Dormant Bank and Building Society Accounts Bill [Lords]


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Mr. Hoban: I confess to being disappointed with the Economic Secretary’s remarks. I understand the Government’s objection to the requirement to have a triennial review in perpetuity. The Chief Secretary made that objection clear on Second Reading, and she admitted, as indeed did the hon. Gentleman, that
“we must ensure that the scheme is working simply and fairly, and we think it right to review it once it is up and running”.—[Official Report, 6 October 2008; Vol. 480, c. 45.]
Having heard those words on Second Reading, I rather assumed that, rather than debating whether to reject the clause completely, we would be considering whether to amend it so that there was still a statutory requirement to undertake a review three years after setting up the scheme. We could have argued with the Minister whether one triennial review was enough or whether we should have more than one, but I did expect the principle of having a triennial review to remain in the Bill.
It is worth the Committee remembering that when the Bill was first discussed in the House of Lords, there was no reference whatever to a review, so we have got the Government to shift their position. The Economic Secretary made a statement about what the review will entail. Lord Davies of Oldham had said that he would make a statement to that effect on Third Reading in the Lords, but he did not do so. At least now we have a little more clarification about what the review may take into account.
The Economic Secretary says again for the record that this is a voluntary scheme run by a private company, but it is being set up under an Act of Parliament, and given the public interest in the matter it is important to have continued scrutiny of the scheme. In the debate on clause 11 he said that the dormancy period in the clause is a minimum and that banks will be required to publish in the banking code how they are defining and implementing that. The triennial review set out in the Bill would have required a careful look at those arrangements in the hope that shining a spotlight on them would encourage the banks to move to best practice. That would have been an important outcome of the triennial review.
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There are other important aspects to the clause on which the Minister has given no assurances. Dormant bank accounts are a very narrow set of assets, but we know from the Young report on the financial assistance scheme, from the report of the Select Committee on the Treasury and from the lobbying of the charitable sector that a huge range of other unclaimed assets could be subject to the same type of procedure.
Clause 12(2)(f) refers to those types of asset and whether a similar scheme should be established. Experience suggests that National Savings & Investments is a glaring omission involving significant unclaimed assets. It is part of the reunification scheme, for which we should be grateful, but not part of the process of transferring money from NS&I to good causes. We touched on that, and on the flimsiness of the Government’s arguments against it, on Second Reading.
The statutory requirement strengthens Parliament’s role in scrutinising the scheme and requires those involved in it to recognise that, once it is up and running, there will be a statutory review rather than just an expression of the intention to hold a review.
What will happen at the triennial review? The Government are saying that there will be one review. While I accept that there is a good argument for not having a review every three years until the end of time, what will be the mechanism for taking forward any significant issues that arise during the triennial review? At least our proposals provide for such a mechanism, because there would be another review in three years. It would be a rolling process.
The best amendment for the Government to introduce would be an order-making power to enable them to terminate the three-yearly reviews when they were satisfied that the scheme was working efficiently and in the interests of consumers and the bodies that are to receive the money. That would be far more acceptable than deleting clause 12 entirely, which would mean losing an opportunity to keep the scheme under review until Parliament was comfortable that it was operating properly and in the best interests of all the stakeholders. The Minister put us on notice on Second Reading that we would come back to the matter, but the way that has been done is unsatisfactory. I would rather that clause 12 remained.
Mr. Jones: I am happy that the Minister intends to review the Bill’s proposals in three years and that he agrees that the adequate functioning of the voluntary scheme requires transparency. Will he therefore explain whether all the information that would be collated in the triennial report will be available from other sources? What information requirements will fall on banks and building societies when they make dormant bank account contributions? How much information will they be required to give to the public or to the BBA or the BSA?
Mr. Browne: I concur with everything that the Conservative spokesman said, so I shall not repeat it. He laid out the case for the continuation of clause 12 very well and made a valid criticism of the Minister when he said that the Government could have been more imaginative in their approach to the clause rather than ordering their troops to vote it down without coming up with a more satisfactory compromise. Both Opposition parties understand that a commitment to review the legislation every three years for the rest of time, as the hon. Member for Fareham put it, would be unduly onerous, but some recognition of the concerns raised in the Lords beyond the commitment to the initial review would have been more constructive.
I must make one further point, which I raised on Second Reading but have yet to hear a satisfactory answer on. There will inevitably be a hit at the beginning, when all the money in accounts that have been dormant for 15 years or more will accrue to the central fund, and there will need to be some sort of review of how efficiently that is being done. Some of the money may not shake out of the system as quickly as it might. However, after that initial hit, in the second year we shall be talking only about bank accounts that have currently been dormant for 14 years, so there will be far less money in the second year.
With the initial hit of publicity in the media and elsewhere for the 15 years and more, quite a few people whose accounts have lain dormant for 14 years may wake up to the concept of the dormant account and suddenly remember a deposit that they put in the bank 14 years ago. The following year, there will be only those whose accounts have currently been dormant for 13 years—when that feeds through two years down the line.
We are talking about legislation whose effects will evolve, may change quite substantially—not just in the first three years, but as they work through the system—and might have an impact on customer behaviour and awareness. Nine or 10 years down the line, the people involved will be people whose bank accounts had been dormant for only five or six years when the legislation was enacted. A case can be made, which the Government could engage with a bit more constructively, that there is benefit to having more than an initial review, just to ensure that the legislation is up, running and functioning—its effect will change over time. Periodic reviews at different points down the line might reach different conclusions and find out different information from just one review.
For example, in subsection (1), the words
“and not more than every three years thereafter”
could have been deleted. That would have allowed one review three years after implementation, without a commitment to such a thorough review later on, thereby meeting one of his major objections.
