Dormant Bank and Building Society Accounts Bill [Lords]

I was clear, I hope, that the Big Lottery is a non-departmental public body, independent of Government. The accusation that it is a Government-controlled body that takes the people's money and spends it as it chooses is something that I wholly regret. I thank the hon. Gentleman for allowing me to clarify those comments. I re-emphasise that in clause 23 it is proposed that directions to the Big Lottery Fund will be given by the Secretary of State for Children, Schools and Families. The clause has been deliberately written so that it is broadly similar to wording in the 2006 Act, which relates to the strategic guidance given by the Secretary of State for Culture, Media and Sport. It is right that the Government should give broad, strategic directions for the Big Lottery Fund. We have been clear that spending must be additional to Government provision. Unclaimed assets are in effect community resources. They are not a substitute for Government funding. It is right that they should be seen to be used to develop and strengthen communities. On the proportion of funds that are likely to go to the Big Lottery Fund, I stress that the reclaimed fund must hold back sufficient funds to repay potential customers. That is crucial. It will manage money on the basis of the FSA's prudential regulation regime. The FSA will consult on that regime and publish a cost-benefit analysis in the usual way. It is not possible at this stage to say what proportion of funds will be passed on to the Big Lottery Fund. That is a decision for the reclaim fund. It will be under a statutory obligation to transfer to the Big Lottery Fund sums that are not needed for reclaim or expenses. My hon. Friend the Member for Clwyd, South raised a number of issues in his powerful contribution. Again, I stress that we believe that a voluntary scheme will work. It has the support of banks and building societies. It will be highly transparent, so the basis on which they are participating will be clear. My hon. Friend asked about the definition of dormancy and how confident we are about the industry's figures. The industry has provided us with an estimate that after 15 years, 80 per cent. of dormant accounts are genuinely lost by the customer. That level of accuracy in identifying dormant accounts is important to minimise the ultimate level of the reclaim fund and hence overheads. The Government have listened to concerns about the time limit that were identified and discussed in the other place. We plan to introduce a power to amend the limit in the light of suitable evidence that a reduction or increase is advisable. We are reliant on the industry for the estimates, and they are the best estimates available. Of course, we would welcome it if more money were ultimately transferred into the scheme. My hon. Friend also asked whether banks will publish their dormant account policies. Again, that is an important issue. My understanding is that the answer is definitely yes. Banks are committed to doing that under the banking code. There will be transparency about how banks are participating, along with the other specific disclosure requirements in the Bill. The flexibility of the proposed scheme is one of its main strengths. It will allow banks to take a wide range of factors into account in identifying dormant assets, which will minimise the possibility of misidentification and, in doing so, help to reduce the costs of administering the scheme. A number of hon. Members asked how we will know whether banks are engaging the scheme and in particular whether there will be independent audits. The reclaim fund will publish amounts transferred into the scheme by individual institutions. Banks are committed to publishing their policies on how they are participating in the scheme. They are expected to subject transfers to independent audit as well. Hon. Members also mentioned National Savings & Investments and its potential participation in the reclaim fund. NS&I has played an active role in reuniting funds with their owners. It has operated a free tracing service since 2001, and is a committed member of ““mylostaccount”” in the context of operation and advertising. Since 2001, it has reunited £109 million with 93,000 customers. Having examined the issue carefully, the Government concluded that it would not be appropriate to transfer NS&I dormant accounts to the scheme, but NS&I is fully committed to reuniting owners with dormant accounts. I should make the crucial point that NS&I differs from banks and building societies in that its only function is to borrow money for the Government, which is then used to fund public spending. That means that money deposited with it is already doing public good, and including it in the scheme would mean diverting money that would have been spent on public services to the charity sector. We do not believe that that would constitute a prudent use of public funds. My hon. Friend the Member for South Derbyshire asked whether members of building societies would lose their membership rights if their dormant assets were transferred. I think he was the only Member to raise that concern, but I can tell him that the proposed scheme will not affect building society membership rights. In a statement made in October this year, the Building Societies Association supported the Bill's provisions concerning the safeguarding of the rights of building society members. The Bill provides that when a building society transfers a dormant account to the scheme, any membership rights attached to that account will continue to have effect as though the account had not been transferred. Given that the Government designed the scheme to enable spending decisions to be devolved, I think it follows logically that a population-based formula should be used for allocation. That is why we suggested that the Barnett principles offered an established method of apportionment. The Big Lottery Fund will be required, within the spending directions, to achieve a fair and equitable distribution of funds in England. It has been chosen as the principal distributor because it has a track record of achieving a fair regional and local spread of funding, and because of its work distributing funds to revive communities. I am sure that we shall be able to return to some of the points made today in Committee. The last point with which I shall deal this evening concerns the provisions on small locally based financial institutions. The purpose of the alternative scheme for such institutions is to provide a balance between recognition of the special role that some small institutions play in their local communities, and ensuring that enough resources are available for the national scheme to facilitate an overall efficient and strategic approach to distribution. The Government acknowledge the arguments advanced in the other place, and the important role that mutual organisations play. However, while we welcome in particular the commitment of Nationwide and the other major building societies to participating in the scheme as ultimately constituted, we believe that the amendment widening the option to encompass all mutuals is not desirable. I can give three reasons for that. First, the Government consulted on an asset threshold of £7 billion applying to both banks and building societies, and as the proposal received broad support during the consultation, we believe that that is what most respondents want us to do. Secondly, the amendment would significantly reduce the amount of assets available to the national scheme through the Big Lottery Fund, and thereby the strategic opportunity to make a significant difference in the areas identified as priorities for spending. Thirdly, there would be a lack of coherence in national distribution. Nationwide and its partners have stated clearly that they will support the English priorities, which is welcome. However, a whole series of different foundations distributing in parallel to the same causes is inefficient and fails to maximise the opportunity of the dormant accounts scheme. It is for these reasons that we do not believe it would be right to maintain the current amendment passed in the other place, but we will come back to this in Committee.