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Dormant Bank and Building Society Accounts Bill [HL]

Volume 705: debated on Wednesday 19 November 2008

My Lords, I beg to move that the Commons amendments be now considered.

Moved accordingly, and, on Question, Motion agreed to.

commons amendments

[The page and line references are to Bill 80 as first printed for the Commons.]

Amendment No. 1

1: Page 1, line 15, at end insert-

“( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.

In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1. I shall also speak to the other amendments in this group.

I begin by setting out what it means for an account to be dormant and exactly what the definition must achieve. It is vital that the definition is completely clear so that no institution can be in any doubt when it transfers an account to the scheme about whether the account qualifies as dormant. The definition must be able to be applied simply and effectively by over 200 institutions, each with a wide range of accounts with differing features, customer bases and usage profiles.

At the same time, we are committed to doing the utmost to ensure that only truly dormant accounts are transferred into the scheme. However, the available information which could be used to identify whether an account is active varies enormously between institutions, and even between different accounts in the same institution. We are confident that with the refinements in the definition produced by the Bill’s passage through both Houses, we now have a definition that is both clear enough to provide a simple and effective test and flexible enough to allow the institutions to take into account the information available to them

The key condition of no customer-initiated transactions in relation to the account for 15 years is both simple and universally applicable. Yet there is flexibility for an institution to refer to any consumer activity of which it has knowledge in deciding whether an account is genuinely dormant. That could include, for example, correspondence, telephone calls, emails or voting at AGMs. Under the Banking Code, each institution is required to publish clearly, for all their customers to see, the criteria it will use to decide the issue of account dormancy. With that in mind, I turn specifically to the amendments before us.

The Government’s intention is that all bank and building society accounts based on the definition of dormancy in the Bill are eligible for transfer into the scheme. Naturally, this includes accounts that could have been opened a very long time ago. When we first debated the Bill in this House, we were asked to clarify the position for accounts owned by deceased persons. It is of course unlikely that banks and building societies will know whether account holders are living or deceased. Unless they have very good reason not to, we would expect them to transfer into the scheme all accounts that fit within the 15-year qualification period. However, we understand that institutions wish to have certainty on this point so that they are not constrained in their ability to participate in the scheme. We have therefore introduced this amendment, which is a technical clarification confirming that accounts owned by deceased persons are indeed eligible for transfer into the scheme.

Amendment No. 8 also is a technical amendment. It ensures that notice accounts, where a short notice period is required before a withdrawal can be made, are not excluded from the scheme under the provision that was made for fixed-term accounts. Amendment No. 9 covers our intention to ensure that genuinely dormant bank and building society accounts lost by the account holder will be transferred into the scheme, and not those accounts which are simply rarely used but of which the account holder is still aware. This will minimise unnecessary costs associated with returning accounts to customers after transfer. We want, of course, to keep the necessity for any return transfer to an absolute minimum.

Our scheme provides a definition of dormancy that is simple, clear and straightforward. It is an account open throughout a period of 15 years with no customer-initiated transactions. However, the scheme is also sophisticated. It allows banks and building societies the flexibility to refer to customer-initiated activities which may indicate that an account is not in fact dormant even where there have been no transactions on it. Of course in those circumstances the account would not fall within the framework of the scheme.

If the institution is aware of activity—the request of periodic statements, for example—we would fully expect institutions not to transfer such accounts. Furthermore, those with particularly strong or individualised systems will be able take this into account in their individual policies. This flexibility is one of the great strengths of our scheme. Institutions will be expected to use their knowledge. That was indicated in our consultation and is clearly set out in the Explanatory Notes.

The Building Societies Association has said that the ability to take account of other forms of customer contact is “particularly important” to it, and that it supports the Bill as it is. The British Bankers’ Association has also welcomed,

“The ability to take into account other indications of whether an account is genuinely dormant”.

Furthermore, it is simply not in the interests of any institution to transfer an account to the scheme unless the deposit-taker and the customer have genuinely lost touch. This would add to the administration of the scheme, a substantial proportion of which will be borne by those institutions themselves. Requiring institutions to use all their knowledge in legislation is unnecessary, as it adds nothing to the scheme. On the contrary, it would have a detrimental impact on the clarity of the definition.

It is immediately apparent in the Bill when the minimum definition of dormancy has been achieved. If there has been a transaction in the last 15 years, the account cannot be considered dormant. If there has not been a transaction in that time, it can be considered so. Most importantly, however, the consumer will have a full right to repayment in all circumstances through the bank or building society where they held the account, whether or not it is transferred under the scheme. The consumer experience will not even differ. The process of recovering their account will be the same to them. All they will have to do once they identify that they have an account with the institution is to present suitable proof of identity and of account ownership. Once their identity has been established, the bank or building society will reinstate their account or pay them the balance. The only difference if the new account has been transferred under the scheme will be that the bank or building society will subsequently recover the balance from the reclaim fund. We therefore oppose any change to the definition of “dormancy” in the original draft of the Bill.

