Dormant Assets Bill [HL]
Wednesday 12th May 2021
(3 years, 7 months ago)
Lords ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text
Dormant Assets Bill [HL]
Wednesday 26th May 2021
(3 years, 6 months ago)
Lords ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, this Bill delivers on the Government’s commitment to expand the dormant assets scheme. Not only does the scheme provide a great opportunity to support industry’s work to reunite more people with their assets but it also has the potential to unlock hundreds of millions of pounds for good causes.
The dormant assets scheme takes a pragmatic approach to forgotten money. Rather than leaving funds to languish in dormant accounts, money can instead be channelled into long-term initiatives that address some of the UK’s greatest challenges. Since the scheme was established a decade ago, more than £1.4 billion has been transferred voluntarily into the system by banks and building societies. Of the total transferred, £106 million has been reunited with owners. The scheme responds to the imperative to put any money that is not reclaimed or reserved to good use. So far, £800 million has been released, including £150 million for coronavirus response and recovery.
I hope noble Lords will indulge me for a few minutes as I reflect on the impact of the original scheme. In England, funding is distributed via expert organisations. The first, Big Society Capital, was established in 2012. It received £425 million of dormant assets funding with the explicit aim of growing the social investment market. Since then, with partners, it has been able to invest more than £2 billion in social impact organisations. This includes around £200 million directly targeted at place-based investments, supporting left-behind communities to develop vibrant, local, social economies that reduce poverty and inequality.
The second, Access—The Foundation for Social Investment, seeks to support the development of enterprise activity and improve access to social investment. It has developed a £21 million programme of flexible recovery finance for the social sector and has made £7 million available for emergency Covid support through social lenders. Together, these organisations have grown the social impact investment market from £830 million in 2011 to more than £5 billion today.
More recently in 2019, the scheme supported the establishment of Fair4All Finance and the Youth Futures Foundation. By 2025, Fair4All Finance will have supported community finance providers to increase their lending capacity from £300 million a year to over £900 million, enabling more than 800,000 people to access affordable loans and escape high-cost credit. It is also working to grow the financial services market to support 14 million people in vulnerable financial circumstances. The Youth Futures Foundation is targeting support to young people from marginalised backgrounds facing barriers to work. By the end of this year, it will have directed £40 million towards funding and evaluating the largest range of youth employment interventions ever initiated in England.
Scotland and Wales use dormant assets funding for projects focusing on young people, climate change and sustainability, while Northern Ireland has worked with the National Lottery Community Fund to establish a £20.5 million Dormant Accounts Fund NI for the voluntary, community and social enterprise sector.
I thank in particular all those involved in the development, passage and implementation of the 2008 Act, several of whom are in the Chamber today; without their vision of what could be achieved, this would not have been possible. I am proud of what the current scheme has achieved to date and I hope that the Bill will continue to build on its notable successes.
With 34 banks and building societies now participating in the scheme, including all major high street banks, the current scheme is reaching a mature state, with significantly fewer funds flowing into the system each year. Over £300 million was transferred in 2011, but this will decrease to around £42 million per year in future. Expansion means that the flow of funds is not only maintained but will be increased substantially.
Consumer protection remains at the heart of the expanded scheme, with the continued priority being to locate and reunite people with their financial assets. Where that is not possible, expansion will enable more responsible businesses to redirect money to some of the nation’s priority issues. Full restitution will also continue to be a core principle. Asset owners will always be entitled to reclaim what they would have been owed, had their assets never been transferred into the scheme.
Industry expects that around £1.7 billion-worth of dormant assets could be eligible for transfer after expansion. Once transferred, a proportion is held back to satisfy any future reclaims and around £880 million could then be released. Money must fulfil the additionality principle, so it cannot be used as a substitute for central government funding. We have worked closely with industry leaders on how best to design expansion. I record my warm thanks for the support we have received throughout this process. I also thank everyone who responded to the public consultation, whose contributions have informed the shape of the Bill.
I shall now outline the main contents of the Bill. Currently, the dormant assets scheme accepts transfers only from dormant bank or building society accounts. The Bill expands the scope of eligible assets, so certain assets from the insurance and pensions, investment and wealth management, and securities sectors will be eligible for transfer. Our consultation response committed to considering how legislation could best provide the flexibility to expand the scheme further in the future. In reply, the Bill introduces a new power to broaden further the pool of eligible assets through future regulations.
The Bill also enables the specific focus of the English portion of funds to be set through secondary legislation, subject to statutory consultation. This harmonises the mechanism in England with the devolved Administrations and will allow the scheme to respond more flexibly to changing needs over time.
After 10 years of operation, we are at a critical juncture in considering the scheme’s overall operation, and now is the right time to think about how the scheme can deliver the greatest impact once it has been expanded. Therefore, subject to the Bill passing, we will launch a public consultation on the use of funds in England. The current restrictions of youth, financial inclusion and social investment will continue until any new arrangements come into force.
The Bill also includes provisions to improve the operation of the scheme: for example, by making owner reunification efforts a requirement before funds are transferred, with the exception of situations where efforts are considered disproportionate or unnecessary.
The Bill also reflects Reclaim Fund Ltd’s recent establishment as a Treasury non-departmental public body. It names Reclaim Fund Ltd as the scheme’s only authorised reclaim fund, and as a result the Government are seeking a power to enable the Treasury to add, substitute or remove an authorised reclaim fund in future through secondary legislation. The Bill also enables the Government to cover the liability for reclaims should any authorised reclaim fund face insolvency, in the form of a loan. Such a liability will be established following the usual parliamentary process.
In closing, I emphasise our mission to support industry efforts to reunite owners with lost money and to provide a practical way for unclaimed and unwanted funds to be put to good use. I hope that the Bill receives strong support from your Lordships so that we can proceed swiftly with its passage and continue to build on the scheme’s success. I look forward to all noble Lords’ contributions to this debate but in particular to the maiden speech of my noble friend Lady Fleet. I beg to move.
Lord Blunkett (Lab)
My Lords, I very much look forward to the maiden speech of the noble Baroness, Lady Fleet. I already welcomed it last week, thinking that she was going to speak, so forgive me if I ensure that I do not miss it on this occasion.
I welcome strongly this small but important part of the legislative process, which expands availability of and access to these funds, as the Minister has explained so clearly. I pay tribute to all those who have played a part over the last 13 years in making this a successful venture, and to those who have worked with organisations such as the Youth Futures Foundation, as the Minister described, using the money to find ways to improve people’s lives.
First, I will say a word about the important contribution that the noble Lord, Lord Field of Birkenhead, made in originating this programme. As noble Lords will know, he has been seriously ill but I understand and hope that he is now well on the mend. If he is not watching this afternoon, perhaps he will read in Hansard that we send our very best wishes to him. He pressed very hard for this under the Blair and Brown Governments, and he will be very pleased indeed with the work being done on reclaimed assets and putting them to proper use. He will be disappointed, as am I, that we have not been able to raise greater funding to undertake this valuable work and to put to use money that, as described in the legislation, lies dormant.
When we talked about this in 2004-05, we anticipated that as much as £8 billion to £10 billion and beyond would be accessible. That has not proved to be the case, but this legislation enables us to raise additional funds up to £1 billion, as the Minister described. However, as the Association of British Insurers points out in its briefing, in excess of £2 billion could be available. That obviously depends on the successful outreach to those who have not claimed funds to which they are entitled. While I understand that the dashboard being developed in the insurance and pensions industry will take up that important task of reuniting people with their resources, it would still be a very significant and, I hope, a beneficial outcome if we can raise substantially more than the anticipated figures given this afternoon.
It is almost as if we are facing two ways. We want to ensure that we reunite people with their legitimate funds, particularly in the pensions and insurance industry, where the number of people who do not notify their change of address when they move is staggering. If the figures are correct, 4% of people have not given notice of the change after a number of years. No wonder difficulties arise in reaching out and finding them, although I hope that the Minister will briefly indicate that it will be possible, even with data protection, to encourage the use of other data platforms, including local government, to ascertain where people have moved to and therefore reunite them with their funds. That apart, the critical element here is being able to put to work the massive dormant resource that still exists. I still believe that it is much greater than the amounts that the ABI has talked about.
The Minister mentioned Big Society Capital. Its predecessor, which the right honourable Hazel Blears and I were involved in establishing with the then Chancellor, was designed, as has happened since, to ensure we use that capital literally to kick-start the development of social capital, and the ability of communities to develop their capacity not only to fend for themselves but to create new initiatives that build from the bottom rather than the top.
The National Council for Voluntary Organisations has suggested that there might be the development of a community wealth fund. I hope that we might look at the existing community foundations. For instance, South Yorkshire’s Community Foundation does an enormous amount of good in my area. Making resources available to it for grant giving and establishing social capital funding that would enable community organisations to develop, flourish and become self-sustainable would be an extremely good move. I would be very grateful for the Minister’s confirmation that her department would be prepared to look at that as part of the development and use of the NDPB.
We have made good progress with the lottery over the years. It is much more likely to reach out to the parts that the Government now describe as requiring levelling up. It has certainly been true that it was, as so much of our nation is, southern and London-centric for understandable reasons to do with capacity to put in bids. In the past—not so much currently—the complexity of the bidding process provided a barrier to those who were not familiar with it. I hope it will be possible to make that much easier, perhaps through community foundations.
This is something that we all agree with and support. Clause 29 offers the opportunity of consultation, which the Minister mentioned. Perhaps she will confirm that it will be built into, and be a critical part of, the process. It is important to establish that that is the case, because Ministers move on and departments get reconfigured.
If, from this afternoon, we can have even greater optimism about being able to put this money to use while reassuring people that, if they reappear, their investment and contribution will still be available to them, that would be very good. I also hope that, although we are widening the criteria for access, it will be possible to continue with the existing programming criteria, because so much has been done, particularly on financial inclusion. Many of us have been engaged over the years in promoting social inclusion, and in avoiding exploitation and the way that misuse of domestic credit—and worse—has exploited people in greatest need. The answer to that has to be education on financial matters in school. KickStart Money and the APPG have been doing a really good job, and so have those working in teaching citizenship, which covers financial inclusion and the economy, as well as personal, social and health education.
This afternoon we give a very warm welcome to this legislation, building on what already exists and empowering and freeing people to be part of the solution to the challenges they face in their lives by providing the resources, funding and capital to turn themselves and their communities around through self-help and building from the bottom. It is by civil action that we ensure that, whoever the Government of the day, people remain in a position to fend for themselves, to build for themselves and to be creative in building safe, clean, green and functioning communities.
Baroness Barker (LD)
My Lords, I draw attention to the fact that I am an officer of the All-Party Group on Social Enterprise. I thank the Minister for the helpful way in which she introduced the Bill and for the briefings that she and her officials gave to noble Lords recently.
It is good that this Bill is starting its passage through Parliament in this House, because on one level it is impossible to object to it. The use of dormant assets—long forgotten, probably not missed and therefore not urgently needed—being redistributed to places where they are needed and can be used is something with which it is impossible to disagree. Moreover, the Bill builds on approximately a decade of experience of financial institutions transferring dormant cash assets to the Reclaim Fund Ltd for disbursal by four funds appointed in each of the nations of the United Kingdom. It is estimated by them and the Government that if we go ahead with the Bill, a further £2 billion-worth of other assets could be released.
However, there are some assumptions behind the Bill that the House should look at before we give the Government the freedom to go ahead. Some elements of how the scheme is currently working are not thoroughly explained. It is our duty, before we give Ministers the Henry VIII powers that they are asking for in this Bill, to ensure that we are satisfied that each of the Bill’s component parts is working to maximum effect and cannot be more efficiently and effectively undertaken by other people.
It is right to bear in mind that this is a limited source of money set out for a limited purpose. Throughout the debate, we will hear lots of suggestions of ways in which it should be extended, but this will never be a source of long-term sustainable funding for voluntary organisations or social enterprises. It is a one-off and therefore it has to be targeted. I like the focus on financial inclusion and the idea of transferring assets between generations in a targeted way, but we need to ask ourselves, and particularly to ask the Government, exactly how well the scheme has worked in the past.
Although the headline figures in the briefings that we have been given are compelling, we do not, for example, know the costs to industry, to the relief fund or to the distributors, nor do we know important things such as the quantum of the assets put into the recovery fund or the frequency with which they are put into it, only for them then to be rightly reclaimed by somebody who turns up and having to be returned to the institution. We should have that kind of information at our disposal before we move on to more complex assets. I leave it to other noble Lords, including those on these Benches, to talk about the much more complex difficulty of bringing in assets that cannot easily be crystallised because they are not in cash.
The Government have an obligation to bring this sort of detail to Parliament, so that we can avoid the temptation to use this as a fallback or piggyback fund for government when times are tough. The Government did themselves no favours last year when, in the first lockdown, the sector said that it could see that it would lose £4 billion of funding. The Government responded with £750 million of funding, £150 million of which was taken from these sources and thrown into a pot. They really need to think about that.
We are now 10 years on. We know now that one of the most pressing needs of poor communities is access to resources. There is no indication in the Bill of a responsibility to make sure that the voluntary sector bodies carrying out this work on financial inclusion will themselves be sufficiently viable for a number of years. That is missing. One of the problems is that we have relied, yet again, on the National Lottery as the distributing body in England, but this has never been part of what it does. I want to see us looking into how to get greater flow from this source into social enterprises. I agree with the noble Lord, Lord Blunkett, that, right now, there is a desperate need in communities for a source of capital to get viable social enterprises off the ground so that they can create employment. I therefore ask the Minister to make sure in her consultation that those bodies are included as a matter of right.
Finally, I am never a fan of Henry VIII powers in principle, and certainly not when there is not much obligation on Ministers to come back and report to Parliament. If we are going to let this Bill go through—and inevitably we will—I think that Members of your Lordships’ House should ask for a greater degree of reporting than the five-year post-legislative scrutiny given to the 2008 Bill that is responsible for this. We should ask them to come back with much greater detail about the costs and operations of the scheme and its benefits.
We are talking of billions of pounds, but the one thing missing in all that I have read on this is any estimate of the impact that this funding has had in communities, against the objectives set for it. It would be remiss of us to go ahead with this scheme if we do not even ask the question that would be asked of any little charity that applied for any funding: how is it going to demonstrate that it is making the difference that it says it will? With those caveats, I look forward to some detailed work on the Bill, which I am sure deserves to pass, but perhaps not in the form that is before us today.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
The noble and learned Lord, Lord Mackay of Clashfern, has withdrawn, so I call the noble Baroness, Lady Wheatcroft.
Baroness Wheatcroft (CB)
My Lords, I thank the Minister for introducing the Bill so clearly and enthusiastically. Its purpose, in extending the scope of the dormant assets regime to other sectors, is perfectly sensible. I look forward to hearing the comments of the noble Baroness, Lady Fleet, which I am sure will add significantly to the debate. Her dedication to the arts over the years makes her a very good addition to the House.
If assets have lain unattended and forgotten for 15 years, they should be put to better use, but I was intrigued to learn that the extension of the regime could affect an additional £3.7 billion of dormant assets and that the enhanced tracing of assets required under the regime could mean that, of the £3.7 billion, perhaps only £2 billion might be returned to the owners. If £2 billion could be returned to the owners under the new regime, can we be comfortable that financial institutions are doing what they can to trace the owners of assets? It seems to me that if such a significant portion could be traced under the new regime then what has gone before, over the past 15 years, has been somewhat slack.
What does this imply for the financial institutions and the need to do something before the 15-year threshold? Could the Minister say whether she believes that financial institutions should be prevailed upon more to return that money? However, if efforts to trace owners have genuinely failed, putting the assets to good use makes sense, and it would appear that, since the scheme was established, it has made good use of the funds. The operation of Reclaim Fund has been paid for through income on its investments, rather than depleting the assets being reclaimed, and there seems no reason why this should change because of RFL’s change of status to become a non-departmental public body.
Under the asset scheme, smaller institutions are allowed to deploy unclaimed assets to work directly with local charities. This seems to me to be wholly admirable, but, so far, only two institutions have opted to do so. I would be enthused to hear that others are interested in joining the Newcastle Building Society and the Cambridge Building Society in using unclaimed assets to benefit their local communities. Financial institutions that are close to the communities they serve can be very useful in building society and can play a part in the community.
Most of the money, however, is designated for social or environmental purposes—a very broad category. For England, which receives more than 80% of the cash, in line with the Barnett formula, the demands have been more clearly spelled out. It is specified that the money should be used for youth projects, financial inclusion or social investment. The Bill repeals this, and it is reassuring to know that there will be public consultation on how the increasing funds should be spent before the Government change the stipulations.
It is fair to say that those whose assets are being reclaimed would espouse a variety of good causes, varying from international aid agencies to those charities dedicated to looking after donkeys. But it is perhaps appropriate that these funds, which are available only because of the failure of individuals, either through carelessness or circumstances, to manage their money effectively, should be directed, at least in part, to financial education.
In particular, some of the money could fund vital schemes to make sure that all children in primary schools learned about how to manage money. KickStart Money, which backs this plan, claims that money habits are formed by the age of seven—when so much of a childhood is formed. A lack of financial education in the early years may in part be responsible for the fact that, prior to the pandemic, 11.5 million people in the UK had less than £100 in savings. That will not see them through a rainy day—or, worse still, through the sort of weather that we are experiencing now.
The situation has worsened. The Rowntree Foundation reported that 2.4 million people in the UK experienced destitution in 2019—a 54% increase since 2017. One in seven of those experiencing destitution was in paid work. In many cases, they have little idea of how to manage the money they have. They take on loans at onerous rates of interest. They use hire purchase schemes. A nationwide scheme to teach children about finance would have real benefits and might result eventually in there being fewer dormant assets to be employed in the way in which we are discussing—but that would be no bad thing.
Lord Adonis (Lab)
My Lords, we are much looking forward to the speech of the noble Baroness, Lady Fleet, and to the great contribution that she will make to the House on the basis of her long experience of the cultural and media sectors. She is extremely welcome here.
We strongly welcome the Bill. Indeed, I cannot think of any good reason why anyone would oppose it unless they think that it is a great idea for dormant assets to sit untouched. Short of them being in some Swiss vault, having been improperly gained in the first place, why would anyone welcome that? This is a thoroughly welcome Bill and, as my noble friend Lord Blunkett said, it builds on a cross-party initiative that was taken nearly 15 years ago seeking to deploy dormant assets. The then Government sought to unlock assets that were in bank and building society accounts, and this legislation expands the range of assets that can be brought forward. I strongly welcome it and I hope that it has a speedy passage.
However, the noble Baroness who opened the debate invited us to look at the wider voluntary sector and the work that is being supported by these good causes. I should like to enlarge the scope of the debate in that direction. This is the principal measure in respect of the voluntary sector that the Government are bringing forward in this Session. It is one of the first measures that they have introduced after the Queen’s Speech, and the first measures introduced after a Queen’s Speech are a good guide to the priorities of a Government. I am at one with Iain Martin, who was quite insightful in his column in the Times last week. He said that the problem with the Queen’s Speech is that it lacked big themes and reform directions. He quoted a Conservative MP who said to him that the Speech was like reading from the Yellow Pages the first five or six items on the list. He compared that unfavourably with the Thatcher Government, who had a big and bold programme of reform of the public and private sectors in the 1980s, and the Blair Government, who had a similar level of reform after 1997.
What struck me as I was reading that and thinking about the Bill is that it is true of the voluntary sector, too. The Thatcher and Major Governments had a bold approach to that sector. Indeed, the National Lottery was one of the biggest and boldest reforms of the voluntary and third sectors—and the injection of funds into them—that we have seen in the history of this country. In the 27 years—or whatever it is—since the lottery has been in operation, an estimated £42 billion has been raised for good causes, and that of course has had a dynamic effect. The lottery has massively energised the voluntary life and good causes of this country and it dwarfs the resources that can be made available under the Bill.
The Blair Government sought to be as bold in their vision. The two particular bold things that we sought to push forward included the engagement of voluntary, private and religious-based organisations in the delivery, as appropriate, of public services. When I was Education Minister, we put a huge effort into developing public-private partnerships in respect of schools—particularly independently managed state schools, or academies, which I am glad to say have now spread far and wide. With the enormous partnership of my noble friend Lord Blunkett, we established more than 400 academies and raised more than half a billion pounds in charitable contributions, with huge energy from the sponsors, including notable Members of this House—the noble Lord, Lord Harris of Peckham, is a formidable academy sponsor—and I was very proud of the work that we did there.
The Charities Act 2006 sought to enlarge the scope of charitable endeavour. The single biggest form of charitable endeavour in this country is in education. That Act sought, in particular, to introduce the public benefit test into the definition of the charitable activities of private schools to enlarge their work. I want to come back to that in a moment, because it is a significant piece of unfinished business.
The Cameron Government started well. The idea of the big society is one that I should have thought everyone in the House would embrace as a direction of travel. It built on the National Lottery, on the engagement of the voluntary sector in the delivery of public services and on the Charities Act to enlarge the scope of what could be done by voluntary effort in meeting big, national objectives. I was a strong supporter of the National Citizen Service; indeed, I am a patron, and wish for it to be extended much more boldly than it has been, so that all young people get an opportunity to make an organised contribution to society which will set them on a track that, I hope, will live with them for the rest of their lives, bring our communities together in the way in which we need to—they are so divided, and have become more divided, in this country over recent years—and, in the jargon of today, engage them in levelling up. The tragedy of the big society is that it was a great idea but the policy was not there to follow it up and it essentially fizzled out.
The problem at the moment is that, under the present Government, there is no real strategy beyond a few measures of this kind that are fairly minor in the big scheme of things. The Minister said that perhaps £800 million or so may be raised from this measure over many years to come. That is all very worthwhile but the amount is small by comparison with the big measures that I have talked about. In some respects, we are going backwards.
Of particular concern to me is that the area of charitable endeavour in which we are going backwards is education. An attempt was made by the Charities Act 2006, which was long overdue, to focus the huge charitable assets invested in the education sector on the provision of genuinely charitable activity—by which I mean engaging in poorer communities and giving poorer students opportunities that they do not have. Unfortunately, that big policy emphasis has moved backwards in the past 15 years because of the rigid determination of private schools—which are of course charities, most of whose assets were given in the form of charitable donations, mostly for the education of the poor and underprivileged—and the failure to ensure that those assets are properly applied. That is a constant problem at the heart of our charitable sector, which we were seeking to get at in the 2006 Act.
That policy, by legal action on the part of the private schools, was reversed. Then, under the present Government—including through the appointment of a former Leader of this House as chairman of the Charity Commission; an unusually political act—the policy was actually put into reverse. The obligations that we had sought to impose on those private schools have now been entirely lifted. The private schools sector, which is substantially charitable, is now more focused on simply delivering education for the very rich and privileged in our society than it has probably ever been in the history of this country.
The British Sociological Association, in a paper published last month which is hugely important in order to understand what is happening to the charities sector in this country, estimates that £1 billion a year—I repeat, £1 billion—is spent on fee relief for less-advantaged children attending private schools. These are charitable institutions to start with, and command about £1 trillion-worth of assets between them. But according to the study of 142 schools by the association, 97% of the £1 billion is spent on subsidies to essentially middle-class families who can afford substantial fees; only 3% goes on the relief of fees in their totality, or up to a level of 75%, for families who have very low means. So what starts off as a hugely privileged sector, even in the work that it does that is supposed to be charitable—in relieving fees and giving access to these charitable assets—is not meeting those objectives.
While I welcome the Bill and think that what it does in its own small way is worth while, and while I welcome the laudable objectives for the charitable and voluntary sectors which have been played out in noble Lords’ speeches throughout the debate, we are being deeply complacent if we think that we are moving broadly in the right direction on these issues. We are moving backwards not forwards when it comes to the expansion and engagement of the charitable and voluntary sectors in the life of the country. It is a big part of the problem we have in levelling up across different parts of the country and different parts of the community. The Government need a much bolder and more coherent policy if we are to meet these big social objectives.
Baroness Fleet (Con) (Maiden Speech)
My Lords, I am grateful to follow the noble Lord, Lord Adonis, who spoke so passionately, and for the opportunity to make my maiden speech. I begin in the traditional way by thanking the doorkeepers and the staff who have guided me more than once up and down the different corridors and made me feel so welcome. Black Rod, the Clerk of the Parliaments and officials here have all helped me to begin to understand how this place works. I also thank the Prime Minister for nominating me; my supporting Peers, my noble friends Lord Black of Brentwood and Lady Morgan of Cotes; and my mentors, my noble friends Lady Chisholm of Owlpen and Lady Sanderson of Welton.
I trust noble Lords will indulge me for a moment before I return to the business in hand. I would like to pay tribute to my ancestor Sir John Bowring. Although he left school at the age of 13, he became a protégé of Jeremy Bentham and was later elected MP for Bolton and, thanks to the patronage of Lord Palmerston, was appointed governor of Hong Kong. Sir John was well known for his progressive views on free trade, his ambition that the United Kingdom should have a decimal currency and his remarkable knowledge of languages. He spoke 12 fluently and understood 12 more. He also had an unfashionable enthusiasm for women’s participation in politics.
I hope that Sir John would have approved of my elevation to this House and perhaps also of my decision to take up a trade, for journalism is indeed a trade. Inspired by the formidable Clare Hollingworth, I headed for southern Africa, arriving shortly before the Soweto riots, and later I went to southern Sudan when it was on the brink of famine and civil war. As editor of the London Evening Standard, I too adopted unfashionable causes. In 2003, the newspaper backed London’s bid to host the 2012 Olympics and Paralympics. The view then was that Paris was bound to win and that even if we won we would not be able to build the facilities on time. Another unfashionable cause the Evening Standard supported was the wild-card Conservative candidate who wanted to become Mayor of London. The rest is history.
Music and music education now fills much of my life. During the pandemic, music has been a source of great joy and comfort to many. This last year has indeed been devastating, but the work of my noble friend Lord Mendoza as commissioner for cultural recovery and renewal has played a vital role in giving hope and funds to music and the arts. Teachers have valiantly persevered, maintaining music tuition wherever possible, often online. They recognise the important role that music plays in a child’s education, boosting mental health and self-esteem and improving cognitive ability to raise attainment in maths and English. Students from low-income families who take part in musical and creative activities are three times more likely to get a degree and a job. I live in hope that there will be renewed government support for music education, following the recent publication of the Department for Education’s Model Music Curriculum. I played a part as chair of the expert panel and believe that the document is an important step in helping our teachers to ensure that every child can access high-quality music education. Concert halls and village halls across the country are ready to take up the challenge of being part of the national rebirth through music and the arts. Like all those for whom culture and the arts are so important, I take this opportunity to urge the Government to negotiate speedily amendments to the visa restrictions and work permits for the EU for all our musicians, actors and artists. They are critical to the livelihoods of tens of thousands of wonderful people and vital to global Britain.
I also take this opportunity to give my full support to the Government’s proposal further to extend the dormant assets scheme in the Bill. I congratulate the Minister on the success so far. It is a remarkable achievement. I am very proud to have been very involved with the voluntary sector, so I look forward to an active role in the debate. Expanding this scheme is crucial to maintaining its impact and to contributing to the levelling-up agenda. Additional funds would make a real difference to so many communities and to the cultural economy. Is this not the moment to level up music education and ensure that children from all backgrounds and all regions can benefit from the power of music?
I am immensely grateful to all those who have welcomed me today, and I look forward to the rest of the speeches in this debate and the many debates to come.
Lord Vaizey of Didcot (Con)
My Lords, since I was introduced to your Lordships’ House in September I have been given many opportunities, but I did not realise that I would have the wonderful opportunity to follow my noble friend Lady Fleet and to sing her virtues, although after her maiden speech I feel I should now praise her in 24 different languages on the basis of her distinguished ancestor.
As my noble friend indicated, and as the noble Lord, Lord Adonis, pointed out, she has an immensely distinguished career both in the media and in the arts. She was deputy editor of the Daily Telegraph and the Daily Mail before becoming a campaigning editor of the Evening Standard and helping to secure two great adornments to this country: the London Olympics and our current Prime Minister. When I dabbled in freelance journalism, I occasionally sat at her feet writing the odd editorial under her instruction, but she and I worked most closely together when I was lucky enough to be Minister for Culture when she was taking up prominent roles in the arts, as chair of Arts Council London for almost 10 years and as a senior adviser to the then London mayor, now the Prime Minister. She set up the London Music Fund, which was originally called the mayor’s music fund, but it should really have been called the Wadley music fund. It has delivered more than 500 music scholarships for young musicians in London. Her latest work on the music curriculum has also been incredibly important. I wholeheartedly second what she said about how important music education is for young people, not just to give them a love for and appreciation of music but to give them some of the skills and qualities one needs to succeed in wider life.
My noble friend served as a distinguished board member of the Yehudi Menuhin School and is now on the council of the Royal College of Music, chaired by my noble friend Lord Black of Brentwood. I can say only, as I have said before in this House, that it is a wonderful privilege to serve here with so many experienced and distinguished people, but to have my noble friend join our ranks and bring her expertise in culture is a particular pleasure to me.
I turn to the substance of the Bill. I am grateful to the noble Lord, Lord Blunkett, for reminding the House of the important role played by the noble Lord, Lord Field of Birkenhead—mainly on a personal basis, as I have known him all my life as a close family friend. It is a great testament to the success of the scheme that it has been broadly uncontroversial, very much welcomed and has channelled many hundreds of millions of pounds to good causes. I echo the noble Lord, Lord Adonis: it is hard to think of any reason to oppose the Bill, although there may be opportunities to improve some of its detail. Nobody can oppose the need to extend the remit of the dormant assets scheme to insurance and pension products and potentially to unlock a further £2 billion for good causes.
I take on board the remarks of the noble Baroness, Lady Barker: it would be interesting to know what one could learn from how the dormant assets scheme has been working in the past decade or so and how effectively the money has been used. Partly on a financial basis, I should be intrigued to know—I may be going a bit off piste here—whether we can learn anything about what type of financial assets are unclaimed and why. I think this will become rarer as we move into a digital age. Noble Lords have mentioned the digital dashboard. As more and more of us manage our finances online, there will be no need to write to our insurers to tell them that our address has changed, because our digital address should, broadly speaking, remain the same.
I was also musing, because I am obviously thinking ahead to my speech on public service broadcasting in tomorrow’s debate, that some of the great causes that the dormant assets scheme has supported so far are exactly the kind of programme that the BBC should be making, so I think we can elide the dormant assets scheme with the future of the BBC.
I want to use this opportunity to raise one specific point that has been a hobby-horse of mine for several years, and I think I may have played a tiny role in nudging things along. As I do not tell need to tell your Lordships, because you all know what I am about to say, I am talking about the National Fund, which is on everyone’s lips. The National Fund was started by a man called Gaspard Farrer in 1928. He was a member of the distinguished Farrer family, the solicitors, but he was a partner at Barings Bank, and he gave half a million pounds to the National Fund, intending it to pay off the national debt. That half a million pounds attracted a few other public subscriptions, and it was then promptly forgotten about, although I think it was managed for years by Barings Bank, which probably claimed useful fees from it. It was actually managed extremely well, because in 2019, before the stock market boom, it was worth £519 million.
We have had one dormant assets Bill in the past decade which has unlocked about £700 million or £800 million. We now have a Dormant Assets Bill which might unlock £2 billion, but we do not have a National Fund Bill, which at one stroke could unlock £519 million, which I know that my noble friend Lady Fleet and I would deploy very effectively to support the arts and music.
What on earth are the Government going to do about the National Fund? At the moment, its future is the subject of a modern-day Dickens novel as it grinds slowly through the courts. I lobbied the Attorney-General, he forgot about it. I lobbied him again, he forgot about it. He finally went to court. At a court hearing at the end of last year, the High Court judge decided that the National Fund could potentially be wound up and its funds deployed to causes other than the national debt. He concluded that because the National Fund represents 0.03% of the national debt, despite the excellent management of Barings and others, it was highly unlikely to achieve its purpose of paying off the national debt, which I think is now £2 trillion. It has even been spotted by the Prime Minister’s former private secretary, Danny Kruger, now a distinguished Member of Parliament, who in a recent report on community service asked why we cannot deploy the National Fund.
I am afraid that I have slightly hijacked the debate on the Dormant Assets Bill to once again bring the National Fund to the Government’s attention. I know that there is no more able and effective Minister than my noble friend on the Front Bench this afternoon to grab this issue, run with it and bring forward appropriate government amendments in Committee to unlock the National Fund and, at a stroke, double the assets available to good causes.
The Deputy Speaker (Baroness Watkins of Tavistock) (CB)
My Lords, I am aware that, due to the reduced capacity of the Chamber, many people were not here earlier, when the normal rules for the current situation were read out. I remind Members in the Chamber that all Members are expected to respect social distancing, as everybody is doing, but also to wear face coverings while in the Chamber, except when standing to speak—unless, of course, they are medically exempt.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, it is a great pleasure to welcome the noble Baroness, Lady Fleet. She is singing the right tune in everything that she said about the value of music education. I also pay tribute to how she has practised what she just preached to us.
I welcome this Bill as a follow-on to the Dormant Bank and Building Society Accounts Act, and I am aware that it is welcomed by the industry responsible for the assets, as well as the charitable bodies that hope to put the funds to good use. Participation by industry is voluntary, but it is still expected to be significant, more than doubling the volume of the funds released by the original scheme.
The two main aspects to the Bill are enlargement of scope to include dormant insurance, pension, investment, securities and client account assets and to make the approach to distributing the assets more flexible. A contemporaneous matter is that as from 30 March, Reclaim Fund Ltd has transferred its shareholding from Angel Square Investments—formerly the Co-operative Banking Group—to HM Treasury.
The new dormant assets each have their own clause, but the general principle seems to have been to include at this stage only assets that already have contractual mechanisms that can determine a cash reference value or, as in the case of a collective investment, have an established formula for valuing compensation at a subsequent date. That strategy makes sense in terms of managing liability. I was concerned whether seven years was the right length of time for deeming an asset dormant with regard to pension and insurance-type assets, but, on balance, perhaps I can see the benefit of bringing forward the point at which greater attempts are made to reconnect people with their assets. In theory, that should make it less likely that, for example, the notifier on a death certificate has moved, which is one way of tracing connected people.
Regarding the assets that are not included, the Bill includes the ability to expand to further asset classes. That creates an incentive for industry to develop new contractual terms relating to dormancy and “gone away” in these other kinds of investments so that, ultimately, if that was pursued to the extreme, it could apply to everything. What safeguard is there to make sure that there is not a perverse incentive to change future contractual terms to the detriment of asset owners in general?
One matter that does not appear in the Bill is that directors are free of fiduciary duty in respect of decisions to transfer dormant assets. It may be more complicated for some assets than for cash deposits if there are other, possibly unforeseen, consequential effects—for example, of reducing assets under management. Perhaps the Minister can say something about why there is nothing specific other than with regard to the cash liability.
