Mr.
Browne: Will the Minister give an example of circumstances
where that may be necessary, as I am confused as to what they might
be?
Ian
Pearson: My understanding is that they would be
exceptional circumstances. At the moment, in normal circumstances,
banks or building societies should hold sufficient information to
identify the account holder and to ensure that the money that was held
in their accounts and transferred to the reclaim fund is genuinely
reclaimable. Under those circumstances, there should be no need for
information to be transferred. Of course, there is potential for
dispute in such situations—for example, a bank or building
society might no longer exist, and the records might be imperfect.
Clause 14 is intended to deal with such exceptional circumstances. The
principle that we should not routinely transfer data that give private
information about an individual to the reclaim fund is correct. Normal
account details should remain with a bank or building
society.
Mr.
Browne: I understand the Minister’s point about not
transferring data beyond what is necessary. In practical terms,
however, presumably I could go along to a bank where I had an account
with £100 in it that I had not touched for 10 years, withdraw
the money and walk out with £100 in cash. If I had a bank
account that I had not touched for 20 years, could I similarly go in
and walk out with my £100? Would there be a delay or
complications because that money, having passed the 15-year threshold,
had gone into the reclaim fund? Could the bank say, “Sorry,
we’ll have to process it, and it will take a certain amount of
time”? Would I, as the customer, notice the difference between
an account that had not passed the 15-year threshold and one that had?
Ian
Pearson: Subject to verification checks, which one would
expect a bank or building society to want if someone had not been in
touch with them for 15 or 20 years, a person should be able
to get the money immediately. If the money has been transferred, it
will be up to the bank or building society to get it back from the
reclaim fund. A customer can walk into a bank or building society and
get the money that is rightfully theirs. The bank or building society
should have already written to the individual to alert them to the
possibility that the money might be dormant. If they had not received
any information back from the customer, after 15 years the money could
be transferred into the reclaim fund. The principle that someone can
get their money back by going to their bank or building society and
having some simple verification checks is right, and it is one of the
reasons why banks and building societies
should maintain official data that can be verified so that customers can
get their money as easily as possible. Overall, I do not believe that
the amendment is necessary.
Let me
respond briefly to the point made by the hon. Member for Fareham. When
money is transferred to the reclaim fund, there should be sufficient
information—but not personal details—to enable the
reclaim fund, when producing its business plan, to make some assessment
of the likelihood of dormant funds being repatriated. We discussed on
Second Reading the need for a balanced decision to be taken by the
reclaim fund on that basis. There will be information that enables the
reclaim fund to take those decisions, but customers’ details
will not be routinely passed to the reclaim fund. We do not believe
that to be
necessary.
Mr.
Hoban: I am grateful to the Minister for that
clarification. What type of information does he envisage being passed
across by the banks or building societies to the reclaim fund? Will it
have a breakdown of the individual account balances that have been
transferred across, on a numbers basis? Will they know for how long an
account has been dormant, again on a numbers basis? What sort of
information will they get to enable them to make such a judgment, which
we all agree is a fundamental part of making sure that the scheme
works?
Ian
Pearson: My understanding is that fairly high-level
information will be provided. Individual accounts will not be subject
to in-flight refuelling. My advisers suggest that that will be a matter
for agency agreement and not for the Bill. As regards the general
principles involved, we need sufficient high-level
information—to be clarified in agency agreement—to be
provided to enable the reclaim fund to understand how many
customers’ accounts have been transferred to it, the age profile
of those accounts and the quantums involved. The reclaim fund need not
necessarily know exactly which individuals are having accounts
transferred into it. The Bill allows for the provision of information
that is likely to be necessary to repay customers. Other than that, it
will be a matter for agency agreement. I appreciate that the hon.
Member for Fareham is making a probing point. The reclaim fund needs
sufficient information to be able to have a properly functioning
business plan and to conduct the work that we want it to do, which is
to transfer money to good
causes.
Mr.
Browne: I have been reassured by the Minister. I beg to ask
leave to withdraw the amendment.
Amendment,
by leave,
withdrawn.