As regards Amendments Nos. 10, 10A and 10B and the period of 15 years, we recognise that there is considerable debate over the suitable length of the period for the purpose of defining dormant accounts. We believe that 15 years’ customer inactivity is the most appropriate time to determine whether an account is truly dormant. That figure was arrived at after considerable discussion with industry and consultation. It is also the figure that other countries, including Ireland, have adopted in legislation.

Industry has estimated that 80 per cent of accounts that have had no customer initiated activity for 15 years are truly dormant. Adopting a lower dormancy period runs the risk of a higher reclaim rate, with a corresponding inevitable increase in costs. In any case, any accounts which are truly dormant will still be dormant when they reach the 15-year mark, and will come into the scheme then. However, we have listened carefully to the arguments for a shorter period, which have been put on a number of occasions. We accept that, in the future, the experience of the operation of the scheme and of industry could suggest that there should be an alternative figure to that in the Bill. Accordingly, the Commons amendment brings forward a reserve power for the Treasury to amend the dormancy period. The amendment was drafted with a negative resolution procedure. However, the Delegated Powers and Regulatory Reform Committee considered this power and recommended that, since the definition of a “dormant account” is central to the purpose of the Bill, the power to amend the 15-year period should be subject to the affirmative procedure. We have, of course, respected its conclusions and representations and are happy to bring forward Amendment No. 10B for inclusion in the Bill. Accordingly, I will move that amendment when we get to it. I beg to move.

Moved, That the House do agree with the Commons in their Amendment No. 1.—(Lord Davies of Oldham.)

My Lords, we on these Benches are content with the package of changes that the Minister has put before us. We might regret that some of our pride of authorship has disappeared as regards some of these amendments, but the overall package is acceptable.

On Question, Motion agreed to.


2: Page 2, line 1, leave out “building society or a smaller bank” and insert “smaller bank or building society”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 2. I wish to speak also to Amendment No. 2A and to the other amendments in the group. I remind noble Lords of the objective of this Bill. I am not unmindful of the fact that the noble Lord, Lord Shutt of Greetland, holds a somewhat different view from the Government on this. I shall in no way, shape or form attempt to pre-empt his arguments. I will, of course, bend the ever-listening ear to what he has to say, but wish to indicate the strength of the Government’s position as we see it.

The Bill sets out to facilitate fair and efficient distribution of funds in dormant accounts for the benefit of the wider society. Small banks and building societies often play a key role in supporting and engaging with their local communities. For this reason, the Government have always been clear that small, locally based institutions would be able to focus dormant account assets on real needs in their local communities. Of course, the Government recognise the value of “small and local”.

We consulted with the bank and building society sector, and the Government identified a £7 billion turnover as a credible threshold to define small and locally based institutions. The Building Societies Association advised us that more than 90 per cent of building societies with less than £7 billion total assets have all their branches within 70 miles of their head office. Thus “small” also means reasonably local.

By contrast, the big building societies are, by definition, not small and are not local. The noble Lord, Lord Shutt, will forgive me if I draw attention to a building society based in Yorkshire, as he is likely to quote Yorkshire-based examples back to me. The Leeds Building Society, which is the smallest of those that will be above the £7 billion threshold, with assets of £9.2 billion, has branches the length and breadth of the country, from Aberdeen to Southampton and from Belfast to Braintree.

We are confident that the asset limit that we have identified enables genuinely small and local institutions to provide support for their local communities, while ensuring that funds from institutions that operate on a national scale are distributed towards the agreed national spending priorities in a co-ordinated fashion.

Let us be clear: the Government are of course committed to supporting mutual organisations and recognise the many benefits that they bring to society and communities across the UK. If I had any doubts about this matter, my recollection of exchanges with the noble Lord, Lord Shutt, and other noble Lords in the House earlier in the year would have convinced me of the virtues of the mutuals. We recently introduced new legislation to support the mutuals sector, including improving rights relating to members’ shares and improving the procedures involved in transferring business to the subsidiary of another mutual.

Let us also be clear that the vast majority of building societies will be eligible for the alternative scheme. According to the BSA’s November 2008 statistics, 50 of its 59 members, nearly 85 percent, will meet the “small and local” definition and the distribution of resources within that framework.

It was pointed out at Second Reading that the building societies that will not be eligible hold the vast majority of the dormant account funds in the sector. That is correct. To be precise, the BSA estimated that of the £130 million in dormant accounts in the sector, £100 million lay in the larger institutions.

Much has been said of the great need in the areas to which the spending priorities of this scheme have been directed. The noble Lord, Lord Shutt, will take solace in knowing that this was a subject of considerable debate in the other place. It was hardly likely that Members of Parliament, with their representative role in their constituencies, would miss the opportunity of emphasising the local good that this dormant accounts scheme could provide from the institutions that would contribute to it. However, MPs emphasised also, with great force, the advantages to their communities of the priorities to which the major resources from the big building societies and banks would be directed: youth facilities, a social investment wholesaler and improving financial capability and inclusion. On the latter point, we are all too well aware that the more difficult the economic circumstances, the greater the need for people to be able to manage their affairs effectively.

