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Grand Committee

Volume 697: debated on Monday 10 December 2007

Grand Committee

Monday, 10 December 2007.

The Committee met at half-past three

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) in the Chair.]

Dormant Bank and Building Society Accounts Bill [HL]

(First Day)

If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Title postponed.

Clause 1 [Transfer of balances to reclaim fund]:

1: Clause 1, page 1, line 4, at end insert—

“( ) This section and section 2 are subject to section (Report on operation of schemes in sections 1 and 2).”

The noble Baroness said: In moving Amendment No. 1, I shall also speak to Amendment No. 15 and to Amendment No. 16 in the name of the Liberal Democrats.

As we begin this Committee stage, I should like to set out our broad approach to the scrutiny of the Bill. Our overall view is that the Bill is excessively narrow and needs to be widened in a number of ways, both as to the assets that could be brought within its scope and the purposes to which money could be put. Those will be our main subjects for debate, but we also have a number of detailed amendments designed to tease out the finer points of detail on parts of the Bill, on which we all want to work constructively to improve it.

We start today with one of our larger themes—the range of assets within the scope of the Bill. We had hoped to table amendments specifically aimed at bringing in other forms of dormant financial asset to the Bill. The list is potentially very long, including life assurance policies, pension assets, shares not taken up in demutualisations, other shares whose owners cannot be traced, and so on. The values are potentially at least as significant as those involved in the dormant bank and building society accounts covered by this Bill.

I tried very hard to persuade the Public Bill Office to allow me to table an amendment that would have created an order-making power for the Treasury to bring other categories of dormant financial asset into the overall scope of the Bill at a later stage. The broad scheme of transferring funds but preserving the owner’s rights to reclaim those funds provides a good umbrella that could cover many other kinds of asset—and we hoped to be able to amend the Bill to that effect. We recognise that there are many legal and technical complexities involved in the other categories of assets, which is why we wanted to create a fairly extensive order-making power.

The Minister will know that such an amendment would have had support from all sides of the Committee. However, he can breathe a sigh of relief because the Public Bill Office was adamant that the scope could not be extended beyond the financial assets similar in nature to bank and building society accounts. Hence my noble friend Lord Higgins was allowed to table Amendment No. 31 in respect of national savings, to which we shall come later, but I could not table anything broader. I believe that the Liberal Democrats hit a similar Public Bill Office roadblock on this issue. I mean no criticism of the Public Bill Office, which was as usual entirely helpful, but it has its rules to follow and it follows them—and the Opposition have to accept its judgments even though we do not agree with them.

Amendments Nos. 1 and 15 are second-best amendments. Since we cannot extend the Bill to other forms of asset, we have instead, and with the help of the Public Bill Office, inserted a new clause after Clause 2 which requires the Secretary of State to report on the operation of the scheme set up under Clauses 1 and 2. Importantly, subsection (2) of the proposed new clause says:

“The report shall… consider the desirability of establishing similar schemes in respect of other providers of financial services”.

That will not of itself create new schemes for gathering in dormant financial assets, but it will ensure that such schemes will not disappear from public view. The amendment calls for the report within 12 months of the coming into force of Part 1 of the Bill. On reflection, however, that period must be too short and I shall reconsider it when we return to the issue on Report.

Amendment No. 16, tabled by the noble Lord, Lord Shutt, extends the report to “other orphan assets”. I am not clear what the terminology “orphan asset” actually means but I see that the sense of the report should extend to other categories of asset such as shares whose owners cannot be traced rather than simply focusing on those found in financial services businesses. Perhaps the Liberal Democrats and we can work on a better amendment before we return to this matter at Report.

The Government in their consultation on this scheme did not ask for views on whether the scope of assets within the scheme was right. Nevertheless, they got those views. According to the Government’s summary of responses in the document that they issued in November, around 60 per cent of respondents wanted the scheme to cover other assets. That was the response to a question that had not been asked. It is not only organisations in the third sector that wanted this; some financial institutions also wanted it.

The Government will have their way, and ignore that strong support for a wider scope to the Bill, because we will not oppose the Bill and thereby delay the scheme for bank and building society accounts. However, we do not believe that the Government should get away with ignoring the issue, which is why the amendment is designed to keep the public focused on those other categories of assets. I beg to move.

I shall speak to Amendment No. 16, but before I do so, I say that we, too, are here to widen the Bill so that it presents greater opportunities. We, too, had bother with the Public Bill Office, as did the noble Baroness. It may well have been operating by the rule book. Eventually, we managed to come up with an amendment that was agreeable to it.

In a way, the problem was not the Public Bill Office, but the Government losing faith at an earlier stage. The Bill was going to be called the unclaimed assets Bill, but was then renamed the Dormant Bank and Building Society Accounts Bill. It has been narrowed by the Government, which is why we are in this difficulty. Many Members will have seen the report of the Treasury Select Committee in the other place. It had seen a document from the US state of Vermont, where 110 different forms of orphan asset were listed. We are talking about two: bank and building society.

I approve of the amendment that the noble Baroness, Lady Noakes, has been able to table, but it needs pushing a little further to bring in other things. The reason for that are the words “financial services”. I am not clear about their precise definition, but owning a share, and dividends that follow shares, may not be financial services. Many things are financial services, but there will be other forms of orphan asset; that is, an asset that has been abandoned and should be looked at if a review is to take place.

It is a very gentle approach—I wish it were otherwise. It is interesting that the Republic of Ireland, even though it started reclaiming unclaimed assets only three years ago, is now on to its third Act of Parliament to pursue orphan assets. It takes time, with the conflicting ideas that Governments want to pursue. It would have been far better if this matter could have been dealt with through orders, once the bank and building society side of it had been successfully completed and we could move on to other assets. If this is the only way of doing it, I hope that we can move in this direction.

I declare an interest as a member of the Commission on Unclaimed Assets, ably chaired by Sir Ronald Cohen. Those of us who worked for two years on that commission were delighted that the idea of getting in touch with and using unclaimed assets or dormant accounts for the benefit of charities should have received such a fair wind from the Treasury Select Committee. I hope that the “gentle approach” that has been referred to by the noble Lord, Lord Shutt, will eventually lead to a widening of the scope for these ideas.

We should remember as we consider the Bill how long it has taken to get to this stage and how gentle the persuasion has had to be just to get us to where we are today. Many people have been working on trying to have the assets made available to the charity sector, which was not even called the third sector when we started with these ideas. The ideas go back many years—in fact, decades. I pay tribute to those who have worked so assiduously to get this idea into the public consciousness, particularly Geraldine Peacock, the former chair of the Charity Commission. She has pursued this idea indefatigably.

We should bear in mind that the banks have not rushed enthusiastically to support access to their dormant accounts. Getting to this stage has been a matter of gentle persuasion and of trying to sell the idea. Where we are now is not where we will eventually end up, but I hope that as we consider the Bill we will bear in mind how difficult it has been to reach here.

It is not surprising that the banks are not happy about giving up their dormant accounts because they pay no interest on them and earn interest elsewhere. It is a bit like the position of Swiss banks. A very large number of victims of the Holocaust deposited enormous sums with them, and it was very convenient for them to sit on that money and to have nobody asking for it back.

It must be right that we put into the Bill the capacity to move on and take up other orphan assets—if orphan assets is the right description of what we mean—so that we do not have to come back and legislate all over again to move on to other areas when we have dealt with banks and building societies.

I apologise for not participating in the debate at Second Reading and for juggling this Bill and the Bill in the Chamber, but such is life. It may be more appropriate for me to speak to Amendment No. 24, but I wish to support Amendments Nos. 16, 24 and 44. These amendments have strong support from the Unclaimed Assets Charity Coalition, which is a coalition of 53 charities and umbrella organisations. I declare an interest as vice-president of Marie Curie Cancer Care, which provides care to cancer patients. In the briefing, which has been widely circulated, the coalition recognises that this is a highly technical Bill—certainly far too technical for me, as I am purely a clinician. The Bill seems to be an opportunity to ensure that charities in the coalition are able to locate assets bequeathed to them in supporters’ wills which remain unclaimed.

One in seven of those who die leaving valid wills also leave legacy gifts to charity which, on average, amount to 5 per cent of their total estate; so potentially large amounts of legacy income have yet to reach the charities named in the wills. These legacies are an important source of voluntary income—46 per cent of the British Heart Foundation’s income comes from such legacies. The coalition urges that the Bill be strengthened, because it is reasonable to assume that charities are owed a significant proportion of the unclaimed assets in the UK. Unlike in the US, there is no mandatory register that can be used to identify assets. That issue is addressed in Amendment No. 24 and I hope to return to it when we reach that amendment.

As we are giving an overview, I should make it clear that I have been involved in the mutual movement for a very long time. I am interested in ensuring that those in the mutual movement which have an existing charitable foundation—whether it is the larger building societies that are over the £7 billion mark or the smaller ones under it—will not find that, all of sudden, the money in dormant accounts which they have looked after and where they have done their best to discover the owners is going to be siphoned off to, of all places, the Big Lottery. I heard what the noble Baronesses said, but if we are talking about small charities, then I am not sure that the Big Lottery Fund is exactly the ideal vehicle. However, that is a matter for debate.

I support my noble friend on the first subsection of the new clause inserted by Amendment No. 15. In Parliament, we too often put through a law and do not take stock of its effect. That amendment requires that there shall be a report to Parliament one year after this Act comes into operation. The noble Baroness who spoke at the beginning indicated that there will be future developments. That is a fundamental point in the report, and I would not have thought that such a point was in the least bit party political. I hope we will be able to pass the amendment, and that the Minister will be able to take it on board quickly without much further debate.

I am grateful to all noble Lords who have spoken in this important debate. I am sorry about the trouble the opposition Front Benches have had with the Public Bill Office. That is not an experience I have ever enjoyed. Generally it is the Government who wince a little at just what is acceptable in the Public Bill Office, but we do not normally bring any complaints before the Committee so that they are on the record. I appreciate the frustration of the noble Baroness and the noble Lord, Lord Shutt, but now and again the issues will rub against them and they must take that in their stride.

The 2005 Pre-Budget Report and subsequent announcements set out the scheme, which is reflective of a clear government manifesto commitment. The scheme is restricted to retail banks and building societies’ bank accounts. The rather facile arguments that have come from the two main opposition Benches about how easy it is to extend the Bill to other areas merely betray the fact that they are high in ambition and low on practicality with regard to such a scheme. The noble Lord, Lord Hamilton, indicated that the banks would not necessarily enthuse about a scheme of this kind because it represents a loss of the yielding of an asset, and the Government have had a difficult task in persuading the banks and building societies to participate in a voluntary scheme that will make substantial resources available to the good causes that my noble friend Lady Pitkeathley identified.

It is asking a great deal to suggest that it is simple to extend the Bill to banks and building societies. The accounts we are dealing with are cash accounts, but the orphan assets to which the noble Lord, Lord Shutt, refers, otherwise known as the inherited estate, are held by insurance companies in with-profit funds. They represent assets in excess of those needed to meet the fund’s liabilities. Orphan assets are different from unclaimed assets. To take one obvious issue, if the assets are held by an insurance company, the policyholders have a right to share in any distribution according to the rules of the fund. What is suggested here, however, is that the fund should be contracted—without consultation with policyholders, from what I have seen so far—and that there should be a concentration of the fund to which policyholders would otherwise have the right of access. I am not saying that that cannot be done; I am merely saying that it is a pretty important issue to confront.

All other forms of unclaimed assets—particularly pension assets, which often come within this framework—raise a whole different set of legal and procedural issues compared to banking assets. Both the legal ownership structure and the nature of the investment assets are very different from cash. For instance, if we removed assets from the majority of unclaimed pension funds managed by insurance companies, that might well require higher members’ and employers’ contributions. Again, I am not saying that that is totally impractical, but I am indicating that it is another hurdle to cross beyond the one which the noble Lord, Lord Hamilton, identified with regard to the banks and building societies.

We have to be limited in our ambition with this scheme, but it represents a massive step forward. It is the fulfilment of a pledge that we made in 2005, and it will realise significant assets. The issues which have been raised are important but difficult ones. Getting this scheme off the ground will take probably until 2009. To undertake full consultation in seeking to overcome the difficulties with all the other assets that I have identified would mean, even if it proved practicable, that we would be a good deal more distant from effective legislation. The Government are proud of what is before the Committee; it is the fulfilment of a commitment and a significant step forward for banks and building societies whose co-operation we have achieved.

There has been extensive consultation, as the noble Baroness, Lady Finlay, emphasised. We received 56 responses to the scheme’s first consultation, of which around 30 were from the charities which she identified as part of the Unclaimed Assets Charity Coalition. Those representations were more in the form of a campaign letter advocating how widely we should set our ambitions than practical solutions towards realising our objectives.

As for the Bill’s limitations, one of the joys of opposition is to be expansive and ambitious beyond the wildest dreams of government. But Oppositions also have to temper those dreams with the hope that one day they may have to address themselves to the practicalities. The great danger is that they may be out of practice, and they may remain so for a considerable time. As has been identified on the noble Baroness’s own Back Benches, bringing the banks and building societies within this framework is an achievement, and we have had widespread consultation.

I turn to the proposal about a report within a year. We will have to bring the Financial Services Agency into the scheme in order to make it viable and guarantee that matters are conducted properly and that will be done after Royal Assent. A report on such a scheme within a year could only indicate that we were making very limited progress indeed on meeting any ambition at all. It is not realistic to talk about a report in one year. It is important, as the noble Baroness identified, that the Government should be accountable for the scheme, but it is a scheme with a light regulatory touch. I warn noble Lords opposite that if they press us too far on certain aspects of regulation and enforcement I might be prone to use the argument that they have on other occasions been in favour of the lightest possible touch.

The Bill is a product of consultation and agreement. That is why it is limited in its ambition. We have had an interesting debate, but it is not realistic for the Government to produce a report on an Act that contains a great deal of secondary legislation which will come into effect to guarantee that the Financial Services Authority plays its part effectively. To expect a report annually on this is asking a great deal.

