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Dormant Bank and Building Society Accounts Bill [HL]

Volume 696: debated on Wednesday 21 November 2007

My Lords, I beg to move that this Bill be now read a second time.

It is a fact of life that many people forget about, or lose track of, often small deposits of money in bank and building society accounts. This may be because they have changed address and lost contact with their bank, or perhaps have died without anyone being aware of the account. As a consequence, a large amount of money is lying dormant in bank and building society accounts. The estimation of the British Bankers’ Association and the Building Societies Association is that there is currently between £250 million and £350 million in banks, and up to £150 million in building societies. This is based on a dormancy period of at least 15 years.

Several countries have schemes to enable these unclaimed assets to be reinvested in society. Following a Labour Party manifesto commitment, the 2005 Pre-Budget Report set out that the Government had decided that the time had come for such a scheme in the United Kingdom. The Dormant Bank and Building Society Accounts Bill is a key part of turning that ambition into a reality. The Bill enables a scheme that both releases money for distribution in the community and protects consumers, providing them with the same ongoing right to repayment as they would have had from their bank. It also takes an approach that deliberately limits the regulatory burden on industry. As such, it is an approach that is good for the consumer, good for industry and good for society.

The Bill is central to the delivery of the scheme. Its key elements include: defining a dormant bank account as one where there has been no customer-initiated transaction for 15 years; defining the financial institutions able to participate in the scheme, which is broadly speaking retail banks and building societies; and permitting eligible institutions to have their liability extinguished on eligible accounts on certain conditions, including a transfer to a reclaim fund, which in turn takes on the liability to repay any reclaiming customer. It sets out what a reclaim fund is and amends the Financial Services and Markets Act 2000 to enable the activities of a reclaim fund to be specified in secondary legislation as regulated activities and, thus, for a reclaim fund to be regulated by the Financial Services Authority.

The Bill provides consumers with protections, including the right to repayment from the reclaim fund. It gives powers to the Big Lottery Fund to distribute assets that the reclaim fund deems surplus to its requirement to hold assets to meet anticipated levels of customer reclaim. It provides a power for the Secretary of State to apportion money between the countries of the United Kingdom following consultation with the devolved Administrations. It sets out the priorities for expenditure in England as youth services, financial capability, financial inclusion and resource for a social investment wholesaler. It provides Ministers in the devolved Administrations with an order-making power to set distribution objectives in their country, and it sets out an alternative option for small institutions to participate through separate arrangements that allow distribution of money in their local communities.

There are a number of elements outside the proposed legislation that will be integral to the delivery of the scheme. These include: the setting up of a reclaim fund and its subsequent authorisation by the Financial Services Authority; agreements between individual participating institutions and the reclaim fund under which institutions agree to act as agents of the reclaim fund for the purposes of repaying customers; revisions to the self-regulation of the Banking Code; and the industry’s commitments to maximise efforts to reunite account holders with their lost accounts.

The Government’s approach has been informed by the following principles: first, wherever possible, reuniting account holders with their money; secondly, the consumer’s right to reclaim—account holders must have the legal right to reclaim their money at any time; thirdly, the light-touch approach, as our intention is to minimise the running costs for the scheme and participating institutions by wherever possible building on existing infrastructure in order to maximise the money available for reinvestment in the community; and, finally, better regulation. The proposed UK scheme differs significantly from other international arrangements in being in part a self-regulatory scheme. It is proposed that legislation will enable, but not compel, banks and building societies to transfer funds held in dormant accounts.

The scheme is intended to operate as follows. Following the pre-scheme reuniting exercise, participating institutions identify accounts that meet the definition of dormancy. The Bill allows banks and building societies to cancel their liabilities to holders of these accounts on certain conditions, including the transfer of assets to an FSA-authorised reclaim fund. As part of this transfer, the Bill establishes a new statutory right for consumers to be repaid by the central reclaim fund. Money that the reclaim fund does not require to repay consumers will be passed over for reinvestment in the community via the Big Lottery Fund.

In England, distribution will focus on providing places to go for young people, financial capability and inclusion projects, and, resources permitting, developing the social investment market. The devolved Administrations will determine their own priorities for distribution. Small institutions will have an option of seeing money reinvested in their local communities. As I set out earlier, banks and building societies estimate that between £400 million and £500 million currently lies unclaimed under the proposed definition. Clearly, the impact of pre-scheme reuniting and the provision by the reclaim fund against future reclaim requests will mean a significantly smaller amount is available for distribution. It is not possible to quantify this figure at present with any degree of confidence.

While customers will always have the ongoing right to reclaim their money under the proposed scheme, the Government believe that it is important that any scheme is preceded by a concerted reuniting effort. Reuniting customers with their lost accounts is primarily a matter for financial institutions and their customers and is outside legislation. The Government therefore welcome the bank and building society sector’s commitment to a comprehensive reuniting exercise in advance of the scheme launch.

The BBA and the BSA made a detailed announcement on 8 November, which is available on their website. It sets out that they and the individual institutions will undertake proactive search activity throughout 2008. As part of this, the BBA, BSA and NS&I will bring together their free tracing schemes into a single cross-industry facility for customers seeking to locate a lost account. The one-stop shop will be launched in January. The scheme aims to capture genuinely lost accounts as opposed to those that are managed by customers. The proposed dormancy period of 15 years is deliberately long with this objective. In the Bill, dormancy is defined as no customer-initiated transactions on the account.

It is intended, however, that banks and building societies can use the voluntary nature of the scheme to generate greater flexibility. Thus, they can refer to any customer-initiated activity related to the account, such as correspondence or telephone calls, e-mails or voting at AGMs, in deciding whether an account is suitable for the scheme. Institutions that can participate in the scheme are, broadly speaking, all retail banks and building societies operating branches in the UK. National Savings & Investments is not included in the scheme.

The reclaim fund will receive money from dormant accounts transferred by individual banks and building societies. The Bill does not create a reclaim fund but sets out the requirements that a company must meet in order to operate as one and paves the way for its authorisation and regulation by the FSA. A reclaim fund will be a private sector-run company and the banking and building societies sector has committed to lead on selecting and setting up a central reclaim fund. This commitment and a timetable for the identification were set out in its 8 November announcement.

The Bill requires a reclaim fund to be authorised by the FSA, and the FSA’s regulation will help to ensure that it has sufficient money to meet anticipated levels of claims for repayment by customers. The Bill also sets out the three purposes of a reclaim fund which will be incorporated in its articles of association and may not be changed at a later date. The purposes are that the reclaim fund must meet repayment claims, manage money prudently, and transfer surplus funds to the Big Lottery Fund for distribution. In addition, the Bill will place further restrictions on a reclaim fund. A fund may cover its running costs to the extent that they are reasonable and it must publish key information about institutions that are participating. The flow of money into the scheme and the levels of customer reclaim by institution must also be published.

It is intended that account holders will experience no practical difficulty in the way that they are treated as a result of the scheme. Banks and building societies will act as a reclaim fund’s agents, and this will be set out in private arrangements outside of legislation. Consumers will therefore be able to continue their usual relationship with their bank or building society and will deal with their bank directly if they wish to reclaim their money. Banks and building societies’ relationships with their customers are self-regulated through the Banking Code, and this will remain the case for customers with accounts under this scheme.

The Banking Code is to be updated in March 2008. The industry has indicated that the code will be updated to ensure that customers will continue to use their own bank or building society as a means of reclaiming their money. They will ensure equivalency of treatment for all customers regardless of whether their money has been transferred into the scheme, and banks and building societies will inform their customers about the scheme, including publishing their policies for treating accounts as unclaimed assets. In the event of any disputes, consumers will continue to have recourse to the Financial Ombudsman Service for resolution, subject to the usual qualifying conditions, and of course consumers can resort ultimately to the courts to enforce their legal rights.

The reclaim fund will release money not needed to cover reclaim for distribution. The principles underlying the Government’s approach to redistribution are that it is an efficient and co-ordinated light-touch scheme which limits spending on administration and releases as much money as possible for investment in communities; that, as a UK-wide scheme, it is an appropriate and efficient distribution of assets across England, Scotland, Wales and Northern Ireland; that spending is additional to government provision in a manner which is accountable and transparent; and that distribution should benefit a diverse range of communities and be used to deliver practical programmes which bring about real change to neighbourhoods.