If the largest building societies do not take part in the main scheme, quite simply we undermine our ability to fund these very important initiatives for the wider society. The Government are aware that banks and building societies already support a variety of good causes in different communities, and we applaud those initiatives, but are they really in the best position consistently to consider the needs of wider communities throughout the UK? If we allow dormant account money to be administered through multiple individual foundations, that will inevitably lead to significant overlaps and to possible gaps in provision.

In the interests of the fair and efficient distribution of substantial funds, it is right that we concentrate on establishing centralised, national distribution. With respect to the main scheme, the Big Lottery Fund has a track record of ensuring that all communities benefit from its funding. At this point, I should say that I am all too well aware that for every success in relation to National Lottery allocation, there will be attendant disappointments, and that therefore Big’s record will be subject to criticism. However, given the forebodings expressed during the passage of the Bill about the arrangements for the National Lottery and the distribution of its funds, and given the flurry of questions that were asked shortly after it began to operate, it is markedly the case that the lottery’s distribution work is subject to much less criticism than was foreshadowed. That suggests that the Big Lottery Fund is doing its job ably and reflects the fact that it is well placed to do so. It has a track record of ensuring that all communities benefit from its funding; it has used, and will be expected to use in relation to dormant accounts assets, a variety of methods to achieve a fair regional and local spread of funding; and it already has a comprehensive infrastructure in place for distributing funds on a national level, in line with spending directions. Therefore, here is an institution with considerable knowledge of, and experience in, fielding grant applications and in administering the volumes of money that the dormant accounts scheme will be expected to generate.

We welcome the October statement from the Building Societies Association supporting the Bill and the Government’s proposals for an alternative scheme for smaller financial institutions. We also welcome the statement of the coalition of building societies expressing its members’ commitment to making the scheme a success and its intention to participate in it. Likewise, the British Bankers’ Association offered a statement confirming commitment to participate from banking groups which represent 90 per cent of the UK retail banking market.

The proposed scheme is designed to be simple and efficient to minimise costs to institutions and the scheme overall, and to maximise funds for distribution. The asset limit provides a balance between giving small, locally based banks and building societies the flexibility to directly benefit their local communities against maximising assets for the main scheme.

The government amendments are designed to create an alternative scheme for small, locally based institutions. Those require a definition, which is given accurately in the Bill, and I therefore hope that the House will support Commons Amendment No. 2 and the other government amendments when they are brought forward.

Moved, That the House do agree with the Commons in their Amendment No. 2.—(Lord Davies of Oldham.)

Lord Shutt of Greetland moved, as an amendment to the Motion that this House do agree with the Commons in their Amendment No. 2, leave out “agree” and insert “disagree”.

The noble Lord said: My Lords, this issue is about the best way to dispense moneys when we all agree that the beneficiaries should be good causes. Perhaps I should declare an interest as a grant-maker. For nearly 35 years, I have been a trustee, particularly with the Joseph Rowntree Charitable Trust and the JRSST Charitable Trust, and I am a vice-president of the Community Foundation for Calderdale.

In our previous discussions, we have resolved that all building societies should be encompassed in the scheme for the smaller banks and building societies. That was the position when the Bill left this place on 31 January. At that time, there were 59 building societies, 51 of which were regarded as small and eight of which were regarded as large. I want to recap the case that was made then.

First, the big eight wanted to be included in the smaller banks scheme. They did not want to be volunteered into the bank scheme; we are told that it is a voluntary scheme. Secondly, seven out of eight of those big building societies have in place their own building society foundations. They are experienced grant-makers and they have independent trustees who are at arm’s length from the institutions. Thirdly, we believed then, and the House agreed, that it was invidious to exclude them on the basis of 51 to eight. The Nationwide, as a big society, is an exception. I still do not accept that the others are big societies in the same way as are those that demutualised, which were much bigger. Surely the aims of the Nationwide are splendid in terms of its foundation and the good that it is doing throughout the land. Fourthly, decision-making by those building societies and their foundations is often speedy and in many cases the members are involved. Fifthly, grants are made to local and regional groups, away from the centralised position that we are offered with the National Lottery.

Since the Bill left this place in January, it has been dormant for 10 and a half months, but quite a bit has happened in the banking and building society world. Let us look at building societies. We had the big eight but, as the noble Lord, Lord Davies, has indicated, we have the November list, in which we find that we now have the big nine. The Derbyshire has passed the threshold and gone over the £7 billion level. However, because of difficulties in the building society movement, the Derbyshire and the Cheshire are to be taken over by the Nationwide; furthermore, the Scarborough is to be taken over by the Skipton; the Barnsley is to be taken over by the Yorkshire; and the Catholic is to be taken over by the Chelsea. That means that the assets in the smaller societies are now £43.2 billion rather than £58.5 billion. Similarly, 16.5 per cent of the building society movement was in the smaller societies but, after the mergers take place, the figure will be 12.2 per cent. A quarter of the funds that would have been distributed to local and regional causes will now be distributed by the National Lottery.