I have an interest around how risk is determined and managed by the authorised reclaim fund. The Explanatory Notes make it clear, as in the 2008 Act, that reclaim funds are responsible for managing reserves to meet customer reclaims. Presently, 40% of the dormant assets received by Reclaim Fund Ltd are reserved for potential reclaim, which is based on actuarial calculations and recommendations from the FCA. Reclaims actually run at a much lower percentage. According to the 2020 accounts, the dormant assets received were some £89 million, £36 million was reserved for reclaims, and actual reclaims were just shy of £13 million. It is more representative to look at the cumulative figures for reclaims, as obviously they relate to a spread of years. The 2020 accounts show a cumulative liability provision of nearly £474 million against total reclaims since inception of just over £105 million, which is for 10 years of operation.
This low level of reclaim was attributed in the response to the consultation as due to the due diligence in trying to unify assets with their owners. It makes me wonder whether the calculations around that 40% rate should be revisited, at least for the bank and building society assets where there is a track record, presumably not just of the reclaims but of the ages and other data surrounding who has reclaimed. I acknowledge that for the new assets the same reclaim rates may not apply, but I am curious to know how the reunification rates are fed into the retention calculations and how far additional prudence was previously built in—for example by the FCA in order to protect the financial services compensation fund.
I would also like to ask what the attitude is of the Treasury towards the current level of prudence, given the provisions of Clause 27 and the new Treasury ability to provide a loan in the event that a reclaim fund is unable to meet its liabilities. I am not suggesting there should be a gung-ho approach, but with the government loan facility, a future stream of dormant assets and no financial services compensation protection to consider, does that also point to lower provisioning and higher release of funds for good works? Even if half of the 40% retention rate is released, it is a lot more money.
Also on this point, although under Schedule 2 to the 2008 Act there is no profit distribution to the shareholders of an authorised reclaim fund that could distort retention incentives, there is a cost to managing the retained assets as well as, if you like, a charitable lost opportunity cost.
I cited just now some 2020 figures. In fact, in 2020 the amount of £89 million of dormant assets represented a remarkably low year for dormant assets received—the lowest since 2013, when it was £87 million. The intervening years averaged £121 million, although I note that the Minister said that a rather lower £42 million steady state is expected. The year 2020 followed a somewhat bumper year of £147 million in 2019. I am wondering where these projections and steady state numbers come from. I can accept, and maybe it is the case, that projections show more digital banking is likely to keep people better attached to their money but, so far, none of the expectations, whether of the reclaim amount or the general level of the fund, seems to follow the projections.
A related question with regard to pensions and projections is: what effect does the Minister think the pensions dashboard will have in terms of reducing the number of accounts that go dormant because of loss of address? When would it be expected for that effect to kick in?
On the distribution of assets, I accept that a more flexible approach has benefits. However, even with consultation—and I think it should probably be in the Bill—surely the underlying strategic objective should be within the legislation. Ten years on from the 2008 Act, the definition could usefully be widened, but I am concerned about repealing Section 18 of the 2008 Act and leaving no structure. Focusing on a few areas, as the 2008 Act did, should potentially enable a game-changing investment that has a multiplier effect, which is an idea worth hanging on to even if realised partly in a different form. There are proposals around, as the noble Lord, Lord Blunkett, mentioned, relating to a community wealth fund, and that might be one such vehicle. Like him, I would be interested to hear about any thinking that the Government have done on the community wealth fund idea and how better to gain multiplier effects.
The Earl of Devon (CB) [V]
My Lords, it is a pleasure to follow the noble Baroness, Lady Bowles, and, before her, the excellent maiden speech of the noble Baroness, Lady Fleet, who is warmly welcome, particularly for her wisdom and support for music and the arts.
It is a rare treat to contribute to such a positive debate on a piece of legislation that finds widespread support across the House and the country. The dormant assets scheme has clearly been a success, as confirmed by the Dormant Assets Commission some years ago, permitting the distribution of hundreds of millions of pounds towards good causes in the categories of youth projects, financial inclusion and social investment. I understand that the expansion of the scheme to include insurance and pension products will allow potential access to over £2 billion of further dormant funds, so it is a great shot in the arm for the scheme and those good causes. I see that it meets the approval of the Association of British Insurers and that the financial industry more generally is supportive, too.
I note my membership of the All-Party Parliamentary Group for Social Enterprise. Dormant assets have played an invaluable role in the development of social enterprises over the past 10 years, and the sector is keen to ensure that they continue to do so. Social enterprises are critical to the levelling-up agenda; they ensure investment in people and projects across the United Kingdom and are often located in our most deprived communities, creating considerable employment and routes out of poverty. Since 2010, many millions in dormant assets have been invested this way, supporting more than 1,500 organisations, 82% of which are outside London.
The demand for social investment remains strong, particularly given the impact of the pandemic on our most fragile and vulnerable communities. Over the coming months, the social enterprise APPG will be conducting an inquiry, which I am honoured to be chairing, to assess the performance of the sector during the pandemic.
Over 5,000 new community interest companies have been registered since March 2020. Of particular importance to these institutions is access to long-term financing, which is exactly the support that the dormant assets scheme can provide. That is why this legislation is so important and why it is key that the Government consider the role of social enterprise in the context of the dormant assets scheme. To that end, can the Minister please confirm what level of engagement has taken place with the social enterprise sector in developing this updated legislation?
Given the importance of dormant assets to the funding of social enterprise, can the Minister confirm that their use for its development will not be diluted by this legislation? In particular, what assurances can the Minister give that social enterprises will remain a primary beneficiary of the use of dormant assets?
It is of particular concern that, under Clause 29, the Government propose to move the power to change the use of dormant assets from primary to secondary legislation. I know that the Government have committed to consult with the National Lottery Community Fund and hold a public consultation, but this is very different from requiring a change via primary legislation and, thus, debate in this House.
There also appears to be no obligation to consult specifically with the social enterprise sector, which is concerned that it may lose this crucial source of funding without consultation or the ability to voice its concerns. I ask the Minister to do what she can when she responds to put this very important sector’s mind at rest.
Lord Bates (Con)
My Lords, it is a great privilege to speak in this debate. I very much welcome the Bill and support its Second Reading today. It is a great privilege to hear the maiden speech of my noble friend Lady Fleet; she brings incredible experience to bear on this important issue. I look forward to her future contributions in Committee.
I draw the attention of the House to my non-executive and non-financial charitable interests as listed in the register. I pay tribute to my noble friend Lady Barran for introducing the Bill and for her willingness to meet with us and officials beforehand to consider its contents and answer our questions. That courtesy was very much appreciated and extremely useful.
As has been said, the Bill has support on all sides of the House, and, after the past few Sessions, we need to see more of this type of legislation. It arrives here in excellent shape, building on the proven success of the 2008 Act. I wish all Bills were like it. Of course, that is to be expected when it is prepared by my noble friend Lady Barran, given her experience in the charitable sector and finance, and John Glen, who is simply a brilliant Economic Secretary to the Treasury. Given that preparation, I hope that the Bill can move quickly along its parliamentary journey so that people can be reunited with their forgotten assets.
I note that The Dormant Assets Scheme: A Blueprint for Expansion, a report that the industry champions presented, mentions the difficulty of tracking down the owners of these assets. I am sure that that is an issue, but if they thought that the owners of the assets owed money to them—banks, building societies and insurance companies—they might have a better success rate in tracking them down. This is a difficult issue, and we very much welcome the Bill.
When we have a Bill that is so universally welcomed and so clearly good-news legislation, one of the problems is that Second Reading speeches tend to range a little more widely than the Bill itself, and I tend to follow that theme. I will make four points about how the use of these proceeds could be improved. First, we need to remember that the Queen’s Speech that introduced the Bill had an overarching theme: levelling up. While the Covid pandemic has hit all communities, it has hit the poorest and most marginalised most. Few would deny that because of the pandemic, the challenge of levelling up has become much harder and far greater resources will therefore be required in order to recover.
My second point is that if left-behind communities in Britain have suffered disproportionately, it is the children and young people in those communities who have suffered most. I want to pay tribute to children and young people in this country. They sometimes get a raw deal and a bad press. They have been wrongly described as a “snowflake generation”, but they have shown discipline and resolve throughout this crisis in following the guidance and making sacrifices—more than most—despite being statistically at least risk from the virus. When our children and young people have made such a sacrifice and such a contribution to beating this pandemic, it behoves us to do all we can to level up for them.
Thirdly, we should devote our efforts to increasing the rate of return on these assets to honour the sacrifice of the former owners. I have two suggestions in this regard. The first is that we use the assets not so much as a fund per se but as a catalyst to generate further funds, perhaps through match-funding of projects. The second is that we give people who have been reunited with their dormant assets the option of donating them to the scheme for good causes.
Before people suggest that this would not be taken up, I should remind the House—not that noble Lords need reminding, but I will mention it—that the British people are among the most generous on the planet. The Charities Aid Foundation reported that in the first six months of the pandemic, donations to charities in the UK increased from £4.6 billion to £5.4 billion, a quite extraordinary £800 million increase compared with the same period during the previous year. In passing, I should say that this statistic slightly scuppers the justification for reducing the overseas aid commitment from 0.7% to 0.5% because of the economic crisis. The British taxpayers have demonstrated through their actions that they wanted to be more generous to good causes and those in need in hard times, not less.
Fourthly, volunteering is the greatest dormant asset in the United Kingdom. There have been two notable occasions in the past 10 years when we have called upon people to volunteer. The first was for the London 2012 Olympic and Paralympic Games, when over a quarter of a million people volunteered for 70,000 roles, a response that almost caused the system to collapse. The Games-makers of London 2012 did indeed make the Games. The second time the call went out for volunteers was for 250,000 people to support the NHS during this crisis; 750,000 signed up.
On 28 February this year, the Sun newspaper, which has been running an excellent campaign, “Jabs Army”—the noble Baroness, Lady Fleet, is probably wishing she had thought of that as a headline for a campaign—reported that almost 12 million people had volunteered during the pandemic and that a third, 4.6 million, had done so for the first time. Jill Rutter, who led the Talk/together research, was quoted in its piece:
“With 4.6 million people volunteering for the first time and keen to do so again, there is massive potential to harness this positive legacy. You can achieve a lot with four million people helping out. We know that volunteering helps people feel more connected to their community and offers a chance to meet new people from different backgrounds too—so this surge in volunteering could help to build closer and more connected communities as we come out of lockdown.”
I say amen to that.
My final point is that, having been born and educated in the north-east of England, and having worked and represented left-behind communities there, I have seen that some of the most successful groups in transforming the life chances of our young people have been faith groups, churches, sports clubs and uniformed youth groups such as the Sea Cadets, Scouts, Brownies and Guides. We do not hear a great deal from them because they are too busy getting on with their work, and perhaps they do not have vast comms resources to do that, but there are almost 500,000 Scouts in the UK and 120,000 adults who volunteer with them. Brownies and Girl Guides account for a further 240,000.
Just as we must be careful that government funds do not crowd out private capital in our markets and economy, we should ensure that government schemes do not crowd out charitable initiatives and volunteering in our communities. We must maintain open spaces for our communities, to encourage people to volunteer and invest their time and money. This is not just because it tends to yield better returns but because—to paraphrase Shakespeare—it is twice blest: it blesses both the giver and the receiver alike.
This is an excellent Bill whose impact can be strengthened still further by focusing on levelling up in left-behind communities; having a bias towards children and young people, who have sacrificed so much; adding an opportunity for owners reunited with dormant assets to donate them to the scheme; and, most of all, having a programme to celebrate our outstanding volunteers, who care about their communities and seek only the opportunity to serve them. They are the engines of social capital and we cannot let such an incredible human asset remain dormant any longer.
Baroness Noakes (Con)
My Lords, it is a pleasure to follow my noble friend Lord Bates, because it gives me an opportunity to wish him a very happy 60th birthday.
If my noble friend Lady Fleet will forgive me, I am going to stick with the guidance in the Companion that my noble friend Lord Vaizey’s congratulations to her were made on behalf of the whole House. I have noticed recently that noble Lords seem to have forgotten that this is the way we used to do things.
This is a Bill that the whole House can celebrate. It harms no one and will do much good. When the Dormant Bank and Building Society Accounts Act 2008 was considered in your Lordships’ House, I led for the Opposition. We fully supported the Bill’s principles, but our main critique was that its scope was too restricted, covering only bank and building society accounts. It was known then that there were other significant dormant asset classes, and we wanted to include them. Despite the welcome addition of extra assets with this Bill, the same basic criticism applies.
I particularly single out dormant accounts held with National Savings & Investments. Some 14 or 15 years ago it was estimated that around £1 billion was sitting in dormant National Savings accounts. If that was the correct figure then, it must be very much higher now. Can my noble friend the Minister say how much is now held in dormant National Savings accounts?
The Treasury’s position has been that the money has already been used, in its words, for public benefit—but that is a weaselly formulation. The Treasury borrowed money from you and me and used it to finance public expenditure, some of which will have been of dubious public benefit. If people forget about their savings—which is easy to do, especially for things such as premium bonds and prizes, and certainly before the advent of online accounts and apps—the Government get to keep that money in perpetuity. I believe that the right destination is the good causes supported by the dormant assets scheme.
The Bill includes a power in Clause 19 to widen the scope of the dormant assets scheme, and I welcome that. The Labour Government rejected our modest request for that power in 2008. Will my noble friend the Minister say when the Government next plan to review further dormant assets? It seems to me that the Bill ought to provide for this, to ensure that we can maximise the assets within the scope of the Bill.
As has been pointed out, the asset classes in this Bill are more complex than those to which the 2008 Act applied. That is likely to mean that there will be more disputes about the value an owner will receive if an asset is reclaimed. It is not clear to me that all the assets now coming within the scheme will be covered by the Financial Ombudsman Service. Can my noble friend say how disputes about amounts due to asset owners will be dealt with?
The main issue I want to raise today concerns the structure of the scheme and whether it is unduly restricting the amounts released for good causes. The 2008 Act envisaged that there would be several reclaim funds, all independent of government. In the event, the Government had to rely on the Co-operative Bank to set up the company known as Reclaim Fund Ltd, or the scheme might not even have got off the ground.
After another eight years or so, the Office for National Statistics decided that Reclaim Fund Ltd had to be classified to the public sector, and it is now an NDPB. Since then, the Treasury, as we heard earlier, has become the legal owner of the company and it is now going to be the only officially recognised reclaim fund. Since it is now clear that the body handling the dormant assets is a public sector one, it is not clear to me that the fiction of a separate legal entity needs to be maintained. My question to the Minister is why they are keeping this separate legal entity. The importance of this question lies in the way in which huge sums of money accumulate in Reclaim Fund Ltd and are not transferred for distribution to good causes—my comments echo those of the noble Baroness, Lady Bowles of Berkhamsted. Some £1.4 billion has been transferred from banks and building societies since the scheme got going, but only £800 million has been released for good causes. As we heard from the noble Baroness, Lady Bowles, the difference mainly lies in the reserves that the company maintains against the legal obligation to repay when owners come forward. At the end of 2020, that reserve amounted to £475 million.
In the context of private sector reclaim bodies, it was obviously right that the reclaim reserves were set with prudence. That is how, initially under the supervision of the Financial Services Authority and more recently of the Financial Conduct Authority, highly conservative reserving policies were determined. Despite the fact that only around 7% of the £1.4 billion has been reclaimed to date, for every £1 that is transferred to the reclaim fund, only about 60p gets transferred for good causes—40% gets held back. And due to very conservative investment policies within Reclaim Fund Ltd, the amount earned on those reserves is very small. This is highly inefficient.
If we were starting again, I am not sure that a limited liability company would be the vehicle of choice, given that it is now in the public sector, although obviously some kind of organisation is needed to gather the money in and distribute it. The public sector does not need conservative reserving policies. If the Minister says that, legally, restructuring is off the table, the same result could be achieved if the Treasury issued a formal guarantee to meet any shortfall in the company. In practical terms, now that the Treasury owns Reclaim Fund Ltd, it already stands behind it under normal public sector principles. The sums that could be released are huge. Nearly £500 million is already sitting there and another £800 million is likely to be reserved and could therefore be released under this expanded dormant assets scheme.
While I am on the subject of Reclaim Fund Ltd, will the Government now switch from using private sector auditors to using the Comptroller and Auditor-General, like they do for most other public sector bodies? I believe that several areas of Reclaim Fund Ltd’s operations would benefit from a value-for-money audit from the NAO. It would be the right thing to do now that the company is in the public sector, and it requires only an order under Section 25 of the Government Resources and Accounts Act 2000.
Lastly, I welcome the removal of restrictions on how the released moneys can be spent. The 2008 Act reflected the priorities of the then Labour Government. It was short-sighted to restrict it in that way, and I support the replacement of those restrictions, as proposed in the Bill.
Baroness Lister of Burtersett (Lab)
My Lords, like others, I welcome the Bill and I will focus my remarks on how the funds it will release will be invested. However, first, even if it is not in the traditions of the House, I congratulate the noble Baroness, Lady Fleet, on her maiden speech.
Colleagues may know that I have long been an advocate for a more inclusive society, one that enables those who are most marginalised to thrive, regardless of their race or ethnicity, gender, social class, generation, disability or the place where they live. With at least £880 million of dormant funding being made available, and possibly much more, the question that the Government now have to answer is how to use this funding so as to have the largest impact on the most marginalised people and places, so that the benefits are felt right across the country.
Research and work undertaken in this House testify to the importance of strong communities in responding to the pandemic. As the Biden Administration has recognised, strengthening the social infrastructure is as important as, if not more important than, the physical infrastructure, if we are to build back better, as the Government say that they want to do. Such social investment is also crucial to the Government’s levelling-up agenda, mentioned by the noble Baroness, Lady Fleet, and the noble Lord, Lord Bates. The Legatum Institute, among others, has made the point that, in its words, levelling-up cannot just be about bridges and trains. Just as social infrastructure—the places to meet and the local institutions that bring people together—is a key pillar of community resilience, so too does it underpin much socially beneficial activity that goes on within our communities every day. It is, in essence, the foundation upon which people can thrive.
The All-Party Group for “Left-Behind” Neighbourhoods., of which I am a member—though I dislike “left-behind”, as it can be taken to imply that these neighbourhoods are somehow too slow to keep up, rather than being held back by processes of social and economic marginalisation—has identified 225 places which suffer from both the worst levels of economic deprivation and a severe lack of social infrastructure. Recent research found that just over a quarter of residents in these neighbourhoods are going on to higher education, compared with over 40% nationally and over 30% in those areas that are similarly economically deprived but benefit from a foundation of social infrastructure. This suggests that barriers to educational advancement are greater where social and community support networks are weak.
As my noble friend Lord Blunkett mentioned, much of this is because social infrastructure is vital to developing our social capital, the network of trusted social connections that can play such an important role in improving job prospects and enabling people to pursue their aspirations, as well as improving economic performance and productivity. In a recent letter to the Prime Minister on the proposed levelling-up White Paper, the Public Services Committee emphasised the importance of expenditure on social infrastructure such as childcare services, libraries, youth and community centres, and higher education institutions. Here I echo the point made by the noble Lord, Lord Bates, about children and young people. They have been the main victims of austerity. The facilities available to them have been heavily weakened.
One proposal that is key to building a strong social infrastructure in marginalised neighbourhoods is a community wealth fund, already mentioned by several noble Lords, as proposed by the Local Trust and supported by the Community Wealth Fund Alliance. I am grateful to the trust for its help with this speech. This fund would use a portion of dormant assets funding to invest in the social infrastructure of our most deprived communities over a long-term period. Using learning from previous place-based schemes such as the New Deal for Communities and the Single Regeneration Budget, and charity schemes such as Big Local, would help to ensure that there is a lasting legacy of change in the most deprived neighbourhoods across England.
Importantly, it would ensure that local residents were actively involved in the development of that social infrastructure, with support where necessary, as a key principle of the proposed fund is
“community-based decision-making”.
Again, the Public Services Committee has consistently emphasised the importance of genuine consultation in the development of public services. It suggests that
“the pandemic has shown that designing public services without consulting the people who use them embeds fundamental weaknesses such as inequalities of access … Involving user voice in service design increases the resilience of those services … Co-production can embed service delivery innovations of the kind that have developed since the pandemic began”.
In its letter to the Prime Minister, the committee stated:
“The Government should set out in its ‘Levelling Up’ White Paper how local people in areas receiving ‘levelling up’ investment will be consulted on how that money is spent. It should involve civil society organisations in the design, delivery and evaluation of ‘levelling up’ funds. It should work with the local voluntary sector to consult marginalised groups on how ‘levelling up’ money should be spent in their areas.”
The same principle should apply to the money released from dormant assets.
I am aware that the Government intend to set the mechanisms for distribution of dormant assets funding via secondary legislation and to consult on what this secondary legislation contains. While I have some reservations about reliance on secondary legislation, I welcome the commitment to consultation. Building a better society cannot be a top-down exercise but must involve a public conversation with those who live in that society and, in particular, its most marginalised members, such as those located in these so-called “left-behind neighbourhoods”.
Will the Minister give a commitment that the consultation will include specific reference to the possibility of a community wealth fund as one of the possible recipients of funding? Given the importance of the consultation process, I would be grateful if she could provide some clarity on the detail. In particular, the Bill currently stipulates that the Secretary of State must consult only with
“the Big Lottery Fund, and … such other persons (if any) as the Secretary of State thinks appropriate.”
It is difficult to believe there would not be “any” other appropriate people to consult. Could she give us some idea of who these appropriate people might be? She did mention public consultation in her opening speech, and that was very promising, but could she confirm that it will include public consultation with interested civil society and local community organisations?
Would she also consider adding a duty to consult when powers granted under Clause 29 are deployed in future, as called for by NCVO and others? And what is the proposed timeline for consulting on funding purposes once the Bill has Royal Assent? In addition, when does she foresee funding from the expanded scheme being distributed to new causes?
In conclusion, the Bill offers a golden opportunity to provide resources to the most marginalised neighbourhoods to enable them to start to build back better through the development of social infrastructure in line with their own priorities, through the vehicle of a community wealth fund. I hope and trust the Government will not squander that opportunity.
Lord Taylor of Holbeach (Con)
My Lords, I am pleased to have the opportunity to speak in this Second Reading of a Bill that has such widespread support for its purpose. My interests are listed in the register. In common with most noble Lords, I retain an active community involvement, but I believe that at a personal level I am unlikely to be the beneficial owner of dormant assets. If, at some stage, gambling winnings were included, there would still in my case be no chance, I fear.
I approve of the custom whereby people wishing to participate in the passage of a Bill speak on Second Reading. I was drawn to get involved because the Library briefing made me realise that this was a very worthwhile piece of legislation. Not for the first time, I thank our Library—for laying out the Bill’s nature and its origin in building on the Acts of 2008. I am grateful for the contribution of the noble Lord, Lord Blunkett, who reminded us of the origins of the 2008 Acts, and the role of our noble colleague, the noble Lord, Lord Field of Birkenhead. The brief that the Library produced contained much of the department’s clearly expressed Explanatory Memorandum produced for the Delegated Powers and Regulatory Reform Committee.
Compared with many other pieces of legislation that have come before us, this one is particularly free of contention. It does what most Ministers would love to have the opportunity to do: not change the practice of the law or even reinforce it by change, but build on the success of an already existing dormant assets scheme—a scheme that has been described well in documents and by my noble friend the Minister in her introduction and other noble Lords in this debate.
The Explanatory Memorandum repeats that the primary purpose at the heart of the scheme is to reunite customers with their property, but it does this by building on joint action between government, the private sector and civil society, whose collaboration and shared objectives are at the heart of the scheme. As the Minister told us, by expanding and broadening the Bill and the measures flowing from it, a further £1.7 billion could be brought into the scheme, with social and environmental causes across the UK receiving around £880 million.
Like other noble Lords, I therefore do not find it surprising to have received a number of submissions from groups generally welcoming the Bill, even though they differ in their specific interests. The Association of British Insurers makes a very good point: when moving house, many pension holders do not inform providers of their change of address. It points out, as previous speakers have done, that the pensions dashboard exists to mediate this situation but is unlikely to have an immediate effect. It suggests that a step change in reconnection might be achieved through the use of government data. It might be less controversial if conveyancing and rental agreements came with a prompt list of things that parties should do at the time. It would be interesting to hear the Minister’s comments on the ways in which we might be able to map people’s movements more accurately.
The Government have already consulted widely on the pattern of legislation that commits to consultation. It will be a target for amendments to the Bill, I am sure, because most Bills get demands for amendments on consultation. However, there has been a commitment from the Minister to a consultancy process. The National Council for Voluntary Organisations promotes the idea that powers in Clause 29 should bear a legal duty to consult, but we already have the commitment to consult. I would be interested to hear whether my noble friend the Minister feels that this is justified.
Along with other organisations, including the Local Trust, the NCVO supports the idea of a community wealth fund, which has its own alliance of supporters. Again, it would be useful to know my noble friend the Minister’s thoughts on this point.
I cannot buy the suggestion of Social Enterprise UK in its view on distribution that the funds may become, as it calls it, a slush fund for government projects or schemes. This flies in the face of the creation of the RFL, which is a single-claim fund and will, through the Bill, be reconstituted as a non-departmental public body kept separate from the Treasury, with surplus funds going—as now—to the National Lottery Community Fund.
As this Bill looks to the future, the review by the Dormant Assets Commission pointed the way to an expansion of UK-domiciled financial products to be included in the scheme. The advantage is that the Bill provides for an expansion by secondary legislation in Parliament on an affirmative procedure. That is the right way, ensuring that the co-operation that I mentioned before between government, the private sector and civil society is continued.
I have enjoyed the speeches of a more general nature from the noble Lord, Lord Adonis, who is not in his place at the moment, and my noble friend Lord Bates, both looking at a wider view. I agree with them, and indeed the noble Baroness, Lady Lister, that the modern, young generation has done itself credit. I have grandchildren of school age and I know how calm they have been in difficult circumstances and how diligently they have sought to maintain their education through a difficult time. We should be proud of that generation and the way that they have handled the crisis that has come on us.
All in all, I am delighted to have been able to speak in this Second Reading. I was delighted to hear from the noble Baroness who spoke here for the first time—I will not name her because I have been implored not to do so—and I am sure that she will make very valuable contributions to this House. All the contributions that we have heard so far give me reason to look forward to the further consideration of this Bill.
I am a builder of a brighter Britain with small bricks. The noble Lord, Lord Adonis, wanted to build a very big building. This Bill may be a small brick but walls are built with bricks—and we can argue about the colour of the wall. The Bill is worth supporting and I am pleased to be able to do so today.
Lord Hodgson of Astley Abbotts (Con)
My Lords, it is always a pleasure to follow my noble friend Lord Taylor of Holbeach. I have a long-standing interest in the charity and voluntary sector. I have written a number of reports for the Government on it, so a Bill that proposes to provide just short of another £900 million for the sector obviously has my support, as it does from everybody else around the Chamber.
Before I come to my remarks, may I ask my noble friend, when she comes to wind up, just to pick up a point made by the noble Lord, Lord Adonis? I think he said that this was the only charity piece of legislation planned for this Session. I have a certain proprietorial interest in a Law Commission Bill on charity law which picks up a number of the recommendations in one of my reports. I think—I hope—that she will be able to say that it is in the programme and that, therefore, that point from him is not correct. I look forward to hearing her comments on that.
I have two areas which I wish to probe and on which I hope that my noble friend can reassure me and the rest of the House, both now and in Committee. The first flows from my chairmanship of the Secondary Legislation Scrutiny Committee. The committee has noticed increasing use of skeleton legislation, where you get a broad idea of the direction of travel but the detail—what it really means to people on the ground—is left for secondary legislation from regulations. With great deference to my noble friend Lord Taylor as an ex-Chief Whip, let us be honest: secondary legislation has virtually no effective scrutiny at all—affirmative or negative or whatever. The nuclear nature of the scrutiny means that no party will press the button to blow the thing up. You cannot amend it, so you are left with a situation where you really have to—as my children would say—suck it up. We need to bear that in mind as we consider the provisions of this very worthwhile Bill.
The Bill starts with good will. We all think that it is wonderful. We all know that my noble friend will do her stuff and that the Opposition have good intentions, but we are making primary legislation. This will be on the statute book for years, and who knows what comes after us? We need to make sure that sufficient checks and balances are built into some of the provisions to ensure that less worthy people than currently populate our Front Benches are controlled in the way they may wish to use the proceeds from the Bill.
I am concerned about Clause 19, under which the Secretary of State can extend the scope of the dormant assets scheme both by regulation and by amending the provisions of the 2008 Act. I know that I will get knocked about by my noble friend Lady Noakes, who thinks that we are not being brave enough, but we need to be prepared to look at and examine the dangers of adding categories of assets that might change not only the shape of the scheme but the processes under which it operates, the way that it is managed and the impact it has. That is the point that the noble Baroness, Lady Barker, made in her comments. We need to probe all these things in Committee, not because we want to stop the Bill, but because we want to make sure it remains true to the purposes we are discussing.
My second area of concern is Clause 29, on the distribution of money and the way it can be controlled by regulation, which the noble Earl, Lord Devon, referred to. When all present are gone there can be a danger of the slush fund that my noble friend Lord Taylor referred to, and which is referred to in the briefing sent to us all, because when it is convenient and expedient Governments find ways to say, “We can wriggle our way around this.” Regulations do not provide enough protection from that, unless we find ways to buttress them in some form or another. My noble friend the Minister will be aware of the principle of additionality: that funds should not be made available merely to replace other funding. I cannot clearly see any provisions in the Bill that ensure that the additionality principle cannot be infringed so that the Government cannot say, “Let’s take a bit out of this and the dormant asset boys will fill the gap.”
That is my first area of concern. My second is whether the Bill’s purposes, as laid out in the 2008 Act, are still sufficiently focused on and relevant to the urgent needs of the social conditions prevailing today. Since 2008 we have had the financial crash and the pandemic, and, in the background as we sit here, the inexorable wave of the fourth industrial revolution of artificial intelligence and robotics is sweeping through our society, with all the changes it will make to the way our society lives, operates and collaborates.
I had the privilege of chairing your Lordships’ Select Committee on Citizenship and Civic Engagement. I am pleased to say that a number of its members are participating this afternoon: the noble Lord, Lord Blunkett, the noble Baronesses, Lady Barker and Lady Lister, and my noble friend Lady Eaton, who is to speak. The group of us are not cut from the same political cloth by any manner of means, but we produced a unanimous report. Sadly, there has been pretty limited follow-up on its recommendations to date.
Our evidence sessions and, indeed, our trips around the country, brought home starkly how very unevenly social capital is distributed across the country. The noble Baroness, Lady Lister, may not like the title “‘Left Behind’ Neighbourhoods”—I am a member of the APPG too—but it does carry with it a clear nomenclature of what we are trying to achieve. As we visited these areas, and met people, it was clear that it was not just about money. Money was, of course, important, but it was also about structure. The lack of knowledge and experience and, even more importantly, a lack of self-confidence and self-belief, meant that practical help was needed, often very locally based, along the lines mentioned by my noble friend Lady Wheatcroft. That is a precondition of the long and often painful process of rebuilding local social capital. Like many other noble Lords, I argue that this is an essential plank in the levelling-up process on which the Government are placing such emphasis. I am not yet sure that the Bill, as presently drafted, has enough focus on the deployment of patient, long-term capital to enable the provision of the practical experience and help need to provide remedies for these deep-seated structural challenges.
My final question is about the expanded asset list. I have served as a director of a number of listed companies and the unclaimed dividend register is the most awful administrative pain. I am not clear how private companies, public companies and private shareholders who do not have dividends due to them but have disappeared now fit into the scheme. I have read through the proposals for these unclaimed assets and the expansion of asset management companies. Nominee names may be one way that they could be attracted, but a lot of the people who have held shares for a long time still have them in their own name. They are registered with the company and they remain there. I would like to hear whether companies are joining the scheme, are encouraged to join it, are being told about it, are being told how they can provide or meet the provisions of it, or how they can delegate someone to do that on their behalf. Perhaps my noble friend will devote a word or two to that when she comes to wind up.
I conclude by saying that this Bill has absolutely worthy objectives and it has my support. Without wishing to delay the Bill or destroy its objectives, there are one or two areas where, in Committee, we just need to probe, explain and perhaps, from time to time, tighten it up.
Lord Triesman (Lab) [V]
My Lords, it is a real pleasure to follow the noble Lord, Lord Hodgson of Astley Abbotts, not least because I feel at one with a number of the sentiments that he expressed. I thank the Minister for introducing a very good Bill with such clarity. I also send my good wishes to the noble Lord, Lord Field of Birkenhead, and hope that he recovers from his illness speedily. It may not be convention, but since London generally gets a very bad press and I am an unrepentant Londoner, I welcome the noble Baroness, Lady Fleet, and anybody who has edited the London Evening Standard.
This is a welcome extension, through the Bill, to what has been a very good and useful scheme. The original concept was strong and very careful in what it set out to do. The safeguards for those who, for one reason or another, had left funds dormant, avoided them facing unnecessary mistakes and that has given great confidence to the processes which have been in existence. Confidence increased because everyone in 2008 could understand and applaud the objectives which were set out: the funding of social investment, of youth schemes and of helping people up the first rungs of the financial ladder. The variations of practice in Scotland, Wales and Northern Ireland are, in their way, testimonials to the varied thinking of devolved inspiration that has also added confidence in what we might now do as a result of this Bill. The somewhat broader schemes that they have demonstrated that there was no threat in extending a good idea. I am convinced that the extension will work equally in England.
The concept will reach further into areas of need through access to and use of a wider pool of dormant funds. They will obviously be subject to the same safeguards, although, like the noble Lord, Lord Hodgson, I think the Government should be very careful and could be unwise to change confidence in this bit of the bedrock by, as they put it, laying a new order to vary the restrictions. As we have all observed, orders are typically not subject to the same scrutiny as, for example, this primary legislation, and the changes may be thought to provide wriggle room which we would not intend.
Of course, new circumstances may occur—Covid is demonstrating this on a daily basis—but the restrictions should not become potentially so elastic that they distort the intention of the Bill. Confidence and consent are built around the good sense and cultural appeal of the existing restrictions. Perhaps the Minister could provide some real-life illustrations of the variations that the Bill when enacted would permit and how they would be identified in future.
None the less, I start by welcoming the sequence of prioritising restrictions on funds. The first of course is the restitution of the funds to their owners if they can be identified; and restitution if the owners of assets reappear. I also welcome the exclusively voluntary involvement of the financial industry players. The Explanatory Notes set out the sums that have been released by the scheme, and they are reasonable, but not decisively significant.
My main reason for wanting to see more deployed is that, in any vibrant and modern economy, or in an economy which sometimes can struggle to modernise for all its members, in the face of the greatest need the last thing you want is significant pools of dormant assets. While it is obviously prudent to hold something in reserve for inclement times, idle resources never motor growth and change. That is something we understand broadly in the economy. In general, even assets thought of as being in safe reserve, often in the form of savings, are in fact actively deployed. They may be deployed with great caution and little risk appetite, but the institutions that deploy our savings are actively, if modestly, putting money to work. Idle money helps neither its owners nor anyone else. Unlocking nearly £900 million is a very prudent step, even if it has been the case that relatively small amounts have been given in any one year, but it will be a much more significant step if the sum is larger.