Guided by these principles, the Bill appoints the Big Lottery Fund as the distributor of dormant account money. The decision to use the lottery was supported in consultation. It has been chosen because using an existing body makes practical sense. The Big Lottery Fund is one of the few existing UK-wide organisations with the capacity to distribute resources on a large scale. It operates across the whole of the UK and has country headquarters in England, Scotland, Wales and Northern Ireland to which decision-making is devolved, and it has access to an extensive network of third sector and public sector delivery partners ranging from large-scale national charities through to grass-roots community groups. Dormant account money will not be folded into the lottery’s other activities but will be managed as a separate and distinct fund with separate financial management and accounting arrangements.

The 2005 Pre-Budget Report stated the Government’s preference for these resources in England to be focused on youth services that are responsive to the needs of young people, and on the issues of financial capability and inclusion. The Government believe that there is a strong case for focusing resources in England on improving the life chances of young people and helping them through the important transition from childhood through adolescence to adulthood. Investment in young people is an investment in the future of the whole community. Their success is a social and economic necessity. More also needs to be done to raise the level of financial capability and financial inclusion across the whole population and to ensure that people are able to make the right financial choices and develop the skills to manage their finances to their own advantage.

The Government feel that spending on these activities represents an appropriate use of dormant account assets. In addition to these spending areas, following consultation the Government would also like to see a proportion of the available assets in England, if resources permit, used to invest in the long-term sustainability of the third sector. This can boost the social investment market through support to the creation of a social investment wholesale institution. These priorities for distribution are set out in the Bill and are for England. Scotland, Wales and Northern Ireland will determine their own spending priorities, reflecting the needs of communities in each country.

Under the proposals, small banks and building societies will have the option of distributing money not needed to fund reclaim to charities that benefit their local communities. Typically, these institutions will be building societies often playing an important role in their local communities, and this builds on the commitment made in the 2005 Pre-Budget Report. Customers with these small locally based institutions will be treated in the same way as for the main scheme. For example, the reclaim fund will take on the liability to repay them and they can continue to claim directly with their bank or building society to get the repayment. But money not needed by the reclaim fund will be available for the small institution to distribute the balance to charities benefiting their local communities. To qualify for this scheme, an institution must have total assets of £7 billion or less. The Government believe that larger financial institutions serving wider communities should take part in the main scheme.

The scheme is not intended to affect membership rights. The Bill contains provisions so that if a building society transfers an account to the scheme, any membership rights attached to the account will continue as though the scheme had not been transferred. This includes any rights that might exist to demutualisation benefits. The Bill will not impinge on the Crown’s existing rights to bona vacantia, or ownerless property. It will also allow existing arrangements for dormant charity accounts as set out in the Charities Act 1993 to continue.

This Bill offers an historic opportunity to allow money lying dormant in bank accounts to be used to the wider benefit of society. It does so while protecting consumers and maintaining a low burden on industry. As such, I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)

My Lords, as the Minister said, this Bill came out of a statement made by the then Chancellor, now Prime Minister, in his Pre-Budget Report in 2005. He said that,

“unclaimed assets held in bank accounts will, once realised, be put to use to improve youth and community facilities throughout Britain”.—[Official Report, Commons, 5/12/2005; col. 613.]

That is the area of the Bill that I should like to concentrate on. While the Minister gave a very detailed explanation of the Bill, he did not say why it should be these particular areas. Why do the Government feel that they are in particular need of extra funding that is not already distributed by any of the lottery bodies, the Big Lottery Fund or any of the others? The Government have given no explanation of why they have taken these two areas, and it would be useful to know how the decision came to be made.

As to the Bill, Clause 15 states that the money shall be distributed for,

“meeting expenditure that has a social or environmental purpose”.

Having heard the Minister’s speech, I find it difficult to know how the environmental purpose fits into this.

Clause 17 refers to distribution being made for,

“the provision of services, facilities or opportunities to meet the needs of young people”.

That makes sense. But paragraph (c) refers to distribution being made,

“to a social investment wholesaler”.

There is an intriguing explanation of this in subsection (2), which states that a,

“‘social investment wholesaler’ means a body that exists to assist or enable other bodies to give financial or other support to third sector organisations”.

Sadly, not being a draftsman or as clever as the Minister, I have no idea what that means. In fact, there is no explanation in the Explanatory Notes. Can the Minister explain what on earth a “social investment wholesaler” is in this context? It is absolute gobbledegook to me.

We all give the Government credit for the principles behind the Bill—the principle regarding dormant accounts is a good one—but the big question is how the money is to be distributed. We know it is going to go to the Big Lottery Fund, but why just to that fund? The Big Lottery Fund is an amalgamation of the New Opportunities Fund, the Community Fund and the Millennium Commission, and it has done quite well since it was set up by the Government, but why are the other distributing bodies not included? After all, the Big Lottery Fund gets 50 per cent of all lottery money and the other organisations, for sports, arts and heritage, receive only 162/3 per cent.

Those distributing bodies are under real pressure because under the recent Olympic Lottery Distribution Fund order that the Government laid before the House, the Secretary of State is going to transfer £1.085 billion from the National Lottery Distribution Fund to the Olympic Lottery Distribution Fund between February 2009 and August 2012. This sum, as the order states, represents a previously agreed transfer of £410 million plus an additional £675 million. This will have a huge effect on both heritage and the arts. It begs the question: why are they not included on the list? Why is the money going only to the Big Lottery Fund? After all, their budgets are being squeezed. Their budgets are smaller than the Big Lottery Fund, which gets 50 per cent of all the money. I remind your Lordships that the Big Lottery Fund will probably distribute close to £700 million this year.

If one follows the chain through, it raises the issue of whether the Government are, in effect, allowing this money to go to the Big Lottery, and then money that would go to the Big Lottery is given to the Olympic Games. It is a circular motion. It begs the question of whether the Olympic Games are being bailed out in this way. I hope that is not the case. I hope the Minister will be able to say that he will not be coming before the House with any additional orders for taking money from the lottery.

On the previous lottery Bill we had arguments about prescription, specifying matters and additionality. I am delighted to see that in both Clause 21 and Schedule 3 those points are addressed and that we will not have to refight those arguments. I congratulate the Minister on succeeding, again, against the Treasury. But there is a concern because it has proven more difficult to ascertain whether the money given out by the Big Lottery Fund is additional. As we know, it has given money to provide hospital scanners and so on, some of which we believe should be part of normal expenditure.

I welcome the Bill although it does raise some questions. I am sure the Minister will answer them when he winds up. We will have an interesting time in Committee probing him on some of the details and checking that the directions the Government can give to the Big Lottery Fund on the way the money is spent does not allow them to control the distribution of funds. I hope that that is not the case. I look forward to the Minister’s response.

My Lords, I thank the Minister for outlining the purposes of the Bill. It has a fairly dull name for an incredibly exciting and life-enhancing Bill; I am an enthusiast for it.

I should declare my own position. For some years I have been a trustee of the Joseph Rowntree Reform Trust Limited; I am chairman, a director and a trustee of the Joseph Rowntree Charitable Trust. We are not averse to money coming in but, because these are endowed funds, we are mainly donors. Therefore I have some understanding of the grant seeker. I also founded in 1990—I am now a vice-president—a community foundation for my own community, Calderdale. It was my major voluntary activity for nine years. From nothing in 1990 we have put together £6 million now. That organisation is looking for money and I shall say more about it later.

It is now 11 years since I penned a pamphlet for Demos entitled The Building Society Bounty. I was concerned about the demutualisations that were taking place and, whatever the principles involved in whether it was right for a mutual to remain as it was or to be demutualised, my concern was whether it was right for a specific generation to pick up all the benefits of intergenerational equity that had been built up, often over 150 years or so. It was like the parlour game of pass the parcel; the music stopped and those who happened to have a pass book ran off with all the assets.

The Bill has limited aims. It is about gathering in, holding and spreading out to good causes. There is a definition of “dormant accounts” and a suggestion that they are accounts that have not been touched for 15 years. It has been suggested also that that is too long; that perhaps it should be 10 or 12 years. This has happened in other countries and we hope it will happen in the UK. I have read that in one country the period is three years. I do not argue with 15 years because it may be right. We could perhaps cope with 10 or 12 years but I am not going to argue that point.