Next, we have the credit crunch. Regardless of the views of noble Lords on banks and the way in which they behave, the banks have had a good record on grant-making and on their social responsibilities. The financial sector has been a good donor. Indeed, many years ago, this House saw to it that one such bank was a good donor. When the TSB was privatised, the late Lord Taylor of Gryfe inserted an amendment requiring 1 per cent of its profits to go to good causes. When Lloyds took over the TSB, it had to be a reverse takeover and the 1 per cent still followed.

What is going to happen to grant-making by financial institutions in the current climate? Grant-seekers who have been looking in the financial services area could be in some difficulties because the way in which the banks are functioning after the bail-out and the restriction on dividends may make the institutions feel that they cannot be as generous. I hope that they do not take that view, but I can see circumstances in which they will not be able to be as generous. Members of this House know about grant-giving and grant-seeking, but I hope that that point will be pondered.

The mergers that I mentioned have not yet taken place, although we have every expectation that they will in the next few months. However, there is another. The Britannia Building Society, the second largest building society, has announced that it is in exploratory talks with Co-operative Financial Services, including over a possible future merger. It said:

“This would be enabled through the introduction of measures contained in the Building Societies (Funding) & Mutual Societies (Transfers) Act—known as the Butterfill bill … A merger would also have to be approved in a vote by Britannia's members … The organisations … have similar values and share a mutual ethos, so there would be a strong cultural fit”.

If that merger takes place, what sort of animal does the Britannia become? Does it become part of the Co-op? If it does, is it not covered by the Bill? Many of us argued that the definition of dormant assets was far too tight and that we should be looking at insurance and so forth. We found that in one of the American states there are more than 100 definitions of dormancy, but we were told that we had to be tight and consider banks and building societies only. Will the Britannia escape because it becomes a different being?

The amendment that I was able to persuade the House to accept meant that people believed that resources would be available to communities, localities and regions. Communities in Derbyshire, Cheshire, Barnsley and Scarborough certainly have every expectation that that is the case, yet if the Minister has his way the resources will go into the large scheme and those places will not share on a local basis.

Three points were raised by the Minister. He mentioned that the Building Societies Association suggested that the Bill is the right way forward. The Building Societies Association seems to be a strange outfit. It may be good in many respects, but it seems strange for an association to say that it supports a position while 83.5 per cent of its members by financial weight think rather differently. However, that is its affair; perhaps it is good at doing other things.

It was interesting that the Minister mentioned the Leeds Building Society. Back in 1959, as an articled clerk, I was involved in auditing it. In those days, it was the Leeds and Holbeck. It may have branches based substantially in Leeds—when I was there, it had eight or nine branches in the city and it certainly has branches throughout Yorkshire—but, like many others, it has put its tentacles a little further. Look at the board; you will find that it is based in Leeds.

Thirdly, the Minister talked about undermining the scheme for youth. In my view, there is plenty to go at with the resources that will be available from the larger banks. The amazing thing about the Bill is that, regardless of the credit crunch and other financial problems, cash is cash. What we are talking about today are the same resources that we talked about 10 and a half months ago. It is not some stock that has fallen in value and is now worth a quarter of what it was; it is exactly the same. If noble Lords would like to see diversity in grant-making and support for localities and regions, they should support the amendment.

My Lords, I listened carefully to the noble Lord, Lord Shutt, presenting what I can only call well rehearsed arguments. We last heard them in February, not as far back as January, but I freely confess that that is a long way back. I remember the force with which he presented the argument then, which is why I have prepared with considerable care for the issue today.

The noble Lord must accept that, if there is a merger between two societies that takes them significantly past the line that we draw, they have moved from one category into another. It will not do for him to say that that is a pity because one of them, at least, was small. All banks and building societies started small, especially building societies. It may be a long time back for him to remember—it takes him back past his Leeds and Holbeck days—but all banks and building societies started small. No one would suggest that our major banks are small, local institutions.

That is the logic behind the Bill: there is a difference between institutions that are small and local and those that are not. We consulted widely on where the line should be drawn. The noble Lord knows that the institutions have offered broad approval to the proposal. There have been recent changes of some significance, but he will have to accept that this will always be the case when we draw up a set of criteria and institutions change through mergers. He cannot sustain much of a case on that.

The noble Lord is right to say that large institutions are experienced grant-makers; of course they are. We could have proposed that the whole of the fund was left in the hands of those institutions. However, the banks do not own the funds. The people who have the accounts own these resources, which is why those people have the right at any stage to claim from the reclaim fund if their resources have been transferred to it. It is their money, not the banks’ money. It is a chance feature of banking activity that there are dormant accounts, which add up to a considerable sum of money.

Institutions have signed up to the concept that these resources should not lie dormant—they are of no use to the individual, who, by definition, is not taking any advantage of them—but should be put to community use until someone lays claim to them, when they will get their full reparation. Where the institutions are small enough to be defined as local, they will take responsibility for distributing these resources in their localities. In the case of large institutions, which we have defined in the Bill, it is right that the objectives should be defined as nationwide objectives in principle but that the distribution should be effected through a guaranteed distribution mechanism. As I said earlier—I do not want to repeat myself—that is the role of the Big Lottery Fund.

