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First, the big eight wanted to be included in the smaller banks scheme. They did not want to be volunteered into the bank scheme; we are told that it is a voluntary scheme. Secondly, seven out of eight of those big building societies have in place their own building society foundations. They are experienced grant-makers and they have independent trustees who are at arm’s length from the institutions. Thirdly, we believed then, and the House agreed, that it was invidious to exclude them on the basis of 51 to eight. The Nationwide, as a big society, is an exception. I still do not accept that the others are big societies in the same way as are those that demutualised, which were much bigger. Surely the aims of the Nationwide are splendid in
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Since the Bill left this place in January, it has been dormant for 10 and a half months, but quite a bit has happened in the banking and building society world. Let us look at building societies. We had the big eight but, as the noble Lord, Lord Davies, has indicated, we have the November list, in which we find that we now have the big nine. The Derbyshire has passed the threshold and gone over the £7 billion level. However, because of difficulties in the building society movement, the Derbyshire and the Cheshire are to be taken over by the Nationwide; furthermore, the Scarborough is to be taken over by the Skipton; the Barnsley is to be taken over by the Yorkshire; and the Catholic is to be taken over by the Chelsea. That means that the assets in the smaller societies are now £43.2 billion rather than £58.5 billion. Similarly, 16.5 per cent of the building society movement was in the smaller societies but, after the mergers take place, the figure will be 12.2 per cent. A quarter of the funds that would have been distributed to local and regional causes will now be distributed by the National Lottery.
Next, we have the credit crunch. Regardless of the views of noble Lords on banks and the way in which they behave, the banks have had a good record on grant-making and on their social responsibilities. The financial sector has been a good donor. Indeed, many years ago, this House saw to it that one such bank was a good donor. When the TSB was privatised, the late Lord Taylor of Gryfe inserted an amendment requiring 1 per cent of its profits to go to good causes. When Lloyds took over the TSB, it had to be a reverse takeover and the 1 per cent still followed.
What is going to happen to grant-making by financial institutions in the current climate? Grant-seekers who have been looking in the financial services area could be in some difficulties because the way in which the banks are functioning after the bail-out and the restriction on dividends may make the institutions feel that they cannot be as generous. I hope that they do not take that view, but I can see circumstances in which they will not be able to be as generous. Members of this House know about grant-giving and grant-seeking, but I hope that that point will be pondered.
5.15 pm
The mergers that I mentioned have not yet taken place, although we have every expectation that they will in the next few months. However, there is another. The Britannia Building Society, the second largest building society, has announced that it is in exploratory talks with Co-operative Financial Services, including over a possible future merger. It said:
“This would be enabled through the introduction of measures contained in the Building Societies (Funding) & Mutual Societies (Transfers) Act—known as the Butterfill bill ... A merger would also have to be approved in a vote by Britannia's members ... The organisations ... have similar values and share a mutual ethos, so there would be a strong cultural fit”.
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If that merger takes place, what sort of animal does the Britannia become? Does it become part of the Co-op? If it does, is it not covered by the Bill? Many of us argued that the definition of dormant assets was far too tight and that we should be looking at insurance and so forth. We found that in one of the American states there are more than 100 definitions of dormancy, but we were told that we had to be tight and consider banks and building societies only. Will the Britannia escape because it becomes a different being?
The amendment that I was able to persuade the House to accept meant that people believed that resources would be available to communities, localities and regions. Communities in Derbyshire, Cheshire, Barnsley and Scarborough certainly have every expectation that that is the case, yet if the Minister has his way the resources will go into the large scheme and those places will not share on a local basis.
Three points were raised by the Minister. He mentioned that the Building Societies Association suggested that the Bill is the right way forward. The Building Societies Association seems to be a strange outfit. It may be good in many respects, but it seems strange for an association to say that it supports a position while 83.5 per cent of its members by financial weight think rather differently. However, that is its affair; perhaps it is good at doing other things.
