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Grand Committee
Monday, 10 December 2007.
The Committee met at half-past three
[The Deputy Chairman of Committees (Lord Faulkner of Worcester) in the Chair.]
Dormant Bank and Building Society Accounts Bill [HL]
(First Day)
The Deputy Chairman of Committees (Lord Faulkner of Worcester): If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 1 [Transfer of balances to reclaim fund]:
Baroness Noakes moved Amendment No. 1:
“( ) This section and section 2 are subject to section (Report on operation of schemes in sections 1 and 2).”
The noble Baroness said: In moving Amendment No. 1, I shall also speak to Amendment No. 15 and to Amendment No. 16 in the name of the Liberal Democrats.
As we begin this Committee stage, I should like to set out our broad approach to the scrutiny of the Bill. Our overall view is that the Bill is excessively narrow and needs to be widened in a number of ways, both as to the assets that could be brought within its scope and the purposes to which money could be put. Those will be our main subjects for debate, but we also have a number of detailed amendments designed to tease out the finer points of detail on parts of the Bill, on which we all want to work constructively to improve it.
We start today with one of our larger themes—the range of assets within the scope of the Bill. We had hoped to table amendments specifically aimed at bringing in other forms of dormant financial asset to the Bill. The list is potentially very long, including life assurance policies, pension assets, shares not taken up in demutualisations, other shares whose owners cannot be traced, and so on. The values are potentially at least as significant as those involved in the dormant bank and building society accounts covered by this Bill.
I tried very hard to persuade the Public Bill Office to allow me to table an amendment that would have created an order-making power for the Treasury to bring other categories of dormant financial asset into the overall scope of the Bill at a later stage. The broad scheme of transferring funds but preserving the owner’s rights to reclaim those funds provides a good umbrella that could cover many other kinds of asset—and we hoped to be able to amend the Bill to that effect. We recognise that there are many legal and technical complexities involved in the other categories of assets, which is why we wanted to create a fairly extensive order-making power.
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The Minister will know that such an amendment would have had support from all sides of the Committee. However, he can breathe a sigh of relief because the Public Bill Office was adamant that the scope could not be extended beyond the financial assets similar in nature to bank and building society accounts. Hence my noble friend Lord Higgins was allowed to table Amendment No. 31 in respect of national savings, to which we shall come later, but I could not table anything broader. I believe that the Liberal Democrats hit a similar Public Bill Office roadblock on this issue. I mean no criticism of the Public Bill Office, which was as usual entirely helpful, but it has its rules to follow and it follows them—and the Opposition have to accept its judgments even though we do not agree with them.
Amendments Nos. 1 and 15 are second-best amendments. Since we cannot extend the Bill to other forms of asset, we have instead, and with the help of the Public Bill Office, inserted a new clause after Clause 2 which requires the Secretary of State to report on the operation of the scheme set up under Clauses 1 and 2. Importantly, subsection (2) of the proposed new clause says:
“The report shall... consider the desirability of establishing similar schemes in respect of other providers of financial services”.
That will not of itself create new schemes for gathering in dormant financial assets, but it will ensure that such schemes will not disappear from public view. The amendment calls for the report within 12 months of the coming into force of Part 1 of the Bill. On reflection, however, that period must be too short and I shall reconsider it when we return to the issue on Report.
Amendment No. 16, tabled by the noble Lord, Lord Shutt, extends the report to “other orphan assets”. I am not clear what the terminology “orphan asset” actually means but I see that the sense of the report should extend to other categories of asset such as shares whose owners cannot be traced rather than simply focusing on those found in financial services businesses. Perhaps the Liberal Democrats and we can work on a better amendment before we return to this matter at Report.
The Government in their consultation on this scheme did not ask for views on whether the scope of assets within the scheme was right. Nevertheless, they got those views. According to the Government’s summary of responses in the document that they issued in November, around 60 per cent of respondents wanted the scheme to cover other assets. That was the response to a question that had not been asked. It is not only organisations in the third sector that wanted this; some financial institutions also wanted it.