The noble Lord has fought his corner well and strongly. I know that he feels deeply about these issues, but I think that a great deal of his commitment is about the small and the local, the force of which the Bill recognises. Of course the Government recognise the strength of the small, mutual society, but we must make provision for a different world. Nine of our building societies—eight now, through the changes—are very large indeed and it is right that we have a different strategy for them. I therefore hope that the House will not accept the noble Lord’s amendment and will agree to the government amendment.

My Lords, without a wide-ranging debate, I shall respond to the Minister on only two points. First, we talked about small and large. When we met 10 months ago, the Derbyshire Building Society was small, regardless of the changes of the potential takeover. Today, it is large, according to these rules. The Minister, one believes, knew what he was doing 10 months ago. Would he do the same thing today as far as the Derbyshire Building Society is concerned? The cliff edge is there; you are either over it or you are not. The Government have now jumped over it, to the detriment of the localities, and it is the same for everyone else.

Secondly, the Minister acknowledged that the institutions, including the banks and the building societies, are experienced grant-makers. However, the banks did not make contact with us at any point. I found that thoroughly disappointing, quite frankly—clearly, they were not that interested—but the building societies did, which is why the amendment was tabled and why I press it today. I wish to test the opinion of the House.

On Question, Motion agreed to.

Amendment No. 3

3: Page 2, line 19, at end insert-

“( ) The reference in subsection (1) to an account that a person holds is to be read as including an account held by a deceased individual immediately before his or her death.

In such a case, a reference in subsection (2) to the customer is to be read as a reference to the person to whom the right to payment of the balance has passed.”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 3.

Moved accordingly, and, on Question, Motion agreed to.

Amendments Nos. 4 to 6

4: Page 2, line 27, after “bank” insert “or building society”

5: Page 2, line 43, after “bank” insert “or building society”

6: Page 2, line 46, after “bank” insert “or building society”

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 4 to 6.

Moved, That the House do agree with the Commons in their Amendments Nos. 4 to 6.—(Lord Davies of Oldham.)

[Amendments Nos. 4A to 6A not moved.]

On Question, Motion agreed to.

Amendment No. 7

7: Leave out Clause 6

7B: Page 4, line 32, at end insert-

“( ) The Treasury shall lay before Parliament a copy of any direction given under subsection (4).”

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill. I shall speak also to the other amendments in this group. I hope that the House will agree that these amendments show that the Government have listened to the debates held both in this House and in the other place, and are seeking to reinforce the principle of transparency in the Bill. This is an issue that has been advanced on all sides, and I pay tribute to the noble Baroness, Lady Noakes, for the force with which she has presented her case. I hope, too, that she will see that we have moved to meet the arguments made.

We regard transparency as crucial for the scheme. I remind noble Lords that Schedule 1 already requires the reclaim fund to publish an annual list of institutions participating in the scheme, the amounts of money transferred into the scheme—at individual institution level, the amounts of money reclaimed by consumers—and the aggregate amount passed to the Big Lottery Fund. This information will be available for public scrutiny.

As a result of being formed as a company under the Companies Act, the reclaim fund will be required to prepare annual accounts and reports each year. Government Amendments Nos. 15 to 19 require the reclaim fund to publish this information as soon as possible after the end of each financial year so that it is available for all to see, including noble Lords. Visibility of the reclaim fund’s accounts and report was a matter of concern and lengthy debate in this House and, I believe, a key concern behind the tabling of what was the original Clause 6. We believe that the government amendments address this concern while recognising that the reclaim fund is a private rather than a public body. I want to emphasise that we are talking about a body that is not a government agency.

To require the reclaim fund to lay its annual accounts and reports before Parliament is unnecessary in the light of the amendments we have tabled to increase the transparency of the fund’s work. Requiring the fund to report directly to Government and Parliament would be to define it as a public body and would be out of keeping with the fund’s status as a private body. We have also reflected carefully on the debates about the Treasury’s direction-making power. I wish to stress first and foremost that it is not the case that the reclaim fund is a public sector body, so the Treasury is not in a position to give directions, as some have contended.

The Bill sets out how the reclaim fund will be constituted. It does not establish a reclaim fund since that is a task for the industry. As the creature of the institutions that establish it, the fund will be truly independent of government. We do not envisage using the direction-making power in the Bill to interfere in the day-to-day running of the reclaim fund and the management of its money. That will be the sole responsibility of the Financial Services Authority, which will regulate the reclaim fund for obvious prudential purposes.

The direction-making power that we are taking is not a day-to-day issue; it is the ultimate sanction that the nation would expect us to have to ensure that the reclaim fund functions in accordance with the articles of association, particularly in those areas which the FSA will not regulate and where it would not be expected to do so. This includes, in principle, the requirements in Schedule 1 to the Bill of the publication of information by the reclaim fund on the use of money to cover reasonable running costs, or the requirements elsewhere to transfer surplus money to the Big Lottery Fund. The power the Treasury will have is meant to be used only in exceptional circumstances to require the reclaim fund to comply with the statutory requirements under the legislation—no more and no less than that.