From the vast range of amendments which have been tabled already, it would appear that noble Lords opposite believe that the breadth of our ambition is limited. This project is difficult enough within its framework. I hate to think how many amendments the noble Baroness would have tabled had we sought to include those orphaned assets which raise so many other issues. She would rightly have advanced a critical analysis, as she usually does.

I do not think that anyone said that this would be easy. I did not think that the Government were here to do things that are easy. I thought that they were here to do things that are perhaps difficult. The Irish, bless them, have done very well, but it has taken them three Acts of Parliament. Perhaps they are cleverer than the Government, because they have managed to include insurance assets. I understand why the Minister is saying, “Let’s do it a bit at a time”, but we would like a bit more to be done at some time. The noble Baroness talked about this year but perhaps that was not her first thought. These things had to be done in a hurry because of what we said about the Public Bill Office. The main issue is whether or not the Government have greater horizons.

We have had an interesting first debate. I notice that the Minister did not ask me to withdraw my amendment. Perhaps he will accept it—or perhaps not. I wish he had read the amendment, because he spent most of his response telling me how difficult it was to deal with other categories of asset. I recognised that in my opening remarks. The noble Baroness, Lady Pitkeathley, rightly reminded us of how hard it has been to get to this stage. I do not dispute that, and I pay tribute to all those who have worked to get us to this stage. The point of the amendment, however, was simply to ask the Government to report on the operation of the scheme and—importantly, as I pointed out—on the desirability of establishing schemes in respect of other providers of financial services, and to ask that the drafting be reviewed. I also said to the Minister that one year was not the right period and that I would consider a longer period. As he said, the amendment would not require an annual report.

We have never said that moving into other categories of asset was easy. The Minister tried to say that the Opposition do not understand how difficult everything is. We fully understand how difficult it is, which is why we wanted to draft a broad order-making power. We also recognise that the Government want to concentrate in this Bill only on banks and building societies, which is why we want to ensure that other categories of asset are not lost sight of. That is why we drafted a very modest amendment that asked for a report. As I said, one year is almost certainly too short and the definition of what that report should cover certainly needs to be worked on, but we should be in no doubt that we should not lose sight of those other categories of asset. There is a great danger that when the Minister says, “We’ve fulfilled the commitment in our manifesto”, people will breathe a sigh of relief at the Bill’s passage and think that the job of collecting in large amounts of value which could be put to better use has been done.

Despite the fact that the Minister did not ask me to withdraw the amendment, I shall withdraw it.

The Minister’s answer on timing left me a little confused. I think he was saying that because the regulations will be made after the Bill receives Royal Assent, a year is far too soon. That is a practical point that we as practical legislators can understand. However, he went on to say that the FSA will be involved. The FSA does produce an annual report. The Minister was unclear on whether the FSA will be charged with producing an annual report on this aspect of the totality of things it looks after. The key dimension of this issue for organisations with charitable foundations whose dormant accounts will be taken away is where this money will go. Perhaps I am being a little flippant here but—as the Minister and I often debate the Olympics—let us say that the whole lot will go to the Big Lottery Fund to pay off the further debts of the Olympics. Those charitable foundations would not be too pleased. They have every right to know where this money is going.

I thank my noble friend for that further contribution. I think the Minister will have received the message that there is considerable support for leaving a trail in the Bill that allows gathering in other assets.

If the noble Baroness would be so kind, I would like to reassure her—because she will have taken very seriously the representation of her noble friend Lord Naseby—that accountability is very important with regard to these funds and this scheme. We will have a series of opportunities to identify how the Government should be made accountable in the scheme.

I also want to make another point absolutely clear. Later, we shall come to the amendments which will give us a chance to clarify these matters further. However, as distributor, the Big Lottery Fund will ring-fence these funds and keep them separate from all its other operations. Therefore, there is no question of a flow-across to the Olympics or any other worthwhile project that may exist.

We all look forward to getting to Part 2 at some stage during Grand Committee. However, I just leave the Minister with the thought that we will return to this issue on Report because we think it is important that we keep other categories of asset firmly in the public view and that the Government should have responsibility for continuing to research means of gathering value from those assets. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

2: Clause 1, page 1, line 5, leave out from “applies” to end of line 8 and insert “—

(a) to all banks which are required to transfer to an authorised reclaim fund the balance of a dormant account that a person (“the customer”) holds with it, and”

The noble Lord said: The purpose of the amendment is to make the scheme compulsory rather than voluntary. The key words in the amendment are that the scheme applies to all banks. We should probably have put a comma after the word “banks”; there is a slight Eats, Shoots and Leaves issue there but I am sure that, if the Minister is minded to accept the amendment, we can deal with that on Report. However, as I said, the purpose of the amendment is to require the scheme to apply to all banks and building societies. It seems strange to us that a programme which is deemed to be so important and on which the Government put so much store should be completely voluntary. Why should some banks hang on to these assets and keep them on their balance sheets? Under the scheme as it stands, there is no sanction for doing so.

We were very interested to see how this issue is already being dealt with and debated in the context of the Treasury Select Committee in another place, which considered this matter. The Government helpfully anticipated the noble Lord’s speech this afternoon by making a number of objections to the proposal, which I should like to go through.

The Treasury Select Committee said:

“A compulsory scheme has the overwhelming advantage of guaranteeing fairness and consistency between institutions”.

That seems to us to be an overwhelming case. However, in their response, the Government came up with a number of reasons why that overwhelming case was not adequate. Essentially, they came up with four objections, all of which, in my view, are to a greater or lesser extent spurious.

The first was that a voluntary approach,

“enables the use of private sector expertise to manage and invest the money paid to the reclaim fund by banks and building societies”.

Why does a compulsory scheme not allow that possibility?

The second objection was that a voluntary approach means that,

“it will be the private sector that takes responsibility for managing liabilities to account holders, which will remain on the private sector’s balance sheet”.

Why is that affected by whether it is a compulsory or a voluntary approach?

The third objection was that a voluntary approach,

“brings added flexibility. It will allow individual institutions to determine whether an account is genuinely dormant”.

Why does that have anything to do with whether it is a voluntary or compulsory approach?

The fourth was that:

“A voluntary scheme”—

I like this—

“also takes account of better regulation principles, building on existing regulatory arrangements, helping to maximise the money available for reinvestment in the community”.

Why does a voluntary approach help to maximise the money available for reinvesting in the community when banks can simply opt out of it if they want, thereby reducing the amount of money available for investing in the community?

Those seem to be almost completely spurious arguments, and I suspect that the real reason for the Government going forward in the way that they have is as follows. A throw-away line in the next paragraph says:

“In light of the sector’s ongoing support for a voluntary scheme, the Government”,

and so on. I can see that the sector might like a voluntary scheme but banks and other institutions of all sorts like voluntary schemes across a whole raft of areas where we now make things compulsory. Therefore, that is a poor argument.

The Treasury Select Committee, in a spirit of extraordinary generosity, then said that if the Government cannot bring themselves to make the scheme compulsory from the start, they ought to have reserve powers—to which the Government gave the following terrific response:

“Including these powers in legislation would not be a good use of Parliament’s time”.

There may be compelling arguments why it is a bad idea to make this scheme compulsory, but I think that there are very strong arguments for making it compulsory. The Government have so far failed to make their case. I beg to move.

I should perhaps outline our position. Although we have considerable sympathy with what the noble Lord, Lord Newby, said, we recognise that it has been a long and rocky road—a point to which the noble Baroness, Lady Pitkeathley, alluded—to get to where we have got. This is an uneasy truce, or a fragile agreement, but it is where we are at. Our general principles would indicate that if a voluntary scheme can work then it should be allowed to work and we should not go to compulsion as our first port of call. So to that extent we are comfortable with a voluntary scheme as the first port of call. However, if that does not work—and we have tabled amendments on a review to probe whether it is working—then compulsion will be necessary. But a voluntary scheme would be better: it is a lighter touch and avoids a heavy regulatory hand and bureaucratic overlays. If it can work, that has to be the better way. That is why we are just about content to go along with the scheme in the Bill.

We may be surprised by what the Minister says but my guess is that he will defend the voluntary scheme. I have just one question on this voluntary scheme: what is it that we are asking the banks to volunteer for? Is it whether they join the scheme, or the extent to which they join the scheme? They could say, “We’ll put so much in”. In other words, it is the hokey-cokey—some in, some out. The answer will be very important in determining whether it is a proper scheme or a hokey-cokey scheme. The spirit must be that they are in the scheme. If it is hokey-cokey, we will not have a level playing field even though that should be the position. I hope the Minister will address that.

I do not think there is any doubt that robust self-regulation and total commitment to the scheme is what we would hope for from the banks, with as little bureaucracy as possible and the minimum of anything getting in the way of the actual administration of the funds for the benefit of the charitable sector. We therefore need to look at enshrining the spirit of co-operation. Although I agree with many of those who say that we should aim for compulsion, such a course would veer us away from the one we want by making the banks start from a position of defensiveness rather than co-operation. If the scheme is to work to the benefit of the charitable sector we will need to see co-operation all round.

Commercial considerations would suggest that it makes a lot of sense for a bank to agree to do this, but to do it as slowly as it possibly can. Can the Minister answer that point?

I am grateful to all Members of the Committee who have spoken, particularly to the noble Baroness, Lady Noakes, who I thought put the rejoinder to the noble Lord, Lord Newby, far more eloquently than I could. I therefore do not propose to embellish the main argument; the position she outlined is exactly the one that the Government adopt, and we do so for the excellent reasons that she put forward.

However, there are issues of detail to which my noble friend Lady Pitkeathley drew attention and which I wish to emphasise. A voluntary approach enables the use of private sector expertise to manage and invest the money paid into the reclaim fund by banks and building societies. It means that the private sector will take responsibility for managing liabilities to account holders, which will remain on the private sector’s balance sheet. If it is asked why they should do that and what is in it for them, as did the noble Lord, Lord Hamilton, we should explain that it will be a publicly explicit scheme. The public will know which banks sign up to the scheme and the extent to which they take part, so we do not have to worry about whether any of the major institutions will refrain from participating—very far from it.

The basis of the agreement—or “uneasy truce”, as the noble Baroness abstracted from the sense of the noble Lord, Lord Newby, but it is a little more than that—is a willing partnership to give effect to what the banks and building societies recognise is the unacceptability of money lying in accounts which according to their records they do not own. A careful, articulated approach will be taken to safeguarding the owners of those assets until we are clear that there are no claimants. We will also guarantee that claimants will get their money at any stage that they establish that they have a rightful claim, at whatever point of transfer the money has reached. That is all part of bank and building society goodwill and commitment. Therefore, the advantages of the voluntary approach are considerable.

This approach also adds flexibility. Instead of going in with a heavy hand of state regulation, we can expect significant aspects of the scheme to operate on the basis of good practice. It also takes account of better regulation principles, building on existing regulatory arrangements, which will help us to maximise the money flows rather than detract from them. The great trouble with regulation, which requires the enforcement of law, is that one is compelling the unwilling, when what we expect within this framework is a light touch that will indicate how the willing meet their obligations.

I emphasise again that the scheme will be wholly transparent, so there will be no question of significant institutions reneging on their public responsibilities or commitment to this scheme to which they have signed up in this agreement, on which all the proposals are based.

When the voluntary negotiations with the banks and building societies were going on, they must have quantified the money that was at stake. They must have a good idea of what it all amounts to. Have they agreed to any time scale by which the great majority of the money should be paid over?

We have a broad range of figures for the money that may be available through the scheme. I cannot be pinned down to a particular figure. At Second Reading, the noble Baroness trumped me by indicating that she thought that rather more money would be available than in the Government’s more modest estimation. Well, time will tell. However, I make it clear that the reclaim fund will publish a list of participating institutions, so the public will know those which are pulling their weight in the scheme and participating voluntarily. The noble Lord, Lord Newby, is never persuaded by my arguments and will probably not accept my response. He will emphasise that law is the compulsive element in our society, as it is, but if within these voluntary terms we can get willing participation with a light touch, we may meet the point of the noble Lord, Lord Hamilton, about the time scale within which the scheme begins to realise the majority of its assets. I cannot put a figure on it, not least because many difficulties about defining the accounts will have to be worked through. But the intent is there, and the public responsiveness of the institutions will be clearly identified.

The noble Lord, Lord Shutt, asked whether the banks were completely involved in the scheme. Can banks, for instance, say that they are in the scheme but then choose their own definitions for dormant accounts which are stricter than those in the Bill and thereby not transfer much money? It is an interesting point whether someone who signs up to the scheme is likely to deliver a great deal of money or a small amount. I do not think that the Minister covered that in his remarks. I would be interested to hear his response.

I do not think that we can impose on the banks a quota on the amounts they can realise because they will likely contend that there are differential positions with regard to customers. However, the Bill clearly identifies the broad contours of the funds and accounts available. As I have said all along and will continue to reiterate throughout proceedings on this Bill, any claimant who appears, however late, is entitled to his resources because he is the owner of them. But in a publicly accountable scheme such as this one, there will be substantial leverage on the participating institutions which have voluntarily and with good will engaged in it to meet their obligations under it. The light-touch regulatory regime and public opinion are important dimensions in that respect. The informed opinion of Parliament and the operations of Select Committees and so on also will hold institutions to account on meeting their obligations.

Can the Minister explain what leverage there is? Unless one knows how much dormant account money there is, what leverage can the Bill provide to get out the maximum amount? I am not quite sure how that will work.

I have trouble with estimation but not with process. The banks will publish their policies on how they define “dormancy”. The noble Lord, Lord Hamilton, indicated his suspicion of a bank that was extraordinarily restrictive in its definition of dormancy. If a regular comparison showed that other banks of about the same size and role had a wider definition which released more funds to the scheme, then the restrictive bank would come under pressure. The reclaim fund will publish the flows into the scheme. So if the smallest building society in the country was producing more resources than the biggest bank, informed public opinion would want to ask a few questions of the large bank.

Did the noble Lord answer the question about reserve powers in the Bill, and whether compulsion should be a reserve power that could be brought in if banks did not co-operate?

Within the Bill’s framework is the underpinning that it will be an Act of Parliament. Regulation will be imposed by the Financial Services Authority and the scheme will be subject to consideration by Parliament. Although I am not accepting the first-year report which the noble Baroness proposed in her initial amendment, as she will recognise, we would not anticipate having a scheme of this kind without a mechanism for reporting to Parliament. However, we have not yet reached conclusions on that.