It was interesting that the Minister mentioned the Leeds Building Society. Back in 1959, as an articled clerk, I was involved in auditing it. In those days, it was the Leeds and Holbeck. It may have branches based substantially in Leeds—when I was there, it had eight or nine branches in the city and it certainly has branches throughout Yorkshire—but, like many others, it has put its tentacles a little further. Look at the board; you will find that it is based in Leeds.
Thirdly, the Minister talked about undermining the scheme for youth. In my view, there is plenty to go at with the resources that will be available from the larger banks. The amazing thing about the Bill is that, regardless of the credit crunch and other financial problems, cash is cash. What we are talking about today are the same resources that we talked about 10 and a half months ago. It is not some stock that has fallen in value and is now worth a quarter of what it was; it is exactly the same. If noble Lords would like to see diversity in grant-making and support for localities and regions, they should support the amendment.
Lord Davies of Oldham: My Lords, I listened carefully to the noble Lord, Lord Shutt, presenting what I can only call well rehearsed arguments. We last heard them in February, not as far back as January, but I freely confess that that is a long way back. I remember the force with which he presented the argument then, which is why I have prepared with considerable care for the issue today.
The noble Lord must accept that, if there is a merger between two societies that takes them significantly past the line that we draw, they have moved from one category into another. It will not do for him to say that that is a pity because one of them, at least, was small. All banks and building societies started small, especially building societies. It may be a long time back for him
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That is the logic behind the Bill: there is a difference between institutions that are small and local and those that are not. We consulted widely on where the line should be drawn. The noble Lord knows that the institutions have offered broad approval to the proposal. There have been recent changes of some significance, but he will have to accept that this will always be the case when we draw up a set of criteria and institutions change through mergers. He cannot sustain much of a case on that.
The noble Lord is right to say that large institutions are experienced grant-makers; of course they are. We could have proposed that the whole of the fund was left in the hands of those institutions. However, the banks do not own the funds. The people who have the accounts own these resources, which is why those people have the right at any stage to claim from the reclaim fund if their resources have been transferred to it. It is their money, not the banks’ money. It is a chance feature of banking activity that there are dormant accounts, which add up to a considerable sum of money.
Institutions have signed up to the concept that these resources should not lie dormant—they are of no use to the individual, who, by definition, is not taking any advantage of them—but should be put to community use until someone lays claim to them, when they will get their full reparation. Where the institutions are small enough to be defined as local, they will take responsibility for distributing these resources in their localities. In the case of large institutions, which we have defined in the Bill, it is right that the objectives should be defined as nationwide objectives in principle but that the distribution should be effected through a guaranteed distribution mechanism. As I said earlier—I do not want to repeat myself—that is the role of the Big Lottery Fund.
The noble Lord has fought his corner well and strongly. I know that he feels deeply about these issues, but I think that a great deal of his commitment is about the small and the local, the force of which the Bill recognises. Of course the Government recognise the strength of the small, mutual society, but we must make provision for a different world. Nine of our building societies—eight now, through the changes—are very large indeed and it is right that we have a different strategy for them. I therefore hope that the House will not accept the noble Lord’s amendment and will agree to the government amendment.
Lord Shutt of Greetland: My Lords, without a wide-ranging debate, I shall respond to the Minister on only two points. First, we talked about small and large. When we met 10 months ago, the Derbyshire Building Society was small, regardless of the changes of the potential takeover. Today, it is large, according to these rules. The Minister, one believes, knew what he was doing 10 months ago. Would he do the same thing today as far as the Derbyshire Building Society is concerned? The cliff edge is there; you are either
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Secondly, the Minister acknowledged that the institutions, including the banks and the building societies, are experienced grant-makers. However, the banks did not make contact with us at any point. I found that thoroughly disappointing, quite frankly—clearly, they were not that interested—but the building societies did, which is why the amendment was tabled and why I press it today. I wish to test the opinion of the House.
5.29 pm
On Question, Whether the said amendment (No. 2A) shall be agreed to?
Their Lordships divided: Contents, 64; Not-Contents, 152.
Addington, L.
Allenby of Megiddo, V.
Alton of Liverpool, L.
Avebury, L.
Barker, B.
