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, 6 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, 6 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.
Member’s explanatory statement
This amendment is consequential on the government amendment to Clause 14(3) at page 12, line 26.
“umbrella company sub-fund umbrella co-ownership scheme sub-fund umbrella unit trust scheme sub-fund | section 9(6)(b) and (7) section 9(6)(c) and (7) section 9(6)(d) and (7)” |
This amendment is consequential on the government amendments to Clause 9.
Dormant Assets Bill [HL]
Tuesday 16th November 2021
(3 years, 1 month ago)
Lords ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 37-I Marshalled list for Report - (12 Nov 2021)
16:28 - Division on Amendment 1 - Ayes: 216 / Noes: 195 - Amendment 1 agreed.
17:49 - Division on Amendment 6 - Ayes: 164 / Noes: 192 - Amendment 6 disagreed.
Lord Bassam of Brighton
“(1A) An order under this section may enable the creation of funds (to be known as “community wealth funds”) that may make grants and other payments to support the provision of social infrastructure to further the wellbeing of communities suffering from high levels of deprivation and low levels of social infrastructure.(1B) The Secretary of State may—(a) by order create one or more community wealth funds for a temporary period of at least 10 years, and(b) at the end of that period review the efficacy of the community wealth funds with a view to creating community wealth funds on a permanent basis.(1C) In subsection (1A), “social infrastructure” means—(a) buildings or other assets owned or managed by organisations located in communities for the purposes of local residents’ meeting, socialising, accessing educational resources, or conducting other activities to improve their wellbeing, or(b) organisations, whether incorporated or unincorporated, existing for the purposes set out in paragraph (a), (c), (d), (e), (f), (g), (i) or (j) of section 3(1) of the Charities Act 2011.”Member’s explanatory statement
This amendment would enable orders under Clause 29 to create community wealth funds as a means of tackling deprivation and building social infrastructure in left-behind communities. It would mandate the Secretary of State to establish and review the effectiveness of one or more pilot schemes which would run over at least ten years.
Lord Bassam of Brighton (Lab)
My Lords, I welcome the Minister to his first outing on the Bill. Before I get into the body of the amendment, I perhaps ought to declare an interest. I am a member of several boards of charities, and I work for a charity, so I am rather hoping that if we endorse this amendment, those charities might at some point benefit from it. Nevertheless, it is an interest to be declared.
I thank the noble Lord, Lord Hodgson, for leading this debate in Committee, when he proposed what could be called a “full-fat” version of the community wealth fund initiative. In Committee, the Government argued that the local trust proposals, while interesting, are not sufficiently worked through, meaning that the DCMS is not in a position to make community wealth funds a beneficiary of dormant asset funds at this time.
Amendment 1 suggests a reasonable compromise and, on that basis, we hope that the Minister will be able to accept the amendment. The text would give the Government the power to establish a long-term pilot scheme, enabling small-scale investments to be made in local communities that have been left behind in recent years and for data relating to the social impact of those investments to be gathered and analysed. The amendment does not compel Her Majesty’s Government to act but gives them the tools needed to commission such a pilot.
The Government’s stated commitment to the levelling- up agenda was very much at the centre of their 2019 election campaign and, of course, they have subsequently argued strongly in favour of levelling up in many different guises and fora—we await anxiously, with bated breath and much anticipation, the arrival of the White Paper—so it is hard to see any reason why DCMS should exclude itself from that policy process and not agree to trial the community wealth fund approach.
My argument is simply that the proposal could act as a powerful tool in boosting deprived areas, putting small sums of money in communities’ hands so that they can invest in the facilities or services that would have the most local benefit—perhaps subsidising a community hall, running adult learning classes, supporting skills and training hubs and sports facilities, and improving digital connectivity. I am sure we could all come up with a long list of things that could directly benefit communities that have been left behind and require levelling up.
The other feature of this, which speaks to the amendment, is that much of the Government’s funding so far announced for levelling-up programmes is focused from the centre, so it is directed and targeted at precise places and communities. There is nothing necessarily wrong with that, but the community wealth fund, if trialled and piloted in the right way, would put money directly into the hands of communities that sought to benefit from them, giving a sort of bottom-up approach, one that I believe most of us in your Lordships’ House would very much support.
Stakeholders have repeatedly signalled a willingness to discuss their idea with Ministers. They are realistic about the difficulties of adopting community wealth funds with a big bang approach, which in my view adds rather more weight to the proposal for a time-limited series of low-risk pilots.
Finally, while I am on this point, I thank the right reverend Prelate the Bishop of Newcastle, who has made a valedictory speech and is therefore unable to contribute to this debate. We are grateful for her support for this amendment, as well as that of the Bishops at large. We are also, of course, very grateful to the right reverend Prelate for her wider service in your Lordships’ House.
We see this amendment as part of a levelling-up agenda and a way of empowering communities, as well as an opportunity to trial new and innovative ways of funding communities. We believe that this has a low-risk attached to it but would nevertheless give a boost, and some inspiration and thinking, to local wealth creation. I beg to move.
Baroness Kramer (LD)
My Lords, I am very delighted to support this amendment. My colleagues and I are great believers in empowering local communities. Indeed, in my years as an MP, I saw a number of local initiatives, driven by local people and community groups, that did some extremely good work but could not cope with the mutual demands of both providing their services and fundraising, so they were unable to grow to that kind of sustainable point that was so important in the community. It seems to me that the community wealth fund gives opportunities to those new initiatives, driven by local people, targeted very much towards the members of the local community and very much reflecting local need. It would seem ideal to do this under the structure of the dormant assets programme.
I have two other reasons for feeling that this is important. Later on Report, we will address issues of oversight over the kind of programmes funded through dormant assets. But it seems to me that there is no way that that issue can be addressed without recognising that the kind of resources for the detailed scrutiny and monitoring of programmes is in short supply. It seems to me that, when you have small local programmes, a well-structured community wealth fund arrangement can put in place that administrative oversight and make sure that, locally, the funds are well spent, provide value for money and are properly targeted. So that level of administration in fact makes up for a much broader weakness, frankly, within the overall dormant assets structure.
I am also very pleased to look at a pilot approach—this will be a case of trialling, reshaping and refining—because I am concerned to make sure that the money derived from the dormant asset funds is used in addition to the kind of services that ought to be provided, whether by central or local government. It will be really important for an entity such as the community wealth fund to work in tandem with local authorities but not substituting for what they can or should be doing. We do not want duplication of administration or service, and we certainly do not want to give central government an opportunity to further reduce the resources that it provides to local authorities on the grounds that the dormant asset fund and various charitable and local civic societies will do the work in its place and not require the normal support and resource that ought to be provided.
It therefore seems to me that this is very much a win-win approach, and I hope that the Government will take it on board. The Bill is an opportunity to expand what has been a very successful programme in significant additional directions, and this is certainly one of them.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have my name down in support of this amendment, which, as the noble Lord, Lord Bassam, said, builds on one that we debated in Committee. As is always the case, when you come back to the subject, there is a risk of a great deal of repetition, and I do not wish to try the patience of the House with a long exposé. During the debate in Committee, the Minister’s predecessor, my noble friend Lady Barran, raised some significant concerns that the Government had about the way that this might operate. The amendment of the noble Lord, Lord Bassam, has very neatly—if I may say so without sounding patronising—answered some of the points made then.
I will repeat, in four sentences, four reasons why I am attracted to community wealth funds. They are very local and can reflect the often highly idiosyncratic needs of a particular local community. They can provide a physical space—a building—as a focus for presenting and answering those particular needs. Thirdly, they can provide an element of professional help, without which a purely voluntary organisation can struggle. Fourthly—this is most important—they can provide the long-term capital needed to answer and build answers to the very deep-seated challenges that many of these communities face.
However, as my noble friend Lady Barran said—I am sure that if I could see my noble friend’s speaking note I would see that he will repeat it in a minute—this is a new approach and the Community Wealth Fund Alliance is setting out, brimming with confidence, hope and optimism. I certainly wish it well, but there will be difficult days ahead with hard decisions about structure, approach, governance and impact. The noble Baroness will probably raise that last issue in her speech in a minute. It is dangerous if you accept too rigid an approach in primary legislation; if it subsequently turns out to be less than ideal, you are stuck with it. So there is an element of “Be careful what you wish for”.
Then there is the issue of consultation. I think many of us would say that this was a case of putting the cart before the horse. Normally you have a consultation, get the results, draft the legislation and then discuss it in the light of what has been discovered, but that has not happened here and we are going at it the other way around. Whether we like it or not, that is where we are. So I can see why, unsatisfactory though that approach is, in the circumstances, the Government cannot and do not want to pre-empt the results of that consultation.
Conversely, primary legislation, like buses, does not come along very often; the next Bill might be in another five or 10 years—it is 15 years since the noble Lord, Lord Bassam, and I discussed the Charities Act, and we have had probably had one since—but we need to send a signal of our support for community wealth funds. How do we balance those issues? I suggested that if the noble Lord, Lord Bassam, replaced “must” in his original drafting with “may”, that might provide an answer that would not force the Government, the Secretary of State and my noble friend on the Front Bench to set up a community wealth fund but would provide them with an option to do so in light of the consultation when they had the full outcome available. Since the noble Lord was kind enough to make that change, I am delighted to support his amendment.
The Lord Bishop of Ely
My Lords, the noble Lord, Lord Bassam, is correct that my friend the Bishop of Newcastle has made her valedictory speech, but I have been permitted to speak on her behalf. Noble Lords may have noticed a certain discrepancy in height and volume between me and the Bishop of Newcastle but she is living proof that stature has nothing to do with size. I applaud my friend for her significant role as a Lord Spiritual and a community leader in Newcastle; the city has honoured her with the freedom of the city in recognition of her work.
In support of the amendment, we would like to say that the creation of community wealth funds, as the noble Lord, Lord Bassam, has said, will strengthen community life in left-behind communities, including many in the diocese of Newcastle. Levelling-up investment, while welcome, has been largely about hard infrastructure but we want to see more investment in social infrastructure so that our communities can flourish. It is precisely that social infrastructure which could be provided by the community wealth funds, so they are already creating confidence in communities even if the consultation is yet to happen.
One of the key founder members of the Community Wealth Fund Alliance is a local trust that administers the Big Local programme, a programme that has inspired this community wealth fund proposal. The Big Local programme has been operating for 10 years and has generated considerable learning and evidence that could inform the design of the new pilot fund or funds that the amendment would enable.
The Big Local programme supports 150 neighbourhoods across the country that have each received just over £1 million in funding from the National Lottery Community Fund. That funding is placed directly into the hands of local residents, giving them the ability to make decisions about how to improve their neighbourhoods and their quality of life. Areas were selected on the basis that they suffered from higher-than-average levels of deprivation and had previously missed out on their fair share of lottery or other public funding.
An in-depth evaluation of 15 of the 150 Big Local areas half way through the programme outlined the benefits for individuals, groups and organisations and charted wider community change as a result of the funding and support offered. The benefits are considerable, including increased employment and access to employment opportunities, increased confidence and aspiration and reduced social isolation. The programme has also increased people’s sense of agency and belief in their own ability to make things happen.
Baroness Lister of Burtersett (Lab)
It is a pleasure to be able to speak in support of the amendment. As Committee was quite a long time ago, I hope noble Lords will forgive me if I repeat some arguments.
We are all committed to building back better—to coin a phrase—and the proposed community wealth fund or funds could be a valuable foundation, enabling us to tackle a range of inequalities and improve outcomes for the residents of our most disadvantaged areas. As such, they potentially have a key role to play in the levelling-up agenda, as already noted, as increasingly it is recognised that levelling up must involve not just physical but social infrastructure, as the right reverend Prelate has said. As the report from the Bennett Institute for Public Policy argues, social infrastructure brings
“economic, social and civic value”
—and, we might add, cultural value—to areas where such assets may be weak. According to the British Academy, of which I am a fellow, the pandemic has shown:
“National capacity to respond to changing circumstances and challenges requires effort to sustain a strong web of communities and community engagement at local levels.”
Community-led networks are vital for combating inequalities over the long-term and must be at the centre of plans to build back better.
Social infrastructure matters to people. There is a lot of evidence that the presence or absence of it makes a big difference to how people feel about their neighbourhoods and their satisfaction with them. In areas with strong social infrastructure—particularly places and spaces to meet, and community organisations—people feel a greater sense of community, civic pride and belonging. These areas are more neighbourly and more cohesive. They also have better health and employment outcomes.
The Minister may have seen the recent report from Onward, a right-of-centre think tank, entitled Turnaround. It draws a number of positive lessons from the Labour Government’s new deal for communities, one of which is that
“the most significant sustained improvements are those with the strongest base of civic assets and most engaged communities. This suggests that the government should pay much more attention to nurturing the social fabric of a place alongside economic interventions.”
