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The issue is whether the voluntary scheme, with the banks, building societies and National Savings & Investments bringing their information together, will work. I do not know. Clearly, a voluntary scheme is the best way. As I have said before, we go with the grain of voluntarism to that extent. I hope that the Minister can say whether all banks and building societies in the arrangements that are being set up. I am not clear whether only those that subscribe to the Banking Code are within the current scheme. Not all banks sign up to the Banking Code. Eight banks,

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several of which are quite small, do not sign up. One is the Post Office in respect of its accounts, and those who enjoy racing have accounts with Weatherbys. I admit to the Committee that I have one. It was news to me that the bank did not sign up to the Banking Code, but now I know, having done my research for this Bill. My questions are: does the scheme cover them all; and will it work in practice?

Clearly, the amendment tabled by the noble Lord, Lord Newby, is permissive. It does not require the Secretary of State to do anything, so it can contemplate a voluntary scheme working well and be brought in only if necessary. What happens if it has to come in? Who would run it? Who would pay for it? How would we deal with that? The noble Lord’s amendment glosses over that, it is fair to say. At present, banks and building societies are in effect paying for the reuniting activity. If a statutory scheme were introduced there would be a question mark over whether the banks would sign up to pay for it. I am not sure that a statutory instrument could impose significant costs easily on the private sector.

We have some sympathy with the need to have a reserve power in case a voluntary scheme does not work or does not cover enough institutions, but we have some concerns about how it has been put forward.

Baroness Finlay of Llandaff: Before the noble Baroness sits down, what is her view of the possibility that the reclaim fund itself could be the point at which a register of the different voluntary lists could be held? This money would be passing into the reclaim fund, which may be the point at which a centralised register could be compiled. Might that be an answer to her question?

Baroness Noakes: Not necessarily, partly because banks voluntarily put money into the reclaim fund, which does not deal with National Savings & Investments. Its activities are to do with making repayments not reuniting. That is not structured in the Bill. While it is entirely possible for the noble Baroness’s suggestion to be done, that would require different amendments.

Lord Davies of Oldham: I am grateful to the noble Lord, Lord Newby. The Government welcome all proposals that are directed toward the aim we share, which is how to reunite the rightful owners with bank accounts that otherwise would become dormant.

5.30 pm

We strongly believe that customers should retain the rights they already have to reclaim their money, as set out in the first two clauses of the Bill. We want to make sure that account holders experience no practical difference in the way they are treated as a result of the scheme. We discussed earlier how they would apply to banks when making a claim.

Substantial efforts have been made in recent weeks by the bank and building society sector. In some respects, it has moved towards the concept of a register. I share the reservations of the noble Lord, Lord Hamilton, and the noble Baroness, Lady Noakes,

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about the desirability of a register, but the banks and building societies have put together the concept of a one-stop shop for customers who are searching for their lost accounts. It will be launched in January and will include National Savings, the role of which we have debated elsewhere in the Bill. There is already clear evidence for the necessity of more effective action than in the past. In addition, a commitment has been made to proactive searching by individual institutions. Both the Halifax and Nationwide have indicated that they are stepping up their activity in this area.

All concepts that are put forward should be treated seriously by the private institutions, because performance in the past has fallen short of what account holders have the right to expect. However, worries have been expressed about a central register—the noble Lord, Lord Hamilton, identified one of them. A central register might be a battleground for those who are interested in fraudulent identity and making fraudulent claims, working out how they could square themselves with accounts on the register. We are anxious about the potential for ID fraud.

I know that the noble Lord, Lord Newby, would restrict the information on the register, but we would have to anticipate that demands would be made for the register to be effective and carry sufficient information for individuals to make progress. The right reverend Prelate and the noble Baroness, Lady Finlay, indicated that charities would have difficulty coping with information. The demand would be for the information to be as explicit as possible, which raises issues of its confidentiality.