The scheme is the result of a substantial consultation. Parliament and public opinion will have information available to make judgments on whether institutions are playing their proper part in the scheme. I cannot project the figures, but I can anticipate compliance; otherwise why would these worthy and significant institutions have signed up to the scheme?

I do not want to be tedious about this, but the starting point is important. There are many references to the Banking Code, which started 15 years ago. It is amazing that assets also have to be 15 years old. It is possible for a bank to say that there might have been unclaimed assets but they were written off before the Banking Code came into effect and now there are none. The starting point is very important. The bank could say that unclaimed assets were written off to a suspense account, then to the profit-and-loss account, and then were paid out as dividends. The starting point is important, particularly when the Banking Code was, in effect, invented 15 years ago.

That is an important point and we shall have a chance to discuss it later. The Committee would not want me to trail an extensive answer before further significant points are made. We are all too well aware of the importance of the starting point. That is why the definitions of dormancy established by the institutions will be subject to scrutiny. Norms will be established, and if it were thought that a bank was operating well out of line with what other banks were doing by using an argument about accounts that preceded the Banking Code which enabled it to siphon off substantial resources, that would be identified and aired and the bank would scarcely be participating in the scheme to the extent that we all would wish. The banks retain their liability to customers at any stage, and so does the reclaim scheme. The institutions have committed to update the Banking Code to take account of this legislation when it is enacted.

The Minister mentioned FSA regulation as a part of the scheme that will ensure that the money is paid out under the dormant accounts schemes. The FSA regulates banks and building societies, and it is intended to make repayment claims subject to the FSA. I am not sure that I understand how the FSA will provide any value-added in releasing dormant account moneys. The Minister suggested that it will. I would be grateful for clarification.

I was not suggesting that the FSA had that position but identifying that it has an important role in regulating banks. This scheme is based largely on a light regulatory touch. The revision of the Banking Code and the openness with which banks have to meet their obligations within the scheme are the key definers of how the scheme will work successfully.

I am grateful to all noble Lords who have taken part in this debate. I agree with the Minister that the ideal situation would be for all banks to participate willingly in this programme, to think that it is the best thing that anybody has ever put to them, and to participate to the maximum in the speed with which they operate the scheme and in the extent to which they transfer the assets that become eligible for transfer. My problem is that I am something of a hardened old cynic when it comes to an entire sector. When I see the way that many of our best known and best loved banks, including Northern Rock, have been playing fast and loose by using charities to give cover for trust funds while claiming to be highly ethical institutions, I am suspicious that the entire sector will not come joyously down the aisle to consummate this proposal.

I would have preferred to deal with this by making it compulsory from the start. I heard what the noble Baroness, Lady Noakes, suggested. Perhaps on Report we should come forward with a reserve power in case the scheme does not work as well as the Minister might hope. We will consider that between now and then. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3: Clause 1, page 1, line 6, after “society” insert “, having advertised the names and last known postcode address of dormant account holders on its books so that the holders, or their heirs, can claim them within a period of six months,”

The noble Lord said: It will be convenient to debate Amendment No. 6 along with this amendment, as in many ways it is complementary to it. Reference has already been made to the helpful way in which the Public Bill Office operates. However, I note, at the end of my Amendment No. 3, the appearance of the words,

“within a period of six months”.

I have no recollection of ever having written that, and while it may be that the Public Bill Office has long suffered from being unable to read my writing, it has not yet managed to imply that I was going to write something that I actually did not. I do not wish to raise the issue of six months.

I referred to this legislation in the course of the debate on the gracious Speech. Unfortunately arrangements for a funeral prevented me from being at Second Reading, but I have read the debate carefully. The Minister, and a number of others, stressed that reuniting account holders with their money must be the first priority wherever possible. I am sure that is right. On the one hand, as has been implied just now, the banks have an interest in hanging on to the money, while on the other hand the charities are saying how marvellous it would be if they could get their hands on it, but in the middle of all that are the actual account owners. We must ensure that everything possible is done to find them.

When I spoke in the debate on the gracious Speech I referred to the fact that almost exactly 10 years ago I was asked by Mr Paul Volcker, former chairman of the Federal Reserve in America and a distinguished American public servant, to act as one of the arbitrators on what became known as the Claims Resolution Tribunal for dormant accounts in Switzerland. I took that on, and on the whole it operated well. We were successful in uniting many of the dormant account holders or their heirs with the money that was rightfully theirs. I say to my noble friend Lord Hamilton that on the whole I found the Swiss banks extremely helpful in the course of that exercise.

The task we had was a much more difficult one than identifying dormant accounts in British banks will be. To start with, Swiss bank accounts, certainly in the earlier period, on the whole did not have anything by way of a signature. It was simply a numbered account—someone wandered in, opened the account and that was that. To try to find the heirs to that account 70 years later was not easy. It involved identifying individuals to see whether they were the right person at all. That ought not to be a difficulty so far as these bank accounts are concerned. Similarly, we had trouble tracing the addresses and so on. But that was a long time ago.

With this legislation we are talking about an account being dormant if it has been so for more than 15 years. I suspect that many of them have been dormant for a much longer period. We are not really seeking to find the “customer”, but probably the heir or even the heir of the heir, as the rightful owner of the account. The question then is how should one seek to find them? On the Claims Resolution Tribunal we were faced with this problem. What we did—and I am extremely grateful to the Library for digging this out—was publish in the press lists of names and addresses, as far as they were known. It will be easier in this case, because we could simply put in the last known postcode of the person. Eventually, we dealt with it on the internet, which was in its infancy. That would be a much easier way of doing this, together with an explanation of what it was all about—namely that these were dormant accounts. If you thought that the accounts belonged to you or your grandmother or whoever, then you should write in because we would be able to check.

I notice from the banks’ briefing that two of the largest deposit takers have launched reunification exercises, while others are at an advanced planning stage. As I am coming a little late to this, I have not previously looked at the proposed legislation as closely as I might have. However, if two banks have launched reunification exercises, I am not aware of it, and I do not know whether many people in this room are aware of it. There is an overwhelming case for adopting a similar approach to the one we adopted on the Claims Resolution Tribunal—namely, to publish the names of the dormant accounts and the last known postcodes, inviting people to write in and apply if they think that an account is theirs or that it belonged to one of their relatives and they may be entitled to it. The individual cases can then be examined in the same way as the tribunal examined such claims. The scale of the operation would not be vastly different—some £250 million or so, and some £100 million or so in relation to building societies.

We were dealing with similar amounts regarding the Swiss accounts. I never totted up how much I actually disbursed, but it was certainly tens of millions of pounds and it may have even been hundreds of millions. Therefore, such an exercise can be carried out successfully, and it would be the right approach for us to adopt. I was concerned with the Holocaust accounts, but a great many others were nothing to do with the Holocaust and were accounts that had simply gone dormant. Very often a person died and did not tell their heirs or relatives of the account. Indeed, in some remarkable cases, having given the family everything else, a person had not mentioned that they were hanging on to a dormant account, for whatever reason. It is interesting, perhaps, to speculate on that.

This is a positive amendment and it would be helpful to incorporate it in the Bill. Perhaps the Minister can tell us what present arrangements are being made, but it is not my impression that a great deal is being done at the moment. It is essential to hit a balance between the banks and potential beneficiaries and I would like to consider whether those who have tragically suffered regarding their pensions in the past 10 years should be recipients, rather than charities, and whether this is the right approach. I hope that this amendment is a constructive suggestion.

Other questions arise, and one that I hate to raise relates to safe deposit boxes. Many safe deposit boxes may contain very large sums. Again, I say from my own experience that all kinds of different things turn up once you start to open up safe deposit boxes. In one instance, it was believed that the box contained a magical jewel that would allow a certain sect to, if not rule the world, be a lot better off.

This amendment is a constructive suggestion and I hope that we have a positive response from the Minister. I beg to move.

It was not until my noble friend stood up that I realised that he had such a wealth of experience to offer on this Bill. Perhaps he could help the Committee with one question. When he did his work in Switzerland, how was the duty of confidentiality reconciled with publishing names and other personal details? That is one of the issues that has been raised as a reason not to advertise particular details. If that can be overcome, it is a very powerful tool to enable reuniting to occur.

It did not seem to us a particular problem at the time. I suppose that if you use just the name then it does not really breach confidentiality, because it could be anyone. If you put in the postcode, what is the confidence that one is breaking? We did not find it a problem, and I do not remember anyone ever raising the issue or asking whether it was wrong. Certainly, none of the newspapers concerned raised the point. I have here the Times of 23 July, which the Library very kindly dug out. The Times and other major newspapers were involved, and we covered the whole range of tabloids, and none of them seemed to feel that there was any problem with this at all. If the Minister has a legal angle on this, he should by all means tell us about it—but we were not aware of the problem.

We absolutely support the noble Lord in his view that one of the main aims of the legislation should not simply be that the dormant assets end up in a reclaim fund; they should end up where they should properly be—namely, with the people whose accounts they are, or their heirs and successors. The amendment would be one way in which to begin to improve the proportion of people who reclaim their own assets. My query is whether it goes far enough. We have tabled our own amendment, Amendment No. 24, which seeks to do something slightly more comprehensive. One problem is that if heirs are unaware that there may be such a dormant account, having to trawl around a number of banks and building societies to find it is quite a business. How you do that is also a challenge. I do not think that for the clearing banks and big building societies you could do it by advertising in the newspapers because that would involve too many names. Using the internet would mean that you would not need a paper-based approach. Our approach is a slightly different one but would achieve the same aim as this amendment, and I shall be interested to hear how the Minister responds.

Although I understand and to a considerable extent sympathise with the argument put by the noble Lord, Lord Higgins, if it is the case that the holders of dormant accounts will genuinely be no worse off when the balance has been transferred to a reclaim fund than they would have been if it had not been so transferred, are we really justified in imposing such burdens on banks and building societies? The larger banks and building societies could afford it, but for the smaller building societies to have to take up quarter-page advertisements in the whole national and much of the regional press is asking too much. I should be grateful to hear the Minister’s comments on that.

The whole Committee is at one on the objective, which is as far as possible to reunite people with their rightful resources, so I very much welcome the motivation behind the amendment of the noble Lord, Lord Higgins.

I shall be increasingly embarrassed in this Committee if the noble Baroness, Lady Noakes, continues to put forward my arguments for me, as she will render me redundant somewhat before my time. However, our concern is exactly as she articulated—namely, that the banks and building societies are concerned about confidentiality and identity fraud. Let us remember that under the amendment they would be writing after 15 years to an address which may or may not be correct. They would not know the recipient, otherwise they would be able to solve the problem of the dormant account. There are real anxieties on this score.

I hear what the noble Lord said about newspaper advertisements. Being costly, that may not be practicable for the smaller building society, but it beggars belief that we would expect the major banks to produce advertisements which would make sense to anyone. The process would therefore presumably involve a letter to an address, with all the risks that that would carry.

I emphasise that the banks and building societies are all too well aware that this legislation raises the question of how diligent and efficacious they are in seeking to ensure that dormant accounts are kept to an absolute minimum as they are not their property but the property of customers. Banks have a practice of pursuing dormant accounts. They have a clear definition of when an account becomes dormant in terms of a lack of activity in the account and they seek to reduce the number of such accounts.

All banks recognise that, when they signed up to the agreement which underpins this legislation, effectively they were throwing a searchlight on the whole process of dormant accounts. In doing that, it behoved them to address more vigorously whether they were guaranteeing that they had made strenuous efforts to reunite owners with their resources. They made it pretty clear on 8 November that they intended to make additional efforts in this field. A one-stop shop is being established for customers searching for their lost accounts. It will be launched in January and will enable people to initiate a free search covering banks, building societies and, in this respect, National Savings & Investments via a single application.

In addition, a great deal of publicity and activity will attend the development of this legislation. After all, a lot of institutions will be potential beneficiaries. The banks and building societies have entered into the agreement in the full knowledge that more effort will now be necessary to reunite owners with their money and there will be vigorous activity in that regard. The Banking Code will also identify progress on these issues. Therefore, there will be public recognition of the success of the work done in regard to dormant accounts in terms of both what it facilitates for other institutions and the effort that the banks make to ensure that these accounts are kept to a minimum. The customer is, after all, their main responsibility.

Although this is not strictly germane to the Bill, can the Minister try to persuade company registrars to join this one-stop shop? They are the real villains of the piece here but they make absolutely no effort to reunite with their money those who are entitled to dividends and, in some cases, capital sums following reorganisations or takeovers. People change addresses and there must be hundreds and thousands of unclaimed assets knocking about but the registrars do nothing about it.

A number of helpful points have emerged. On the one-stop shop argument, it is a question whether someone’s children or heirs know to go to the one-stop shop. Unless they have some positive indication that the account exists, I do not really see why they should. Whether it should be one shop, in the sense that it is not individual banks that should seek to discover the owners of the assets, or whether it should be done collectively, is something that is worth considering. In that context, given the point made by the noble Lord about the position of small building societies, it may be that they should get together in seeking the rightful owners.

I do not get the impression at the moment that this problem is being tackled sufficiently proactively. If I understand it correctly, these building societies and so on are not being proactive but are sitting and waiting for the owners to come along and say that they have their account. There is a big difference between those two things. The attitude that we took was that we wanted to find these people. I do not really get the impression that that is what is happening, although I may be doing them an injustice.

My noble friend mentioned small building societies. They are very regional; there is no point in a small building society in Cumbria getting together with a small building society in the depths of Kent and then another one from Norwich getting involved. That is a hopeless situation. We should leave the individual building societies to find their own people.

Those building societies are being proactive, in fact. Earlier last week I had a session with Nationwide and asked people there specifically how many dormant accounts there were—the answer was 25,000—and how long they had been trying to find the people whose accounts they were, to which the answer was “years”. They are still very active in trying to find them.

Finally, the vast majority of those dormant accounts are absolutely tiny. Of course, some are bigger. I can speak only for the mutual movement, but it is trying and has tried very hard to find the owners of those dormant accounts.