The Government will have their way, and ignore that strong support for a wider scope to the Bill, because we will not oppose the Bill and thereby delay the scheme for bank and building society accounts. However, we do not believe that the Government should get away with ignoring the issue, which is why the amendment is designed to keep the public focused on those other categories of assets. I beg to move.
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Lord Shutt of Greetland: I shall speak to Amendment No. 16, but before I do so, I say that we, too, are here to widen the Bill so that it presents greater opportunities. We, too, had bother with the Public Bill Office, as did the noble Baroness. It may well have been operating by the rule book. Eventually, we managed to come up with an amendment that was agreeable to it.
In a way, the problem was not the Public Bill Office, but the Government losing faith at an earlier stage. The Bill was going to be called the unclaimed assets Bill, but was then renamed the Dormant Bank and Building Society Accounts Bill. It has been narrowed by the Government, which is why we are in this difficulty. Many Members will have seen the report of the Treasury Select Committee in the other place. It had seen a document from the US state of Vermont, where 110 different forms of orphan asset were listed. We are talking about two: bank and building society.
I approve of the amendment that the noble Baroness, Lady Noakes, has been able to table, but it needs pushing a little further to bring in other things. The reason for that are the words “financial services”. I am not clear about their precise definition, but owning a share, and dividends that follow shares, may not be financial services. Many things are financial services, but there will be other forms of orphan asset; that is, an asset that has been abandoned and should be looked at if a review is to take place.
It is a very gentle approach—I wish it were otherwise. It is interesting that the Republic of Ireland, even though it started reclaiming unclaimed assets only three years ago, is now on to its third Act of Parliament to pursue orphan assets. It takes time, with the conflicting ideas that Governments want to pursue. It would have been far better if this matter could have been dealt with through orders, once the bank and building society side of it had been successfully completed and we could move on to other assets. If this is the only way of doing it, I hope that we can move in this direction.
Baroness Pitkeathley: I declare an interest as a member of the Commission on Unclaimed Assets, ably chaired by Sir Ronald Cohen. Those of us who worked for two years on that commission were delighted that the idea of getting in touch with and using unclaimed assets or dormant accounts for the benefit of charities should have received such a fair wind from the Treasury Select Committee. I hope that the “gentle approach” that has been referred to by the noble Lord, Lord Shutt, will eventually lead to a widening of the scope for these ideas.
We should remember as we consider the Bill how long it has taken to get to this stage and how gentle the persuasion has had to be just to get us to where we are today. Many people have been working on trying to have the assets made available to the charity sector, which was not even called the third sector when we started with these ideas. The ideas go back many years—in fact, decades. I pay tribute to those who have worked so assiduously to get this idea into the public consciousness, particularly Geraldine Peacock, the former chair of the Charity Commission. She has pursued this idea indefatigably.
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We should bear in mind that the banks have not rushed enthusiastically to support access to their dormant accounts. Getting to this stage has been a matter of gentle persuasion and of trying to sell the idea. Where we are now is not where we will eventually end up, but I hope that as we consider the Bill we will bear in mind how difficult it has been to reach here.
Lord Hamilton of Epsom: It is not surprising that the banks are not happy about giving up their dormant accounts because they pay no interest on them and earn interest elsewhere. It is a bit like the position of Swiss banks. A very large number of victims of the Holocaust deposited enormous sums with them, and it was very convenient for them to sit on that money and to have nobody asking for it back.
It must be right that we put into the Bill the capacity to move on and take up other orphan assets—if orphan assets is the right description of what we mean—so that we do not have to come back and legislate all over again to move on to other areas when we have dealt with banks and building societies.
Baroness Finlay of Llandaff: I apologise for not participating in the debate at Second Reading and for juggling this Bill and the Bill in the Chamber, but such is life. It may be more appropriate for me to speak to Amendment No. 24, but I wish to support Amendments Nos. 16, 24 and 44. These amendments have strong support from the Unclaimed Assets Charity Coalition, which is a coalition of 53 charities and umbrella organisations. I declare an interest as vice-president of Marie Curie Cancer Care, which provides care to cancer patients. In the briefing, which has been widely circulated, the coalition recognises that this is a highly technical Bill—certainly far too technical for me, as I am purely a clinician. The Bill seems to be an opportunity to ensure that charities in the coalition are able to locate assets bequeathed to them in supporters’ wills which remain unclaimed.