Bonham-Carter of Yarnbury, B.
Bowness, L.
Bradshaw, L.
Brookeborough, V.
Chalker of Wallasey, B.
Clement-Jones, L.
Craigavon, V.
Dholakia, L.
D'Souza, B.
Dykes, L.
Falkland, V.
Ferrers, E.
Garden of Frognal, B.
Glasgow, E.
Goodhart, L.
Greaves, L.
Hamwee, B.
Harris of Richmond, B.
Hooson, L.
Jones of Cheltenham, L.
Laird, L.
Lamont of Lerwick, L.
Lee of Trafford, L.
Linklater of Butterstone, B.
Livsey of Talgarth, L.
Mackie of Benshie, L.
McNally, L.
Maddock, B.
Mancroft, L.
Marlesford, L.
Masham of Ilton, B.
Methuen, L.
Miller of Chilthorne Domer, B.
Montagu of Beaulieu, L.
Neuberger, B.
Newby, L.
Patten, L.
Powell of Bayswater, L.
Razzall, L.
Renton of Mount Harry, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Rogan, L.
Selsdon, L.
Sharp of Guildford, B.
Shutt of Greetland, L. [Teller]
Smith of Clifton, L.
Stewartby, L.
Teverson, L. [Teller]
Thomas of Gresford, L.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tonge, B.
Tope, L.
Tordoff, L.
Tugendhat, L.
Wallace of Saltaire, L.
Walpole, L.
Watson of Richmond, L.
Adams of Craigielea, B.
Adonis, L.
Ahmed, L.
Anderson of Swansea, L.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Barnett, L.
Bassam of Brighton, L. [Teller]
Berkeley, L.
Billingham, B.
Bilston, L.
Blackstone, B.
Blood, B.
Boothroyd, B.
Borrie, L.
Bragg, L.
Brooke of Alverthorpe, L.
Brookman, L.
Butler of Brockwell, L.
Campbell-Savours, L.
Carey of Clifton, L.
Carter of Barnes, L.
Carter of Coles, L.
Chester, Bp.
Christopher, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Corbett of Castle Vale, L.
19 Nov 2008 : Column 1173
Crawley, B.
Cunningham of Felling, L.
Darzi of Denham, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Dubs, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Falkender, B.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Finlay of Llandaff, B.
Ford, B.
Foster of Bishop Auckland, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Golding, B.
Gordon of Strathblane, L.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Greenway, L.
Griffiths of Burry Port, L.
Grocott, L.
Hannay of Chiswick, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Henig, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howarth of Newport, L.
Howells of St. Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Irvine of Lairg, L.
Jay of Ewelme, L.
Jay of Paddington, B.
Jones, L.
Judd, L.
King of West Bromwich, L.
Kingsmill, B.
Kirkhill, L.
Layard, L.
Levy, L.
Lipsey, L.
Low of Dalston, L.
Macaulay of Bragar, L.
McDonagh, B.
Macdonald of Tradeston, L.
McIntosh of Haringey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Maxton, L.
Meacher, B.
Moonie, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Moser, L.
Newcastle, Bp.
Norton of Louth, L.
O'Neill of Clackmannan, L.
Parekh, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pendry, L.
Pitkeathley, B.
Plant of Highfield, L.
Portsmouth, Bp.
Prosser, B.
Prys-Davies, L.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Richard, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Sawyer, L.
Scotland of Asthal, B.
Simon, V.
Snape, L.
Soley, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Tenby, V.
Thornton, B.
Tomlinson, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Uddin, B.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Whitaker, B.
Whitty, L.
Wilkins, B.
Williams of Elvel, L.
Williamson of Horton, L.
Woolmer of Leeds, L.
Young of Hornsey, B.
Resolved in the negative, and amendment disagreed to accordingly.
On Question, Motion agreed to.
5.40 pm
Amendment No. 33: Page 2, line 19, at end insert-
“( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.
19 Nov 2008 : Column 1174
In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.”
Lord Davies of Oldham: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 3.
Moved accordingly, and, on Question, Motion agreed to.
