Dormant Bank and Building Society Accounts Bill [Lords]


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Ian Pearson: I appreciate the probing nature of the amendment, which would impose a cap on the costs that the BLF can defray to limit its administration charges to 5 per cent. of the dormant account funding transferred to it. Although I appreciate and share the concern about the effective use of public funds that no doubt motivated the amendment, I hope that hon. Members will recognise why it is important that the scheme’s ability to operate is not constrained by a rigid and arbitrary cap.
I do not think that the issue is as straightforward as the hon. Member for Fareham suggests. I want the BLF to be as effective and efficient as possible at delivering money to the good causes to which it has been allocated through the dormant account funding mechanism. I do not want money to be delivered at the lowest possible cost, because in areas such as working with young people, I want the BLF to talk to young people and discuss their needs, rather than simply concentrate on throwing money out the door in as simple a process as possible, with limited checks. I do not think that anyone really wants that.
We want to ensure that the BLF’s costs are properly controlled and that it is held accountable for them. Its costs have come down across its activities. As set out in its 2007-08 annual report, it currently spends about 9.1 per cent. of its income on operating costs. It operates a portfolio approach to funding, with commitments being made over three years and payments being made over five years or more. As a consequence, it requires some flexibility to administer its budget over a longer-term cycle. That is a practical reason why an annual cap on its costs would inhibit that activity. I reiterate that I appreciate the probing nature of the amendment.
We want the BLF to approach its distribution of dormant account funds with a similar thoroughness to the way in which it assesses individual grant applications and to its work in developing partner relationships with the projects that it funds and supports. That applies to small-scale projects as much as to larger ones, which often involve more administration costs to support them in getting up and running. We expect the BLF to consult young people, so that they are actively engaged in shaping bids for community resources. That is a worthwhile activity, but intensive effort and sensitive handling are required to manage it appropriately.
I agree that it is important that the BLF is able to operate with effective scrutiny and that its ability to assess and support bids is not constrained. I am aware that, in the other place, the lords drew comparisons between the BLF and other organisations. I am sure that the Committee would be interested in this year’s National Audit Office report, “Making grants efficiently in the culture, media and sport sector”, which shows that the BLF’s costs compared favourably with public sector funders and other funders in the voluntary sector. Nevertheless, there is no room for complacency, and we expect it to work effectively and efficiently and to ensure that as much of its available resources as possible are distributed to front-line organisations. The hon. Gentleman and I share that commitment.
Under the National Lottery etc. Act 1993, the BLF is legally required to comply with provisions for a statement of financial requirements issued by the Government. That makes clear its responsibility to ensure its finances are managed appropriately. However, it is properly the responsibility of the accounting officer for the relevant Department—in this case the Department for Children, Schools and Families—to be sure that the administrative costs incurred were appropriate, as part of the overall duty to make effective use of public funds. It is also the responsibility of the accounting officers of the devolved Administrations to do the same in respect of their relevant functions.
I assure hon. Members that an accountability framework is in place and that we are satisfied that the requirements and responsibilities under that framework will be sufficient to ensure efficient and effective allocation of resources. If there is any doubt about the BLF’s future efficiency and effectiveness, I would draw hon. Members attention to the power in clause 25 that will enable the Government to add or remove distributors of dormant assets. On that basis, we think that the Bill already allows for sufficient checks to ensure the efficiency and effectiveness of distribution. I hope that the hon. Gentleman agrees and will withdraw his amendment.
Mr. Hoban: I am grateful for the Minister’s thoughts on the matter. I suspect that the Secretary of State’s powers under clause 23(5) to give directions on
“the management and control of money received by the Fund”
might also be used where the Government do not want to take the nuclear option of changing the distributor and to give some guidance to the BLF on how it spends the money allocated to it and how it uses it to pay its administrative costs.
