Mr.
Hoban: Again, the Minister points out two communities that
could lose out as a consequence of this measure. The communities of
customers being served by the Derbyshire and Cheshire building
societies would benefit if dormant accounts were sitting there and
those societies were not taken over by or merged with—I am not
sure what the technical language is—the Nationwide. Now, those
accounts will be lost in the big pot that will be transferred to the
Big Lottery Fund. The communities that those two building societies
serve could have used dormant accounts to help particular projects in
their area. Let us not forget, these building societies have been built
over time through the agglomeration of smaller building
societies.
We are in
danger of losing the potential for local links for larger building
societies and creating two different sets of building society. It boils
down to the Minister’s argument that the Government want more
money for the good causes. We support the three spending priorities
that are set out in the Bill and we want to see those work well, but
the scheme is voluntary, there is competition and there is tension
between the scheme and recognising the principle of mutuality and how
members of building societies and the local communities that they
support should be able to benefit.
A second
issue arises from the £7 billion limit, which is what happens
when the value of the assets fluctuates. When is a scheme in or out? If
a building society shrinks its lending book and has lower assets, one
year it will be over the £7 billion limit, the next it will be
under. That does not create a stable base on which to
operate. There
is regular discussion on the financial pages about de-leveraging. That
could lead to shrinkage in the size of some of those building
societies, which would suddenly go below the threshold. I think I am
right in saying that the Skipton building society has recently gone
over the £7 billion limit, although it might find itself going
below that threshold, so even the threshold does not quite work. The
Government are making an artificial distinction. It does not sit well
with the treatment given to the vast majority of building societies,
and it is a retrograde step to restore the Bill to how it was before it
was, I believe, improved in the
Lords.
Ian
Pearson: Clearly, there is a difference of opinion between
us on the matter, but let me have one more go at reassuring the hon.
Gentleman. We want co-ordination and a fund of sufficient size to give
money to good
causes. I repeat that youth provision, financial inclusion and
capability are important areas, and they have been recognised widely as
such here and in the other
place. The
hon. Gentleman seemed to suggest that having a small and local scheme
will create an artificial distinction. I do not agree. Building
societies are all not the same. They vary enormously in size, and many
small and local building societies are primarily locally and regionally
focused. Clearly, some societies with many millions of customers are
not, and it is not the case that building societies will be
disadvantaged in any way by participating in the reclaim fund and the
scheme if they are of sufficient
size. The
Big Lottery Fund has already proved that it can invest effectively in
projects at local level and will continue to do so. If Nationwide
participates in the reclaim fund and the scheme, I am sure that many of
its members will benefit from the reclaim fund through the Big Lottery
Fund at local level. I must say to the hon. Gentleman that large
building societies such as the Nationwide are national. The clue is in
the title. They are not small and local, and I do not think it
unreasonable to have a small and local
scheme.
Mr.
Hoban: The Minister’s argument is rather spurious,
given the existence of building societies such as the Chelsea, which
has its headquarters in Cheltenham, as well as the Yorkshire and the
Skipton. To say that the clue is in the name is not the best argument
that he can make in
Committee.
Ian
Pearson: I understand the hon. Gentleman’s point,
but it plays to what I am saying as well. A number of building
societies have names that might imply that they are regional, such as
the Yorkshire, although in actual fact they operate very much on a
national
basis. Mrs.
Janet Dean (Burton) (Lab): Has my hon. Friend estimated
how much less there would be for good causes, such as youth facilities,
if large building societies were allowed to opt out of the
scheme?
Ian
Pearson: The best figures that we have available show
that, of the £130 million that we estimate would be classified
as dormant and be transferred to the reclaim fund in the first
instance, £100 million would come from building societies with
assets in excess of £7 billion. By the way, that
includes the Derbyshire, which, although it is being acquired by the
Nationwide, is already above the £7 billion threshold. We are
saying that if the Bill remains as amended in the other place,
£100 million will not go into the reclaim fund and then, I hope,
out to the Big Lottery Fund for
distribution. Without
wanting to be in any way critical of large building societies, which I
am emphatically not, having a scheme of sufficient size to be able to
operate strategically, which is our intention, is the right thing to
do. It is also important that we make provision for small and local
building societies. That is the balance we struck as a result of the
consultation exercise. The BSA is happy with our amendments and the
approach that we want to
follow. I
hope that I have has reassured the hon. Member for Fareham, although I
suspect that I have not done so
entirely.
11.15
am Question
put, That the amendment be made:—
The
Committee divided: Ayes 8, Noes
5.
Division
No.
1] Question
accordingly agreed to.
Amendments
made: No. 10, in
clause 2, page 2, line 19, 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.’. No.
11, in
clause 2, page 2, line 27, after
‘bank’, insert ‘or building
society’.—[Ian
Pearson.] Clause
2, as amended, ordered to stand part of the
Bill.
Clause
3The
assets-limit
condition Amendments
made: No. 12, in clause 3, page 2, line 43, after
‘bank’, insert ‘or building
society’. No.
13, in clause 3, page 2, line
46, after ‘bank’, insert ‘or building
society’.—[Ian
Pearson.]
Mr.
