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Session 2007 - 08 Publications on the internet General Committee Debates Dormant Bank and Building Society Accounts Bill [Lords] |
Dormant Bank and Building Society Accounts Bill [Lords] |
The Committee consisted of the following Members:Celia Blacklock, Committee
Clerk † attended the
Committee Public Bill CommitteeWednesday 15 October 2008[Dr. William McCrea in the Chair]Dormant Bank and Building Society Accounts Bill [Lords]2.30
pm
The
Economic Secretary to the Treasury (Ian Pearson): I beg to
move amendment No. 17, in
clause 11, page 7, line 13, at
end insert— ‘( ) The
Treasury may by order amend the figure in subsection
(1)(a). ( ) An order under this
section is subject to annulment in pursuance of a resolution of either
House of
Parliament.’.
The
Chairman: With this it will be convenient to discuss
amendment No. 28, in
clause 11, page 7, line 13, at
end insert— ‘(6) The
Treasury may by order reduce the period of dormancy referred to in
subsection (1)(a). (7) An order
made under subsection (6) may not be made unless a draft of the
statutory instrument containing it has been laid before, and approved
by a resolution of, each House of
Parliament.’.
The
amendment will enable a time limit for defining dormancy to be changed
by order if evidence shows it to be inappropriate. We recognise that
there is considerable debate over the most suitable length of that
period for the purposes of a dormant account scheme such as this. It is
our view that 15 years of customer inactivity is the most appropriate
period to determine whether an account is truly dormant, but we
recognise that others hold different views and that has been the
subject of debate.
The 15-year
figure was arrived at after discussion with industry and through
consultation. It is also the figure that other countries, including
Ireland, have adopted in legislation. Industry estimates that 80 per
cent. of accounts that have had no customer-initiated activity for 15
years are truly dormant. Adopting a lower dormancy period would run the
danger of having a higher reclaim rate with a corresponding increase in
costs. In any case, any accounts that become dormant earlier will still
be dormant when they reach the 15-year mark and come into the scheme
then.
Nevertheless,
we have listened to the arguments for a shorter period and we accept
that, in the future, the experience of the operation of the scheme and
of industry might suggest that an alternative figure is more
appropriate. Accordingly, the Government amendment will introduce a
reserve power for the Treasury to amend the dormancy
period. Amendment
No. 28, which stands in the name of the hon. Member for Fareham, has
the same objective. The fundamental difference between us is the level
of parliamentary scrutiny, which we consider appropriate for the use of
this power. Let me be clear: this is not a
power that the Treasury will use lightly. Plainly, this is an issue on
which it would be appropriate and necessary to consult before any order
was drafted. That said, we do not believe that this is the type of
power to justify the use of parliamentary time that an affirmative
resolution instrument would
require. We
believe that this is an instrument in relation to which the negative
resolution procedure is appropriate. Its scope is broadly similar to
that to amend the asset limit for participating in the small and local
aspect of the scheme. The Delegated Powers and Regulatory Reform
Committee gave the opinion that a negative resolution procedure is
appropriate and sufficient in that
instance. Mr.
Mark Hoban (Fareham) (Con): It is a pleasure to serve
under your chairmanship, Dr. McCrea, for what is probably the first
time. The
Minister highlights one difference between the two amendments and the
approach that we have adopted—going down the positive route. We
think that, because this is affecting customer assets, and we are all
here to help to safeguard the interests of our constituents, there
should be a debate over this matter. He says that it would be an
inappropriate use of parliamentary time to go down the affirmative
route, but we could pray against the measure and still take up the same
amount of time.