The BLF has always indicated to me that it came out very favourably from the NAO report on the efficient use of money and that it compares well with other grant-making bodies. It is important to ensure that the BLF and the Government recognise the importance of keeping costs to a minimum to ensure that as much money as possible gets through to the causes; otherwise we might not see quite as much money as expected coming through. However, on the basis of the Minister’s comments, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 18 ordered to stand part of the Bill.

Clause 19

Distribution of money for meeting English expenditure
Mr. Browne: I beg to move amendment No. 5, in clause 19, page 10, line 28, at end insert—
‘(1A) The Secretary of State may, by order, amend the distribution areas listed in subsection (1).
(1B) An order made under subsection (1A) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.’.
The Chairman: With this it will be convenient to discuss amendment No. 32, in clause 19, page 10, line 34, at end add—
‘(3) For the purposes of making a distribution under subsection (1), each of (1)(a), (1)(b) and (1)(c) should rank equally.’.
Amendment No. 32, which was tabled by the hon. Member for Fareham, makes a reasonable point. Unless I have missed something, throughout the debates on the Bill, the Government have been rather vague about the amount of money to be allocated to each of the three areas identified as priorities. We have been led to believe, not only because the lead Government Minister is the Secretary of State for Children, Schools and Families but because of the emphasis in the comments made by Treasury Ministers, that the primary area that will benefit relates to young people.
Of course, young people may benefit under financial management and financial inclusion provisions too, but projects specifically aimed at young people appear to be the main thrust of what is being proposed by Ministers. However, I understand that nothing in the legislation specifies that. Of course, that makes quite a big difference; people who are involved in an organisation that is solely concerned with advancing the interests of young people might be enthusiastic about the Bill because they think that 90 per cent. of the money will go to young people and only 5 per cent. to financial management and 5 per cent. to financial inclusion. They will celebrate if the Bill is passed. If the Government then turn round and say, “Actually, we are only envisaging 1 per cent. going to young people, 1 per cent. to financial management and 98 per cent. to financial inclusion,” those people may feel that they were sold something slightly different to what they thought was the case when the legislation went through all its stages in both Houses of Parliament.
Therefore, although I think that my amendment is a charitable one, I am big enough to say that the more important and interesting amendment of the two is amendment No. 32. I do not necessarily follow the argument that the two amendments should be equally weighted, so I would not necessarily support amendment No. 32. Nevertheless, I think that the issues that it raises are—
Mr. Field: Hedging, as usual.
Mr. Browne: I leave hedging entirely to the people of expertise in the City and the Conservative party.
I would not necessarily support an equal distribution—one third, one third, one third—but the onus is on the Minister to try to indicate, preferably in legislation but at least orally to the Committee, what he sees the division being.
Mr. Hoban: May I first address my remarks to amendment No. 5? There is a very clear logic to that amendment, which was tabled by the hon. Member for Taunton. Clause 12 was removed from the Bill because the Government did not want a triennial review in perpetuity, yet we are casting in stone for perpetuity—until time ends—that these are the three priorities for that money. A point may arise at some time in the future when the Government wish to change those three priorities, but they would then have to introduce primary legislation to change them, so the hon. Member for Taunton may have done the Government a service by pointing out this gap in the Bill.
Regarding amendment No. 32, I am not sure that I would support it either, if it went to a vote. I tabled it for the very reason that the hon. Member for Taunton gave; there is nothing in the Bill that tells us how the money will be spent, or what priorities will be given to the various projects. I assume that the order in the Bill reflects the order of spending and that more will be spent on A than on C. However, what I do not know is how much more? Is it just a fraction more? I also do not know how the Government will determine the priorities.
A very clear signal has been given by the fact that, in our debates, the lead Secretary of State has been referred to as the Secretary of State for Children, Schools and Families, who, in an earlier incarnation, gave evidence to the Treasury Committee’s inquiry into unclaimed assets—I will come back to that inquiry in a minute, because I think that we can see where the order of priorities comes from, judging by the Secretary of State’s evidence to the Committee. That suggests that the main area of expenditure will be, as the clause puts it, on
“the provision of services, facilities or opportunities to meet the needs of young people”.