It also emphasises the importance of
“social infrastructure within local places”.
If we are to build back better, we need to invest in social infrastructure in these deprived neighbourhoods. We need—as is the case with the proposed community wealth funds—this investment to be long-term so that it provides continuity. Crucially, as my noble friend Lord Bassam of Brighton said, we need it to be community- led, albeit with communities receiving appropriate support to build community confidence and capacity. Again, to quote the Onward report, one of the lessons from previous regeneration policies is that
“communities must have a stake in regeneration, not merely be consulted … community involvement is essential, but many are capacity constrained”.
I realise that the Government are reluctant for the Bill to be amended to specify the distribution of dormant assets—and I am supportive of the intended consultation which will be the subject of later amendments —but, as has already been explained, this is a permissive amendment. I can see no reason for the Government not to support it.
One of the reasons I am speaking in support of this amendment is because it has such widespread support, as has already been said by the right reverend Prelate. Those 450 organisations to which he referred are part of a growing alliance advocating for the fund. This includes 40 local and combined authorities, most of the major independent charitable funders and all the main civil society umbrella groups, including the NCVO.
Polling research by Local Trust—and I express my appreciation for the briefing that it provided—demonstrates that the proposal would have the support of senior leaders in the financial services industry.
The community wealth fund has also been recommended in reports from a large number of think tanks and inquiries, including Localis, the Centre for Cities, the Fabian Society, New Local, the No Place Left Behind commission and the Civil Society Futures inquiry. It has also been endorsed by the APPG for “Left Behind” Neighbourhoods, of which I am a member.
I acknowledge concerns expressed by those who use dormant asset funding for the work that they already do. However, I see no reason why they should not continue to do that work and receive funds because these are new funds and no one is arguing that the whole of them should be used for community wealth funds. Again, this is a permissive amendment, not one that requires specific action. Such a strong case has been made by so many civil society groups. There is a growing consensus that a community wealth fund, or funds, is much needed and that investment should come from dormant assets. I therefore urge the Government to listen to civil society and accept this modest amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Lister of Burtersett. I think the case for this amendment has been powerfully made and I want to show the breadth of support for it.
Last night in the policing Bill we were debating how we saw a grass-roots-up initiative starting from Nottingham that saw the practice of recording misogyny as a hate crime. So many new ideas and innovations start with the local and start in local areas. Yet we live in one of the most centralised nations on this planet, certainly in Europe, with power and resources concentrated here in Westminster. This amendment very modestly puts power and resources out into places that desperately need them.
Often, we are talking about places that no longer have a place to meet—even the pubs have closed in many of the poorest communities that I see. Lots of housing has recently been built without any public meeting places and places for people to gather at all. What we are talking about here is giving power to local communities that are really struggling, to let them decide for themselves what they need to do. I think we could see some truly wonderful innovations starting from the community wealth fund that then could spread far more widely. Perhaps appropriately for a Green, let us think about throwing out some seeds and seeing some wonderful plants flourishing, flowering and growing.
Baroness Barker (LD)
My Lords, when I initially heard about community wealth funds, I was rather sceptical, and I perhaps remain on the more sceptical end of the spectrum in your Lordships’ House. But during discussions on the Bill, I have become less sceptical about the idea, as the noble Lords, Lord Bassam of Brighton and Lord Hodgson of Astley Abbotts, have talked to me, along with the groups mentioned by the right reverend Prelate the Bishop of Ely.
Two things in particular have caused me to think again. The first is the experience of the pandemic and how everybody’s sense of locality and place has changed. I happen to live in south London, and one of the many things that got me through the toughest of times was discovering local parks that I had never come across before. Watching other people having to live their lives in a much more geographically restricted scope has made a new sense of place. I now understand —in a way that I perhaps did not before—that being able to appreciate and develop your community space will be a very important part of people’s physical, economic and mental well-being in future.
The second reason why I have changed my mind is this. The noble Baroness gave a long list of community initiatives that have flowed out over the past 30 years, many of them from the National Lottery, the new deal for communities and so on. Pretty much all of them were the release of resources into a community, with varying degrees of restriction on how they could be spent—but they were resources to be spent in poor communities.
This is about something different. It is about an investment fund that has to generate wealth within those communities. To do that, the people who will be managing it locally will have to learn and display economic development skills themselves. That is a different proposal from the ones before. The noble Baroness is right that, as we move through a huge period of economic change—green development and the green economy—if we get away from the old idea of development solely in buildings and talk about investment in economic skills and new jobs, managed in a much more local way, that has the potential to be different.
The noble Lord, Lord Hodgson of Astley Abbotts, was absolutely right: we had to grab a passing Bill and shove something on to it. But the very purpose of this Bill is to take assets that are lying dormant and put them into communities where people are financially excluded, do not have business skills or need some help with the generation of wealth and well-being. This is about doing that with people in their community, not yet another building. So I have changed my mind and think this is something different, and therefore I now think it is worthy of support.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, I thank the noble Lord, Lord Bassam of Brighton, the noble Baroness, Lady Kramer, the right reverend Prelate the Bishop of Newcastle, and my noble friend Lord Hodgson of Astley Abbotts for tabling this amendment relating to community wealth funds. I am also grateful to the right reverend Prelate the Bishop of Ely, who spoke on behalf of his right reverend friend, who, as he explained, has made her valedictory speech to your Lordships’ House and is therefore unable to speak today. I offer my best wishes to her as she leaves your Lordships’ House for a well-earned retirement and thank her for her contributions, both here in your Lordships’ House and across the diocese; it is one I hold particularly dear, having been baptised in it and having many relatives who live there still. I know that she will be much missed, but we are delighted that, through the apostolic succession, the right reverend prelate the Bishop of Ely was able to speak for her today.
I hope that, during my remarks, I can reassure all noble Lords who have spoken that it is already possible for community wealth funds to be a named cause in an order made under Section 18A, and that I can demonstrate why this amendment, even in its semi-skimmed form—if that is the evolution from the full-fat version to which the noble Lord, Lord Bassam, alluded earlier—is still unnecessary.
Lord Bassam of Brighton (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. With the exception of the Minister—although not entirely with the exception of the Minister—all have been rather in support of the amendment. I listened very carefully to what the Minister had to say, and by the end of his speech I was almost convinced that he was going to agree with our side of the argument.
The key to this amendment is one word, and the noble Lord, Lord Hodgson of Astley Abbotts, touched on it: the word “may”. This amendment is extraordinarily modest. It just says to the Government, “Look, you may do this; you don’t have to”. For me, that is the key, because the Government may do it after a period of consultation. It does not seem to me to be a great leap of faith to encourage the creation of community wealth funds for social infrastructure in having the consultation that can take place at any time, where this provision actually enables the Government to be more active in supporting, if they wish at some later stage, the introduction of pilots running community wealth funds.
Noble Lords have all spoken to the importance of creating social infrastructure. That is what this amendment seeks to do, through ensuring that we create community wealth funds. That is the part that particularly attracts me to it, because in my day job as an employee of Business in the Community we seek to create levelling up through work in places. One essential thing we do not have ready access to is good, robust, sustainable funding. In future, I can see community wealth funds becoming exactly that.
It is critical that we provide communities with that hope and potential. Many of our poorest communities do not have the capacity to generate funds or the social infrastructure to enable them to develop as communities and grow the resilience and strength they need. The noble Baroness, Lady Barker, touched on this rather well in talking about her experiences during lockdown. I experienced similar feelings; well-managed, manicured open spaces provide you with a lifeline, inspiration and an ability to go out, enjoy fresh air and breathe and live again. Many of us had that experience, particularly during the first lockdown. Those things and places need nurturing and looking after. They are community assets, and something like community wealth funds will ensure that they are there and are well managed and looked after.
I will not detain the House too much longer. The noble Lord’s primary argument against the amendment was consultation. There is no reason why that cannot take place. It is already taking place. He also said that the power is already there; why not use this clause as a way of driving that and supplementing the power that is already there? It is useful in highlighting the importance and value of creating those community assets and ensuring that we have social infrastructure that works for local communities.
At an earlier stage of the Bill, the noble Baroness, Lady Barran, suggested that the ideas were not yet perfected. I do not think that is the case. That now seems to have fallen away from the Government’s range of arguments. I agree with the Minister that we need sustainable, long-term funding models. Some of those already exist, but this would add to and empower local communities in a very specific and direct way. It would not be top-down, but bottom-up. It would enable communities to thrive and do much to tackle the long-outstanding needs of some of those communities which are obviously in urgent need of levelling up.
For those reasons, I wish to test the opinion of the House on this amendment.
Baroness Kramer (LD)
“(1A) Regulations made under this section must specify that any organisation in receipt of a distribution of dormant account money—(a) must demonstrate that any returns to private companies or individuals are commensurate with the overall aim of delivering public good, and(b) must not be used to enhance investor returns.”Member’s explanatory statement
This amendment would ensure that a distribution of dormant assets money must be to an organisation that has an overall aim of delivering public good and must not be used to enhance investor returns.
Baroness Kramer (LD)
My Lords, this amendment was triggered by remarks made in Committee by the noble Baroness, Lady Barran, who was the very capable Minister then who was replaced by another very capable Minister. She was very open in response to a question that had been asked quite innocently. We wanted to put in an amendment in Committee a requirement to confirm that the dormant asset money would flow to charities or recognised and formalised social enterprises.
In her response, the noble Baroness said no, that the Government wanted to make sure that the money was also available to mission-focused for-profit companies. There was general shock around the Committee, as everyone talked about the Dormant Assets Bill as providing money to charity and social enterprises, and it sent me away to Google. Perhaps others in your Lordships’ House were far less naive than I, but there is a massive business growing in the social impact arena these days, which has become very attractive to the private sector.
To give your Lordships an idea of who is coming to play in this particular arena, I will refer to one of endless websites that contain copies of similar discussions: “Mainstream venture capital … funds”—we are talking about VC funds—
“are beginning to look for a new kind of unicorn—companies that will not only provide huge financial returns”—
we are talking here about 12% returns for modest venture capital, perhaps with earlier-stage money 20% returns—
“but also create huge social impact.”
It notes London and San Francisco as two of the leading hubs for these kinds of investments.
I have no argument with a venture capitalist who puts money into social good. That is absolutely fine as far as I am concerned. But I am very concerned if that entity is seeking grants from the dormant asset fund and turning that around to enhance the returns to its investor, who is expecting a return around the 12% to 20% mark. I can see why it is extremely attractive to the for-profit company; after all, it is very hard in most circumstances for social impact to generate returns of that extraordinary size. But if there is a very significant grant coming from the dormant asset fund, one can achieve those kinds of benchmarks easily. I do not think that is the purpose that was embedded in the original Bill or the purpose which most of us who are associated with this have in mind.
The amendment is not an attempt to exclude all for-profit companies, because I understand that there are some areas where they have been very useful, for example in teaching financial literacy. It is to make sure that they are not plucking extraordinary returns as a consequence of grants from the dormant assets fund. Charities and social enterprises seeking funds and grant money may indeed find that they have some excess over the particular project that they have been working with, but their whole constitutional structure requires them to make sure that money flows back into good causes. I do not want this to turn into an opportunity for that money to flow back to large-scale investors.
As we all know, the oversight process in the Dormant Assets Bill—we will talk about this on the very last amendment—is very weak, because in the original concept the end users were going to be charities and social enterprises that were under constraint and governance of various different kinds. Therefore, an additional level of scrutiny was not a matter of significant concern. With this big expansion, and with the purposes to which the fund can be applied being essentially in the gift of the Secretary of State, this becomes a major concern.
We are all concerned about money being spent inappropriately. Nothing would be more damning to this whole process than a major scandal in which we suddenly have a newspaper describing circumstances in which money from the dormant assets fund has gone to an investor seeking very large returns. This could compromise not just that particular project but the whole programme. Frankly, I do not think that is a principle that should be allowed to proceed in this Bill, which is why I have moved this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise briefly to commend the noble Baroness, Lady Kramer, on her alertness in uncovering this issue, and to make a very simple comparison with something that has occupied a great deal of time in your Lordships’ House lately: the water companies, and what we have seen happen with them, with, very often, hedge fund owners involved, massive profits being taken out and massive loads of debt. This is a terribly important amendment. I regret not attaching my name to it. I certainly would have done had I been alerted to it earlier. This is terribly important, and I encourage the noble Baroness to keep pushing.
Lord Bassam of Brighton (Lab)
My Lords, I do not have a great deal to add. The argument of the noble Baroness, Lady Kramer, is very sound and was well made and well researched. We had an interesting debate on this topic in Grand Committee, and I am grateful to our colleagues on the Liberal Democrat Benches for allowing us to return to it through this reformulated amendment.
