Dormant Bank and Building Society Accounts Bill [HL]

My Lords, I echo what my noble friend Lady Pitkeathley said. All of us who support this Bill owe a great deal of thanks to the Unclaimed Assets Charity Coalition and to charities in general for having pushed this point so that it in effect became an election manifesto, and then finds itself now going through—I hope—your Lordships’ House. I also pay tribute to the noble Baroness, Lady Finlay of Llandaff, who moved the amendment. I am not going to accept it on behalf of the Government, and I will try to explain why. I shall deal first with the point about the central register. It is an important point but not as important as her point about whether this is a voluntary or perhaps eventually compulsory scheme. She pointed out that there had already been some discussion about the central register in the brief time that we have already spent on Report. We have concerns. We welcome the constructive suggestions as to how the industry’s reuniting arrangements might be further improved, but a central register would be expensive and would place a large and unnecessary administrative burden on the scheme. More importantly, perhaps, there are concerns that financial institutions respect the confidentiality of the information that they hold about their customers. We would genuinely have to look carefully at the human rights implications of any power to issue regulations that in effect required banks to breach that confidentiality. Reuniting is important, however, and we welcome the banks’ and the building societies’ commitment to a major reunification exercise in the run-up to this scheme becoming operational. In particular, we welcome the BBA, the BSA and the NS&I proposals for a single one-stop shop for reuniting, and their commitment to help hard-to-reach, disadvantaged customers. These proposals will allow people to be reunited with their lost money, and should, we hope and believe, make a register unnecessary. Participation in the scheme will be voluntary for individual banks and building societies. This has rightly been a focus of our debates. I say ““rightly”” because I would be the first to accept on behalf of the Government that these proposals are innovative. The unclaimed assets scheme will not be like other mandatory schemes in countries such as Ireland, which the noble Baroness mentioned, or even the United States. Our approach is based on clear and firm commitments on the part of the sector to participate in a voluntary scheme and to make it a success. We welcome those commitments, which are one of the reasons why we believe that we can implement a voluntary scheme with some confidence. I draw noble Lords’ attention again to the public commitments set out in the joint foreword to the Treasury’s consultation document on the scheme last year, which was jointly signed by the BBA and the BSA. I also draw the House’s attention to the press notice that the industry released on 8 November 2007, which confirmed its continuing commitment to the scheme and illustrated that commitment to the major banking groups that have participated in discussions with the Government to date. Banking groups are fully committed to the scheme, and it is estimated that they represent about 90 per cent of all retail and saving balances held by those institutions in the UK. This is an illustration of the level of support that we believe we have for the scheme. If a voluntary scheme can be a success, it is not necessary to consider a compulsory scheme now or in the future. There are advantages to a voluntary scheme, and downsides to a compulsory one. A voluntary approach brings some flexibility; I hope that we agree on that. Our legislation provides a minimum definition of dormancy, but will allow individual institutions to refer to a range of indicators that suit their own capabilities and customer needs best in order to determine whether an account is genuinely dormant. This means that not all accounts that technically meet the legal definition of dormancy must be transferred, and enables only genuinely unclaimed accounts to be transferred into the scheme. As a result, the UK scheme will be less rigid than many other international schemes. It has been based on existing industry systems, helping to reduce what can easily run out of hand and add unnecessary administrative costs. It can also be kept up to date, in line with the latest technology. A voluntary scheme allows us to take account of better regulation principles, ensuring a low regulatory burden on business and helping to maximise the money available for reinvestment in the community. I see some noble Lords in the Chamber who are, like me, lucky enough to be involved in another Bill going through Committee, so I hope that this argument rings some bells with them. We believe that if there is an opportunity to maximise money for good causes with the sector’s support, we should clearly take it. Let us be frank: a voluntary approach enables the use of private-sector expertise to manage liabilities to account holders. It is right that the private sector, which has the expertise to manage reclaim risk, should take on that function. As I have said, the sector is committed. I will look more carefully at the arguments put forward by some noble Lords that banks and building societies might renege on the commitments that they have entered into. We expect institutions to join the scheme in order to play a positive role in reuniting customers with their assets and making money available for community reinvestment. We believe that prestige is likely to be attached to participation, and we do not accept that the industry’s profits really provide incentives not to participate in the scheme. The banking industry estimates that dormant accounts in the UK account for only 0.047 to 0.065 per cent of the totals in retail banking and savings balances held by the nine largest banking groups alone. The industry itself rejects the argument that retaining this money on its balance sheets is a disincentive to participation—not, I repeat, a significant motivation for them. Yet, when we consider its potential to be used for good causes, we see that it is a significant amount to us and to the charities that the noble Baroness, Lady Finlay, so proudly praises—and rightly so. Of course, the scheme must be highly transparent, to demonstrate that the banks and building societies are delivering on their commitments, to maintain public confidence in the scheme and to strengthen further the incentives for institutions both to reunite customers with their own money and to transfer genuinely dormant accounts to the scheme. Later, we will discuss the disclosure requirements in the Bill, which will result in details being published about which institutions are participating in the scheme, how they will participate and the value of assets transferred into the scheme and of those reunited with account holders. We hear sympathetically what the noble Baroness says; indeed, we understand some of the scepticism. Yet our view is that those arguments run counter to the public commitments of the industry, the many advantages of a voluntary scheme and the positive incentives for institutions to participate. I shall deal briefly with the reasons why a compulsory scheme is not the best option. In the light of the sector’s ongoing support, we see no reason to take a reserve power to establish one. We may not agree again all afternoon, but on this occasion I agree with the noble Baroness, Lady Noakes, that the reserve power that the amendment would give to a Secretary of State is very great. We have fundamental concerns about the appropriateness of such a power, as a compulsory scheme would look completely different to a voluntary one. It would not be able to rely on the industry’s willingness to establish a reclaim fund. In effect, the Bill would have to establish that fund as a public body and set out in detail an enforcement mechanism so that it was clear which sanctions would apply to institutions that failed to comply with the scheme. That would have to be monitored and regulated. I could go on, but the point is that a compulsory scheme would require extensive further legislation. I am sure that your Lordships will be delighted to hear that we do not believe that it would be appropriate to deal with such extensive legislation in secondary legislation. Fundamentally, it is not our intention to take substantial reserve powers that we do not believe to be necessary. In short, we have a lot of confidence in the scheme; let us see whether we are proved right. We do not expect our voluntary scheme to fail. We do not want to take unnecessary powers. We believe that extensive primary legislation would be required to introduce a compulsory scheme. We have every sympathy for the charities; they do a magnificent job, which is accepted around the House without exception. We do not believe that on this occasion they are right. We believe that we should give this voluntary scheme a chance to succeed, so we ask the noble Baroness to withdraw her amendment.