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My concern about this is a day-one principle for the sums that we are talking about. Once the Bill becomes law there should be a flood of money from accounts that have not been touched for donkey’s years. Then, every year or two, people think, “The 15-year process has happened for those accounts, perhaps we should look at these others”. It is crucial that we have a real definition. I was hoping that that would be of help and we get it absolutely clear that we are talking about sums of money that are nowhere near having a name on them in accounts that are in suspense, accumulated funds or profit-and-loss accounts. They used to be account-holders’ moneys that have not been claimed for many, many years. I hope that that issue can be bottomed.
Lord Davies of Oldham: I am grateful to the noble Lord because he recognises what we are seeking to achieve with this technical amendment. That is exactly what we are seeking to do—there should not, in fact, be an obstruction to the account being defined as dormant, because of the technical nature of the operation of the building society or bank. So I am grateful for the noble Lord’s support on that.
Baroness Noakes: The noble Lord, Lord Shutt, raised an interesting point there. I completely understand the distinction as regards accounts that are pushed to suspense and that such accounts are treated as closed within the bank in order to deter fraud and other things. Those balances should be within the scheme, but if the bank or building society has been smart enough and chosen to transfer the money to profit, reserves or whatever in the past, do they come back again? I do not know how banks and building societies have accounted for such accounts, but I know how many other commercial organisations account for liabilities that hang around the balance sheet for a long time—they take them into profit.
Lord Davies of Oldham: I am not sure that I can respond to the noble Baroness’s interesting but challenging question directly, but let me adumbrate the principle again. First, as I said to the noble Lord, Lord Shutt, we are seeking to make sure that there are no undue obstructions on resources being made available to the scheme through the technical operations of banks. That is the purpose of the amendment. In response to the noble Baroness, the issue that I addressed was: if the account was transferred into the reclaim fund and the claimant appeared with a properly attested claim after the money was gone, of course the available resources would include the account and proper interest that might have accrued. It looks as if I am not answering the noble Baroness’s direct question, so I will draw a line and give her a chance to press me further.
Baroness Noakes: Let me try to explain again what I think the noble Lord, Lord Shutt, and I are trying to get at. The noble Lord has put himself in the skin of
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Lord Hamilton of Epsom: I support the noble Lord, Lord Shutt, on this. We are talking about the identification of the account. What has happened to the money is secondary. Even if it has been paid out in profits and dividends, it can still be hauled back again. There can be a contra item to transfer it back. Are we saying that the accounts have effectively been written off and the name has gone, the money has been transferred and that there is no way in which to identify the account in future? If that is the case, the holder is never going to see that money again.
Lord Davies of Oldham: If a claimant or their heirs is able to attest that there was an account that was in existence for a period of time and went after the 15 years into the scheme, the claimant would have the right to expect those resources to be presented to them together with the appropriate interest that the account might have accumulated over that period of time. I am trying to reassure the noble Lord, Lord Shutt, and the noble Baroness, Lady Noakes, on this: we are not seeing this money swallowed—which is the anxiety expressed by the noble Lord, Lord Hamilton, too. Such accounts are eligible for the scheme and the money goes into the scheme, and the recipients at the other end—and this is the first time this afternoon that we have addressed such individuals or organisations—will be the beneficiaries of these resources, because they will be within the scheme. But in response to the anxiety about the definition of dormancy, which we have discussed for the past hour or so, I can say that there is potential for a claim from the original depositor or their successors, if it can be attested to subsequently.
The prime principle of the Bill is obvious. Banks and building societies are participating in our concern that people should be reunited with their property but, when they are not, the scheme obtains.
Lord Shutt of Greetland: Perhaps I may have another go. I read out what the British Bankers’ Association said in the paper that it published a day or two ago. It
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Lord Davies of Oldham: I remember at Second Reading the noble Lord saying that a relative of his had left him 15 shillings, or 60p. If the noble Lord talks about historical records in those terms, I will have difficulty in responding to him. He will recognise that what is being transferred into this scheme are accounts that have been extant but have not been active over the past 15 years. If he is asking whether banks are going back into their historical records since their foundation, I think that that would be a somewhat unreasonable request. The banks are addressing themselves to those accounts that are extant with them and which have not been activated over the past 15 years. Those resources are going into the scheme. I shall have to write to the noble Lord about how far banks are going to go back into their historical records on claims, but it is obvious that if there is a claim on a bank, it can always be sustained as long as the law will establish that. Nineteenth century money is as eligible for the scheme as 20th or, in 15 years’ time, 21st century money. As the noble Lord is not acting as the claimant but on behalf of the potential recipients, I can give him the positive answer that the scheme will benefit from all such resources.
On Question, amendment agreed to.