We all understand that a big effort has to be made to reunite the dormant money with the rightful owner—that is only right and proper—and then, at the appropriate time, to transfer it to the intermediate agency, the reclaim fund. After weighing up the probabilities of a reclaimer appearing, the reclaim fund will transfer dormant money from large banks and building societies to the Big Lottery, or from smaller ones with under £7,000 million in assets to a local trust or foundation. That is allowed for in the Bill, but it is all voluntary.

There is not enough prescription in the gathering-in but there is too much in the spreading- out. There has been a fair period of consultation on the gathering-in, but some say there has not been as much consultation on the spreading-out as there might have been. The Government have looked at the position in Ireland, which is ahead of us in this work, and I have read and carefully considered the report of the Treasury Select Committee of the other place on the work it has carried out on this.

The Bill is too limited in scope. Before it was published, it was the draft Unclaimed Assets Bill; now it is the Dormant Bank and Building Society Accounts Bill. Is this just the start? It covers two specific areas: banks and building societies. However, in Ireland, post office accounts—equivalent to National Savings here—have been brought within the scope of the equivalent legislation, as were unclaimed life assurance policies two years later. What about shares and dividends? We should look at non-take-up following demutualisations. I have the latest figures for Standard Life, the Scottish life assurance company. It issued shares in July 2006. It put out a press release in January 2007 stating that 235,000 members had yet to claim £236 million worth of shares. In April, it put out another press release stating that the number of members was 220,000, but that the value of the shares had increased to £261 million. It might well be less now. That is only one company. There is a rich seam to tap.

Government savings are important. The Treasury estimates that there is just short of £1 billion in them. There should be a level playing field with the private and mutual sector. During the past four or five years, I have looked in detail at the Northern Ireland budget and kept my eye on the Ulster Savings scheme. It was closed by the Government in March 1997. I suggested four or five years ago that the unclaimed assets of that scheme should go to the Community Foundation for Northern Ireland, but was told that it was “too early”. However, I had to raise the matter again a few months ago, because it was the last time that the assets were in the Budget book before going off the edge. I received a letter from the noble Baroness, Lady Amos, who stated that the cash was not ring-fenced and that the balances had already been used to fund public services. She said that a few months ago, but I could have been told that four or five years ago. The Government have not been clear about that.

Pages 59 to 61 of the Treasury Select Committee’s report refer to what happens in the US state of Vermont, for which it lists 110 different categories of unclaimed asset. The Bill deals with two. The Bill makes provision for four orders and three regulations, plus sub-orders for Scotland, Wales and Northern Ireland, but why does it not make provision for an order to extend the provisions of the Bill to other forms of asset?

I turn to the definition of dormant bank and building society accounts. The Bill refers to 15 years—I could have been persuaded of 10 or 12, but I shall leave that aside for now. However, what about the starting point? Reference has been made to the voluntary Banking Code, which states:

“If you have money in a dormant account, it will always be your property (or if you die, it will become part of your estate). This is the case no matter how many years pass”.

However, the Banking Code was first introduced in 1992, which, amazingly, is 15 years ago. We are therefore talking about assets that, in terms of the Bill, were dormant before the Banking Code was introduced. The code followed the Jack committee and was established in 1992. What about earlier years? When did history start? The Halifax Equitable Benefit Building Society, the precursor to the Halifax, was started in 1871. In terms of the Halifax, is that the starting point?

I shall share with your Lordships an experience of my own. I found in a drawer a passbook for the Yorkshire Bank. The account was opened just after my wife and I were married. The book states that it was opened on 5 March 1966. I thought that it was mine, but it was my wife’s. There must have been a specific savings plan, because a few pounds were put in, then they were drawn out. There now remains, 41 years later, the princely sum of five shillings and 11 pence. It does not matter; it is from more than 41 years ago; it is a very small sum; it will not buy a postage stamp. I am now in my third matrimonial home. What if the book that I had found had belonged to a great-great-grandfather and the balance was £500? Would that be available now to be written off? Or would it be available under this scheme, had it not been found, to go to good causes? What happened before the introduction of the Banking Code? Did banks and building societies write off money to profit, or did they write off to a suspense account, which meant that the bank or building society would have greater capital? The start is important. It is important, too, in terms of a level playing field for all banks and building societies.

I turn to the voluntary or compulsory nature of the scheme. What is in it for the volunteers? The British Bankers’ Association and the Building Societies Association say that they will be in it, but will they? How can we be certain? What about the overseas element? We know, for example, that the Bank of Ireland and the Allied Irish Bank are in business here in the UK. Has any dormant money there already found its way under the Irish Sea, or is it in a separate UK bank or subsidiary? What about overseas ownership? The demutualised Abbey National Building Society is now part of the Bank of Santander. Is the decision whether to join the voluntary scheme to be made here or in Spain? Similarly, the Yorkshire Bank is now Australian-owned. Other changes in ownership of banks and building societies, if they demutualise, can take place. Could banks volunteer now, then be taken over, and backtrack later?

Apart from the BBA/BSA indication, the only really persuasive issue is the comfort of indemnity via the reclaim fund. I shall not say too much about it—I understand the indemnity point—but I have one question for the Minister: does he have any idea of the generosity/caution ratio of the reclaim fund? The reclaim fund will have to say, “Yes, 15 years have passed and we’ve tried very hard, but we haven’t been able to reunite, but, you never know, something might crop up”. What will be the balance? To what extent will it be able to say, “Well, we think that we could put in 80 per cent”? Or will it be 60 per cent? Does the Minister have any indication of that?

On spreading out the money to the good causes and the main scheme, I was—as previous speakers have said that they were—surprised at the specific prescription of the money being provided for,

“services, facilities or opportunities to meet the needs of young people … or connected with … the development of individuals’ ability to manage their”—

own affairs, or—

“the improvement of access to personal financial services, or … made to a social investment wholesaler”.

I asked myself, “Is there a problem here? Is it to do with the manifesto?”.

The Labour Party manifesto of 2005 said:

“There are many bank accounts that are lying dormant and unclaimed, often because people have forgotten about them or because the owner has died. We will work with the financial services industry to establish a common definition and a comprehensive record of unclaimed assets. We will then expect banks, over the course of the Parliament, to either reunite those assets with their owners or to channel them back into the community”.

So there is not the precision there that is now in the Bill.

Bearing in mind the source of the money, the category about assisting the financially excluded is bang-on right, and there is no question of that. I would have expected housing to be mentioned, however. Think about what building societies were set up for. If Shelter could use a significant grant, that would be quite appropriate. Furthermore, although I am very much in favour of supporting youth, I would have said “youth and community”. We are talking about capital money—although there is no problem whether we are talking about capital or revenue, ultimately, in how the money is used. But you would not want a place to be built in a rural area that could be used only for youth when it was quite obvious that it could be used for the community more generally. It would be out of keeping with today’s thinking not to have a place that is multi-use.

I highly approve of the position for the second scheme, involving smaller banks or building societies, and that resources can be used locally. However, there is a problem. This is where I come back to the nine years that I put into the Community Foundation for Calderdale. In a place such as Halifax, the Halifax Building Society was, and HBOS is, an incredibly important part of the community. If you are looking for money from the private sector in a community whose major employer and institution is so huge, it can well be the first port of call. Under this scheme, if HBOS followed the BBA advice, it would have to sign up to the main scheme. There should be a compromise so that with organisations as big as HBOS, which clearly have an incredible local involvement but whose depositors, former members and shareholders are UK-wide as well, we balance the national interest in the incredible potential resource nationally, which is obviously beyond the local need, with the local need that is clearly still there.

In other words, we have a cliff edge in this Bill. We are told that there are 60 building societies, 52 of which are below the cut-off line of £7,000 million. I shall give a little case study of the Skipton Building Society. The figures are easy to cope with. That building society is based in Skipton, in the Craven area of Yorkshire. It has been a successful and progressive building society and is now number six in the list of building societies. Its asset base of £10.5 billion puts it in the top eight, and it is above the £7,000 million for the alternative scheme. Would the Minister agree that there should be a way of avoiding the cliff edge, so that there is an element of local generosity available? I happen to know that in Skipton there is a community foundation called the Craven Trust, which in my view would be particularly well placed to look after local money.