I wonder whether I might suggest two concrete ways, wholly in the spirit of the legislation but possibly requiring modest amendment, through which this could be achieved. I would welcome the Minister’s observations and at least an undertaking that they could be considered. I first draw your Lordships’ attention to my entries in the register, as they bear on some of what I want to say. It follows from the view of my noble friend Lord Blunkett that we are looking for base-up change. For several years, I had the privilege of chairing an organisation developing new social housing for housing associations, which, post 2008, had unusual difficulties in raising new capital for building.
Post 2008, housing was an unpopular and probably oversized asset class in the experience of financial institutions. They had caught a cold from a lot of it, and they did not want to do so again. It was also unpopular for short-term investors. Indeed, there is still a mismatch between their preferred exit timetables and the intrinsic long-term nature of returns in social housing. The cornerstone in the investment of the funds was the quite remarkable financial organisation Big Society Capital, to which I was introduced by the equally remarkable Sir Ronald Cohen. They shared our aspiration for incremental provision rather than simply the replacement of an existing source of money. It was new money for new provision, and therefore very unlikely to be done in the normal markets with the quoted REITs—it needed a new approach.
Big Society Capital, which was largely created to invest dormant funds in incremental social intervention, with some funds from other sources, had exactly the impact you would hope for in a cornerstone investment. It encouraged other investors and in my view was even more dynamic than simple philanthropy, however welcome; it did a great deal more. It potentiated greater private investment in social housing. The scale of social issues will inevitably demand more than £900 million, large as that amount in general will be thought—although maybe not in this day and age. This must mean encouraging impact investors to come hand in hand with organisations such as Big Society Capital, for example. The cornerstone that it provided led to over £172 million of additional social housing—new housing. It rehoused 1,431 families, and 40% of our projects were in 20% of the most deprived areas.
I will give one example from Tottenham, the area I come from. In Tottenham, a class in what is usually a well-run, well-organised school at the beginning of the year will have 30 students in it—not more, not fewer—and you will find by the end of the year that three-quarters of them have gone to another school. As you travel across Tottenham by bus, with every bus stop you can calculate that, roughly speaking, half a year will be knocked off your life expectancy. Many of the issues around schools and health are to do with the really impoverished housing, with people not having settled or firm places to live.
The impact of course means that the impact on people with pressing needs is not met. However, it is also not just the impact on them but the impact on investors, and on their willingness to impact invest over long periods. Some outstanding organisations, such as Philanthropy Impact, without doubt build together charitable giving with the private capital concept of an element of long-term return at very modest levels, rather like bonds. The value created can be reinvested to do still more; even if on occasions a very modest dividend is paid, it encourages more investment.
Impact has to be evidenced, and we found with Big Society Capital that it demanded that—and it was quite right that it did so. We had to measure outcomes. What we did had to be demonstrable: not marking our own homework but showing that you do what you say you will do—a point that the noble Baroness, Lady Barker, made very well. We got an organisation, The Good Economy, to measure, manage and report on the social impact of investments in affordable housing. One of the impacts that we set for ourselves and which was measured by The Good Economy was the formation of tenants’ associations so that people in the houses would be authors of their own futures—in short, building from the base up.
That impact inspires investment, including matching investment, or increases the scale of investment. So I wonder, in the context of this legislation, whether it can consider how partnership between the deployment of dormant assets and impact-led philanthropy could be encouraged? This may need some careful choreography around charity law, but the attraction could be a major inflow of funds for socially critical projects.
Aside from supporting the noble Baroness, Lady Noakes, in her excellent points on National Savings dormant assets, my other proposal concerns the investment demanded of high-net-worth individuals who are seeking the right to remain in this country. Broadly, these incoming funds are sent in the direction of holdings in bonds. That is a very reliable method of logging in funds, and of course these funds are used by the nation for a variety of purposes. However, it lacks the dynamism that is plainly needed for incremental provision in the most challenging social needs, where it is needed the most.
It could be a strong addition to the Bill if a formal mechanism could be introduced with the following characteristics. First, it would permit incoming sums from those seeking the right to remain, who have a requirement to invest in the United Kingdom, if this could be added to the pool created by the dormant assets. Secondly, the Government could guarantee a level of return at an appropriate duration matching a specified government-issue bond, and therefore at no disadvantage to the person coming in and making the investment. Thirdly, in the event that the Government achieve this outcome through a bond itself, it should be a hypothecated bond stating the special purpose for which the bond is issued, so it would be used for the purposes that the Bill wishes to see matured and advanced.
I know that the Treasury does not like hypothecated bonds—but then, the Treasury always feels it knows best, and perhaps on this occasion it does not. If it did, social housing would not be the unresolved, still-growing problem that we see. The Treasury has always failed to resolve these kinds of problems over the decades. If it understood them better, it would see that businesses can grasp how to do these things better and in far more timely ways. A big-society capital methodology has a huge amount to commend it: more focus; more direct social value. It may make this branch of immigration more transparent and attractive, both to the host population and to wealthy immigrants. It is hard to disrespect people contributing to reducing homelessness or keeping kids on the right side of the law. Let us try to build on the opportunity the Bill provides to achieve those social outcomes.
Baroness Eaton (Con) [V]
My Lords, it is a pleasure to follow the noble Lord, Lord Triesman. I welcome the Bill and the Government’s commitment to expanding the dormant assets scheme. Bringing the purposes for which this funding can be distributed in line with those of Scotland, Wales and Northern Ireland is to be welcomed, and I commend the Minister for all the work she has done on the Bill. It represents a vital part of our bold and ambitious agenda to level up the country over the coming years.
I wish to speak briefly today about how I believe the Bill can best be put to use to support some of the most left-behind places in England. The long-term nature of dormant assets funding means that it is well-suited to bold objectives, and one such objective should be to create stronger, more resilient communities through a strengthening of our social infrastructure. This would be an investment in the places for people to meet and the locally rooted organisations that bring vibrancy to our communities. It is essential to create a strong and thriving society. We all know how important local football clubs, scout groups, youth centres, faith groups and knitting circles are to our sense of well-being and our community life. However, these things are not just nice to have; they are fundamental to the strength, resilience and prosperity of our communities.
As a nation, we have a history of uniting in times of great adversity, but our communities require the foundations strong enough to allow us to do so. We saw this during the early outbreak of the Covid-19 pandemic, with many communities across the country coming together to keep each other safe through little more than good will and neighbourliness. Research from the Third Sector Research Centre investigating how grass-roots community groups responded to the pandemic found that having strong social infrastructure was vital to a comprehensive response to the crisis. It allowed these groups not only to ensure that no one fell through the cracks of service provision, but to plan for a future beyond Covid-19.
Comparatively, those areas that lack strong social infrastructure struggle to respond as comprehensively. The APPG for “Left Behind” Neighbourhoods, of which I am a member, advocates on behalf of the 225 areas across England that suffer from significant economic deprivation as well as severely lacking social infrastructure. These areas saw just one-third of the number of mutual aid groups springing up in the first few months of the pandemic compared with the English average, and half compared with areas that are similarly economically disadvantaged and deprived but that benefit from strong foundations of social infrastructure. Similarly, these left-behind neighbourhoods got half the charitable grant funding per head, compared with other deprived neighbourhoods.
It is clear that residents in these areas had to struggle much harder in the early weeks of the pandemic to receive the same basic support as elsewhere. This suggests that community resilience and the ability to respond to crises relies not on economic factors alone but on the strengths of the local networks and organisations that tie us together. If we are to level up opportunity and prosperity across the country, we need to focus some attention on strengthening these networks. Without improving social infrastructure in left-behind neighbourhoods, the brilliant work being done by this Government to improve skills, access to jobs, transport and healthcare will simply not reach those places that need it most. Opportunities will continue to be missed in places where the social fabric is most frayed.
As we have heard from several noble Lords today, the funding set out in this Bill represents our greatest opportunity to address this. One proposal we have heard about this afternoon, supported by a number of colleagues across both Houses, is for a community wealth fund. This would create a permanent endowment capable of fortifying the foundations of our communities, directly improving their social infrastructure and building social capital, while providing the long-term support to enable these areas to make better use of other opportunities being brought forward by this Government. I hope my noble friend considers taking the creation of the community wealth fund forward and I look forward to hearing her response.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to join many others in welcoming a fellow former newspaper editor to your Lordships’ House. I am sure that the noble Baroness, Lady Fleet, will be a great addition to our ranks and I particularly welcome her comments about encouraging the creative industries and, I hope, creative education. I hope that she has considerable influence on the government Front Bench of both your Lordships’ House and the other place. She arrives on the day that we heard the dreadful news that the University of Sheffield plans to close its world-leading, world-renowned archaeology department. I hope that she also picks up advocacy of archaeology as a subject that explores and helps us to understand the creativity of the past, which can inform our lives in the present.
We have had an interesting and wide-ranging debate, but I have to pick up a point made by the noble Lord, Lord Bates, and echo his praise for the volunteers who contribute so much to so many of our communities. However, I am afraid that I do not share his confidence in the capacity of volunteers to pick up more and more responsibilities, when we have an increasing pension age and the pressures of low wages, high rents, long working hours and reduced government services, which leave many with increased care responsibilities within their families and among their friends. From libraries to lunch clubs, volunteers have been asked to do more and more.
I find myself today in the unusual situation of welcoming a government Bill and entirely agreeing with the Minister’s introduction. Proposed here we have a sensible use for money parked in obscure places doing nothing. We are talking about potentially a further £880 million for social and environmental initiatives. We are building on an existing scheme that has provided more than £745 million for charities and social enterprises in the past decade. That is £75 million a year. It sounds nice when you say it like that, but I would like to put that figure in the context of the financial sector, of which we are drawing on a very small part here.
The amount of money lost in corporate tax revenue because of money placed in tax havens is estimated to be between $500 billion and $600 billion a year. It is estimated that lost tax revenues from high net worth individuals are about $200 billion a year around the globe. The Minister spoke about money languishing and sitting around doing nothing. That is what that money is doing in tax havens—not being used to fund the real economy or to circulate in the kind of communities we are looking to enrich. For full clarity, those figures come from a September 2019 article called “Tackling Tax Havens” by Nicholas Shaxson in Finance & Development, a journal published by the IMF. What we are talking about here is not so much peanuts as the crumbs of peanuts. The warmth with which this Bill has been greeted in your Lordships’ House is a measure of the public hunger even for crumbs.
Looking at the detail of the Bill, I will focus particularly on Clause 29, as does the briefing that I am sure many noble Lords received from the National Council for Voluntary Organisations. As many noble Lords have said—I cannot list them all, but they include the noble Baroness, Lady Barker, and the noble Lord, Lord Hodgson of Astley Abbotts—it focuses on the way in which we are once again in the Henry VIII territory of Governments being able simply to readjust the direction and change what is happening with very little reference to any kind of democratic structure.
Clause 29 contains a legal duty to consult. I suggest—and I would very much like to talk to other noble Lords who might like to join me in this—that there should be a legal duty to see this money directed towards the most disadvantaged areas of the country, as measured by objective, agreed and academically accepted means and criteria, not something dreamed up by the Government. This is one of the ways in which the European Union was always much more democratic than the UK, in that money explicitly allocated to disadvantaged communities actually had to go to disadvantaged communities, using objective and agreed criteria.
The noble Lord, Lord Taylor of Holbeach, said one campaign group had expressed concern that there was a danger of this becoming a slush fund. I can only agree with that campaign group and thank the noble Lord for highlighting this, because it reflects the concerns in many quarters. What we have seen with other funds originated by the Government are essentially pork barrels dropped by helicopter into chosen places.
The noble Baroness, Lady Lister of Burtersett, focused on the idea of a community wealth fund. She explored that at considerable length, so I will not go to the length I was planning to. I note that 400 community groups have backed that idea. As the noble Baroness stressed, what is really crucial is local decision-making and how these funds are allocated and used. We have the most centralised polity in western Europe. Far too much power and resources are concentrated here in Westminster. We need to transfer the power, resources and decision-making out into communities.
In my final short section, I feel like I probably need to declare my position as a vice-president of the Local Government Association. In her introduction, the Minister said that they were making sure that this could not be used as a substitute for central government funding. I would like to see that as a theory, but I would say that there is absolutely no alternative but that this money will be used in that way, given the level of austerity over the past decade. From 2010 to 2020, we have seen a reduction in funding to local government of £16 billion. I contrast that with the kind of total figures that we are talking about through this Bill. Local councils have lost 60p in the pound of money from Westminster to spend on local services.
What we are seeking to do with the money from these funds is to put a plaster on a gaping wound of deprivation and destruction of community services. None the less, this is a small positive. But if we really want to tackle the issues that affect so many communities on these islands and really want to spread prosperity around our land, what we actually need to do, to circle back to where I started, is to ensure that rich individuals and multinational companies pay their taxes. That requires a Government who want to make rich individuals and multinational companies pay their taxes.
Lord Patten (Con)
Lots of barbs are sometimes chucked at the House of Lords from different directions, sometimes quite rightly, but there seems to be a consensus among most people when they say that at least it is a House of experts and that they should listen to the experts thrashing out these difficult issues. This debate this afternoon has shown absolutely that this Chamber is a Chamber of experts, with one exception, which is me in this particular area. No one can be more expert than my noble friend Lady Barran, and it is worth remembering just how expert the Minister is in this world of the voluntary sector and of charitable organisations, not from some grandstanding chairing of this or that charity but for setting one up and taking 12 years or more to build up SafeLives, a notable charity devoted to dissemination of more information about domestic violence and harassment. She was there at the workface, recruiting people and trying to scratch around and find money. We are very lucky to have her to lead us in this debate.
I welcome this Bill, which of course builds on a considerable consensus that has developed since the then Labour Administration back in 2008, much encouraged by my noble friend under the political skin, the noble Lord, Lord Field of Birkenhead—one of my parliamentary heroes, although not one of my political heroes. He did so much to get this going, as was said by the noble Lord, Lord Blunkett, who is not in his place. It is always good to see a consensus when it is there.
I have four issues that I would quickly like to raise. First, I greatly approve of the new flexible approach which this legislation wants to introduce to extend the areas where new dormant assets may lie—and may be undiscovered still—using secondary legislation, particularly in England, rather than waiting another 13 years for changes to be made, as we have had to since 2008. None the less, the pressure not to do something and not to shelve, to wait until we have a good selection of things to bring the new secondary legislation into play, must be resisted. One way in which to do that is to publish annually through some Ministerial Statement to both Houses the progress made in identifying new targets in shorthand for this secondary legislation to be applied to.
Secondly—this is not something that I have raised with the Minister before; it just came to me, as things sometimes do—I would like to see all online self-investment platforms included in this Bill. These sometimes hold very substantial amounts of client moneys and levy pretty chunky fees on them. I am told that, during the recent lockdown, the sector saw far more people investing in these platforms than before. I do not know whether they are covered or not—I will not start making a Committee stage speech—and this particular point could well be covered in Clauses 12 and 13, as they deal with client moneys. However, I would like my noble friend, perhaps today or at a later stage, to deal with a straightforward policy point: is it the policy of Her Majesty’s Government to embrace investment platforms and drag them into this legislation?
Thirdly, has my noble friend or her officials come across any notable reluctance on the part of potential new entrants to get involved? Of course, we cannot name and shame because dealing with dormant assets is a voluntary process, and we value the co-operation there has been in these voluntary schemes. However, I wonder whether more can be done to involve active consideration of dormant assets, using the framework of ESG—environmental, social and governance practices of all sorts—in the financial services world and its institutions. In other words, consideration of what we will do about dormant assets this year should be an automatic part not of box-ticking but of the checklist of good ESG policies.
Fourthly and lastly, I hope that, in this territory and the others, when money is realised and distributed by the different bodies, smaller, newer and sometimes innovative outfits will not be overlooked, provided they have strong governance.
It is good to see in the Bill all the provisions that have been set out as part of a full legislative process. It is also good to see this Chamber getting progressively fuller week by week; that is very heartening. We will see more debates with more people able to be here in—to use the Whips’ Office’s phrase—their physical presence, rather than the deathly presence of Zoom, with due respect to the people who cannot get here.
I suppose that we are now edging, little by little, towards a new normality, whatever that turns out to be. However, I know that at least one noble Lord has said that he does not think the new normal will turn into total normality until the Bishops’ Bar is no longer a dormant asset but is brought back into full use.
Lord Davies of Brixton (Lab)
My Lords, first, I welcome the maiden speech of the noble Baroness, Lady Fleet. I made my maiden speech in what is more like a school language lab than the Chamber, so it must have been particularly intimidating for her. She made a point to which I will return.
My noble friend Lord Adonis set me a challenge to oppose the Bill in principle. Of course, I do not: why should these dormant assets hang around unused or, worse, potentially fall into private hands? However, I do wish to raise two issues—I fall short of calling them concerns. First is the issue of where this money comes from; I feel that insufficient attention has been given to this. I feel some queasiness about the source of it: why have we constructed this system whereby ordinary people end up losing contact with unfeasible amounts of money?
It is all too easy to blame the individuals. One speaker referred to people’s failure to “manage their money effectively”. I question a system that ends up with this sort of result. There is something particularly odd about a system whereby we end up having to use dormant assets to solve the problem of dormant assets, when it might be better not to create the problem in the first place.
I am particularly interested in the provisions of the Bill on pension scheme assets, which we will return to in Committee. I think the Government have got this just about right, at least at the initial stage. The provisions are particularly limited, and I think that is right. Pension scheme money is there to provide pensions, and that should remain the focus. A number of references have been made to the potential impact of the pensions dashboard, which is currently under construction. The initial focus of the dashboard will be to put people in touch with their money; the problem here is money needing to be put in touch with individuals. It will happen in due course, but not particularly soon.
I have expressed my unease about the source of the money. I also have concerns about its destination. I have a problem because, as a proponent of high levels of public provision, I find it very difficult to see examples of where charities should take the leading role. There will always be room for charitable action on the part of individuals and organisations, but regarding the issues raised in this debate for which the money should be used, my question is: why are we not doing it anyway? Why do we have to rely on dormant assets to achieve these public goods? Would it not be better just to achieve them anyway? Strengthening the social structure, which a number of speakers have referred to, is certainly worth doing, but it is worth doing in any event—public action should take the lead.
It is very easy to agree in principle with the aim of always having additionality, but it is perhaps more difficult to agree what things count as additionality and what the public sector should be doing in any event. For example, under the current regime we have financial inclusion and youth employment. The state certainly has an important role in the latter; financial inclusion is slightly different, to the extent that it is not part of the normal curriculum of schools and further education. Perhaps this is an area where the finance industry as a whole should be doing more.
Of course, the Bill raises the possibility of new objectives for the use of dormant assets. I hope the Minister can provide us with more information about what possibilities have been floated—this can probably be done in Committee.
There is also the issue of how the money should be used. The noble Baroness, Lady Fleet, mentioned music education in her maiden speech. I am sure we can all agree that the education we provide in this area should be strengthened but, as a past leader of the Inner London Education Authority, I must say that, back in the day, we took it for granted that this would be done by the local authority. Unfortunately, this has fallen by the wayside, so maybe we do have to rely on the dormant assets. But to me this is most regrettable. My noble friend Lord Triesman gave another example, social housing, which I wonder why the state is not providing, as I would expect it to.
Finally, regarding the use of the term “social capital”, I have been involved over the years in making grants to voluntary organisations for worthwhile objectives, and the problem you always encounter is that the capital expenditure is always a lot more exciting than the routine running expenditure. I want some assurance from the Government that in establishing whatever structure they have for the use of this money, sufficient attention is given to running costs as well as capital funding. Where you have a capital fund, there is this ease of making capital grants, but providing the running costs is always much harder work. Can the Government respond on that issue?
Lord Bellingham (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Davies, and it was a particular pleasure to hear the quite superb maiden speech of my noble friend Lady Fleet, which was well worth waiting for. I congratulate the Minister on how she presented the arguments and made the case that, although the Dormant Bank and Building Society Accounts Act 2008, which I strongly supported in my role as an Opposition spokesman at the time, unlocked very substantial assets—so far about £750 million—and has been more successful than expected, now is the time to extend the scheme. I support the consultation process that took place and its recommendations, and the Government’s extending the scheme to those other asset classes.
Obviously the potential is huge, and the figure of about £800 million has been mentioned. However, I was looking at some work by Bruce Cane of Monimine, an organisation which tries to reunite individuals with their unclaimed assets. It pointed out that the UK’s insurance and long-term savings industry manages investments of £1.9 trillion. I then looked at the FCA’s thematic review of 2017, which pointed out that up to 10% of customers in the life and pensions market have gone away, meaning that all contact with them has been lost. That is an incredible number, and 10% of £1.9 trillion comes to about £200 billion. Even if that figure is fanciful, at 1% that figure goes up to £2 billion, compared with the £750 million that it has been suggested this could raise, so we are talking about a very large amount of money indeed.
It is obviously very important that this is channelled in the right way, and that the Reclaim Fund works effectively. I am troubled to some extent that there are a lot of people out there who have gone away and are not claiming their money; other noble Lords have raised that point. I certainly expect extra efforts to be made to find them. As my noble friend Lord Vaizey pointed out, perhaps there will be more scope for tracking them down as we move into the digital world. I do not know, but one certainly is left thinking that the banks would be going after them if they were overdrawn. That reminds me of a story of a Norfolk farmer who got calls from his bank manager—in the days when we had bank managers managing local banks—about his £2,000 overdraft every day for a number of weeks. On about the sixth occasion, the farmer asked the bank manager to tell him the exact state of his account on 1 May last year. The manager said that it was £2,000 in credit, and the farmer said, “Well, did I ring you every five minutes?” When the boot is on the other foot, the bank will go after people, but there is a lot of money out there and it is quite right that a significant amount of it will now be captured by this new scheme and by the Bill, which we hope will become an Act of Parliament.
Maybe the Minister can respond to my concern that the Reclaim Fund must keep the vast majority of its money in cash. I understand that when it was set up in 2008, interest rates were 4.5% and there would have been a lot more money accumulated during the course of a year, but now, when you practically have to pay banks to keep money there, why can the funds not be invested in bonds or government-backed instruments of some kind, and bring in a reasonable income? Even it were a very conservative blue-chip portfolio with 80% invested in tracker funds, you would still bring in a very substantial income indeed, and there would still be enough money in the fund to pay out quickly to people who came forward to reclaim those assets.
I would also like to ask the Minister about the fund only being able to hold cash. It cannot hold assets such as shares and bonds; they have to be liquidated. I am slightly troubled by the example of somebody who goes away and does not come back for many years but then comes back to try and reclaim their share portfolio—which they are entitled to do—which would then be in cash. Would it not make sense to keep some of these assets—shares and bonds—in the original format? It is obviously more difficult with products such as insurance products. That would be welcomed by the small number of people—we gather it is only about 5%—who come back to reclaim those assets.
The Minister was very eloquent in explaining how the funds are dispensed, and she spoke warmly of the main bodies doing this. This is a point echoed by the noble Lord, Lord Triesman, who spoke in support of Big Society Capital and the Youth Futures Foundation. Other noble Lords have touched on the work done by these organisations that come under the banner of the National Lottery. I do not doubt that many of them have been doing a really good job but, as a former constituency MP dealing with a lot of small charities and organisations, I can tell the House that trying to access lottery funds is often incredibly bureaucratic. It is intimidating for small charities; it is sometimes a labour of love to achieve what you set out to.
This may not be a popular point, but the Minister could take it away and have a look at it: this could be an opportunity to reset the dial and set up a completely new organisation, because many of these charities have suffered horrendously during the Covid outbreak. Many of them are on their knees; many are small, innovative charities of exactly the sort my noble friend Lord Patten was talking about a moment ago—tiny charities operating below the radar screen, many of which are going to go out of business unless they get urgent help. Can we not use this opportunity to set up a new organisation separate from the lottery and have in place a form of governance to leverage the new guidelines that have been put in place, in terms of the organisations and causes that can be helped? A number of noble Lords have mentioned to me that it would be a good idea to do this, although during the debate other noble Lords have spoken highly of existing arrangements.
The other point I would like the Minister to examine is whether the Bill could be extended on a voluntary basis to the Crown dependencies. Obviously you have the Isle of Man, Jersey, Guernsey and all the major offshore banking centres. It would perhaps be a step too far to take it to overseas territories—places such as the Cayman Islands, the Turks and Caicos Islands or Bermuda—but these competencies are devolved to the Crown dependencies. On the other hand, by a voluntary initiative, I would have thought there would be quite a lot of appetite within them to enter a scheme that could benefit a lot of more vulnerable people. It would be done on a completely voluntary basis and would not in any way compromise their integrity as banking centres. Maybe the Minister could take that away as well and have a look at it in her closing remarks.
This is a phenomenal opportunity for the charitable sector, and I hope we can look forward to the UK being an absolute world leader and setting an example to many other countries.
Lord Bhatia (Non-Afl) [V]
My Lords, the UK dormant assets scheme was established by the Dormant Bank and Building Society Accounts Act, and is administered by Reclaim Fund Ltd. The scheme was originally predicted to bring in almost £400 million, but contributions to date have exceeded this by 250%. Over the last decade, more than £745 million has been released for social and environmental initiatives across the UK. The scheme allows responsible businesses to have a positive impact on society in their environmental contributions. The Government have forced systematic change. Expanding the scheme is crucial to maintaining its potential impact in the UK by supporting industries to reunite people with their forgotten assets.
The Bill will deliver the Government’s commitment to enable additional types of dormant assets from the insurance and pensions, investment, wealth management, and securities sectors to be transferred into the scheme. This has the potential to make around £889 million available across the UK as it recovers from Covid-19.
I would like to praise the speeches of the noble Lords, Lord Adonis and Lord Blunkett, who covered the core of the Bill. I too ask the Minister: what will be the cost of administering the scheme, and which Minister will be responsible? Also, should these funds be transferred to a new charity, which could distribute them and be monitored by the Charity Commission?
Lord Polak (Con)
My Lords, I congratulate my noble friend Lady Fleet on her terrific maiden speech. It reminded me of my school days in Liverpool, at King David High School, where music was key. We had 500 pupils and four orchestras; in fact, when a new pupil arrived and they were not holding a violin case, we knew that they were a pianist.
I also congratulate my noble friend the Minister on her introduction of the Bill this afternoon and refer the House to my interests as set out in the register. I will focus my brief remarks on the benefits that the Bill can bring. Like other noble Lords, I am grateful to the organisations that have sent in information. I commend them all on the work they undertake to keep noble Lords updated and informed.
Like the noble Lord, Lord Blunkett, and the noble Baroness, Lady Wheatcroft, I was particularly struck by the material I received from KickStart Money—a coalition of savings and investment firms with an important mission that I fully support. The goal is simple and clear: to ensure that every primary school-age child leaves school at the age of 11 having received a high-quality and effective financial education. The coalition of supporters of KickStart Money was brought together by the Investing and Saving Alliance in response to research which found that habits and attitudes towards money can be formed in children as young as seven, thus making education at a young age vital to their future financial capability.
Just a few weeks ago, KickStart Money was fortunate to have had a meeting with the right honourable Gavin Williamson MP, the Secretary of State for Education, to discuss how financial education at primary school level helps to form positive attitudes towards money and establish important saving habits for future life. KickStart Money also won the Good Money Award last December, at the 2020 Better Society Awards, for its work in championing early-intervention financial education and funding vital money management lessons for almost 19,000 primary-aged children, delivered by MyBnk.
The Bill, which the Government have brought forward, is to be welcomed and provides an exciting opportunity to educate young people. The Bill will rightly expand the dormant assets scheme across the financial sector to make, as we have heard, potentially just under £900 million available for good causes—and clearly there must be more. What better cause could there be than using some of the funds to ensure that all primary school children receive that high-quality and effective financial education? It seems to me that the lost assets of those who have not managed their money effectively should be used to ensure that the next generation builds strong money-management skills and positive saving habits. In fact, I suggest that it is deeply appropriate.
As a result of the economic impact, more than one in four UK adults has low financial resilience. That comes from the FCA’s Financial Lives survey of February 2021. It also seems that the pandemic has had an impact on the younger generation, where six in 10 young people are saying that Covid-19 has made them more anxious about money issues. Research by the Money and Pensions Service has shown that money habits are formed at the age of seven, as I said, and evaluation of KickStart Money’s financial education programmes has shown how money management lessons can close the gap in financial capability, levelling up the playing field between those who receive some form of financial education at home and those who do not.
I hope that my noble friend the Minister will agree that this type of education is vital and will find a way to ensure that the opportunity is not missed to use the assets of financial mismanagement to create a society where young people can be given tools and skills at an early stage to prevent people falling into debt or financial vulnerability by focusing these dormant assets to ensure that primary schoolchildren develop a positive money mindset as early as possible.
Baroness Sater (Con) [V]
My Lords, it gives me great pleasure to follow my noble friend Lord Polak. I thank my noble friend the Minister for bringing forward this Bill, which will enhance and continue to support so many good causes. I pay tribute to her and her colleagues at the Department for Digital, Culture, Media and Sport for all the work they are doing to support the charity sector, particularly in these challenging times. I also add my welcome to my noble friend Lady Fleet and congratulate her on her excellent maiden speech.
We know that, in addition to the unprecedented £750 million package of support specifically for charities, a further £150 million from dormant bank and building society accounts has already been unlocked to help charities, social enterprises and individuals in vulnerable financial circumstances during the coronavirus outbreak. Expanding the scheme through the Bill means that even more people will reconnect with their assets. At the same time, it will provide more money for good causes, helping us to build back stronger in the years to come—a clear win-win.
The dormant assets scheme, established in 2008 and administered by the Reclaim Fund, has distributed assets from bank and building society accounts to good causes, while ensuring that sufficient funds are retained to meet any future claims on them. It has been a great success to date, and has unlocked and contributed more than £800 million for social and environmental causes in the UK. It operates, as we know, on three main principles, which remain unchanged in this expansion: reunification, full restoration and voluntary participation.
We are told that expanding the scheme through this Bill has the potential to unlock a further £880 million over the coming years through enabling additional types of dormant assets, including investments, insurance and pensions. This proposed expansion has also gone through a lengthy consultation, with each of these new types of assets having their own appropriately tailored definition of dormancy. Importantly, the Bill enables the social and environmental focus of the English allocation of the funds to be set through secondary legislation, in line with the model used in the devolved Administrations, which allows the scheme to consult on, and in turn be flexible to, the changing environmental and social needs in England into the future.
I welcome the additional measures in the Bill, which include making reference to the requirement for firms participating in the scheme to make attempts to reunite assets with their owners. It also makes necessary changes to reflect the Reclaim Fund’s recent establishment as a non-departmental public body of Her Majesty’s Treasury.
I am pleased to see through the consultation that there is consensus that tracing, verification and reunification —TVR—should continue to be a cornerstone of the scheme. We know that the evidence demonstrates that TVR has improved over time under the existing scheme. However, I would be grateful to hear more from my noble friend the Minister about the plans to enhance it even further. While we recognise the value of delivering funds to good causes, it is also crucial that more people are reunited with their assets.
We know there is much more to be done to help individuals and good causes across the country, particularly as we recover from the pandemic. This funding is already changing lives for the better, and expanding it further will help more vulnerable people to benefit. Instead of gathering dust, this money, if it cannot be reunited with its rightful owner in the first instance, is, among other good causes, being invested to help our young people into employment and to tackle problem debt. I support the Bill and I hope it obtains a very swift and successful passage through this Parliament.
Baroness Kramer (LD)
My Lords, one of the wonderful things about this House is that there is always a way to say what you want and stay within the rules. So I thank the noble Lord, Lord Vaizey, not currently in his place, for welcoming, on behalf of the whole House, the noble Baroness, Lady Fleet, on the occasion of her maiden speech. She joins quite a cabal of noble Lords all across this House who are very focused on the issue of music education; I hope that her addition will help them take that issue over the transom, as it were, and make sure that we get a secure basis for funding music education in the future—though, like some others, I think that it should be less a charity issue and more a fundamental issue of funding from central and local government.
I also thank the noble Baroness, Lady Barran, who was kind enough to provide a briefing to those of us with an interest. It was a thorough and very open briefing, and we on these Benches very much appreciated that opportunity. As she said in her opening comments on that briefing, this is a technical bill. Usually, when I hear those words, I am immediately suspicious—we have just dealt with a Financial Services Bill described as “technical” and it was anything but—but, in this case, I accept that that is an accurate description of the Bill. As the noble Lord, Lord Hodgson, said, it has worthy objectives that none of us could possibly object to, and I have heard no fundamental objection in any of the speeches in this House.
We all understand that there are principles that were established in the original dormant assets Act, and we understand that the intention is that those will remain consistent in this new Bill. The most important of these is almost certainly that reclaim is an absolute priority—the rights of the gone-away are in no way trammelled—but there has to be positive action to try to relink people to their lost assets.
I take some objection to the comments of the noble Lord, Lord Polak, though he is not the only person who said that if people cannot manage their money, let us at least do something useful with it. In the incredibly complex financial world that we deal with, and one that has changed in so many ways—just look at the whole pensions environment—it is not surprising to me that people have lost track of assets that should rightfully be theirs. There needs to be real pressure on the industry to make sure it does a much better job in reconnecting them. As the noble Lord, Lord Bates, said, were the shoe on the other foot, it would be hunting people down to pay their various obligations.
I found it interesting that, in the briefing we had from the AIB, the insurance lobby group, there was a plea for access to government data where that is possible without trammelling privacy regulations, and to make that an easier process. Now, with the addition of new assets, this is becoming more and more important, as well as, frankly, more and more of a challenge. It is also a principle that participation in the scheme by asset holders is entirely voluntary, and it seems to me that that is upheld.
The noble Baroness, Lady Barran, also talked in her briefing about the importance of the additionality principle. I will say a little more on this later, but I am somewhat in the camp of the noble Lords, Lord Hodgson and Lord Davies of Brixton, in asking: what is additionality? It is a rather fuzzy concept, and one of which I think we have to be aware and wary. My noble friend Lady Barker pointed out that during the Covid crisis—Covid became an excuse for many things—that principle was openly breached. I do not think that any of us in the House today want to see that become an underlying pattern. We all know through common sense what additionality is, and let us hope that, by the time the Bill leaves this House, we end up feeling that it is well embedded in this new legislation.
On the expansion of the scheme to new classes of assets, we heard a number of suggestions for additional new classes of assets that have not been dealt with in the Bill. Yet others were cautious about taking the scheme too far, particularly where there is no easy way in which to crystallise the value of the asset and where there is no established principle within the current industry on how gone-away owners will be dealt with and how the value of their assets, if they come to reclaim them, will be set. That will be important, and I hope that we can press the Minister on it a bit, because the Bill essentially gives power to the Minister to make those future decisions; it no longer brings them in front of Parliament. It will be critical that we understand what the principles are that would lead to expansion. I am not saying that it should be an anti-expansion measure; it is just important to understand before we sign off on the Bill exactly how that process will happen and what the underlying principles will be.
