Dormant Bank and Building Society Accounts Bill [Lords]

It has been six years since the Government first raised the prospect of using money from dormant accounts for good causes. Since the Government published their consultation paper on the Bill, we have had three Economic Secretaries—I am glad to see that the third is in his place—and it has been eight months since the Bill had its First Reading in the Commons, and I suspect that even now it will be at least a year, if not longer, before the money will start to flow. However, in that time, the scheme has changed so that now, rather than charities benefiting directly, the money will be spent at the direction of the Government in line with the priorities they set out in the Bill and, as a number of interventions have indicated, the amounts involved have shrunk. The unclaimed assets register suggested there was about £8 billion split between bank accounts and National Savings & Investments. The current estimate from the Building Societies Association and the British Bankers Association is that there is about £400 million to £500 million from banks and building societies to be used in the scheme. Clearly, the effectiveness of the operations to reunite customers and their accounts will reduce those amounts, so, although the amounts involved are still significant, the scaling down of the estimates does lead, as I shall mention later, to some difficult issues regarding the distribution of the assets. However, an important prior step to the process set out in the Bill is to ensure that banks and building societies take action to clean up their records, and try as far as possible to reunite customers and their dormant accounts. I am aware from my conversations with the sector that banks and building societies are taking steps to do that. For example, Lloyds TSB announced in June that it is appointing a company to help trace the holders of dormant bank accounts. HBOS has united £18 million sitting in dormant accounts with its customers, with another £29 million left to trace through. According to the BBA, some £50 million has already been reunited with its rightful owners. In addition to the efforts of individual institutions, there has been a collective effort through the website mylostaccount.org.uk, which provides bank, building society and National Savings & Investments customers with a single point of contact for tracing accounts. Since its launch on 30 January 2008, more than 140,000 people have submitted search forms for money left unclaimed in dormant accounts. That compares with 44,000 claims in 2007 via the separate tracing services for the BBA, the BSA and NS&I. That demonstrates that the focus on reuniting has led to an increase in interest in the matter, and more customers clearly are trying to track down their unclaimed assets. I want to address the concerns that a number of Members have expressed about charities. Charities represented by the Unclaimed Assets Charity Coalition have set out a very important case—they believe that they would be unable to unlock money sitting in dormant accounts where they are the residuary legatee. They have argued for a central register of accounts that they could use to identify accounts that they believe belong to them, and that a reserve power should be included in the Bill. I can understand their arguments and have some sympathy with them, but such a power goes beyond the voluntary approach that forms the basis of the Bill. However, clause 12 provides them with an important safeguard, as the triennial review explicitly refers to the right of a charity to receive money due to it under the terms of a will. That is an important safeguard, and I hope that that transparency will encourage banks and charities to work closely together on making sure that they have access to those dormant accounts. However, it will be interesting to see how the debate plays itself out in Committee. It is imperative that, within the constraints of the scheme, there is a robust exercise to reunite customers with their money. If the process is robust, there will be much greater certainty that money transferred across to the reclaim fund relates to genuinely dormant accounts and is therefore less likely to be subject to a reclaim. The Bill before us sets out a legal framework for a voluntary scheme to enable money sitting in dormant accounts to be used for the public good, while ensuring that those who rightly own those assets are able to recover them. The Bill has four essential components: one relates to the question of how we know when an account is dormant, the second extinguishes the liability on the bank's or building society's balance sheet when the asset is transferred to the reclaim fund, the third establishes the proper legal framework for the reclaim fund and its functions, and the fourth relates to the allocation of amounts transferred from the reclaim fund to the Big Lottery Fund and to the spending priorities identified in the Bill. However, I want to explore some issues that flow from those steps. Although there has been a great deal of discussion in recent years about the use to which unclaimed assets in a range of categories can be put, those assets are there to meet liabilities—there is a debt due to a customer, a pension to be paid out or a life assurance policy to mature—so in any scheme it is vital that the record of liability be retained, even if the liability itself is legally removed from the institution's balance sheet. It is therefore important that, once that liability has been extinguished from the balance sheet, there is a reserve in the reclaim fund to pay out to customers who come forward to reclaim their money. One of the fund's priorities is to build up sufficient reserves to cover future claims, yet there is a countervailing pressure to transfer as much money as possible from the reclaim fund to the Big Lottery Fund for distribution. Too few reserves will leave the fund and potential claimants exposed. In the event of a fund's being unable to meet all its claims, customers will be covered by the financial services compensation scheme, but that is not a green light for the reclaim fund to be imprudent in how it operates. I am also conscious of the fact that if too little money is distributed to the Big Lottery Fund and to the spending priorities, there would be pressure from the potential beneficiaries, and perhaps the Government, for more to be distributed. I come back to my intervention on the Chief Secretary, because the Bill gives the Treasury the right to give directions to the reclaim fund. I would be grateful if the Economic Secretary's response could explain how those powers might be used, because a conflict of interest is involved: the Treasury has a role not only with regard to the reclaim fund, but as one of the departmental sponsors of one of the spending priorities—financial inclusion. How does he believe the Treasury will help the fund to strike the right balance between protecting the interests of customers and ensuring that the right moneys flow through to the spending priorities? Given the important role of the reclaim fund and the need for public confidence in its work, we support the amendments tabled in the Lords to require the accounts of the reclaim fund to be laid before Parliament. I am sorry to hear that Ministers are seeking to remove those provisions in Committee. We will clearly have a debate about that, because it is important to recognise that although the reclaim fund is a private body in terms of its constitution, it is clearly not just a private body. The Bill provides for the Treasury to give direction to it and, as such, one would expect the levels of transparency and accountability to go beyond those applicable to a conventional limited company. Once proper protection for customers has been established, the next stage is how to use the money. As the Chief Secretary has said, the Bill distinguishes between two sources of these funds: building societies and small banks, and large banks. The money from large banks will go to the Big Lottery Fund, and I shall return to that matter in a moment. The Bill, as drafted, allows for building societies and small banks to allocate the amount from dormant accounts, over and above that needed for the reclaim fund to protect its customers, to be allocated through their own charitable foundations, reflecting the strong links that exist between building societies and the communities that they represent.