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I understand what the noble Lord said. After all, all building societies were small once. The Halifax, one of the largest of them all, started off small and has, I understand, local connections and loyalties. However, in creating the reclaim fund, we could either have gone for a scheme where everything was distributed on a national basis, with the Big Lottery Fund distributing resources to areas where they are beneficial; or we could have recognised the significant role which small building societies play in their community. We recognised that role and we have made specific arrangements for it.

The Bill would have looked very different if we had not made that division. The division is agreed with the industry. The noble Lord is arguing about only eight building societies. We maintain that the dual scheme meets need and enables us to keep regulation to the absolute minimum. On that basis, I defend what is in the Bill while recognising the arguments of the noble Lord about the history of all building societies in their localities. However, eight of them at least are large enough to produce a different dimension from the local institutions for which we are seeking to provide a particular relationship. I hope that, on that basis, he will feel able to withdraw his amendment.

5.30 pm

Lord Shutt of Greetland: There is an element of compulsion in Amendment No. 8 for all building societies and smaller banks. The facts are these. I have worked out—I tested this with the Nationwide and we

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were within £1 million—that the figure the building societies are saying is available is £150 million. That is 0.0005 of 1 per cent of the asset base. That means that if the largest of the smaller societies was able to use these funds locally, a sum of £3 million would be available for its communities. However, the Skipton would generate £4.5 million, which would not be used locally but nationally. The issue at stake here is the comparison between communities with small building societies and communities with slightly larger ones. That is why I mentioned the cliff edge.

This concerns the eight societies to which the Minister referred, the banks and the bigger financial institutions. There should be an element included in the Bill allowing them to honour their local connections and contributions over the years. That is why I have put in the figure of 10 per cent. It is simple; it does not complicate anything; it widens things; and it treats communities up and down the country on a much more even keel.

However, I hear what the Minister says. We shall ponder these matters and no doubt return on a later occasion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Transfer of balances to charities, with proportion to reclaim fund]:

[Amendment No. 8 not moved.]

Baroness Noakes moved Amendment No. 9:

Clause 2, page 2, line 1, leave out “smaller”

The noble Baroness said: I was not expecting the noble Lord, Lord Shutt, to approach his amendment in the way that he did. As I explained earlier, I thought he was talking about compulsion, which is the way in which Amendment No. 8 is drafted. It may be for the convenience of the Committee if I deal with the next two groups together because they cover similar issues.

Amendments Nos. 9 and 13 and our opposition to Clause 9 standing part of the Bill are designed to take out limits from the Bill so that all banks and all building societies have the option of entering the alternative scheme in Clause 2. This is distinct from the amendments to which the noble Lord, Lord Shutt, spoke, where he suggested that the larger banks could perhaps put 10 per cent of their reclaim money through the Clause 2 scheme. I suggest that they should have the option of putting the whole amount through if they want to do so. The amendments would achieve this.

The Government’s defence of segregating banks and building societies is that they believe the larger financial institutions should go into the main scheme so that the money goes via the Big Lottery Fund, as the Minister said. In fact, in their summary of responses they said it was more appropriate given the wider outlook of the larger financial institutions. What they mean by “wider outlook” is that the larger financial institutions want the Government to decide where their money goes, in this case to the Big Lottery Fund. This ignores the fact that large financial institutions can have clear relationships with the communities in

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which they operate. All large financial institutions have branch networks and strong community bases even though they are not confined to one particular community. The Clause 2 scheme is not restricted to communities; it can also apply to charities with which the banks or building societies consider they have a special connection. One can think of a lot of large institutions that have a special connection with particular charities that they have built up over a long period of time. Some banks, such as Northern Rock, have their own foundations, rather like building societies—Northern Rock was a building society. Clear mechanisms that allow the money to be spent do exist.

My first group of amendments asks why large financial institutions cannot reflect the fact that they have branches throughout the land and well established connections with specific charities. They fit fully within the concept of Clause 2 and would direct the money to causes that they would have thought about carefully, and that would be aligned with things that they want to achieve. Why is that worse than transferring money via the Big Lottery Fund? There is a sense in which the Minister was saying earlier that somehow the Government now own the money that comes from the larger financial institutions; they can spend it on things that they want it spent on and can ignore the wishes of others.