During the previous debate, examples were raised of organisations that are not social enterprises or charities, but which nevertheless deliver public good through the use of dormant assets funding. This new amendment captures that reality, while introducing the safeguard that these funds, which are finite and will be highly sought after, are not used to enhance investors’ returns, where that may be a concern.
I do not really understand why the Government should not write this kind of safeguard into the Bill. Failing that, will the Minister put something on the record that will provide us with some comfort? We need that reassurance, protection and level of accountability.
Baroness Barker (LD)
My Lords, I will just add two points to the very convincing case made by noble friend Lady Kramer. First, the Minister knows from all our discussions that we on these Benches have concerns about the loose nature of this scheme and the somewhat loose definition of its purposes. Therefore, it remains a concern that it is a not insignificant pot of money that can be very easily diverted. Part of what we are trying to do this afternoon, in a number of different ways, is to bring this scheme under a much tighter definition and close loopholes.
Secondly, we listened very carefully to the noble Baroness, Lady Barran, and the noble Lord himself, when we had discussions. They explained to us, in particular, that the new purposes under the Bill—financial inclusion and the very ambitious programme that Fair4All Finance has of putting loan sharks out of business—might necessitate the sorts of skills that are not commonly found within the social enterprise or charitable sector. It might require there to be companies in forms that are not usually found within the social enterprise sector, either. So I would like the Minister to acknowledge, in dealing with this amendment, that it is specifically that part of the scheme which has caused us to move. We are not talking about private companies entering into the other parts of the Bill, to my mind—unless he can make a case for them to do so.
Lord Parkinson of Whitley Bay (Con)
I am grateful to the noble Baronesses for their amendment and for their vigilance and scrutiny in this area. I am grateful also for their time the other day, when we had a helpful discussion.
Amendment 2 concerns the direction of the English portion of dormant assets funding and seeks to ensure that money cannot be used purely for profit but must have public good at its heart. It is already enshrined in primary legislation that dormant assets funding must be distributed to initiatives with a social or environmental purpose. This is a clear and core function of the scheme and it remains unchanged in the Bill. The Government of course agree that private profit is not the purpose of the dormant assets scheme.
The noble Baronesses’ concerns, as expressed in the amendment and their contributions today, relate to the scheme’s current support for social investment. As I mentioned in the debate on the previous group, dormant assets funding has provided £465 million to Big Society Capital and Access over the last 10 years. During that time, social impact investing in the UK has grown almost eightfold, increasing from £830 million in 2011 to £6.4 billion now, thanks in large part to those two organisations. It is largely by leveraging private capital alongside dormant assets that the market has been able to expand in this way, providing the voluntary, community, and social enterprise sector with access to billions of pounds of investment.
To give an example, dormant assets funding enabled Big Society Capital to invest £6 million in the Fair By Design fund, which aims to eradicate the poverty premium by 2028. Fair By Design invests in several initiatives, including some businesses with considerable impact which provide services in sectors such as energy, insurance, borrowing, transport and food, to support over 340,000 people across the country. Its work has helped those people collectively to save £12 million per year on goods and services for which they were previously paying more than those who were financially better off. The scheme advances important opportunities such as this for collaborating with the private sector and civil society organisations to amplify its impact, within the boundaries of governance structures which ensure that the money is managed appropriately.
I hope I can reassure noble Lords that robust systems are in place to ensure that the money funds projects delivered by organisations that prioritise impact. As a registered charity itself, Access employs strict eligibility criteria for its funding, which ensures that money flows only to those social enterprises and charities that it was created to support. Similarly, £2.5 billion from Big Society Capital and its co-investors is being used to support over 1,500 social enterprises and charities across the country. Both organisations apply layers of due diligence to ensure that the intermediary fund managers with whom they work also have impact embedded in their approaches. Fund managers applying for Big Society Capital funding are required to present a social impact plan during the due diligence process, and Access requires its funds to be held in finance structures that cannot be used commercially.
As these existing structures have operated effectively over the past decade, we do not consider it necessary to place in primary legislation a requirement such as that proposed by Amendment 2, though we understand the concerns the noble Baronesses had and the vigilance which led them to table it. The scheme already ensures that funds go towards organisations with the overall aim of delivering public good, and we will ensure that this continues to be the case.
Ultimately, it remains the Government’s priority to afford people the opportunity to have a say in how funds are distributed in the country, including whether social investment should remain a priority. That is why we have committed to a public consultation to welcome wide-ranging views on how these funds can best have an impact on social and environmental priorities in England. Those are the reasons we cannot accept the amendment, and I hope that the noble Baroness will be satisfied to withdraw it.
Baroness Kramer (LD)
My Lords, I am glad to have raised the issue and I will be withdrawing the amendment, but I hope very much that the point that I have made will carry through into the Government’s thinking, because this is a constantly changing field. As the Minister knows, with mission-focused companies there is nothing to say that they cannot pay their directors what they like; they can pay what salaries they like and make what returns they like to their core investors. We very much hope that in the reporting requirements that he will talk about later there will be real clarity around this issue. He can expect to find quite a number of Written Questions asking him to detail those kinds of benchmarks, so that we understand what is actually happening with this dormant assets fund. I beg leave to withdraw the amendment.
The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)
We now come to the group beginning with Amendment 3. If Amendment 3 is agreed to, I cannot call Amendments 4 or 5 due to pre-emption.
Amendment 3
(a) carry out a public consultation about the purposes for which, or the kinds of person to which, the money apportioned under section 17 for meeting English expenditure should be distributed, and(b) consult the Big Lottery Fund about a draft of the order.”Member’s explanatory statement
The amendment would have the effect of adding to 18A(3) of the Dormant Bank and Building Society Accounts Act 2008 (as inserted by Clause 29) a new duty to carry out a public consultation before making a section 18A(1) order, in place of the duty in the current section 18A(3)(b). The consultation would relate to what, or who, should be supported by dormant assets money distributed in England.
Lord Parkinson of Whitley Bay (Con)
My Lords, a number of noble Lords tabled and signed amendments in Committee which sought to broaden the range of consultees listed in Clause 29 of the Bill, which I believe remains the primary intention of this group of amendments. We share the view about the importance of considering how dormant assets funding can be used most effectively, and we are keen to get a wide range of views to help shape our position, as I said in previous debates. That is why we have consistently committed to launching a public consultation on the social or environmental focus of the English portion of funding before the first order is laid under Clause 29.
In response to the multiple calls which have been made in your Lordships’ House, we are happy to formalise this commitment in legislation. Amendment 3, in my name, therefore makes a public consultation a requirement before any changes can be made to the focus of the English portion of funds now or in the future. I thank the noble Lord, Lord Bassam of Brighton, for adding his name and the support of Her Majesty’s Opposition to our amendment.
Amendment 3 takes the broadest and most inclusive approach to ensuring that the scheme benefits the most pressing social or environmental priorities in England. The Government plan to launch the first of these consultations after the Bill receives Royal Assent and are happy to commit to this lasting at least 12 weeks. Our amendment requires the Secretary of State to consult the National Lottery Community Fund, as the named distributor of dormant assets funding, about a draft of this order. The order would then be subject to the scrutiny of both Houses through the draft affirmative procedure. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, I am speaking on behalf of my noble friend Lady Merron, who signed Amendment 4 but is unable to participate in today’s debate. I should explain that one of our concerns has been a lack of clarity around future consultation. We have already had some discussion this afternoon about consultation, and, of course, it was raised by a number of colleagues during the Bill’s Second Reading and featured fairly heavily during the debates in Grand Committee.
On the face of it, we do not really understand why Amendment 4, which lists a variety of topics and proposed participants, is not acceptable to the Government, but we are nevertheless grateful to the Minister for tabling Amendment 3. For that reason, I agreed to co-sign it on behalf of our Benches. That amendment ensures that there will have to be a full public consultation, as the noble Lord, Lord Parkinson, has already described, which will have to take place before uses for dormant assets funds are determined in regulations.
I am grateful to my noble friend Lady Lister of Burtersett for tabling Amendment 5, which seeks to ensure that future consultations include consideration of the merits of establishing community wealth funds. This is a good addition, and we hope that the Minister can address this point explicitly in his response—not least, of course, because we have passed and supported the community wealth fund amendment this afternoon.
I am therefore looking for further reassurance from the Minister that the public consultation will be run in accordance with Cabinet Office best practice, including the Secretary of State being proactive when engaging with charities and social enterprises, rather than merely posting a notice online. We are satisfied by the Government’s amendment, but we would like to see them go further. I guess that our amendment is inviting them to flesh out exactly how they see this working in some more detail.
Baroness Lister of Burtersett (Lab)
My Lords, I rise to speak in support of Amendment 4, to which I have added my name, and Amendment 5 in my name, which augments the original amendment by ensuring that the consultation makes specific reference to community wealth funds as a potential beneficiary of dormant assets.
I am grateful to the noble Lord, Lord Hodgson, and my noble friend Lord Blunkett for their support—and to the Government for listening to at least some of what we said in Committee about consultation so that, as we have heard, the Bill now makes clear that there will be a public consultation. I am very grateful to the Minister for, first, finding the time to have a word about this yesterday and, secondly, for confirming on the record that the consultation will last for at least 12 weeks, which I and others pressed for in Committee.
I will simply speak to Amendment 5, about the explicit reference to community wealth funds. When this was raised in Committee, the then Minister’s initial response was that she was unable to give any reassurance because:
“We need a collective agreement on what goes into any consultation document”.—[Official Report, 23/6/21; col. GC 99.]
But when I read that in Hansard, I realised that I did not really understand what she meant. Collective among whom? Could the Minister please explain? Could we not collectively agree today that the consultation should include specific reference to community wealth funds because, otherwise, many of those consulted might not have heard of them and only those who already know about them would be in a position to support them?
In doing so, I do not think it excludes other possible uses of the fund. The Minister raised this fear in his response to Amendment 1, but having a consultation that does not put out some options will not be terribly useful. Therefore, all we are asking is that he makes clear that this is one of the options and that the consultation would explain what community wealth funds are.
When I pressed the then Minister, she made a commitment to consider the community wealth fund proposal
“as we review the range of questions that go into the consultation.”—[Official Report, 23/6/21; col. GC 100.]
Can the Minister reconfirm that commitment? Regardless of what happens to Amendment 1 when it is sent to the Commons, it is important that the consultation on the use of the new dormant assets includes explicit reference to a proposal that has such widespread support from national civil society organisations.
Baroness Kramer (LD)
My Lords, my name is attached to Amendment 4 and I would gladly support Amendment 5. Government Amendment 3 is definitely an improvement on the previous situation, which was unclear; the Government were sure they would have a public consultation but were not really required to do so.
When the original Dormant Assets Bill was passed, the purposes for which dormant assets could be used were on the face of the Bill in primary legislation. Consultation, now that the Secretary of State is in a position to expand that range significantly, is absolutely vital. In Amendment 4, we reflect some of my ongoing frustrations with consultation after consultation: they fall to the attention of the usual suspects and, indeed, the responses of the usual suspects are very often taken into serious consideration, but they never get out into the wider world. When there are lots of diverse views, perhaps supported or mentioned by only small handfuls of people because they have never occurred to others, those tend to go into the “dismiss” bucket almost immediately.
I know how difficult it is to structure a consultation that really does consult. I say that from the position of having been a Minister during the coalition years, when I wanted to use a consultation to bring in new ideas as well as to get people’s responses to possible avenues that we might go down. It was a sheer battle with my own staff to devise such a consultation and questionnaire and to leave space for open responses and gather them in. It is not the norm; I am very well aware of that. I do want to press the Minister, because this should be going to a much wider range of groups than might normally keep an eye open for a consultation —the wide range of social enterprises and charities that go out to various communities, particularly deprived communities. Those communities tend to be the least alert to the fact that there is a government consultation happening or to knowing how to respond to it.
Then there is Parliament. Most of us understand that secondary legislation is not worth the paper it is written on in terms of getting parliamentary opinion or any potential for amendment, so it is important that the relevant committees of Parliament are engaged with something as significant as this. I press the Minister: we understand that he has moved some way, but we need quality. The style is perhaps there but there is no quality or content behind it to give us full reassurance. If he will not accept Amendments 4 and 5, can he at least give us a verbal assurance of the kind of quality that we want within the consultation itself?
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have put my name to Amendment 5 in the name of the noble Baroness, Lady Lister. I was reassured by my noble friend’s introductory speech and the deal that has been hacked out between him and the noble Lord, Lord Bassam of Brighton. The noble Baroness, Lady Kramer, has, in part, shot my fox because I wanted to talk about the usual suspects, which she referred to. That is the danger, although I say to the signatories to Amendment 4 that it looks to me like a pretty good list of usual suspects in that amendment. I was not sure that we were not just going back down the track that we were trying to avoid going down.