My noble friend has come precisely to the points that I was going to make. With regard to the smaller accounts, it could well be that the local or regional press is a better way in which to pursue this aim. Furthermore, there is presumably already some idea of the minimum amount; I presume that the banks are not chasing people with 50p in their account. Perhaps the Minister could let us know whether it is envisaged not to intend to find smallish accounts.

I am not going to reply. It is the noble Lord’s amendment, so he does the replying. However, I shall comment on one point that he emphasised very strongly—that there is no evidence of the banks or building societies upping their game on this issue. As agreement has been reached on this legislation and as the legislation proceeds, a searchlight has been thrown on their activities—and they are all too well aware of that. On 8 November, they said that they would take further steps on notification. One dimension is the concept of the one-stop shop in January. Halifax and Nationwide have already indicated that they are engaging in much more strenuous activity than they have in the past. So the noble Lord may be a little unfair in saying that there is no sign of the necessary response and urgency about this. What would be contended by the Government and certainly the industry is that they are all too well aware of the fact that they cannot see this legislation go through without making very strenuous efforts to reunite the owners of the property—that is, their accounts—with that property.

Of course the Minister is right—I am replying, not him—but I was not clear about the Government’s view on the minimum size of the accounts. Have there been discussions saying that anything less than £100 will not be pursued, for example?

We are not seeking to prescribe in those terms—it is for the institutions to prescribe. But it is obvious enough what would be expected as a reasonable position. The noble Lord, Lord Shutt, said that he had a 60 year-old account containing 50p—

I am awfully sorry—I translated the sum into modern currency. That would certainly not fall within the area of diligent search, whereas once the sum got into three figures action would be expected. It is for the industry to define.

Obviously, if one sets the figure very high the number of claimants is likely to be lower. I am slightly worried about the five shillings and 11 pence as I was the Minister responsible for carrying decimalisation through. But be that as it may, I come to the important point originally raised by my noble friend Lady Noakes on the question of confidentiality. I find it difficult to believe that British banks are more worried about confidentiality than are Swiss banks, which had no problem with this. I suspect that, while it may be a helpful argument if you do not really want to become too proactive, it is not a genuine problem.

I am most grateful for the response from various colleagues. Let us see where we get to on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4: Clause 1, page 1, line 7, after “account” insert “including interest due”

The noble Lord said: This amendment is related to Amendment No. 32 and raises the question of what the position is with regard to the payment of interest on dormant accounts. It may be that the consideration is not particularly relevant, but at all events we need to be clear on the position. With the Swiss situation, we had to set up a most distinguished group of economists to distinguish what the interest rate would have been over that period of 70 years. At some periods it was incredibly low and not really significant. But we ought to be clear whether these accounts will include interest, as the interest will not have been paid in the period during which the account has been dormant, although it may have been—and I presume normally would have been—added to the accounts as they rolled along. Can the Minister enlighten us on what the various banks do? Do they tot up the interest on a dormant account or do they wait until the account is finally claimed and then add it on? Of course, it does not matter either way because they still keep the money, but it would be helpful to know where we are on this point. I beg to move.

I was slightly surprised that my Amendment No. 32 was grouped with Amendment No. 4 as Amendment No. 4 deals entirely with what happens to the account before it is transferred into a reclaim fund whereas Amendment No. 32 relates entirely to what happens after it has been transferred to a fund. None the less, it is probably sensible that I should continue and speak to my amendment.

At Second Reading, I and at least one noble Lord on the Liberal Democrat Benches—perhaps the noble Lord, Lord Newby—raised the question of what interest would accumulate on sums transferred into a reclaim fund. That is an important matter that is not set out clearly in the Bill, and it is fair to say that we did not get a very clear answer; indeed, I am not at all sure that we got an answer at all. I had not at that point read the Explanatory Notes, which are much more precise and specific on the question of interest and charges. However, the Explanatory Notes have no legal validity and do not form part of the Bill. If I have interpreted them correctly, it is the Government’s commendable intention to see that account holders are no worse off—and, conversely, no better off—following a transfer into the reclaim fund, than they would have been if their account had remained open. That is by far the fairest option, albeit the most expensive to administer. I imagine, too, that the banks and building societies and not the taxpayer will pay for the administration. I hope that that can be confirmed.

Clause 8 as drafted is somewhat imprecise and ambiguous. I believe that Amendment No. 32 would go a long way to clarifying matters for all concerned.

I am grateful to the noble Lord, Lord Higgins, for Amendment No. 4, which makes clear that when a bank or building society transfers a dormant account to the reclaim fund under Clause 1, this includes any interest due. The amendment would ensure that when customers reclaim their money, they are repaid the interest due on their accounts. We agree that this is a vital principle. Dormant account holders should be repaid in full. The amendment is unnecessary—and I believe that it is put forward in a probing way—as we have taken separate steps to ensure that this will be the case.

Clause 8, which defines the term “balance”, is an important clause in the Bill. It explains that the amount a bank or building society will transfer into the scheme, and the amount a customer is entitled to be repaid, must be adjusted according to the terms of the original deposit to include any interest accrued or charges deducted.

The noble Lord, Lord Monson, expressed surprise that Amendment No. 32 is grouped with Amendment No. 4. That is nothing to do with us. The amendment seeks to clarify that the interest rate that will apply will be the contractual rate. This is unnecessary, as it is clear in relation to Clause 8 that the interest will be calculated in accordance with the contract between the individual and the bank. In particular, subsection (2) sets out that the interest rate that the customer will be repaid is the one that would have applied had the transfer not taken place. It is not therefore possible for any other interest rate to be applied, as subsection (2) prevents this. Individual financial institutions will be responsible for calculating how much a customer is owed, including accrued interest, according to their records, andwill make the payment on the reclaim fund’s behalf accordingly. Customers will be repaid their balance, adjusted for interest according to the terms of the original contract.

If the bank were to make a mistake and transferred too little or too much to the reclaim fund, the institution would still be obliged to repay to the customer the full amount that they would have been owed under the terms of their contract. The banks and the reclaim fund are expected to adjust for overpayment or underpayment. If there is a dispute about the fairness of any charges deducted post-transfer, customers can now complain to the Financial Ombudsman Service, if necessary.

I hope that I have made the position crystal clear on the record as to what the Bill intends. If noble Lords want to raise any other matters on this issue, I am happy to answer them.

How is this supposed to work? If a bank transfers £100 from a dormant account to the reclaim fund and at some later stage someone establishes their entitlement to that account, and if the bank then says, “Oh, it is £120”—and tells the reclaim fund that it is £120—does the reclaim fund pay out £120? Whether the extra is for accrued interest from the time the £100 went over to the fund or some other amount, how will this work in practice? The reclaim fund will not have access to the information and therefore will not know whether that is the right amount. I apologise for asking this basic question but it was not until the Minister started describing it that I thought, “I am not sure I know how this works”.

In part, the voluntary nature of this enterprise means that I cannot give the noble Baroness a direct answer as to how it will work. The relationship between the banks and building societies and the fund will be critical in how people are paid. Working out the interest will, of course, be a matter for the bank, and if the customer is not satisfied, he will be entitled to take the matter further. As I understand it, because the bank is likely to act as the agent for the fund, the bank will pay the customer and will reconcile matters with the reclaim fund through the agency arrangements. So it will be an agency arrangement between the bank and the reclaim fund, and that is how the right amount will be paid.

So, in my example, the reclaim fund would have to pay the additional £20 even though it had received only £100 in the first instance, and that calculation is entirely in the hands of the banks. I think that is what the Minister is saying.

This raises the question of how the reclaim fund invests the money. It could be required to pay out significantly more than it receives—for example, the five shillings and 11 pence of my noble friend Lord Shutt could be worth £20 or £30. Presumably the reclaim fund will have to invest its money to best effect for it to be capable of paying back to the banks any amounts that are required to be paid.

There is another issue here—the rate of interest. The Committee will be aware that banks and building societies keep changing the style of their accounts. I have not heard of a brass account—they usually talk about gold, silver and platinum and so on—but if you do not watch it they say, “This issue is now closed and has a reduced rate because we have now got the double gold account”. If people ultimately turned up to claim their money, the dormancy position would perhaps be a code of conduct or a banking code issue.

It is certainly an issue. I repeat the basic principle that the customers will be repaid the amount they would have been repaid had their accounts not been transferred to the scheme; so they will get the interest. If a particular type of account has been withdrawn, which I think is what the noble Lord, Lord Shutt, is referring to, the bank or building society will obviously need to determine what happened to equivalent non-dormant accounts which were not transferred into the scheme. If these had automatically moved on to some other terms, the interest on the transferred dormant account should be calculated in accordance with the new terms too.

The noble Lord looks sceptical about what I have said. I repeat that customers will have the right to go to the Financial Ombudsman Service, just as they have now, if they wish to dispute the fairness of the repayments. Ultimately—we hope that it does not come to this—customers will have recourse to the courts. That is why I said to the noble Baroness that it is impossible to say exactly how the scheme will work in every single case, but I hope that the principle is clear from what I have said.

The noble Lord, Lord Newby, raised an important point. It is expected that the fund will manage money prudently. FSA regulation, too, will need to be taken into account, but the noble Lord is right that the claim fund may have to pay out more than it sometimes anticipates.

The noble Lord, Lord Higgins, will obviously decide what he wants to do about Amendment No. 4, but perhaps I may touch briefly on what the noble Lord, Lord Bach, said about my Amendment No. 32. If one reads Clause 8(2) very carefully, it is just about possible to make out what the Government intend. However, legislation should surely be intelligible to the reasonably literate man in the street. The noble Lord, Lord Davies, might consider having the clause redrafted so that it makes a little more sense. It would not do any harm to insert the word “contractually” after “interest” in Clause 8, simply as belt-and-braces extra clarification.

Will the noble Lord confirm that interest at the standard rate, which is currently 20 per cent, will be deducted from all the accumulated payments and paid over to the Treasury annually? I imagine that that is the case. What happens about higher-rate tax, which will be due in a few cases, I have no idea.

I take seriously the noble Lord’s point about the way in which the subsection is drafted. Perhaps we may look at that again.

I am waiting for an answer from my officials that confirms what the noble Lord presumed. He may have to wait a little longer. It is better to get it right than jump into an easy answer.

There are two points here. Bank deposits yield money gross, and building societies pay the tax. Is there not variation between the two?

I think that the noble Lord is wrong. Interest is normally deducted at 20 per cent on ordinary deposits. On special, fixed-term deposits of very large sums—let us say, £50,000—it can be paid gross.

If the noble Lord will allow us, we will write to him with the correct answer to his previous question.

I am grateful to those who have contributed to this debate. It was what I would call an “onion-peeling” debate, in that more and more layers came off and questions that we had not thought of previously, even if we had sat down for 10 hours to look at the Bill, suddenly emerged.

I think I am right in saying that the situation is as follows. There is a dormant account on which interest will be paid, but one of two things can happen to it. It may simply be paid out to the owner, in which case I presume that interest either has been or will be added. I am a little more doubtful about fees. If the account has been dormant for 30 years, there will be little of it left if the fees that have accumulated in that period, in which nothing has happened, wipe out the whole account, which might have been quite large 30 years previously. We had that problem in Switzerland as well. Perhaps we should reconsider the fees aspect. In all events, that is the case where the money goes to the rightful owner.

Alternatively—and this is a more difficult issue—the account with interest up to that point goes to the fund. The problem is what happens then. Does interest continue to be added to it and, if so, at what rate? It would be jolly difficult for the fund to track back what interest was being paid by the bank and then apply that rate of interest. Does a charity, for example, eventually get what that interest would have been?

Finally, there is the question of tax—on which the noble Lord says he will write and I do not ask him to comment further today. A dormant account may hold a large amount—say, £0.5 million—which has been there for 30 years and the interest will have piled up. Will the Revenue get its hands on that?

My noble friend, who knows more about tax than I do, says, “Yes, probably”. That is probably true, so we need to consider all these issues. The difficulty in this case is that the Minister is replying for the Government but, in a sense, is a proxy for the bank. Perhaps he could say at a later stage what the Government understand the position to be. That might be helpful if this matter turns out to be more complicated than we thought. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5: Clause 1, page 1, line 7, leave out “customer”” and insert “owner””

The noble Lord said: This amendment is the last that I shall be moving for some time. Throughout, the Bill uses the term “customer” of the bank. I am troubled because the customer may well be long dead and gone and no longer exist as far as this world is concerned, but the account is the property of one of his heirs. Therefore, I believe that it would improve the drafting if we used the word “owner” instead. I shall leave it there but I hope I have made the point. I beg to move.

I appreciate that, wherever the word “customer” appears, the noble Lord would change it to “owner”. In responding to the noble Lord, I have to resort to strict legal terms as to why “customer” rather than “owner” is used. Strictly speaking, the customer does not own the money in the account. The balance on an account is a debt that the bank owes to the customer. In other words, the customer owns a right to enforce the debt, as opposed to owning the asset. That is a strict legal definition and one does not know how much that would affect the position but, as I understand it, that is the main reason why the term “customer”, as opposed to “owner”, has been employed in the drafting of the Bill.

Of course, heirs can still claim money back if they prove their claim; in those circumstances, they become the customer. However, because of the strict legal position, we think that on balance it is better to leave the term “customer” in the Bill rather than change it to “owner”.

Can I just clarify that? The Minister said that he cannot use the word “owner” because it has a specific legal meaning, but this is simply a shorthand word being used in the Bill—it does not carry any other implication. The Bill could have said a person “the monkey” holds the account, and we could have carried on using the word “monkey” throughout the Bill. It would have been offensive and we would not have done that, but there is no magic in the word “customer” and my noble friend’s point is that “customer” does not reflect the relationship. It is not a good shorthand word to use throughout the Bill.

I am not particularly keen on the word “monkey” as an alternative. I believe it has financial implications in some jargon and would totally confuse the issue. Be that as it may. I understand the Minister’s point but, if that is so, the right expression would be “creditor” or “the creditor’s heirs” and not “customer”. He has just said that it is a debt but that point is not met by the use of the word “customer”. Customers may or may not have debts. I understand that he has an objection on those grounds to the word “owner”. It seems to me to be better than “customer” but perhaps it should be “creditor or his heirs”. I do not think that “customer” is right because the person owning the asset may not be, or ever have been, a customer of the bank concerned.