Number nine on the list of building societies is Derbyshire Building Society, with £6 billion. There is also a community foundation in Derbyshire—and again, that would be an appropriate body to use the money. There would be something wrong in my book if Derbyshire could benefit locally and Skipton and Craven could not. We should be thinking about the opportunities available to ensure that there is some possibility of doing things differently, so that there is some local element. Because the numbers fit, my suggestion would be that if £7,000 million is seen as the correct figure—and in the case of Skipton the figure is £10.5 billion—two-thirds could be distributed locally and one-third nationally. Of course, when you get to the big ones, such as HBOS and Nationwide, a tiny percentage would be local. Clearly, with a very large institution, the local element would be very small as a proportion, but it would be incredibly worth while.

My Lords, I am grateful to the noble Lord for giving way. I am just wondering whether I will be able to have dinner tonight, or not.

My Lords, the noble Earl has ample time for dinner. I believe that this is an important Bill, as I hope he does—and I hope that he stops and listens.

There are three ways for the smaller bank or building society to act. They could create or add to their own charity, or they could give to a community foundation, which now covers 95 per cent of the country. Indeed, they could have a discrete fund within the foundation. Or they could do nothing. They could say that by order the figure of £7,000 million could be raised. The Skipton Building Society, which gave evidence to the Treasury Select Committee of the other place, raised the issue with its members, and 88 per cent of its members believe that the money should not go in the direction of government. Half its members agree with the potential scheme. I suspect that many people would think that the National Lottery was somewhere near government—and this is an area in which we have to be careful.

On the Big Lottery Fund, as the Minister knows, since we have been here before, I have a preference for local and regional decision-making on grants. But if the local element is enhanced, perhaps the system as described could be right. There is a case for the Big Lottery, with its expertise in grant-making covering the national scheme. The Bill is clear in its transparency as to accounts. But I am doubtful of the name—the Big Lottery—being used for the money. Perhaps a new brass plate could be ordered, even if it is placed outside the doors of the Big Lottery, and perhaps rather than “dormant” it could refer to the “reawakened” fund, so that it is clear that these funds have not been raised from gambling, which is an issue that has been upsetting to some.

Finally, this is an important and exciting Bill. I return to the theme of a rich seam. Early calculations in Ireland were that there would be €3 million from the scheme, and €196 million came out of it in the first year. They were wrong by a factor of 64. Early estimates here are £450 million, on these very restricted proposals. If that factor were applicable here, the figure raised would be £28.8 billion in the United Kingdom. That is not a forecast—but it could be that £450 million is a little on the low side.

I look forward to the Committee stage in which we shall endeavour to improve, enhance and localise the splendid opportunities available in the Bill.

My Lords, I hope to be relatively brief. While freely acknowledging the good intentions of its sponsors and supporters, I must confess to considerable misgivings about this Bill, specifically Part 1. Despite the safeguard incorporated in it designed to prevent the effective confiscation of an individual's assets, I none the less fear that de facto confiscation could sometimes occur in whole or, more likely, in part as the Bill stands. At the very least, it could involve individuals in unwelcome time and trouble when they finally come to discover their entitlement, particularly if they are old or confused, as may statistically often be the case by the nature of things.

There are many reasons why people may want to keep sums of money undisturbed in an account for 15 or more years. For example, they may not want to keep their rainy day nest egg in the proverbial sock under the mattress for fear of being assaulted or robbed in their home—an increasingly likely scenario, unhappily. At the same time, they may have a deep distrust of stocks and shares in whatever form. You and I would almost certainly advise anyone investing for 15 or more years to put their money into a selection of well-run unit trusts or, better still, well-run investment trusts standing at a good discount to net asset value. But there are many who would never entertain such a sensible proposal, in particular if they burnt their fingers over Railtrack or Northern Rock shares.

People should not be penalised for being suspicious, stubborn or unsophisticated. Moreover, someone who puts money into certain types of building society account for 15 years—accounts whose relatively high interest is earned in return for restricted withdrawals and substantial notice periods—is not necessarily being silly or irrational. Their funds may sometimes even keep or very occasionally exceed the rate of inflation.

Another aspect came to light yesterday evening in your Lordships' House when I briefly mentioned this Bill to a friend from overseas who was dining here. She told me of a Jewish acquaintance living in the near East who deposited a five-digit sum with a London bank and left it totally undisturbed for 20 years, just in case life started to become difficult for people of Jewish origin in their part of the world. One suspects there must be hundreds—perhaps thousands—of similar cases where members of potentially vulnerable political, ethnic or religious groups have transferred funds to the supposed safety of United Kingdom institutions as a contingency fund to keep their families afloat should things go wrong.

If, therefore, it is accepted that some people have subjectively valid reasons—even if sometimes cranky reasons—for keeping money undisturbed in banks or building societies for decades, how will the Government protect their interests?

It is claimed that Clause 2(2)(a) will do the trick: provided the account holder instructs the bank or building society not to communicate with him or her concerning the account, it will not be reclaimed. But most sane account holders will positively want to be communicated with once or twice a year with statements showing the opening and closing balances and any interest credited or bank charges debited, if only to reassure themselves that some fraud or computer glitch has not transferred their funds wholesale to someone else with a vaguely similar name living hundreds of miles away. Surely it should instead be made incumbent on banks or building societies to make every effort to ascertain from the account holder every three, four or five years that he or she wishes to maintain the account in force.

What about interest? A small current account will earn no interest; a larger one a fairly derisory rate. But a well-chosen building society account could earn on average 5 per cent gross or 4 per cent after 20 per cent tax. Compounded, that would increase a £5,000 deposit to £7,400 after 10 years. Will an individual whose £5,000 in a dormant building society account has been switched into a “reclaim fund” in 2008 be able to claim back £7,400 in 2018 when he suddenly reappears from some distant part of the world? If not, this surely constitutes partial confiscation of his or her assets.

Will the Minister assure the House that under no circumstances will there be attempts to extend the provisions of this legislation to the Channel Islands or the Isle of Man? If one or more of the legislatures of those territories decides to do so of their own free will, all well and good, but there should be no arm twisting.

My Lords, I, too, will try to keep my remarks short. There are two schemes in the Bill, as has been pointed out. There is what you might call the general or public sector scheme, which is much the bigger part of the available money, and the alternative scheme. The general scheme is bureaucratic and complicated. The alternative scheme is very simple. In fact, you only have to look at the space given to the alternative scheme in the Bill to see that it must be simple, but it would come out with a much more diverse funding than the general scheme, which is constrained.

The Treasury Committee report that came out in August concentrated on consultation. The Committee took a lot of evidence—from the NCVO, the Charity Bank and the British Bankers’ Association, which has been referred to, but interestingly not from the Big Lottery Fund as far as I could make out. In conclusion 15, which is on disbursement, the report states:

“We regret the Government's decision to make its choices on funding priorities without meaningful prior consultation with relevant stakeholders”.

The Government's reply, which has already been given to us by the Minister, was, “Well, we said what we were going to do in the Pre-Budget Statement of 2005. That was our decision and our minds are made up”. That is the first “given” in this situation.

The second “given” is the arrival of the Big Lottery Fund. That is wrong in principle. If you are going to support the third sector, you do not come up with a public sector solution. It is the wrong way to go. That leads me to say that I entirely agree with the noble Lord, Lord Shutt, that the alternative would give a more desirable outcome. I certainly hope that Skipton Building Society will be above the barrier rather than below.

Big is also wrong for practical reasons. These moneys are too small to make much difference to its operations and likely to remain so on the figures given by the Minister. The Big Lottery’s level of activity is shrinking at the moment, which gives it a major management challenge. It paid out grants in 2005-06 of £900 million. Its income the following year was £640 million. Clearly, that will not support the continuation of £900 million of disbursements. Its commitments in 2006-07 were £400 million, which is a reflection of the fact that, whether as an intended or unintended consequence of the Olympics, the Big Lottery Fund has to reduce its operations drastically to meet the prospective funding from lottery funds. The last figure is less than half the first—£400 million and £900 million respectively.

What has been happening at the same time to the Big Lottery Fund’s costs? The answer is that they have continued to rise. The Minister referred to running costs. They have risen from £72 million in 2005-06 to £77 million in 2006-07. This leads to awful ratios. Their ratios are quite out of order. If you look at the Wellcome Trust, which has been referred to, or the Gatsby, which the noble Lord, Lord Sainsbury of Turville, is very much involved in, the Esmée Fairbairn or any of the other big trusts, you will find that on balance the ratio of costs for administering their funds and making grants vis-à-vis the grants themselves is about half that of the Big Lottery Fund. That leads me to wonder what is the sustainable level of Big Lottery Fund grants, given its own original statement and given more recent statements.