I should say on behalf of my party that my noble friend Lord Foster of Bath, who was unable to speak today, will, in Committee, raise the issue of whether unclaimed winnings and dormant betting accounts would be appropriate assets to bring into the pool. The Dormant Assets Commission in 2017 promised that it would look again at that issue in three years’ time—and here we are, four years later. It would be worthwhile.
Almost nobody raised the issue of the Reclaim Fund Ltd entity. It is now, as we know, a non-departmental public body, and that is right; a public interest element should be embedded in whatever organisation handles the reclaim process. But we are also giving powers to the Government to replace that body with additional bodies. As far as I can see, there is little constraint on what the character of that new player might be. Forgive me for being an old cynic, but look, for example, at recent legislation on what happens in bankruptcy. I have watched financial institutions manoeuvring to put themselves into positions where they can maximise commissions and fees that offer a whole variety of opportunities. I am cynical enough to think that, if we do not have some sort of standards or criteria for a group behaving as a reclaim fund, we could certainly see entities coming forward that would find ways in which to exploit the opportunity of managing this.
We must understand better why the current retention rate is so high—the noble Baroness, Lady Noakes, was eloquent on this issue and my noble friend Lady Bowles spoke to it—particularly as the Government stand behind a reclaim fund. A simple guarantee would serve, and that might release a great deal more money. It all becomes much more complex as we go into a more diverse set of assets, and we need much better understanding.
That leads me to the point originally made by my noble friend Lady Bowles and others in this House: the entity is rather opaque. We do not understand quite how it is functioning and making its various decisions. We do not understand the level of efficiency. The noble Baroness, Lady Noakes, said that there should be value for money. Perhaps a private audit firm is the wrong way in which to look at this; we need something with a shape that is much more in the public interest. I very much hope that the Government will explore that.
I shall draw my comments to a close by considering the distribution of funds—an issue that has occupied most of the discussion in this House. I have no intention of repeating the wide range of proposals for ways in which the money should be distributed, but a lot was said about social capital, the need for money for long- term patients, local input and control, and music education. The noble Lord, Lord Vaizey, I think, talked about the BBC as a possible recipient. There was reference to the community wealth fund proposals that we have all received. There are many different ways in which this could go as the distribution of funds is expanded.
I want to pick up a point made by the noble Lord, Lord Triesman. He said that the existing distribution has sitting behind it confidence and consent. That principle must extend into any changes to the way in which the assets are distributed.
I also want to pick up the point made in detail by the noble Baroness, Lady Lister, and many others. The Minister described the consultation process promised in this Bill as a public consultation, whereas that is not what the Bill says. The Bill says that
“the Secretary of State must consult … the Big Lottery Fund, and”—
as the noble Baroness, Lady Lister, said—
“such other persons (if any) as the Secretary of State thinks appropriate.”
I do not think that will survive Committee stage, quite frankly. There is too much opportunity for this to become a game of favourites, and we cannot let that happen. That principle of confidence and consent seems absolutely fundamental to all of this.
I welcome this Bill. It has many useful purposes. I accept that it is a technical Bill. We will support it but, again, we will do so in principle. I can see areas that will be explored in Committee. I am delighted that those areas have been identified by speakers on several different Benches across this House, because the fundamental concept of the first dormant assets Bill was cross-party, and I believe that this Bill very much needs that characteristic too.
Lord Bassam of Brighton (Lab) [V]
My Lords, first, I start by drawing the House’s attention to my interests as set out in the register. I work as a director for the charity Business in the Community. I am also a trustee on a number of charitable boards that may potentially benefit from funds disbursed from dormant accounts.
Secondly, I thank the Minister for the way in which she introduced the Bill: with care and not a little passion. We truly have a Minister who understands the value of the NGO and charitable sector and draws richly from her own personal experience.
Next, I congratulate the noble Baroness, Lady Fleet, on her maiden speech, which reminded us all of the rich experience that Members bring to this House—in the particular case of the noble Baroness, her championing of the arts with passion and enthusiasm. I must say I liked her call for levelling up in musical education. It only made me wish that my younger, tuneless self had been musically levelled up.
Before I turn to the detail of the Bill, I think that this an opportunity to give our thanks to the thousands of charities and community groups across the country for their amazing work during the Covid pandemic. Much of this has been done in the face of severe financial constraints—as the noble Lord, Lord Bellingham, made clear—and in the face of unprecedented public health restrictions. They have persevered and found creative ways to continue running vital services and supporting local communities. We should express our gratitude to those involved, just as we have saluted the heroic efforts of the National Health Service and our key workers.
As we have heard, the dormant assets scheme was established under the last Labour Government in a moment of cross-party support. Recognition of the crucial role played by civil society and the importance of properly supporting those organisations that do so much to help people and communities across the UK is at its root. We are proud that, to date, hundreds of millions of pounds have been unlocked and passed to good causes. For some charities, extra funding has given a greater sense of financial security, providing greater freedom to focus on service delivery. For others, it has meant expansion either in reach or in the range of services provided.
When designing the original scheme and the list of assets included in it, reunification was a key consideration. If somebody has a rightful claim to assets that become dormant, of course every effort should be made to ensure that the money returns to its rightful owner. If that is not possible, there is a clear moral justification for putting it to good use elsewhere. It may be a simple principle, but we welcome that it remains untouched in this Bill.
On a slightly different note, I was taken by the comments on reunification and reserve rates made by the noble Baronesses, Lady Bowles, Lady Noakes and Lady Kramer. This suggested overprovision, and I ask whether the Minister can explain why.
While we welcome the introduction of the Bill, can the Minister shed any light on its timing? The post-implementation review of the 2008 Act was published in 2014, and the Dormant Assets Commission published its recommendations in early 2017. While we appreciate the need to consult widely and consider civil society finance in the broader political and economic context, we have had to travel an extraordinarily long road to find ourselves here today. Why? Is it, for example, because departmental resource has been focused on other matters, such as preparing for Brexit, perhaps?
It is an interesting time to discuss funding for good causes. Despite some support from the Government, whether through grants or the furlough scheme, the past 14 months have been incredibly tough for the charitable sector, as I said earlier. For many, coronavirus support grants were slow to arrive and insufficient to allow business to continue as usual. While the economy may be gradually reopening, it is important for a degree of government support to remain in place until the charity sector’s ecosystem is fully rebooted.
We must be thankful that, despite the challenges of the past year, fundraising has not ground to a complete halt. Many charities have been creative in hosting virtual events or promoting individual sporting challenges, in the absence of occasions such as the London Marathon. Nevertheless, money has been tight and, despite the characteristic generosity of the British public, with so many people furloughed or losing their jobs as a result of Covid-19, charity income has taken a big hit, just as many organisations have experienced a surge in demand.
On the Labour side, we very much support the Government’s intention to unlock further funds through the measures in this legislation, but we must consider the Bill in context, as I have outlined. Earlier this year, for example, the Chancellor unveiled spending plans reminiscent of the coalition Government’s austerity years. With this in mind, can the Government assure us that the new money derived from the dormant assets listed in the Bill will be in addition to other forms of public support for charities, rather than being used as a rationale to scale back other initiatives?
While we support the thrust of the legislation, can the Minister provide a rationale for the decision to exclude some of the asset classes recommended for inclusion by previous consultations and industry champions? On pensions, for example, the justification seems to be that we need time to take stock of the introduction of pensions dashboards. How long does the Minister believe is needed to assess the changing pensions landscape? If conditions are favourable, is this an area where the Government may wish to utilise the powers in Clause 19?
The dormant assets eligible for this scheme are generally financial products. What consideration are the Government giving to including other asset types? Does the Minister see, for example, a case for including the proceeds from government land disposals? Similarly, is there scope to pass some of the proceeds of crime confiscated under other legislation to community groups, in recognition of the harm that crime has on the area in which it is committed? I am particularly interested to hear the Minister’s response to the bid from the noble Lord, Lord Vaizey, to bring the National Fund into scope and, similarly, to the case made by the noble Baroness, Lady Noakes, for NS&I unclaimed assets and, by the noble Lord, Lord Hodgson, for unclaimed dividends.
These questions lead us to a more fundamental debate: should funds continue to be disbursed by the National Lottery Community Fund, as they have been since the inception of the scheme? Is it time, as others have suggested, to look at alternative models? The Minister is no doubt aware of proposals drawn up by civil society organisations for what they call a community wealth fund, which invests in left-behind areas. A number of Peers, notably the noble Baronesses, Lady Lister and Lady Eaton, refer to the proposition, as did others across the House. What is the Minister’s response to that, given that it is consistent with the Government’s stated aim of levelling up, which the Minister drew attention to in her opening speech?
During the passage of the Bill, we intend to probe the operation of Clause 27 to gain a better understanding of what oversight the Treasury and Parliament have of Reclaim Funds Ltd’s finances and operations. We will also seek to amend proposed new Section 18A, which is inserted into the 2008 Act by Clause 29. The consultation requirements included in the draft appear inadequate and we would therefore welcome the opportunity to discuss this with the Minister and her officials in due course. The case for a broader consultation was well made by my noble friend Lady Lister.
As I said at the outset, we welcome this Bill as it builds on the scheme which Labour launched back in 2008. We think there are some missed opportunities in this new, additional proposal. We hope the Government will recognise this, and we commit to probing the opportunities the Bill could unlock and to constructive engagement throughout the Bill’s passage through both Houses. As the noble Lord, Lord Hodgson, observed, we, as the Opposition, have good intentions in examining the Bill, not least because the Bill has good intentions behind it. We will be its critical but supportive friend, seeking to improve its content and impact.
Baroness Barran (Con)
My Lords, with the leave of the House, I thank all noble Lords for their valuable contributions today. The debate has indeed been very wide-ranging, and your Lordships have set me a difficult challenge in trying to cover your points in the time allowed. If I may, I will therefore follow up with a letter to noble Lords after this debate.
I join other noble Lords in congratulating my noble friend Lady Fleet on her excellent maiden speech; I look forward to listening to her speak many times in future. I also echo the best wishes expressed by the noble Lord, Lord Blunkett, to the noble Lord, Lord Field, and wish him well. I congratulate the noble Baroness, Lady Bennett, on starting a new trend of supporting, agreeing with and welcoming government legislation.
I shall touch on some of the broader points that went beyond the direct scope of the Bill. The noble Lord, Lord Adonis, challenged the Government on their ambition in relation to levelling up. The Queen’s Speech had a very strong theme of levelling up going through it. I highlight in particular the changes we have already made to the social value legislation and the potential it gives for social enterprises, charities and SMEs more broadly to benefit from £49 billion of government commissioning.
My noble friend Lord Vaizey managed to combine Dickens, the BBC and the National Fund in an incredible bit of knitting. As he is aware, the National Fund is currently subject to court proceedings, so there is no more that I can do to release it, but perhaps when we get there it will be a combination of “Sleeping Beauty” and Hard Times, if that is not too bad a combination.
Finally, and importantly, I thank my noble friend Lord Bates for stressing the incredible generosity of the British people over the past year in donating to charities and in volunteering for the NHS responder scheme to help with the vaccination rollout. I am sure that we will shortly see an incredible outpouring when volunteering options for the Commonwealth Games open in a couple of weeks.
The first area of discussion by your Lordships related to the size of the assets that will be released; that was raised by the noble Lord, Lord Blunkett, and several other noble Lords. To reiterate, industry valuations show that expansion has the potential to make £1.7 billion available to transfer to Reclaim Fund Ltd, which is based on an estimated £3.7 billion of dormant assets in the new asset classes that will be included in the Bill. The industry believes that, with enhanced tracing and verification efforts, £2 billion could be reunited with its rightful owners. The noble Baroness, Lady Wheatcroft, talked about whether we could do more, as did other noble Lords. This represents an important step forward. Obviously, in the regulations we propose to make further expansion of the scheme more flexible and, when that happens, the money will of course increase.
I listened intently to the noble Lord, Lord Triesman, talking about social housing and was writing down all the good things that Big Society Capital had done—but of course that was exactly where he was going with his comments. However, it is also important to recognise the multiplier effect that some of these specialist distribution organisations have had and the additional funds that they have brought into areas such as social housing, where the market is now I think over £800 million. I absolutely agree with him about the potential for both impact investment and impact philanthropy.
My noble friend Lord Bellingham also talked about the greater potential both to reunite people with their assets and to release money for good causes. I reiterate the point that the Bill includes the principles not just of reuniting but of full restitution.
The noble Lord, Lord Blunkett, and my noble friends Lady Sater and Lord Taylor of Holbeach asked about increased efforts in relation to tracing, verification and reunification. The requirement to make efforts to trace, verify and reunite the owner with their asset before transfer is set out in the agency agreements between current participants and the authorised reclaim fund, and that will be mirrored in future. However, the Bill strengthens that position by ensuring that the reclaim fund can accept transfers from a participant only if it has made satisfactory contractual or other arrangements with it.
A newspaper—not my noble friend Lady Fleet’s former employer but another—has a supplement called How to Spend It, and here we come to the “How to spend it” section of the debate. It is absolutely right that we should bring this focus if we are to expand the scheme and review where those funds can be spent. We have had such a rich and knowledgeable debate, and I thank in particular my noble friend Lord Bates, the noble Baroness, Lady Lister of Burtersett, the noble Earl, Lord Devon, and my noble friend Lady Eaton for their contributions here. During the consultation on expanding the scheme, we received multiple calls to change the current restrictions. There was some concern from a number of your Lordships about the restrictions in Section 18 coming to an end and there being a gap before the new restrictions would apply. That is not correct; they will apply until a new order has been made.
There was a lot of discussion about the additionality principle. This is set out in paragraph 9 of Schedule 3 to the 2008 Act and remains unchanged. There was perhaps a misunderstanding on the part of the noble Baroness, Lady Barker, reiterated by the noble Baroness, Lady Kramer, in suggesting that there had been a breach of that principle in the last year. There was absolutely no breach. I am not quite sure where that idea comes from, but it is not correct. The additional £150 million that was given to the dormant asset distribution organisations came from dormant assets themselves. Their mission was absolutely as set out in the legislation. There was no government interference whatever.
The noble Earl, Lord Devon, commented on the valuable role played by social enterprises. I share his support for that sector, with which I engage very regularly. The Act does not currently specify social enterprises as particular beneficiaries of the funds; rather, they will often deliver in the social and environmental areas which are the funds’ focus. Since that broad area of focus will stay unchanged—the restrictions may change beneath it—we would very much expect them to continue to be part of the ecosystem.
There were a number of questions about the consultation, particularly from the noble Baroness, Lady Lister. The position was made clear in the press pack, which noble Lords may be forgiven for not having read. It is absolutely in the public domain that we have committed to a full public consultation with all the groups that the noble Baroness talked about. Regarding the comments made by the noble Baroness, Lady Bennett, it is important to remember that dormant asset funding is entirely dependent on industry participants who voluntarily transfer into the scheme, as well as the general public’s trust in it. It is therefore very important that we listen to those groups as well as the others that were cited.
The noble Lord, Lord Davies of Brixton, asked about capital versus revenue funding. To clarify, it is up to the distribution organisations to decide what they want to make grants to; the Government do not interfere as to whether it is capital or revenue. They will use their expertise to find the best way to have a positive impact on the issues they are seeking to address. On the points raised by my noble friends Lord Patten, Lord Polak, Lord Bellingham and other noble Lords, the distribution to small organisations already happens through those four distribution organisations.
I turn to the expansion of the scheme. My noble friend Lord Patten asked about industry participation and support for the scheme. There has been very strong interest from industry in participating in the expanded scheme. It has, in the nicest possible way, been nudging us along very politely and it backs the swift progression of the Bill. We are continuing to work closely with the dormant assets expansion board, as well as the Reclaim Fund, trade bodies and regulators, as we prepare to operationalise the expanded scheme.
There were a number of specific questions about additional types of assets, including online investment platforms, raised by my noble friend. I will respond in writing to these, including on the proceeds of crime, raised by the noble Lord, Lord Bassam, and gambling proceeds, raised by the noble Baroness, Lady Kramer.
The noble Baroness, Lady Bowles of Berkhamsted, the noble Lord, Lord Davies of Brixton, and others asked about the relationship between the scheme and the pensions dashboard. The consultation cited ongoing changes in the pensions landscape, including the introduction of the dashboard, as needing “time to fully develop”. Many responses asserted that the dashboards would interact positively with the scheme. Both initiatives have the primary aim of reuniting owners with their assets, and the dashboards will make it even more likely that only genuinely dormant pension products that will not be reclaimed will be transferred to the scheme.
The noble Baroness, Lady Bowles, also asked about safeguards against perverse incentives. Legislation may indeed incentivise firms to change their terms in order to participate, but the Bill tightly prescribes the circumstances in which an asset is eligible, including dormancy definitions and reclaim values. If the terms of an asset align with these, it is obviously appropriate for it to be in scope.
My noble friend Lady Noakes asked about dormant national savings accounts. She may be aware that money invested in National Savings and Investment products is passed directly to the Exchequer and used to fund public services, which means that any unclaimed balances are already being used for public benefit. There is also the My Lost Account scheme, which seeks to reunite customers with their money and premium bond winnings. In the past 20 years, £840 million has been reunited in that way.
My noble friend Lord Hodgson of Astley Abbotts asked about the inclusion of shares and dividends. The Government have been engaging with the sector on plans to include them since 2018. More recently, share registrars have joined forces to think about how they will work with companies to operationalise the scheme, which includes thinking about what kind of register would be needed to ensure full restitution.
I turn to the Reclaim Fund and focus on the reserves policy, raised by my noble friend Lady Noakes, the noble Baroness, Lady Bowles, and the noble Lord, Lord Bassam. I absolutely share your Lordships’ wish to see more money distributed. As your Lordships are aware, the Reclaim Fund is legally obliged to retain a portion of the funds that it receives to repay owners. That portion has been declining over time: initially, 60% of assets were reserved, but that has now reduced to 40%. In relation to the point of the noble Baroness, Lady Bowles, that explains the bumper year in 2019, when there was a large release of assets because of a reduction in the reserving policy, which allowed the establishment of Fair4All Finance and the Youth Futures Foundation.
We expect the approach to reserves to evolve over time. It remains the responsibility of the Reclaim Fund to set the reserves at the right level. My noble friend Lady Noakes asked about whether the guarantee from the Treasury affects this. There is a balance to be struck here, but the principle of additionality and separation of the assets means that the current structure is sound.
I turn to the issues of secondary legislation raised by my noble friend Lord Hodgson and the noble Baronesses, Lady Barker, Lady Kramer and Lady Bennett. We have kept the provisions and the number of delegated powers in the Bill to a minimum and have only included those powers that are necessary for a successful operation of an expanded scheme. Where it is possible and practical, we have implemented future changes in the Bill. However, in a way, the answer to the question from the noble Lord, Lord Bassam, about timing and why it has taken such a long time to get to this point lies in the need for secondary legislation to make this more flexible. It has been about five years since the industry started to encourage us to expand the asset classe,s and obviously through the consultation recently, we heard the calls for more flexibility in deployment of those assets. The secondary legislation will give us that flexibility.
I have appreciated enormously the tone of a generous but critical friend in this debate and I look forward very much to working with your Lordships as we pass this important piece of legislation. I am also able to put my noble friend Lord Hodgson out of his suspense as I look forward to introducing the Charities Bill. With that, I beg to move.
Dormant Assets Bill [HL]
Monday 21st June 2021
(3 years, 5 months ago)
Grand CommitteeRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 3-II(Rev) Revised second marshalled list for Grand Committee - (21 Jun 2021)
Baroness Barran
“(3A) In subsection (3)(a) “amount owing” includes an amount available to be paid as benefits under a personal pension scheme (see section 6(1)(c) and (3)).”Member’s explanatory statement
This would ensure that the overview of the dormant assets scheme in Clause 1 reflects Clause 6, which covers amounts available to be paid as pension benefits even though the owner has not made an election as to how the benefits are to be received.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, on 14 June I tabled minor and technical amendments to the Bill, which are needed to ensure that it works properly. These included changes for clarity and consistency, and updates to references and consequential amendments. I set these amendments out in my letter to your Lordships on the same day.
The changes, for clarity, can be grouped into three categories. The first group includes Amendments 1, 2, 3, 5, 21, 22, 23, 24, 28, 29, 30, 31, 42 and 46. These amendments clarify that amounts owing or payable to a person include those which are not immediately owing or payable until some action is taken. The second group includes Amendments 16 to 20, as well as Amendments 75 and 77. These amendments clarify that orphan moneys would arise in the context of a sub-fund of an umbrella structure. This is because an umbrella structure is effectively a shell structure, and it is the sub-fund of it that would be authorised under the Financial Services and Markets Act. The third group includes Amendments 7, 8, 9, 13, 14, 15, 25, 26, 27, 33, 35, 36 and 44. These amendments clarify that lifetime ISA provisions apply in the context of access restrictions and to client moneys; in other words, restrictions on assets held within lifetime ISAs apply when their transfer to the Reclaim Fund Ltd would trigger a withdrawal charge payable to HMRC. With that, I beg to move.
Lord Davies of Brixton (Lab)
My Lords, I was going to crave the indulgence of the Grand Committee in trying to hang on to my fast-disappearing status as a new, inexperienced Member: I wanted to provide an opportunity for a debate on Clause 1, on the overview of the scheme, and I was going to do that by stand part or by putting down an amendment—but I got the timetable wrong and I failed to do so. However, other people have come to my aid, in that there will be sufficient opportunities later in the Bill’s progress to raise the issues that I would have raised here had I got my act together.
I will mention the main issues that I have in mind. Of course, I mentioned them at Second Reading, but the ability to repeat points seems to be one of the great assets of this process that we go through. The first issue that I will come back to at an appropriate time is the whole structure that leads to this situation. We can have a lot of discussion about the process of the dormant assets scheme, but we need to address the question of why dormant assets appear in the first place. It would be wrong to have a full debate on the scheme without at least reflecting, to some extent, on that issue.
In the government consultation and in preceding debates that led to the Bill there has been a lot of discussion by various people about what the financial institutions are doing to make sure that this issue does not arise. In general terms, there has been a lot of discussion of that issue—well, perhaps not a lot—but I am not sure that it really gets anywhere. Everyone expresses intentions, but how detailed the planning is to avoid it happening is a separate issue.
However, I think there is a stage before that. Why do we have a structure that leads to this sort of end result? The fact that this can happen is something that bears investigation—not just because it has happened but what we can do about it—as does the extent to which the financial institutions seem, in one way or another, to try to shift the blame to individuals. There are questions about what we can we do so that it does not happen in the first place, and I will come back to that at a later stage, possibly this afternoon—and I will try not to repeat myself too much.
The other issue is additionality. There has not been nearly enough discussion of what exactly is meant by additionality; there is no clear structure as to how it is defined. I will take the opportunity at a later stage to raise and discuss that issue as well. So I am really just putting these issues on the table and saying that, at the appropriate time, I will raise them at a later stage of the process.
Since I am here and speaking, I will ask something. The Bill was published effectively only a few days ago, yet we end up with this extensive raft of minor technical amendments, which makes the job of understanding what the Bill is doing extremely difficult—twice or three times as difficult. The grid that we have been supplied with for today’s session is extremely useful, but getting it only an hour before the meeting reduces its value. If I had been quick, I would have ticked off which amendments fall into which of the groups that the Minister has identified. It would have been helpful if we had had it earlier and the different groups had been identified on that list. Perhaps we could have that in arrears, as it were.
Baroness Kramer (LD)
My Lords, I will be exceedingly brief. As the Minister has said, these are highly technical amendments. Like the noble Lord, Lord Davies, I am frustrated by so many amendments of a highly technical nature and confess that I have been unable to spend the time to get on top of the impact of those changes. I am therefore wholly reliant on the Government’s definition of them. Even my noble friend Lady Bowles was floored by this number coming at this point. I hope for assurance from the Minister that we are done with these technical changes. This truly is an unusual number for a Bill that everyone has been aware is coming for some time. On additionality, which the noble Lord, Lord Davies, referred to, and which I agree is exceedingly important, I have an amendment tabled for Wednesday which tackles that issue. I hope that he will have some input.
I wish to talk about the various amendments to Clause 3 relating to lifetime ISAs, which, in effect, can go into the scheme only if their transfer to a reclaim fund does not trigger a charge payable to HMRC. I am slightly taken aback. HMRC would not be getting its tax payments until the point of reclaim under normal circumstances, so by allowing the assets to go into the dormant assets scheme it loses nothing, not even the timing of the payment of tax charges, because without the reclaim there would be no tax due, as far as I can tell. That strikes me as extraordinary. Why on earth can these assets not be put into the dormant assets scheme? The tax relationship would probably need amending but that is surely not beyond HMRC’s scope. Surely we could ensure that the taxable event happened only at the point of reclaim, as it does right now, meaning there was a bigger pool available for very good causes. Can the Minister give us an idea of what kind of money we are talking about? How much is being denied to the fund because of this constraint that an event which is taxable under today’s legislation is not being amended to make it clear that it is taxable on reclaim, not on transfer to the fund?
I am getting a bit fed up with HMRC. Time and again we get its very narrow focus on tax revenue generation and very little interest in some of the consequences and external impacts of its actions. We have seen it on things such as the loan change, although this is an entirely different issue. Surely it has some responsibility to ensure that the dormant asset programme is as effective and generous as it can possibly be, and therefore making the effort to sit down and draft the various clauses that would in no way deteriorate its current or its proposed tax position, but would allow those assets to be transferred, is a reasonable expectation. I simply do not understand it.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
Lord Bassam of Brighton? I think he may have muted his equipment. Can he unmute?
Lord Bassam of Brighton (Lab) [V]
My Lords, I apologise. I apologise doubly for being late and for failing to unmute.
I missed the Minister’s explanation as she introduced this group, but a few points occur to me. There are some 20-plus issues tied up in these technical amendments and clarifications. That is a lot and, while I am very grateful for the text explaining them, there are some fairly substantial issues here. My attention was drawn to government Amendment 17, which applies a new clause in the case of a wound-up unit trust scheme or a terminated sub-fund of an umbrella unit trust scheme. It sounds awfully complex, actually; it may well be technical, but I do not fully understand exactly what lies behind the wording.
Baroness Barran (Con)
My Lords, I start by thanking noble Lords for their interventions. Like the noble Lord, Lord Davies of Brixton, I still feel like a newbie here, so I hope on that basis that we will both be given a little leeway.
I think that the central point of all of your Lordships’ comments was about the number of technical amendments, and a request for greater clarification—particularly, in the case of the noble Baroness, Lady Kramer, in relation to lifetime ISAs. I will say three things in that regard. The first, as I said in my letter of 14 June, is that in no way do these amendments change the policy intent of the Bill. In some ways this Bill is not complicated, but in other ways it cuts across a number of policy areas, and that is apparent in the number of government amendments.
The second point on which the noble Lord, Lord Bassam, asked for reassurance was that we would not be having another slew of government amendments on Report. I cannot that there will not be any more: I think there may be a very small number—but it will be a very small number. Thirdly, I undertake to write to your Lordships between now and Report and address in a bit more detail the impact of these amendments.
Baroness Barran
Member’s explanatory statement
This would ensure that the description of pension assets in Clause 1(5)(c) includes the right to elect how to receive pension benefits.
Member’s explanatory statement
This would remove words in the description of client money assets in Clause 1(5)(e) that are unnecessary in the light of the government amendment at page 2, line 45 and consequential changes proposed to be made by the government amendments to Clause 12.
Lord Bassam of Brighton
“(5A) Additional assets may be added to the scheme using powers under section 19, including where this is recommended by a report laid under section (Requirement to review the operation of the dormant assets scheme).”Member’s explanatory statement
This amendment makes clear that the list of assets in Clause 1(5) may not be exhaustive, given the existence of the Clause 19 power and the Government’s commitment to keep included asset classes under review.
Lord Bassam of Brighton (Lab) [V]
My Lords, this amendment is grouped with others that will have a similar effect, which is to secure reports on the operation of the dormant assets scheme. I think that we are all fishing in the same pool here. We all want the same thing and it is always nice to be able to agree with colleagues across the piece on something such as this.
We need periodic reviews. My amendment seeks to have the first periodic review after two years and subsequent reviews every five years thereafter, and I think that there is a degree of consensus that that is desirable. Why do we want to do that? Well, clearly, it makes sense; we need to know what other dormant assets can be released into the fund and how they are consulted on when they are brought forward. We also need to ensure that mechanisms work properly and that any new additions are sufficiently worked out. That is the purpose behind the amendment.
We also need to know why other fund that are dormant are not being released—in particular, I guess, some of the pension funds. I know that concern was expressed about that at Second Reading, because many of us see dormant pension funds as having a lot of potential. I know that the Government said that the dashboard was not yet ready or bedded in, but we could use periodic reviews to ensure that we are regularly updated on this.
So, very simply, that is my introduction to this amendment. I am sure that there will be a degree of consensus in the Committee on this issue, and I hope that the Minister can be positive about it and that, between now and Report, between us we can fashion amendments to the Bill that give expression to that consensus and that the Government can be happy with as well. I am more than happy to talk to other colleagues about this, so that we get it right, because ensuring that we have regular and periodic reviews is important, as it will build up trust in the legislation and across the sector that will benefit from this. I beg to move.
Lord Davies of Brixton (Lab)
My Lords, I really do not have anything extra to add to my noble friend Lord Bassam’s comments. The proposed clause is about a review of the functionality of the scheme, so it does not really get to the issues that I referred to earlier, so I think that I will leave it there. I am happy to support the amendment.
Lord Etherton (CB)
My Lords, I shall address Amendment 62. Like other amendments in this group, especially those of the noble Lord, Lord Bassam of Brighton, and the joint amendment of the noble Baronesses, Lady Bowles of Berkhamsted and Lady Kramer, Amendment 62 provides for a general review of the dormant assets scheme. Some of the other amendments are framed in rather narrower terms—for example, a review of whether further assets should be added—but I am looking at the issue of a general review in Amendment 62, as do the other amendments that I have referred to.
As a matter of principle and policy, the desirability of a review has already been recognised and provided for in Section 14 of the 2008 Act. Section 14(1)(a) provided:
“The Treasury shall carry out a review of … the operation of this Part”.
Section 14 is necessarily limited to the assets specified in the 2008 Act; it does not extend to any additional dormant assets subsequently added to the scheme under the Bill. But I would suggest that, by parity of reason and policy, there should be a provision in the Bill for a review of the scheme as enlarged by the Bill—or indeed if there are any further assets in the future to be transferred.
Now, I confess that I have made a mistake—a technical mistake, I suppose it could be called—in my amendment, in that the review under Section 14 of the 2008 Act was to be completed
“within three years from the date when a reclaim fund is first authorised.”
I have not seen that review, but I assume that it was duly conducted. Technically, therefore, I suppose, the section is spent. That is, presumably, why it is not repealed.
It would be possible, and quite easy, to extend Section 14 of the 2008 Act to Part 1, which is what I suggest by my amendment, just by extending the date for completion of the review specified in Section 14. I failed to deal with that in my proposed amendment but, having considered the other proposed amendments in this group, I agree that it would be better for there to be an initial review, as there was in Section 14, and then periodic reviews.
As the noble Lord, Lord Bassam of Brighton, said, there is minimal disagreement between people about what the time period should be. Some have suggested that there should be a general review within two years or three years and then periodic reviews thereafter every five years or three years. My alteration is minimalist because Section 14 provided for only one review, not periodic reviews, so that, if we were to extend the date for the review, as I said would be possible, there would be only one review. It seems sensible that there should be periodic reviews, whatever the period is, and I do not feel it is necessary for me today to specify whether I think it should be three, four or five years.
There is a difference between all the amendments proposed in this group about what is specially to be included in any review. The amendments I have mentioned provide for a general review and then the provisions go on to say, “bearing mind specifically x, y and z”. Section 14 of the 2008 Act is rather narrow, but it covers the identification of transferor banks and building societies.
Amendment 45, tabled by the noble Baroness, Lady Noakes, would determine whether additional assets can be covered by the scheme. I suggest, with respect, that that is too narrow. The noble Lord, Lord Bassam of Brighton, specifically addresses that purpose and the extent to which new dormant assets since the last review have contributed to meeting the underlying policy objectives. That is wider than Section 14 and is quite a wide objective. The amendment tabled by the noble Baronesses, Lady Bowles of Berkhamsted and Lady Kramer, addresses wider issues and has a structure similar to Section 14 of the 2008 Act.
I suppose this is in a sense taking up a comment made by the noble Lord, Lord Davies of Brixton. My amendment is directed in terms of mentioning certain matters that must be specifically included in the general review. It is looking at identifying where these various assets have come from, where they have gone to and what has happened to them. We need to understand that in order to see why there are dormant assets. It is quite an important process to go through to identify how many there are and what proportion of them have come from, for example, banks, pension funds, ISAs or whatever it may be, and then we want to know why. If, for example, the information reveals a great disparity between where the assets have come from, that would raise a question that is worth investigating, and then we can go down the route that the noble Lord, Lord Davies, suggested and ask why this category produces so many dormant assets. I have also said that one should identify what has been spent in relation to each category of person and activity and what assets have been successfully claimed.
In subsections (2)(a) and (2)(b) of my proposed new clause, I have sought to get together enough information to understand whether we can learn something about why there are these dominant assets so that Parliament can identify whether some policy is being pursued that is not explicitly apparent in the way that the asset is applied. Having fully admitted that my own amendment is, to the extent I have mentioned, defective—I also think it is too narrow now—I certainly support the suggestion of the noble Lord, Lord Bassam of Brighton, that, together, surely we ought to be able to arrive at a consensus as to what should be covered.
Baroness Barker (LD)
My Lords, following our Second Reading, I went away and reflected on the way in which the Bill has been received and debated in your Lordships’ House. It would be fair to say that noble Lords as a whole wish to be supportive of the Government in what they are trying to do in the Bill. However, from a number of different perspectives, we all have questions about the effectiveness and efficiency of this method of doing things.
In particular, I tabled my Amendment 63 to make the point that nowhere in this Bill, or in its predecessor, is there an explicit statement about what these assets are supposed to be used to achieve. If we do not know what the objectives are, it is difficult to measure either the effectiveness or the efficiency with which the vehicle that has been constructed is doing that. It therefore seems that we as a House have an obligation to look at the reporting mechanisms that already exist. There are many of them in different places. They are all bits and pieces that you have to go and look at in, for example, the National Lottery Community Fund reports or the Reclaim Fund Ltd reports. Much of the detail of income and expenditure is in those reports, but there is very little in any of them on what has happened in terms of the impact.
My understanding is that the fund exists to use dormant assets not just because they happen to be there but for specific purposes of financial inclusion and developing financial literacy, particularly within poorer communities. That is what I really want us to try to have. When the Minister introduced the Bill at Second Reading, I was very struck when she said to us that the main impetus behind it coming to us was from the financial services industry, which wishes to see more dormant assets being used. That is fine—I absolutely agree with that—but to what end, and is the expenditure on this being done properly?