Amendments Nos. 10, 14, 17 and 18 form the next group. They have been pressed on us by Nationwide, the largest building society in the world, which has spoken to a number of Peers and has been very active in presenting its case. The Minister said earlier that there was a consensus that small building societies should have the alternative provisions. That is probably the consensus among building societies because there are more smaller building societies than large ones. There are only eight above the £7 billion threshold and 50-odd below it so there will be a natural consensus within the building society community, but that does not make it right that large building societies should be deprived of joining the alternative scheme in Clause 2.

As the noble Lord, Lord Shutt, has already explained, Nationwide has a foundation that has existed for a long period of time. It has committed to putting a certain amount of its profits into it every year and that has been approved by its members in general meeting. It is very committed to that foundation, and wants the ability to put further resources into it. I am struggling to see why the Minister goes against good voluntarism closely associated with causes and projects that have clearly had a lot of thought put into them, and instead goes for the big black hole of the Big Lottery Fund. I am sure that good will come out of it, but it has less immediacy. It is always difficult to draw dividing lines. The noble Lord, Lord Shutt, raised the case of the Skipton Building Society. It is local and not that much above the £7 billion threshold compared with some of the larger building societies.

I have another concern about the Government’s approach that smaller building societies can have the alternative scheme. That will skew money into certain communities, because I suspect that most of the smaller building societies are not based in conurbations such

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as London. From a quick look at the list, I could see only one building society that had a connection with London. That means that Londoners will be deprived of targeted money, although they have branches of banks and building societies everywhere. That seems unfair.

My first group of amendments suggests that we should allow all financial institutions the choice of whether to go into the alternative scheme in Clause 2. If that is not acceptable to the Government, they should at least allow building societies, with their mutuality and their close connection with their members and their communities, to support the schemes that they have so successfully developed. I beg to move.

Lord Naseby: I rise to support the noble Baroness. In relation to Amendment No. 13, I do not think that any of us has had a chance to check with every building society. However, it is conceivable that there will be a small building society that does not want to take on the job of dealing with its lost or closed accounts but will prefer to hand it over to the Big Lottery Fund because the administration involved will be just too much for it. Therefore, I think that that option should be kept open.

The key point, if I may say so, is that the Minister needs to understand the difference between the building society movement and high street banks. The difference is one of mutuality. My noble friend on the Front Bench tends to wince when I talk about mutuality but that is the fundamental difference. The members of a building society own the building society and the whole thrust of the organisation is to meet the members’ needs. There are no shareholders, no outside bodies can hold influence and the building society cannot be taken over, so it is a very different animal. Therefore, the threshold of £7 billion is wrong and unrealistic. Ultimately, the members will benefit and in many cases they have already set up charities within the building society.

The Minister talks about a light touch. At the moment, control over where the money goes lies with the Charity Commission and, frankly, no one else has to get involved. The Charity Commission is charged with looking at whether the trustees of a charity are appropriate persons. One has only to look at the breadth of experience of the Nationwide’s trustees to see that they are.

I asked the Nationwide, as I was able to get hold of it quickly, what sort of awards are given. An awful lot of them are around £5,000 and they are all over the place; for example, £5,000 for the Newtownabbey CAB and £3,737 for North Wales Victim Support. Also listed is the Benefit Advice Shop in Rhyl, Wales—and the list goes on and on. Why are the awards so small and why are they so regionalised? It is, as the noble Lord said at the beginning, because they basically started from the co-operative movement and they have a footprint in the local community which they have developed, in some cases, over centuries.

It irks a building society to hear that money that has lain in a dormant account will be transferred to the Big Lottery Fund, over which it has absolutely no influence. The members do not want that and I think

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that the Government should listen to them. The key point is that there is a big difference between a mutual society and a mainstream, high street bank. The amount of money involved is substantial: I think that the figure of £22 million has already been mentioned in relation to one society over the past 10 years. We should also look at the quality of what has been done. Who won the Charity Awards 2006? It was a building society—the Nationwide.

I repeat that there are good, solid trustee boards. If the Government really believe in a light-touch framework, they will recognise that the mutual movement is different from the joint stock bank movement. There is already a track record there and there should not be a differentiation of an arbitrary figure of £7 billion.