I recognise that there are concerns about the power scheduled for the Treasury. However, the Government’s new amendment addresses those concerns by requiring the Treasury to lay before both Houses any directions to the reclaim fund so that there is complete transparency in the use of the power. The amendment is similar in effect to the second part of what was originally Clause 6.

I hope that I have satisfied the House that the power that the Treasury seeks is an exceptional reserve power to deal with the reclaim fund. However, I accept that if and when it is ever exercised it should be subject to full transparency. I hope the House will recognise that we have a reserve power which the Treasury can effect only by ensuring that there is transparency, and that it will support the Government’s position.

Moved, That the House do agree with the Commons in their Amendment No. 7 and do propose Amendment No. 7B in lieu of the words so left out of the Bill.—(Lord Davies of Oldham.)

My Lords, I thank the Minister for introducing Amendments Nos. 7, 7A and 7B. I shall not go over the interesting discussions that we had before on whether this is a private body, a public body or a hybrid. The plain fact is that this is the only example that anyone can locate of a private sector body—if, indeed, it is one—which has a power of direction from the Treasury. That is why, when the Government chose to remove Clause 6, which we so painstakingly inserted into the Bill during its passage through your Lordships’ House, we were disappointed. Nevertheless, that has been considerably ameliorated by the Government bringing forward Amendment No. 7B, which we welcome because it contains the most important part of what was in Clause 6. I thank the Minister for that.

My Lords, like the noble Baroness, we are grateful to the Minister for his explanation and for reintroducing the key part of Clause 6 in Amendment No. 7B. I am tempted to at least begin to reopen the arguments about what kind of body this is. I was not convinced when we debated it before, and I am certainly not convinced now, about this concept of a body whose purpose is to raise money that the Government then spend at their own discretion but which is nothing to do with government. It is a wonderful model. If government could do this across the board, just imagine, there would be bodies which were not public bodies but whose sole function was to raise money which the Government would then decide, in minute detail, how to spend.

We spent many hours discussing this earlier, however, and it would tax the patience of the House to go any further. We support the amendment.

My Lords, I am grateful for the graciousness that both noble Lords have displayed. I am more grateful to the noble Baroness, Lady Noakes, because she did not produce quite the quibble that the noble Lord, Lord Newby, had. The noble Lord said how extraordinary it was for a non-public body to raise money, but let me be absolutely clear that this organisation is not raising any money. Transferred to it will be dormant accounts which, I insist again, belong to the owners of those accounts if they succeed in establishing title at some later stage. The noble Lord will not get away with raising the spectre of the Government being fertile in how to pass the crucial role of Parliament with regard to raising resources for public purposes.

On Question, Motion agreed to.

Amendments Nos. 8 and 9

8: Page 7, line 3, at end insert “in all circumstances”

9: Page 7, line 4, leave out subsection (3)

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 8 and 9.

Moved accordingly, and, on Question, Motion agreed to.

Amendment No. 10

10: Page 7, line 13, at end insert-

“( ) The Treasury may by order amend the figure in subsection (1)(a).

( ) An order under this section is subject to annulment in pursuance of a resolution of either House of Parliament.”

10B: Line 3, leave out from "section" to "House" in line 4 and insert "may not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each"

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 10, but do propose Amendment No. 10B as an amendment thereto.

Moved accordingly, and, on Question, Motion agreed to.

Amendments Nos. 11 and 12

11: Leave out Clause 12

12: Insert the following new Clause-

“Review and report to Parliament(1) The Treasury shall carry out a review of-

(a) the operation of this Part, and(b) the effectiveness of the efforts made by financial institutions to secure that those entitled to money in inactive accounts are made aware of the fact.(2) In reviewing the operation of this Part the Treasury shall in particular consider-

(a) how many banks and building societies have transferred balances as mentioned in section 1(1) or 2(1);(b) how much money has been transferred and how promptly;(c) how effective have been the arrangements for meeting claims made by virtue of section 1(2)(b) or 2(2)(b).But the review shall not consider the activities of a reclaim fund in so far as they are regulated activities for the purposes of the Financial Services and Markets Act 2000 (c. 8).

(3) The Treasury shall make arrangements to enable anyone with an interest in any aspect of the review to make representations, and shall consider all representations received.

(4) The Treasury shall set out the results and conclusions of the review in a report and lay it before Parliament.

(5) The report must be laid within three years from the date when a reclaim fund is first authorised."

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 11 and 12.

We have listened to the arguments setting out the importance of a review of the scheme to ensure that it is working and to take action if we identify any problems with its operation. We agree that it is right that the Government return at an appropriate time to review whether the scheme is effective in delivering the right outcomes to consumers, so we have made it clear that we will undertake a post-implementation review when the scheme is up and running.

We have listened carefully to the debates in both Houses and have been convinced that our doubts about such a review should be set aside. We have brought forward a new clause to commit to a comprehensive review, set out in legislation, and accountable to Parliament. This was the main burden of representations in this House and in the other place, and I hope it will be recognised that we have listened to these views and are acting accordingly.