Noble Lords have to understand that the charitable sector is in a seriously bad way. A year ago, the Government asked the charitable sector what it thought the impact of Covid would be. In the initial lockdown, it thought that it would lose £4 billion. We have been through three lockdowns since that one. The government funds released to the sector in response to that figure of £4 billion were £750 million, of which £150 million came from bringing forward some of the dormant assets referred to in the Bill. The whole of the charitable sector is going to experience severe problems. It is every part of it, from Cancer Research UK already having to delay some of its projected work for the next five years through to the small neighbourhood organisations.
It is therefore extremely important that these assets be used for the express purpose for which they have been given and used as effectively as possible. We must also be able to work out from all the reporting that we do get to see that the principle of additionality is being adhered to: that these are funds for a specific reason, and that they are largely treated as one-off and not as ongoing revenue, particularly when government comes to talk about its overall response to the charitable sector.
My amendment was in part a nod to the Public Accounts Committee’s report of 9 June, in which it came up with its analysis of the Government’s response to the charitable sector and Covid. I understand that that report relates not just to the £150 million of dormant assets funding but to the £750 million. Nevertheless, the PAC raised significant questions in it, not least about the National Lottery Community Fund being able to provide sufficient data about what is happening with the distribution of some of its funds to poorer communities. Similarly, the report raised questions with the Charity Commission and the Government about the ongoing viability of charities, which are sometimes involved in quite essential charitable work.
For all those reasons, I came up with my amendment. I am agnostic on the length of time to be taken. I do not think that, for a programme of this kind, it is worth doing reports of anything under three years, because I do not think that you can generate significant data in fewer than three years, but we should have reports that are something more than a succession of different sets of accounts and annual statements for the different bodies responsible for the collection or the distribution of money, and we should look at whether this will continue to be the best way to deal with this issue. That is my amendment.
Lord Hodgson of Astley Abbotts (Con)
My Lords, the noble Baroness, Lady Barker, made a very important point about impact. I will come back to it in a moment in my remarks.
In the first instance, we heard from the noble Lord, Lord Bassam of Brighton, and the noble and learned Lord, Lord Etherton, about the timing of reviews to look at whether the structure is working effectively now and will work effectively at some date in the future. I want to probe the Minister a little further about the situation now and the current operation of the system. Specifically, I want to ask her whether the Government think that the existing powers to investigate, measure and check are sufficient.
As I understand it—I stand to be corrected—under the present system, money from the fund is passed to recipient bodies or recipient groups by what are called distributors, which have clear responsibilities to decide which bodies are worthy of funding and should get the money, and, after the funds have been passed over, to ensure that the proceeds are spent properly, effectively and in accordance with the way envisaged at the time of the grant. Again, as I understand it, there are currently four distributors: Big Society Capital, Access, Fair4All Finance and the Youth Futures Foundation.
The work of these four distributors is overseen by the Oversight Trust, which has no power to determine where the money goes but is charged with ensuring that the distributors have effective procedures in place to ensure good governance and proper performance of their duties. Clearly, the Oversight Trust has a very important role to play in maintaining public trust and confidence in the dormant assets scheme.
Can my noble friend enlighten me on three points? First, can a new distributor be appointed or dis-appointed? Who decides that and initiates it? If a decision is made to go ahead, what powers, if any, does the Oversight Trust, which is responsible for monitoring that body, have in making that final decision? That is my first question: can we remove or add distributors? How do we do it? What role does the Oversight Trust have in that process?
Secondly, and more generally, are the Government satisfied that the Oversight Trust has the powers necessary to fulfil this important role? For example, are distributors required or obliged to collaborate and co-operate with the Oversight Trust to ensure that it performs its duties effectively?
Thirdly—this point was made by the noble Baroness, Lady Barker—what role, if any, does the Oversight Trust have in measuring the impact of what the distributors are doing? Do we look in any way at whether the distribution policy being followed by one of the four groups now in power to do this makes sense for our society, or are they free as a bird? It would be helpful if the Minister could say a little about that.
Finally, it must be of importance, as we begin to see the expansion of the whole scheme—I think every Member of your Lordships’ House thinks that it is a good idea in principle; I certainly do—to ensure that the governance structure is adequate for the increased responsibilities that will be placed on it. I hope that my noble friend the Minister will be able to reassure me on these points when she replies to the debate.
Baroness Noakes (Con)
My Lords, Amendment 45 in this group is in my name. As has already been pointed out, it differs from the other amendments in the group, which call for reports, as it is a targeted amendment focused on ensuring that the scope for new asset classes being added to the dormant assets arrangements under the Bill is kept under review. The other amendments are broader and seek reports on the impact and operation of the scheme. I do not support littering legislation with reports on the impact of Bills—that is what the post-legislative scrutiny process is for—so I do not support the other amendments in the group.
I was going to point out to the noble and learned Lord, Lord Etherton, that his amendment is ineffective because Clause 31 deletes Section 14 from the 2008 Act, but he got there first. I would just explain that Section 14 was put in in the very specific context of the first Bill, the then Dormant Bank and Building Society Accounts Bill. At the time, there was considerable controversy about whether a voluntary scheme would work. There was much scepticism about whether banks and building societies would yield their assets, which is why that specific reporting section was put into the 2008 Act. It reported within a few years. It has been some time since I looked at that report but, broadly, it concluded that it had been effective. Not absolutely every bank and building society is in the scheme but, in terms of value, substantially the whole amount are.
I focused my amendment on bringing in other asset classes because it took a long time for this Bill to come forward after the 2008 Act. It was 13 years before more asset classes appeared, which is just too long. Indeed, my noble friend the Minister admitted as such at Second Reading when she said that the industry had been “nudging”—a polite term—the Government to get on and get this Bill done. I do not think that we can necessarily rely on the Government to prioritise or be proactive about the source of new funds coming into dormant assets, which is why I suggested a periodic report specifically on asset classes to keep up that pressure.
When the Dormant Assets Commission, which was set up to be independent of government, reported about four years ago it identified a number of additional assets. It decided to concentrate on the financial services sector, but even within that it noted, as we discussed at Second Reading, that a number of sources of assets in the financial services sector have not yet been brought within the scheme’s scope. The report also outlined a long list of assets outside the financial services sector, ranging from Oyster cards—I was astonished to find that there are 42 million cards with a balance on that have not been used for more than a year—to a large amount of money in unclaimed gambling winnings, which I find surprising. There are also lots of balances on things such as telephone accounts and energy accounts. There are lots of forms of dormant assets hanging around; they ought not to be retained by the companies that hold them but ought to be released for the kind of good works that are fostered by this Bill and the 2008 Act.
I hope that one day the Treasury will be shamed into no longer being the only body keeping its dormant assets out of the scheme, in the form of National Savings & Investments accounts. I believe it amounts to something close to state larceny for the Treasury to insist that it can keep dormant National Savings & Investments money because it has been used to fund public expenditure. It is not the Treasury’s money to keep. However, I acknowledge that shame is not something generally found in the Treasury, so we may have to wait a very long time to see those assets come within the scheme.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, it is quite useful to speak relatively late in this debate, because we have had a good flavour of the things that noble Lords are interested in. I agree with the noble Baroness, Lady Noakes, about additional assets, although I disagree with her in that I think there is room, as many other noble Lords have suggested, for a more general review clause. As has been suggested, between us perhaps we can find what shape that should have. There may also be a question over whether to load the review of potential new assets into that repeating review or to have separate reviews. That is something I have not yet resolved on in my own mind.
Amendment 65 in my name and that of my noble friend Lady Kramer concerns the report to Parliament, which is styled in the manner of a report from the Treasury and encompasses many of the features already discussed. It is obviously a probing amendment at this stage and covers a review of how the dormant assets scheme has worked, and then a review every three years.
It is probably too long not to have a review until three years from now. I almost want a review now, because an early review makes sense from the perspective of the point of transfer to Treasury responsibility and because there are now several years of experience of how the bank account side of things has progressed over time. That provides a datum against which to measure progression of other assets as they are brought in, and maybe to understand more about the differences as they emerge. I am sure that such monitoring has to be done anyway, but it is a matter of interest to Parliament. I therefore think it is reasonable to have the basis to interest Parliament with a review and to have a few more debates. I have not come across a debate on this before, though obviously I am much newer to this House than some other noble Lords.
I will highlight two specific things from my amendment. The first is the mention in proposed new subsection 1(b) of reviewing
“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.”
It now appears that there have been rather fewer claims on dormant assets than originally provided for—a matter we will return to in later amendments—but that does not explain what the various steps are and when they are taken.
I am curious about this from a recent personal experience when a bank used the notifier on a death certificate to locate the next of kin for one of my husband’s deceased brothers, but it was over 14 years after he died. The notifier had in fact moved, fortunately only once, and a letter eventually got to her and thence onward to my husband. I have absolutely no knowledge as to whether that is a typical time period before using such steps for tracing to take place, but it seems that the chance of success is much greater if tracing happens sooner and does not wait for when transfer to the dormant assets system is possible or imminent.
For pensions, of course, we are hoping that the pensions dashboard and other digital mechanisms will help keep people more attached to their money, but I am interested to know the point at which efforts are made, because it seems that it should not wait until that transfer point. It is thoughts such as that which lie behind seeking review of the effectiveness of efforts made by financial institutions. When things are done is as key to effectiveness as what has been done.
The second thing I want to highlight—it is really a collection rather than an individual point—are the issues in my subsection (2), in particular about the promptness of transfer of funds, their use and the value for money of the scheme. Again, as we will come on to in later amendments, there will have been caution over transfers at the start but by now there should be much more confidence about projections and risk assessments, and that should have flowed through to the efficiency and value for money of the scheme. It will also be important to follow what I would expect to be a similar kind of cautious and then maybe more aware progression for the new assets.
More generally, there seems to be a good case for review of all the matters that have been raised by the amendments in this group, and I hope that the Minister will note the interest in that and look favourably on an amendment on Report. If the Government were so inclined—as they seem to like amendments so far—to bring forward some more as a consequence of our discussion, maybe this is even something we could all work together on.
Baroness Kramer (LD)
My Lords, the amendments in this group touch on quite a wide range of topics. I hope it will be acceptable if I skim over them.
I want to start by picking up the issues raised by the noble Lord, Lord Bassam, and even more strongly in the amendment in the name of the noble Baroness, Lady Noakes, which stress the significance of—and make sure that there is capacity for—additional assets to be added to the scheme. The noble Baroness, Lady Noakes, summed up that particular set of problems exceedingly well. There is absolutely no reason why the Treasury should be sitting on a whole lot of dormant assets. In fact, there is no reason why anybody should be sitting on a whole lot of dormant assets.
I would like an answer to the question about lifetime ISAs that I raised in the first group. I have no idea of the size of the pool of lifetime ISAs that cannot be put into the dormant assets scheme because without amendment that would trigger a taxable event. It would be good to have clarity on whether these are tiny sums or rather big numbers; I fear it is the latter. This would be a good opportunity to put some pressure on the Treasury to sit down and write the two or three clauses needed to amend that particular set of problems.
At Second Reading I mentioned that the noble Lord, Lord Foster of Bath, was considering tabling some amendments which would expand the scheme to include dormant betting accounts. I need to tell the Committee that he has decided not to, for some fairly straightforward reasons. After discussion with the industry, it became clear that it would not agree to participate in the scheme, which is voluntary. This is because under the current arrangements those dormant accounts can be reclassified into the profit lines of the various companies in the industry. Of course, they then pay taxes on those profits and it does impact nominally on the size of their contribution to the voluntary levy they are involved in, but it is still a meaningful source of income for them. I know that there is going to be reform of the gambling industry; this strikes me as an excellent opportunity to deal with that problem, because surely this should not be money for a company’s bottom line—these are dormant accounts, and I think all of us across the Committee would far rather see them put to good use.
I want to pick up a couple of issues raised in Amendment 65 in the name of my noble friend Lady Bowles, to which I have also added my name—particularly the paragraph she discussed on
“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.”
As she said, the right moment for this is as soon as the accounts begin to look dormant, not 14 years later.
I note the memo from the insurance trade body, the ABI, which most of us have probably received. It said that
“a step change in reconnection efforts will only truly be achieved through the use of Government data, which can be used to verify customers’ addresses and would vastly improve industry’s tracing efforts.”
Can the Minister comment on that? If things could be done at government level to greatly enhance reclaim, that would be useful and a comfort to all of us as we become much more aggressive about making sure that more and more assets go into the dormant assets scheme.
I move to the points made by my noble friend Lady Barker on the impact of the dormant assets scheme. The noble Baroness, Lady Noakes, suggested that it is not something to review, but we have to recognise that this is not a straightforward area. Since we have mandated the scheme, we surely have a responsibility to know what happens with those dormant assets and exactly what they are achieving. I make a gentle point, noting the 9 June report of the Public Accounts Committee in the other place on the distribution of Covid support for charities, which says that it is
“unclear what influence special advisers had over some funding decisions, with some charities awarded government funding despite the Department’s officials initially scoring their bids in the lowest scoring category, including four out of the five lowest scoring applications.”
This suggests that identifying who should be a recipient is not straightforward. While we hope, of course, that we have chosen the right intermediaries, that they have processes in place and that the oversight is working, I believe that Parliament cannot walk away from this—so it is necessary that a report comes back to us covering this range of issues.
We will address additionality later but, if the Minister is concerned to explain constantly that the dormant assets scheme is entirely independent from the Government, she might want to look at the Government’s own website. I was going to quote it next week and had it in front of me just a moment ago. Anybody reading it would certainly assume that the Government were entirely in control, certainly of the £150 million from dormant assets that was used to support Covid. I have the text before me now. It says:
“The government has pledged £750 million to ensure VCSE can continue their vital work supporting the country … including £200 million for the Coronavirus Community Support Fund, along with an additional £150 million from dormant bank and building society accounts.”
To anybody reading that document, the Government have made clear that this is their decision, direction and influence. If that is not the case, it should not be written in that way; the Government cannot have it both ways. This may be independent and the money distributed on the basis set out in this legislation, but we are moving towards a situation in which the Secretary of State will be able to have a great deal of direct influence over where the money is distributed by changing the uses of the funds, et cetera. All of that brings us back to reporting for clarity, to make sure that everything is transparent—that strikes me as crucial.
I very much support all the measures here which, in various ways and in different clauses, call for proper review and transparency. Many of us coming to this for the first time have been quite shocked at how little anybody seems to know about a scheme that has been controlling £1 billion in assets and will be controlling several billion more in assets, and which surely will have a very significant impact for good, ill or indifference—so we really do need answers to all our questions.
Baroness Barran (Con)
My Lords, I thank your Lordships for your proposals on reviewing various aspects of the dormant assets scheme, and for raising the important issue of transparency. Like the noble Baroness, Lady Kramer, I will try to organise the amendments into different groups, because I believe that they cover three aspects of reporting. The first relates to regular reporting to Parliament on the operation of the scheme. The second relates to the role of reporting as a mechanism for encouraging further expansion of the asset classes that are eligible for inclusion in the scheme. The third relates to reporting in relation to the impact of the scheme.
On the first aspect, I turn to Amendments 61, 62 and 65, in the names of the noble Lord, Lord Bassam, the noble and learned Lord, Lord Etherton, and the noble Baronesses, Lady Bowles and Lady Kramer, which call for a regular government report on the scheme’s operations, including, for example, the amounts transferred into the scheme, by whom they were transferred, how they have been applied and the amounts reclaimed from RFL. I am grateful to your Lordships for raising these issues, and certainly agree on the importance of such transparency.
We believe that there are a number of mechanisms already in place for reporting on the scheme’s operations. Some of them are well established. For example, as the scheme administrator, RFL publishes annual reports that set out, among other metrics, the amounts it receives from participants and the value of reclaims. Other mechanisms have only recently been set up with RFL’s establishment as an arm’s-length body of the Treasury. For example, the Government will now be monitoring RFL’s delivery against the scheme’s objectives on a quarterly basis. In addition, the relevant Select Committee can always probe the working of the scheme at any point, and the Bill may be subject to post-legislative scrutiny, which takes place between three and five years after Royal Assent. In addition, starting in the current financial year, RFL will be audited by the Comptroller and Auditor-General, who will be able to report to the House of Commons the result of any value-for-money assessment it carries out. This will enhance Parliament’s oversight of RFL’s delivery of the scheme.
The noble and learned Lord, Lord Etherton, asked about the transposition of Section 14 from the original Act into this Bill. As he noted, the original Act required the Treasury to undertake a review of the legislation and lay it before Parliament within three years of the date that the reclaim fund was first authorised—and this review was indeed published in 2014.
I have tried to set out a number of the mechanisms that are now in place for reporting on the scheme’s operations, and we believe that these combined efforts do provide a greater level of transparency on the scheme’s operations and allow for flexibility in monitoring RFL’s delivery of the scheme as it works on the phased introduction and implementation of these new and more complex assets. By tightly prescribing the timing for carrying out such a review, an equivalent to Section 14 would, we believe, have a potentially limiting impact.
However, the basic principle that I have heard from your Lordships this afternoon is the importance of transparency and robust reporting—how much money, where is it coming from, what is the asset type, what is the purpose and what is the reclaim experience? We believe that all these points are covered, but we are anxious that your Lordships should agree that they are transparent and easy to access. So I am very happy to meet your Lordships ahead of Report to go through this in more detail and make sure that our understanding of the transparency that we believe the current reporting mechanisms offer indeed aligns with what your Lordships seek.
I will now turn to Amendments 4, 45 and 61, in the names of the noble Lord, Lord Bassam, and my noble friend Lady Noakes, relating to the role of reporting in encouraging further expansion of the scheme. Over the past five years, the Government and the reclaim fund have worked closely with industry on the scope and design of an expanded scheme, and I am extremely grateful for their hard work and dedication in helping to realise these very ambitious plans. While our industry stakeholders are keen to maintain momentum, they have consistently recommended a phased approach to expansion. This will allow participants to deepen their understanding of the scheme and to implement new processes progressively. This also enables RFL to build experience managing these new and more complex assets.
Decisions on which assets should be included in the future will depend on a number of factors, including identifying asset classes with high instances of dormancy and then setting the dormancy definitions for, and quantifying the value of, such assets. Consideration may also be given to whether other mechanisms for dealing with dormancy already exist and how these could interact with the scheme. Any further expansion will require the same close collaboration between the Government, the reclaim fund and industry, which has supported this phase of expansion.
The noble Lord, Lord Bassam, asked about the inclusion of additional asset classes, and my noble friend Lady Noakes strayed into the territory of state larceny—on which, obviously, I could not possibly comment. To be clear, at this stage the Government are not considering widening the net to include non-financial services assets. My noble friend talked about Oyster cards; the Bill contains a power to extend the scheme in future by way of regulations, and this obviously offers a more flexible avenue to reconsider whether some types of non-financial assets should be included in future. The noble Lord, Lord Bassam, also asked about the potential to expand to other forms of pension. Occupational pensions are excluded under the scheme as they are trust based, belonging to a fund or a group of investors rather than a specific identifiable individual. Only contract-based pension schemes are within the scope of the Bill.
To date, bringing new assets into the scheme has required primary legislation. As I just mentioned, Clause 19 provides a power to extend the scheme without need for this. In future it will be subject to the draft affirmative procedure, rightfully allowing Parliament the opportunity to scrutinise such regulations before they are made. It is natural that we will continue to review which assets may be suitable for further expansion. I will consider the best mechanism and timing to achieve this, taking into account the implementation of this phase and RFL’s quarterly reporting to the Government.
Further to this, the UK Government remain committed to engaging with the devolved Administrations on any legislative proposals or statutory changes that could have an impact on transferred or devolved matters of competence. This is in line with the principles set out in the devolution memorandum of understanding between the UK Government and the devolved Administrations. We will consult with the Northern Ireland Executive where the provision of any statutory instrument laid under Clause 19 will have an impact on transferred areas of competence in Northern Ireland—for example, the regulation of credit unions—with a view to obtaining mutual agreement on any approach before taking it forward.
Before I turn to Amendment 63 in the name of the noble Baroness, Lady Barker, I would like to make sure that we are on the same page about the £750 million and the £150 million. The £750 million was funding from the Treasury for the charitable sector, including social enterprises. The £150 million was in addition to that; it came from dormant assets and was distributed to the existing organisations.
Amendment 63 considers the impact of the scheme. I reiterate my thanks to the noble Baroness for placing emphasis on having transparency and clarity in reporting on this issue. If I followed her question correctly, she asked why this was not in the Bill. As she knows, this is something that we proposed putting into secondary legislation, with the purposes being specified through a public consultation.
As your Lordships know, the scheme provides long-term flexible funding that enables expert organisations to focus on creating positive and systemic change. It is essential that this funding has a positive impact by contributing to the social and environmental initiatives for which it is designed. The independent spend organisations are regularly reviewed by the Oversight Trust, which is their parent body, to examine their effectiveness in delivering against their objectives. They are also subject to standard annual reporting requirements.
My noble friend Lord Hodgson asked a number of specific questions about the role of the Oversight Trust. He will be aware that it was set up relatively recently in its current form. I will cite the example of Fair4All Finance, which was established in February 2019 following widespread consultation with almost 100 organisations, and I am sure that, had the Oversight Trust existed at that time, it would have been part of that. I do believe that it has the powers necessary to look at the impact of the different distribution organisations. As my noble friend knows, the issue of measuring impact in this area—attribution versus contribution and all the other complexities—is genuinely very difficult, but we are extremely encouraged by some of the early reports from the Oversight Trust on the way that it has approached that. I will briefly comment on that now.
As I mentioned, the independent spend organisations are regularly reviewed by the Oversight Trust on their effectiveness in delivering against their objectives—that happens every four years—and they are also subject to standard annual reporting requirements. The Oversight Trust’s review of Big Society Capital was published in 2020. It reported that Big Society Capital had made substantial progress in catalysing development of the UK social investment marketplace, which was one of its primary original objectives. For example, social property funds, which did not exist at all in 2012, are now worth more than £2 billion.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
I have received a request to speak after the Minister from the noble Lord, Lord Davies of Brixton.
Lord Davies of Brixton (Lab)
I naively had it in my mind when I spoke that I was speaking only to Amendment 4. I cannot come back on the substance of the amendments, but I have a couple of specific questions. First, in the formal consultation, and in the previous reviews, the Government said that they recognised
“the strong interest in the ways that funds can best be spent”,
even though it was outside the consultation, and that:
“Accordingly, we will consider whether this is an area that should be reviewed”—
in other words, other ways of spending the money. Is this what the Minister just referred to or is it a separate exercise that is being considered?
In the Second Reading debate, the Minister referred to the additionality principle in her introduction. She said:
“Money must fulfil the additionality principle, so it cannot be used as a substitute for central government funding.”—[Official Report, 26/5/21; cols. 1035.]
In response to the debate, she said:
“There was a lot of discussion about the additionality principle. This is set out in paragraph 9 of Schedule 3 to the 2008 Act and remains unchanged.”—[Official Report, 26/5/21; cols. 1084.]
Of course, I turned to the 2008 Act. It is far from explicitly set out; it is actually set out only at one remove. It refers to the need for the Big Lottery Fund to cover the issue in the annual report and to say how it complied with that requirement. It does not set out explicitly what is meant by additionality, so my second question is would it not be better to have a clear and specific definition of what is meant by additionality, given the emphasis the Government place on it as a pillar of the scheme?
Baroness Barran (Con)
I thank the noble Lord for his additional questions. He talked about other ways of spending the funds. I was talking about other causes; I am not sure whether we are using different words for the same thing. In the consultation that we are proposing, we will invite the public to name the issues they care about on which these funds should be used—the aim being to have that in secondary rather than primary legislation to make it a bit more flexible—as opposed to using different types of spend organisations. I was referring to the causes on which that will be spent.
I think that issues of additionality are likely to come up quite frequently, particularly on Wednesday, when we debate some of the other amendments. Perhaps we can take that issue in the round then, if the noble Lord is agreeable.
Lord Bassam of Brighton (Lab) [V]
My Lords, the noble Baroness, Lady Kramer, said it all, in the sense that this has been an extremely wide-ranging debate covering many topics, even though, as I said at the outset, we are fishing in the same pool here looking for a form of review. I thank the Minister for her very full, detailed and thorough response. I will have to read it carefully before deciding what to do about this subject area on Report.
I also thank her for the opportunity she has afforded us through her response of meeting and considering what other ways there may be to look at the impact of the dormant assets review and how we can best formulate it. I think she was inviting us to subscribe to an amendment that covers that point, but I am not sure yet. I look forward to having that discussion with her.
It is perhaps worth reflecting on comments that colleagues made. The noble Baroness, Lady Noakes, knows that I agree with her that there is not much point bringing forward amendments that lead to pointless reports unless those reports have an action at the end of them. That is why my amendment in particular calls for a review with the purpose of leading to something. That is why it is important that we have an early review. The noble Baroness, Lady Bowles, asked for a review now. “Now” may be in two years’ time after the Bill has passed—that would be about right—and periodic reviews thereafter.
The good thing about this legislation is that flexibility is brought into it. Although at the moment it is limited to financial products, in her response the Minister did not seem to rule out entirely that it might be extended to cover non-financial products. I liked the noble Baroness, Lady Noakes, looking at things such as Oyster cards, gambling winnings and utility accounts. At Second Reading I raised that assets from criminal activity might be brought into the scheme. That is perhaps going a bit far at this stage, but we are all looking at ways in which we can expand dormant assets so that they can be used for a broader social purpose.
The noble Lord, Lord Hodgson, was right to ask whether the powers are sufficient at the moment. I want to be confident that is right. As the Minister acknowledged, the Oversight Trust is very much in its early phase of development, though clearly it has done some important and valuable work so far.
The Minister said that transparency could be guaranteed through a number of routes: the RFL, Select Committees and post-legislative scrutiny. That is true—there is no doubt that those routes are available—but one of the reasons I am keen to see a review process built into the legislation is that we need to have that review in one place so that we can look across the piece in a more coherent and cohesive way, decide whether the dormant assets are having impact, determine whether there are other financial and non-financial assets that could be brought within its scope and see that there is a degree of transparency about the way in which the legislation is operating. That is why I am keen to see a review process.
The noble and learned Lord, Lord Etherton, made a good point about the need to look at the derivation and application of funds: where from and why? That is really part of the thinking behind my amendment and, I think, other amendments in this group.
We have had a very good discussion on this. It is an important part of the legislation. I welcome the Minister’s offer of some discussions and restate my intent to bring back an amendment that captures the best of the other amendments and brings them to bear on how we move forward in reviewing how this legislation works. I am grateful to everybody for their interest and support on this. I beg leave to withdraw my amendment.
Baroness Barran
“(9) In this Part—(a) any reference to an amount owing (or payable) to a person includes a reference to an amount which is not immediately payable to the person only because it is necessary for a request for payment to be made or for the person’s entitlement to payment to be verified, and(b) any reference to the right to payment of an amount owing (or payable) includes, in the case of an amount described in paragraph (a), the right to request payment of the amount.”Member’s explanatory statement
This would ensure that the provisions of Part 1 relating to transfers of dormant assets to an authorised reclaim fund cover not only cases where an amount is payable immediately (i.e. as a debt) but also cases where the person entitled to an amount needs to request payment, or that person’s entitlement needs to be verified, before the amount becomes payable immediately.
Member’s explanatory statement
This would correct an inconsistency between Clause 2(2)(a) and corresponding provisions elsewhere in Part 1, such as Clause 8(2)(a).
Lord Parkinson of Whitley Bay (Con)
My Lords, on 14 June the Minister tabled minor and technical amendments that, as she has explained to the Committee, are needed to ensure that the Bill works properly. These included changes for clarity and consistency and updates to references and consequential amendments. My noble friend set out these amendments, along with some further detail, in her letter to all noble Lords on the same date.
The changes relating to consistency can be grouped into two categories. The first, including Amendments 6, 10 and 12, seeks to ensure consistency of language in the insurance and pension transfer provisions. This includes a change of tense to align with other transfer provisions. These amendments would change references to a person to whom the benefits or proceeds
“were payable immediately before the transfer”
to a person to whom they are
“payable immediately before the transfer”.
The other change to the insurance and pension transfer provisions is to correct a minor terminological error in Clause 7(5)(c), which should refer to the “benefits” rather than the “proceeds”, aligning with the pension benefits mentioned in the opening words of Clause 7(5).
The second category, including Amendments 34 to 37, seeks to ensure consistency of language in references to shareholders. In particular, it would change references to the individual in whose name the share was “held” to the individual in whose name the share was “registered” so that there could be no doubt that the Bill refers to the same individual. I beg to move.
Baroness Kramer (LD)
I have nothing to add. I looked at the amendments and they all seem to make technical sense to me.
Lord Bassam of Brighton (Lab) [V]
My Lords, I have nothing to add except that government Amendment 12 is described as a “verbal error”. I am not quite sure that you can have a verbal error in a piece of written legislation; perhaps the Minister can help us with that one.
Lord Parkinson of Whitley Bay (Con)
I am grateful to the noble Baroness and the noble Lord for their support and brevity. As I said, these are minor amendments.
The noble Lord, Lord Bassam, alighted on “verbal”. I changed that word in my opening to this short debate to “terminological”; I hope he agrees that that is a bit clearer. Either way, I hope he sees that it is de minimis.
Baroness Barran
Member’s explanatory statement
This amendment is consequential on the government amendment at page 3, line 35.
Member’s explanatory statement
This amendment is consequential on the government amendment at page 3, line 35.
“(2A) Proceeds of a contract of long-term insurance held in a Lifetime ISA are excluded from subsection (1) if their transfer to an authorised reclaim fund would result in liability to pay a withdrawal charge to HMRC.”Member’s explanatory statement
This would secure that insurance proceeds held in a Lifetime ISA are excluded from “eligible insurance proceeds” only when their transfer to a reclaim fund would trigger liability to a withdrawal charge payable to HMRC.
Baroness Barran
Member’s explanatory statement
This would correct an inconsistency of expression between Clause 5(2)(a) and corresponding provisions elsewhere in Part 1, such as Clause 8(2)(a).
Member’s explanatory statement
This would correct two minor errors in Clause 7(3)(b)(ii). The reference to subsection (2)(a) is unnecessary and should be removed. And “a person” at the beginning is more accurate than “the person”, as there may be no person of the kind mentioned.
Lord Parkinson of Whitley Bay (Con)
My Lords, again, these amendments relate to the minor and technical amendments about which the Minister, my noble friend Lady Barran, wrote to your Lordships on 14 June.
Amendments 66 to 72 are consequential amendments to the schedules to other pieces of legislation. Amendment 66 would amend references in the Financial Services and Markets Act 2000 to an “authorised reclaim fund”; it would also amend the regulated activities order to ensure that it reflects the wider activities of a reclaim fund provided for by the Bill.
Amendments 67 to 71 would amend the Dormant Bank and Building Society Accounts Act 2008. Amendment 67 would ensure that the provisions made in Clause 17(1) of the Bill, on trust and fiduciary duties, apply to banking assets. Amendments 68 and 69 would clarify that the Reclaim Fund is to transfer money from unwanted assets to the National Lottery Community Fund while being able to retain the amount it needs to meet regulatory requirements or expenses. Amendment 70 would remove an unnecessary reference to the deduction of expenses from surplus funds. As these have already been identified as surplus and therefore available in full for transfer to good causes, no further deductions would be needed. Amendments 71 and 72 would ensure that the 2008 Act refers to all types of eligible pensions benefits.
The other amendments—Amendments 11, 32, 38 to 41, 43, 47 to 49, 73, 74 and 76—would ensure that cross-references to the Bill are correct. I beg to move.
Baroness Kramer (LD)
My Lords, I will again be brief but I went nearly mad trying to track some of these amendments through. I accept that they are consequential but I have one question. FSMA 2000, an Act with which I have spent far too much of my life, will—after these amendments—now use the phrase “unwanted asset money”. Are the Government comfortable that we do not have a problem with the word “unwanted”? There is a difference between dormant money and money that is unwanted. We all know that the reclaim process is critical but I want to be sure that we have not got ourselves into any tricky corners with all of that. That is my only comment; the intent is obviously consequential.
Lord Bassam of Brighton (Lab) [V]
My Lords, I too am broadly satisfied with this collection of amendments, although they raise some questions about the initial drafting. I made a point about that at the outset of this afternoon’s deliberations. I just wonder why we have to amend the definition of “third party” by government Amendment 47. Also, what is not right—this is in government Amendment 49—with the definition of “repayment claims” that requires amendment? Perhaps the Minister could help us with that.
Lord Parkinson of Whitley Bay (Con)
Again, I am grateful to the noble Lords for their support, particularly given the large number of amendments, albeit small ones. To answer the question of the noble Baroness, Lady Kramer, the use of “unwanted asset” is the intended terminology. “Unwanted” is different from “dormant”.
On the question raised by the noble Lord, Lord Bassam of Brighton, if he will forgive me, given the speed of progress on this group, it might be better if I make sure that I have understood it and write to him with a full answer so that he has that before Report. With that, I commend these amendments to the Committee.
Baroness Barran
Member’s explanatory statement
This would correct a minor verbal error in Clause 7(5)(c), which should refer to “the benefits” i.e. the pension benefits mentioned in the opening words of Clause 7(5).
Baroness Barran
Member’s explanatory statement
This amendment is consequential on the government amendment at page 8, line 30.
Member’s explanatory statement
This amendment is consequential on the government amendment at page 8, line 30.
“(3A) An amount held in a Lifetime ISA is excluded from subsection (3) if its transfer to an authorised reclaim fund would result in liability to pay a withdrawal charge to HMRC.”Member’s explanatory statement
This would secure that an amount held in a Lifetime ISA is excluded from “eligible amount owing by virtue of a collective investment” only when its transfer to a reclaim fund would trigger liability to a withdrawal charge payable to HMRC.
Member’s explanatory statement
This would amend Clause 9(5)(a) so that it applies in the case of a wound-up OEIC or sub-fund of an OEIC which is an “umbrella company”. The term “umbrella company sub-fund” is defined in the text proposed to be inserted by the government amendment leaving out paragraphs 9(6)(b) and (c) on page 9.
Member’s explanatory statement
This would amend Clause 9(5)(b) so that it applies in the case of a wound-up unit trust scheme or a terminated sub-fund of an umbrella unit trust scheme. The term “umbrella unit trust scheme sub-fund” is defined in the text proposed to be inserted by the government amendment leaving out paragraphs 9(6)(b) and (c) on page 9.
Member’s explanatory statement
This would amend Clause 9(5)(c) so that it applies in the case of a wound-up authorised contractual scheme or a terminated sub-fund of an umbrella co-ownership scheme. The term “umbrella co-ownership scheme sub-fund” is defined in the text proposed to be inserted by the government amendment leaving out paragraphs 9(6)(b) and (c) on page 9.
Member’s explanatory statement
The amendment would leave out words rendered redundant by text proposed to be inserted by the government amendment leaving out paragraphs 9(6)(b) and (c) on page 9.