My reason for supporting the amendment in the name of the noble Baroness, Lady Lister, was to make sure that we would make a big effort to get down to the smaller organisations, which often had unique insights into the problems of a particular area. From my point of view, I rather doubt whether that goes well into legislation, but it is the sort of area where a good strong ministerial Statement, given on the Floor, would reassure a lot of us that there will be words that we can go back to if the consultation does not reach as far, as deep and as wide as some of us think it should.
Lord Parkinson of Whitley Bay (Con)
My Lords, I thank noble Lords for their recognition of the action the Government have taken on this, even if it is conditional at the outset. I am grateful to the noble Baronesses, Lady Kramer, Lady Merron and Lady Lister of Burtersett, for the important issues they have raised in tabling Amendment 4. I thank the noble Baroness, Lady Lister, my noble friend Lord Hodgson, and the noble Lord, Lord Blunkett, for Amendment 5.
We have had a good debate, both in Committee and again today, and I welcome the support shown for securing the widest possible input into determining the future spending priorities for England. I share the desire raised by noble Lords to ensure that the public, beneficiaries, both Houses of Parliament, social enterprises and charities can have their say on the future focus of dormant assets funding; although I disagree about the means and submit that Amendment 3 is a better way to achieve this, we all share the same intent.
As my noble friend and predecessor Lady Barran outlined in Committee, it is our position that everybody who is interested, rather than a collection of predetermined or specified stakeholders, should be consulted. That is why we have chosen to take the broadest approach available in Amendment 3, and why we believe that Amendment 4 is not as inclusive.
Dormant assets funding is not government money; it originates from individuals who have lost or forgotten about their asset and is voluntarily transferred into the scheme by responsible industry participants who, despite their best efforts, have not been able to reunite those moneys with their owners. The scheme is a unique example of collaboration between the public, private and civil society sectors, responding to the imperative to put forgotten money to better use, rather than letting it gather dust in inactive accounts. Because of the wide range of organisations and individuals that are potentially affected by the scheme, we want to avoid at all costs making further specifications in this clause which could imply that certain groups are more important than others that it might be equally appropriate to consult.
The government amendment is sufficiently broad and, in line with common practice, parliamentary committees will continue to be able to consider relevant issues as they see fit in the future. That is why we do not think it is appropriate or necessary explicitly to name parliamentary committees as a consultee. However, we are happy to commit on the record to engaging with relevant and interested parliamentary committees for the first consultation.
As noble Lords have highlighted, the social and environmental focus of the English portion is a significant and important question. The Government agree that the consultation must be open for a proportionate amount of time to allow for considered and good-quality responses. That is why I am happy to place on the record our commitment that the first consultation under this section will last for at least 12 weeks. I am grateful to the noble Baroness, Lady Lister, and others for their appreciation of that.
I also reassure noble Lords that our intention is to consult widely, taking care to welcome local community voices into the discussion to ensure that we capture as many views as we can, as the noble Baroness, Lady Kramer, my noble friend Lord Hodgson and others rightly pressed.
The Government will continue to consider the most appropriate length of future consultations, in line with Cabinet Office guidance. I hope that our previous conduct in this area has proven we take that seriously and are committed to ensuring fair and open consultations on the dormant assets scheme. The 2020 consultation on its expansion, for example, was extended from 12 to 21 weeks, as requested by voices in the industry in response to the Covid-19 pandemic, to ensure that everybody had the time to contribute meaningfully. I am pleased to say that that was very successful: we received 89 responses, representing over 500 organisations and individuals, which informed the development of this legislation. Given the range of interested parties involved and the complexity of the policy area, we will always ensure that a proportionate length of time is provided for consultation. In order to preserve the integrity and protect the impact of the scheme, we also do not anticipate changing the causes regularly.
The consultation would seek views on what social or environmental causes should be supported with dormant assets funding in England. However, we do not think it is appropriate to specify the scope and content of the consultation in primary legislation, including the extent to which the scheme is meeting some of its underlying policy objectives or what additional assets or operational changes would improve its performance. We believe it would be most appropriate and effective to consider those as part of Amendment 7. We therefore do not support combining aspects of this equally important work with the duty to consult, particularly as the latter relates only to England.
Our commitment to an open, fair and inclusive consultation is also the reason why we cannot accept Amendment 5, from the noble Baroness, Lady Lister, which seeks to require the Government to consult on community wealth funds every time an order on English expenditure is considered. I am conscious that we went into a more detailed discussion of the community wealth fund model in our debate on Amendment 1. Even if I did not convince your Lordships’ House not to support that amendment, I hope I convinced noble Lords that the Government are by no means against the proposals for community wealth funds but maintain that putting them in the Bill, and in the case of this amendment legislating for them to be consulted on every time an order was considered, would be inappropriate.
Baroness Lister of Burtersett (Lab)
I am conscious that the Minister has said “every time” every time. Could he give the commitment on the record that the noble Lord, Lord Hodgson, was looking for: that the first time—that is, in the first consultation—the Government will give serious consideration to including a reference to community wealth funds and an explanation of what they are?
Lord Parkinson of Whitley Bay (Con)
The noble Baroness has anticipated my next remarks: I was going to reiterate the commitment given by my noble friend Lady Barran in Committee that the Government will consider including community wealth funds in the first consultation launched under Clause 29. I have already noted that the Government are considering the community wealth fund model as part of the wider development of the levelling-up White Paper. As the work on that is ongoing, now is not the right time to commit to any particular source of funding to be associated with the proposals, but we will continue to look into this matter. As I committed earlier today, the Government will ensure that the consultation provides the opportunity for people to respond with their view, including advocates of community wealth funds and those who think that is their preferred course of action.
For these reasons, the Government feel that our amendments to bolster the consultation requirements and to introduce a separate review and reporting requirement better accomplish our joint aspiration to secure the scheme’s success. I believe that Amendment 3, which I am pleased to say has cross-party support, strengthens the Bill and addresses the House’s desire that any consultation on the use of future dormant assets funding in England must not be restricted to a limited number of perspectives.
In the light of that, I hope the noble Baronesses, Lady Kramer and Lady Lister, will be content with what we have proposed in our amendments and the assurances that I have given today and so may be minded not to press their amendments. With thanks again to the noble Lord, Lord Bassam, for putting his name to it, I commend Amendment 3 to the House.
Baroness Kramer
“(3A) An order under this section may not be made unless the Secretary of State has certified that dormant account money will be used to fund projects, or aspects of project, for which funds would be unlikely to be made available by a Government department.”Member’s explanatory statement
This amendment would require the Secretary of State to certify that dormant assets money would be additional to, and not replacing, Government spending.
Baroness Kramer (LD)
My Lords, this amendment deals with additionality. It was the intent of the original Bill, which placed a responsibility on the Big Lottery Fund alone to ensure that the moneys were additional to expenditures that one would expect a government department to make; I assume that means any level of department, including local authorities. That seems to be a fundamental concept which sits behind the dormant assets fund. In our early discussions, the Government constantly confirmed that the principle of additionality was an immovable one for this Act.
One should always spend some time looking at government websites. I was slightly surprised to find a government announcement from June 2021 of financial support for voluntary community and social enterprises, to enable them to respond to the coronavirus. This was a very good thing which I have no criticism of; however, according to the announcement:
“The government has pledged £750 million to ensure VCSE can continue their vital work supporting the country during the coronavirus (COVID-19) outbreak, including £200 million for the Coronavirus Community Support Fund, along with an additional £150 million from dormant bank and building society accounts”.
In other words, that means dormant asset funds. Technically, this does not say that the Government have said to the folks at the dormant asset funds, “We want £150 million from you to support this activity, because we don’t really want to put in more than £750 million”, but it is a very grey area. Anyone reading this would assume that the Government were announcing what they would regard as the use of funds under their control.
I am very concerned, because additionality can be a very grey area. What should be the responsibility of the local authority of a particular government department? What should be the add-on which comes from the dormant assets fund, with its focus on supporting the additionality that is provided by the charity and social enterprise sectors? Therefore, I have very quickly drafted an amendment requiring the Secretary of State to certify that as far as he knows, the additionality principle is in play. I am slightly surprised that the Government have not said, “The Secretary of State only wants this to be additionality and is delighted to sign a piece of paper confirming that this is how the money will be used.”
That is the rationale behind this important amendment. From the announcement I read a moment ago, it is not difficult to see that the creep across the boundary is relatively easy. The initial dormant assets fund was under £1 billion. The new assets that will be brought into scope as a consequence of this Bill amount to a minimum of an additional £2 billion. As expansion goes beyond that, that number will keep increasing, so we are talking about very large amounts of money. The Treasury could view this as an opportunity to constrain public sector debt or to enhance particular spending programmes.
It is very important that we get an assurance from the Minister that this amendment is not needed, otherwise, it will be necessary for me to press it. I have been listening to the response from the Minister, but my noble friend Lady Barker, who is a specialist in this field and far more expert than I, will be the person who is really listening. I will see whether she is satisfied—if not, I will ask the House to pronounce on something that I believe is fundamental.
Lord Bassam of Brighton (Lab)
My Lords, this is an important topic. It took quite a bit of our time in Committee, has been raised again today and runs as a thread through our concerns. We have had some discussion with the Minister between stages, and useful discussion it was.
We acknowledge that additionality has been built into Amendment 7 in the next group, but we are very sympathetic to the call from the noble Baronesses, Lady Kramer and Lady Barker, for the Secretary of State to certify as part of the regulation-making process that funds will indeed be on top of existing government commitments. The noble Baroness, Lady Kramer, has made quite a compelling argument. Dormant assets are going to grow. There are many other sources of dormant assets not included within the current scheme. I could see a hungry Treasury, worried about the supply of funds in the future, seeking to make use of substitute funding from dormant assets. I think we will need to be thoroughly convinced by the words of the Minister this afternoon if he is to avoid us having a further Division.
If the Government have no plans to pull accounting tricks, I would have thought that there was no issue with accepting this amendment or perhaps introducing a new text either at Third Reading or when the Bill moves to the House of Commons to put this issue beyond doubt. That is what I am listening for this afternoon and hoping to hear from the noble Lord.
Baroness Barker (LD)
My Lords, I wish to add two points to those made by my noble friend Lady Kramer. It is right that in the next government amendment there is reference to a report and the additionality principle being included in that report. The reason why we drafted this amendment in the way we did was the requirement for the Secretary of State to certify the matter. One of the criticisms that was initially made of this Bill by the Delegated Powers Committee was the number of Henry VIII powers being assumed by the Minister.
The second reason is that the next government amendment refers to:
“Periodic review and report to Parliament”.
It does not say what those periods should be. Therefore, we are trying to deal with exactly the sort of scenario outlined by my noble friend Lady Kramer, where the Government suddenly dip into this back pocket of money and start to use it. That is the reason why it is there and why we think it is so important.
Lord Parkinson of Whitley Bay (Con)
I am grateful to the noble Baronesses, Lady Kramer and Lady Barker, for tabling Amendment 6 on the additionality principle. I also thank the noble Baronesses for their time in the productive discussion that we had on this issue. I hope that during the course of my remarks I can reassure them and other noble Lords that the intentions of this amendment are sufficiently covered both in the 2008 Act and through the Government’s Amendment 7, to which the noble Baroness, Lady Barker, just alluded.
The principle of additionality has successfully under- pinned the scheme since its inception and will continue to be a core principle of its distribution across the UK. In line with the proposed wording in Amendment 6, the 2008 Act already 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. Therefore, the principle as defined by this amendment is already enshrined in legislation.
Baroness Kramer (LD)
Can I just ask for some clarification? Does not that responsibility apply only to the one distributive entity—to the Big Lottery Fund, or whatever it is called—and very conspicuously not to any other distribution sources or to the Secretary of State?
Lord Parkinson of Whitley Bay (Con)
Without having the 2008 Act in front of me as well as the Bill, I am afraid that I may not be able to give the noble Baroness the speedy response that she seeks.
I shall address the point that she also raised—while seeking an answer, if I can give her a definitive answer now—about the £150 million that was released last June. As she noted, the scheme released £150 million of dormant assets funding to support the response to the Covid-19 pandemic and recovery across England. That was distributed by the four spend organisations in line with the 2008 Act. In this instance, it is important to note that the funding was entirely separate from the UK-wide charity support package of £750 million, which was announced in April 2020.
Baroness Kramer (LD)
The reference is in Schedule 3 to the 2008 Act—on page 24—under Part 3, headed “Reports and Accounts”, where it says in paragraph 9(3), in relation to the Big Lottery Fund:
“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”—
and then it lists
“a Government department … the Welsh Ministers … the Scottish Ministers, or … a Northern Ireland department”.