I understand what the noble Lord is saying but perhaps we can agree that, if I am right about the legal point, it would clearly be wrong to put the word “owner” in the Bill. The noble Lord may not like the word “customer” but everyone will know that “customer” refers to the dormant account holder. We prefer that word to the word “creditor”, which is the noble Lord’s second alternative.

We could say “dormant account holder” but that is three words where we think one will do, and it appears quite a few times in the Bill.

I think we had better think about it between now and Report. My present view is that “customer” is not the right word. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

7: Clause 1, page 1, line 15, at end insert—

“( ) A bank must transfer up to 90% of its contribution to the general scheme providing at least 10% of its contribution is transferred to the alternative scheme under section 2.”

The noble Lord said: I shall speak also to Amendments Nos. 8 and 11. As regards that last exchange, another word comes to mind—“member”. Banks refer to customers but building societies refer to their members. Another group of amendments, starting with Amendment No. 10, also refers to this issue.

Amendment No. 8 deals with the two schemes for the distribution of money from these dormant accounts. The amendment refers to,

“building societies and smaller banks”.

I am persuaded that it would be right to treat all building societies the same. The Bill treats 51 building societies in one way, and eight in another. At Second Reading, I referred to the position of a provincial but progressive building society with some national touches: the Skipton Building Society. Its resources would be deployed nationally in the main scheme and there would not be a local element. I was therefore concerned about the cliff edge, an issue to which I shall return.

There is a case for considering building societies as a whole. Eight building societies will be pushed into the main scheme but the bulk of them have local roots. Many of them have their own charitable activities and foundations. The Nationwide—the biggest of them all—has given out £22 million over the past few years. Serious amounts of money are involved and the members have a say; they go to the annual meetings of building societies and take a view on what should happen

There is a real case for “mutuality” meaning something and for the members having a real say. The Nationwide has its roots as a co-operative building society, with all that that means in terms of mutuality. Amendment No. 8 is about taking building societies out of the national scheme and entering them into the local scheme, or enabling them to operate nationally, with their own foundations which have been tried and tested. That is my first point.

Secondly, we should look at the national scheme and consider what is currently the cliff edge. At the moment, even a locally based society, such as the Skipton, would be in the national scheme. Perhaps we can deal with building societies, then consider the smaller banks and, indeed, banks as a whole. Some banks, such as the Halifax, started in the mutual movement. I restate the interests I declared at Second Reading so that they are on the record. The Halifax, which is now part of HBOS, has responsibilities in Halifax, Leeds, Birmingham and Scotland and it would be wrong if, because the bank is so big, those local communities did not benefit in the way that the smaller communities will benefit under the Bill. Similarly, other banks, such as Lloyds TSB, have their own serious and substantial foundations. I suggest that there should be a scheme whereby 10 per cent of the money can be either localised or put into the foundations or charities run by the respective banks.

The proposal—this is important for the Government—accepts that the Bill is basically about using the resources to enhance youth services and not about trying to include every favourite charity in the world. It accepts that that is the basis of the Bill but seeks to remove the cliff edge whereby only smaller communities can benefit locally. It seeks to include an opportunity for all communities to benefit, either locally or under the guidance of their own charitable foundations. I beg to move.

I shall not comment in detail on the amendments in the name of the noble Lord, Lord Shutt, because my amendments in the next two groups make the same points. I was a little mystified by the noble Lord’s introduction to Amendment No. 8. It seemed to me that it was another compulsion amendment, like Amendment No. 2, moved by the noble Lord, Lord Newby, and that this was not just a question of what options we gave larger building societies and banks in terms of falling within the alternative scheme in Clause 2. That is why I shall reserve my comments for the two groups of amendments that follow this one.

I am grateful to the noble Lord for the way in which he moved the amendment. Two different perspectives are clearly at play here: the Government have one and unfortunately he has the other. We have tailored the Bill to meet the needs not only of the large institutions but also those of smaller banks and building societies. He made excellent points about the role which some building societies play in their local communities, and we want to foster and encourage that.

However, we are talking about five or six building societies under the definition to which we are working. When we consulted on where the line should be drawn, assets of £7 billion received broad support, reflecting a consensus on the scheme and providing a specific option for the smaller institution. I understand that the noble Lord is saying, “Well, that’s fine for the smaller institutions. You have safeguarded their role, identified exactly the position for them and it is light touch. But I’d like the big boys, with resources vastly in excess of £7 billion, to enjoy the same role in localities”. That threatens the concept of the scheme.

We are seeking a light-touch approach and not heavy regulation. The moment we brought within the framework some concept of a local dimension to very large institutions, we would need much greater specification from both the institutions and the scheme’s reclaim fund. Within that framework, we would have to have the machinery to look at the way in which resources would be utilised. The scheme’s light-touch approach is designed for small financial institutions. It is appropriate that it applies to banks and building societies within that framework. The light touch will not work for the large institutions if they are able to concentrate significant resources in the local way the noble Lord has identified.

I understand what the noble Lord said. After all, all building societies were small once. The Halifax, one of the largest of them all, started off small and has, I understand, local connections and loyalties. However, in creating the reclaim fund, we could either have gone for a scheme where everything was distributed on a national basis, with the Big Lottery Fund distributing resources to areas where they are beneficial; or we could have recognised the significant role which small building societies play in their community. We recognised that role and we have made specific arrangements for it.

The Bill would have looked very different if we had not made that division. The division is agreed with the industry. The noble Lord is arguing about only eight building societies. We maintain that the dual scheme meets need and enables us to keep regulation to the absolute minimum. On that basis, I defend what is in the Bill while recognising the arguments of the noble Lord about the history of all building societies in their localities. However, eight of them at least are large enough to produce a different dimension from the local institutions for which we are seeking to provide a particular relationship. I hope that, on that basis, he will feel able to withdraw his amendment.

There is an element of compulsion in Amendment No. 8 for all building societies and smaller banks. The facts are these. I have worked out—I tested this with the Nationwide and we were within £1 million—that the figure the building societies are saying is available is £150 million. That is 0.0005 of 1 per cent of the asset base. That means that if the largest of the smaller societies was able to use these funds locally, a sum of £3 million would be available for its communities. However, the Skipton would generate £4.5 million, which would not be used locally but nationally. The issue at stake here is the comparison between communities with small building societies and communities with slightly larger ones. That is why I mentioned the cliff edge.

This concerns the eight societies to which the Minister referred, the banks and the bigger financial institutions. There should be an element included in the Bill allowing them to honour their local connections and contributions over the years. That is why I have put in the figure of 10 per cent. It is simple; it does not complicate anything; it widens things; and it treats communities up and down the country on a much more even keel.

However, I hear what the Minister says. We shall ponder these matters and no doubt return on a later occasion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Transfer of balances to charities, with proportion to reclaim fund]:

[Amendment No. 8 not moved.]

9: Clause 2, page 2, line 1, leave out “smaller”

The noble Baroness said: I was not expecting the noble Lord, Lord Shutt, to approach his amendment in the way that he did. As I explained earlier, I thought he was talking about compulsion, which is the way in which Amendment No. 8 is drafted. It may be for the convenience of the Committee if I deal with the next two groups together because they cover similar issues.

Amendments Nos. 9 and 13 and our opposition to Clause 9 standing part of the Bill are designed to take out limits from the Bill so that all banks and all building societies have the option of entering the alternative scheme in Clause 2. This is distinct from the amendments to which the noble Lord, Lord Shutt, spoke, where he suggested that the larger banks could perhaps put 10 per cent of their reclaim money through the Clause 2 scheme. I suggest that they should have the option of putting the whole amount through if they want to do so. The amendments would achieve this.

The Government’s defence of segregating banks and building societies is that they believe the larger financial institutions should go into the main scheme so that the money goes via the Big Lottery Fund, as the Minister said. In fact, in their summary of responses they said it was more appropriate given the wider outlook of the larger financial institutions. What they mean by “wider outlook” is that the larger financial institutions want the Government to decide where their money goes, in this case to the Big Lottery Fund. This ignores the fact that large financial institutions can have clear relationships with the communities in which they operate. All large financial institutions have branch networks and strong community bases even though they are not confined to one particular community. The Clause 2 scheme is not restricted to communities; it can also apply to charities with which the banks or building societies consider they have a special connection. One can think of a lot of large institutions that have a special connection with particular charities that they have built up over a long period of time. Some banks, such as Northern Rock, have their own foundations, rather like building societies—Northern Rock was a building society. Clear mechanisms that allow the money to be spent do exist.

My first group of amendments asks why large financial institutions cannot reflect the fact that they have branches throughout the land and well established connections with specific charities. They fit fully within the concept of Clause 2 and would direct the money to causes that they would have thought about carefully, and that would be aligned with things that they want to achieve. Why is that worse than transferring money via the Big Lottery Fund? There is a sense in which the Minister was saying earlier that somehow the Government now own the money that comes from the larger financial institutions; they can spend it on things that they want it spent on and can ignore the wishes of others.

Amendments Nos. 10, 14, 17 and 18 form the next group. They have been pressed on us by Nationwide, the largest building society in the world, which has spoken to a number of Peers and has been very active in presenting its case. The Minister said earlier that there was a consensus that small building societies should have the alternative provisions. That is probably the consensus among building societies because there are more smaller building societies than large ones. There are only eight above the £7 billion threshold and 50-odd below it so there will be a natural consensus within the building society community, but that does not make it right that large building societies should be deprived of joining the alternative scheme in Clause 2.

As the noble Lord, Lord Shutt, has already explained, Nationwide has a foundation that has existed for a long period of time. It has committed to putting a certain amount of its profits into it every year and that has been approved by its members in general meeting. It is very committed to that foundation, and wants the ability to put further resources into it. I am struggling to see why the Minister goes against good voluntarism closely associated with causes and projects that have clearly had a lot of thought put into them, and instead goes for the big black hole of the Big Lottery Fund. I am sure that good will come out of it, but it has less immediacy. It is always difficult to draw dividing lines. The noble Lord, Lord Shutt, raised the case of the Skipton Building Society. It is local and not that much above the £7 billion threshold compared with some of the larger building societies.

I have another concern about the Government’s approach that smaller building societies can have the alternative scheme. That will skew money into certain communities, because I suspect that most of the smaller building societies are not based in conurbations such as London. From a quick look at the list, I could see only one building society that had a connection with London. That means that Londoners will be deprived of targeted money, although they have branches of banks and building societies everywhere. That seems unfair.

My first group of amendments suggests that we should allow all financial institutions the choice of whether to go into the alternative scheme in Clause 2. If that is not acceptable to the Government, they should at least allow building societies, with their mutuality and their close connection with their members and their communities, to support the schemes that they have so successfully developed. I beg to move.

I rise to support the noble Baroness. In relation to Amendment No. 13, I do not think that any of us has had a chance to check with every building society. However, it is conceivable that there will be a small building society that does not want to take on the job of dealing with its lost or closed accounts but will prefer to hand it over to the Big Lottery Fund because the administration involved will be just too much for it. Therefore, I think that that option should be kept open.

The key point, if I may say so, is that the Minister needs to understand the difference between the building society movement and high street banks. The difference is one of mutuality. My noble friend on the Front Bench tends to wince when I talk about mutuality but that is the fundamental difference. The members of a building society own the building society and the whole thrust of the organisation is to meet the members’ needs. There are no shareholders, no outside bodies can hold influence and the building society cannot be taken over, so it is a very different animal. Therefore, the threshold of £7 billion is wrong and unrealistic. Ultimately, the members will benefit and in many cases they have already set up charities within the building society.

The Minister talks about a light touch. At the moment, control over where the money goes lies with the Charity Commission and, frankly, no one else has to get involved. The Charity Commission is charged with looking at whether the trustees of a charity are appropriate persons. One has only to look at the breadth of experience of the Nationwide’s trustees to see that they are.

I asked the Nationwide, as I was able to get hold of it quickly, what sort of awards are given. An awful lot of them are around £5,000 and they are all over the place; for example, £5,000 for the Newtownabbey CAB and £3,737 for North Wales Victim Support. Also listed is the Benefit Advice Shop in Rhyl, Wales—and the list goes on and on. Why are the awards so small and why are they so regionalised? It is, as the noble Lord said at the beginning, because they basically started from the co-operative movement and they have a footprint in the local community which they have developed, in some cases, over centuries.

It irks a building society to hear that money that has lain in a dormant account will be transferred to the Big Lottery Fund, over which it has absolutely no influence. The members do not want that and I think that the Government should listen to them. The key point is that there is a big difference between a mutual society and a mainstream, high street bank. The amount of money involved is substantial: I think that the figure of £22 million has already been mentioned in relation to one society over the past 10 years. We should also look at the quality of what has been done. Who won the Charity Awards 2006? It was a building society—the Nationwide.

I repeat that there are good, solid trustee boards. If the Government really believe in a light-touch framework, they will recognise that the mutual movement is different from the joint stock bank movement. There is already a track record there and there should not be a differentiation of an arbitrary figure of £7 billion.

I do not want to repeat the eloquent speeches that noble Lords have already made on Amendment No. 10 and the other amendments in that group; I simply rise to support them. The key is that there are differences, of the nature that the noble Lord, Lord Naseby, has just explained, between a bank and a building society. One of the key differences is the link with the local community. Bar the Nationwide, the eight building societies that we are talking about still have a very local or regional base. I gather that, in addition to the Nationwide, the Britannia, Chelsea and Skipton Building Societies support the amendment. Those three have very clear local or regional bases. That is very different from virtually all the banks; it is certainly completely different from banks which may have just one branch—it may be a foreign bank—in the City of London, which I presume would be included in the scheme. The nature of building societies is different. They are in many ways admirable institutions. Many of us, I think, wish that there were rather more of them, and we might not have some of the current problems that we have with our banks. However, be that as it may, they do admirable work. It is in the interests of the public that we support them when we can. This is a way of strengthening the building societies. Therefore, I hope that the Government will treat the amendment sympathetically.