The clause is clear and detailed. It commits the Government to review the scheme within three years after it is up and running. The review will cover the effectiveness of the money inside the scheme. This includes industry arrangements for reuniting customers with accounts before they are dormant, industry participation in the scheme, and the arrangements for repaying customers whose assets have been transferred to the scheme. This will be based on consultation with all relevant parties.

I insist again that this scheme comes from the industry and we could not make this move without the fullest consultation, which we undertake to carry out. We will present our findings and conclusions in a report which will be laid before Parliament.

As to the scope of the review, as I have said, it will look at the effectiveness of the legislation and of the industry’s arrangements for reuniting owners with their accounts. It will not review FSA regulation of the reclaim fund’s management of money, which will ensure that the reclaim fund keeps back sufficient money in reserve to meet reclaim applications; I do not think that noble Lords will think that appropriate. FSA regulation is a matter for the FSA and we expect the regulator to make its own assessment of the effectiveness of its regime. It is not for us to second-guess that position or to add extra demands.

I hope that the House will appreciate that strong representations on this matter from both opposition Front Benches, from many parts of House and from the other place have convinced the Government of the merits of this proposal. I hope that the Government’s amendments will be supported.

Moved, That the House do agree with the Commons in their Amendments Nos. 11 and 12.—(Lord Davies of Oldham.)

My Lords, we shall not object to Amendments Nos. 11 and 12, but I regret the Government’s removal of the more extensive review and report to Parliament that was contained in the Bill when it left your Lordships' House and its replacement by the new clause in Amendment No. 12. The Minister described it as a comprehensive review, but it is less comprehensive than that which we inserted into the Bill. In particular, it does not look at the desirability and practicality of establishing similar schemes for other categories of asset, which arose throughout our consideration of the Bill. That is to be regretted.

The original review and report would have been triennial, which with the benefit of hindsight I think was a fatal flaw in the formulation, but the three-year review that we are offered instead is once-only. Somewhere between the two would have been a better outcome.

Nevertheless, it would have been open to the Government simply to strip out the review and not to have made any statutory provision for it, so we are grateful that a statutory provision is reinstated in the Bill. However, we regret that it did not go as far as the review proposed by your Lordships' House.

My Lords, I am grateful to the Minister for explaining the scheme. He explained what was in it, but he did not explain what it left out. As the noble Baroness, Lady Noakes, said, it leaves out scope for being broadened to consider other categories of asset. As we discussed in Committee, other schemes in other parts of the world cover many other categories of asset. As my noble friend Lord Shutt has just pointed out to me, if the Britannia Building Society is taken over in some manner by the Co-op, it might become an insurance company or a new, slightly unusual body, and it will not be immediately clear that it is covered by the Act. That is unfortunate.

It is equally unfortunate that there will be only one review. However, it is better to have one review than to have none, and it is better to have it covering the majority of the matters that we wanted it to do. With those caveats, I say that we will not oppose the amendment.

My Lords, I share the regrets expressed that the new clause is in a number of respects weaker than that which it replaces. I shall not reiterate what has already been said by other noble Lords.

The real concern for many of us here has been moral. So much of the debate here and in another place has focused on the various mechanisms for distributing moneys in dormant accounts to a variety of good causes, but the primary public policy objective should be that moneys held in these accounts is reunited with their proper owners or heirs. Only once those owners have been provided with both a simple mechanism and an appropriate timescale for recovering their lost assets should they be considered for distribution for other purposes. Many of us are still concerned about whether such a mechanism and timescale as are proposed in the amended Bill are sufficiently robust. In the view of many of us, the recent mylostaccount voluntary scheme needs significant improvements if it is to be truly effective. It is of course good that there is now imposed on the Treasury a requirement for review and report; it is encouraging to hear that the review will look at the effectiveness of the industry reunification scheme and that the recommendations will be laid before Parliament. However, I am looking to tempt the Minister to give a slightly firmer affirmation that the Government are committed to a thorough review of the workings of the Bill in this respect after three years, and perhaps also in due to course to look again at the possibility of further reviews.

My Lords, I am grateful to all noble Lords who have spoken in this debate. I notice that one verb—or noun—categorises everybody’s response; that is, “regret”. The noble Baroness, Lady Noakes, showed her political judgment when she identified that the Government’s position in her terms was significantly different from that which we adopted when the Bill was last before the House—and, indeed, it is. We took considerable persuasion on this matter, so while I note the regrets, on this occasion noble Lords who have spoken may also feel that they have had some success in this area. The Government are, of course, always wise enough after mature consideration of all viewpoints holding sound weight to change their mind, which they did with regard to this review.

The noble Lord, Lord Newby, wants me to extend this Bill to other financial assets, the insurance industry and so on. I can see the attractiveness of that, as here we have a scheme which, when it works, will bring great benefits to the nation. The noble Lord wants to see extra dormant resources channelled that way. I applaud him for his ambition, but he will forgive me if I emphasise the fact that the Government have to deal with the here and now and with where we have agreement with an important part of the financial industry to make progress with the substantial resources, which are not inconsiderable, in dormant accounts in banks and building societies. There would be a whole range of complexity involved, if we extended this Bill to other areas. Therefore, the noble Lord will just have to rein in his passions in the short term and, no doubt, will be fertile in managing to produce some ideas on this theme in future.