The Big Lottery Fund’s own report published in July states—in a joint introduction by the chairman and chief executive—that it,

“will receive £425 million less than we forecast in the period 2009-12”,

and that,

“there will be less money available for new funding programmes after 2009”.

But in fact its disbursements have already fallen. They were 900; last year they were 750. What will they be this year? Is it not risky to put another responsibility on to the Big Lottery Fund when it already has major issues to deal with?

As regards my next point, I support my noble friends Lord Astor and Lord Inglewood. My noble friend Lord Inglewood would have made this point if he were present. However, he has a family commitment and the timing of this debate has meant that he is unable to be present. As noble Lords know, he was the chairman of the committee that looked into whether works of art should be exported. He has said on many occasions that if only £25 million a year had been provided over the last few years, many works of art would not have gone abroad. He wanted to draw the Minister’s attention to that as a good cause. If additional money is to be provided, could not that cause be supported. Other witnesses have suggested that there should be a much more diverse approach to deciding where the money goes as opposed to the approach of which we have heard a great deal during this short debate.

The Government should think again. Are they stuck with the 2005 decision or could they be a bit more imaginative? What do they consider the original depositors would think about most of their money going into the single stream that is proposed by the Government? As regards the alternative approach, it is not difficult to raise the £7 billion ceiling; in fact, I believe that the Bill provides for a regulation to do just that. That would give us much greater scope. If the scheme were voluntary and private, I think that many more of the institutions that have potentially dormant assets would become enthusiastic about it, whereas I fear that if they think that the scheme is government controlled and that the disbursements will also be controlled by the Government through the DCMS and the lottery fund, they will not want to join it with anything like the same enthusiasm.

My Lords, like, I think, all other speakers in the debate thus far, I welcome the intentions of the Bill, if not necessarily the way that they are to be fulfilled. As my noble friend Lord Shutt said, this is an untapped seam. As he also demonstrated, the seam that could be tapped is very much larger than is covered in the Bill. So I join him in wishing that it was not as prescriptive as it is, and hoping that before too long—I hope during its passage—it will become less so.

I was also a little surprised that the Government have chosen to put quite such a prescriptive measure in Clause 17 with regard to England. I say straight away that I very much welcome the provision for youth. Like many other services, youth services have suffered greatly during the years of restrictions on local authority budgets. However, I wonder why it was necessary to be so prescriptive. I again agree with my noble friend Lord Shutt—it is always a good idea to agree with one’s Chief Whip—that it would be better to refer to youth and community purposes in that regard.

I want to concentrate my remarks on the distribution mechanism proposed in Part 2. I ask the Minister specifically why the Government have chosen the Big Lottery Fund as the distributor. In saying that I make no criticism of the Big Lottery Fund, the way it does its job or the decisions that it makes; my criticism, if there is any, is directed at the Government, not at the Big Lottery Fund. As a matter of principle, is it now government policy that all money not drawn directly from taxation should be distributed by national non-departmental agencies such as, in this case, the Big Lottery Fund? If this is a point of principle, we should be clear about it, or is there some other reason why this is happening? I ask this particularly in the context of the work that another arm of government has been doing to develop local strategic partnerships—LSPs in shorthand—and the new process for funding them that is about to be introduced through local area agreements, usually known by the acronym LAAs.

At this point I must declare my own interest. I am a member of the local strategic partnership board in the London borough of Croydon, on which I represent the Metropolitan Police Authority, and of the local strategic partnership board in the London borough of Sutton, on which I sit as the executive councillor for community safety, leisure and libraries. So in both cases I have a very real interest—although not a pecuniary one, I hasten to add—in what is proposed here and in the opportunities that it gives.

These local strategic partnership boards are statutory bodies and exist in all parts of England. They bring together on one board and in one place all the statutory bodies in that area—the local authority, the police, primary care trusts, learning and skills councils, Jobcentre Plus, and, most importantly, the business sector, the voluntary sector and the community sector. They are brought together on one board and their role is to work together to agree the priorities for their area and to address in partnership how those priorities will be achieved. Those priorities are then reflected in the local area agreement, which is agreed with the relevant government regional office. The Government have just revised their method of funding these strategic partnerships into a new process based on identifying improvement targets for the area, drawn from the new national indicator set, as published in the Comprehensive Spending Review. Alongside the new local area agreements, local strategic partnerships will be given a new single pot area-based grant from government. This brings together a number of specific grant-funding streams previously received by the partner agencies as specific grants. Then the local strategic partnership—which I again stress includes as very real partners the voluntary and community sector—will decide locally how those funds are distributed in accordance with the priorities that have been set locally.

The context of my question is that this new mechanism created by government, which involves all the relevant players in a local area, would determine how funds are distributed to meet locally determined priorities. Why is that not an appropriate mechanism to deal with the funds released through unclaimed assets? Why do we have to go through the process of setting up a whole new regime?

Did the Government specifically consider using local strategic partnerships and this new mechanism as the distribution mechanism? If so, why was it rejected? I think it is probably conceptually impossible that the Government would not know what another arm of government was doing, but if they did not consider it, why not? The decision seems at odds with the clear leadership role for local authorities envisaged in Aiming high for young people: a ten year strategy for positive activities, published jointly by the Treasury and DCSF as recently as July of this year. Paragraph 4.22 of that publication states:

“The investment of unclaimed assets from dormant bank accounts offers a once-in-a-generation opportunity to stimulate more visionary and ambitious thinking about what can be achieved through partnership, co-funding and putting young people in the lead. The Government wants to see a network of high-quality dynamic and attractive places for young people to go that reflects circumstances and uses existing provision, such as community buildings, libraries and art centres”.

It continues at paragraph 5.18:

“Local authorities need to play a strong leadership and coordinating role, working with a wide range of local partners from the statutory, third and private sectors to provide high quality services for young people”.

That could not sound more like a role for the local strategic partnership. All that is missing is any reference to it. So why does it not feature in the Bill?

The briefing from Barnardo’s, under the heading “Local ideas to meet local needs”, states:

“In order to have maximum impact on communities, the funds from this scheme should be targeted at projects that are responsive to the needs and priorities of communities”.

Who is better placed to judge that than the local strategic partnership in which all those interests are represented, including—I say again—the voluntary and community sectors? Barnardo’s goes on to say:

“Local and regional knowledge is essential in targeting resources to have the most impact by designing and delivering services to meet local need”.

Why is a national agency like the Big Lottery Fund—albeit through its regional offices—better placed to determine that than the local strategic partnership board? Later on Barnardo’s states:

“We also believe local organisations and individuals are often best placed to advise on the overall impact projects may have on communities, providing information on how well proposals would complement others in their areas”.

Again, the local strategic partnership is clearly best placed for that, but there is no reference to it in the Bill.

As I said at the start, I intend absolutely no criticism of the Big Lottery Fund or its work; my questions are to the Government and about their decisions. I understand that 80 per cent of responses to the consultation supported the Big Lottery Fund; and I understand why. Was the new and developed role of the local strategic partnerships, and particularly the new funding regime, which is about to come into existence, part of the consultation? I think probably not. Even among the 80 per cent who supported this, concerns were expressed that funding through a national organisation might render the application and decision-making process overly bureaucratic and therefore time-consuming and resource intensive for smaller third-sector organisations to manage. Knowing this Government, it is likely that they will press ahead with using the Big Lottery Fund as the distributor. If so, how does the Minister see local strategic partnerships fitting into the process? For instance, will the Big Lottery Fund be required—not requested—to consult local strategic partnerships before making its decisions and to take properly into account any recommendations made there? Indeed, will the local strategic partnership be able to apply for funding from this source?

I am conscious not only of the time, but also that I am the last speaker from the Back-Benches. I had expected that the concerns expressed by a number of us from the Unclaimed Assets Charity Coalition of 52 charities would have already been mentioned in the debate. As I am the last speaker from the Back-Benches I will raise briefly the coalition’s concerns so that they are on the record, and I hope that the Minister can respond. The coalition is united by a desire to locate the assets bequeathed to its member charities in supporters’ wills but which currently remain unclaimed. Its main concern is simple; that the Bill should focus far more on the central objective of reuniting people, including relatives, with the unclaimed assets that are rightfully theirs instead of focusing primarily on how those assets should be distributed.