Ian
Pearson: I beg to move amendment No. 8, in
clause 1, page 1, line 15, at
end insert— ‘( ) The
reference in subsection (1) to an account that a person holds is to be
read as including an account held by a deceased individual immediately
before his or her death. In
such a case, a reference in subsection (2) to the customer is to be
read as a reference to the person to whom the right to payment of the
balance has
passed.’.
The
Chairman: With this it will be convenient to discuss
Government amendment No. 10.
Ian
Pearson: The amendments are technical and arise from
debates in the other place. Our consistent position has been that all
accounts should be eligible for transfer into the scheme, provided that
they meet the test of dormancy set out in the Bill. That includes
accounts opened a long time ago. As the Bill is currently drafted, if a
customer dies it is not possible for their balance to be transferred to
the reclaim fund and the bank’s liability extinguished, because
the account is not one that the customer holds with the bank. That
presents difficulties, as banks will not know whether older, inactive
accounts are owned by living or deceased persons. We certainly intend
to address that point, which was raised in the other place. It is
unlikely that banks or building societies would know whether account
holders were living or deceased. We appreciate what the banks and
building societies have told us—that they wish to have certainty
on that point so that they are not constrained in their ability to
participate in the scheme. We are happy to propose the amendments,
which are a technical clarification confirming that the accounts owned
by deceased persons are eligible for transfer into the
scheme.
Mr.
Hoban: I am grateful to the Minister for that
clarification of the purpose of the amendments. He will be aware of
concerns outside the Committee about how accounts belonging to deceased
persons can be reunited with the people to whom they have been
bequeathed in a will. Does the measure make it easier or more difficult
for that process to take place?
Ian
Pearson: My understanding is that it makes no
difference.
Amendment
agreed to.
Clause 1,
as amended, ordered to stand part of the Bill.
Clause
2Transfer
of balances to charities, with proportion to reclaim
fund
Ian
Pearson: I beg to move amendment No. 9, in
clause 2, page 2, line 1, leave
out ‘building society or a smaller bank’ and insert
‘smaller bank or building
society’.
The
Chairman: With this it will be convenient to discuss
Government amendments Nos. 11 to 13.
Ian
Pearson: The amendments intend to bring the Bill back to
the state in which it was originally introduced. It is right to have a
significant debate on the objectives of the small and local schemes. I
would like to remind the Committee about the objective of the Bill,
which is to facilitate fair and efficient distribution of funds in
dormant accounts for the benefit of society.
We recognise
that small banks and building societies often play a key role in
supporting and engaging with our local communities. It has always been
clear that small, locally based institutions should be able to focus
dormant account assets on needs in their local communities. That was
announced as far back as the pre-Budget report of 2005. In consultation
with the bank and building society sector, we have identified £7
billion as a
credible threshold to define small and locally based institutions. The
Building Societies Association advised us that of those building
societies with less than that amount in total assets, more than 90 per
cent. have all their branches within 70 miles of their head office. We
consulted on the suitability of that threshold for identifying small,
locally based institutions, and the majority of respondents who
expressed a view believed the limit to be appropriate. The Government
are fully committed to supporting mutual organisations and recognise
the many benefits that such organisations bring to society and
communities across the United Kingdom. We recently introduced new
legislation to support the sector, including improving the rights
relating to member shares and improving procedures involved in
transferring business to the subsidiary of another mutual. The vast
majority of building societies will be eligible for the alternative
scheme. The BSA advises that 50 out of their 59 members—nearly
85 per cent.—will be eligible. On Second Reading, it was
helpfully pointed out that building societies which will not be
eligible hold a large proportion of the dormant account funds in that
sector. To be precise, the BSA has estimated that £100 million
of the £130 million in dormant accounts in the sector lie in the
larger institutions. I am aware of the views that have been regularly
expressed by Nationwide building society. Much has been said of the
great need in the areas to which spending priorities in the scheme have
been directed, particularly the need for youth facilities and for
improving financial capability and inclusion. One of the key messages
on Second Reading was the strong support across the House for
investment in youth facilities and in matters of financial capability
and inclusion.