A case has not been made for putting a register in the Bill. However, we recognise that the industry is looking for intelligent and constructive ways to make progress. Concepts are coming forward which the industry may be able to develop. At this moment, we are dealing with legislation. The Government are not persuaded that the disadvantages attendant on a central register do not outweigh the advantages which the noble Lord, Lord Newby, and others identified.

Lord Higgins: Will the Minister comment on the suggestion of the noble Baroness that, once problems with the register when the banks’ list of names is published have been cleared and reasonable time has elapsed, the case for a register at the second stage, when the money has arrived at the repayment fund, would be stronger? It would be smaller and would have considerable advantages, because one could at that stage unite the remaining accounts.

Lord Davies of Oldham: I see the refinement that the noble Baroness recommended and that the noble Lord, Lord Higgins, has identified. It is not that the disadvantages I have identified might not be overcome and the private sector persuaded about constructive ideas, but this is legislation: if we put this into the Bill it becomes obligatory on institutions to fulfil these obligations and we are not persuaded of the case.

Lord Newby: I am grateful to all noble Lords who have spoken. On the Minister’s last comment, banks and building societies jolly well should make sure that

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this information is available. They have been very happily sitting on a lot of it, with the dormant account money sitting on their balance sheets, and it remains not in their interests to co-operate with this legislation in every respect. I therefore retain a considerable amount of suspicion—as I have on other aspects of the legislation—about the voluntary approach.

The Minister said that details of the one-stop shop will be announced and that it will be launched in January. We would find it extremely helpful if he were to ask the banks and building societies which are putting this together to supply noble Lords who have participated in this debate with an early briefing paper. This will enable us to form our own views before we get to Report stage about whether or not the scheme meets our requirements.

Lord Davies of Oldham: I can probably send the noble Lord almost any document under the sun before we get to Report stage at the present rate of progress. Nevertheless, I give him that undertaking in respect of the document he has asked for.

Lord Newby: I am most grateful to the Minister. I do not want to prolong proceedings too much at this point. The Minister and the noble Lord, Lord Hamilton, raised a question about fraudulent claims and identity theft. I repeat what I said before: these schemes have been running for a number of years in other places and this is not a major problem. Empirical evidence in this area is much more persuasive—certainly to me—than what I accept is a strong theoretical possibility. The question is: where people have done it, has it worked? Have these problems undermined the scheme? The answer is no, they have not. Any scheme will have to be very careful in dealing with people claiming dormant assets, just as banks have to be very careful. If I were to pinch the 1963 building society account book of the wife of my noble friend Lord Shutt, I could take it with me to prove that I was entitled to it, but we believe that it is possible to put in place a scheme with sufficient safeguards.

We look forward to reading the document before Report stage, however soon or far distant that point is. We reserve our right to bring forward amendments at the next stage. Pending that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 [Provision to be made in articles of association of reclaim fund]:

Baroness Noakes moved Amendment No. 25:

The noble Baroness said: Amendment No. 25 seeks to delete paragraph 1(1)(b) of Schedule 1, which deals with some detailed provisions relating to the articles of association of a reclaim fund.

Paragraph 1(1)(b) states that the articles must make provision,

This is a probing amendment because I have absolutely no idea what that means. I do not think I have ever encountered such a provision in any of the articles of association of companies that I have come across. I am aware that the reclaim fund is an invented body for

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the purposes of the Bill, but the Government have decided to use a Companies Act company as the vehicle and I assume that they have some precedent in mind on which they have based this extraordinary provision.

Can the Minister explain how “reasonable” is to be determined? Is it reasonable as to the type or the quantum of expenditure, or is it both? Is this an objective or subjective test based on what the directors actually think or what an objective set of directors might think? Is the reasonableness to be judged by the board of directors of the reclaim fund? If so, they are the people incurring the expenditure so they would be judge and jury. We also have to come back to what is the Treasury’s role. Will it get involved in judgments? The Minister said in an earlier amendment that the Treasury would be getting involved in judgments about reasonableness of expenditure because that was one of the reasons that the Minister gave for the Clause 5 direction power.