That does not appear to apply to anything other than the Big Lottery Fund. When the 2008 Act went through, the only distribution entity was the Big Lottery Fund. There are now three others, and the new Bill anticipates potentially creating more distributors, whose responsibilities will be directed by the Secretary of State.
I fully accept that, in the original concept and structure of the Act, additionality was a fundamental underlying principle. That does not appear to have carried over into the expansion that is embedded in the new Bill. That is my concern.
Lord Parkinson of Whitley Bay (Con)
I am grateful to the noble Baroness for that, and I hope that what I go on to say will address that point. If there is a change in distributor or an additional distributor is established, there are already powers in the 2008 Act to amend the legislation to ensure that any new or additional distributor must similarly report on their policy and practice in relation to the additionality principle. The noble Baroness is very welcome to intervene again, if I have not addressed her point.
The question to consider is not about the definition of additionality but where the accountability for that principle should lie. We fully support all the points raised in Committee regarding the fundamental importance of ensuring that the principle is adhered to, but we believe that how the 2008 Act positions the additionality principle, plus the new provisions in government Amendment 7, is the right approach to ensuring this and I welcome the opportunity to clarify why.
The Labour Government which brought in the 2008 legislation ensured that the accountability for the additionality principle lies with the named distributor responsible for all the funds across the UK, rather than the Secretary of State. This Government agree that it remains the most appropriate place for its inclusion in primary legislation. As we outlined in Committee, Schedule 3 to the 2008 Act requires the National Lottery Community Fund, the current distributor of dormant assets funding across the UK, to set out in its annual report its policy and practice in relation to the additionality principle. These reports must be laid before Parliament, and this Bill does not change that requirement. In fact, Amendment 7, to which we will come in a moment, seeks to bolster this further by requiring additionality to be included in periodic reports of the scheme’s effectiveness, as the noble Baroness, Lady Barker, noted. Your Lordships’ House will continue to have the opportunity to scrutinise how the National Lottery Community Fund approaches this in practice. This will ensure that funding continues to be directed to causes which fulfil the scheme’s objectives while being additional to central or devolved government funds.
As has been noted, the principle as it stands is critical to the scheme’s success, and our partners in industry have made it clear that their participation is reliant on it. As this is not central government funding, and as the Government have limited control over only the English portion, it is appropriate that the primary accountability for the principle should sit with the UK-wide distributor of the funding and its accounting officer—namely, the National Lottery Community Fund. Indeed, the fund is well versed in making this assessment, as an additionality principle also applies to its other portfolio of funds. To date, there has never been a breach of this principle of which the Government are aware.
We feel there is no evidence that the principle needs to be altered, and we believe the current approach is serving the scheme well. It has been upheld for 10 years, and we do not think it necessary or desirable to significantly change a demonstrably successful approach.
Baroness Kramer (LD)
Is the Minister saying he is making a commitment from the Floor that, when additional distributors are added—and this Bill contemplates that —they will be put under the same additionality requirement as the Big Lottery Fund?
Lord Parkinson of Whitley Bay (Con)
The commitment is already made in the 2008 Act. If there is a change in distributor, or if an additional distributor is established— and I should stress that there are currently no plans for that—there are already powers in the 2008 Act to amend the legislation to ensure that any new or additional distributor must similarly report on their policy and practice in relation to the additionality principle.
However, we have responded to the noble Baroness’s desire to see the Secretary of State more specifically held accountable to the principle, and we have reinforced its importance even further by including it within Amendment 7, which we will come on to shortly, on reviewing the scheme and reporting to Parliament. The noble Baroness, Lady Barker, said in Committee:
“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.”—[Official Report, 21/6/21; col. GC 9.]
We thoroughly agree, which is why our Amendment 7 will ensure that the report must include any policies and practices of the principle by the Secretary of State as well as the National Lottery Community Fund. This provision responds to requests made by noble Lords that the Secretary of State should be held more expressly accountable for ensuring that and explaining how dormant assets funding is used in ways that are genuinely additional to central Government expenditure. This demonstrates our ongoing commitment to ensuring that the principle continues to be honoured, including the ways in which funding flows to distributing bodies and on to beneficiaries.
That is why we cannot accept the amendment. I hope I have reassured the noble Baronesses that we understand their concerns, and that is why we have brought forward the additionality provision in our review and reporting amendment, Amendment 7. I can see the noble Baroness is rightly consulting the 2008 Act for the references to it. I hope on that basis she will be content with what we have proposed and content to withdraw her amendment.
Baroness Barker (LD)
My Lords, I thank the Minister for the attention he has given to this, but I will pick him up on one issue. A power to do something is only a power; it is not an undertaking that the thing will be done. I do not think he has spelled out, as I hoped he would, how exactly the Secretary of State would be reviewing the additionality and demonstrating the additionality. It may be that he is going to come on to that under Amendment 7. But it seems to me that it is only the Secretary of State who can determine whether something is additional or not, because only the Secretary of State can have full knowledge of what the Government’s overall intentions were. I think this is important. I think we have had the example my noble friend talked about, and I would therefore like to test the opinion of the House.
“Periodic review and report to Parliament
(1) The Secretary of State must carry out periodic reviews of the following matters—(a) the operation of the dormant assets scheme and the alternative scheme under section 2 of the 2008 Act during the period to which the review relates;(b) the effectiveness of the steps taken during that period (by institutions holding or providing assets within the scope of the dormant assets scheme or the alternative scheme) to reunite assets with their owners;(c) any use made of the powers conferred by section 19 during that period;(d) any use that may be made of those powers after that period.(2) In reviewing the matters described in subsection (1)(a) the Secretary of State must consider—(a) how many institutions have made transfers;(b) how much money has been transferred;(c) the effectiveness of the arrangements made with institutions for meeting repayment claims.(3) The steps referred to in subsection (1)(b) include anything done with a view to tracing, and verifying the identity of, either (or both) of the following, in relation to a particular asset—(a) the person whose right to payment (or right to direct payment) is or would be extinguished by a transfer;(b) where the asset is the proceeds of another asset, the owner or beneficiary of that other asset (before its conversion into proceeds).(4) In subsections (2) and (3)— “transfer” means a transfer of an amount to an authorised reclaim fund as mentioned in section 1(1)(a) or 2(1)(a) of the 2008 Act or section 2(1)(a), 5(1)(a), 8(1)(a), 12(1)(a) or 14(1)(a) above;“repayment claim” means a claim against an authorised reclaim fund relating to a right to payment arising as mentioned in section 1(2)(b) or 2(2)(b) of the 2008 Act or section 2(2)(b), 5(2)(b) or (3)(b), 8(2)(b), 12(2)(b) or 14(2)(b) above. (5) The matters within the scope of a review do not include the regulation by the Financial Conduct Authority of an authorised reclaim fund or any other institution.(6) The Secretary of State must—(a) make arrangements to enable anyone with an interest in any aspect of a review to make representations,(b) consider all representations received, and(c) set out the results and conclusions of the review in a report and lay it before Parliament.(7) The report of a review must also include—(a) information about the uses made by any authorised reclaim fund of its financial resources during such period as the Secretary of State considers appropriate,(b) information about the uses made of dormant assets money for meeting English expenditure during such period as the Secretary of State considers appropriate,(c) the text of any directions given by the Secretary of State under section 22 of the 2008 Act which have effect during the period mentioned in paragraph (b), and(d) information about any policy and practice in relation to the additionality principle of—(i) the body or bodies specified in section 16(1) of the 2008 Act, and(ii) the Secretary of State, in exercising functions under Part 2 of that Act.(8) The report of a review may include information about the uses made of dormant assets money for meeting Welsh expenditure, Scottish expenditure or Northern Ireland expenditure during such period as the Secretary of State considers appropriate.(9) In this section—(a) “the additionality principle” is the principle that dormant assets 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, the Welsh Ministers, the Scottish Ministers or a Northern Ireland department;(b) “dormant assets money”, “English expenditure”, “Northern Ireland expenditure”, “Scottish expenditure” and “Welsh expenditure” have the same meaning as in Part 2 of the 2008 Act.(10) The first report under this section must be laid no more than 3 years after the day on which this Act is passed.(11) Any subsequent report must be laid no more than 5 years after the day on which the previous report was laid.”Member’s explanatory statement
The amendment would require periodic reviews of the dormant assets scheme and the alternative scheme, with a report to Parliament on the results. A report would include certain additional information, on matters such as the expenditure of the reclaim fund, and the use made of dormant assets money, and the additionality principle, in England. Information about use of dormant asset money in the rest of the UK would be optional. For practical reasons information included about the use of dormant assets money, or the additionality principle in England, is likely to be information publicly available elsewhere.
Lord Parkinson of Whitley Bay (Con)
I thank noble Lords for their amendments in this area and for the issues raised in Committee and during meetings with me and my predecessor, my noble friend Lady Barran. We have carefully considered the different concerns raised about the need for the dormant assets scheme to be periodically reviewed and reported on to Parliament. We have both heard the strength of feeling about the importance of transparency, and welcome and echo the enthusiasm for maintaining momentum beyond this phase of expansion.
That is why the Government have brought forward Amendment 7, as many noble Lords invited us to do in Committee, which would require the Secretary of State to review and report on various aspects of the scheme on an ongoing basis. I again thank the noble Lord, Lord Bassam of Brighton, for adding his name to it.
Our amendment mirrors Section 14 of the 2008 Act, which some amendments tabled in Committee also sought to replicate. It goes further, however, responding to noble Lords’ calls for maintaining momentum for further scheme expansion, greater transparency over the use of funds as well as reporting on how the principle of additionality has been met. We heard in the debate on the last amendment about the importance of ensuring that this principle flows through to not only the National Lottery Community Fund but any new or additional distributors, were there to be any. To clarify, the National Lottery Community Fund is the only named distributor, and the four independent organisations receive funding from it rather than being named distributors themselves under the Act.
I would also like to draw noble Lords’ attention to the very deliberate phrasing of subsection (7)(d)(i) of our Amendment 7, which refers to any distributor or distributors named in Section 16(1) of the 2008 Act. We have done that, rather than specify the National Lottery Community Fund, so that in the event that a distributor is changed—which Section 24 of the 2008 Act allows the Secretary of State to do as well as allowing them to make consequential amendments to Schedule 3 to ensure that the principle of additionality similarly applies—this would ensure that it is still covered by our Amendment 7.
Amendment 7 will require the Secretary of State to carry out periodic reviews of specified matters, including the operation of the scheme from transfer to reclaim; the effectiveness of tracing and reunification efforts by scheme participants; and any efforts to expand it to include new dormant assets. The amendment will require the results of the review to be laid in a report before Parliament within three years of the Bill receiving Royal Assent and every five years thereafter. This is in line with Amendment 8 in the name of the noble Lord, Lord Bassam of Brighton.
In Committee, my noble friend Lady Barran explained that a number of mechanisms for reviewing and reporting on various aspects of the scheme already exist. We agree, however, with the helpful suggestion of the noble and learned Lord, Lord Etherton, that it is sensible to bring these together in one place. Therefore, Amendment 7 also requires the report laid before Parliament to include information about the uses of dormant assets money, including the principle of additionality. This will build on reports already published by Reclaim Fund Ltd and work done by the National Lottery Community Fund and, currently, the Oversight Trust, which oversees the four existing distribution organisations, to assess the scheme’s impact.
I hope that this amendment provides reassurance that the Government are committed to ensuring the ongoing success of the scheme and reflects a number of the helpful suggestions that noble Lords have made in our debates on the Bill hitherto. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, I should first say that our amendment, signed by me and the noble Baroness, Lady Bowles, was an attempt to combine different aspects of previous amendments into a single text. The result is, as noble Lords can see, a fairly lengthy shopping list. The thing about shopping lists is that something is always forgotten; something always falls off the end. That makes their operability in legislation perhaps less than perfect.
We envisaged, in construct, that the amendment would cover what had happened during the relevant period and whether the funding was delivering on the scheme’s priorities. So, we are grateful—I am certainly very grateful—to the Minister for his constructive approach to discussions since taking up his post. I believe that Amendment 7 represents a fair compromise. I think the Minister has said the reports will combine information that was already available from other sources —annual reports et cetera—but also require the Secretary of State to go somewhat further, including by giving information on whether and how the additionality principle has been adhered to. We have heard in earlier debates how important that is.
We hoped to gain more from the Government, including more concrete data on the contribution that funds make to people and communities subject to high levels of deprivation and inequality, but I am sure that there will be further consideration of such issues in the other place, and perhaps in our debates here as well, as this legislation kicks in. I am impressed with the approach the Government have taken, and they have certainly listened to our Committee considerations, taking on board the core of what we are after. Nothing is ever perfect, but this goes a long way in the right direction. While I would have preferred our amendment, I was more than happy to sign up to the Government’s, as it represented real progress in the way we considered the Bill.