One of the
reasons behind the scheme is that, if the larger building societies do
not take part in the main scheme, the funds for the spending priorities
will be heavily impacted on. We are aware that banks and building
societies support a variety of good causes in different communities
and, of course, we fully support such laudable objectives. However, are
banks and buildings societies really in the best position to consider
consistently the needs of wider communities throughout the United
Kingdom? We have identified the good causes following an extensive
consultation exercise in England, and other Administrations have
similarly consulted. We think that it is right to proceed with the
scheme. If we were to allow all dormant account money to be
administered through multiple individual foundations, it would
inevitably lead to significant overlaps and potentially large gaps in
provision. It is in the interests of a fair and efficient distribution
of funds to have a centralised national distribution
scheme. 11
am
Mr.
Browne: Is the Minister satisfied that the
£7 billion threshold is still appropriately pitched,
given the events of the past few weeks and
months?
Ian
Pearson: Yes, I am. I have asked that question of
officials. Obviously, there have been changes during the past few weeks
and months, but I am confident that an asset limit of £7 billion
strikes the right balance and enables us to have a scheme of a
sufficient size that it can be efficient in its distribution of
funds.
We very much
welcome the recent BSA statement in support of the Bill as it was
introduced to Parliament, which is what the amendments are designed to
achieve. The Government’s proposals for an alternative scheme
for smaller financial institutions have also been welcomed by the BSA.
We also welcome its statement expressing its members’ commitment
to making the scheme a success and their intention to participate in
it, as we do the British Banking Association’s statement
confirming commitments to participate from banking groups representing
90 per cent. of the UK retail banking
market. The
proposed scheme is designed to be simple and efficient, to minimise
costs to institutions and the scheme overall, and to maximise funds for
distribution. The asset limit provides a balance between giving small,
locally based banks and building societies the flexibility to benefit
directly their local communities against maximising the assets for the
main scheme, which will be operated through the Big Lottery Fund to
give money to good causes. We believe that the amendments will produce
the alternative scheme for small, locally based institutions, which is
what small banks and building societies
want.
Mr.
Hoban: The matter under discussion was the subject of
significant debate in the other place, and I happen to think that the
balance of debate there was right. Building societies are in a
particular position in our society and they differ from banks. We are
talking about the money not only of customers, but of members of a
building society. The society is a mutual and the money is its
members’ money. I am conscious that members of building
societies have made decisions about how building societies should
operate. For example, at its last annual general meeting, members of
Nationwide agreed to a commitment that 1 per cent. of its profits
should be allocated to charitable
purposes. There
is a strong belief in those organisations, which is one reason why
there is so much support for mutuals throughout the House. The mutual
nature of such organisations gives them different status; they see
their mutuality as a distinctive selling point compared with other
institutions. To carve out one group from the whole population says
that there is almost a two-tier category of building society: those
that are of sufficient size and thus will be dealt with on a different
basis when it comes to dormant accounts and those that will be allowed
to continue to use their members’ funds when there are dormant
accounts to benefit the communities in which they are based. That
creates an unhelpful
distinction. The
hon. Member for Taunton asked whether the asset limit of £7
billion is right. From the Minister’s justification of the Bill,
a better measure is the one that he used on the concentration of
branches—to what extent does a building society serve a
well-defined local community?
Ian
Pearson: I am not sure how this is helping the hon.
Gentleman’s argument. My argument is that it is right to have a
small and local scheme, and that small building societies, which
generally serve local or regional and sub-regional communities, are in
a different place
from the larger building societies, which have extensive branch networks
and customers throughout the United
Kingdom. The
hon. Gentleman mentioned the Nationwide building society. I have
enormous respect for the Nationwide and its policy on giving money to
good causes, but it has 14 million customers and is about to acquire
the Derbyshire building society, which will make it even larger. It
does not help his argument to say that we should treat all building
societies the same. The Nationwide is of sufficient size that it
deserves to be regarded as an institution on a par with some of our
banks, and it is right in that case that it participate in the wider
reclaim scheme, which will give money to good causes through the Big
Lottery Fund.
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