receives some 47 per cent. of its funding through legacies, or a range of other charities, all of which do fantastic work and rely heavily on legacies to maintain their core funding, their fundraising activities being in addition to that.
I think it behoves Parliament to consider charities’ worries about the inadequacies that they see in the Bill at present. They want to be sure of being able to identify and claim their assets. I am sure that the Minister has seen early-day motion 1581, which refers to the Unclaimed Assets Charity Coalition. I think that its request is modest and reasonable. It suggests that we should see whether a voluntary scheme works, but also take the precaution of stating in the Bill that if a case can be put in the triennial review that it has not been seen to work, the Bill will provide for the establishment of a different kind of register that will enable charities to claim their assets much more effectively. That would not bind the present Parliament, and would not impose an excessively bureaucratic burden on banks—which I understand is what worries Conservative Front Benchers, and we can all understand that at the moment. It would, however, mean that we would not need to have recourse to primary legislation again if we wanted to devise a more robust system. Powers in the Bill could be activated on the advice of a future Parliament.
As was suggested by the hon. Member for South Derbyshire, the online traceability scheme relies on knowledge of the name of an institution that might hold assets that a charity might feel belonged to it. As we all know, perhaps from our own experience but certainly from the experiences of friends and family, it is easy to forget about small amounts of money in a bank account. We may change our name or address, we may lose the paperwork, the box may be in the attic; but it is easy to lose track of small amounts if, for certain reasons, we have opened a variety of bank accounts. Without a name with which to trace someone—people’s lives change: they may get married, change their names for other reasons, or move house—it is easy to lose sight of bank accounts. That is particularly true when someone dies, and the relatives must perform the horrible business of clearing up that person’s life and financial accounts.
I completely understand that there are concerns about fraud, but successful schemes that have brought forth a much easier way of tracing people’s accounts and assets already exist in America and Ireland. The ambition of the Unclaimed Assets Charity Coalition, which comprises 60 charities, is modest; all it is asking is for the legislation to include a chance to revisit this issue if the Government’s good intentions set out in the Bill are not as successful as they might be.
I welcome the Economic Secretary to his new role at the Treasury, alongside his other responsibilities elsewhere in Government, and I look forward to hearing what he has to say later.
6.50 pm
Tom Levitt (High Peak) (Lab): It is a pleasure to follow the hon. Member for Bromsgrove (Miss Kirkbride), who began in the style of someone making a winding-up speech, to the extent that I suddenly wondered whether I was going to be called to speak at all. She told us that someone who is dead is someone who is not alive but, in what was a good and consensual speech, she made the important point that this is our one chance to get the legislation right. We will not revisit this issue through primary legislation because the Labour Government of 2011 will be too busy, and we owe it to everyone involved, whether bankers or the communities who will benefit from this, to get the legislation right first time. There are a number of issues about that which I shall address later.
I take, rather than declare, an interest in this issue as chair of both the Community Development Foundation and the all-party group on the community and voluntary sector. Until this Bill came along, I had not realised that in one important respect the banking industry is part of the voluntary sector, and I will return to the issue of whether the banks will volunteer to take part in the dormant accounts proposals.
I was interested to think about the nature of the funding that will come out of this legislation—as well as the quantity, which is also important. Is what we are talking about a windfall, or will there be an ongoing stream of funds as more and more current live accounts become dormant in the future? My guess is that, in the future, as awareness of dormant accounts rises increasingly through the reunite process and other means, there will be fewer dormant accounts reaching maturity. Also, as people have more control over their accounts, through internet banking and so forth, there might be less chance of them losing control of those accounts in the future. Therefore, there is a worry that what we are talking about might, in effect, be a windfall—that it might be a source of income that peaks over the first two or three years as the backlog of dormant accounts gets cleared but that then rapidly falls. If we believe the British Bankers Association, we are talking about the sum of £500 million. That is a lot of money in some respects, but over how many years will it be spent, and will it get topped up as the years pass?
As the Chief Secretary told us at the beginning of the debate, that £500 million equates to 0.07 per cent. of banks’ assets. In other words, the size and impact of this scheme, were it to be taken up 100 per cent. by the banks, is a pinprick. It will not make a difference to the stability of the banks, and while I understand the sensitivity in the current circumstances, which could not have been predicted weeks ago, let alone months ago or when this issue was prioritised, we should enact the legislation. We possibly should talk later on in Committee about implementation dates, but even in these circumstances it is right only to tolerate months of delay, not years of delay. We need to know how much money we are talking about and, as has been said, the BBA estimate is at the bottom end of the estimates. Regardless of whether we end up with a voluntary or a mandatory scheme, we need to find a way of being clear about how much money is involved and the time scale governing that money.
I agree with what has been said about the reunite process. It is absolutely right that people should be reunited with what are, after all, their own possessions. Like other Members, I have had the e-mail from Halifax Bank of Scotland telling me how it is getting on, with £18 million of dormant funds already allocated and £29 million still to be allocated. It also told me that 83 per cent. of accounts left to be reunited hold less than £100. For that reason, I would be wary of the suggestion reported to us by my hon. Friend the Member for Clwyd, South (Mr. Jones) that there should be a £100 de minimis sum, because if we are talking about 83 per cent. of all these accounts, lots of those £100s make up a lot of money, and they should be included.