I support Amendments Nos. 9 and 13 and the question that Clause 3 stand part of the Bill, because, while it is correct that a building society is one thing and a bank another, it would be unfortunate if we left the impression that the banks never engaged in any charitable activities or local charitable activities. My own experience would suggest that that is not the case. They are involved in local charitable concerns, and many of them delegate powers to branches to support different activities. It may require a clearance procedure, but, nevertheless, the money comes from the banks’ charitable arms into the charity sector. Removing the word “smaller” from Clause 2(4)(b), and therefore making it a voluntary scheme, whereby everybody who joined it could opt for the alternative scheme, would be a very good option. That would be the lightest-touch of all the options in the Bill, because the charities, as my noble friend Lady Noakes said, are regulated by the Charity Commission and have to conform to charity law, which is already in existence. If they are lucky enough to receive extra money from dormant accounts, they just put in place exactly the same procedures as they already have, whereas, as has already been said by the Minister, the Big Lottery Fund has to create a whole new, ring-fenced system, which has to keep any assets that come to it separate from its lottery assets and enter a series of complicated agreements. Banks and building societies, if they are in the alternative scheme, will make sure that they do not forget Wales, Scotland and Northern Ireland. The simplest way in which to deal with the matter is to leave the scheme voluntary, keep it as light-touch as possible and, as we move on to the next group of amendments, recognise that the building societies have now, whatever they are thought to have said at the beginning, decided that they would like to be in the alternative, and not the general, scheme.

I am grateful to all noble Lords who have spoken in the debate. We are to a certain extent straining over relatively minor features of the Bill. All the smaller institutions, if they want to, can participate in the nationwide scheme, so there is no restriction on them. The scheme is designed to facilitate their possible contribution to local communities, in recognition of the role that they want to play there, but they may prefer the other option. We are not talking about the small institutions in these terms; we are talking about the large ones. With regard to the large ones, the idea that they could not participate in their local communities is a little strange. One obvious objective of the national fund is financial literacy. Is it conceivable that a building society cannot bid successfully to the distributor, which will be the Big Lottery Fund, for the opportunity to provide financial literacy locally? Who is likely to compete against it and do better? There will be competitors, of course, and the Big Lottery Fund is used to competition of that kind. The idea that because large building societies are within the framework of the national objectives of the scheme they will have no relationship with the locality, apart from their present independent schemes, is based upon a misunderstanding of the Bill.

We are not talking about lottery funds. It will not do for noble Lords to give the impression that these resources now flow to the lottery. They do not flow to the lottery; they have nothing to do with it. The Big Lottery Fund is merely responsible for distribution. The only reason why it is in the frame as far the legislation is concerned—legislation that has been welcomed by those who are participating voluntarily in this scheme—is because it is a recognised distributor with the regional and local centres and the powerful position in each of the nations of the United Kingdom to do its job well. It is acting as an agent for this scheme, and one should not confuse the lottery with the distribution of these resources. I must insist—as far as I am able—that we draw a clear boundary between any criticisms we may have. I recognise that criticism is not infrequently in the air about certain aspects of the National Lottery, although I have never met anyone in this country who thinks it has been a bad idea and for every person who has voiced criticism, I have met many more who have identified what it has done for their favourite causes or localities or who are bidding to make sure that that is what it should do. We are not arguing about the National Lottery. This part of the lottery is merely the distributor. In that sense, it is entirely neutral with regard to the allocation of the assets and will play its role within that framework. That is why the big banks and building societies signed up to this scheme and are happy with it.

They are not. I assure the Minister that the big building societies are not happy with this scheme. I cannot put it more plainly. I would be grateful if the Minister would address the point about the difference between mutual financial organisations and high street banks. That difference is the primary reason for some of the unhappiness about at the moment.

I hope I paid due regard to the role of building societies, whatever their size, with regard to local communities, particularly those in which they originated. I have already made that comment. I am not gainsaying the value of that. I was going on to emphasise that they play their role through their own structures. I recognise the letter from Nationwide and the role it plays. It already has structures through which it can fulfil a great many of its objectives in those terms. With the national scheme, it has the opportunity to play its part at a local level. It is not denied the local-level position but it applies to a different distributor for that role. As I indicated, a large number of the overall priorities of the national scheme will accord well with what the building societies want to achieve—particularly the development of financial literacy—so it will be recognised that we think that the big mutuals will play their part at a local as well as a national level. I recognise the noble Lord’s point about the derivation of the institutions, but all banks were local once and the big banks, too, can play their part in localities through this framework if they wish to do so.

I recognise that there are reservations and representations from some quarters but broadly the financial institutions will willingly participate in the scheme. It is a scheme that embraces two concepts, one of which is the local, for which we have made particular provision. I recognise the point that the noble Lord, Lord Naseby, made: any figure that we put in will have an arbitrary quality, and £7 billion is an arbitrary figure for small as opposed to large financial institutions. However, there are clearly three priorities to be achieved through the structure of the scheme, and the large institutions are well placed to play their part in its development in those terms.

I think that this is the last that I have heard of this representation. I am pretty sure that, once again, the noble Baroness will emphasise that she may be withdrawing the amendment for now but there is still trouble to come. However, the trouble is “sufficient unto the day” for the moment, and I hope that she will withdraw her amendment.

We must stop cross-dressing on each other’s speeches. I thank all noble Lords who have taken part in this debate. My noble friend Lord Naseby referred to the fact that normally I express myself as an extreme sceptic on the benefits of mutuals, as opposed to any other form of commercial organisation. To that extent, I agree with my noble friend Lord Eccles, but there is not necessarily a distinction between banks and building societies to this extent. If large banks wished to take part in the alternative scheme, I would want to support them, but even the banks that used to be building societies have not been knocking at our door to say that they should be able to do so. However, it is clear that the larger building societies, led by the Nationwide, wish to have more flexibility in how they approach the use of dormant account money on their books.

The Minister said that these building societies can go to the Big Lottery Fund. It is a ludicrous argument that has the building societies paying the money to the reclaim fund, which pays the money to the Big Lottery Fund, which then, if it feels like it, might hand it back. That is such a nonsensical argument that it is barely worth responding to it, other than to note that it is ludicrous.

I hesitate to intervene in my noble friend’s comments. I do not know whether the Minister has ever seen the form that you have to fill in for either the regional lottery or any of the big lotteries but it is horrendous. However, all the charities in existence have already organised a scheme and they know what they are doing. Frankly, the prospect of filling out one of those forms is absolutely horrendous.

Does the noble Baroness also accept that the Nationwide’s priorities over the period to 2010 are domestic violence, prisoners’ families and young offenders? As we understand it, those are not subjects on which the Government intend the youth strand of this fund to concentrate.

I thank both noble Lords. I agree with everything that has been said and, in particular, the bureaucracy aspect that my noble friend Lord Naseby pointed out. It is nonsense to pass money through several organisations and to pick up several layers of bureaucracy en route. I shall return in a later amendment to the subject of several layers of bureaucracy.

The Minister urged us not to confuse the Big Lottery Fund, as a distributor, with the lottery. For the record, we insist that there is a major connection; the reason why the dormant account money is being put through the Big Lottery Fund is to conceal the fact that large amounts of money that would otherwise be available for good causes through the lottery distributors has been stolen for the Olympics. By funnelling this money through the fund, the Government will be able to give the appearance of large sums of money going through the lottery distributors when in fact it is coming from the dormant accounts. We will not forget that throughout the whole of our consideration of the Bill and when we consider the Big Lottery Fund itself.

As the Minister anticipated, we will want to return to this on Report because it is a point of principle that we need to address before we let the Bill go through. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 10 and 11 not moved.]

11A: Clause 2, page 2, line 18, leave out “the balance” and insert “the total amount of the balance on the dormant account calculated prior to any transfer of the proportion to a charity under subsection (1)(b) which”

The noble Baroness said: The amendment has been suggested to us by the Law Society of Scotland, which, as I am sure the Minister is aware, often produces careful and well thought-out amendments, which I am always happy to table in Committee for the purposes of discussion.

The intent of Clause 2 is that the small bank or building society should transfer its dormant account money to its own pet charity, but that it should reach an agreement with the reclaim fund to transfer some money to that fund to meet possible repayment claims. There is no problem with that.

The Law Society of Scotland believes there is some ambiguity about the use of the term “balance” in subsection (2)(b). Because the balance on the dormant account is being split into two destinations, the references in subsection (2) could mean the balance transferred to the reclaim fund or the balance transferred to the charity. The amendment is designed to make it clear that what is intended on a repayment is the whole balance, calculated before any transfers were made elsewhere. I hope the Minister shares the Law Society of Scotland’s desire for clarity, and I beg to move.

I am grateful to the noble Baroness for raising this issue. I share her high opinion of the Law Society of Scotland, having met it a number of times. As I said in reply to an earlier group of amendments, though, we rely on how Clause 8 defines “balance”. We have already had a discussion about whether Clause 8 deals with the issue of interest in particular. The noble Lord, Lord Monson, reprimanded me for—he did not describe it in these terms, but it is what he meant—the opaque language of Clause 8(2) and wondered whether we could do better. The answer to the noble Baroness’s question is to be found in the definitions in Clause 8.

I had expected that the Minister would say that Clause 8 was the source of the answer. I shall invite the Law Society of Scotland to consider carefully his views and to see whether any ambiguity remains between the way the wording is put together in Clause 2 and that in Clause 8. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12: Clause 2, page 2, line 22, after “account” insert “only”

The noble Baroness said: This is a probing amendment. Under Clause 2, in the alternative scheme the amount available to be transferred to charities by the smaller bank or building society is the amount that is left after paying an agreed proportion to the reclaim fund. That seems reasonable because the reclaim fund will have to meet any repayments. In Clause 2(3) we are told that the agreed proportion must take account of the need for the reclaim fund to have enough money to meet repayment claims. My amendment is a small one: it inserts the word “only” into that formulation so that the reclaim fund can take only amounts needed for repayment and not for anything else.

This is the first time we have encountered the issue of the finances of the reclaim fund. I hope the Minister will be able to explain how much it is anticipated will be withheld by the reclaim funds before it is decided how much a smaller bank or building society can transfer to its charities, or indeed how much the reclaim fund has to hold back before it distributes money. None of the papers I have seen thus far has given any information about how this holding-back of money will work in practice.

Will the banks and building societies under Clause 2 be involved in setting the percentages or will they be told by the reclaim fund how much the fund wants? Will the Treasury be involved in that, or will it be left entirely to the fund and/or the banks and building societies? While we are dealing with Clause 2 schemes, is it anticipated that there will be a flat rate for all transfers, or will it be institution-specific or dormant account-specific? If it is the latter, which is arguably the most accurate, we are talking about significantly detailed calculations being involved.

We touched on the Financial Services Authority earlier. It will supervise the payment of customer claims because the Government intend to specify that as a regulated activity. Does that mean that the authority will get involved in the policies adopted by the reclaim fund, either for the amounts taken from those involved in the Clause 2 scheme or from the amounts that it holds back within the fund and does not pay over to the Big Lottery Fund? That raises the question of whether the Financial Services Authority has any competence in this area and how transparent its involvement might be.

The amendment arises in the specific context of the alternative scheme in Clause 2, but the principle—that of the money that is set aside to meet repayment claims—has a wide application throughout the rest of the Bill. I hope the Minister will be able to answer questions on that basis as well. I beg to move.

The reclaim fund is a company run by the private sector and regulated by the FSA. We expect it to act reasonably and manage its affairs responsibly. Its directors will have a duty to act in accordance with company objects and articles of association, particularly those objects that are defined by this legislation. In order to obtain FSA authorisation, the fund must satisfy the “fit and proper person” test that forms part of the threshold conditions for authorisation under the Financial Services and Markets Act.

I emphasise that the scheme will be highly transparent. The reclaim fund will prepare audited annual accounts. In addition, its articles will require it to publish detailed figures on the flows of money into and out of the scheme. If we believe that a reclaim fund has not managed its assets appropriately, we have powers under the legislation to take action. The Treasury would be able to direct the reclaim fund to comply with its company objects or any of its articles required by Schedule 1. If it did not comply with such a direction, the Government would be able to take action in court to ensure that that was rectified.

The reclaim fund will have costs. An aspect of its necessary expenditure will be the costs involved in administration. It is reasonable that the income from dormant accounts covers the fund’s running costs, but those will need to be subject to public analysis through the transparent structure we are putting in place.

I am grateful that the noble Baroness has said that this is a probing amendment. I hope that I have met the most precise of her probes. I have no doubt I will have an opportunity at a later stage to deal with any that I have not answered.

The Minister might even have an opportunity now. He has answered one specific point covered by the amendment: the reclaim fund will claim not only money set aside to meet repayments but also money set aside to meet other costs. That will raise concerns in building societies, which will be wary of the amounts that will be held back from them, diverted away from their local charities, with which they have special relationships, and going into this more amorphous body, the reclaim fund, which they will probably have nothing to do with.

I asked the Minister specifically whether the Financial Services Authority will be getting involved in the way that the reclaim fund sets its policies for holding money back or indeed taking money from the Clause 2 schemes. I do not think he answered that.

I indicated that the company that is established will be subject to financial services regulations. It will have to meet the objectives that this legislation lays down for it.

With respect, that does not quite answer the question. Just to say that something is regulated does not mean that an aspect of its activities is regulated. As I understand it, the Treasury has said that the making of repayment claims would be a regulated activity. I am not sure how far that takes the FSA into the financial policies of the reclaim fund. It is important to establish that.

I want to link that to something else the Minister said about the Treasury having the ability, if things were not going right, to tell the reclaim fund to comply with its articles. It has the direction power, which we will be coming on to later. I was wondering how the Treasury knows about that—as well as what competence it has—and how it gets into questions of that nature. The Minister was keen to say that the reclaim fund will be a private sector body, and I am sure he will keep asserting that, but I am trying to tease out how in practice certain calculations will be reached about money held back or taken from a Clause 2 scheme, who gets involved in that, how and on what basis, and how much they know about it.

I shall try to help here. There are three jobs for the reclaim fund. First, it has to keep proper records. Secondly, it has to invest any money it receives. The third and main aspect, though, is judgment. The fund has to judge how much it dares to give to charitable purposes, whether a local or a national scheme, and how much it holds back. Then, having held back that amount, it has to exercise more judgment on a later occasion about how much more of that sum it should hold. With regard to the word “only”, what else does the fund need to spend money on? That is what the noble Baroness is asking.