One might think that reasonableness ought to be judged only by the shareholders; that is what companies are really about. But that depends on an active shareholder group. I am still very unclear. The noble Lord, Lord Newby, asked some questions about this company earlier in relation to the Government’s arrangements. In the context of this amendment, can the Minister explain a little more about the company? Is it a limited or non-limited company? If it is limited, is that by shares or guarantee? Can he say who precisely the shareholders will be? Will they also be directors, which is often the case for companies limited by guarantee? That is important information if we are trying to establish what paragraph 1(1)(b) is about and whether it is workable in reaching judgments on reasonableness.

Will the Minister also say what happens if the reclaim fund incurs or defrays—I should use the rather Victorian language parliamentary draftsmen have chosen for the Bill—expenses that with the benefit of hindsight are shown to be unreasonable? Presumably that would be some other person’s judgment at a later stage. Does that make the expenditure ultra vires? If so, what are the consequences? Does the reclaim fund have to sue the directors?

I hope that the Minister gets a flavour of my concerns about this paragraph, and that he can explain a little more what is meant by it. I beg to move.

Lord Hamilton of Epsom: The amendment raises wider issues about what the management structure of the organisation will be. Are we envisaging a non-executive board and a non-executive chairman? Are we talking about a paid chief executive? How much will he be paid? Will all the non-executives be paid? How many people do we envisage will be needed to keep the organisation running? We need to have a picture of that before talking with any authority on the question of expenses, and so forth. I do not know who will control all of that. If the board decides how much it will be paid, we have seen what has happened elsewhere on that. Somehow there is an escalation; a consultant comes in and compares you with all sorts of other people around the world and says that you should be paid enormous sums. How will there be a limit on that? How can it be kept within reasonable limits?

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Lord Davies of Oldham: I am grateful to both noble Lords who have spoken. As we are talking about a body that is being set up to achieve goals to which we all subscribe—to deal with money that it does not own, for which its owners cannot be located, and one that will have to work in the full glare of public accountability—I should have thought it entirely reasonable for the Government to make it clear that they expect very high standards from the company, which should have due regard to the issue of reasonable costs. I shall not define them here; that would be asking too much of a body that is to be developed by the private sector. It seems to me entirely reasonable that we should seek to establish that this body will work within reasonably tight and responsible parameters. It has not been established whether the company will be limited by shares or by guarantee. The Bill is not prescriptive on that point, and I am not sure that the noble Baroness would expect it to be prescriptive about the creation of the private company in those terms. However, it is clear that we want to be sure that the company will act for the purposes identified in the Bill, using money from the dormant accounts for the public benefits identified.

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As I indicated earlier, we expect the fund to be governed responsibly. What is reasonable will be a matter for the directors and members to decide but, ultimately, it will be a transparent organisation operating with great concern for the public interest. As I indicated earlier—although I do not want to go back over that ground again—the Treasury would have a reserve power if an outrageous position developed. Noble Lords opposite, including the noble Baroness, said that this power was scarcely necessary because the company would act responsibly, so I do not have to re-emphasise that point now. I have no doubt that the company will follow a proper model of responsibility. However, due to the unique significance of this company, we want to emphasise that it is there to manage a scheme of resources which are not its own but are dormant accounts where it is not possible to locate the owners. The resources are directed towards the benefit of the wider public and it is only right that we should be concerned that the costs of the company are kept within reasonable parameters.

Lord Hamilton of Epsom: I did not realise that it was as unsatisfactory as that. Here the Bill is straining at the gnat of what expenses are to be paid to employees of the company but no reference is made to their salaries. In most companies the salaries are inordinately larger than any expenses that might be claimed. We are worrying about whether reasonable expenses are paid, but why are we not more concerned about reasonable salaries being paid?

Lord Davies of Oldham: When I talk about costs, of course I include salaries. I am talking about the costs of the scheme’s administration. The noble Lord, with his usual acumen, may be right that the public will pay close regard to the salaries paid to the directors, but I emphasise that the concept of “reasonable” that we have here is consistent with the overall public interest in what the company does.