“(b) “umbrella company sub-fund” means a separate part of the property of an umbrella company that is pooled separately;(c) “umbrella unit trust scheme sub-fund” means a separate part of the property of an umbrella unit trust that is pooled separately;(d) “umbrella co-ownership scheme sub-fund” means a separate part of the property of an umbrella co-ownership scheme that is pooled separately.”(7) In subsection (6)—“umbrella company” means an OEIC whose instrument of incorporation provides for pooling in relation to separate parts of the scheme property and whose shareholders are entitled to exchange rights in one part for rights in another;“umbrella co-ownership scheme” means an authorised contractual scheme whose contractual scheme deed provides for pooling in relation to separate parts of the scheme property and whose unitholders are entitled to exchange rights in one part for rights in another; and“umbrella unit trust scheme” means an authorised unit trust whose trust deed provides for pooling in relation to separate parts of the unit trust property and whose unitholders are entitled to exchange rights in one part for rights in another;and in this subsection and subsection (6) references to pooling are to such pooling as is mentioned in section 235(3)(a) of FSMA 2000 (collective investment schemes).”Member’s explanatory statement
This would define the terms “umbrella company sub-fund”, “umbrella unit trust scheme sub-fund” and “umbrella co-ownership scheme sub-fund”, as used in Clause 9(5).
Baroness Barran
Member’s explanatory statement
This is a drafting amendment to secure consistency of expression across Part 1 of the Bill in consequence of the proposed removal of subsection (3) of Clause 12 by the government amendment to page 11, line 14.
“(a) a person to whom the amount is payable immediately before the transfer ceases to have any right against any investment institution to payment of the amount, but”Member’s explanatory statement
This is a drafting amendment to secure consistency of expression across Part 1 of the Bill in consequence of the proposed removal of subsection (3) of Clause 12 by the government amendment to page 11, line 14.
Member’s explanatory statement
This amendment is consequential on the government amendment to leave out subsection (3) of Clause 12.
Member’s explanatory statement
This amendment, with the other government amendments to Clause 12, would remove references to a person entitled to direct the payment of an amount of dormant eligible client money and brings Clause 12 in line with other similar provisions in Part 1. Cases where payment of a dormant amount needs to be requested, or entitlement verified, before an amount becomes owing (or payable) to a person will be covered by the government amendment to Clause 1 proposed at page 2, line 45.
Member’s explanatory statement
This amendment is consequential on the government amendment at page 11, line 31.
“(5A) Client money held in a Lifetime ISA is excluded from subsection (5) if its transfer to an authorised reclaim fund would result in liability to pay a withdrawal charge to HMRC.”Member’s explanatory statement
This would exclude from “eligible client money” client money held in a Lifetime ISA at a time when its transfer to a reclaim fund would result in liability to pay a withdrawal charge to HMRC.
Member’s explanatory statement
This amendment is consequential on the government amendment at page 11, line 31.
Baroness Barran
Member’s explanatory statement
This amendment is consequential on the government amendment to leave out subsection (3) of Clause 12.
Member’s explanatory statement
This amendment is consequential on the government amendment to leave out subsection (3) of Clause 12.
Member’s explanatory statement
This amendment is consequential on the government amendment to leave out subsection (3) of Clause 12.
Baroness Barran
Member’s explanatory statement
This would correct an inconsistency of expression between Clause 14(2)(a) and corresponding provisions elsewhere in Part 1, such as Clause 8(2)(a).
Member’s explanatory statement
This would limit the scope of the definitions in Clause 14(3) to Clauses 14 to 16, as there are other references in the Bill to a share for which the Clause 14(3) definition is inapt.
Member’s explanatory statement
This amendment is consequential on the government amendment at page 13, line 4.
Baroness Barran
Member’s explanatory statement
This would make the language in Clause 15(1) consistent with Clause 14(1)(a).
Member’s explanatory statement
This amendment is consequential on the government amendment at page 13, line 4.
“(1A) An amount held in a Lifetime ISA is excluded from subsection (1) if its transfer to an authorised reclaim fund would result in liability to pay a withdrawal charge to HMRC.”Member’s explanatory statement
This would secure that an amount held in a Lifetime ISA is excluded from “eligible proceeds or distribution” only when its transfer to a reclaim fund would result in liability to pay a withdrawal charge to HMRC.
Baroness Barran
Member’s explanatory statement
This would make the language in Clause 16(3)(a) consistent with Clause 14(1)(a).
Baroness Barran
Member’s explanatory statement
This amendment, with the government amendments at lines 9, 11, 14, 17 and 19 on page 14, would ensure that Clause 17 refers to the correct provisions of Part 1.
Member’s explanatory statement
See the explanatory statement for the government amendment at page 14, line 4.
Member’s explanatory statement
See the explanatory statement for the government amendment at page 14, line 4.
Member’s explanatory statement
See the explanatory statement for the government amendment at page 14, line 4.
Member’s explanatory statement
This amendment would remove an unnecessary word in Clause 17(4) to ensure it applies correctly to a right to payment of the reclaim amount referred to in Clause 8(2)(b).
(5) In this section—“extinguishing provision” means section 2(2)(a), 5(2)(a) or (3)(a), 8(2)(a), 12(2)(a) or 14(2)(a);“right to payment provision” means section 2(2)(b), 5(2)(b) or (3)(b), 8(2)(b), 12(2)(b) or 14(2)(b); and“transfer provision” means section 2(1)(a), 5(1)(a), 8(1)(a), 12(1)(a) or 14(1)(a).”Member’s explanatory statement
See the explanatory statement for the government amendment at page 14, line 4.
Baroness Barran
““withdrawal charge payable to HMRC” means a charge payable under paragraph 8 of Schedule 1 to the Savings (Government Contributions) Act 2017.”Member’s explanatory statement
This would define “withdrawal charge payable to HMRC” by reference to the primary legislation governing Lifetime ISAs.
Baroness Barran
Member’s explanatory statement
This is a drafting amendment to secure greater consistency of expression in references to a person’s right to payment of a dormant amount owing.
Baroness Barran
Member’s explanatory statement
This would amend the definition of “third party” in Clause 22(2) so that it refers to claims arising by virtue of Clause 5(3)(b), as well as those arising by virtue of Clause 5(2)(b).
Baroness Barran
Member’s explanatory statement
This amendment would ensure that Clause 24(1) refers to claims arising by virtue of Clause 5(3)(b), as well as those arising by virtue of Clause 5(2)(b).
Baroness Barran
Member’s explanatory statement
This would amend the definition of “repayment claims” in Clause 25(3) so that it covers claims arising by virtue of Clause 5(3)(b), as well as those arising by virtue of Clause 5(2)(b).
The Deputy Chairman of Committees (Lord Haskel) (Lab)
My Lords, we now come to the group consisting of Amendment 50.
Amendment 50
Baroness Noakes
“Examination by Comptroller and Auditor General
(1) The Comptroller and Auditor General (“the Comptroller”) may carry out examinations into the economy, efficiency and effectiveness with which Reclaim Fund Ltd has used its resources in discharging its functions.(2) An examination under this section may be limited to such functions (however described) of Reclaim Fund Ltd as the Comptroller considers appropriate.(3) Before carrying out an examination under this section, the Comptroller must consult Reclaim Fund Ltd.(4) The Comptroller may report to the House of Commons the results of any examination carried out under this section.”
Baroness Noakes (Con)
My Lords, I thank the noble Baroness, Lady Bowles of Berkhamsted, for adding her name to the amendment.
At Second Reading, I asked the Government whether they would switch from using private sector auditors for Reclaim Fund Ltd to using the Comptroller and Auditor-General. I was disappointed that my noble friend the Minister did not reply to that when she wound up the debate; nor did she write to me following the debate. However, the Government’s Back-Benchers are well aware that they are generally not the priority of Ministers and I do not hold it against her.
At Second Reading, my primary focus was on switching the statutory audit arrangements. All limited liability companies, apart from very small ones, are required to be audited by statutory auditors. The Companies Act 2006 opened up the possibility, for the first time, of the appointment of the C&AG to companies in the public sector. That was in response to a report by Lord Sharman, who sadly has now retired from the Liberal Democrat Benches. I hope that my noble friend the Minister will explain what arrangements will be made for the statutory audit of Reclaim Fund Ltd, now that it is fully within the public sector. It has been audited by private sector auditors to date. I continue to believe that it should be audited by the C&AG.
Last week, I had a helpful meeting with my noble friend the Minister and her officials. They said that the audit would be carried out by the C&AG in future and that the power for this existed under the National Audit Act 1983. This left me a little confused because that Act does not deal with the statutory audit of companies incorporated under the Companies Act. I hope that my noble friend will be able to clarify the position today. In the first group, she referred to value-for-money auditing—I shall come to that in a moment—but she did not refer to statutory audit.
My reasons for shifting the financial audit of Reclaim Fund Ltd from private sector auditors were partly because it would be cheaper but mainly because the National Audit Office carries out value-for-money work, not just financial audits. I believe that there are strong grounds for believing that the activities of Reclaim Fund Ltd would benefit from a value-for-money audit. For example, I believe that the ultra-cautious approach to the investment of the huge funds that are retained within the company has not optimised the income of the company. It has offices in St James’s Square, which, I wager, is not the most cost-effective location. Every penny that is either spent unwisely or represents forgone income translates into less money flowing to the good causes that should be funded by the dormant assets.
This is why I have tabled an amendment for Committee that focuses on value-for-money audits alone. Value-for-money audits are a routine part of auditing in the public sector, and those bodies that are in the public sector but are not government departments usually have the C&AG specified as their auditor by statute. However, some, like Reclaim Fund Ltd, are not set up like this and value-for-money audits generally proceed on a voluntary basis. I assume that this will be the basis underpinning the upcoming VFM audits that my noble friend referred to earlier.
As there have been some difficulties in getting the NAO into some bodies in the past, it has been necessary from time to time to make statutory provision for this. However, these have generally been big beasts rather than a small company such as Reclaim Fund Ltd. My amendment is drafted on the basis of what is now Section 7D of the Bank of England Act 1998—inserted by the Bank of England and Financial Services Act 2016—which was necessary to get access for the C&AG to carry out value-for-money audits in the Bank of England. Obviously, it would be best if the C&AG did both financial and value-for-money audits on Reclaim Fund Ltd.
I very much look forward to hearing what my noble friend the Minister says. I beg to move.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, I added my name to this amendment because I support entirely the objective that has been so well outlined already by the noble Baroness, Lady Noakes. Like her, I share the view that both the statutory audit and the value-for-money audit should be provided for. I will defer to her superior knowledge in terms of which bodies tend to be routinely audited or where there is a degree of optionality, or, at least, life is made difficult so that you have to have something like Section 7D of the Bank of England Act 1998. I too had a meeting with colleagues and the Minister in which I believe it was said that the audit would be by the Comptroller and Auditor-General, but I am not sure now whether that is absolutely the case, given what the noble Baroness, Lady Noakes, has said.
It is very important that we have, for the record, a knowledge of exactly what is expected to happen and whether there is any optionality about it. If there is some kind of optionality, then it is necessary to have an amendment of the kind proposed by the noble Baroness, Lady Noakes. The record has to be clear as to what will happen. I am sure the Minister has all the best intentions, but it is obviously not quite such a clear-cut situation as we have been led to believe. If no fulsome response is available at this point in time, then it is absolutely necessary that we have the information about that well in advance of Report so that we can know whether there is still a need for the amendment.
Lord Davies of Brixton (Lab)
My Lords, I thank the noble Baroness for the amendment, which I support in principle. I am not saying this in jest, but I am always gravely suspicious of lists which involve alliteration, because you are left wondering whether the wish to have all the words starting with the letter E—economy, efficiency and effectiveness—overcomes the need to comprehensively describe what the audit should be doing. Where does “economy, efficiency and effectiveness” come from? Maybe it is a standard phrase which is well established and understood to be comprehensive, but reassurance on that would be helpful.
Baroness Kramer (LD)
My Lords, I very much support everything that has been said so far, and I hope that we will get some clarity. Value for money is critical when we are dealing with these kinds of organisations.
I decided I would take a quick look at the financials of Reclaim Fund Ltd—which does not take very long as they are not hugely detailed—and the number that knocked me over and made me very concerned that value for money was definitely on the agenda was the remuneration of the chief executive. They may be an absolutely stellar individual and I would not wish in any way to criticise the individual personally but, according to the numbers I was looking at, there are 12 employees of Reclaim Fund Ltd, one of whom is the chief executive himself, and the chair. The median CEO salary in 2019 at the largest 100 charities was £155,000 a year, but in 2020 the chief executive of Reclaim Fund Ltd earned £217,000, if I add up simply salary and performance-related pay and leave out the pensions stuff. It struck me as prima facie rather out of line. Making sure that there is an audit that takes value for money into account would certainly give us all much more confidence that these issues were being handled appropriately. I fully understand that, as the asset base expands, there will be more complexity, so maybe there is a changing situation. But the 2019 pay packet was similar and I want to make sure that the appropriate body is focused properly on these issues and that value for money sits right at the front of the audit responsibility.
Lord Bassam of Brighton (Lab) [V]
My Lords, it is always nice to be able to agree with the noble Baroness, Lady Noakes. We have crossed swords many times, but I very much share one thing in common with her, and that is a desire to have an absolutely laser focus on getting value for money. So I am very supportive of her amendment; it certainly goes to the right place. The noble Baroness, Lady Kramer, touched on the importance of that in drawing our attention to remuneration levels within Reclaim Fund Ltd.
We need to be assured that we are getting value for money. Getting the Comptroller and Auditor-General involved in looking at the Reclaim Fund Ltd is a valuable use of the time of that body, because we need to better understand how funds are being used and be reassured that the best possible value for money is being secured. After all, this is a very significant funding mechanism and we need to ensure that, as part of it, the Reclaim Fund Ltd operates to the best and highest of standards. My noble friend Lord Davies is right that we need to focus on issues such as efficiency and effectiveness of spend, so I am very supportive of the amendment moved by the noble Baroness, Lady Noakes.
Baroness Barran (Con)
My Lords, Amendment 50 seeks to provide a power for the Comptroller and Auditor-General, the C&AG, to examine the Reclaim Fund Ltd for its economy, efficiency and effectiveness in using its resources to carry out its functions—also known as a value-for-money assessment—and to lay the result of the examination before Parliament.
I will first address the question on RFL’s auditors that my noble friend Lady Noakes asked at Second Reading. As set out in the Government’s framework agreement with RFL, which has been published in the Libraries of both Houses, the C&AG will audit the company’s accounts. This will be possible because of the explicit agreement made between RFL and the Treasury for such an arrangement. I hope that my noble friend will feel that that is sufficiently clear.
I know that my noble friend was also anxious to confirm that both the value-for-money assessment and the audit would be carried out by the same body, so, to continue in that vein, the C&AG may also carry out value-for-money assessments of the Reclaim Fund Ltd in the way proposed in subsection (1) in my noble friend’s amendment. The C&AG can carry out value-for-money assessments of public bodies under the National Audit Act 1983. The Act enables the C&AG to carry out value-for-money assessments of a body if there is an agreement between the body and a Minister of the Crown that requires the body’s accounts to be examined and certified by the C&AG and that enables value-for-money assessments to take place. This is set out in Section 6(3)(d) and 6(5) of the National Audit Act. An agreement has been made between the Treasury and RFL that meets these conditions of the Act, and this arrangement is outlined in the RFL/Treasury framework agreement.
Value-for-money assessments can be undertaken under Section 6 of the National Audit Act in relation to many public bodies, including UK Asset Resolution, the British Business Bank and S4C, the Welsh language broadcaster, to name but a few. In future, the Comptroller and Auditor-General will be able to undertake value-for-money assessments in relation to RFL.
Section 9 of the National Audit Act 1983 enables the Comptroller and Auditor- General to report to the House of Commons the result of any value-for-money assessment carried out under Section 6 of the Act. So, the provisions in the Act, which as I have already explained are applicable to RFL, also make provision for the Comptroller and Auditor- General to bring the results of the value-for-money assessments to the attention of the House of Commons.
My noble friend picked up on the location of RFL’s offices in St James’s. My understanding is that this is the registered address of the company secretary and that RFL is actually based in Crewe. I hope my noble friend sees that as a more cost-effective, dare I say levelling-up, option.
Baroness Noakes (Con)
My Lords, I thank my noble friend the Minister for her comments, which seem to have addressed all the points I was seeking to make. I think it is important that all bodies in the public sector are subject to public sector audit for various reasons—not least value for money, the subject of my amendment. I am grateful to her for setting that out in detail and I do not mind what she calls me on that basis. I beg leave to withdraw the amendment.
“(3) The provision in subsection (2) may be taken into consideration by an authorised reclaim fund when setting the amount of reserve that it holds in order to meet any reclaims.”Member’s explanatory statement
This amendment is to probe the Government’s guarantee with a view to enabling a lower reserve: currently Reclaim Fund Ltd reserves 40% of its funds to meet any reclaims and releases the remainder to charity.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, this is a probing amendment standing in my name and that of my noble friend Lady Kramer. I also support the similar aim in the amendment of the noble Baroness, Lady Noakes.
As I indicated at Second Reading, I was surprised at the level of funds kept back from distribution in order to cover possible repayments. It was 40% that alarmed me but, as the Minister explained subsequently in our meeting, it was actually 60%, which is even more alarming. That is travel in the right direction, but it still seems to be excessive prudence.
With regard to bank and building society account assets, even if there were no change in the status of Reclaim Fund Ltd, there is a change of status in that the Government are essentially a guarantor and can provide a loan to cover a deficit. That makes a difference and it should be utilised, whether by influencing the risk appetite, which is where I have directed my amendment, or by specific guarantee, as the noble Baroness, Lady Noakes, suggests.
I am not suggesting that a reclaim fund should take an outlandish view of risk, but the fact is that it should not be necessary to be ultra-cautious, because the consequence of extraordinary and unexpected reclaim amounts would be the triggering of a loan from the Treasury rather than a call on the Financial Services Compensation Scheme. I am well aware that protection of such compensation schemes can feature as a large factor in the mind of the regulators when they give advice about what would be the right approach. We know this to be a fact when it comes to the Pensions Regulator; I have discussed that extensively on another Bill, although that is not in the Minister’s purview. It could well have been a factor in the Financial Conduct Authority’s computations and its part in advising on the provisioning. I would like to know whether that is the case and whether there is any suggestion of reviewing that in the light of the change in status and the removal of access to the Financial Services Compensation Scheme and its replacement with the availability of the Government’s loan.
I recognise the need to protect the public purse, about which the noble Lord, Lord Bassam, is concerned in his amendment, but a loan is not a giveaway; it is a mechanism to smooth the unexpected and remove the need for an excessively cautious risk appetite. That is the direction I am coming from in my amendment: to allow the loan possibility to influence risk appetite and change it from an ultra-cautious to a mid-range approach. The noble Baroness, Lady Noakes, has taken a more formalised accounting approach and I have no problem with that as a mechanism. The point on which we concur is that being ultra-cautious needlessly keeps funds doing nothing. That is wasteful when the loan facility or another mechanism exists. I beg to move.
Baroness Noakes (Con)
My Lords, I have Amendment 53 in this group. It is very much on the theme of Amendment 51, which the noble Baroness, Lady Bowles of Berkhamsted, just spoke to. As she said, the common ground between us is that the amount of money kept back in Reclaim Fund Ltd as reserves for repayment claims is much too high. Like her, I was shocked when I found out that the company started off by holding back 60% of the funds transferred from banks and building societies. The fact that it is now 40% is no great comfort.
When the then 2008 Bill was debated in your Lordships’ House, the Government could offer no estimate of the amounts that would be held back, but the kind of figure that we talked about was 10%. Surprisingly, that is not a million miles away from the experience to date, which is between 5% and 7%. The ultra-cautious reserving policy adopted by the company has meant that around £500 million has been held back. Just think what could have been achieved in the voluntary sector if even half of that had been released.
Nothing in the 2008 Act required this to happen, but the Act did require any reclaim fund to embed in its articles of association the transfer of money for good causes being subject to ensuring that it could meet repayment claims that are prudently anticipated. The issue is about the judgments that have been made for these prudently anticipated repayment claims.
I understand that the calculation of the reserves has been made using actuarial advice. With apologies in advance to the noble Lord, Lord Davies of Brixton, I was once told that people became actuaries rather than chartered accountants because they found chartered accountancy too exciting. That may well account for the fact that an extreme version of prudence has been at work in this provision.
When the Dormant Assets Commission reported to the Government in 2017, it too was concerned about the amounts held back for both repayment claims and a capital reserve. Both appear to be ultra-prudent. So far as the repayment reserves are concerned, the Dormant Assets Commission recommended using commercial reinsurance against the tail risks driving the extent of this provision. Now that the company is firmly in the public sector, it makes little sense to carry on preparing accounts as though it were a free-standing organisation needing to guard against extreme possibilities for future payments.
The plain fact is that, if Reclaim Fund Ltd overdistributes its funds and runs out of money due to unexpectedly high repayment claims, the Treasury will have to step in. I will comment later on the problems I see with the power in Clause 27 to lend money to the company, but I believe that the crucial issue is that the Treasury now de facto stands behind the company. It should now be run from a financial management perspective in that light. It would not make sense to buy commercial reinsurance for the company’s tail risks because the public sector can bear such risks on its own balance sheet, which is why the Government rarely, if ever, buy commercial insurance.
My Amendment 53 could have tried to replicate an internal public sector reinsurance arrangement, but that felt rather artificial. Instead, it would give the Treasury power to guarantee the liabilities of the company, which it de facto does anyway now that it is in the public sector, and to tell the company how much of that guarantee can be taken into account when it makes its determinations under the 2008 Act about how much to anticipate on a prudent basis. It is now the Treasury’s responsibility to determine how much can be released for good causes. It must not hide behind an artificial construct of a limited liability company making its own judgments because, in the context of the public sector, the broad shoulders of the sector is bearing the risks anyway.
Amendment 51 in the name of the noble Baroness, Lady Bowles, basically links the power of the Treasury under Clause 27 to lend money to a reclaim fund when it calculates its provisions for liabilities. I do not think that that works in accounting purposes because, whether or not it is drawn down, the availability of a loan has no impact on the calculation of a liability. A loan is about funding—that is, cash flow—rather than the amount that is or may become payable.
In fact, I believe that the loan power in Clause 27 may be pretty useless. If the directors consider that they are unable to meet their liabilities as they fall due and there is any uncertainty about their financial forecasts, it may well be that the correct course of action for them is to place the company into liquidation. A loan would make sense only if the company had a strictly short-term need for cash but was confident that other funds would flow in from more dormant assets in the future to make up any hole in its accounts.
In any other case, liquidation is the obvious route because directors bear personal responsibility if they trade while insolvent. The Treasury would almost certainly want to avoid liquidation, with the possibility that repayment claims were not met, and would in practice have to recapitalise the company rather than lend money to it if a major loss emerged. So Clause 27 may well be a bit of an illusion, but it is certainly not the basis for reduced provisioning for repayment claims.
Lord Davies of Brixton (Lab)
My Lords, I am going to live up to the caricature—I thank the noble Baroness—and will speak up for prudence. I find this a difficult issue. For me, it will be resolved only if we have access to the advice—I presume that it was made to the reclaim company rather than to the Government because this is a decision by the reclaim company—so I would be interested to know whether it is possible to see the advice that it has received.
It would also be useful to have a bit more information on the mechanics of how the reserving works. It is possible that, as the fund rolls forward, money that was required for reserving date one becomes available because of the way that the fund operates at date two and the reserve is more about when the money becomes available rather than an absolute bar on the availability of funds for charitable causes.
Baroness Kramer (LD)
My Lords, I am definitely in the camp of the noble Baroness, Lady Noakes, and my noble friend Lady Bowles here.
I say to the noble Lord, Lord Davies, that my understanding of the fund—the Minister will correct me if I am wrong—is not that this is sort of an endowment that is meant to subsist in perpetuity, essentially dispensing just part of its income to various charities every year. It looks back historically, and says: “Over years we’ve built up this huge block of dormant assets. Let’s do something with it, and quick.” The people receiving it know that they are not getting a future stream of cash. This is a way basically to say: “We’ve got a pool of dormant assets—money that’s not being used. Let’s just get that out into the community.” The way in which the fund is replenished is by the addition of new categories and classes of asset, not a continuous rate of people keeping up the level of forgotten bank accounts. That is an important message to get through.
I look at the retention rate of 40% against cash—it is not even a question of the value—as extreme prudence. This fund was created ahead of the financial crash. It has been through the financial crash and the Covid nightmare and has never needed anything even vaguely close to a 40% retention rate. You have to say that this has been tested in fire. I cannot imagine anybody looking and saying that 40% makes sense. I have no idea where the actuarial number comes from. It would be interesting to see the logic, but I suspect we would raise our eyebrows if we did.
As my noble friend Lady Bowles and the noble Baroness, Lady Noakes, made clear, we are now in a situation in which Reclaim Fund Ltd is a non-departmental public body. On Wednesday, I will speak to an amendment exploring whether any replacement or addition to Reclaim Fund Ltd would continue to have that status. I take the view that it should, but it now has the Government sitting behind it, for goodness’ sake: it is on books, and if it is on books then let us use it. In effect, we have a guarantee. I doubt that we would ever want to see the retention rate drop to the level where we thought that there was any serious probability that it would have to tap into that government guarantee—that is not what we are looking at—but that number and the 40% for cash are very wide apart. We now have a move by the fund into new classes of asset. I dread to think what retention rate it thinks will be necessary for that. We could easily be looking at 80% or 90% retention rates, which are absolutely pointless.
The purpose of the whole dormant asset concept is to take money that is sitting in pots not being used and get it out there where it can do good. I have one question. Since there is a huge pool of cash sitting somewhere under the auspices of Reclaim Fund Ltd, what is happening to it? Where is it sitting, who is getting fees, who is getting commissions, who is being paid to manage it? It may be my inadequacy in trying to read the accounts, since the only ones I have been able to get have been from Companies House, but I cannot work that out. Can the Minister inform us?
Lord Bassam of Brighton (Lab) [V]
My Lords, this useful set of amendments will help us to tease out the relationship between Reclaim Fund Ltd, Parliament, the Treasury, and the Government. My probing amendment is in a slightly different direction from those of the noble Baronesses, Lady Bowles and Lady Noakes, but they sit comfortably next to each other.
I want to understand what the oversight mechanism is and what will be available to Parliament in the event of Reclaim Fund Ltd requiring money from the Treasury. We have heard that this will never happen, which I am sure is quite right—with the reserve level set at 40% it is extremely unlikely—but I too believe in prudence in the management of funds, and I would like to understand what oversight Parliament will be given. We need a position where we can discuss and debate how it is working. Will that be through some kind of annual report to Parliament? Would oversight by Parliament be triggered in the circumstances of a particular use of funds? Can we perhaps see a situation where there is an annual debate about Reclaim Fund Ltd and how the money has been distributed so that we could test whether the 40% reserve is right?
Parliament needs to be in a stronger position here. These amendments take us in that general direction, particularly the clever one tabled by the noble Baroness, Lady Noakes, which would put the Treasury in the hot seat and ensure that we have a level of accountability enabling a regular look at how Reclaim Fund Ltd operates. I am looking forward to the Minister giving us not only some assurance but a guarantee that we will be able to see how the mechanism is working through a regular oversight session.
Baroness Barran (Con)
My Lords, before I turn to the detail of the amendments, I will respond to the question from the noble Baroness, Lady Kramer, about how Reclaim Fund Ltd invests its assets. The reserves are a mix between cash held at the Bank of England and an externally managed bond portfolio managed by Goldman Sachs asset management. All the assets are held to maturity. The portfolio is not actively traded to save on management fees and the portfolio follows environmental, social and governance principles. I hope that this comforts her or otherwise regarding the fund’s approach.
I turn now to the amendments. Amendments 51, 52 and 53 relate to Clause 27 of the Bill. These amendments seek to understand the oversight that Parliament will have over any loan that the Treasury provides to RFL, and intend to allow RFL to take into account the loan when considering its reserving policy. I will address the amendments together.
In recognition of RFL’s establishment as a Treasury non-departmental public body, the Bill introduces a new provision to provide that, in the event that an authorised reclaim fund is, or looks likely to be, unable to meet its reclaim liabilities, the Treasury would provide a loan to cover these liabilities.
On Amendment 52, from the noble Lord, Lord Bassam of Brighton, the Government agree that Parliament should have oversight of the Treasury loan. Parliament will already be sighted in respect of the loans made from the Treasury by virtue of this being recorded in its annual reports and accounts, which are laid before Parliament on a yearly basis. The terms and conditions of the loan will be set in line with usual Treasury practice, as set out in Managing Public Money. It would not be usual practice to provide the full terms of the loan, which may contain commercially sensitive information. Further transparency to Parliament is provided in the reclaim fund’s annual report and accounts, which, as we discussed earlier, are audited by the Comptroller and Auditor-General.
Amendments 51 and 53, tabled by the noble Baroness, Lady Bowles of Berkhamsted, and my noble friend Lady Noakes respectively, seek to understand the impact on RFL of a potential Treasury loan when setting its reserving policy. I will respond, first, by summarising the particular features that govern RFL’s reserving policy, and then turn to the implications on these of the Treasury loan. While the Government agree that as many dormant funds as possible should be channelled to good causes, we also fully recognise that the decision on how much money should be retained to meet reclaims should sit with RFL and not the Government. The RFL board is responsible for overseeing the process for changing the level of reserves, and RFL has confirmed that this is regularly revisited by the board.
I met recently with RFL. Following that meeting, I am satisfied that it follows diligent processes with respect to its reserving policy, which is based on an analysis of the relevant risk factors, actuarial modelling using both internal and independent actuarial advice, and Financial Conduct Authority guidance. This ensures that RFL can achieve its primary objective of meeting reclaims from owners at any time in the future. The fundamental principle that underpins RFL’s current approach to its reserving rates and investing policy is that it is required to meet reclaims in perpetuity. As your Lordships well understand, that makes it very different from, say, an insurance company. Therefore, it has to plan both for any normal trends in the reclaim experience and for any future stress scenarios that may occur, and model those accordingly.
Examples of such stress scenarios include developments in artificial intelligence that help to reunite more customers with their lost assets and, as we discussed in an earlier amendment, future changes in government data access, which could affect participant’s tracing efforts. Any stress scenario could result in a sudden increase in reclaims, and a combination of these scenarios would, of course, have a significant impact on RFL’s reserves. This is reflected in RFL’s regulatory permission and activities under which it is authorised to operate, with the purpose of ensuring that RFL has adequate financial resources to meet its ongoing reclaim obligations without placing it into undue financial distress or business failure.
While I recognise your Lordships’ interest in the current level of reclaim rates compared with money reserved, RFL has informed me that the cumulative reclaim rate is increasing and looks set to increase further in future years. RFL has reviewed and will continue to review its reserving policy regularly, using both internal and independent actuarial advice and modelling, to ensure that it is appropriately prudent and will continue to release as much money as responsibly possible to good causes across the UK, while retaining sufficient funds to meet reclaims. RFL’s remit is expanding to include previously unheld asset classes. I therefore understand why RFL has chosen not to amend its reserving policy at this time, although that decision remains solely with the company.
The Deputy Chairman of Committees (Lord Haskel) (Lab)
The noble Baroness, Lady Noakes, has asked to speak after the Minister.
Baroness Noakes (Con)
My Lords, I hear what my noble friend the Minister has said—that she was speaking to my amendment and that of the noble Baroness, Lady Bowles, which both rely on the loans to reduce the amount of reserving. That is not what my amendment said at all. Mine was based on more explicitly recognising that the Treasury de facto now stands behind the company and that anything else is a complete fiction.
My noble friend talked about industry needing confidence in the scheme being independent of government. Frankly, the whole world has changed: the Treasury now owns 100% of the capital and it has been reclassified as public sector. The fact of life is that this is a public body and its “separate legal entity” nature is just a fiction.
If the Treasury wanted to release more for good causes, it could. That is at the heart of the issue; anything else is some form of dissembling. So I personally am not satisfied with the Minister’s response today. I do not think meeting the chief executive of the Reclaim Fund Ltd will get us any closer to the heart of the matter. The issue is: why will the Treasury not step up to the plate and recognise that it now carries responsibility for the amounts released, and that in public sector terms there is no good reason to withhold significant sums for tail risk?
Baroness Barran (Con)
I accept that I am not going to convince my noble friend this afternoon. Although she may see the fact that Reclaim Fund Ltd is a separate legal entity regulated by the FCA as a fiction, I respectfully disagree. She will decide whether she wishes to meet those from Reclaim Fund Ltd. The reason I felt that it might be helpful is that it may clarify to what extent the current level of reserving is “excessive”, as it was described in the debate this afternoon.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, this has been an interesting debate; it has brought forward shared concerns and different ways of expressing much the same thing. The way in which the noble Baroness, Lady Noakes, explained it has been very informative, in particular the comparison with the original suggestion that maybe you need a 10% reserve and that that approach is the reality. Although I expressed it in a different way—I am sure that her amendment is probably crafted better than mine—we share the view about the tail risk and the role of government meaning that you do not have to provide for that in the ultra-cautious way. This also reflects my noble friend Lady Kramer’s comments that it is not being run as an endowment whereby you have to hang on to money. However, I suppose you can argue that there is a perpetual risk because there is an in-perpetuity claim.
It has been interesting to hear the Minister outline some of the concerns about AI tracing and using government data. If the 40% level will be retained as new assets come along, maybe I am not quite so alarmed. I shared the fear of my noble friend Lady Kramer that when these new assets came in, it was going to shoot back up to 60% or beyond.
We have this strange arrangement whereby limited liability companies that are on the public books but have to run under the Companies Act have the possibility of going into liquidation, which is how the directors can protect themselves, but the fact is that the Government will have to pick up the tab. It seems a bit wrong, somehow, not to use what is, in effect, a de facto “extreme circumstance” reinsurance provision that will be triggered come what may. We have to reflect the reality of that, and it is probably rather an excuse to say, “We will have to have it at arm’s length from the Treasury so that it is not interfering in the way the funds will be used.” We will get on to that when we begin to talk about additionality and some of the ways that the money has been deployed.
It may be interesting to have a bit more information on the figures; there are noble Lords who can get their heads around some of this. I am open to having more information and Parliament needs to see this level of it, but I am not entirely certain that I am satisfied at this point—particularly as the section regarding the loan turned out to be really rather meaningless, as the noble Baroness, Lady Noakes, outlined. We need some kind of explanation and reassurance either that that is not the case or that it can be made into something meaningful. Otherwise, what is the point of it being there?
This has been a very useful debate, which will continue. I too may consider returning to it on Report. I feel I know more—I have had a little comfort but maybe not yet enough—but, for now, I beg leave to withdraw my amendment.
Dormant Assets Bill [HL]
Wednesday 23rd June 2021
(3 years, 5 months ago)
Grand CommitteeRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 3-II(Rev) Revised second marshalled list for Grand Committee - (21 Jun 2021)
Lord Hodgson of Astley Abbotts (Con)
My Lords, I beg to move Amendment 54 and will speak to Amendment 55. I am grateful for the support of the noble Baroness, Lady Kramer, on Amendment 54 and of the noble Baronesses, Lady Lister and Lady Bennett, and the noble Lord, Lord Blunkett, on Amendment 55. I will focus the bulk of my remarks on Amendment 55 but will first deal briefly with Amendment 54. I thought about degrouping it but, in the interests of speed, the Committee might be able to deal with it as part of this group.