As I have indicated, the fund has running costs. That is all I was prepared to vouchsafe as a contributory answer to the question. I hope it meets the noble Lord’s anxieties, but it will not meet the noble Baroness’s as she wants some precision on the calculations. She will have to show a little patience on that. I have indicated that the Financial Services Authority will authorise a reclaim fund and will consult on the rules that should govern it, but it is a little early for any precision about how that structure will develop. I have already indicated that there is much work to be done on that. However, the structures are in place to guarantee public accountability.

I thank the Minister and the noble Lord, Lord Shutt, who is right that it is a question of judgment. The judgment of the reclaim fund will be set against the judgment of others, like the smaller banks and building societies that do not want so much kept back, or it might be the judgment of the Treasury and/or the Financial Services Authority. The latter might incline to greater prudence in holding money back, while the Treasury might be keen on more money flowing through to the Big Lottery Fund. I was trying to tease out who will actually make those decisions. I accept that precise percentages cannot be given today but, based on what the Minister has said, I am not much clearer about the actual process for determining them.

The Minister said that much work remains to be done. I hope we do not hear that throughout Committee. The scheme has been a long time in gestation, and to be told that much work still needs to be done is not a satisfactory response. I will let it go this one time, but I hope it does not become a constant refrain from the other side of the Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 13 and 14 not moved.]

Clause 2 agreed to.

[Amendments Nos. 15 and 16 not moved.]

Clause 3 [The assets-limit condition]:

[Amendments Nos. 17 and 18 not moved.]

Clause 3 agreed to.

Clause 4 agreed to.

Clause 5 [Functions etc of a reclaim fund]:

19: Clause 5, page 4, line 9, after “money” insert “to the Pension Protection Lifeboat Fund established by section (Pension Protection Lifeboat Fund) or”

The noble Baroness said: I shall speak also to Amendment No. 45. I said at the beginning of our session that we thought the Bill was too narrowly drawn in relation to the purposes to which the money gathered under the dormant accounts scheme could be put. The amendment is intended to widen the way in which the money can be used on a national basis.

Amendment No. 19 would insert some additional words into Clause 5(1)(c) so that a reclaim fund could transfer money either to the pension protection lifeboat fund set up by my Amendment No. 45 or to the Big Lottery Fund. The amendment itself does not create an obligation on the reclaim fund to transfer money to the lifeboat fund, but there is a Treasury power of direction in Clause 5(4) that would allow the Treasury to direct a reclaim fund to give effect to a specified object. Transferring money to the lifeboat fund would be one of the reclaim fund’s objects.

Amendment No. 45 would insert a new clause after Clause 10 setting up the pension protection lifeboat fund. Noble Lords who followed the passage of the Pension Bill in our last Session will recognise the drafting of that amendment. It draws very heavily on the amendment which was passed by your Lordships’ House during the passage of that Bill but overturned in another place before the Bill became an Act.

The lifeboat fund is designed to ensure that those unfortunate individuals who lost their pension entitlements prior to the setting up of the Pension Protection Fund get pension payments at the same level as those who qualify for payments from the Pension Protection Fund. I shall not recite the whole messy history here. The Parliamentary Ombudsman has said that the Government should provide compensation to those who lost their pensions. The Government have refused to do that and have instead introduced a financial assistance scheme that gives some additional pension payments but certainly not at the level that would be paid under the Pension Protection Fund.

The amendment does not address the many concerns that there are about the efficiency of the financial assistance scheme in delivering additional pension payments but it does help to address the need to increase the level of payment beyond the FAS level. The lifeboat fund, which would be run by the PPF, would pay top-up pensions up to the PPF levels. Under subsection (4), the Secretary of State could make loans to the lifeboat fund to enable the pension top-ups to be paid until sufficient had been received from a reclaim fund. If the reclaim fund ended up transferring more than was needed, subsection (6) would require the funds to be returned to the reclaim fund, which could then transfer the money to the Big Lottery Fund.

When we moved our amendments to the Pensions Bill, we also tried to set up an asset recovery agency, which was designed to gather in dormant assets to pay for the lifeboat fund. That was widely misreported as being aimed only at unclaimed pension assets—about which there are technical issues, as well as strong opposition from the pensions industry—but in fact the agency was designed so that dormant bank account money would also have been covered.

We believe it is important not to let the Bill pass without creating the opportunity—it is no more than that—for dormant bank account money to be used to supplement the FAS level of support. The work being undertaken by Mr Andrew Young’s review of scheme assets is identifying some further money for the FAS, but the interim review did not find enough to fill the funding gap. Today’s papers are saying that Mr Young’s final report will say that there will be enough money only if the Treasury matches certain elements of funding, and it is no surprise to learn from the newspapers that the Treasury does not want to stump up. Hence, these amendments are potentially important in ensuring that decent pensions are delivered to those who were unfortunate enough to suffer pensions loss before the PPF came into force.

I should say that that we support money being spent on the matters listed in Clause 17 and, in particular, we support spending on youth facilities, provided that it produces things that young people actually want and not what some well intentioned committees think they want. At Second Reading, I asked some questions about that as the Prime Minister had been talking about £670 million being spent on youth, which is way ahead of the amount that will be available from the dormant accounts scheme according to the figures from the British Bankers’ Association and the Building Societies Association. I asked the Minister to cover that question in his winding-up speech but he chose not to do so. I have heard from the Commission on Unclaimed Assets that the £670 million was a classic bit of government spin because it included already budgeted government expenditure and existing lottery money amounting to £495 million. What a surprise. The additional amount going to youth projects, being spun as £670 million, is, I understand, somewhere between £100 million and £150 million, depending on whom you ask.

So, we can fulfil the Prime Minister’s promises to fund youth and still have a lot left over, even on the cautious estimates being put up by the banks and building societies. Few would deny that spending money on youth projects is a good thing, but I hope that the other end of the generation spectrum is not forgotten when the dormant account money is handed out. Pensioners and prospective pensioners forced to rely on the stingy FAS support payments should be among those first in the queue for help, and I hope that noble Lords will support these amendments, which create the ability to give some very deserving pensioners a slightly better income in retirement. I beg to move.

We have considerable sympathy with the noble Baroness to the extent that the pension protection lifeboat fund is a worthy aim. In our view, it is a sufficient priority that it should be dealt with straightforwardly by the Treasury. I congratulate the noble Baroness on having come up with this alternative route to deal with the problem, but I have some slight difficulties with it. They relate to how thinly we spread any resources that are available under this fund. There are already considerable doubts about whether enough resources will be available to fulfil the third of the three objectives set out for the reclaim fund in respect of the social investment bank. My immediate view is that, unless there is considerably more money available than we have been led to believe, adding a fourth limb to the spending streams—if you can add a limb to a stream—would dilute (which you can do to a stream) the purposes. It also opens up the project to further amendments. I have colleagues who feel strongly that some or all of this money should be going to support international development goals. Indeed, at one point it may well have been Liberal Democrat policy that we should do so. There are no end of positive, useful things to do with the money.

To go back to the discussions that we had earlier, if we were extending the scope of the scheme to include the dormant assets of insurance companies and pension funds, the logic for some of the funding going in this direction would be stronger. However, we are clearly not going in that direction in the foreseeable future. Within the scope of the scheme as it is likely to emerge from the Bill, because of the “spreading thin” argument we are not minded to support these amendments.

It is not normally my habit to interfere in Bills run by my fellow Front-Benchers but, as I moved the original amendment to the Pensions Bill on the lifeboat scheme, I feel duty-bound to point out, especially to the noble Lord, Lord Newby, that, as he will remember, the Government have been pushed kicking and screaming at every stage into increasing the amount of money available to the now 125,000 pensioners who lost some or all of their pension expectations. Originally, it was thought that there were some 60,000 of them, and the Government decided that £400 million over 20 years was quite enough money to lay aside. Since then, that has been ratcheted up, not least in the Budget last year. There will be an order on exactly that subject in this very Room on Thursday, which will bring a total of £2.3 billion into the FAS pot.

The indefatigable Dr Altmann, who is the spokesman and, arguably, leader of the Pensions Action Group, has pointed out, first, that that is still not nearly enough and, secondly, that what is needed is for the Government to accept the moral result of the ombudsman’s report of some two years ago. My noble friend mentioned the investigation that is going on into the use within the FAS scheme of those residual assets that are coming into the scheme. A report was due in July. I still have not seen it—and of all people, I would be the most likely in your Lordships’ House to do so.

The most recent news is that, from somewhere within the DWP, money is available. I do not know whether your Lordships saw an article in today’s Daily Telegraph, in which a Mr Bob Soar, who lives in Mr Hain’s Neath constituency, said that he had been urged by the Work and Pensions Secretary to lobby the Treasury. Mr Soar is quoted as saying,

“Mr Hain said he had sent some personal recommendations to the Treasury”—

which may or may not include the results of this report; we do not know—

“and he indicated that there was money available”.

Just what is going on between DWP and Treasury Ministers?

I have a sense of déjà vu. I should have looked up my earlier speeches on the FAS and read them out verbatim to show how much “I told you so” was a justifiable comment on this occasion.

Like my noble friend, who has done a splendid job on this subject since I left the Front Bench, I was surprised by the comments in the weekend press—those are the ones I saw, rather than the comments today—with regard to the funding of the FAS. It was also suggested somewhere yesterday that the administrative costs of the FAS have amounted to more than it has succeeded in paying out. No doubt the Minister will tell us whether that is so. At all events, it was clear from the beginning, when the FAS was introduced to quell a rebellion in another place, that the amounts involved were totally inadequate. They were sufficient to buy off the rebellion in the other place, but they certainly were not sufficient to meet the needs of the group of people who are on the wrong side of the deadline. If you got the other side of the PPF being set up, it was all right; but if you have to rely on the financial assistance scheme, it has proved totally inadequate.

The ombudsman’s report seems to have been totally disregarded by the Government. This is becoming something of a pattern with independent reports. The reports spell out the problems arising as a result of government policy and maladministration, and then the action for which they call is not taken. Given that this is a deserving group of people who have been grossly misled about what was being done to help them, there is an argument for saying, as my noble friend Lady Noakes said, that this is indeed a charitable enterprise, albeit one which ought to be financed quite straightforwardly by the Treasury.

I am grateful to all noble Lords who have spoken, including those who have made a special effort to be here and to bring with them the expertise they have displayed on pensions legislation—expertise which, I hasten to add, I have not a hope of matching. The Committee will recognise that my task is to defend the proposals in the Bill.

The noble Lord, Lord Newby, is right: the issue of support for deserving pensioners is of great concern to the Government, hence the great deal of activity going on at the present time which is giving rise to some remarkably ill informed press comment. The issues we are seeking to address are challenging, but it would be singularly inappropriate to divert resources from dormant account funds to the lifeboat fund.

The Minister said it is singularly ill informed press comment. Is it in fact the case that the administrative costs are greater than the amount the FAS has paid out?

No. Normally when the press is speculating on clashes within government, from my perspective I am all too well aware that it is often singularly ill informed. That is why I used the phrase there.

It cannot be an intelligent strategy to divert to the lifeboat fund the dormant account money. It would be an open-ended commitment. We do not know how much money would be involved nor how long the undertaking would be. So we would be building into these accounts and the structures of the Bill a long-running commitment which we would not be able to calculate and the end of which we could not foresee; we would not know when the obligation was fulfilled. I have not the slightest doubt that in other areas of the Bill—I have already had some experience of this today—the Opposition are only too keen to identify how precise we need to be with certain calculations. Here we have a grandiose scheme which is utterly open-ended.

We have set out our key priorities for the dormant account money, we have discussed with the institutions the structure of a light-touch regime to which they broadly give their support and, of course, we have our priorities within it. The noble Lord, Lord Newby, emphasised that the issue should be dealt with elsewhere and the noble Lord, Lord Higgins, although he supports the amendment, also thought that the resolution of the pensions issues lies in other funding structures. The Government are extremely busy about meeting those needs, and it will be appreciated that the reason why there is considerable press comment at present is because of the degree of hard work going on to see how issues with regard to those suffering losses can be remedied. That is all against a background of the review of the financial assistance scheme taking place under Andrew Young to find out what better use can be made of the residual assets in the pensions scheme, and we expect that report in the near future.

Mike O’Brien, the Minister, committed during the passage of the Pensions Bill to match the extra funds that the review identifies with the goal of moving towards 90 per cent of expected core pension for all recipients. That was not a lightly entered-into commitment. We all recognise how difficult it is to fulfil, which is why the issue lies in where the resources will come from. But of course we are taking action on this important issue. I do not underestimate the noble Baroness’s opportunistic skill in identifying the issue—

Well, it is opportunistic in the context of this Bill. After all, noble Lords elsewhere in the House could identify a range of very good causes indeed. If I sit down now, I can see two noble Lords on the Liberal Democrat Benches who are eager to rise to mention excellent objectives that could be included in the framework of the Bill, while not recognising the resources of the Bill as the ones that should be directed towards those objectives.

I can say to the noble Baroness that it was a good try and an opportunity for identifying a very difficult issue that we want to see addressed. No one underestimates the deserving cause which she has identified, and the Government are addressing themselves to the issue, but we do not intend to do so within the framework of this Bill.

The noble Baroness constantly upbraids me when I fail to answer her more detailed questions. She asked me one on the taxation issues for customer accounts.

Oh, it was the noble Lord, Lord Higgins, who asked that question. I hoped that I was going to answer the noble Baroness’s point but I shall keep my 0 per cent record with regard to her.

I think that the noble Lord, Lord Higgins, will be satisfied with my answer, which is why I was offering it to the noble Baroness, who has rejected it, of course. The changes in taxation will ensure that any interest credited to a dormant account on transfer to the reclaim fund or credited while the funds are held by the reclaim fund will be treated as paid for the purposes of income tax and tax reporting requirements only if a customer reclaims the money. Then it would be, otherwise not.