However, it would be helpful for the Committee and outside bodies to understand just what weighting will be given to that priority in comparison to the other two. Some people out there will be interested in knowing that. They may wonder if they can apply for funding under those streams. The Minister may reply that we will have to await the strategy produced by the Big Lottery Fund for England to know what the priorities are, but it would be helpful to signal the order at an earlier stage.
The third priority will be left in quite a difficult position. The Treasury Committee’s report on unclaimed assets gives a very clear steer that the social investment wholesaler will need a significant endowment to function properly. The conclusion to the report states:
“We find the concept of using gearing to multiply the potential impact of unclaimed assets attractive when compared to more traditional grant-giving distribution methods. We have been told that the Social Investment Bank needs minimum funding of £330 million over five years for it to be viable, but we do not, at present, see any sign of the Government committing resources to social investment of this scale. We believe that the Government cannot will the ends if it does not will the means. We want the Government to allocate sufficient resources to a Social Investment Bank funded in part through unclaimed assets.”
The Treasury Committee gave a clear signal. The then Economic Secretary, who is now Secretary of State for Children, Schools and Families, also touched upon the issue in the debate.
4.45 pm
Sir Ronald Cohen, the chairman of the Commission on Unclaimed Assets, said that it would be
“very difficult to get an allocation from Government for a purpose such as this if the unclaimed assets were not available”.
The sense was given that unclaimed assets would be the source of funding for the establishment of a social investment bank. The suggestion is that if the priorities are as set out in the Bill, there will not be enough money available from unclaimed assets to provide a sufficient endowment.
I am not arguing for the benefits of one cause against those of another. If we had the time or inclination to do so, we could make cogent arguments for the proportion being divided in particular ways. We might be able to put percentages on youth services, financial inclusion and the social investment wholesaler.
From the way that the Bill has been drafted and the mood music around it, I think the problem is that most of the money will go to facilities for young people and the third priority will get the small change. That may not be sufficient to produce the benefit that people who support a social investment bank believe it should have. Lord Davies of Oldham said of this issue in another place:
“We want to go ahead with the top two priorities but the third concept in the clause is dependent on resources being available.”—[Official Report, House of Lords, 15 January 2008; Vol. 697, c. GC493-494.]
That sends a clear signal about the priorities.
There is a lot of interest from the third sector not just in the first two priorities, but also in the third. This debate is an opportunity to air those issues and for the Minister to give more clarity on what he believes might be the distribution between the three causes.
Ian Pearson: I will be delighted to bring as much clarity as I can to this issue. There are two very different amendments. Amendment No. 5 would insert an order-making power to amend English spending areas by affirmative resolution. In reply to the hon. Member for Taunton, we believe that the areas we have identified are important and enduring. We have consulted on the areas and do not feel that there is a need to change them, even in the long term. One of the reasons why there is no need to change them is that youth services are an important area now and for the future. I confirm that we regard youth provision as a priority. Financial inclusion and financial capability are rightfully areas in which the Big Lottery Fund could make a significant difference. We clearly put it on the record in the other place and on Second Reading that, if resources permit, we would consider funding for a social investment wholesaler. That remains our position.
There is still great uncertainty about the quantum of resources available to the Big Lottery Fund in the first instance and on an ongoing basis. We have yet to see how it will work out. We have discussed estimates of the amount of genuine dormant assets, and it will be up to the reclaim fund through its business plans to decide how much of those assets are to be transferred to the Big Lottery Fund for distribution. At the moment, there is a lot of uncertainty about the areas, and putting rigid percentages in place would not make sense. It is right, too, that the balance of priorities within the three areas might need to be changed over time. I explained that the process of making directions on spending decisions will involve a range of Departments, with overall direction coming from the Department for Children, Schools and Families, which reflects the priority that we give to youth service provision. It seems a sensible way in which to give direction and guidance to enable the Big Lottery Fund to do its work, yet still retaining some flexibility as circumstances change.
 
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Prepared 16 October 2008