Baroness Bowles of Berkhamsted (LD)
My Lords, as I am sure the Minister has noted, there were significant contributions about review in the earlier stages of the Bill. It is in that vein that these Benches worked with the noble Lord, Lord Bassam, on Amendment 8. Like him, I still prefer some of the content of Amendment 8 and wish to try to establish how far the wording of the relevant bits of the amendment put forward by the Government delivers similar things. I appreciate the efforts which have been made, in the review amendments and concerning consultation but, as has already been aired by my noble friends, there are certain things which do not appear necessarily to carry through exactly as expected.
First, can the Government say whether their review can do everything envisaged by Amendment 8? Further, is there appetite to cover everything covered by Amendment 8? The first difference was on timing. The Minister said that they would broadly follow the three-year and five-year timing proposed in Amendment 8, which is one tick. The next big difference is whether the review will cover the worthiness of the expenditure and whether—as in subsection (2)(b) of the new clause proposed by Amendment 8—the expenditure has met the scheme’s underlying objectives, particularly the criteria listed in subsection (2)(c) addressing deprivation, inequality, the capacity of social enterprise and charity, and the principle of additionality. I am particularly interested in these policy criteria because the wording of the consultation introduced by Amendment 3—which we broadly support—nevertheless leaves an open question about what the conclusion of that consultation will be. It could change the direction of policy. One could say that it is acceptable that a public consultation is used to change the direction of policy, but is that what the previous consultation paved the way toward, when it consulted about whether further dormant assets should be incorporated into the scheme, as had been successfully done for bank deposits? It seems that public consent, in essence, was given to the first Act on the basis of additionality and the worthiness of the public goods undertaken with the money. If there was a substantive change from that, the public might be surprised, even if it was the result of a consultation held with many more responses coming from well-funded private enterprises and the “usual suspects”, in the terminology that we have adopted.
Lord Parkinson of Whitley Bay (Con)
My Lords, I welcome the collaborative and pragmatic approach of the noble Lord and the noble Baroness in relation to government Amendment 7. I am also grateful for the contributions on that and on Amendment 8 on reviewing and reporting, which would require a review of the performance of an authorised reclaim fund and the Big Lottery Fund, now operating as the National Lottery Community Fund, in administering the scheme. Although I recognise the intention to ensure that the scheme’s success is maintained, bringing such details within the scope of a review would only duplicate processes that already exist.
Both the National Lottery Community Fund and Reclaim Fund Ltd are arm’s-length bodies, of DCMS and Her Majesty’s Treasury respectively. As they are public bodies, robust mechanisms are already in place for the monitoring of both organisations’ delivery against their objectives. These are more frequent than every five years and enable regular assessment of whether they are running effectively and efficiently. Instead, Amendment 7 will ensure that there are periodic reviews of the operation of the scheme from transfer to reclaim and that relevant information from both organisations’ existing reports is included in the report laid before Parliament. This will enable it to track the journey of dormant assets money from participant to beneficiary. This includes how the principle of additionality has been approached, and we can confirm that it is the intention of this part of Amendment 7 to ensure that the principle has been met and that Parliament receives information about how.
As a scheme that is led by industry and backed by the Government, it is appropriate that the scheme’s primary policy objectives—namely, to reunite customers with their money, to ensure voluntary participation and to guarantee full restitution—are similarly the primary focus of the periodic reviews. However, as part of the journey from participant to beneficiary, the scheme’s impact on social and environmental initiatives will, of course, be an important aspect to report on. There have been calls to assess the impact of the scheme here as well as at previous stages of our debates on the Bill. It is absolutely crucial that the funds have a positive impact on social and environmental initiatives. However, Amendment 8 seeks to assess the scheme against more narrow criteria than social and environmental causes. In line with the scheme’s impact to date, it specifically focuses on the benefit to people and communities subject to high levels of deprivation or inequality, and the impact on developing the capacity of social enterprises and charities.
I understand that the overarching purpose of this is to ensure that the scheme has maximum impact on the communities that need it most. However, the Government are clear that the nature of this impact should be subject to a future consultation. That is why we tabled Amendment 3, which would require this to be realised through a public consultation. The Bill must therefore be sufficiently broad to accommodate the outcome of this and future consultations, and to ensure that it is captured by the requirement to report on the scheme’s impact. It may be, for instance, that the public wish to see more of the funds being targeted at environmental initiatives, which would not be satisfactorily covered by the more narrow definition of the scheme’s objectives in Amendment 8.
Amendment 8 also seeks to review the extent to which administrative, investment policy or other changes to the scheme would improve its performance. Government Amendment 7 will ensure that the relevant information from organisations in the ecosystem are presented in the report. In particular, subsection (7)(a) provides that it must include
“information about the uses made by any authorised reclaim fund of its financial resources”.
The amendment should not encroach on the governance arrangements and regulations in place for managing and maintaining an authorised reclaim fund by both Her Majesty’s Treasury and the Financial Conduct Authority.
Finally, Amendment 8 would also require the Secretary of State to consider the views of specific groups when conducting the review. We agree that the review should be informed by a range of views, including those of social enterprises and charities. However, as I said in relation to previous amendments, we believe that prescribing a set list would be too restrictive. The Government’s amendment will instead enable anyone with an interest in the review to make representations and all representations received must be considered by the Secretary of State.
We think that the changes proposed in Amendment 7 strike the balance that noble Lords have called for today and in previous stages. I am again grateful to the noble Lord for his support. I hope that our Amendment 7 demonstrates that we have listened and are committed to transparency and robust reporting. That is why I hope your Lordships’ House will support the amendment and that the noble Lord will be minded not to move Amendment 8.
Baroness Barker
“Capacity of the Oversight Trust
(1) Within six months of the day on which this Act is passed the Secretary of State must lay before Parliament a review of the Oversight Trust. (2) The review in subsection (1) must include but is not limited to an assessment of—(a) the capacity of the Oversight Trust to oversee the operations of companies that receive dormant assets money;(b) whether the Oversight Trust has the appropriate resources to fulfil its objective;(c) whether the Oversight Trust has the appropriate powers to fulfil its objective; and(d) whether a duty should be placed on the Oversight Trust to monitor the distribution of dormant assets money, and whether it would have the resources to undertake this duty.(3) The review in subsection (1) must make a recommendation as to whether the Government should bring forward further legislation to improve the capacity and effectiveness of the Oversight Trust.”Member’s explanatory statement
This amendment would require the Government to undertake a review of the capacity of the Oversight Trust and make a recommendation as to whether further legislation is needed to improve its effectiveness.
Baroness Barker (LD)
My Lords, as those who followed our previous deliberations will know, when this scheme was originally set up, the Government introduced an arm’s-length body, the Oversight Trust, to monitor the performance of the distribution bodies. It is a very small entity with a small budget and it does not have a great many staff.
The question we put to the noble Baroness, Lady Barran, in Committee was whether this small body would be able to deal with a scheme that was going to increase in not only volume but complexity. Having listened to what the noble Baroness said, we on these Benches went off and met the Oversight Trust. We had already spent time reading some of its reports and reviews. Every year, it produces a report on all of the distributors and does a very detailed report on one of the distributors.
It became apparent in our conversation with the Oversight Trust that, although it has done several reviews of the bodies that have grown out of Big Society Capital and so on, it has not yet done a big, deep review of Fair4All Finance. As I said before, that area of work is perhaps the most difficult of all, in that it is about, in short, trying to put loan sharks out of business by making sure that there is affordable finance in poor communities.
It seems to us that understanding the impact or performance of a body such as that is different and less easy in terms of the annual reports and accounts that the trust is used to looking at. In particular, through the youth finance bodies and so on, it is more used to looking at charities and social enterprises. Therefore, we thought it not unreasonable to ask the Government to look at the capacity of that body to ensure proper and deep oversight of a much more complex scheme. Consequently, we have tabled this amendment to raise the issue at this stage. I look forward to the Minister’s response and I beg to move.
Baroness Kramer (LD)
My Lords, I want to add just a word or two. My noble friend Lady Barker said that the Oversight Trust had relatively few staff; my understanding is that it has one staff member. I have great respect for the trustees; they are highly capable, totally dedicated people. But resource matters when you are dealing with a complex world. The original oversight body was designed to cope with a situation in which the amount of money in play was relatively small—under £1 billion—and the primary recipients of the end funds were going to be charities and social enterprises. The Charity Commission is involved in the disciplinary process, and there are clear structures that social enterprises have to follow if they are formally to be social enterprises.
We now all accept that the Government consider that the language allows for-profit companies to be recipients of the funds, provided they are mission focused—although nobody can tell me what mission focused looks like. If you are looking at the statutes of a particular company, there is no formal constraint on what is paid to directors in the form of salaries, no definition of acceptable returns to the original investors, and new distributors can be added. We are talking now about a pool of assets of a minimum of £2 billion, and that is just stage 1—it could easily expand to £4 billion, £7 billion, £8 billion or even £10 billion as more and more entities or organisations are captured within the scope of those eligible to provide dormant assets to the fund.
This is an attempt to ask the Government to set up a structured review to make sure that the Oversight Trust has the capacity that it needs, recognising the significant increase in complexity and responsibility. That is not in any way to denigrate anybody who is involved today with the Oversight Trust. I do not know how they do it, frankly, with one staff person. The time has come for expansion of this group, and what we are listening for from the Government is real recognition of the importance of detailed oversight.
Lord Bassam of Brighton (Lab)
My Lords, our colleagues on the Lib Dem Benches have made a pretty compelling case here. It is obviously good that we have the Oversight Trust but, with a staff complement of one, anything it does will be light touch. The amendment from the noble Baroness, Lady Barker, makes quite a lot of sense in terms of reviewing arrangements and determining whether further legislation is needed to improve its effectiveness. For that reason, we happily support this amendment.
If the Minister cannot accept the amendment as drafted, perhaps he can explain to the House how the matter is to be kept under review, and how the Oversight Trust can be strengthened to ensure that it does its work, because, clearly, oversight is very important in all of this. We need to have that assurance and guarantee that things are as they should be.
Lord Parkinson of Whitley Bay (Con)
As the noble Baronesses, Lady Barker and Lady Kramer, have said, Amendment 9 has been tabled with a view to ensuring that the Oversight Trust is appropriately resourced and empowered to monitor the distribution of dormant assets funding. The DCMS and the National Lottery Community Fund have worked closely with a range of partners to ensure that the right levels of accountability and transparency are in place for the organisations that are given the task of distributing dormant assets money in England. We have sought to support their independence while respecting that dormant assets funding is money which comes from the public.
The four spend organisations’ operations are regularly reviewed by the Oversight Trust, which, as the noble Baroness said, is an independent organisation that ensures accountability and transparency in each of the spend organisations’ activities. I should flag that the trust’s reviews are not conducted in-house; it commissions external experts to conduct them independently. The Oversight Trust does not intervene in day-to-day operations, which are of course the responsibility of the organisations’ boards; rather, its aim is to ensure that each remains true to its objectives, which involves having oversight of the general operations of the spend organisations, as referred to in subsection (2)(a) of the new clause proposed in the amendment. In particular, the Oversight Trust is required to ensure that the four organisations are well governed and that their strategic plans and budgets are in accordance with their objects; and to review their achievement of social impact and transparency of financial and impact reporting.
Those powers are formalised in legally binding governance contracts between the Oversight Trust and each organisation. These contracts empower the Oversight Trust, for example, to remove directors in the case of significant mismanagement; to approve any changes to remuneration policies; and to be involved in the process of appointing new chairpersons, including ratifying their formal appointment. The contracts set out the key processes to enable the Oversight Trust to fulfil these responsibilities, and the trust may make reasonable requests from each spend organisation, in addition to those set out in the governance arrangements, if necessary, to help it meet its obligations.
The Oversight Trust receives quarterly updates, conducts annual deep dives and publishes quadrennial reviews on each organisation, which is required to co-operate to ensure that it can perform its duties effectively. This includes a commitment to participate with the independent review panel and to provide any information and assistance that may be necessary. We therefore do not believe it would be necessary or appropriate to provide the Oversight Trust with further powers in legislation for it to perform its current mandate effectively.
Access to up to £500,000 per annum from the English portion ensures that it can draw on sufficient resources to fulfil these important objectives. We are confident that this enables the Oversight Trust to meet its objectives, but we continue to keep that under review. Last year the Oversight Trust published its first quadrennial review, which focused on Big Society Capital, with the review of Access following in June this year. The next review, which will be of Fair4All Finance, is due next year.