The coalition makes five points about what it wants from the Bill. I will quickly read them so that they are on the record and the Minister can respond to them. It says it wants: first, any activity to reunite owners with their assets to include provision for identifying unclaimed assets from deceased people's estates; secondly, the establishment of a “one-stop shop” for searching data to reclaim lost assets; and, thirdly, the definition of an “unclaimed asset” to be extended in time to include more financial assets. I think that point has been covered in the debate. Fourthly, it wants a recognised scheme to identify unclaimed assets held by financial institutions. Its preferred approach would be mandatory. Finally, it wants the dormancy period of what is considered an unclaimed asset to be reviewed. It thinks that for many asset types 15 years is too long. I hope that the Minister will respond to those points because they are important and undoubtedly we will return to them during what I think will be a very interesting and, if I may say so, quite a challenging Committee stage to the Bill.

My Lords, like other noble Lords who have spoken this evening, I welcome the Government’s proposals to put dormant assets to positive use. I particularly welcome a number of the Bill’s features. The concept of the reclaim fund is clever and the plan on how to make it work has much to recommend it. In particular, the fact that depositors will still have access to their funds beyond the 15-year period is crucial, and the Bill deals elegantly with the point. Like my noble friend Lord Shutt, I strongly agree with the special provisions for smaller banks and building societies.

I know that the Government have undertaken consultation on the Bill but fear that, at least in certain respects, this consultation has followed the pattern of Treasury consultation down the ages, which is to put out proposals for consultation and then completely ignore what people have said. The fact that the Government have almost entirely repudiated the Treasury Select Committee’s comments and suggestions is extremely unfortunate because those comments were in most cases extremely sensible.

We on these Benches will, as we have heard, wish to examine in Committee a number of issues regarding the operation of the reclaim fund and the distribution to good causes. There are a number of general issues, but I will raise just a few. The first is the importance of trying to reunite assets with their owners before the assets reach the fund. It is much better for the owners of the assets to use them as they wish rather than for someone else, whether it is the Big Lottery Fund or anyone else, to use them on their behalf. One interesting issue is what scope there is for reuniting people with their assets. According to evidence that I have seen from an organisation called Heirtrace, some 80 per cent of currently dormant assets can be reunited with their owners if sufficient effort is put into it. Although that figure seems high, even if it is only 50 per cent it would be worth making a considerable effort to try to reunite people with their assets or to ensure, as the Unclaimed Assets Charity Coalition is at pains to point out, that assets which may be dormant at the time of someone’s death and might be allocated to a charity can find their way to the charity specified in the will. Some of the proposals—at least the ones on a one-stop shop for information—go some way to addressing that issue.

I am not clear whether that can best be dealt with by including additional provision in the Bill or whether those are administrative provisions that are best dealt with by the banks, building societies and the reclaim fund. However, we need to be satisfied that, whatever provisions we put in place, maximum effort is expended to reunite people with their assets. I am not sure that I agree with the Unclaimed Assets Charity Coalition about 15 years being too long. It seems to me that you must pick an arbitrary figure, and it is probably about right.

The next issue is whether membership of the scheme should be voluntary or compulsory. I am very far from convinced by the Government’s arguments for voluntary involvement. If the idea is so important, why should any bank or building society be able to avoid it? The Government’s answers on this point in their response to the Treasury Select Committee are pretty thin. They argue:

“A voluntary approach enables the use of private sector expertise … A voluntary approach means that it will be the private sector that takes responsibility … The voluntary approach brings added flexibility ... A voluntary scheme also takes account of better regulation principles”.

All those are highly questionable assertions which I will examine in Committee.

The next issue, raised by a number of speakers, is whether the Bill is correct in limiting its scope to banks and building societies. Again, I greatly enjoyed reading the Government’s response on why National Savings & Investments should not be included in the scope of the Bill. They explained that it was completely unnecessary because that money is,

“used to fund public services”,

and therefore is “already benefiting the community”. I wonder whether the Government could explain how they came to that conclusion and whether the unclaimed assets from National Savings & Investments might, at the very least in future, be identified in some way in government accounts so that we would know exactly how they were “benefiting the community”.

There is also the issue of whether we should extend the scope to other sorts of assets, including insurance policies. My inclination at this stage would be to follow the precedent in the Financial Services and Markets Act, in which additional categories of financial activity can, by order, be brought within the remit of the FSA. It seems to me at this stage that bringing banks and building societies into the scope of the Bill to start off with is a good idea. Bringing additional classes of asset in at a later stage might be an equally good idea, and it may be possible to amend the Bill to allow that to happen relatively easily.

My noble friend Lord Shutt mentioned the situation of overseas banks, which again raises the issue of voluntary versus compulsion. The logical situation is that any bank account held in the UK should be subject to the Bill. I take the point made by the noble Lord, Lord Monson, about people who bring assets into the UK with no intention of using them for a considerable time. I would have thought that there are two mechanisms that might give him some reassurance. First, the bank will maintain the life of the asset by occasionally contacting the person who has deposited it so that it does not become technically dormant. Secondly, under the reclaim fund people could come back at any point and reclaim their assets.

There is also a technical issue regarding interest on balances held in the reclaim fund. Clause 8 says that the balance is,

“the amount owing to the person … after the appropriate adjustments have been made for such things as interest due”.

Given that the reclaim fund will, as I understand it, be a fund that will contain assets coming from a large variety of accounts, how does one determine what interest is due? Some will be from non-interest varying accounts and some from different accounts. Is each amount, or a proportion of each amount, going to be allocated a separate interest rate? That seems almost inconceivable, both conceptually and in practice. In the absence of such a complicated scheme, will a composite interest rate be applied to all the assets and, if so, what will that interest rate be? There is no indication in the Bill.

That is the business of gathering the money together; we now come to the question of spending it. As for who should have overall responsibility, given the scope and purposes of the expenditure, there has to be a single national body. At least until I heard my noble friend Lord Tope, it seemed to me that the Big Lottery Fund was the logical national body. If not it, who will it be? Given that one of the aims must surely be to get this out of the clutches of central government, it is equally possible that local strategic partnerships could, in theory, bid for funds from the Big Lottery Fund from this account. There is no reason either under the Bill as drafted or as it might be amended why local strategic partnerships could not have a big say on how at least the youth strand is funded. When it comes to financial inclusion and the social investment wholesaler, there is not necessarily similar local involvement and national schemes may be necessary.

Equally, although we may need “a body” responsible for overseeing how the money is spent—the Big Lottery Fund might be the logical choice—the money could in theory be used for anything. I know that this is unusual for the Lib Dems, but we have had a tendency to want to spend such money on everything and to spend it many times over. We had a strong lobby in our party that such money should be used for overseas development. It seems to me that, with the exception of financial literacy, where there is an obvious link, you could in theory spend the money on anything. The two other causes are perfectly sensible. We can always beneficially spend more on youth affairs and young people. I therefore do not have any huge problems with the Bill’s definition of where the money should be spent.

I have an issue about what a “social investment wholesaler” is. First, I have never heard the phrase, and I have been involved in this area for some time. I had never seen it until I read it in the Bill. The Bill does not define what I thought the Government were seeking to achieve. I thought that the Government were seeking to establish a social investment bank. The Bill says something completely different, which is much less prescriptive of what the wholesaler could do. It says that it is,

“a body that exists to assist or enable other bodies to give financial or other support to third sector organisations”.

It therefore seems that the NCVO is a social investment wholesaler, because that is exactly what the NCVO does. It exists to give support to third sector organisations. As a member of the NCVO advisory board, in which I declare an interest, I can see some advantage in the NCVO getting some of this money; but I did not think that the Government wanted that. I thought that the Government were talking about a single new social investment bank and that there was a suggestion that it had to have several hundred million pounds in it to be worth while.

I am pleased that the Minister has confirmed that the money will not be used to substitute for existing government expenditure and that additionality will apply. In terms of its broad usage, I would be grateful if he could confirm that the Government envisage that the money could be used for both capital and current expenditure and would not be limited to one. There is no doubt that we will want to deal with many other issues in Committee. I hope that I have dealt with some of the main ones, but we look forward to the Committee stage and to seeing the Bill through.