HBOS went on to tell me that 244 dormant accounts had been identified in my constituency. I found that a bit odd, because either it is extrapolating, in which case on average there should be 244 accounts per constituency, or it knows the postcodes of the people who own these accounts and who it is seeking to reunite with them. I would be interested to know from HBOS whether those 244 accounts are an extrapolation or that is the right figure.
Tom Levitt: I think my hon. Friend is going to tell me he has the same number in his constituency.
Mr. Todd: I am not. What I have to say demonstrates that this must be based on real data about real people, because my figure is 136, and the population of my constituency is a great deal larger than that of my hon. Friend’s.
Tom Levitt: That is interesting, and it does not reflect well on the people of the northern part of Derbyshire who are obviously more careless than the people in the southern part of Derbyshire—I hope that does not get reported. Taking the figure of 244 such accounts in my constituency as an average—which might be an overestimate—given that it is said that the average sum per account is £316, there is about £50 million over the country as a whole from HBOS alone that should be available for this scheme. That figure must then be multiplied by the sums for the other banks and building societies as well, so we are talking about a lot of money.
I want to talk about the issue of whether this scheme should be mandatory or voluntary, on which I made an intervention earlier in the debate. When my hon. Friend the Economic Secretary sums up, I would like him to make a point—he might write this down now in capital letters—of listing for us all the Treasury regulations that are voluntary. Which of the current regulations can financial institutions opt in or out of as they choose? I think that will be a very short list. I do not see what the point is of having optional regulations. As has been said, Ireland, Australia, New Zealand, Canada, the United States of America and Spain all have dormant account recovery schemes and none of them has gone for the voluntary approach, because they realise they cannot get as much social value and investment coming from those dormant accounts through voluntary means;
my hon. Friend the Member for South Derbyshire articulated that point well. A mandatory scheme would be equitable because it would treat every financial institution involved in exactly the same way. At the very least, I urge my hon. Friend the Economic Secretary that we must have, as the hon. Member for Bromsgrove said, a reserve power so that we do not have to return to this House when we find in a few years’ time that the voluntary approach has produced very good results from some institutions and negligible results from others, because that is the way it will work.
I take on board the Chief Secretary’s point at the beginning of the debate that a triennial report is probably more important in the early years of the working of the scheme, and I think that after one or two years we would probably know how successful the scheme is, so I am willing to go along with her on that to some extent. However, I think there needs to be at least one triennial report to review the effectiveness of the scheme and to examine how much money banks and building societies have transferred for reinvestment. I am agnostic about whether 15 years is the right length of time after which to declare an account dormant. I am fighting the case of a constituent whose dormant account is 10 years old and appears to have disappeared completely already. Fifteen years is probably a bit on the long side, but such a period does indicate that control of and interest in an account has been lost.
Finally, I want to look at the distribution mechanism. The National Lottery Act 2006 gave the Big Lottery Fund the power and authority to handle non-lottery as well as lottery funding. The Arts Council and Sport England also have the same powers, as I understand it. More than 80 per cent. of those who took part in the consultation on who should be the distributor of unclaimed assets said that the Big Lottery Fund was the correct organisation to do it. It is already responsible for delivering half the funding raised through the national lottery to projects across the UK concerning health, education, the environment and charitable purposes. The themes that we have heard about so far as the Bill and the focus of this money are concerned are totally appropriate for that.
I find it a bit odd that the issue of additionality was brought up by the hon. Member for Fareham (Mr. Hoban) earlier. Additionality was one of the sticks with which the Conservative party used to beat the Big Lottery Fund and its predecessors. However, the Big Lottery Fund won the argument over the years, and we have not had an argument for three or four years about additionality. Although there may be grey areas and areas where funding is complementary, we accept that the taxpayer, through the Government, has certain obligations, but that complementary funding from other sources is wholly appropriate. What is more, the Big Lottery Fund has won the trust of the people for being fair in the way that it delivers, and it certainly has the experience. The young people project, through the Young People’s Fund and YouthBank UK, was a lottery project that gave young people themselves direct input into decision-making projects regarding who should benefit from the funding. I hope that that practice will be taken up again in this instance. The Big Lottery Fund has experience of individual financial management and access to personal financial services through the advice plus programme, through which it awarded more than £11 million to projects for
financing and fundraising across the UK. As a social investment wholesaler, it knows that partnership is the key to delivering projects, avoiding duplication and making effective use of funding. The £50 million “fair share” programme, for example, operated in 77 areas of the UK, working in collaboration with the Community Foundation Network—a much underestimated body—to get money to where it really works: inside our communities.
I very much welcome the fact that we are talking not just about grants so far as distribution is concerned—another Member touched on this issue—but about loans and endowments being made through this funding. All of that helps to create a much more sustainable form of funding, whether or not it is within the life of the funding stream, in so far as it goes.
There is therefore no need to debate who the distributor should be—the Big Lottery Fund has won that argument. It has a record of appropriate funding, and of openness and transparency and accountability to Parliament. It has well-established offices in Scotland, Wales and Northern Ireland and in the English regions. On financial efficiency, according to the National Audit Office, its overheads, at 9.1 per cent., are lower than any of the other lottery distributors’, so it is an obvious and satisfactory choice of distributor.
We will have some interesting debates in Committee, and I hope that there will be some movement on the mandatory versus voluntary issue, because that is the only way that the provision can be made reliable, as well as sustainable.
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