It has taken us considerable years of consultation, analysis and building of consent with regard to this legislation. I hope that noble Lords will recognise that the Government are bound to be content to ensure that this scheme is working well before we consider other possibilities. The review will be a comprehensive one that provides the framework in which to analyse how the scheme is working against the objectives of the Bill. I am grateful for the support, although it was expressed somewhat reluctantly, of all noble Lords who spoke.

On Question, Motion agreed to.

Amendment No. 13

13: Page 11, line 31, leave out subsection (2)

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 13.

The government amendment inserted in Committee in the other place has the effect of removing what was, in this House, subsection (2) of Clause 23, which was inserted by noble Lords, against government opposition, into the Government’s intended process for issuing directions to the Big Lottery Fund. The effect of subsection (2) was to require Parliament to agree, by affirmative resolution, to the directions issued to Big by the Secretary of State concerning operational matters, such as Big’s financial management, staffing and accounts; and by the Secretary of State or the devolved Administrations concerning the distribution of dormant account funds.

As set out in the other place, the Government removed noble Lords’ subsection (2) because it would be inappropriate, given the devolution settlement. These issues are so sensitive at the other end and there are times when I feel that noble Lords may not always be conscious of those matters at this end. The concept that Parliament and the Government would be involved in scrutinising aspects that relate to the devolved Administrations’ powers is a matter of considerable concern. That is a prime reason why the Government could not accept the structure of the Bill as produced by this House in January.

We also rejected the requirement imposed by the former subsection (2) for parliamentary scrutiny of financial spending directions, given that it is customary for departments to issue financial directions of this sort to their non-departmental public bodies without parliamentary scrutiny. I ask the House to appreciate just what might be the significance of all directions from government departments being subject to parliamentary scrutiny of that kind, what an impossible task would be created for Parliament and what an impossible task would be forced on government departments. Yes, we can do that for policy in terms of the allocation of funds, but the detailed direction implied in the original proposal could not be acceptable to the Government.

However, we appreciated the concerns expressed in this House that the Government should be open and transparent about their intentions with regard to the issuing of English spending directions. In both Houses, the Government have been clear about the cross-government process they have established for drawing these up. We have listened to the points made by noble Lords; the noble Lord, Lord Newby, was particularly emphatic on the point about the time delay between directions being issued and Big publishing them in its annual report. The Government have confirmed that Big will publish the spending directions on its website on the point of issue. I believe that this produces the necessary transparency and underscores the Government’s commitment to this objective.

Moved, That the House do agree with the Commons in their Amendment No. 13.—(Lord Davies of Oldham.)

My Lords, I have another minor expression of regret that these subsections are being removed, but I recognise that the devolution card trumps all others in your Lordships' House. Therefore, it would be wise not to row against that. I record our gratitude for the Minister’s undertaking to place the directions on Big’s website, as that will at least give some earlier sight of those directions and allow issues to be raised in Parliament, if there were any of concern.

My Lords, I am grateful to the Minister for his assurance about the publication of directions on the Big website. As he reminded the House, my concern was that the original thought was that directions would be reported only in an annual report, which might mean in reality that you would not know until 15 months after the directions had been issued, which seemed to me inappropriate. Given the subject matter covered by the Bill, these are intensely political areas. Therefore, it is very important that people should have the ability to know that directions have been given that change the balance of funding and of priorities that Big is expected to follow in respect of these moneys from the reclaim fund. I welcome the Minister’s reassurance and will not be opposing the amendments.

My Lords, I am grateful to both noble Lords. As this is probably the last time, with any good fortune, that I shall be speaking more generally on these matters, I pay tribute to the assiduous work from both Front Benches, even including on this occasion—if the Conservative Party will forgive me—the Liberal Chief Whip, the noble Lord, Lord Shutt of Greetland, who has been particularly assertive on this Bill.

On Question, Motion agreed to.

Amendment No. 14

14: Page 16, line 1, leave out subsection (2)

My Lords, before dealing with the amendment, I mention that little tremor that always affects any of us at the Dispatch Box when we have an amendment and no note at all of what it is about. That moment of panic just descended. However, I find that this is the privilege amendment, so I beg to move that the House do agree with the Commons in their Amendment No. 14.

Moved accordingly, and, on Question, Motion agreed to.

Amendments Nos 15 to 19

15: Page 17, line 24, leave out “, the following information in relation to that year”

16: Page 17, line 24, at end insert—

“( ) its annual accounts and reports for that year (within the meaning given by section 471 of the Companies Act 2006 (c. 46));”

17: Page 17, line 26, after “fund” insert “in that year”

18: Page 17, line 28, after “fund” insert “in that year”

19: Page 17, line 31, after “transferred” insert “in that year”

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 15 to 19.

Moved accordingly, and, on Question, Motion agreed to.