I am extremely grateful to the Minister for answering that point, although why on this amendment I am not entirely clear. However, what he is saying—if I understood him correctly—is that the revenue obtained by the Inland Revenue as a result of these disbursements will go up. If the account had simply remained dormant the Revenue would not have collected anything.

The Revenue will collect only from the person reclaiming the account—that would be the case at present. All we are saying is that taxation would be paid within the reclaimed fund only if an individual claims the account.

That is what I understood; namely, that the revenue is higher than it would otherwise be if the Bill did not exist.

That is the case, of course. If noble Lords pressed me from every side to have the most extensive campaign—and we are eager that the industry pursues the most intensive campaign—to ensure that money is appropriately directed to those who own it and that those dormant accounts are claimed, of course there will be an element of taxation and, therefore, the Revenue will benefit.

I am extremely grateful to the noble Lord for picking up this point at this stage, rather than waiting until a subsequent stage of the Bill. We are now much clearer about the situation, and we appreciate his help.

The situation might be much clearer to my noble friend, but I am afraid that I am not convinced. The Minister quoted the then Minister for pensions and the current Minister repeated it. He said that the intention of the Young report and, presumably the findings—incidentally, have they reached the Treasury?—are to bring the FAS payment as close as possible to 90 per cent, the so-called PPF level. However, there is a vast difference between that and this incurious invention of the Government—the so-called core pension—which means that people, and especially their dependents, will get far less than they expected under the current scheme.

Having sat here for most of the afternoon—I accept not all of it—I readily understand the Minister’s implication that the FAS is not a charity and, therefore, would not fit into the remit of this Bill. But the Bill covers not only charities, but any social enterprise, as I understand it. For goodness’ sake, my noble friend Lord Higgins, to whom I pay tribute for his great work in this area, pointed out that if this is not a social benefit, what on earth is?

I am grateful to my noble friend Lord Skelmersdale for reminding us that 90 per cent of core pension is certainly not what my amendments are about; they are about taking pensions up to PPF levels. So far, the Government have been searching only to increase pensions up to 90 per cent of core pension, which is simply not good enough in our view. While my noble friend Lord Higgins was delighted by the Minister’s explanation on taxation, I wish to report that I am not going to be diverted by a red herring on taxation in this amendment, which is about a serious issue of how we get appropriate resources to a relatively small group of people—some 120,000 or so—who lost their pensions before the PPF kicked in to give protection.

I am disappointed that the noble Lord, Lord Newby, whose party has supported us in our efforts to get a lifeboat, feels unable to support us in this instance. I hope that he will think again about this before we get to Report. The amendment is permissive. It does not require any amount to be transferred and the decision on whether money could be transferred, as opposed to being put to any other purpose via the Big Lottery Fund, would be taken, in part, in the light of the amounts available. As I shall say later, there is significant doubt about how much money is available and, therefore, it is a shame to miss this opportunity to reinstate a version of what we tried to include in the most recent Pensions Act. This is not very different.

The Bill has an emphasis on youth, but no emphasis on the other end of the generation spectrum; that is, older people, who are at least as important members of our community. Some reflection of the amounts that could probably be spent in that direction would be a useful addition to the Bill. The Minister castigated me for saying that it was an open-ended commitment, but it is open-ended only to the extent that there are some variables, such as longevity, in how much is involved. However, the Government are grappling with the amount that is involved, and the mere fact that we cannot calculate it down to its last penny does not make it not a problem or a proper use of money, it simply makes it difficult to ascertain the final bill.

I am disappointed by the Government’s response to the amendment, but we have been disappointed with the Government’s response on the FAS from the very outset. As the noble Lord, Lord Skelmersdale, reminded us, the FAS was invented only in the face of a big revolt in another place. It was invented at a mean level and incrementally made a little less mean, but is still nothing like good enough. I hope that we will return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

20: Clause 5, page 4, line 10, leave out “15(1)” and insert “15”

The noble Baroness said: I shall speak also to Amendment No. 52.

In my previous amendment, I sought to amend Clause 5 so that payments could be made to a pensions lifeboat, which is a specific example of something that could be funded from dormant account money. With these two amendments, I am seeking to allow money to flow through bodies other than the Big Lottery Fund.

Amendment No. 20 is a small, paving amendment, but the meat is found in Amendment No. 52, which would alter Clause 15, which sets up distribution of funds only via the Big Lottery Fund. My amendment would allow the Secretary of State to specify the body or bodies to which a reclaim fund should transfer money. That money would still have to be transferred for social or environmental purposes, so the purposes for which money could be spent would not be changed. The mechanism or the distribution channel would be changed. That mechanism would be an order requiring the approval of both Houses. It is clearly a significant issue that should be brought for parliamentary approval.

The order could specify the bodies to which the money was to be transferred and how the money was then to be distributed. It could specify particular sums to be transferred to a particular body or say that money could be transferred to the bodies only if certain levels of money or thresholds had been met. This could be important if, for example, the Government wanted to specify a transfer to the lifeboat fund—I do not detect any enthusiasm for that—but not until, let us say, £150 million already had been distributed for youth purposes. My amendment would allow some flexibility in how money could flow and transfers to be time limited.

If, or to the extent that, the Government had not specified particular bodies under new subsection (1A), new subsection (1B) would require the money to flow to the Big Lottery Fund. The scheme would then operate under Part 2 exactly as the Government have drafted it.

The advantage of drafting the Bill in this way is that it would allow the Government to specify that money should go for national purposes. The scheme of distribution via the Big Lottery Fund is predicated on sharing money out among the individual countries, with spending priorities set by those countries. That simply does not allow for money to be spent on things which cross our internal borders in the UK. One example is the lifeboat, because, clearly, pensions are a national issue which could not be addressed through the devolved Administrations without ending up with a curious result of different pensions being paid in different parts of the UK.

There will be other examples related to functions which operate on the national dimension. The noble Lord, Lord Newby cited one, international aid, which would not easily flow out of how the Big Lottery Fund is structured but may well be a proper priority. Another example that I want to press on noble Lords is the Armed Forces and the ability to provide additional support to our servicemen and their families. This may not fit well within a distribution system that is not focused at national level. The Bill means that national causes will almost inevitably be bypassed.

One of the main reasons for seeking flexibility in distribution outside the Big Lottery Fund is that the scheme may well realise far greater sums than have been estimated by the British Bankers’ Association and the Building Societies Association, which have referred to sums of £400 million to £500 million initially, dropping down to possibly £10 million a year. As we discussed at Second Reading, estimates based on the Irish experience lead to very much higher sums. It was the noble Lord, Lord Shutt, who said—probably about 63 times—we are talking about billions, my Lords, billions. If we are talking about a sum of around £20 billion, we are talking about a sum of an order of magnitude such that it should not be pushed through the Big Lottery Fund. There ought to be another mechanism in the Bill for dealing with money in another way.

The Government have steadfastly refused to discuss figures and have given the impression of not having the faintest idea of how much is involved. For example, the Minister during the Second Reading debate said:

“Of course we are vague about the figures”.

That was some form of boast, I think. He went on to say,

“I cannot talk about categorical figures at this stage and I do not think that it is reasonable that we should do so”.—[Official Report, 21/11/07; cols. 896-7.]

It is quite clear that that means, “not the faintest idea”. By saying that they cannot estimate how much money is involved, the Government cannot avoid the fact that they are setting up a system on the basis that it could be handling anything from low tens, or perhaps low hundreds, of millions up to many thousands of millions—billions of pounds. The distribution structure should be robust in the face of potentially very variable outcomes.

The amendment does not threaten the Big Lottery Fund as a distributor. I shall leave that to my noble friends, who have a series of penetrating amendments to which we shall doubtless come on our next day in Committee. In this amendment I am simply seeking greater flexibility and the ability to direct money on much broader fronts than the scheme is currently set up for. I beg to move.

It just occurs to me that it would be right to ask a question of the noble Baroness. I am not trying to be clever about this but she seems to have a hierarchy of ambition in the sense that in earlier amendments she has suggested that all banks and all building societies should be able to take part in the alternative scheme. I was more modest than that when I talked about the 10 per cent versus 90 per cent thing. If the banks and building societies availed themselves of that, there would be nothing left for either the pension life boats or anything else that she is suggesting. Will she set out her hierarchy of ambition here, because it is very important to be clear? I know where I stand on this, but I should be interested to know where she stands.

While the noble Baroness thinks about the hierarchy, I have a further couple of comments to make. If we were to go down the route that she proposed on the pensions protection lifeboat fund it would be logical for this amendment to be carried, because you would be pretty crazy to expect the Lottery fund to get involved in all that. However, if we are not going down that route the argument seems to be much less clear. As the noble Baroness said, it would be possible for the Government to specify UK-wide causes for this money to be spent on. It would also be possible to expand that to cover completely different fields—and the noble Baroness mentioned the Armed Forces.

It seems that whatever amount of money is to be available from this fund—no doubt it will be between the lower and upper estimates that have been made—the causes to which the fund will be directed are perfectly capable of absorbing virtually any amount of money that one could conceivably imagine the reclaim fund could attract. Therefore, potentially to expand the scope in the way proposed by the noble Baroness beyond even the lifeboat fund runs the risk of a serious lack of focus. I do not doubt that one could propose many national programmes. The Armed Forces need additional resources but the same applies to the health service and to every aspect of public expenditure.

The Bill must plump for a definition and a series of containable and manageable programmes. I am not saying that it is absolutely perfect, but our broad view is that the way in which the Government are planning to spend the money makes sense. If you start dissipating it across a whole raft of other things you will lose focus, and that would be detrimental to the whole scheme, not least in the public’s perception of how the dormant assets are being used. For that reason, and the reason given by the noble Lord, Lord Shutt, we are unable to support the amendments.

That is all very well, but one of the Bill’s purposes is for funds from this particular conglomeration to go to social enterprises. The noble Lord, Lord Newby, has just mentioned the health service. I was thinking much more in terms of health charities. Surely to goodness they would be defined as social enterprises. Irrespective of the pecking order for which the noble Lord has just asked my noble friend, the Bill should specify whether the shelling out is going to local charities or whether national charities are included. I hope that the Minister can answer that question for once.

I am grateful to noble Lords who have contributed to this short debate, particularly to the noble Lords, Lord Newby and Lord Shutt, who have raised very interesting issues with the amendment. I have no doubt that the noble Baroness will answer with her usual accuracy.

I was surprised, however, that neither the noble Lord, Lord Shutt, nor the noble Lord, Lord Newby, drew attention to the fact that the concept of distribution proposed by the Government in the Bill pays due regard to the rights and obligations of the national Assemblies and Parliaments of our devolved Administrations. We have been scrupulous in recognising that they have a role in defining priorities for their areas—a role that would be handed over to the Secretary of State if the noble Baroness’s alternative model of distribution were accepted.

We are seeking to develop a light-touch structure, one to which the financial organisations, the banks and the building societies, are prepared to subscribe, for the distribution of resources. I wonder how much consultation the noble Baroness has carried out with those organisations on the suggestion that the Secretary of State should have a much more significant role with regard to the allocation of priorities. She readily identifies national priorities spanning the whole of the United Kingdom and Northern Ireland, while the Bill pays due regard to the fact that our banks and building societies have concerns for their localities. We have provided a structure within the framework to deal with that.

We will have many opportunities to discuss the strengths of the Government’s proposals in detail, particularly the strength of our proposal that the Big Lottery Fund should be the distribution mechanism. It is not for me to test extensively on that now, although I have indicated already that the fund has great strengths in terms of its representation in each of the four areas of the United Kingdom, and its regional and local representation—to say nothing of its great experience. But this amendment is translated from a distribution mechanism which has all those scruples and flexibilities attached to it and potentially establishes by order the Secretary of State as provider of an alternative national distribution mechanism. I hope noble Lords will recognise that it deliberately runs counter to the whole thinking behind the Bill and to one of the most important concepts—that the Government are seeking to enlist the willing co-operation support and administration of resources that are within their domain. This amendment looks like the great hammer of central government being imposed instead.

I hope that the noble Baroness will appreciate that I have the strongest reservations about the amendment and recognise that we will have plenty of time in due course to discuss the ways in which we could perfect the alternative mechanism that the Government propose.

I thank all noble Lords who have spoken. The noble Lord, Lord Shutt, asked about my hierarchy of ambition. My only ambition for Committee stage is to test the logical limits of the Government’s position on the various aspects of the drafting of their scheme. One will then regroup and decide on the most important areas to take further. If the noble Lord, Lord Shutt, wants a more detailed answer, he must buy me a drink in the bar afterwards.

The noble Lord, Lord Newby, was absolutely right to say that the number of causes that could benefit from this money is infinite. However, is the Big Lottery Fund the right place through which to launder the money? That is the question being posed by my amendment. In case there was any misunderstanding, when I suggested that money be provided for the Armed Forces, I did not mean that it should buy guns and uniforms for them, I meant that it should support servicemen and their families for the things that make their lives better and in ways that are not related to armed operations.

My noble friend Lord Skelmersdale asked a question on national charities, which is an important issue, because if the money goes into the Big Lottery Fund, it has to be shared between the countries. How does a national charity fit in with that scheme? That is another reason why I thought that an alternative scheme that would reflect national issues was important. The Minister then said: “Ah, but this is terrible, because the Secretary of State will be making decisions without reference to the devolved Administrations”; but the Secretary of State makes decisions as a Cabinet colleague and I believe that there are Cabinet colleagues representing Scotland, Wales and Northern Ireland, although they are part-time. I do not have a particular problem with that.

The Minister then said that the Government were seeking to enlist the willing support and co-operation of those whose funds were to be liberated by the Bill; but if the Minister has read the comments of the British Bankers’ Association on the amendments, he will have seen that it regards where the money goes as a matter of public policy that does not concern it. Its main concerns are the arrangements for how money is gathered in and not how it is spent. The BBA does not regard itself as having a say in that; it has left that to the Government, so this is a question that we should debate.

I will reflect further before we come back on Report. My previous amendment was on the lifeboat, which I continue to believe is a very important cause. This amendment reflects that the Bill is not robust in the face of very differing outcomes in terms of amounts collected through the scheme and does not allow some national projects to be supported, so I regard this issue as having continuing importance.

Time moves on and, for today, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.