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Viscount Eccles: Perhaps I may ask the Minister one other question. Am I right in thinking that under the provisions of the Bill, if my noble friend Lord Hamilton and I both went to Companies House, we could both now register a company as a reclaim fund? If there is no particular arrangement in the Bill about who is to form the company under the Companies Act, I assume—because the Bill refers to “reclaim funds” and not to one “reclaim fund”—that we could register a company, set out articles of association and a memorandum and seek to become the company in control of the reclaim funds. If that is not the case, the question must be: who has agreed with the Treasury that when the Bill is enacted they will be willing to promote a reclaim fund?

Lord Davies of Oldham: The noble Viscount will recognise the work that has been done with the banks and building societies on this issue. We cannot give effect to this legislation until we have secondary legislation that brings the company within the framework of the Financial Services Authority. If he trotted down to Companies House on these terms he might find it rather difficult to satisfy its requirements, whereas the proper company that is to be established will be able to do so.

Viscount Eccles: I shall pursue this matter one stage further. Would it not be better if Parliament could see an outline prospectus for a reclaim fund company before it agrees to this legislation?

Lord Davies of Oldham: This legislation involves a fairly light regime. The private sector is eager to make progress on a problem that it has not solved in the past and on which it wants to make better progress in future. Public interest in the scheme is so great because the resources are not being directed towards private gain but to public gain. Within this framework we are not creating a statutory body controlled by the Government—I have been at pains to emphasise that it is not a public body—and therefore we would not expect the same degree of prescription in legislation as we would if we were creating something which was directly under government auspices.

Baroness Noakes: I asked who would own the shares or subscribe to the guarantee. The Minister cannot even tell me whether it will be a company limited by shares or a company limited by guarantee, or whether it is even going to be an unlimited company. He has not said who owns it or answered the question of my noble friend Lord Hamilton about the structure of the board and other governance questions. Is the Minister telling me that the Government have no idea on any of these points?

Lord Davies of Oldham: I am saying that we do not regard the issues as being necessarily prescriptive in legislation, which is what we are discussing.

Baroness Noakes: This is increasingly unsatisfactory. We are being asked to pass a Bill without knowing much about what kind of body is being created. We

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are debating this in the context of a company being created, but we are not being told what kind of company. We are told that it is to have a power of direction from the Treasury, which is extremely unusual. We are then told that its articles have to have a provision about reasonableness of expenditure, which, as far as I am aware, has never been included in the articles of a limited company. Certainly I have never come across one. We are trying to find out how this will work in practice. The Minister said that that is a matter for the directors and members. We asked about the directors and members and got no answers. We do not know who the directors or the members are because the Minister is not sharing any of that with us.

Again, we hit the issue of whether this body is public or private. The Minister said that it is a private body but that it would be in the full glare of public accountability. We know that this body is not really private; it is carrying out a public function—as I have already argued—and the Minister expects high standards. He will not tell us how this will work out in practice. What is the balance of rights and responsibilities as between the owners of the shares, the Treasury and the management? These are important issues for the practical working of this body. I am coming to the conclusion that a Companies Act company is the wrong model for this body. It is sitting very uneasily on it and the Minister is not able to answer any of our detailed questions about how it will work in practice.

If the Minister had tried to set up a reclaim fund in a normal Bill, he would have had to specify who appointed the directors, who the directors are and what are the powers and responsibilities of the people who interact with the body. But the Government seem to think that they can set up a definition of a reclaim fund with no detail around it; the banks can then go away and produce something with no involvement from Parliament as to its practical outworking—and the Minister thinks that this is satisfactory. I have to record now that we do not regard this as satisfactory in any sense. The more we get into the detail the more we find that this scheme is so lacking in detail and substance that we might want to think much further about it on Report rather than in these detailed amendments.

For now I will withdraw the amendment but the Minister should be aware that he raised more questions than he answered. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 26:

“No power to borrow

The noble Baroness said: I hope the Minister can give me some kind of answer to this probing amendment—perhaps I shall be living in hope—which would insert a new requirement into Schedule 1 for the articles of association of a reclaim fund.

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