My Lords, we have had a varied debate, which should at least put the Minister on notice that the Bill is not quite as straightforward as he might have hoped. But let me start on a positive note. Like other noble Lords, we agree with the proposition that unclaimed assets should be put to good use. The banks and the building societies thought that they had a rather good use for those assets as a bit of free capital to produce an additional income stream for their shareholders and members. But clearly there are other uses with wider societal benefits. We support the Bill to that extent, but that is the extent of our wholehearted agreement.

Just as the banks were probably quite happy with the status quo, I imagine that the Government feel much the same way about the unclaimed assets in their own bailiwick; namely those in National Savings, to which other noble Lords have referred. We understand that there is just short of £1 billion of unclaimed accounts. I agree with the noble Lord, Lord Newby, that we need to look at that further. Will the Government say when they intend to take action to allow the value locked up in other unclaimed assets within the financial services sector, such as those in pensions or life assurance policies, to be liberated? We do not understand why the Bill is restricted to bank and building society accounts. It should be drawn much more widely in order to provide a way of using the value in other dormant financial assets, and we shall want to pursue that in Committee. I hope that the noble Lords, Lord Newby and Lord Shutt, will join us in that endeavour.

Your Lordships’ House amended the most recent Pensions Bill to allow improved benefits to the 125,000 pensioners for whom the Government still do not provide adequate pensions, in defiance of the ombudsman. We sought to create a “lifeboat” funded by an unclaimed assets recovery agency which could have included dormant bank accounts. The Government overturned those amendments in another place. This Bill closes the door on using dormant bank account money for that purpose. We regret that and believe that the Bill should be widened in scope to allow it.

I turn now to how much money is involved, because it is relevant to how widely the Bill should be drawn. The Explanatory Notes give no idea of how much money should be funnelled through the Bill, and the Minister said that he did not know. The summary at the beginning of the final impact assessment booklet says that costs and benefits are nil, but that is plainly nonsense. In fact, a footnote towards the end of the impact assessment states that dormant accounts could at present yield between £400 million and £500 million. Those estimates are given by the British Bankers’ Association and the Building Societies Association, but, as noble Lords have said, the evidence from a similar exercise in Ireland showed that initial estimates proved to be wild underestimates. If one listens to City chatter—I put it no higher than that—people are talking about very significantly larger sums being made available. The noble Lord, Lord Shutt of Greetland, referred to a figure in the tens of millions. I am not sure that I have heard a figure quite as high as that, but there could nevertheless be significantly more.

The potential for higher sums being available means that we must ensure that the use of the money is drawn as widely as possible in the Bill. I have referred to supporting pensioners. There are other possibilities, including Liberal Democrat pet causes. We need to ensure that the Bill can deal with a wider range of expenditure and also remain flexible over time, because we do not wish to fix in stone the uses to which the money can be put. We need a broader concept built in.

For today, let us assume that the scheme will raise the lower end of the amount estimated by the BBA and BSA—some £400 million. We then have to flow that through because not all of it will be available for distribution, because some has to be used for reserves. We do not know how much that is, and the Minister has already been asked to comment on the level of reserving policy covering how much would be top-sliced before the money could be made available. I look forward to his answer. Expenses will also accumulate as this money passes through the system. On industry estimates, we might be talking about some £300 million to £350 million being available at the outset.

We shall be concerned to look at how the “prescribed percentages” provided for in Clause 16 will work. In particular, we will want to ensure that England gets its fair share. At the moment, England accounts for some 80 per cent of public expenditure. If we assume that England receives that as a minimum, we are talking of perhaps 80 per cent of £350 million—some £280 million—flowing into English activities. When the Prime Minister addressed the Labour Party conference in September, he said:

“so we will use unclaimed assets in dormant bank accounts to build new youth centres, and will invest over £670 million so that in every community there are places for young people to go”.

The simple question for the Minister is why did the Prime Minister use the figure of £670 million? It is unlike any figure that has come out of the industry at any point during the consultation. If you flow that through into England and take off some reserving to get to my £280 million figure, the Prime Minister was overstating the figure by 2.5 times. I hope that the Minister can explain that.

I want to look in a little more detail at the promise on youth centres in the Prime Minister’s speech. I should say that, like other noble Lords, we support spending money on youth facilities, but I want to clarify the Government’s intentions. The consultation issued in May claimed that the money,

“could allow over 700 new places for young people to be built”.

So, the vision is clearly one based on bricks and mortar. I expect that the Prime Minister has some kind of memory from his own youth when teenagers were grateful for the opportunity to gather in youth clubs and listen to the latest chart-topping black discs. The Prime Minister may not have noticed that that is not the aspiration of today’s teenagers, nor does it reflect the lives that they lead, including the way that technology changes the way that young people interact. Will the Minister explain in more detail what the Government envisage the money will be spent on and how they will avoid spending it on things that young people do not actually want in the modern age?

Lastly, it is clear that the Government see the use of this money in terms of capital projects. The noble Lord, Lord Newby, asked whether it could be used also for revenue projects, but it is clear from everything that the Government have written that their vision is that the money is for capital projects. The Minister will be aware that the public sector is littered with many well intentioned capital projects that struggle to find ongoing revenue funding. Will he say how the Government think these youth centres will be financed on an ongoing basis? The amount of money available from dormant accounts is bound to fall sharply after the initial catch-up period, when a backlog is dealt with. Where is the money coming from? It sounds like another hit on council tax is coming down the line.

I have dwelt on spending on youth because that is what the Prime Minister has focused on. However, as we have heard, Clause 17 has two other objects: financial inclusion and social investment. The Government have made it pretty clear that they are still keen on financial inclusion but they seem, at best, lukewarm about a social investment bank, even though that is what their own Commission on Unclaimed Assets recommended, with, by its calculations, a price tag of anything up to £330 million over five years.

Will the Minister explain how the Government see those two additional objects being funded? There is the £670 million to which the Prime Minister referred. That may sound like a lot but, if it is to provide for the 8 million or so teenagers, it could be spread extremely thinly. Do the Government have a view on how much ultimately needs to be spent on these youth facilities? How much will be spent on youth before the other two objects get a crack at the money? Will youth spending stop at £670 million or will the Government have a higher figure in mind before they are happy to see money going into either of the other two concepts? It is important that we understand what the Government intend from the Bill.

Staying loosely with my money theme, there is no information in the papers about the amount to be raised and no information about the costs. As we have heard, the money is to be processed through a reclaim fund and then distributed via the Big Lottery Fund. Overall, that seems to be a recipe for job creation with two layers involved. When will we be told the costs of processing this money? What will the upfront costs and the annual running costs be? How, in the longer term, will the annual running costs compare with the estimated annual flow from dormant accounts? As I said earlier, once the initial amounts have been gathered, we have to expect the annual flow to drop down to a relatively low level, and we have to query whether the Government have designed a value-for-money solution.

The Government’s chosen conduit is the Big Lottery Fund. My noble friends Lord Astor and Lord Eccles raised some very important points on that and I share their concerns. There are concerns about the use of the Big Lottery Fund, the issue of additionality, or indeed the lack of it, and the impact of the huge sums being diverted to the Olympics on all the lottery distribution funds, including those concerned with the arts. We will look at those very carefully in Committee.

As has already been pointed out this evening, the Bill does not guarantee that a single penny of dormant bank and building society account money will flow to good causes. It merely permits the banks and building societies to transfer the money but it does not compel them to do so. What will the Government do if the amounts of money transferred through the scheme are quite low? If the banks get better at contacting their former customers and if those with entitlements, such as the charities which benefit from legacies, manage to track more down, there may well be considerably less money available. We think that those two activities are important and we will be looking at whether the Bill needs to be strengthened to reinforce their importance, but those activities are likely to diminish the amount of money that is available.

How will the Government tell whether the banks and building societies have transferred all the money that they could do? I cannot see where in the Bill there is an incentive for banks or financial institutions to transfer money; nor do there appear to be any inspection or audit functions attached to whether they do so. As has already been said, banks and other financial institutions with head offices outside the UK may well take the view that they have no particular interest in supporting the issues that the British Government have set out for them in the Bill.