Lord Newby: I do not want to repeat the eloquent speeches that noble Lords have already made on Amendment No. 10 and the other amendments in that group; I simply rise to support them. The key is that there are differences, of the nature that the noble Lord, Lord Naseby, has just explained, between a bank and a building society. One of the key differences is the link with the local community. Bar the Nationwide, the eight building societies that we are talking about still have a very local or regional base. I gather that, in addition to the Nationwide, the Britannia, Chelsea and Skipton Building Societies support the amendment. Those three have very clear local or regional bases. That is very different from virtually all the banks; it is certainly completely different from banks which may have just one branch—it may be a foreign bank—in the City of London, which I presume would be included in the scheme. The nature of building societies is different. They are in many ways admirable institutions. Many of us, I think, wish that there were rather more of them, and we might not have some of the current problems that we have with our banks. However, be that as it may, they do admirable work. It is in the interests of the public that we support them when we can. This is a way of strengthening the building societies. Therefore, I hope that the Government will treat the amendment sympathetically.

5.45 pm

Viscount Eccles: I support Amendments Nos. 9 and 13 and the question that Clause 3 stand part of the Bill, because, while it is correct that a building society is one thing and a bank another, it would be unfortunate if we left the impression that the banks never engaged in any charitable activities or local charitable activities. My own experience would suggest that that is not the case. They are involved in local charitable concerns, and many of them delegate powers to branches to support different activities. It may require a clearance procedure, but, nevertheless, the money comes from the banks’ charitable arms into the charity sector. Removing the word “smaller” from Clause 2(4)(b), and therefore making it a voluntary scheme, whereby everybody who joined it could opt for the alternative scheme, would be a very good option. That would be the lightest-touch of all the options in the Bill, because the charities, as my noble friend Lady Noakes said, are regulated by the Charity Commission and have to

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conform to charity law, which is already in existence. If they are lucky enough to receive extra money from dormant accounts, they just put in place exactly the same procedures as they already have, whereas, as has already been said by the Minister, the Big Lottery Fund has to create a whole new, ring-fenced system, which has to keep any assets that come to it separate from its lottery assets and enter a series of complicated agreements. Banks and building societies, if they are in the alternative scheme, will make sure that they do not forget Wales, Scotland and Northern Ireland. The simplest way in which to deal with the matter is to leave the scheme voluntary, keep it as light-touch as possible and, as we move on to the next group of amendments, recognise that the building societies have now, whatever they are thought to have said at the beginning, decided that they would like to be in the alternative, and not the general, scheme.

Lord Davies of Oldham: I am grateful to all noble Lords who have spoken in the debate. We are to a certain extent straining over relatively minor features of the Bill. All the smaller institutions, if they want to, can participate in the nationwide scheme, so there is no restriction on them. The scheme is designed to facilitate their possible contribution to local communities, in recognition of the role that they want to play there, but they may prefer the other option. We are not talking about the small institutions in these terms; we are talking about the large ones. With regard to the large ones, the idea that they could not participate in their local communities is a little strange. One obvious objective of the national fund is financial literacy. Is it conceivable that a building society cannot bid successfully to the distributor, which will be the Big Lottery Fund, for the opportunity to provide financial literacy locally? Who is likely to compete against it and do better? There will be competitors, of course, and the Big Lottery Fund is used to competition of that kind. The idea that because large building societies are within the framework of the national objectives of the scheme they will have no relationship with the locality, apart from their present independent schemes, is based upon a misunderstanding of the Bill.

We are not talking about lottery funds. It will not do for noble Lords to give the impression that these resources now flow to the lottery. They do not flow to the lottery; they have nothing to do with it. The Big Lottery Fund is merely responsible for distribution. The only reason why it is in the frame as far the legislation is concerned—legislation that has been welcomed by those who are participating voluntarily in this scheme—is because it is a recognised distributor with the regional and local centres and the powerful position in each of the nations of the United Kingdom to do its job well. It is acting as an agent for this scheme, and one should not confuse the lottery with the distribution of these resources. I must insist—as far as I am able—that we draw a clear boundary between any criticisms we may have. I recognise that criticism is not infrequently in the air about certain aspects of the National Lottery, although I have never met anyone in this country who thinks it has been a bad idea and for every person who has voiced criticism, I have met many more who have identified what it has

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done for their favourite causes or localities or who are bidding to make sure that that is what it should do. We are not arguing about the National Lottery. This part of the lottery is merely the distributor. In that sense, it is entirely neutral with regard to the allocation of the assets and will play its role within that framework. That is why the big banks and building societies signed up to this scheme and are happy with it.