Amendment 54 is about transparency, a point raised by the noble Baroness, Lady Kramer, in her comments on the group beginning with Amendment 4, which the Committee discussed at its first sitting on Monday. Its very simple purpose is to ensure that, if the Secretary of State wishes to introduce restrictions on the way that the dormant assets scheme works, these have to be contained in regulations. This gives a proper degree of transparency to the actions of the Secretary of State. We all have our worries about the efficacy of the scrutiny of regulations, but this does at least bring them before your Lordships’ House. This is primary legislation, so will be in place for some years; it would clearly be inappropriate for a future of Secretary of State to be able privately to influence the operation of the scheme. That is the purpose of Amendment 54; I trust that the Government would have no problem with its objective.
In Amendment 55, I am returning to a point which I made at Second Reading: the very uneven distribution of social capital across the country. I fear that that unevenness may have been increased by the events of the past 15 to 18 months. This unevenness was originally brought home to me sharply during reviews of the charity and voluntary sectors that I carried out for the Government. It was my practice to try and hold meetings in different parts of the country to be able to take on board local concerns and questions. The fluctuating numbers of attendees at these meetings provided an interesting yardstick of the strength and vibrancy of social capital in those areas. When I chaired for your Lordships’ House the Select Committee on Citizenship and Civil Engagement—I was very lucky to have two such experienced committee members as the noble Lord, Lord Blunkett, and the noble Baroness, Lady Lister—the same situation revealed itself in our trips. Each situation is different, of course, but certain common themes to this problem have emerged. Funding is of course important, often in small, repeated amounts rather than in big dollops, but this is about much more than just money. It is about finding physical structures—buildings in which people can meet, socialise and help create communities. There is a third element: the need for practical experience and paid help to supplement voluntary efforts.
One of the most distressing aspects, for me at least, was the loss of self-confidence and self-belief. For too many, aspiration and hope had died, overwhelmed by the scale of the apparent challenge but, when a spark had been lit, often by a small group of people, the results were remarkable. I recall, on our committee visit to Clacton, that the pub which had been bought by the community, an ACV, was now breathing life into the area in a whole host of ways not originally envisaged. Money, physical structures and practical help are important, but there is yet another requirement—staying power and endurance. Rebuilding social capital is a marathon, not a sprint. Volunteers have lives outside the work they do for their communities.
On our committee trip to Sheffield, we met a group helping to keep libraries open and extend their opening hours, better to assist and serve their communities. But as members of the library group pointed out graphically, if Mrs Smith, say, has undertaken to open the library at 9 am on a particular morning and her child falls ill in the night and has to be taken to hospital, the library will not open because, quite understandably, rightly and properly, her responsibility to her child will take priority. That will be a blow to the community, unless there is a structure to ensure that someone steps into Mrs Smith’s place. That is why some limited paid back-up is important. It can be seen that this is a complex, shifting kaleidoscope of requirements that needs to be sustained over time.
Finally, to be really effective, to ensure that actions are done by and not done to, these activities must be and remain really local. That may seem very obvious to the Committee, but I shall quote a couple of sentences from our Select Committee report. We wrote:
“Communication between citizens and government at all levels is often poor, and was a subject frequently raised not just in formal evidence but by those we spoke to on our visits. When seeking people’s views, communication tends to be with the ‘gatekeepers’—those who hold themselves out, not always accurately, as representing their communities. People, especially in deprived areas, must be made to feel that government is speaking directly to them, working with them and for them, and paying attention to their needs and wishes … Communities must also be prepared to open up and bring more voices into the conversation.”
That is the background to the amendment. The concept of community wealth funds could be particularly well placed to meet the complex requirements I have described. They could provide funding, could provide a means to open and maintain buildings, could employ the limited permanent staff needed to provide the necessary structural framework and, finally, could do all these things over the long period needed to provide remedies for the deep-seated, structural challenges that these communities face—hence my interest in the briefing sent to me and many Members of your Lordships’ House by the Community Wealth Fund Alliance. However, I have to admit that I had a concern about the original briefing. The alliance speaks for 400 civil society public and private sector organisations, and the briefing sought the tabling of an amendment establishing a “Community Wealth Fund”—with a capital C, a capital W and a capital F—as a national body.
I told the alliance I believed that the concept and the approach they represented was entirely praiseworthy and worth supporting, but I did not think that as yet there was enough practical experience to justify a “Community Wealth Fund”, with capital letters, appearing in primary legislation as a national body. Could a CWF—with the capital letters—appear as a national body in future? Of course it could, but we are not there yet. We need more practical experience of how this alliance of 400 different organisations will work together, and how methodologies and objectives will change in the light of real-life experience.
Today, I am delighted to urge the Government to support the creation of community wealth funds—individual local efforts, shaped to meet the particular needs of their areas. I think it highly likely that a national body will emerge in due course, and perhaps become a fifth distributor but, as I have said, I do not think we are there yet. We need more experience of building from the ground up. In short, Rome was not built in a day.
Lord Bassam of Brighton (Lab) [V]
My Lords, I make it clear at the outset that I am very supportive of the amendments tabled by the noble Lord, Lord Hodgson—first, his amendment on transparency, which was usefully preambled in our debate two days ago, and secondly, his amendment relating to a call for the Secretary of State to include the establishment of a so-called community wealth fund in an order under new Section 18A of the 2008 Act.
Labour supports, of course, the principle of putting additional funding into the hands of local communities. Our experience, rather like the noble Lord’s, is that those things are best left local: communities need social capital support to ensure that they work with the charitable interests to achieve the objectives of many of those locally and nationally based charities. The Local Trust and the Community Wealth Fund Alliance have made a strong case in their briefing notes, and we recognise that there is broad-based support for this proposition right across the sector.
The idea of community wealth funds is not new, but the case for long-term and locally focused investment has become even more compelling in the light of the Government’s levelling-up agenda and of events during the Covid-19 pandemic. Our Amendment 56 would make a small but potentially significant tweak to the noble Lord’s proposed text, in that it specifies that new National Lottery community funds should operate independently of National Lottery structures. We appreciate, of course, the good work that the National Lottery Community Fund does across the country, but we saw the arrival of the Bill as an opportunity to debate additional methods of disbursing money to the communities that need it.
The alliance behind the community wealth fund proposal have given it a great deal of thought, and have undertaken research on how best it would work and how a system could be made operational in practice, with neighbourhoods empowered to create a positive community vision, and given time to deliver the change they seek.
There is a range of evidence from Britain and across the world that giving communities a proper stake in local spending decisions produces far better results than imposing schemes from the top down. As with our previous debates on the asset clauses, we should not be confined by how things have been done in the past. Instead, we argue that we should seize opportunities to try new approaches.
I have little doubt that the Minister will say that there is not yet strong enough evidence for the Government to support this approach. If that is the case, would the DCMS be prepared to fund pilot studies in a small number of communities across England, to gain more data? The noble Lord, Lord Hodgson, in a sense, alluded to that. Perhaps we should consider a pilot approach, before bringing into play the full effect of a community wealth fund clause in, or an amendment to, this legislation.
That would be a practical and pragmatic approach and would garner support, but we obviously want to listen to what the Minister has to say on this. We will be more than happy to discuss with her and colleagues across the House how we can make this work because, like the noble Lord, Lord Hodgson, I think that it is a winning idea that would genuinely empower local communities.
Lord Blunkett (Lab)
My Lords, I am very pleased to have put my name behind Amendment 55, spoken to by the noble Lord, Lord Hodgson. I strongly support the presentation that he made this afternoon. His work on the charities report and in chairing the Select Committee on Citizenship and Civic Engagement were milestones in understanding the critical importance of civil society and an enabling state. The way in which he presented his case this afternoon reinforced the importance of communitarianism—of building from the bottom, and of engagement with and facilitating the ability of communities to work for themselves and those whom they serve.
In a moment, I will obviously wish to speak to Amendment 56A in my name, but I want to say a word or two first in support of the noble Lord, Lord Hodgson, and my noble friend Lord Bassam in terms of the possibility in future of building from local experiments and local development into a national community wealth fund, and the facilitation of that through the legislation so that it might happen organically. I am proud of the work done over the years by South Yorkshire’s Community Foundation, which has been able to distribute grants and support local initiatives. Greater funding and support for that kind of operation is where organic change can take place and where people can see not only the contribution made from the unclaimed assets fund but the contribution that they can make in small ways by adding to that and being part of the process of delivery. They see where the funds have gone, experience the benefit of them and then take forward those learning processes to build that enabling state at local level, reinforcing civil society and enabling people to make decisions for themselves. The case is overwhelming and the question is about how we should go forward. I hope that the noble Baroness will be able to indicate that on Report there will be a welcome for a facilitating clause, which will enable us to move forward on that.
On Amendment 56A, I commend the Kickstart money and those who have, over many years, fought for better financial education throughout the education service. Obviously, this applies to young people who reach 16 and are looking to their future. I remember, as Secretary of State for Work and Pensions, going around the country on a fact-finding and informing exercise on what needed to be done about the future of pensions and the pension age. We were picking up the report by Adair Turner—the noble Lord, Lord Turner—and looking at the extension of the working age. We looked at auto-enrolment, which took so many years to implement, having been agreed back in 2005, and the way in which young people should think about their future.
This was complemented by the then child trust fund, which we addressed in the House yesterday and is relevant here. It was designed to enable people to have a nest egg—a small amount of capital that they could engage in their own lives. What we are talking about here has a synergy, and it is important for us to understand how the capital asset divide is a major challenge for the future. If you inherit a house from grandparents, parents or an uncle or aunt in London, it is the equivalent of winning the lottery. If you live in rented accommodation in the north of Sheffield, Barnsley or elsewhere and have nothing to pass on to future generations, you will see the reinforcement of intergenerational disadvantage.
I hope that financial education will help in its own right but also with the wider debate on where we are going as a country. It is particularly important that this happens at primary level; at secondary level, there is at least PHSE and the emphasis that can be placed on the economic side of the financial learning exercise. In the citizenship curriculum, the wider issues can be addressed as well. In primary education, those two things, while relevant to the curriculum, are not taught in a specific or identifiable way and it is really important that we get it into primary education at a very early stage so that young people understand the importance of their part in managing their money and how the financial world works around them. The unclaimed assets fund could be of great benefit if we can get this right.
Baroness Barker (LD)
My Lords, I, too, was a member of the Select Committee on citizenship, but clearly I did not make as big an impression as the noble Lord, Lord Blunkett, or the noble Baroness, Lady Lister. I am very glad that I was, however, because it was one of those pieces of work from which one comes away having learned a great deal about a subject that one thought one already knew a lot about but where there was much more to learn.
One of the lessons that came to members of that committee quite forcefully, particularly from people in communities that felt they had been left behind, was the very low level of knowledge of how to participate in local democracy—simple things such as knowing how to be eligible to vote, for example. In part, that fuels what I shall say over the next few minutes. I do not object to community wealth funds; I have considered them over the past few years and they are undoubtedly well intentioned and beneficial. It is also undeniable that they would in some—perhaps most—cases provide assets to go with the aspirations of local people to own and control the assets, which they are already legally able to acquire under the challenge fund and with the assistance of organisations such as Locality and so on. That legal right is already there.
My question about this is: in general, is the addition of another entity that has to be governed, managed, staffed and accountable advisable? Is it an addition or will it be an unnecessary added complication? We have hundreds of local community groups that rely on the knowledge, skills and good will of people in those localities. What they very often lack is technical skills.
Here I will pick up some of the points made by the noble Lord, Lord Bassam of Brighton, about the National Lottery Community Fund. I go back a very long way. I remember the creation of that fund and the impact it had on the voluntary sector, which I worked in at that point. It is unarguable that the fund brought in resources that could not have been imagined before its creation for capital, sports and social programmes.
However, it has always been a puzzle to me how we enabled the National Lottery Community Fund to be created and to be the size and extent it is, yet we have never had a requirement that part of its money would go towards sustaining and developing the infrastructure of the charities and community groups that largely deliver its programmes. The National Lottery sits on top of the rest of the voluntary sector and requires it to deliver its agenda. It does not have an obligation to sustain it.
It is worth noting that the financial position of the voluntary sector is vastly different from how it was even 25 years ago. Many noble Lords will know that NCVO, together with Nottingham Trent University, is carrying out a tracking exercise on the impact of Covid on the voluntary sector. It is producing some really interesting results about the way levels of demand for local services are rising and the extent to which, in this last year and in the forthcoming year, the resources of those charities will be under significant strain. At least 30% of them expect that they will have run out of reserves and will go out of business. That is the overall position.
I will tell just one story. Quite a number of years ago, National Lottery funding was used to develop a series of healthy ageing centres. These were flagship programmes set up with five-year funding. The great thing about them was that they had to be innovative and dynamic. Therefore, they have to be free-standing and to bring in new partners. They therefore could not be set up and run by the existing local older people’s organisations. They ran very well and highly successfully. Then the five-year funding ended, at which point the remnants of their good programmes were all absorbed by the then-existing local Age Concerns and so on. I wonder whether, in setting up this kind of mechanism, we might not set people up for a similar kind of scenario.
Baroness Lister of Burtersett (Lab)
My Lords, it is a pleasure to be able to speak in support of Amendment 55, tabled by the noble Lord, Lord Hodgson of Astley Abbotts—not least because, as he said, I was a member of the Select Committee on Citizenship and Civic Engagement, which he so ably chaired.
I must admit, it is only recently that I have been made aware of the campaign for a community wealth fund and that I have joined the APPG for “Left Behind” Neighbourhoods. However, I have been persuaded by the evidence from the Local Trust and others that a community wealth fund—or, to take on board what the noble Lord said, perhaps community wealth funds—potentially represents a key building block in the aspiration, shared across the political divide, to build back better or, as Sir Michael Marmot put it, to build back fairer.
In his new report, The Marmot Review 10 Years On, Sir Michael emphasised this:
“Empowering and sustaining communities was central to the 2010 Marmot Review”—
his original review of health inequalities. He also observed:
“Over the last 10 years, these ignored communities and areas have seen vital physical and community assets lost, resources and funding reduced, community and voluntary sector services decimated and public services cut”.
Both in his report and in his Covid update, he called for investment
“in the development of economic, social and cultural resources in the most deprived communities.”
In a similar vein, as I noted at Second Reading, a number of bodies, including the Legatum Institute, have argued the importance of social investment to the levelling-up agenda. According to a recent survey published by NPC, the general public believe that levelling up must address social needs, and just yesterday, the Education Select Committee referenced the idea of a community wealth fund when discussing the implications of the levelling-up agenda for education and children’s outcomes.
While dormant assets, as underlined at Second Reading and in line with the additionality principle, must of course not be used as a substitute for government funding, the idea of community wealth funds as proposed in this amendment provides an opportunity for “empowering and sustaining communities”, to quote Marmot. It would be targeted at a very specific group of communities or neighbourhoods: those in which serious deprivation is combined with lack of social infrastructure, or what Community Links calls “civic inequality”. In its recent report Making a Good Place, Community Links concludes:
“The case for investment in social infrastructure is strong, not just because of the long-term benefits that it brings and the need to address civic inequalities, but also because of the pressing situation created by the Covid-19 pandemic, which makes it all the more important to create good places that promote good mental and physical health and well-being and resilience to other attacks.”
According to Local Trust, which spearheaded the campaign for a CWF, in its experience communities lacking in places to meet and social infrastructure, such as youth centres—so it does include support for young people—pubs, cafes, parks and community hubs, can find it difficult to nurture the social interactions and bonds that play an essential part in developing a community’s civic spirit. The trust argues that investment in social infrastructure is foundational in that it helps to build knowledge, skills and confidence in marginalised communities, thereby contributing to a lasting legacy of change. In response to the noble Baroness, Lady Barker, what is important is the knowledge of continuity of funding that one does not necessarily get from local philanthropy.
As a report from the IPPR Environmental Justice Commission shows, this can strengthen environmental as well as social action in deprived communities. The commission argues:
“For communities to thrive in a climate changing world they must be given greater ownership and agency”.
As I said at Second Reading, in a point that has already been made, a particularly attractive aspect of the CWF is the emphasis its advocates place on the control over spending decisions that it would give to local residents. I quoted the Public Services Committee, which has consistently made the case for user involvement in the development of services if those services are to meet local needs and to be resilient.
There is growing recognition that failure to embed genuine community involvement is one reason why past local-area initiatives have not been as successful as they might have been. To quote Community Links again:
“Community participation in decision-making ensures that investment genuinely serves those it aims to support and also helps build capacity within the community”.
The proposals for a CWF contain detailed suggestions for how this could be done and how to build accountability into its structures. That perhaps goes some way to address the concerns of the noble Baroness, Lady Barker, as to why this kind of structure is necessary: it perhaps adds something to what is there already.
Polling research carried out for Local Trust and its experience of running the Big Local programme suggest there is a real appetite in deprived communities to take on the challenge, provided there is appropriate funding and support to build capacity and confidence. Research in so-called left-behind areas found that three-fifths agreed that local residents have the capacity to make real change in their area, while seven out of 10 said it should be local people and community organisations leading decisions about how any funding should be spent.
The release of new dormant assets under the Bill provides a timely opportunity to invest in such areas through proposed community wealth funds, which, as we have heard, have the support of over 420 organisations, including the NCVO, and 35 local or combined authorities. Again, the fact that it has such strong support from the voluntary sector, the NCVO and others perhaps goes some way to counter the concerns raised by the noble Baroness, Lady Barker.
While I am not looking to pre-empt the consultation that we will discuss shortly, I hope the Minister will be able to give us some idea of the Government’s views about the proposal for community wealth funds as an appropriate use of a portion of the dormant assets that will be released. At Second Reading, despite it having been raised by a number of noble Lords, I think she carefully avoided commenting on it. I hope she will be able to provide a sympathetic response that will give hope to the 423 organisations in the community wealth fund alliance, and to those living in the deprived communities that stand to benefit from such funds.
Baroness Kramer (LD)
My Lords, there is a clause stand part element to this group and I shall address it first as it has not been the subject of discussion. It is important to make the point that Clause 29 removes the requirement to focus on the needs of young people, financial education, access to finance and social investment from primary legislation and puts the responsibility for the areas of focus into future secondary legislation—I know that the current rules stay in place until the first SI comes. That is a troubling issue that Parliament has to consider because we all know that statutory instruments cannot be amended and that killing them is a constitutional crisis, so Clause 29 asks us to change the framework very substantially, and that is an area that Parliament has to consider.
I do not mean to be insulting to the Government, but cronyism is a real worry—frankly it is a worry with any Government—as are fads and fancies. They are not ill intentioned but they tend to mean that attention diverts from one place to another and lacks long-term consistency. It is very hard to deal with in secondary legislation. Will the Minister discuss whom she anticipates will be the winners and losers when we make this change and remove these various obligations from primary legislation? We really do need to know.
A great deal spills on to the consultation process, which the Minister will no doubt mention. We shall deal with that in another group, but I point out now that, although I am sure the Minister will talk about public consultation, it is not in the legislation. There are a lot of issues to deal with around that.
I now turn to Amendment 54, moved by the noble Lord, Lord Hodgson, which I was glad to sign. I hope it is just that the drafters of the Bill wrote a badly constructed sentence and that the transparency that we would have hoped for is intended. Given the number of government amendments, I suspect the Bill has suffered from some rather rushed drafting, and if there is a government amendment to sort this sentence out, I would not object and I am sure no other Member of the Committee would.
The heart of the discussion today has been the proposal of the noble Lord, Lord Hodgson, supported by many others, for the specific inclusion of a community wealth fund. I can see scope for very good work here, but I have heard three concerns, some expressed here, and I want to pick up on them quickly. My noble friend Lady Barker talked towards one of them, but she did not explicitly mention it. It is about the character of the dormant assets fund. It is not an endowment fund. The numbers in the dormant assets fund are large because we were capturing 10, 15 or perhaps even 20 years of dormant assets that had been sitting around and were unspent. I reckon that dormant assets from banks and building societies are fairly close to exhaustion now. There will be new ones every year, but the bulk of dormant assets have already gone through the system. We are now drawing in more assets but they will follow the same pattern, and we may find future assets to put into the fund.
The noble Baroness, Lady Barker, made the point that you can create something very successful and provide it with funding that can last for five years but, if it has no sustainable funding beyond that point, one is in something of a bind. I am not sure that many people have realised the character of the dormant assets fund. The point is that it should be exhausted and driven down to as close to zero as soon as possible by a combination of reclaim and the paying out of money. It cannot be replenished and continually provide support for many of the community wealth funds in the way that has been described. Sadly, there has to be some real thinking about how all that would work.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
I start by thanking all noble Lords who spoke for their reflections and remarks on the amendments in this group. My noble friend Lord Hodgson put forward Amendments 54 and 55; the noble Lord, Lord Bassam, put forward Amendment 56; and the noble Lord, Lord Blunkett, put forward Amendment 56A. As we have heard, these amendments seek to enable specific causes to be supported through the Bill—namely the establishment of community wealth funds or provisions for primary financial education—and, in the case of Amendment 56, to clarify that the National Lottery Community Fund could not deliver a community wealth fund itself.
I shall start by responding to my noble friend Lord Hodgson and the noble Baroness, Lady Kramer, regarding Amendment 54. I assure your Lordships that any future restrictions on spending in England would be contained in secondary legislation.
I recognise that many of these amendments have been tabled with the purpose of sparking a conversation on these initiatives; it is without question a conversation worth having. My noble friend Lord Hodgson expressed very eloquently, as did the noble Baroness, Lady Lister, the value of local community organisations and the needs of those communities. I have certainly seen, on my own visits, similar examples of the value that they can bring. Indeed, more broadly—and clearly beyond the scope of this legislation—we are hoping very much that both the levelling up fund and the UK shared prosperity fund will invest in what I think we described as the infrastructure of everyday life, much of which we have talked about this afternoon.
I also echo the comments of the noble Lord, Lord Blunkett, about South Yorkshire’s Community Foundation and the great work it does, mirrored across the country by many other local community foundations.
While we think that this is a conversation worth having, we are clear that a consultation, as set out in Clause 29, is the best way to agree future spending priorities for England. The noble Lord, Lord Bassam, suggested that I would argue that we need more evidence before we can support a single cause. In one way, I agree with him, but there is a question before that. The point of the consultation is not just to identify the causes and restrictions that will be placed on future moneys; it is also to understand which of these should take priority in future and why. To do so, we need to identify the principles on which we would make such a prioritisation. Attempting to arrive directly at the answer by including specific causes in the Bill would limit and potentially distort the scope of the consultation and compromise its transparency, inclusivity and impact. Work on preparing the consultation will begin following Royal Assent, provided that the Bill passes with this measure. We will need to determine what these principles should be.
I hope it is helpful if I give a few examples of the kinds of issues that I think are important to discern through the consultation. For example, we might consider the benefits of focusing thematically at scale across England. We could take the example of the work Fair4All Finance is doing in trying to put an end to high-cost credit in this country—something I am sure we can all agree would be a great achievement. Contrast that with locally driven initiatives, such as the community wealth fund; we have heard much about their merits. I am not trying to argue that one is right or wrong; I just think that we need the discussion between competing priorities.
We could also think about the size of the problem that we are aiming to tackle. The noble Baroness, Lady Kramer, also helpfully pointed out that this is not an endless flow of money. These should be problems that can be addressed within a certain timescale, so that the quantum and duration of the money released from the scheme in future would make a material difference—on Monday, noble Lords raised points about the ability to attribute and measure the impact achieved with the funding—as well as unlocking other funds using it. That point was raised by the noble Lord, Lord Triesman, and others at Second Reading. The work that the Youth Futures Foundation is currently doing, for example, focuses on expanding the evidence base on what works and has the potential to influence the way an entire sector approaches programme delivery. In another example, Big Society Capital has had a clear success in levering more funds in to the social investment sector.
I have heard that your Lordships care about impact. I am also keen to ensure that the impact of the existing causes, as highlighted by the noble Baroness, Lady Kramer, and how far into their journey of achieving their missions the current organisations are, are taken into account. I stress that I raise these as illustrative examples of the types of conversations that should be had before determining which causes are not just good ones to support but the best causes for this unique type of funding. We need to get as much clarity as possible on how best to define future funding restrictions, to ensure that these funds achieve the greatest possible impact. It is, therefore, vital that we enable a public consultation to take place before making any changes or additions to the current uses of dormant assets funding in England.
We cannot commit at this stage to changing the recipients of this funding in primary legislation. This includes by referencing community wealth funds or financial education, as well as whether or not the National Lottery Community Fund should deliver them, as the amendment in the name of the noble Lord, Lord Bassam, proposes. Given this, it is also not the time to prescribe the distribution mechanism for how future funding might best be administered. While the Secretary of State already has the power to add or remove distribution bodies, the National Lottery Community Fund has fulfilled this role for the past decade and there are no plans to change this. It has access to an extensive network of delivery partners, and has well-established systems of governance, accountability and assurance in place. For these reasons, I am not able to accept these amendments.
I now turn to why Clause 29 should stand part of the Bill. This clause amends part of the mechanism for distributing dormant assets funding in England so that it aligns with the model used in the devolved Administrations. As the noble Lord, Lord Bassam, highlighted, it will provide the scheme with greater flexibility to respond to changing social and environmental needs in the future by enabling the Secretary of State to make an order restricting the purposes of dormant assets funding in England. The Committee has heard this afternoon about the genuine tension that exists between flexibility of funding and the longevity and visibility of it. We believe that the consultation will help us understand this.
The noble Baroness, Lady Kramer, asked me to specify the “winners and losers”. I hope very much that the winners of a consultation will be those that have the greatest impact from the use of the funds and which address issues that communities care about. Expansion of the scheme could unlock around £880 million more for good causes across the UK. In light of this sizeable amount, a changing social and environmental context in the wake of Covid-19, and public calls for input, it is right that we consider how to use this funding most effectively. Clause 29 enables us to do this while ensuring that these decisions have an appropriate degree of scrutiny.
As I have outlined further, the Government have committed to launching a public consultation on the social or environmental causes in England, provided this measure passes. The current restrictions will continue to apply until this consultation has been processed and an order is made. Any new restrictions will have to be approved by both Houses through the draft affirmative procedure.
This power will not affect the additionality principle: the distribution of dormant assets funds cannot be a substitute for government spending programmes. We will discuss this further as part of the debate on Amendment 60 from the noble Baronesses, Lady Kramer and Lady Bowles of Berkhamsted. With that, I ask noble Lords not to press their amendments and I commend that Clause 29 continues to stand part of the Bill.
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
I have received a request to speak after the Minister from the noble Lord, Lord Knight of Weymouth.
Lord Knight of Weymouth (Lab) [V]
My Lords, I want to speak relatively briefly in support of my noble friend Lord Blunkett’s Amendment 56A. I find the procedure slightly odd—I am still trying to influence the Minister after she has asked for it to be withdrawn—but I will give it a good go.
The importance of financial education and financial literacy in primary education does not need too much arguing. I recall a friend of mine, Emily, who finished secondary with four A-levels about three or four years ago. She chose to become a successful actress rather than go to university. About six months after she started work—she got work very quickly—she was furious that her education system had not told her about taxation and that suddenly she had to put money aside to pay her taxes as a self-employed actress.
That reinforced for me that we have an education system that is really passive on this. I was delighted a couple of years ago, when I was working for a company called TES, to be involved with the Bank of England and the Beano on producing some financial literacy resources for primary schools, which were very well received. I also endorse the work of KickStart Money.
It has become particularly acute that we must do more in primary education because of the cashless nature of our transactions. According to a survey this month published by, I think, Yahoo, fewer than a quarter of transactions in this country are now paid with cash. Children no longer see and feel money exchanging hands. They are no longer adding it up and making sense of 1p, 2p, 5p, 20p, 50p, £1, £10 and so on because it is not part of what most of us handle any more. There are apps. My stepdaughter will be 10 tomorrow. We use an app for her called RoosterMoney, which helps her with some of these things. But there has been an impact for primary schoolchildren on their numeracy, their understanding of debt, and of how their school is paid for and how their teachers are paid, because it is taxation and public money. These are really important parts of citizenship.
While the noble Baroness, Lady Kramer, was talking I thought that, although the amendment is about resourcing financial literacy in primary schools, I had better quickly check the primary curriculum to see what is in it. There are two mentions of “financial”. One is in respect of what the curriculum requires years 5 and 6 to do in terms of spelling. The noble Baroness asked whether there is something horribly wrong in the Department for Education. It is so obsessed with things such as spelling in English that you have to learn how endings that sound like “shall” are spelled, as in “official”, “artificial” and “financial”. The only other mention is in the context of maths. It says that studying maths is a good idea and “necessary for financial literacy”, so it gets a slight mention but that is it. There is no real requirement, but there is a little bit of a nudge that there is a good reason for studying maths. We have to do better.
This amendment, and putting something in statute, would give some priority and send a positive signal from government that we should do more on this. It would be able to fund some of the teacher training that is important to give primary school teachers better confidence and competence around how to link this in to various parts of the curriculum, because it is not just in maths that you can teach financial literacy. Of course, it could fund more of those resources so that it is not just down to the Beano, the Bank of England, KickStart and others and we have some properly evidence-based resources that help teachers to link across the curriculum in an engaging and interesting way for primary school students.
I urge the Minister to reflect and perhaps have a chat with some of her colleagues in the Department for Education—particularly the Schools Minister, who is obsessed with spelling, punctuation, grammar and maths but, frankly, is not really that interested in very much else in terms of what is specified in the national curriculum. We could do better.
Baroness Barran (Con)
I thank the noble Lord for his remarks. I absolutely do not deny in any way the importance of financial education, but the issue here is not the importance of any individual cause. The challenge we are faced with—or the privilege that we will all have—is to contribute to a conversation about the right cause for this particular stream of money, with its unique features, and that includes the existing causes that are funded. We will be putting the cart before the horse if we focus too much on causes to go into the Bill; rather, we should put the combined intellect of your Lordships and others into making sure that we spend future moneys in the best way possible.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I am grateful to all noble Lords who have taken part in this debate. I had better begin with an apology to the noble Baroness, Lady Barker, for not having name-checked her as a member of the committee. The truth is that I saw who signed their name to the amendment, but I did not see who was going to speak to it. That is an explanation, not an excuse. I know her as a doughty fighter, and I hope that she will accept this apology for not expressing my thanks to her.
She rightly drew attention to concerns about duplication and what we discussed in our committee about what we call “new initiative-itis”, where ideas are started by a Minister wishing to make a mark but they are abandoned after six months, whether they are good or bad is not followed through with and the institutional memory is never properly adjusted. I accept that. Indeed, I accept the caution from the noble Baroness, Lady Kramer, about future funds flow. She pointed out that this is not an endowment fund but a flow that stops flowing when the money is spent.
I share the point made by the noble Baroness, Lady Lister, that we need continuity. There is sufficient visibility over the next five or 10 years to be able to provide the financial continuity that both she and I see as an important part of the community wealth fund concept.
In response to the point made by the noble Baroness, Lady Barker, about duplication, some of the plan methodologies that we have seen from the Community Wealth Fund Alliance are distinctive and will provide a different approach that is not duplicated elsewhere. However, I accept the strictures of both noble Baronesses.
I am grateful to the noble Lord, Lord Bassam of Brighton, for his support. His suggestion of pilot studies as a means of beginning to build institutional memory was interesting.
I am also grateful for the support of the noble Lord, Lord Blunkett. Of course I accept his remarks about financial education. He and I have discussed many times the narrowness of the national curriculum, which fails to provide education in many of the most important parts of what makes a citizen an effective and worthwhile person knowing their rights and their responsibilities. Financial education surely must be a part of that.
Finally, the response of the Minister was, as ever, smooth and beguiling, and I am trying hard not to be beguiled. I think she said that the current drafting already implies what is made explicit by Amendment 54. Well, if the amendment makes it explicit, let us have the amendment, so that that is explicit, as opposed to relying on the interpretation of the words “at some date in the future”. I hope that my noble friend will come back to that and think a bit more about it, and also about the points that the noble Baroness, Lady Kramer, made.
On Amendment 55, the Minister said that consultation would begin as soon as the Bill becomes law. She referred later to the cart and the horse, and I have to say that that sounds like cart and horse to me because, essentially, Clause 29 throws all the cards up in the air, they will come down where they may, and the only way that your Lordships’ House, or indeed Parliament, will have to influence what happens after that will be by means of regulations. I fully accept that we will have a chance to look at them, but as has been said this afternoon, and as Members of the Committee know, they represent a lower level of scrutiny and of being able to amend what is proposed.
I understand the Minister’s reluctance to accept the amendment, and the weaknesses of the community wealth fund concept at this point in its history, but I hope that she will find time to reassure the people who are working hard in the Community Wealth Fund Alliance that the fact that the Government are reluctant to accept the amendments does not mean that they do not think it is a worthwhile concept. It is a worthwhile concept, and the Government ought to be finding ways—pilot schemes, as the noble Lord, Lord Bassam, suggested, and other ways—to encourage institutional memory and practice to develop in this area. Unlike the noble Baroness, Lady Barker, I think that the idea is distinctive, offers something that no other groups will offer and will be able to do so over a sufficiently long time to make it an attractive prospect in helping to rebuild our social capital. I hope that the Minister will think again about her remarks on Amendment 54. Let us make sure that we have absolute clarity about what can and cannot happen. In the meantime, I beg leave to withdraw the amendment.
Baroness Merron
“(aa) persons appearing to the Secretary of State to represent the interests of the charity sector,(ab) persons appearing to the Secretary of State to represent the interests of communities that—(i) have benefitted, or(ii) may reasonably expect to benefitfrom funding under the scheme, and”Member’s explanatory statement
This probing amendment seeks to understand the consultation process envisaged by the Government when it wishes to exercise powers under Clause 29. It proposes including representatives of charities and communities, as the main beneficiaries of the scheme.
Baroness Merron (Lab)
It is a pleasure to speak to Amendment 57 in the name of my noble friend Lord Bassam. My comments will also refer to the themes drawn out through Amendments 58 and 59, which are also in this group. This group of amendments builds on some of the issues raised in the previous debate about how we ensure that the fund is utilised in way that provides a degree of predictability for the charitable sector.
Consultation needs to be meaningful, and it needs to be seen to be meaningful. It must secure the confidence of the relevant groups and communities as well as the wider public and meet the need to ensure that decisions are fully informed. That quality of involvement is something that my noble friend Lady Lister highlighted when she spoke on the previous group about the need to involve the relevant groups and communities.
Baroness Lister of Burtersett (Lab)
My Lords, I am pleased to speak in support of these amendments, especially Amendment 59 in my name and Amendment 57, to which I have added my name.