I also accept that clause 12 is incredibly detailed—probably more than is necessary for carrying out the review—but it is an awful lot less detailed and convoluted than it would have been had we accepted amendment No. 7. Therefore, it is not as bad as it might have been. The clause could be amended to improve it, but the Bill not providing for a review would be a mistake.
I hope I deduce from the Minister that we shall be able to put things right, in the sense of being able to make changes to such a scheme, when we come to new clause 2, which stands in the name of my hon. Friend the Member for Clwyd, South.
What would be the purpose of a review if it was not specified in the Bill? If banks and building societies joined the scheme only on a voluntary basis, they could opt out if they did not like what a review came up with. If the detailed rules of the scheme were those that banks and building societies had drawn up, what would the review be able to achieve? If the review was not carried out by those who were implementing the scheme, the point of the review would not be very strong.
In addition, could the banks and building societies taking part in the scheme not carry out their own reviews and change the scheme rules without referring back to the Government? All those issues will become real questions once the need to have a review of some kind is taken out of the Bill.
I take the Minister’s word that a review will happen, but if we take this approach and if the review cannot make a fundamental decision three years down the line—that decision might be, “This voluntary approach is not working and we need a mandatory approach,” and I feel that a review not specified in the Bill could not say such a thing—I think we are missing a trick.
I am happy to take the Minister’s word that such a review will take place, and I understand why he wants to delete the clause, but we need something stronger from him at some point on what his review will be capable of doing, especially if it concludes that the scheme is not working as well as it might.
Mr. Mark Field (Cities of London and Westminster) (Con): I hope that the Minister, in justifying his stance on the matter, will be spouting only his own rubbish rather than anything presented by his civil servants. I entirely agree with the comments made by my hon. Friend the Member for Fareham and with many of those made by the hon. Member for High Peak.
I have one other consideration to offer. Given that the Government are now, in large proportion, the owner of two of the big four banks—presumably there will be many dormant accounts in HBOS, Lloyds TSB and RBS—it is incumbent upon them to give stronger justification as to why a triennial review going some way into the future should be struck out in this way.
I appreciate that the Minister has some concerns with elements of the clause, but simply to do away with all the safeguards here—safeguards for Parliament, on behalf of all our constituents, but also to ensure that the system works correctly in the years ahead, not least when the Government are such an important bank owner—would be entirely undesirable.
Ian Pearson: I have listened carefully to the debate and a number of perfectly valid points have been made. When we came to the clause as a team, we had a closer look at it and felt that it would be difficult to produce effective amendments that enabled us to have a review, but not the onerous requirement to review for all time, as the hon. Member for Fareham says and which I think is accepted on all sides.
On the amount of information that will be available for the review—a point raised by my hon. Friend the Member for Clwyd, South—there are already, elsewhere in the Bill, quite substantial requirements to produce information. When we debated previous clauses and amendments, we considered the fact that the private company that operates the reclaim fund must produce accounts on a timely basis. I am therefore confident that there is sufficient information there for a review to be conducted and for it to be an effective one.
Issues were raised about the scope of the review by my hon. Friend the Member for High Peak and the hon. Member for Fareham. When conducting the review, we would want to look at the overall operational effectiveness of the scheme. The issue of whether it should transfer from voluntary to mandatory is different. Similarly, the point made by the hon. Member for Fareham about whether we should consider other assets, such as insurance assets and so forth, raises a range of issues that are not legitimately within the scope of this legislation. Both the mandatory elements and looking to extend the scope of the scheme would require additional primary legislation. It would not be appropriate in a review of effectiveness to include areas that were completely outside the scope of the Bill.
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Mr. Hoban: The subsection in clause 12 that relates to other assets does not talk about using this legislation to set up a fresh scheme. It just ensures that the issue of other categories of assets does not drop off the radar screen. It says that the report should look at
“the desirability and practicality of establishing similar schemes”.
It does not say anything about creating a framework for setting up such schemes. It just says that we should keep our eye on the ball and make sure that we do not forget that there are other classes of assets that people might want to look at carefully.
Ian Pearson: I do not want things to drop off the radar screen either. Of course, as a Government we want to keep legislation under review, but we have no current plans to extend the scope of the scheme, and we think it premature to commit to a specific review of other assets. It might be appropriate in the future.
I commented on how we propose to conduct a review of the effectiveness of the scheme after three years. I do not think that one should doubt the word of Government when they say they will conduct a review after three years but, if it is helpful, I am prepared to reflect on that and produce an amendment on Report which would commit to a review being held after three years.
Mr. Hoban: It may be helpful to the Minister and officials to look at the Financial Services and Markets Act 2000 because that includes provision for a statutory review of the FSA and the financial ombudsman service two years after they were set up. The framework for an amendment might be found there. One of the issues that arose from those statutory reviews was that once they had taken place there was no formal mechanism to go back and review either the FSA or the FOS, and they were just kept under review. That has led in the case of FOS to quite a lot of discontent among industry members. That legislation is helpful in so far as it says that there is a mechanism to do this, but it also suggests that saying once is enough may not be appropriate.
Ian Pearson: As I have said, I am happy to talk to officials and to commit to introducing on Report an amendment that we will conduct a review. We need to be clear about the scope of the review that I am considering. As I said, I do not think that, when we have no current plans, we should be committing to a review of other specific assets at a particular time, but I agree that we should scan the horizon. Nor do I think that we should commit in three years’ time to review whether the scheme should be mandatory because, again, we have no plans to do so and we have no reason to doubt that the voluntary scheme will be successful. However, we will continue to monitor policy developments.
 
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Prepared 16 October 2008