One in seven of those who die leaving valid wills also leave legacy gifts to charity which, on average, amount to 5 per cent of their total estate; so potentially large amounts of legacy income have yet to reach the charities named in the wills. These legacies are an important source of voluntary income—46 per cent of the British Heart Foundation’s income comes from such legacies. The coalition urges that the Bill be strengthened, because it is reasonable to assume that charities are owed a significant proportion of the unclaimed assets in the UK. Unlike in the US, there is no mandatory register that can be used to identify assets. That issue is addressed in Amendment No. 24 and I hope to return to it when we reach that amendment.
Lord Naseby: As we are giving an overview, I should make it clear that I have been involved in the mutual movement for a very long time. I am interested in ensuring that those in the mutual movement which have an existing charitable foundation—whether it is the larger building societies that are over the £7 billion mark or the smaller ones under it—will not find that, all of sudden, the money in dormant accounts which they have looked after and where they have done their best to discover the owners is going to be siphoned off
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I support my noble friend on the first subsection of the new clause inserted by Amendment No. 15. In Parliament, we too often put through a law and do not take stock of its effect. That amendment requires that there shall be a report to Parliament one year after this Act comes into operation. The noble Baroness who spoke at the beginning indicated that there will be future developments. That is a fundamental point in the report, and I would not have thought that such a point was in the least bit party political. I hope we will be able to pass the amendment, and that the Minister will be able to take it on board quickly without much further debate.
3.45 pm
Lord Davies of Oldham: I am grateful to all noble Lords who have spoken in this important debate. I am sorry about the trouble the opposition Front Benches have had with the Public Bill Office. That is not an experience I have ever enjoyed. Generally it is the Government who wince a little at just what is acceptable in the Public Bill Office, but we do not normally bring any complaints before the Committee so that they are on the record. I appreciate the frustration of the noble Baroness and the noble Lord, Lord Shutt, but now and again the issues will rub against them and they must take that in their stride.
The 2005 Pre-Budget Report and subsequent announcements set out the scheme, which is reflective of a clear government manifesto commitment. The scheme is restricted to retail banks and building societies’ bank accounts. The rather facile arguments that have come from the two main opposition Benches about how easy it is to extend the Bill to other areas merely betray the fact that they are high in ambition and low on practicality with regard to such a scheme. The noble Lord, Lord Hamilton, indicated that the banks would not necessarily enthuse about a scheme of this kind because it represents a loss of the yielding of an asset, and the Government have had a difficult task in persuading the banks and building societies to participate in a voluntary scheme that will make substantial resources available to the good causes that my noble friend Lady Pitkeathley identified.
It is asking a great deal to suggest that it is simple to extend the Bill to banks and building societies. The accounts we are dealing with are cash accounts, but the orphan assets to which the noble Lord, Lord Shutt, refers, otherwise known as the inherited estate, are held by insurance companies in with-profit funds. They represent assets in excess of those needed to meet the fund’s liabilities. Orphan assets are different from unclaimed assets. To take one obvious issue, if the assets are held by an insurance company, the policyholders have a right to share in any distribution according to the rules of the fund. What is suggested here, however, is that the fund should be contracted—without consultation with policyholders, from what I have seen so far—and that there should be a concentration of the fund to which policyholders
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All other forms of unclaimed assets—particularly pension assets, which often come within this framework—raise a whole different set of legal and procedural issues compared to banking assets. Both the legal ownership structure and the nature of the investment assets are very different from cash. For instance, if we removed assets from the majority of unclaimed pension funds managed by insurance companies, that might well require higher members’ and employers’ contributions. Again, I am not saying that that is totally impractical, but I am indicating that it is another hurdle to cross beyond the one which the noble Lord, Lord Hamilton, identified with regard to the banks and building societies.
