Dormant Bank and Building Society Accounts Bill [Lords]

I rise to defend the good name and judgment of mutual building societies and, in particular, the Lords amendments that seek to allow the largest of those building societies to exercise their judgment and to follow the priorities of their members, rather than those of the Government, in distributing some of the funds that we are discussing tonight. I claim two qualifications for speaking this evening. As Member of Parliament for Cheltenham, I am, perhaps slightly unexpectedly, the local MP for the Chelsea building society's headquarters. I could not speculate about why it went up-market and ended up in Cheltenham, but I am glad that it did so, as it has been a welcome contributor to the community in Cheltenham and a responsible and ethical presence in our community. I am one of the few hon. Members who has successfully won funding by applying to the national lottery funds and bank and building society foundations in my earlier career as a director of fundraising for a national charity. So I have had experience of the funding processes of both sides, and I shall return to some of that experience later in my remarks. It is rather a topical time to debate these issues, particularly the status of the mutual building societies. It is all very well for the hon. Member for Broxbourne (Mr. Walker) and other Conservative Members to decry the greed and irresponsibility of the banks, but the Conservative party is rather a fickle partner in that respect, since it has been absolutely in love with the banking sector and some of the more exciting practices of, for instance, the demutualised building societies for many years. It obviously encouraged that process when in government. It is telling to note that we have now witnessed the final demise of all the demutualised building societies. They have all either crashed or been swallowed or nationalised. We have none left, but we have a relatively healthy mutual building society sector, which, thankfully, is still with us. The mutuals still have tens of millions of members and £150 billion-worth of assets, and they are one of the healthiest sectors of the financial services industry, with loans overwhelmingly backed by retail savings. We ought to listen to the large mutual building societies. They have concerns about the direction of the legislation, and those concerns were reflected in the Lords amendments. In the Bill, there is a £7-billion threshold above which banks and building societies would lose control of the funds. Funds above the threshold would be handed to a reclaim fund that would be administered, ultimately, by the Big Lottery Fund. The amendments proposed in the Lords removed that threshold for building societies and allowed larger building societies, but not banks, to administer those fund through their own charitable foundations. That was a good thing. I am afraid that I was disappointed by the Chief Secretary to the Treasury's opening remarks, in which she suggested that the Government would try to overturn those amendments. I hope that the Economic Secretary to the Treasury and his colleagues will think twice before fighting that battle, because they would be quite wrong to do so. After all, what is the difference in principle between a building society that has more than £7 billion-worth of assets and one that has less than £7 billion-worth of assets? There is no difference apart from size. Both are mutual organisations that exist for the benefit of their members and that have exercised good judgment in doing so; £7 billion is a completely arbitrary figure to choose. As I pointed out in an intervention, the Chief Secretary to the Treasury rather misleadingly implied in her opening remarks that we were talking about the stratospheric, top layer of the building society market, and that most building societies would still be able to administer their own funds. Of course, that is true in numerical terms, but in terms of the assets, the 80-20 rule applies. Some 83 per cent. of all building society assets are controlled by the seven top building societies. We need to examine the Government's rationale for trying to remove the right of building societies to administer funds that are made available from dormant accounts. That will tell us a lot about the Bill. Perhaps the Government think that the Big Lottery Fund will be a more efficient, more expert and more supportive funder than the building societies' own foundations. I have to say, from my experience as a charity fundraiser, that the reverse is true. The lottery funders, through no real fault of their own—it was more the fault of the way in which the original legislation was designed—had to administer a pretty bureaucratic, awkward system, from which most charities found it a bit of a nightmare to extract money. In contrast, bank and building society foundations such as the Lloyds TSB and the Nationwide and Chelsea building societies foundations have extremely good reputations in the voluntary sector. They are able to administer funds wisely, and as hon. Members have said, the fact that they look to some of the less popular, more difficult causes earns them a lot of praise in the voluntary sector. Perhaps the Government thought that there was a higher rate of dormancy among large building societies. Again, I am afraid that the reverse is true; building societies generally have higher average balances and therefore a lower rate of dormancy overall. The statement might apply to the large banks, but it certainly does not apply to large building societies. Perhaps the Government thought that they are better judges of how the money should be spent, because of their strategic plans. That brings us back to the issue of independence and additionality. I am really disappointed by the fatal words in clause 23(3), which do a lot to undermine the good work that the Government did—I am happy to give them credit—during the passage of the National Lottery Bill only three years ago. That Bill sought to address the issue of the mistreatment of some of the lottery funds. That mistreatment had given lottery funders quite a bad reputation. One need only think of the way in which the New Opportunities Fund was set up; on one notorious occasion, funding announcements were made by a Minister at a Labour party conference. There was the school meals episode, in which the Government awarded hundreds of millions of pounds not from their funds, but from lottery funds. Those are examples of exactly the kind of practices that the National Lottery Bill was designed to prevent. It was a good piece of legislation that enjoyed all-party support. It should have tackled the issue and made unlikely any further Government intervention. However, clause 23, entitled ““Directions to Big Lottery Fund””, has the fatal phrase:"““Subject to subsection (6), the power to give a direction under this section is exercisable by the Secretary of State.””" It is sad to read those words in the legislation. They begin once again to undermine the independence of the lottery funders. The funds are no more the Government's than any other lottery funds ever were. In the case of banks, money from dormant accounts is, in a sense, the property of the original bank account holders, but in the case of building societies, it is certainly the property of the members of the building society. It is unfortunate that the Government should seek to exercise their control by means of strategic plans on how the money should be spent. I am perfectly happy to accept that youth services, for instance, are underfunded; they have perhaps been neglected in previous years. However, that does not make it right for the Government to start rewriting the rulebook on how lottery money is spent. Perhaps the Government thought that there was no difference in kind between banks and building societies. However, the legislation accepts that there are different kinds of accounts. Perhaps the Economic Secretary would like to explain why National Savings & Investments is exempt from both the £7-billion rule and the legislation as a whole. It is regarded as different and special. I would say that the mutual building societies are different and special, in that they have an obligation to serve their members. The money is, in a real sense, not the company's property but the property of its members. It has a duty to its members, and not to any shareholders who could be suspected of ulterior motives by the Government. There is an important difference in kind, which is rightly reflected in the Lords amendments. Perhaps the Government think that the big building societies are somehow less able to manage, account for and distribute funds than the Big Lottery Fund or the Government. Once again, the reverse is true; almost all the large building societies have already set up an infrastructure that has a very strong reputation when it comes to accounting for, recording and reporting the use of charitable funds. Their established charitable foundations are a well-established, highly respected set of bodies that are very good at administering charitable funds. We are left with only one obvious explanation why the Government should seek to apply the £7-billion threshold to building societies as well as banks: the Government must have some political reason for bolstering the Big Lottery Fund. Perhaps there is embarrassment about the underfunding of youth and other services that they now seek to support. Perhaps they are embarrassed about the use of lottery funds to subsidise the Olympics. However, I urge them to resist their command-and-control tendencies and those slightly Stalinist inclinations that have characterised so much new Labour legislation. I ask them to step back and recognise the importance of the independence of the mutual building societies, and of the Big Lottery Fund, and to trust those bodies to stand up to political interference and to administer funds wisely, as they have done with regard to many hundreds of millions of pounds over decades. The Government should take this opportunity to dispel any suspicions. I very much hope that the Lords amendments will stand, and will not be removed by the Government. If the Government take the path that I suggest they take, they will have my full support.