Baroness Noakes moved Amendment No. 43:
“( ) The Treasury may by order specify matters additional to those mentioned in subsections (2) and (3) in order to identify an account as being dormant or not dormant, as the case may be.”
The noble Baroness said: Amendment No. 43 gives the Treasury power to specify other matters that would lead to an account being treated as dormant or not dormant. It incorrectly refers to subsections (2) and (3). I had intended to specify subsections (1) and (2), and I apologise to the Committee and to any Member who is confused by the intent of the amendment.
For the past hour or so we have been debating different aspects of what constitutes an account being dormant or not dormant. The Minister had to move an amendment following representations by deposit takers that the definition was not fit for purpose. I do not suppose that any of us can be sure that we have covered all the angles on this—that is even setting
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I do not draft new powers for the Treasury lightly, but I believe that the efficient and equitable working of the dormant accounts scheme would be enhanced by an order-making power to vary its practical effect in the light of emerging facts and circumstances. My amendment is a simple order-making power not subject to the affirmative procedure because I see it being used to deal with matters of detail, not principle. I hope that it will commend itself to the Government. I beg to move.
Lord Davies of Oldham: I never thought I would see the day when the noble Baroness was eager to see the Treasury have additional powers, certainly not while I was standing at this Dispatch Box, but she is, and I can emphasise to her on principle that I disagree. This is a private scheme and the law is meant to be applied with a light touch. As we have argued for a good part of this afternoon, the Government’s perspective is that the framework of the scheme must have the minimum of prescription. The noble Baroness is threatening the participants in this private scheme, who have given many assurances on how they intend to activate it, and suggesting to them that what lies in wait is the Treasury’s interestingly heavy hand on further potential definitions of dormant or not dormant.
We do not think this amendment is necessary. Banks and building societies have indicated how they intend to interpret the scheme. We are providing in legislation the necessary prescription to make the scheme work. We do not think that it is consistent with the philosophy behind the Bill to have an element in it indicating that the Treasury may have second thoughts. I hope the noble Baroness will see that my reservations on this account may even be shared by some on her own side.
Baroness Noakes: I can assure the noble Lord that it is not shared by those on my side of the Committee. The Minister keeps referring to this as a private scheme; it is not. It is a statutory scheme and the Government have an obligation to make it work efficiently, effectively and equitably. My diagnosis is that the Bill does not do that. It may be that it will still not do that when we send it to another place, but at least it should go with powers built into it to ensure that it will operate well.
We resist the notion that this is simply a way of allowing banks and building societies to do what they want. The Bill should set out with precision the way in which money can, should and should not be transferred under the scheme. We have a difference of approach and we will, of course, return to the issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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Baroness Noakes moved Amendment No. 44:
(5) An order made under subsection (4) may not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.”
The noble Baroness said: Amendment No. 44 seeks to add another power for the Treasury in relation to the Clause 10 definitions of “dormancy”. It would allow the Treasury to reduce the period of inactivity, if I can use that shorthand, before which an account can be treated as dormant, which is currently set at 15 years in Clause 10(1). The order referred to in the amendment would be subject to the affirmative procedure because it would represent a significant change to the scheme set out in the Bill and would need to be given proper scrutiny in Parliament.
The Treasury Select Committee in another place considered this issue in some detail and concluded that the period should be 10 years. It is difficult to be sure whether 15 years or 10 years is the right period, but a period of operating the scheme would allow more information to be gathered about the impact of time on dormancy. Of the other countries that have a dormant account scheme, only Ireland uses a period as long as 15 years. The Select Committee pointed out that that is an incomplete comparator because of the narrow definition used in Ireland. Switzerland uses 10 years; Australia, seven years; New Zealand, six years; and US states use between three and five years. So there is clearly no magic in 15 years.
The UK evidence to the Select Committee was mixed. The Building Societies Association regards accounts as “lost” after three years and for internal purposes the Select Committee was told that banks use around six years. But the British Bankers’ Association said in its evidence to the committee that 15 years should be used because at that point,
- “it can be concluded with reasonable certainty that we have passed an 80/20 threshold in terms of lost monies expected to be reclaimed”.
“As you move down the maturity scale, you rapidly reach the point at which transfers from the balance sheet would be accompanied by a shift in the lost/reclaim ratio towards 50/50% and beyond”.
I believe this means that, at present, after 15 years only 20 per cent of accounts are likely to be reclaimed, while at 10 years the likelihood is that 50 per cent will be. I have no reason to doubt the BBA’s analysis at present, but there is no reason to believe that those relationships would hold true over time. Indeed, as greater efforts are made to make customers aware of the existence of their accounts in accordance with the Banking Code, it may be that the 80:20 ratio is reached earlier. Greater opportunities for reuniting, via the facilities that are now available and still being developed, will also tend to shift the curve.