We have to be limited in our ambition with this scheme, but it represents a massive step forward. It is the fulfilment of a pledge that we made in 2005, and it will realise significant assets. The issues which have been raised are important but difficult ones. Getting this scheme off the ground will take probably until 2009. To undertake full consultation in seeking to overcome the difficulties with all the other assets that I have identified would mean, even if it proved practicable, that we would be a good deal more distant from effective legislation. The Government are proud of what is before the Committee; it is the fulfilment of a commitment and a significant step forward for banks and building societies whose co-operation we have achieved.
There has been extensive consultation, as the noble Baroness, Lady Finlay, emphasised. We received 56 responses to the scheme’s first consultation, of which around 30 were from the charities which she identified as part of the Unclaimed Assets Charity Coalition. Those representations were more in the form of a campaign letter advocating how widely we should set our ambitions than practical solutions towards realising our objectives.
As for the Bill’s limitations, one of the joys of opposition is to be expansive and ambitious beyond the wildest dreams of government. But Oppositions also have to temper those dreams with the hope that one day they may have to address themselves to the practicalities. The great danger is that they may be out of practice, and they may remain so for a considerable time. As has been identified on the noble Baroness’s own Back Benches, bringing the banks and building societies within this framework is an achievement, and we have had widespread consultation.
I turn to the proposal about a report within a year. We will have to bring the Financial Services Agency into the scheme in order to make it viable and guarantee that matters are conducted properly and that will be done after Royal Assent. A report on such a scheme within a year could only indicate that we were making very limited progress indeed on meeting any ambition at all. It is not realistic to talk about a report in one year. It is important, as the noble Baroness identified, that the Government should be accountable for the scheme, but it is a scheme with a light regulatory touch. I warn noble Lords opposite that if they press us too far on certain aspects of
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The Bill is a product of consultation and agreement. That is why it is limited in its ambition. We have had an interesting debate, but it is not realistic for the Government to produce a report on an Act that contains a great deal of secondary legislation which will come into effect to guarantee that the Financial Services Authority plays its part effectively. To expect a report annually on this is asking a great deal.
From the vast range of amendments which have been tabled already, it would appear that noble Lords opposite believe that the breadth of our ambition is limited. This project is difficult enough within its framework. I hate to think how many amendments the noble Baroness would have tabled had we sought to include those orphaned assets which raise so many other issues. She would rightly have advanced a critical analysis, as she usually does.
Lord Shutt of Greetland: I do not think that anyone said that this would be easy. I did not think that the Government were here to do things that are easy. I thought that they were here to do things that are perhaps difficult. The Irish, bless them, have done very well, but it has taken them three Acts of Parliament. Perhaps they are cleverer than the Government, because they have managed to include insurance assets. I understand why the Minister is saying, “Let’s do it a bit at a time”, but we would like a bit more to be done at some time. The noble Baroness talked about this year but perhaps that was not her first thought. These things had to be done in a hurry because of what we said about the Public Bill Office. The main issue is whether or not the Government have greater horizons.
Baroness Noakes: We have had an interesting first debate. I notice that the Minister did not ask me to withdraw my amendment. Perhaps he will accept it—or perhaps not. I wish he had read the amendment, because he spent most of his response telling me how difficult it was to deal with other categories of asset. I recognised that in my opening remarks. The noble Baroness, Lady Pitkeathley, rightly reminded us of how hard it has been to get to this stage. I do not dispute that, and I pay tribute to all those who have worked to get us to this stage. The point of the amendment, however, was simply to ask the Government to report on the operation of the scheme and—importantly, as I pointed out—on the desirability of establishing schemes in respect of other providers of financial services, and to ask that the drafting be reviewed. I also said to the Minister that one year was not the right period and that I would consider a longer period. As he said, the amendment would not require an annual report.
We have never said that moving into other categories of asset was easy. The Minister tried to say that the Opposition do not understand how difficult everything is. We fully understand how difficult it is, which is why we wanted to draft a broad order-making power. We also recognise that the Government want to concentrate
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