Amendments Nos. 4 to 64: Page 2, line 27, after “bank” insert “or building society”
5: Page 2, line 43, after “bank” insert “or building society”
6: Page 2, line 46, after “bank” insert “or building society”
Lord Davies of Oldham: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 4 to 6.
Moved, That the House do agree with the Commons in their Amendments Nos. 4 to 6.—(Lord Davies of Oldham.)
[Amendments Nos. 4A to 6A not moved.]
On Question, Motion agreed to.
Amendment No. 77B: Page 4, line 32, at end insert-
“( ) The Treasury shall lay before Parliament a copy of any direction given under subsection (4).”
Lord Davies of Oldham: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill. I shall speak also to the other amendments in this group. I hope that the House will agree that these amendments show that the Government have listened to the debates held both in this House and in the other place, and are seeking to reinforce the principle of transparency in the Bill. This is an issue that has been advanced on all sides, and I pay tribute to the noble Baroness, Lady Noakes, for the force with which she has presented her case. I hope, too, that she will see that we have moved to meet the arguments made.
We regard transparency as crucial for the scheme. I remind noble Lords that Schedule 1 already requires the reclaim fund to publish an annual list of institutions participating in the scheme, the amounts of money transferred into the scheme—at individual institution level, the amounts of money reclaimed by consumers—and the aggregate amount passed to the Big Lottery Fund. This information will be available for public scrutiny.
As a result of being formed as a company under the Companies Act, the reclaim fund will be required to prepare annual accounts and reports each year. Government Amendments Nos. 15 to 19 require the reclaim fund to publish this information as soon as possible after the end of each financial year so that it is available for all to see, including noble Lords. Visibility of the reclaim fund’s accounts and report was a matter of concern and lengthy debate in this House and, I believe, a key concern behind the tabling of what was the original Clause 6. We believe that the government amendments address this concern while recognising
19 Nov 2008 : Column 1175
To require the reclaim fund to lay its annual accounts and reports before Parliament is unnecessary in the light of the amendments we have tabled to increase the transparency of the fund’s work. Requiring the fund to report directly to Government and Parliament would be to define it as a public body and would be out of keeping with the fund’s status as a private body. We have also reflected carefully on the debates about the Treasury’s direction-making power. I wish to stress first and foremost that it is not the case that the reclaim fund is a public sector body, so the Treasury is not in a position to give directions, as some have contended.
The Bill sets out how the reclaim fund will be constituted. It does not establish a reclaim fund since that is a task for the industry. As the creature of the institutions that establish it, the fund will be truly independent of government. We do not envisage using the direction-making power in the Bill to interfere in the day-to-day running of the reclaim fund and the management of its money. That will be the sole responsibility of the Financial Services Authority, which will regulate the reclaim fund for obvious prudential purposes.
5.45 pm
The direction-making power that we are taking is not a day-to-day issue; it is the ultimate sanction that the nation would expect us to have to ensure that the reclaim fund functions in accordance with the articles of association, particularly in those areas which the FSA will not regulate and where it would not be expected to do so. This includes, in principle, the requirements in Schedule 1 to the Bill of the publication of information by the reclaim fund on the use of money to cover reasonable running costs, or the requirements elsewhere to transfer surplus money to the Big Lottery Fund. The power the Treasury will have is meant to be used only in exceptional circumstances to require the reclaim fund to comply with the statutory requirements under the legislation—no more and no less than that.
I recognise that there are concerns about the power scheduled for the Treasury. However, the Government’s new amendment addresses those concerns by requiring the Treasury to lay before both Houses any directions to the reclaim fund so that there is complete transparency in the use of the power. The amendment is similar in effect to the second part of what was originally Clause 6.
I hope that I have satisfied the House that the power that the Treasury seeks is an exceptional reserve power to deal with the reclaim fund. However, I accept that if and when it is ever exercised it should be subject to full transparency. I hope the House will recognise that we have a reserve power which the Treasury can effect only by ensuring that there is transparency, and that it will support the Government’s position.
Moved, That the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill.—(Lord Davies of Oldham.)
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