Baroness Noakes: No, they are not.

Lord Naseby: They are not. I assure the Minister that the big building societies are not happy with this scheme. I cannot put it more plainly. I would be grateful if the Minister would address the point about the difference between mutual financial organisations and high street banks. That difference is the primary reason for some of the unhappiness about at the moment.

Lord Davies of Oldham: I hope I paid due regard to the role of building societies, whatever their size, with regard to local communities, particularly those in which they originated. I have already made that comment. I am not gainsaying the value of that. I was going on to emphasise that they play their role through their own structures. I recognise the letter from Nationwide and the role it plays. It already has structures through which it can fulfil a great many of its objectives in those terms. With the national scheme, it has the opportunity to play its part at a local level. It is not denied the local-level position but it applies to a different distributor for that role. As I indicated, a large number of the overall priorities of the national scheme will accord well with what the building societies want to achieve—particularly the development of financial literacy—so it will be recognised that we think that the big mutuals will play their part at a local as well as a national level. I recognise the noble Lord’s point about the derivation of the institutions, but all banks were local once and the big banks, too, can play their part in localities through this framework if they wish to do so.

I recognise that there are reservations and representations from some quarters but broadly the financial institutions will willingly participate in the scheme. It is a scheme that embraces two concepts, one of which is the local, for which we have made particular provision. I recognise the point that the noble Lord, Lord Naseby, made: any figure that we put in will have an arbitrary quality, and £7 billion is an arbitrary figure for small as opposed to large financial institutions. However, there are clearly three priorities to be achieved through the structure of the scheme, and the large institutions are well placed to play their part in its development in those terms.

I think that this is the last that I have heard of this representation. I am pretty sure that, once again, the noble Baroness will emphasise that she may be withdrawing the amendment for now but there is still trouble to come. However, the trouble is “sufficient unto the day” for the moment, and I hope that she will withdraw her amendment.

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Baroness Noakes: We must stop cross-dressing on each other’s speeches. I thank all noble Lords who have taken part in this debate. My noble friend Lord Naseby referred to the fact that normally I express myself as an extreme sceptic on the benefits of mutuals, as opposed to any other form of commercial organisation. To that extent, I agree with my noble friend Lord Eccles, but there is not necessarily a distinction between banks and building societies to this extent. If large banks wished to take part in the alternative scheme, I would want to support them, but even the banks that used to be building societies have not been knocking at our door to say that they should be able to do so. However, it is clear that the larger building societies, led by the Nationwide, wish to have more flexibility in how they approach the use of dormant account money on their books.

The Minister said that these building societies can go to the Big Lottery Fund. It is a ludicrous argument that has the building societies paying the money to the reclaim fund, which pays the money to the Big Lottery Fund, which then, if it feels like it, might hand it back. That is such a nonsensical argument that it is barely worth responding to it, other than to note that it is ludicrous.

Lord Naseby: I hesitate to intervene in my noble friend’s comments. I do not know whether the Minister has ever seen the form that you have to fill in for either the regional lottery or any of the big lotteries but it is horrendous. However, all the charities in existence have already organised a scheme and they know what they are doing. Frankly, the prospect of filling out one of those forms is absolutely horrendous.

Lord Newby: Does the noble Baroness also accept that the Nationwide’s priorities over the period to 2010 are domestic violence, prisoners’ families and young offenders? As we understand it, those are not subjects on which the Government intend the youth strand of this fund to concentrate.

Baroness Noakes: I thank both noble Lords. I agree with everything that has been said and, in particular, the bureaucracy aspect that my noble friend Lord Naseby pointed out. It is nonsense to pass money through several organisations and to pick up several layers of bureaucracy en route. I shall return in a later amendment to the subject of several layers of bureaucracy.

The Minister urged us not to confuse the Big Lottery Fund, as a distributor, with the lottery. For the record, we insist that there is a major connection; the reason why the dormant account money is being put through the Big Lottery Fund is to conceal the fact that large amounts of money that would otherwise be available for good causes through the lottery distributors has been stolen for the Olympics. By funnelling this money through the fund, the Government will be able to give the appearance of large sums of money going through the lottery distributors when in fact it is coming from the dormant accounts. We will not forget that throughout the whole of our consideration of the Bill and when we consider the Big Lottery Fund itself.

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