With regard to Amendment 57, I was encouraged by the Minister’s response at Second Reading to concerns raised about the consultation process. However, given what she said and what is said in the fact sheet on the Bill, it seems very odd that the Bill itself suggests a narrower approach to consultation, restricted to
“the Big Lottery Fund, and … such other persons (if any) as the Secretary of State thinks appropriate.”
That “if any” implies that the Secretary of State could well consider that there are no other appropriate persons—not a good look to the outside world.
While it is reassuring to have a commitment to wider consultation on the record, it does not have the same force ultimately as the Bill itself, especially if we are looking to any consultation that might be required in future because of a new order under this clause. Would it not make sense to amend the Bill so that it reflects the Government’s actual intentions, thereby giving a clear signal that the Government would like to hear from a wide range of relevant voluntary organisations and community groups? I hope that the Minister will be able to give us a clearer idea of what is envisaged by way of consultation, but also that she will undertake to take the question away and see whether she cannot come back on Report with an amendment that better reflects the Government’s stated position than the rather forbidding wording of Clause 29(3).
I want to take this opportunity to refer back to the previous group and ask the Minister whether she can confirm that the idea of community wealth funds will be included in the consultation document. If it is not, only those who already know about the idea will be in a position to support it. This links back to what the noble Lord, Lord Hodgson, said about the Government sending a signal that they consider community wealth funds a worthwhile concept. The Minister again carefully avoided saying what the Government think about community wealth funds, so some kind of signal to all those voluntary organisations in the alliance that they look sympathetically on the idea would be helpful.
Amendment 59 reflects concerns expressed, in particular by the NCVO, that there should be adequate time for consultation. When I tabled the amendment, I must admit that I thought that 12 weeks was the normal recommended time period. It had recently been breached by the six-week consultation on the New Plan For Immigration so I wanted to be sure that it would not be breached in this instance. However, thanks to a note provided for me by the Library, I have discovered that, some time ago, the Government withdrew the guidance on a recommended 12-week period in favour of departmental discretion. Since then, there appears to have been a marked reduction in the typical time allowed for consultations.
The NCVO puts two main arguments as to why consultation on the use of dormant assets should last for a minimum of 12 weeks. First, it is important that the Government hear from a wide range of groups and communities, which may themselves need to consult their members and may not be used to responding to government consultations. The official guidance on consultation introduced in 2013 indicated that, when deciding on the timescale for a given consultation, the capacity of the groups being consulted to respond should be taken into consideration. Timeframes should be proportionate and realistic. This all points to a good amount of time to ensure that such groups have the time they need to respond, even though the most recent iteration of the guidance in fact gives very little guidance at all. I was not at the meeting where the Minister gave assurances about following Cabinet guidelines but I do not think that those guidelines take us very far.
Secondly, the decisions that will be taken on funding have relatively long-term implications, notwithstanding what the noble Baroness, Lady Kramer, said on the previous group, so it is important to take the time to listen and get the decisions right. I am sure the Minister will point out that it is not usual to specify a timescale for consultation in legislation, but in the face of increasingly vague official guidance, it may be necessary to specify it to ensure that the Government hear from all those they need to hear from. That said, I would welcome a clear commitment on the record from the Minister that the consultation will last at least 12 weeks.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I put my name to Amendment 57. The essence of the case has already been well covered so I shall be brief, but brevity should not be taken as indicating that I do not attach considerable importance to this amendment.
The Committee will recall that, a couple of minutes ago when I was moving an earlier amendment, I emphasised the need for local views to be taken into account and the fact that, to be effective, “local” must mean precisely that. It is charities and voluntary groups, which are often quite small, that can speak most authoritatively about the needs of their local areas and communities, hence the first part of this amendment. It is obvious that the groups that are the likely recipients of funding under the scheme will have the most relevant first-hand experience or views about how the scheme is or should be operating.
There is a danger, of course. I fully accept that trying to discern what local communities really want is not always easy and may require particular effort. That is why there is a temptation to fall back on what I referred to a few minutes ago as gatekeepers. While many gatekeepers are absolutely fine, we need to ensure that those who are holding themselves out are sufficiently well plugged in to the detail.
In that connection, I re-emphasise the point I made—it was also made by the noble Baroness, Lady Lister, a minute ago—that the concept of community wealth funds are relatively unknown and therefore, to get a proper consultation on how they might work, the Government are going to have to do a bit of pitch rolling, if I may use a cricketing analogy, to ensure that the contributors to the consultation process have a full understanding of what they are being asked to respond about. Having said that, Amendment 57 seems likely to provide the objectives to be fulfilled, which is why it has my support.
Baroness Kramer (LD)
My Lords, I welcome the noble Baroness, Lady Merron, as I think this is her first outing in a Grand Committee in the House of Lords, and she is basically doing it in a prison visitors’ set-up. We probably feel like that sometimes here. She made the absolutely key statement: that consultation needs to be meaningful. That certainly underpins everything that I have to say.
I am exceedingly troubled by the very narrow list of consultees in the Bill. The Minister talks about the public, but has felt it really important not to put public consultation in the legislation. We really need an understanding of why she is so determined that the public will not appear in that consultation list. Obviously a Secretary of State who thinks it appropriate can do so, but it is not inherently appropriate in the way that the Bill is drafted. That really is important and it needs to be justified.
The noble Baronesses, Lady Lister and Lady Merron, and the noble Lord, Lord Hodgson, talked about the importance of including charities more broadly. I would add social enterprises. The noble Lord also pointed out the significance of local views.
It may be that I am an old cynic but I deal with a lot of consultations, particularly in the finance sector—they tend to be HMRC or Treasury-driven—and I am extremely conscious that a handful of voices get listened to. They are the sort of recognised powerhouses, the usual suspects and whatever else. Everybody else might get a little answer to one particular point that they make but very rarely—in fact, never within the field that I have covered—have I seen anybody other than that central core of usual suspects have any significant impact on the outcome, and lead to a different approach as a consequence of the consultation. I am extremely troubled by the way in which all this is currently structured and by its essential identification of only one big usual suspect: the Big Lottery Fund. Frankly, it is not fair to the Big Lottery Fund to make it carry that full burden alone, in the way that has been done.
My Amendment 58, also signed by my noble friend Lady Barker, was tabled because I am spitting tacks generally at the way that there is no role for Parliament in these consultations. From the many exchanges I have had with HM Treasury I know that, when there is a consultation, regulators take exactly the same point of view: that any parliamentarian is welcome to write in. Well, first, you do not find many parliamentarians with the time to develop and do all that but, secondly, they are not among the usual suspects who ever get seriously considered. It is not worth the candle most of the time and I have no reason to think that any other department will be very different in its attitude.
The first time that parliamentarians will have any impact will thus be in the useless process of dealing with a statutory instrument that they cannot amend or kill. This seems fundamentally disrespectful to Parliament. In an area such as this, we are essentially looking at Parliament in many ways as the guardian of people’s money that they have somehow missed or lost, or whatever else, so it is even more important that there should be that much wider voice speaking.
In Amendment 58, which is slightly hopeful, I have popped in a requirement to engage directly with Parliament. This problem will have to be resolved because consultation is increasingly becoming the substitute for scrutiny and accountability. It is not designed to do that in the way that it is structured at the moment.
I will pick up the point made by the noble Baroness, Lady Lister. It is quite shocking that we do not even have a reliable framework now for a consultation: it is back to departmental discretion. That is not appropriate. It is highlighted again in the Bill and, for all these reasons, I find this very troubling. We need a justification from the Government on their approach to consultation, and the answer is not: “In this instance, we’ve decided to do something very broad and general, so be happy”. Why is it in no way captured within the legislation itself?
Baroness Barran (Con)
My Lords, Amendments 57, 58 and 59 put forward respectively in the names of the noble Lord, Lord Bassam, the noble Baronesses, Lady Kramer and Lady Barker, and the noble Baroness, Lady Lister, seek further commitment and clarity regarding Clause 29 and the statutory duty to consult. I thank the noble Baroness, Lady Merron, for setting out so clearly the importance of the consultation process: we concur absolutely with the spirit of her remarks and I hope that my remarks on the earlier group show quite how critical we see the consultation as being as part of the Bill.
The noble Baroness, Lady Lister, asked me to commit that a question about a community wealth fund will be in the consultation. We need a collective agreement on what goes into any consultation document, so I am unable to give her that reassurance today. Similarly, I hesitate to make any comment in relation to the specific community wealth fund initiative, however caveated in the way she suggests, because I do not want to give the impression that any decisions have been made before they have been. We are genuinely going into this consultation with the aim that I outlined on the earlier group; I hope she will accept that.
As noble Lords have noted, Clause 29 mirrors the approach for distributing funding that is already used in the devolved Administrations. In line with their process, the Secretary of State will consider who it is appropriate to consult and has committed to launching a full public consultation on the social and environmental causes in England, provided this measure passes. This will give the public and sector participants the opportunity to contribute their views before any change may be made to the current English causes. The devolved Administrations have similarly undertaken public consultations on the distribution of their portions before laying orders.
I will respond to the points raised by the noble Lord, Lord Bassam, and the noble Baronesses, Lady Kramer and Lady Merron. Making further specifications in this clause could imply that these stakeholders are more important than other groups which it might be equally appropriate to consult.
I turn to the amendment of the noble Baroness, Lady Lister, on the length of the consultation. It will be open for a proportionate amount of time to allow for considered and good-quality responses, and will be in line with Cabinet Office guidance. She will be aware that, in response to the challenges faced by many groups, but including small community organisations, we have extended the time period of consultations where necessary, particularly, most recently, during the pandemic. For the reasons I have set out, I am not able to accept these amendments and I ask that noble Lords do not press them.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
My Lords, I have had one request to speak after the Minister, from the noble Baroness, Lady Lister of Burtersett.
Baroness Lister of Burtersett (Lab)
I thank the Minister for, as usual, responding very fairly, but I have a number of questions. She said, and I understand why, that she cannot commit to including the community wealth funds in the consultation document, but will she at the very least commit to considering it when discussing what will go into the consultation after the Bill becomes law?
The Minister did not respond to my fundamental question—it was raised also by the noble Baroness, Lady Kramer—about the difference between what the Bill says about consultation and what she herself has said about it. I asked specifically whether she would take the matter away and have another look at it before Report. If the Government are committed to consulting community groups and so forth, why does the Bill not say so? It is sending out a very bad message if it stays like it is. I want to push her on that. Will she at least look at what has been said today and see whether the drafting of the Bill could not be improved? As has been pointed out, there has already been quite a large number of government amendments. This amendment would not change what the Government plan to do, but it would give a clear signal to the outside world that the consultation would, to use my noble friend’s word, be “meaningful”.
On the timescale, the Cabinet Office gives very little guidance now. Can the Minister at least confirm that she accepts that, given the kind of groups we want to hear from, “proportionate” points towards a longer rather than a shorter timescale for consultation?
Baroness Barran (Con)
I am happy to commit to consider the community wealth fund proposal as we review the range of questions that go into the consultation. I apologise to the noble Baroness: I thought I had answered her questions. The framing in the Bill mirrors that of the devolved Administrations, which is why it is drafted in the way that it is. The Secretary of State has said in public that there will be a full public consultation on the social and environmental causes—I have said it several times at the Dispatch Box—so that is a matter of record.
Baroness Merron (Lab)
I thank the Minister for her response to the debate. I note that she acknowledged the importance of consultation and indicated that she concurred with the spirit of my remarks, which I welcome. However, I want to press the point raised by my noble friend Lady Lister about the need for the consultation to be meaningful, not just in how it is but in how it looks, how it feels and how it will work. My noble friend referred earlier to matters in the Bill being “not a good look”. I hope that the discussion today will support any changes the Minister might seek to make as we move along in the process to make the Bill, which is intrinsically good, “a good look” rather than to lose out by being in certain cases less than a good look. The quality of consultation is particularly important in that regard.
The Minister reiterated the point that the Secretary of State will decide who will be consulted and that a “proportionate amount of time” would be spent on the consultation. I believe that is all understood. However, the discussion today seeks to move us beyond that. The Minister’s argument sounds basically to be along the lines of we must trust the Secretary of State and be content with what is known as a “proportionate amount of time”. The point made so well by various noble Lords today is that perhaps it would be a better Bill if we were to be rather more focused and explicit about what we are offering, in terms both of timescale and of those who will be consulted.
I hope that the Minister will reflect on the thinking and consideration that has been given today. I thank noble Lords who have taken part in the discussion on this group, which has shone a light on the ways we could improve matters. I am sure that we will revisit this as we continue to consider the legislation. With that in mind, I beg leave to withdraw the amendment.
Baroness Kramer
“(5) Any distribution of dormant assets money provided for under this section must be additional funding, and must not replace funds previously provided for by the Government.”Member’s explanatory statement
This amendment would require that any distribution of dormant assets money must be additional funding.
Baroness Kramer (LD)
My Lords, the Grand Committee has certainly more than touched on the topic of additionality in previous groups of amendments, but I felt it was important to table a specific amendment. I am not at all precious about its wording; I just wanted to make sure that it got discussed directly.
From the beginning of the legislative process—even ahead of it, when she was kind enough to brief us—the Minister has spoken about the importance of the principle of additionality and reassured noble Lords that that principle would sit behind the dormant assets fund. I had a look to see where this is in the legislation. I am not the best comber of legislation so I would be delighted if the Minister were able to enlighten me if I have got it wrong. I can find a reference to additionality in the statues of the Big Lottery Fund; I can find it again in the 2019-22 management agreement between DCMS and the Big Lottery Fund. However, in the 2008 Act, which is entirely consistent with those two items, I only found it in the reporting and accounts requirements in part 3 of Schedule 3, which says:
“The report shall set out the Fund’s policy and practice in relation to the principle that dormant account money should be used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by … a Government department”
and the various devolved Administrations. Have I missed something? I cannot read anywhere that it is a requirement on the department or the Government to ensure that the structure is such that additionality is a fundamental principle. Have I missed it? Is it somewhere in the legislation and I have gone past it? If I have, I am very willing, and will be quite relieved, to be corrected.
The Bill in front of the Committee will allow other organisations to become major distributors, not just the Big Lottery Fund. Is the additionality principle particular for that fund? Will it be applied to other distributors? It seems that the issue is not discussed in any way. I am used to legislation in which, basically, Parliament empowers and instructs the Government to adhere to certain principles, and I cannot see that it is in here. If somebody can help me with that, I would be very grateful. As I have just described, the principle also has a sting in it. As I quoted before, it is
“to fund projects, or aspects of projects, for which funds would be unlikely to be made available by”
the Government. One can see the temptation to blur lines.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, as relatively few of us are speaking on this group, I follow straight on from my noble friend Lady Kramer. Unsurprisingly, I agree with everything she said. She has been putting her finger on quite a few weaknesses and gaps that appear in the Bill. We are all concerned to make sure that the money available does additional good work. It should not be used as an excuse by the Government to put in less than they would have otherwise, so that they do not take it into account by thinking they do not have to do quite so much because a top-up might come along from the dormant assets fund.
On that point, I am also curious as to what “unlikely to be made available by Government” means. It is hard to free one’s mind from the concern that the Government will somehow take account of this pool of money as a back-up, no matter what they say. Indeed, on Monday my noble friend referenced the money put in for Covid purposes and said that it was muddying the waters. The fact that the Government are prepared to recite it altogether means that they are taking it into account in some kind of bigger picture. It is hard to escape that point of view. The last thing we want is for there to be a pattern of cuts, followed by replacement funding.
In debate on the first group of amendments, the Minister said that the funding was intended to achieve maximum impact. That really means that it has to be doing things that would not otherwise be done or things that were previously being done, but from which the Government have decided they can withdraw. I am not saying that it cannot be used for that in extremis if the need is so great, but that cannot be the pattern that we allow. As my noble friend said, it would essentially mean that the money was in one way or another replacing taxation.
We debated this on Monday and, as my noble friend Lady Kramer also said, we have talked about reports and reviews. It is important to show how the money has been spent, and to show additionality—in other words, to show that there is clear water between the use of the funds and what the Government do. Perhaps this is a bit of a conflation of ideas but if things like community wealth funds might be going in at a different level, it could mean that they were more isolated from the risk of becoming replacement funding, in places where the Government have pulled out. This would be new funding.
We need something more in the Bill, unless the Minister can explain categorically that that idea is there. She may make statements about how the spending will be used but it would also be good, in the context of a review clause, to ensure that there is a review to find out whether things have actually happened that way, regardless of the original intention.
Lord Bassam of Brighton (Lab) [V]
My Lords, we are grateful to the noble Baroness, Lady Kramer, for tabling Amendment 60, which touches on an issue raised by many on Second Reading. I thought I heard the Minister, who has been extremely courteous throughout these proceedings, mention the Government’s intention to treat funds from dormant assets as additional to what is distributed through the other distributing bodies fed from the National Lottery.
The inclusion and identification of new dormant asset proceeds is welcome. I acknowledge the earlier commitment that these funds will remain additional, rather than replacing other types of financial help; that is extremely important. The noble Baroness, Lady Kramer, has laid out the case well. There is consensus that we do not want funding of this nature to be replacement funding for mainstream government financing programmes.
If it is really the Government’s intention that this money should be used on top of other funding sources, I ask the basic, simple and fundamental question: where is the harm in the Government accepting this amendment? If they did, there would be a clear statement of policy intent, giving a clear direction on the face of the Bill. If the Minister says that the Government cannot do so, I shall be extraordinarily disappointed. However, I would be more than happy to work with colleagues across the House on this—and with the Government themselves, if they are not content to accept the amendment—to bring forward an alternative to the text in this amendment on Report. There probably is consensus that that would be the right thing to do.
Another important factor to bear in mind is that dormant asset funding will grow only as we find new dormant assets that can be used for charitable purposes. In no way should they be seen as an alternative source of funding, replacing government mainstream funding. For that reason, it would be right to put a commitment in the Bill, as a statement of principle, so I am more than happy to support the noble Baroness’s amendment.
Baroness Barran (Con)
My Lords, as we have heard, Amendment 60 in the names of the noble Baronesses, Lady Kramer and Lady Bowles of Berkhamsted, seeks to confirm the principle of additionality. As I noted at Second Reading and during Monday’s debate, and as the noble Baroness, Lady Kramer, also noted, the principle of additionality is set out in Schedule 3 to the 2008 Act and will continue to be a core principle of the scheme. The Act describes additionality as
“the principle that dormant account money should be used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by … a Government department”
or devolved Administration. The Bill does not alter the part of the 2008 Act in which the principle is defined, which affects all of the UK as opposed to just England.
The noble Baroness, Lady Kramer, asked to whom the principle applies. It applies to the National Lottery Community Fund, as she rightly said, not the Secretary of State in DCMS. That is because the National Lottery Community Fund is the main distributor of the funding and the accounting officer for the dormant asset funds, so there is also a read-through to the spend organisations on additionality, which I think was implicit in her remarks.
I absolutely respect the noble Baronesses’ and other noble Lords’ wish to get real clarity on what we mean by this principle but I hope that noble Lords will, on reflection, agree that the current definition gives a useful degree of flexibility. At one end of the spectrum, there are social and environmental causes that are clearly for government to fund, but, as the Covid pandemic has shown, there are areas in the economy that most of us would never have expected to receive government funding that have now received it, for example the furlough scheme. So we have flexibility depending on pandemics and other economic circumstances on where government funds, and that is well captured in the definition as we have it.
I propose to provide a couple of example of how the additionality principle has worked to date. I do not intend to be comprehensive but to show how it has worked in practice because I think that concern that it could in some way be departed from was behind a number of your Lordships’ comments, and I hope to reassure them that that is absolutely not the case.
The most obvious example of the principle is that it allows the scheme to fund something that would normally be seen as outside the scope of government intervention. A good example of that was the creation of the world’s first social investment wholesaler, Big Society Capital, which used a combination of dormant assets and leveraged private co-investment to make it happen. As another example, the principle of additionality could enable dormant assets funding to test interventions and gather evidence that could then be used as a model for other funders. For example, Big Society Capital and its associated fund managers have worked for a long time on homelessness using innovative social investment.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
I have no requests to speak after the Minister, so I call the mover, the noble Baroness, Lady Kramer.
Baroness Kramer (LD)
I am grateful to everybody who has spoken. Obviously, the Minister is trying to give me some reassurance, but it has not taken me all the way, I have to confess. Although the additionality principle is in the Bill, it is there only in the context of shaping the work of the Big Lottery Fund; it is not there in the shape of a fundamental principle that applies, necessarily, if the Big Lottery Fund were to become one of several bodies managing distribution, for example, or if there were to be a different route for distribution. It is not sitting at that fundamental level; it is sitting at least one arm’s length away. So, I continue to have that concern.
I fully accept that the Minister has given some very good examples of additionality, but if she would care to look again at the GOV.UK website, to which I drew her attention when we were discussing some of these issues earlier in the week, it is a stretch to imagine that the additionality principle is applying to the £150 million from dormant bank and building society accounts involved in providing support to charities as a consequence of the Covid epidemic. Indeed, the way the Government discuss it—running it in with their own £750 million of additional funding—makes it very clear that they see this as a single programme, and express themselves very naturally and honestly in that way. There is a real question: do we say, “In extremis, forget the additionality principle”, in which case that ought to be acknowledged up front? Or do we say, “It’s always been a fairly weak principle and rather blurred; we have some good examples, but it is not something we are really going to press”? A lot of understanding needs to come from that.
When we go through a new Act, of course, Covid is at the front of our minds now, but I very much hope that in a matter of time it will not be and we will be back to normal procedures. We really need to know how the Bill will operate when it becomes an Act, because it will continue into that future period. So, I raised the issue of additionality and I think we could use some better answers. I absolutely still do not understand why it is not written in such a way that it applies to the government department’s actions. That is just beyond me, because I have certainly seen the Government draft similar constraints for other government departments in other areas, and I have certainly seen them accept amendments that do the same kind of thing. It just strikes me as a bit peculiar to see the way it has been handled here. I think all of us are concerned that it should be a tight ship and not a leaky one. Saying all that, I will, of course, withdraw my amendment.
Baroness Barker
“Eligible recipients of dormant assets funds
(1) The Dormant Bank and Building Society Accounts Act 2008 is amended as follows.(2) In section 16(1), at end insert “to social enterprises and charities”.(3) In section 16(3), at end insert “to social enterprises and charities or to a body that will make grants or loans, or make or enter other arrangements for the purposes of complying with subsection (1), with social enterprises and charities”.Member’s explanatory statement
This amendment would mean that all the holders of funds would have to be registered social enterprises and charities and that any bodies that received funding would have in turn to work with social enterprises and charities.
Baroness Barker (LD)
My Lords, I declare an interest as a member of the All-Party Parliamentary Group on Social Enterprise, at whose recent AGM I had the pleasure of listening to the Minister address the subject that we are coming to now. I admit that one of the reasons why I wanted to table this amendment was that, up until approximately an hour ago, the Committee had had very little discussion on social enterprises. We had, naturally, tended to focus on community groups and voluntary sector organisations and that is the trouble; social enterprises are always getting lost in discussions such as this. They also get lost when we come to talk about industrial strategy and so on. I wanted to focus some attention back on them because the dormant assets funding that has been released so far into the Big Society Capital fund and the Access foundation has been really important. It has helped more than 5,000 social enterprises since 2010, dormant assets worth £460 million have been put through social investment, and it has directly supported more than 1,500 organisations. It will be pleasing to some noble Lords that the vast majority—82%—of those organisations have been outside London, so the investment has been going into communities which are, by definition, less wealthy.
Social Enterprise UK, whose chair is the noble Lord, Lord Adebowale, is currently investigating the impact of that, but we know that it is still difficult for social enterprises to access finance and that access to what finance exists is uneven. There is a particular deficiency in support for some minority ethnic organisations. It has always been the case that women and people from minority communities in any walk of life or business have had more difficulty than others in accessing capital. The biggest problem has been access to what is known as patient risk capital—long-term investments—for social enterprises. Dormant assets are exactly what would work for that.
That is the background to my amendment, which seeks to do two things. One is to limit the beneficiaries of the dormant assets scheme to charities and social enterprises. The reason for this is that, as the primary purpose of this legislation moves away from Parliament and down through departments, and given the experience of a year ago, when we watched the Government scrabbling to find money down the back of departmental sofas to put towards the voluntary and community sector, there is a feeling out there that we have to protect these funds from temporary political exigencies. We particularly need to protect against the creation of new vehicles, some of which may be companies, in an attempt to deliver the agreed main outputs of this fund.
Secondly, my amendment would limit the distributing bodies to being charities or social enterprises. We have already seen the emergence into that field of one entity which is not a charity or social enterprise. My noble friend Lady Kramer, who comes from the banking profession, has in previous discussions noted that if colleagues in her former profession were to see a profitable avenue to go down, they might well develop a new arm to do that. In the scope of banking it is not a massive amount of money, but we are talking about billions of pounds of assets.
It is for those reasons that I have tabled this amendment, and it is those issues that I wish to test in discussion. I therefore beg to move.
Baroness Kramer (LD)
My Lords, I shall be brief, because my noble friend Lady Barker has basically laid out the case. I suspect that it was thought a given by everybody in 2008 that the money would go to charities and social enterprises; it probably never occurred to them to do anything else. We live in a much more varied world these days, so it would seem to make sense to add the clarity which the amendment seeks.
When we considered some of the amendments on who should be consulted, they talked about charities. There is a tendency to forget the social enterprise sector and the crucial role it plays. It is a rapidly growing role. I was stunned to learn of the findings of a survey recently conducted by Social Enterprise UK to work out the size of its sector. It started off with the assumption that it was a sector of around £24 billion and discovered that it was one of around £60 billion. An awful lot gets missed and somehow goes under the radar. We need to make sure that attention is appropriately drawn. The amendment is successful in doing that.
As we move into the post-Covid world, we will need to pull all the good levers that we have. That means the social enterprise lever as well as the charitable lever. Making sure that the language matches the reality strikes me as significant and useful. I hope that the points that my noble friend has made will be taken on board. Sometimes it is important to make things explicit, particularly in legislation. I cannot think that it constrains the Government in any way that they would find unacceptable, but it may ring the bell of DCMS when it does the consultation to think, “One of the usual suspects we need to go and listen to is going to be in the social enterprise world; it won’t just be in the big charities world”. Sometimes, we have to do something to make sure those messages get through.
Baroness Merron (Lab)
Although the amendment forms a different group, it certainly speaks to a number of the issues raised in previous debates over the past few days in Grand Committee. I am glad that the amendment is before us, because it shines a light on something very important in respect of social enterprises.
At Second Reading, I recall the noble Baroness, Lady Barker, raising several concerns about the Government’s approach to the dormant assets scheme, including about the long-term viability of projects and whether enough is being done to support social enterprises. She has just restated those concerns. Social enterprises are a crucial part of our economy, as they bring together those dual goals in respect of business but also social in a particular way that enhances our communities.
Baroness Barran (Con)
My Lords, Amendment 64, in the name of the noble Baroness, Lady Barker, proposes that all dormant assets funding must be distributed to registered charities or social enterprises. If I may, I will remind the Committee that there are two parts to the process of distributing dormant assets funding in England. First, the National Lottery Community Fund distributes funding to four independent, specialist spend organisations, which focus on one of the three causes currently specified in the 2008 Act. Secondly, the spend organisations themselves distribute funding to beneficiaries to deliver initiatives, in line with their respective objectives.
As your Lordships are aware, as independent organisations, the spend organisations are empowered to determine the best way to deliver long-term interventions to tackle youth unemployment, to increase the financial well-being of people in vulnerable circumstances and to grow the UK’s social investment market. This focus on creating systems change at scale is a major driver behind the scheme’s success to date. The unique flexibility that the scheme offers enables the money to be deployed innovatively and, as a result of this innovation, some of the bodies that distribute the funding do not happen to be registered charities or social enterprises themselves.
I have heard the emphasis that your Lordships have placed on ensuring the maximum impact of the scheme. Given the social and environmental focus required of the funding, as I have said in previous debates and in evidence to the committee which the noble Baroness, Lady Barker, referred to, it is hard to imagine that charities and social enterprises will not continue to be key partners in maximising this impact. I echo the comments of all the noble Baronesses who spoke on this group: I, too, absolutely recognise the important value of social enterprises. I have been working with a number of them, particularly in relation to implementing the social value Act and the important role that they can play in delivering government contracts in future.
However, organisations deliver impact on a spectrum. Impact-driven charities and social enterprises are an integral and important part of this spectrum, but we should not exclude mission-locked and mission-focused organisations that may differ in legal status. This is particularly so in light of the diversity of mission-locked organisations—many of which are led by individuals from black or other minority communities, which I know is an issue that the noble Baroness, Lady Barker, referred to and sees as important.
Organisations that can deliver impacts which meet the objectives of the scheme should be able to do so; this should not be limited in terms of legal form or status, through primary legislation or otherwise. As I noted earlier this afternoon, it is imperative that we afford the public and our voluntary industry participants the opportunity to have a say in how future funding in England is distributed. Making changes to the recipients of this funding without first consulting would risk the legacy of the scheme that I know we all wish to see expanded and thriving. For these reasons, I am not able to accept this amendment and therefore hope that the noble Baroness will see fit to withdraw it.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
I have received no requests to speak after the Minister, so I call the noble Baroness, Lady Barker.
Baroness Barker (LD)
I thank all noble Lords who spoke in support of my amendment, in particular the noble Baroness, Lady Merron. I thank the Minister for her considered reply. I hope she will understand that we have agreed from the outset of our discussions that there is an overall consensus about the benefit of the scheme and the Government’s intentions to take the existing scheme, grow it and make it work efficiently and effectively.
However, throughout our discussions the Minister will have picked up from all Benches a not inconsiderable degree of concern about the way the scheme is moving away from the initial primary legislation into secondary legislation, and the considerable powers of Ministers to change fairly fundamental aspects of it without further scrutiny. Although she was complimentary and supportive of voluntary organisations and social enterprises in her response, as I fully expected she would be, she still left the door open for for-profit companies to take over aspects of the scheme without any limitation. I worry about that. It is a real concern, particularly given the way parliamentary scrutiny is being watered down by the concept of the Bill.
I heard what the Minister said on this matter, but I am not reassured and I reserve my position for later stages, because there is something deficient about leaving the door open for the growth of non-charitable and non-social enterprise players in the distribution of this money. However, I heard what she said. We have come to the end of our discussions today and I thank her very much for the answer she gave. Therefore, for the moment, I beg leave to withdraw the amendment.
Baroness Barran
“Financial Services and Markets Act 2000 (c. 8)
1A_(1) Part 24 of FSMA 2000 (insolvency) is amended as follows.(2) In section 359 (administration order), in the definition of “authorised reclaim fund” in subsection (4), for the words from “means” to the end substitute “has the same meaning as in the Dormant Assets Acts 2008 to 2021 (see section 26 of the Dormant Assets Act 2021);”.(3) In section 369A (reclaim funds: service of petition etc on FCA and PRA), in subsection (3) for the words from “means” to the end substitute “has the same meaning as in the Dormant Assets Acts 2008 to 2021 (see section 26 of the Dormant Assets Act 2021)”. Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)
1B_(1) Article 63N of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (activities of reclaim funds) is amended as follows.(2) In paragraph (1)—(a) in sub-paragraph (b) for “account” substitute “assets”, and(b) after sub-paragraph (b) insert “;(c) dealing with unwanted asset money.”(3) In paragraph (2)—(a) omit the first entry;(b) after that entry insert—““dealing with unwanted asset money” means—(a) the acceptance of transfers of amounts as mentioned in section 21(2)(b) of the Dormant Assets Act 2021, and(b) dealing with those funds (so far as they are not needed for either of the purposes mentioned in section 5(1)(c)(ii) or (iii) of the Dormant Bank and Building Society Accounts Act 2008) with a view to their transfer to the body or bodies for the time being specified in section 16 of the Dormant Bank and Building Society Accounts Act 2008;”;(c) in the second entry, for ““dormant account funds”” substitute ““dormant assets funds”, “reclaim fund””;(d) in the third entry for the words from the beginning to “the management” substitute—““management of dormant assets funds” means—(a) the acceptance of transfers of amounts as mentioned in section 1(1)(a) or 2(1)(a) of the Dormant Bank and Building Society Accounts Act 2008 or 2(1)(a), 5(1)(a), 8(1)(a), 12(1)(a) or 14(1)(a) of the Dormant Assets Act 2021,(b) ”;(e) at the end of that entry insert “, and(c) dealing with those funds with a view to the transfer of amounts to the body or bodies for the time being specified in section 16 of the Dormant Bank and Building Society Accounts Act 2008.””Member’s explanatory statement
This amendment would insert a paragraph 1A (making two consequential amendments to references in the Financial Services and Markets Act 2000 to an authorised reclaim fund) and a paragraph 1B (amending the Regulated Activities Order to ensure it reflects the wider activities of a reclaim fund provided for by the Bill).
“3A_(1) In section 1 (transfer of balances to reclaim fund), after subsection (2) insert—“(2A) A transfer of the balance of a dormant account as mentioned in subsection (1) does not itself—(a) constitute a breach of trust or fiduciary duty affecting the balance, or(b) give rise to any other liability of any kind (whether against the transferring bank or building society, the reclaim fund or any other person involved), other than the liability of the reclaim fund arising by virtue of subsection (2)(b).”(2) The amendment made by sub-paragraph (1) does not apply in relation to a transfer made before it comes into force.”Member’s explanatory statement
This would make provision in section 1 of the Dormant Bank and Building Society Accounts Act 2008 corresponding to Clause 17(1) of the Bill.
Member’s explanatory statement
This would clarify that a transfer in pursuance of section 5(1)(ca) of the Dormant Bank and Building Societies Act 2008 (as inserted by paragraph 5(2)(c) of Schedule 1 to the Bill) is to be made to the body or bodies specified in section 16(1) of the 2008 Act.
Member’s explanatory statement
This would ensure that unwanted assets money does not have to be transferred to the body or bodies specified in section 16(1) to the extent that the reclaim fund needs to retain any of it to meet regulatory solvency requirements or to use it to meet relevant expenses.
Member’s explanatory statement
This would remove an unnecessary reference to the deduction of expenses, so that section 5(1)(cb) as inserted by paragraph 5(2)(c) of Schedule 1 to the Bill is consistent with section 2A(7) as inserted by Clause 20.
Member’s explanatory statement
This would amend the definition of “repayment claims” in section 5(6) of the Dormant Bank and Building Society Accounts Act 2008 so that it covers claims arising by virtue of Clause 5(3)(b) as well as those arising by virtue of Clause 5(2)(b).
Member’s explanatory statement
This would amend paragraph 3(2)(a) of Schedule 1 to the Dormant Bank and Building Society Accounts Act 2008 so that it refers to Clause 5(3)(b) as well as Clause 5(2)(b).
Baroness Barran
Member’s explanatory statement
This would correct an erroneous cross-reference.
Member’s explanatory statement
This amendment is consequential on the government amendment to Clause 14(3) at page 12, line 26.
Member’s explanatory statement
This amendment is consequential on the government amendments to Clause 9.