There are other aspects of the Bill that my noble friend Lord Howard of Rising and I shall want to explore further in Committee. We shall want to look at the role of Treasury powers—as usual, we find the hand of the Treasury written all over this Bill. We shall want to look at the fact that English money has some very specific objects set out for it but nothing at all is prescribed in respect of the other countries which will get the money. We shall also want to look at the definition of a dormant account in Clause 10 because we are aware that it may raise practical difficulties. The noble Lord, Lord Monson, raised some important points this evening which we should think about. Like the Liberal Democrat Benches, we also want to look again at the scheme for smaller institutions to opt out of the central arrangements and to see whether they can be made more widely available. Lastly, we shall look very closely at the accountability arrangements.

In short, we shall subject this Bill to very detailed scrutiny and we hope to see a number of significant changes to it. I look forward to our Committee stage.

My Lords, I am grateful to all noble Lords who have contributed to the debate and, like everyone else, I look forward with enthusiasm to the Committee stage, when we will have a considerable amount to discuss—as though I ever doubted it.

The only general point that I make concerns the questions asked by the noble Baroness, Lady Noakes. She will appreciate that the approach of the Bill is both voluntary and light touch. Therefore, if the Government came in with very heavy directions in the way that she requested, that would run counter to the philosophy behind the legislation. She may disagree with that philosophy or she may contend that it cannot work on that basis. Of course, I always respect her opinion and I shall listen to the way in which she expresses herself at subsequent stages, but I hope that at this stage she will give us the benefit of the doubt and agree that we have presented to the banks and building societies a proposal for how dormant accounts can be used intelligently.

Of course we are vague about the figures. I said at the start of my opening contribution that the British Bankers’ Association and the Building Societies Association estimate that between £250 million and £350 million is currently in banks and up to £150 million is in building societies. Those are approximations and there are therefore bound to be caveats. I cannot talk about categorical figures at this stage and I do not think that it is reasonable that we should do so, particularly as the noble Baroness and other contributors to the debate have emphasised the prime importance of restoring these accounts to their rightful owners, if that can be achieved.

If the Bill succeeds in passing through Parliament, it will come into operation as an Act some time hence because the banks and building societies need time to do their best to locate the owners of these accounts. Not only are we concerned that that process should continue over the next year with the intensity to which those organisations committed themselves in their 8 November statement but we will also give all the support that we can to the delivery of the process, because the individuals to whom the dormant accounts belong have a prior claim on the property. That is an absolute principle to which we subscribe.

Before that process starts, we have a rough estimate of the money that might be available. I do not suggest for one moment that banks and building societies are currently dilatory in finding out what has gone wrong when an account is not activated, but they are not committed to a drive in this respect because they know that the consequence of the accounts remaining dormant is that they will fall within the framework of the Bill when, in due course, it becomes an Act. Therefore, it is not reasonable for us to be challenged too precisely on the figures for the possible return, which has been a central element in the debate.

The noble Viscount, Lord Astor, as astute as ever, had the opportunity to speak first. He identified the key issues for the benefit of us all. He looked at the priorities to which the resources should be devoted and said that he was not too sure that they were the right ones. They are the product of the most extensive consultation. I do not think that any noble Lord disagrees that we should do something with resources from this source to improve the level of financial literacy and understanding in our society. The fact that resources remain dormant is proof positive that people do not have the acumen to use them as effectively as they might, otherwise they would not be dormant in banks and building societies in the first place.

I hear what the noble Baroness says about how prescriptive and narrow our vision might be of the needs of youth. I do not think that any Member of the other place can be other than very well advised of the challenges that youth provide in the community. We live in challenging times as regards young people. They are articulate and make their presence felt and, of course, if they engage in anti-social activity it affects the whole community in a very direct way. So we will be concerned to look at the provision for youth in the widest possible perspective and against local needs and local demands. We will pursue that objective intelligently.

On other social purposes, we recognise that there will be demands from communities for such resources to be devoted to matters that benefit the immediate local community. The noble Viscount, Lord Astor, has had enough experience of the lottery legislation, which we happily debated together in past years, to focus on the Big Lottery Fund operating this. I make one thing clear. These resources going to the Big Lottery Fund will be separate. They will be separately accounted for and the lottery fund will merely be the intermediary and allocator. There is no question of them being in any way, shape or form absorbed in other activities, going towards the Big Lottery Fund costs or being used for other aspects of the Big Lottery Fund. I want to reassure the noble Viscount, Lord Eccles, who has also been prominent in our debates on these issues in the past, on that point. They would be separately accounted for.

I had one direct challenge from the Liberal Democrat Benches—in fact, a number of challenges—from the noble Lord, Lord Shutt, about the fact that the Government have already created more effective, greatly to be welcomed local partnerships, which could be better distributors. I apologise, it was the noble Lord, Lord Tope. I shall turn to the virtues of the noble Lord, Lord Shutt, in a moment, but I shall start with the virtues of the noble Lord, Lord Tope, who mentioned the local partnerships. I am the first to identify the potential success of the local partnerships doing great work in the localities. He described how and where they were intended to act. Of course, they are distributors of public funds.

We went out to consultation about these funds and the principle on which we should work. These are not public funds; these are private resources in banks and building societies. Of course we have to go in with a light touch. The noble Lord, Lord Newby, emphasised that and I remember the noble Lord, Lord Shutt, mentioning it in connection with who owns the banks and, therefore, how much they will participate. Of course, we have to go for the best and most consensual model, because this is a voluntary scheme and we want the maximum participation by the holders, the organisations that have dormant accounts. The noble Lord, Lord Tope, is a persuasive and articulate member of a number of bodies as well as of your Lordships' House, but I defy him to go to the banks and building societies and say, “I think the Labour Government have exactly the right model and you could add your resources to the local partnerships, which distribute public money locally”. That is not quite how we envisage the world working.

I understand the criticism, although I do not accept it, about the Big Lottery Fund being high on costs. It is not high on costs; it produces good figures on costs and on its distribution. It has the great advantage that not only is it a national organisation but it has regional offices and is represented in all the nations of the United Kingdom. It has a structure on to which we can latch, intelligently, the distribution of other funds, which are not public funds any more than the lottery proceeds themselves are government resources. We can put on to the Big Lottery Fund a distribution mechanism, which is all that we are doing.

In Committee, there will be many questions about the efficacy of the Big Lottery Fund and I have not the slightest doubt that we will have lively exchanges on that matter. It is part and parcel of the main theme behind this legislation, which is to create not a state bureaucracy, or even an arm of a state bureaucracy, but a voluntary participative scheme to do good in the community by the distribution of resources and with the maximum amount of participation. That is why nearly every one of the structures that we have in place with regard to the Bill—of course, I shall listen to strong criticism of them in Committee—has a basis in considerable public support following the consultation process on the way in which the Bill should be created.

I have heard the noble Baroness, Lady Noakes, the noble Lord, Lord Newby, and others say that the Bill is too limited in the number of financial institutions to which it addresses its objectives. The answer is that we are delighted with the progress that we have made and with having on board the two biggest financial institutions, in terms of their spread across the United Kingdom. There are more challenges regarding insurance policies and other financial institutions compared with the bodies that we have approached at present. I hear what noble Lords say: we should leave the door open. That is a debate to which I shall listen with great care. The Government believe that, on the whole, permissive legislation that offers up the hope and optimism of the future being fulfilled, rather than closing down everything within the narrow parameters of the year in which we are operating, is an advantage. So I shall listen to the points that are made on that. Effectively, a deal had to be struck and arrangements had to be made for a voluntary, light-touch scheme. That is why this scheme has certain limits to its ambition.

I have been asked a range of detailed questions. There are two advantages to winding up at Second Reading. First, people hope that you do not continue for too long in any case. Secondly, I can offer the reply that where I invariably fail is in never having produced a satisfactory reply for the noble Baroness, Lady Noakes—so I am not going to succeed this evening. My great advantage is that I will be able to make fuller replies when we meet in Committee in the not-too-distant future.

I have not the slightest doubt that several important points will be made in Committee, or that, from the original concept of what could be achieved by resources that currently benefit no one, we have the basis of a light-touch, voluntarily committed scheme. It can achieve a great deal through a distribution mechanism that has already stood the test of distributing funds for the lottery. I want to reassure the noble Viscount, Lord Astor, that we will not be returning to debates about where resources for the Olympics go, or anything else to do with the Big Lottery Fund. I trust that I will be able to reassure the Committee that these resources are channelled in a specific, controlled direction for the objectives that will eventually be identified in the legislation.

On Question, Bill read a second time, and committed to a Grand Committee.