Browne: I beg to move amendment No. 2, in
clause 3, page 3, line 11, leave
out from ‘section’ to end of line 11 and insert
‘may not be made unless a draft of the regulations has
been laid before, and approved by a resolution of, the House of
Commons.’. I
will be brief. I declined to contribute to discussions on previous
clauses because I thought that I would keep my powder dry for the point
I make now. The £7 billion threshold is clearly controversial; a
substantial body of opinion believes that there should be no threshold
at all. So the amendment would require the Government to use a positive
resolution if they wished to alter the threshold, rather than a
negative resolution, which is the current arrangement.
Opposition
parties routinely use this device in Committee to try to make the
Government more accountable to Parliament, and perhaps there is
something slightly ritualistic in the way that amendments are tabled to
that effect. In this instance, however, a serious point is being made:
it would not be appropriate—indeed, it would be a slight breach
of faith—for the Government to alter the threshold in a way that
substantially changed the legislation and the impact on small
communities that would otherwise benefit, without proper reference
to Parliament. That is the motivation behind
amendment No. 2.
Unlike other
amendments moved by Opposition parties, which the Government—by
virtue of having the majority of members of the Committee—may
wish to disregard, they might want to look more sympathetically on this
proposal. Unless they have malign or hidden motives—I have no
reason to believe that they have—I cannot understand why they
would wish to reject the amendment.
Ian
Pearson: We identified, in consultation with the industry,
the £7 billion limit as a credible threshold to define small
locally based institutions, and it is enshrined in clause 3. The
amendment asks us to use the affirmative procedure rather than the
negative power in the Bill. I say to the hon. Member for Taunton that
we recognise the concerns that were expressed in the other place about
the suitability of the £7 billion limit, and we have recently
discussed those concerns.
There is
provision in the Bill for the asset limit to be adjusted by Government
order, so that it can continue appropriately to identify small and
local institutions in the future, which is its purpose. The most likely
reason for changing the limit would be a technical matter, such as
inflationary adjustment. We therefore consider that a negative power is
appropriate, given the scope of the power and the interest that it is
likely to raise.
The Delegated
Powers and Regulatory Reform Committee confirmed that a sufficient case
had been made for the power, and it did not consider the power nor the
scrutiny that we are proposing—the negative procedure—to
be inappropriate. For those reasons, we believe that the hon.
Gentleman’s amendment is unnecessary, and we will oppose
it.
Mr.
Browne: I am disappointed. I understand the point that the
Minister is making: if the limit will be adjusted due to inflation or
other incremental changes that take place from year to year, we do not
need a full-scale discussion, but I witnessed in the Chamber last week
large parts of the provisions for banking being made under terrorism
legislation, so I am cautious about the Government using powers created
for one reason to achieve different purposes at a later date. It is
perfectly possible that the Government could reduce the threshold
substantially without proper reference to Parliament. That concerns me,
but I sense that I have not persuaded the majority of members of the
Committee, so I beg to ask leave to withdraw the amendment.
Amendment,
by leave,
withdrawn. Clause
3, as amended, ordered to stand part of the
Bill. Clause
4 ordered to stand part of the Bill.
Clause
5Functions
etc of a reclaim
fund
Mr.
Hoban: I beg to move amendment No. 26, in
clause 5, page 4, line 32, at
end insert— ‘(4A) Any
direction given under this section may not be made unless a draft
statutory instrument containing such a direction has been laid before,
and approved by a resolution of, each House of
Parliament.’.
The amendment
continues in the spirit of the previous amendment tabled by the hon.
Member for Taunton, and I am not sure whether it holds any greater
chance of success. I want to introduce into clause 5 a power to ensure
that, where the Government issue a direction to the reclaim fund, that
direction is subject to parliamentary scrutiny. As the Government
frequently point out—doubtless they will do so again today,
perhaps when we have a stand part debate on the clause—the
reclaim fund is a private company and the Government will not have a
great deal to do with it. As with any other private company, it will be
regulated by the Financial Services Authority. Yet, when we look at the
detail of the clause, subsection (4) will give the Treasury the right
to “give a direction” to the reclaim fund, requiring
it “to
give effect to any specified object that it has, or...to comply
with any specified obligation or prohibition imposed on it by a
provision that its articles of association are required to make under
Schedule
1.” We
touched on the issue briefly on Second Reading last week. I asked the
Minister if it would be possible for the Treasury to give a direction
to the reclaim fund to transfer more money to the Big Lottery Fund.
After a while, we got the answer—I paraphrase
significantly—yes. It will be possible, in exceptional
circumstances, to use the power of direction to encourage or require
the fund to transfer more
money. If
the Government intend to have such power of direction, it should be
subject to proper parliamentary scrutiny. In such circumstances, the
Government would be saying, “We do not agree with the prudent
decision that the board of the reclaim fund has made to hold back this
amount of money. We believe that, in the interests of maximising the
amount of money in the Big Lottery Fund, the right decision is to
transfer across another £20 million, £30 million or
£40 million.” The Government’s exercising such
powers without parliamentary scrutiny is not appropriate. What if the
reclaim fund is left short? We had the assurance in the other place
that the financial services compensation scheme would meet the needs of
customers, but it would not be satisfactory for the private sector to
pick up a shortfall through the FSCS.
There is a
need for proper parliamentary scrutiny of the directions that the
Government can give to the reclaim fund. Without that, the directors of
the reclaim fund will be in a difficult position. We are giving the
Treasury powers without proper parliamentary scrutiny. The Minister
ought to accept the amendment, in the spirit of trying to improve the
scrutiny of the operation of the reclaim fund. We are told that the
fund is a private body; but at the end of the day, it will be subject
to those Treasury
directions.
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