I am very glad that the noble Baroness has had the opportunity to meet the Oversight Trust. Since Committee, my noble friend Lady Barran has met the trust as well, to press the importance of in-depth quantitative impact data. The trust has been working with the four organisations that it oversees on this issue, including through its annual governance review meetings. The trust provides robust governance, transparency and accountability over the four organisations’ use of dormant assets funding in England. As ever, though, we are mindful of our commitment to consult widely and with an open mind about the best social or environmental uses of this money.
When the Government consider the outcome of this consultation, we will also need to determine the best approach to ensuring continued good governance over the scheme. This could include asking the Oversight Trust to consider expanding its role to oversee any additional bodies if necessary and appropriate. If so, we would review whether the trust would need additional resources to fulfil a broader remit. It is worth noting that the trust would not be involved in decisions around what, if any, new distributing bodies may be chosen in England.
As it is too early to pre-empt the outcome of that assessment and, given that the Oversight Trust is independent and not an arm’s-length body, I hope the noble Baronesses will agree that it would be inappropriate in the Bill to mandate its role in the way that the amendment suggests. However, we have included a requirement to report on the uses of dormant assets funding as part of the Government’s Amendment 7. The National Lottery Community Fund will also remain responsible for ensuring that funds are distributed in line with legislation. We hope that this, alongside our record to date in ensuring that the distribution of funds is appropriately monitored, will provide the noble Baronesses with reassurance that this is an area that we will continue to take very seriously.
Baroness Kramer (LD)
While the Minister is on his feet, could he tell me with a straight face whether he thinks that £500,000 a year is sufficient for the wide range of responsibilities that he just described? He might wish to talk to some of his colleagues who work in the world of consultancy.
Lord Parkinson of Whitley Bay (Con)
We do; we keep it under review and, if the oversight trust took on a broader role, would review whether it would need additional resources. For the reasons I have set out, we cannot accept Amendment 9, and I hope the noble Baroness will be content to withdraw it.
Baroness Barker (LD)
My Lords, I thank the Minister for his full answer. It will come as no surprise to him that we do not intend to seek to put the amendment in the Bill, but the issues we have raised have a great deal of merit.
When we met Sir Stuart Etherington, the chair of the oversight trust, he set out clearly to us, as the Minister just has, exactly what the responsibilities of the trust are and how it goes about discharging them. He said that, although it has a responsibility to look at governance and management arrangements that impact on reporting, and has the power to remove directors and the chair, the oversight trust regards that as being a nuclear option—it would have to be something rather major for it to do that. By the time it got to that stage, there would already have been a significant scandal. That is what we are worried about with this whole scheme, and have been since the very beginning, because there are so many loopholes.
However, I hear what the Minister says about this being kept under review, alongside the periodic review of the whole scheme. With that assurance, I am quite happy to withdraw the amendment.
Dormant Assets Bill [HL]
Tuesday 23rd November 2021
(3 years, 1 month ago)
Lords ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 37-I Marshalled list for Report - (12 Nov 2021)
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, I beg to move that this Bill do now pass and, in doing so, take the opportunity to thank noble Lords from all sides of your Lordships’ House for their interest and contributions to the progress of the Bill so far. I am grateful for the scrutiny that they have brought, and the co-operative and constructive spirit in which the debates have taken place. I am also grateful for the broad cross-party support that the Bill has received so far. It is clear that all corners of your Lordships’ House share the same ambition to ensure the scheme’s continued success in unlocking dormant assets for public good.
I first thank my noble friend Lady Barran, who expertly led the Bill through Second Reading and Committee. I am very grateful for the opportunity to follow in her capable footsteps. I pay tribute also to the Front Benches opposite. The noble Lord, Lord Bassam of Brighton, and the noble Baroness, Lady Merron, have helpfully challenged the Government’s approach, and I thank them for the collaborative way in which they have done so. I also thank the noble Baronesses, Lady Barker and Lady Kramer, from the Liberal Democrat Benches, for all their invaluable contributions, which have been detailed and thoughtful. Noble Lords from across your Lordships’ House have contributed to a rich discussion on the Bill, and I am very grateful for all the points which have been raised.
As ever, I am grateful to the House authorities and parliamentary staff for their hard work behind the scenes. I acknowledge the extraordinary work of the officials who have worked so hard on the Bill for many months: the Bill team, the policy teams at DCMS and at Her Majesty’s Treasury, the lawyers in both departments, my own private office, the Office of the Parliamentary Counsel and the clerks in this place.
I take this opportunity to clarify aspects of the debate on Report regarding the additionality principle, an issue I discussed with the noble Baronesses, Lady Barker and Lady Kramer. Section 24 of the 2008 Act empowers the Secretary of State to add or remove named distributors of dormant assets funding. Currently, the only named distributor is the National Lottery Community Fund, and all funds, including those distributed through the four independent spend organisations in England, flow through it. Section 24 also provides for making consequential amendments, including to Schedule 3, where responsibility for reporting on the additionality principle is set out.
The Government consider additionality to be critical to the scheme’s success, and we have reiterated this position throughout our debates on the Bill. Indeed, we are clear that the voluntary participation of the industry is dependent on it. While we emphasise that there are no plans to change or add new distributors, I can reassure noble Lords that it is the Government’s policy that any new distributor added should be required to report on this principle in the same way that the fund is required to do so now.
The dormant assets scheme has spent the last decade working to tackle systemic social and environmental challenges and to level up communities which need it most. This Bill is set to unlock almost £1 billion of additional funding to ensure that the scheme continues to support innovative, long-term initiatives that seek to address some of the UK’s most important challenges.
Lord Bassam of Brighton (Lab)
My Lords, the Minister will be pleased to hear that I will be brief, but some thanks are worth echoing. I thank the Minister; it is never easy taking up another person’s Bill halfway through. I have had to do it myself and, at times, I lurched from being completely out of my depth to being a total shambles, so I know how it feels. The noble Lord was neither of those things; he was courteous and considerate of the points that we made and the amendments we moved.
Like the noble Lord I am delighted that we are moving to unlock previously untapped assets. I hope that the next iteration of this legislation—this is, after all, the second Bill on dormant assets—will bring forward even more dormancy and unlock it, so that communities can benefit.
I also thank the Minister’s predecessor, the noble Baroness, Lady Barran, for her time spent on the Bill. She was, like him, very courteous and open-minded about ways in which we can forge improvements. She was also willing to meet and discuss aspects of the legislation. I echo his thanks to my noble friend Lady Merron—my good friend—for her part in this. It is always a pleasure to work with her. I also thank the noble Baronesses, Lady Kramer and Lady Barker, on the Lib Dem Benches, who also played an active and energetic part.
Of course, the noble Lord, Lord Hodgson, played a decisive role on Report in helping to support the amendment that we sponsored on the community wealth fund, for which there was all-party support. Before the Commons is invited to reject that amendment, I suggest to the Minister that it might be an idea to sponsor some discussion between his ministerial colleagues and other Benches in your Lordships’ House to see if there is a way in which we can find some common ground on this—because I am very persuaded, as I know others are, of the benefit of the community wealth fund as a way forward. As he said, these resources can do a lot to take forward the shared agenda of levelling up and bring additional resources to bear in hard-pressed communities. We for our part would be very happy to meet and discuss this to see what common ground we can secure, because this is an important opportunity for us all, if we want to make it stick.
We wish the Bill well. It has been improved by your Lordships’ House, not just by the amendment on the community wealth fund but in other aspects as well. I thank the Minister for his comments on additionality, which will be very helpful. I am happy to support the Bill as it goes on its way.
Baroness Barker (LD)
My Lords, I also thank very much the Minister, his predecessor—the noble Baroness, Lady Barran—and the team. As is always the case with a Bill that is very technical and arcane, they had to display endless patience with the opposition as we painstakingly made our way to the place that they were already at. I also thank my noble friends Lady Bowles and Lady Kramer, who brought to the Bill a completely fresh eye from the financial sector and who set a very high standard of scrutiny for a Bill that is normally given over to those of us interested in the world of charity.
We achieved three things during the passage of the Bill. First, we made it clear that this is not simply an exercise in spending dormant money because it is there. We made sure that the scheme is about achieving impacts on financial inclusion in areas of deprivation. Secondly, we enabled it to be run using far more difficult asset classes than just bank accounts, and we made sure that the reporting systems for that were fit for purpose. Thirdly, we made sure that everyone involved in the scheme is under a duty to report—this is about additionality, not giving the Government a fund that they can dip into in difficult times.
In years to come, we will have reports from the disbursing body and the Secretary of State that I hope will show the impact of this, particularly in one respect: the endeavour to get rid of moneylenders in poor communities. If we achieve that, we will together have achieved something good and which we can be proud to support.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am grateful to the noble Lord and the noble Baroness for their comments, and I echo the tributes that they paid to the noble Baroness, Lady Bowles of Berkhamsted, my noble friend Lord Hodgson of Astley Abbotts and many others who contributed to the debates on this.
I will certainly discuss the point that the noble Lord raised with my honourable friend Nigel Huddleston, the Minister with responsibility for the Bill, in his capacity as Minister for Charities and Civil Society, as we just heard in Questions. I am sure that he will want to continue the discussions that we have had on community wealth funds as the Bill goes to another place but, as I say, I am very grateful that it does so with genuine cross-party support and a fair wind behind it. I grateful to all noble Lords who have ensured that this is so.
Dormant Assets Bill [Lords]
Monday 6th December 2021
(3 years ago)
Commons ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 37-I Marshalled list for Report - (12 Nov 2021)
The Economic Secretary to the Treasury (John Glen)
I beg to move, That the Bill be now read a Second time.
Over the past decade, the dormant assets scheme has released more than £800 million to tackle systemic social challenges and to support the communities that need help most. This Bill is estimated to unlock £880 million of additional funding to ensure that the dormant assets scheme can continue to support innovative, long-term programmes addressing some of our most pressing social and environmental challenges. The scheme is led by industry and backed by the Government. Its aim is to reunite owners with their financial assets; where that is not possible, the money supports vital social and environmental initiatives across the UK.
Consumer protection is at the heart of the scheme. Dormant assets remain the property of their owners, who can reclaim any money owed to them in full at any time. However, only a small percentage do so, meaning that the rest of the money lies dormant. The scheme responds to the imperative to put the money to better use.
The Bill marks the completion of a five-year review in collaboration with industry leaders, including an independent commission and a public consultation. The scheme’s success is down in no small part to the commitment and drive of the banks and building societies that have led the charge on unlocking dormant assets for the public good. However, it is only right that the scheme continues to grow and evolve.
Currently, only assets from dormant bank or building society accounts are eligible to be transferred into the dormant assets scheme. The Bill will enable Reclaim Fund Ltd, the scheme’s administrator, to accept a broader range of asset classes in the sectors of insurance and pensions, investment and wealth management, and securities. Of course, there could be even more dormant assets to unlock in future. The Bill will therefore introduce a new power to provide the flexibility to expand the scheme through regulations.
I stress that the four core principles that underpin the scheme—voluntary participation, reunification first, full restitution and the additionality principle—will remain unchanged by the Bill. The Bill will require the Secretary of State to
“carry out periodic reviews of…the operation of the dormant assets scheme and…any use made of the powers”
to extend the scheme.
Jim Shannon (Strangford) (DUP)
There are many worthwhile projects that local communities would like to bring forward. How can they feel that they are part of this project and gain advantage from dormant bank accounts?
John Glen
I thank the hon. Gentleman for his intervention. There will be a consultation; I or the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), will come to it later.
The Bill makes provision to reflect Reclaim Fund Ltd’s establishment as a Treasury non-departmental public body and names it as the scheme’s only authorised reclaim fund. In addition, the Bill includes a new power for the Treasury to designate additional authorised reclaim funds in future. To guarantee consumer protection, the Bill’s money resolution will enable the Government to cover the liability, in the form of a loan, for reclaims should any authorised reclaim fund face insolvency.
The Bill will amend the approach to distributing dormant assets funding in England, aligning it with the model used in the devolved Administrations, who have powers to focus funding through secondary legislation, provided that it is within the parameters of social or environmental purpose. In England, the Dormant Bank and Building Society Accounts Act 2008 restricts the English portion of funding to youth financial inclusion and social investment. The Bill will enable the current restrictions to be removed from primary legislation and put into secondary legislation so that the scheme can respond to changing needs over time. The Bill will require the Secretary of State, before making an order, to publicly consult on the social and environmental focus of the English portion of funds. No changes to the existing restrictions can be made until and unless a new order is laid.
After 10 years of operation, it is right that we carefully consider how the scheme can deliver the greatest impact once it has been expanded.
Julian Knight (Solihull) (Con)
With the expansion in the amount of money and the number of areas subject to the scheme, there is a danger that we could end up swamping the economy in those areas. We therefore need to broaden out the scope of the good causes towards which the scheme can work.