One of the
Minister’s predecessors, the hon. Member for Wentworth (John
Healey), was very keen when he was a Treasury Minister on introducing
the affirmative resolution procedure at every opportunity, because he
felt it was so important that parliamentary scrutiny was seen to be
working. That is an example that I encourage the Minister, 11 days into
his new brief, to
follow. I
would like to raise the issue of the period of dormancy, because both
amendments offer the power to vary the period from the 15 years
specified in the Bill. In a way, that is probably the more substantive
issue. The Government amendment will enable the period of dormancy to
be increased, while ours is a one-way bet downwards. It is quite
important to get the period of dormancy right. The approach that the
British Bankers Association has adopted is to achieve reasonable
certainty that an account is dormant where there has been no
customer-initiated activity for 15 years. It believes that after 15
years, 80 per cent. of accounts will genuinely be dormant,
and about 20 per cent. might be subject to a repayment
claim. If
the period of dormancy is reduced, the risk will be that the proportion
of accounts subject to reclaim will increase, which could reduce the
certainty in the reclaim fund’s business plan and affect the
fund’s ability to ensure that it adopts a prudent view on
transfers to the Big Lottery
Fund. The
BBA has
said: “We
would not consider the setting of a shorter maturity period to be
compatible with the objective of releasing genuinely lost
monies.” The
BBA, the Commission on Unclaimed Assets and Grant Thornton all agree,
as does the Building Societies Association, with the principle of a
15-year maturity period. However, the Treasury Committee—we have
not referred to it so far in the proceedings—suggested in its
report, “Unclaimed assets within the financial system”,
that the period of dormancy could be reduced from 15 to 10
years.
When one of
the Minister’s predecessors—I think it was the right hon.
Member for Normanton (Ed Balls), not the hon. Member for Burnley (Kitty
Ussher)—gave evidence to the Treasury Committee, he drew a
parallel with the Irish scheme, in which the period of dormancy is 15
years. The Committee took issue with that, as the definition used in
the Irish scheme is much narrower than that used in the UK scheme, and
in Ireland the scheme takes no account of customer activity, whereas in
the UK it
does. It
is clear from the Committee’s evidence that the UK is an outlier
regarding the period of dormancy, compared to other jurisdictions. The
table in the Committee’s report shows that Switzerland has a
10-year period, Australia seven years and New Zealand six. Nevada and
California have periods of just three years. Interestingly, over the
summer, I read reports that some US states are reducing the period to
enable them to reap the proceeds and plug the hole in their coffers by
declaring more accounts dormant. I do not know how desperate the
Treasury feels about plugging holes—it may go down that
route. Mr.
Martyn Jones (Clwyd, South) (Lab): Is the hon. Gentleman
aware that before this legislation was proposed most banks also used a
three-year dormancy
period?
Mr.
Hoban: That is useful information. I had heard—in
the context of building societies, I think—that a five-year
period was being used. The hon. Gentleman is very knowledgeable about
these subjects, but it is not clear to me what difference extending the
period from five to 15 years would make to the banks. While one does
not necessarily want to be driven by practices in other countries, it
is instructive that a wide range of dormancy periods is used elsewhere.
We need to retain an open mind about the period, and our amendment and
the Government’s indicate a willingness to do
that. The
period will also depend on experience, because we may find that as the
reclaim fund does its work, the proportion of reclaims from accounts is
perhaps only 10 per cent., rather than there being an 80:20 split. If
we believe that the rule should be more or less 80:20, that might
encourage a shorter period of dormancy to be set. I am not sure whether
the Government have expressed a view on the appropriateness of that
split, but we should keep it in
mind. While
I would prefer a downward-only, rather than an upward-only, revision, I
do not think that anyone has suggested that the period be longer. The
Government’s amendment will achieve an objective that we share
on both sides of the Committee, which is that we should be able to
reduce the period in the light of
experience. Mr.
Jeremy Browne (Taunton) (LD): I, too, welcome you to the
Chair, Dr. McCrea. On the substantial point just discussed by the
Conservative spokesman, 15 years is inevitably an arbitrary
figure—one could pick, 14, 16 or 10 years. I have no
strong views. There seems to be a reasonable consensus that 15 years is
a good starting point—as good as any—and that it could be
reviewed at some point. I agree that the consensus seems to be that the
figure is likely be made lower rather than higher following such a
review.
More
importantly, I support amendment No. 28, which stands in the name of
the hon. Member for Fareham and which I suspect I support with greater
fervour than he does himself. I think that an important distinction is
being made by the Conservative party, as distinct from the Government.