I am not seeking to determine that issue now—I do not think anyone can say with absolute certainty what the ratio is or could be—but it is important to leave flexibility in the Bill to deal with the facts as they emerge in due course. The reclaim fund will start to
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Lord Newby: We support the amendment, and our names have been attached to it. Fifteen years is not an unreasonable point at which to start, because as the BBA and the noble Baroness have said, one does not want to get to the point where one is transferring a large amount of money to the reclaim fund and a large proportion of it is coming back. That makes unnecessary work and effort, and almost brings the scheme into disrepute. If starting off at 10 years meant that 50 per cent of the money that went into the reclaim fund was being withdrawn, that would be unsatisfactory. The BBA suggests that 15 years will take us towards the 80:20 split, which seems a sensible target, but, as the noble Baroness said, we cannot be sure, and other countries clearly manage with a significantly shorter period than 15 years. The proposal in the amendment initially to stick with 15 years, see how it works and then change it if we find that we can beneficially do so seems to be a sensible way forward.
Lord Davies of Oldham: The noble Lord, Lord Newby, argued his case forcefully. The noble Baroness, Lady Noakes, kindly argued my case by representing the two positions in respect of 10 years and 15 years. She was right that the Select Committee was presented with figures by the British Bankers’ Association which showed that 80 per cent of the accounts are generally lost and not reclaimed—20 per cent might still be so. Our judgment on the basis of that is the that more resources become available to the scheme the fewer the reclaim cases that have to be handled, for the obvious reason that the costs involved in that exercise are just a straight loss to the scheme. One cannot of course argue with certainty about the change between 15 years and 10 years, but it seems reasonable to judge that, after 10 years, many more accounts would be subject to reclaim, with all the costs involved. Our concern is to ensure that the greatest amount of resources is devoted not to dealing with reclaim and the costs involved in that area, but to the scheme.
The noble Baroness presented the case very fairly and with great accuracy. She mentioned that we have looked closely at the Irish scheme, which is working very satisfactorily and is a good model to follow—it is based on a period of 15 years. That is why the Government are not prepared to accept the amendment. We do not think that the shorter definition would generate more assets for distribution in the long term. That is why the 15-year period is in the Bill.
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Baroness Noakes: I thank the noble Lord, Lord Newby, for his support. The Minister was almost not addressing the amendment before him, but addressing the question whether “15” years is a good figure to put in the Bill. We have said that it is, based on such evidence as there is. I think that the British Bankers' Association presented no evidence as such; it presented assertions to the Treasury Select Committee. I do not think that the committee carried out any independent analysis of the impact of maturity or lapse of time on dormancy. However, that was not my point. It is not fruitful to get into the question whether 15 years is better than 10 years—we will accept the judgment that 15 years is right for now.
The point of the amendment is that over time we can reasonably anticipate that the conclusion that 15 years was the right figure would not necessarily hold over time. It is entirely plausible, for the reasons that I outlined earlier, that that figure might come down. The British Bankers’ Association did not portray it as one of the universal truths of banking that it existed for all time or was likely to do so; it merely presented it as a figure based on current circumstances. The point of the amendment is to allow for flexibility to be built in so that the reclaim fund, which will have access to all this information and be able to track patterns of reuniting—because that information will not just be held in the banks—will be able to advise the Treasury on those patterns. Then it will be appropriate for the Treasury to take action to enable the banks to release further resources at an earlier time for the good causes that the Government are so keen on supporting.
I fail to understand—and the Minister has not addressed—why the Government would not take flexibility to deal with those matters as they might emerge. I struggle to understand what the Government’s real position is on this amendment, because the Minister has just said that 15 years was good now and did not address how the figure would be changed to release further money for good causes if it were proved to be wrong in future.
Lord Davies of Oldham: Before the noble Baroness withdraws the amendment, as I sincerely hope she will, she has made a persuasive and interesting case, sufficient certainly for me to think that the Government should consider the matter before we arrive at Report. We shall certainly do so.
Baroness Noakes: I am grateful to the Minister. That is almost victory in terms of the conduct of our Committee to date. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10, as amended, agreed to.
Clause 12 [Disclosure of information]:
Baroness Noakes moved Amendment No. 45A:
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The noble Baroness said: I shall speak also to Amendments Nos. 45B and 45C. These amend Clause 12, which remove the obligation of secrecy from banks and building societies when they give the reclaim fund information to allow them to deal with repayment claims under Clauses 1 and 2. This is one of the amendments suggested to us by the Law Society of Scotland, which believes that Clause 12 provides inadequate protection as merely disclosing the existence of an account at first instance would be a breach of the banker’s duty of confidentiality and may also give rise to difficulties under the Data Protection Act.
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