This is
fundamental. I
know that the Minister gets given all kinds of rubbish to read out and
he has to do his job, but I cannot believe he is telling us that
changing the year is incidental. It is not like putting up prescription
charges by the rate of inflation. As I understand it, he is
saying—he should correct me if I am wrong—that the figure
could be changed from 15 years to, say, one year in a way that
fundamentally alters the legislation and that that would not be deemed
sufficiently important in the context of the Act, if that is what it
becomes, for it automatically to be discussed in the House of Commons.
That seems an extraordinary position for the Minister to
take. This
is not incremental fiddling. I can understand that if the Minister
changed the figure from 15 to 14 years it might feel incremental, but
we are giving the Government the power, without reference to
Parliament, fundamentally to alter the legislation in a way that would
affect millions of people. On that basis, if he chose to reflect on
these matters, he would feel it entirely reasonable to agree to
amendment No. 28, even without a vote of the
Committee.
Ian
Pearson: I have indeed reflected and consulted my
officials, and I remain of the opinion that the negative procedure is
appropriate. However, I stress that there is not much difference
between us. We are all clear that we broadly accept that 15 years is
the figure to go for at the moment. We want to build an evidence base
and see how the scheme works. If the evidence points to the need for
the scheme to have a lesser period, we will commit ourselves to consult
widely on either a reduced or a higher figure. I think it highly likely
that the figure would be lower.
We would have
a public consultation exercise. If there were serious concerns in
Parliament about the outcome of the public consultation and any real
dispute, I have no doubt that after we had laid a proposal before
Parliament it would be prayed against and we would have a debate.
However, I think it likely that we will build a body of evidence,
review it and reach a consensus that there may be a reduction. That is
why I still think that the negative procedure is the appropriate course
to adopt. We should not say that parliamentary time must be allocated
when it is highly likely that it would be
unnecessary. Amendment
agreed
to. Question
proposed, That the clause, as amended, stand part of the
Bill.
Ian
Pearson: It is not my normal practice to speak in stand
part debates, because a lot of legislation speaks for itself and is
straightforward. However, following the debate on earlier amendments to
the clause and comments made by the hon. Members for Fareham and for
Cities of London and Westminster, I asked my officials to check the
scope of the clause with legal advisers to ensure that it meets what we
share as its objectives.
I would like
to make the following points of clarification, which have been agreed
by Treasury legal advisers and parliamentary counsel. Following the
request that we check whether clause 11 will achieve our shared
objectives, we want to confirm that it will. Clause 11(2) makes it
clear that, for the purpose of calculating the 15-year period of no
customer-initiated activity, the period must be continuous and any time
when an account falls within either of the exclusions in subsections
(2)(a) and (b) cannot be included, thus setting the clock back to
zero. 2.45
pm Subsection
(2)(a) excludes no-contact accounts, which are more commonly known as
no-mail accounts, so if an instruction of no communication is given
during a period of inactivity, that sets the clock back to zero. A new
period of 15 years only starts to run when that instruction no longer
applies. Subsection (2)(b) excludes accounts that restrict or penalise
withdrawals in all circumstances. That would cover an account that has
a penalty for making any withdrawal, such as a fixed-term account, but
not an account—notice accounts are an example—in which
withdrawal is penalised only in certain circumstances, such as without
giving a period of notice. Again, any period during which an account
has a fixed-term restriction or penalty is not included for the purpose
of calculating dormancy and sets the clock back to zero. The
debated— and now withdrawn—amendment proposed deleting
the words, “during that period”, but that language is
necessary to give effect to the intention outlined above, as it makes
it clear that the restriction is not an absolute
one. To
summarise, an account that was at one time a no-contact or fixed-term
account is not permanently excluded from the scheme, but the 15 years
of inactivity that qualify the account for dormancy can begin only once
the fixed term or the no-contact restrictions have ended. In the case
of notice accounts, since the restrictions do not apply in all
circumstances, there is nothing to prevent them from qualifying for
dormancy after 15 years of inactivity. I hope that that
clarifies the point made by the hon. Member for Fareham and
others.
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