John Glen
I thank my hon. Friend for that point—a legitimate point that will be raised in different ways across the country during the consultation, and one on which the Secretary of State will need to reflect in due course before an order is laid.
It is vital that we afford everyone a fair and open opportunity to have their say, so the Government plan to launch the first public consultation, which will last for at least 12 weeks after the Bill receives Royal Assent. Until we have launched the consultation and fully considered the responses, the Government are not prepared to make decisions or commitments on the ways in which future funds will be used in England. To do so would clearly undermine the validity and transparency of the consultation exercise.
Kevin Hollinrake (Thirsk and Malton) (Con)
Under the current legislation—the Charities Act 2011—urban regeneration is one of the areas that distributions are allowed to go into, but it is not clear whether they can go to, for example, a regional mutual bank. As my hon. Friend knows, the all-party parliamentary group on fair business banking is strongly in favour of that. Could the point be clarified in the Bill to facilitate a quicker move to fund those regional mutuals?
John Glen
In short, no; that will not feature on the face of the Bill. However, my hon. Friend is a doughty advocate for that cause, and I am sure he will make a hearty contribution to the consultation which will inform the Government’s response in respect of those future parameters.
Mindful of time and the need for contributions from so many Members on both sides of the House, I will end by reiterating that the Government are committed to supporting industry efforts to reunite more owners with lost money, and to provide a practical way for unclaimed and unwanted funds to be put to good use. The dormant assets scheme has achieved that, and we are determined to ensure that it continues to be a success. I hope that the Bill will command cross-party support this evening, and that we will be able to work together on expanding the scheme to unlock hundreds of millions of pounds more for good causes throughout the country in the years to come. I commend the Bill to the House.
Rachael Maskell (York Central) (Lab/Co-op)
In 2008, Labour set out a new principle in the House: to put dormant assets from bank and building society accounts to work, first by trying to reunite owners with their accounts but then, when connections failed to materialise, by moving assets to address social and environmental good causes. Labour’s vision has since released nearly £8 million to infrastructure bodies which, in turn, have multiplied the investment and expanded the work of civil society. I continue to argue that the pounds spent by civil society organisations stretch much further than those spent elsewhere in the economy.
This is a success to celebrate, but the last two years have been tough. As the sector's campaign slogan in response to the pandemic says, charities have been “#NeverMoreNeeded”. Demand went up and funding down as shops were shut and fundraising dried up. That is why this legislation is really “never more needed”, but it also furthers Labour’s ambition to introduce other assets into the reclaim fund, now that the principle has been established and the scheme has proved successful.
The three-year review should have taken place a decade ago, and the legislation before us today should have already released millions of pounds. If it had, the sector might have survived the last two years more securely rather than ending up where it is today. Today we are urging the Government to press on while also ensuring that the Bill is in good shape.
Charities have been tested throughout the last decade as the state failed to give the sector the back-up that it needed. Charities and Labour have shared values and a shared sense of purpose. We want to do all we can to transform our society, and that is why we value charities so highly. Bursting with dedication and expertise, civil society really is the heartbeat of all our communities.
Danny Kruger (Devizes) (Con)
Does the hon. Lady acknowledge that the Government put more than £150 million into the charity sector last year, and does she think that that was welcome, not enough or too much?
Rachael Maskell
As I was going on to say, that money reached only 14,000 charities out of 169,000. As we see demand spiralling, we are seeing charities struggling. The Government could have been far more generous, as they have been to many other sectors during the pandemic.
Every organisation has had to reinvent itself, digging deeper into its reserves, borrowing where possible, and appealing to the ever-generous public for help. We saw charities and mutual aid groups spring up in every corner of every community. Where the state stopped, charities took their service ever more deeply into our communities. That is why this legislation really matters, and why Labour will support its passage through the Commons today. It arrives in a better state thanks to the extensive work undertaken in the other place, and I particularly thank Lord Bassam of Brighton for his skilful handling of it, to help it to reflect the priorities of civil society.
In looking at the detail of the Bill, we are pleased to see that the principles that Labour set out in 2008 remain, including that of reuniting assets with their owners through extensive tracing processes and ensuring that the owner will always be able to claim the value of their asset in full if they seek to do so. The principle of this being a voluntary scheme will remain, whereby participants can opt in, and I encourage everyone to do so. When dormant assets have been through thorough tracing processes, the asset then transfers to the reclaim fund, which is responsible for any reclaim that might occur, moving surplus into the hands of identified organisations. Labour is most grateful to Big Society Capital, Access, the Youth Futures Foundation and Fair4All Finance for the way in which they have multiplied the value of these assets and invested them wisely to help people in our communities. Likewise, we are grateful to organisations in the devolved countries.
Part 1 of the Bill expands the opportunity for the inclusion of other financial dormant assets. The consultations to get to this point have been thorough, and each new product carries its own racing mechanisms and timescales to reduce risk. We welcome the inclusion of all the named assets, but I want to press the Minister further on pension schemes. While there is some inclusion, I know that he is making the case that until the pensions dashboard has been thoroughly tested, he is reluctant to expand in this area. I appreciate that there has been significant delay in the introduction of the dashboard, which has caused the Government significant embarrassment. This delay is denying good causes the assets that they want to put to work.
Perhaps the Minister could set out a timeline for further widening the scheme to these kinds of products. It would be good to hear from him what other assets he is considering for later inclusion, whether they are direct cash or non-cash assets. Charities cannot wait to benefit, and nor can the public. The powerful testimonies from current beneficiaries demand that the Government seek to expand. I know that the Second Reading of the Bill in the other place raised many helpful suggestions as to how that could happen. Wherever funds can be identified, Labour wants to see them put to work for social and environmental good causes.
Part 2 of the Bill focuses on a number of themes, the first of which is the reclaim fund. Moving it under the auspices of the Treasury is a positive move, placing it independently but with lines into the Treasury. However, it is Labour’s consideration that, 13 years since the scheme’s passage through this place, it should be reviewed. Each reclaim product should be assessed separately according to the levels of real risk to the reclaim fund. If data from the first phase is observed, the scheme could be more generous in its support to beneficiaries. The sector agrees with that. A regular review would also help to identify any risk in the scheme. The Government will now be responsible for underwriting any deficit that might occur with a loan to the scheme, but it is far better to avoid such risk in the first place. My broader question is therefore: is the balance right?
Before I address the matter of where the money is spent, I also want to raise the question of the next stage of the Bill. After such detailed consultation over many years, we need to ensure that there is no further significant delay in preparing and instituting secondary legislation. Labour wants to see this process commence on the heels of this legislation, for it to be thorough and allow sufficient time for response and for it then to be expedited through secondary legislation.
I am most grateful for the addition of clause 29 to this legislation. It was added on Report in the other place and it highlights a deficiency in the distribution of the reclaim fund. That is impeding civil society from thriving across many communities and impeding the social levelling-up agenda. Imagine doing a jigsaw and finding one piece missing: it mars the whole picture. The reconstruction of civil society is the same. All the schemes need to be in place, but the exemption of the community wealth fund has meant that whole swathes of communities have been robbed of the opportunity to build the very partnerships that could tackle the deepest of challenges.
In my own constituency, we have a thriving and growing voluntary sector under the superb leadership of York CVS. However, we have areas of real deep entrenched deprivation. Tang Hall Big Local, a local trust, has now developed micro-level infrastructure to start tackling social injustice in the Tang Hall area. It is utterly amazing to see the multi-agency approach and the multiple offers, alongside community engagement—225 such areas have been mapped out.
Imagine areas where there is no thriving CVS or a well-developed civil society sector, on which the new integrated care systems in the Health and Care Bill depend. Imagine this loss in the most deprived and challenged areas, as they often are. The amazing things that charities do just would not happen; the vital partnerships and social infrastructure would not be built. This is at the core of what the community wealth fund does. It empowers communities to develop the partnerships needed to transform themselves. Its inclusion will mean greater equality, which is surely what levelling up is all about.
That is why the inclusion of the community wealth fund in the Bill to build social infrastructure is so vital. The principles of the Bill and the 2008 Act are too broad to provide such a framework without clause 29, and the principle needs to be framed in primary legislation. Without it the funds could go elsewhere and will not meet the ambition that I trust the Government share with Labour.
The Government do not need further pilots, as there are 150 projects at various stages of development. Those projects have been evaluated and will continue to prove their value. When it comes to the civil society sector, the Government always seem to have the knack of overcomplicating things and missing the opportunity it presents. If they really wanted to build back better, they would have poured investment into community wealth funds and seized this moment to bring about social transformation. That is why Labour has pushed so hard so see it included in the Bill, and the Lords supported it. I trust for the sake of its impact that the Government will not lose the opportunity to reaffirm the principle of a community wealth fund in primary legislation to complete that picture.
In closing, I put on the record my thanks to the thousands of organisations that have shown their support for taking the reclaim fund forward, and to the participants in the dormant assets scheme to date for their co-operation and engagement. Across our communities, staff and volunteers are building civil society, fighting inequality and injustice, and supporting people with every need. Their contribution is outstanding and their support is utterly amazing. It gives us all such pride to reflect on all they do. Putting money to good work for them to multiply its benefits has always been a principle that Labour has advanced, and we will again throughout the passage of this Bill.
Julian Knight (Solihull) (Con)
I declare an interest as chair of the all-party parliamentary group on financial education for young people. Several key supporters of the APPG have benefited from the dormant assets scheme, in which I know my hon. Friend the Economic Secretary to the Treasury takes a keen interest. His has often been a lone voice in the wilderness when it comes to financial education for young people, and we are grateful for his support.
It would be fair to say that the current dormant assets scheme has far exceeded expectations since the passage of the Dormant Bank and Building Society Accounts Act 2008. I was a financial journalist at the time, and I well remember that it was seen as revolutionary but relatively small-scale—a staging post. The then Government thought it would raise about £400 million, but it has raised £800 million. I also remember that there were a lot of questions about exactly how it would be brought about, how fair it would be and whether people would get their money back.
There were also questions about whether people would find their money was just taken, whether it would be an example of the state effectively piling into people’s lives, but we have seen a huge amount of fairness. No one can complain—even those from 1864 who lost money from their National Savings and Investments account have not come forward to say they have been mistreated in that respect.
I have seen in my constituency the huge amount of good this scheme has done. Ordinary Magic, a group based in Shirley, received £60,000 through the fund this year, and it is providing support to local children—we know from the tragic events this weekend exactly how welcome this is in my community—who are suffering from mental health conditions by providing psycho-education workshops to teach parents how to enable their children to get through these difficult times and difficult situations. It also provides personal, social, health and economic education sessions in schools, enrichment holiday clubs and breaks for children and carers, which is hugely important.
As Chair of the Digital, Culture, Media and Sport Committee, I believe it is incredibly important for our young people, particularly those living among some of our most deprived communities, to have access to the performing arts. I make reference to the Citizens Theatre, based in Glasgow, which is fantastic in its outreach. I know for a fact that it goes out into the local community; I believe it even tries to recruit young actors in chicken shops, cafés and other such places. The distribution of the dormant assets scheme is therefore providing enrichment experiences that young people in Glasgow need to expand their confidence and explore their identities through the stage. That would not be the case had it not been for this legislation, which has cross-party support.
However, I believe we have a major disparity in the existing system, whereby the devolved Administrations have more flexibility in how the dormant assets funding is distributed in comparison with England, where the funding is restricted to groups promoting financial inclusion—obviously, I have an interest in those—and social investment. While financial inclusion and social investment charities both do important work, it is only right that we widen our funding distribution here in England as well.
That is why I support the Bill before the House. Under this legislation, the Government will be in a position to increase the flexibility on how funding is allocated over time. As they see the money come in, they will be able to suit the distribution of those funds accordingly and be able to bring about real change. That is to be done through amending the Dormant Bank and Building Society Accounts Act 2008, allowing the Government to set out additional clauses through secondary legislation. It will thus be subject to a departmental consultation in the public domain, which is important, and will need the support of hon. Members through parliamentary approval, as per usual.
Supporting this change by approving the legislation before us will allow the Government to bring themselves in line with our devolved Administrations, so they can set their distribution priorities through secondary legislation. According to the Association of British Insurers, which I understand is backing the Bill, it is estimated that £2.1 billion currently sits in dormant insurance and pension products. Let us just think of the life-affirming, life-changing effects that that £2.1 billion, if correctly and safely distributed with the right to reclaim, could have on our communities across the country.
I concur with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) in his ambition for community banks. I also place on the record my thanks to those within banking and financial services who work tirelessly year in, year out to reconnect dormant assets with their customers. They really do not give up—even with the case in 1864 with National Savings & Investments, they are probably still writing letters. Indeed, I know the sector invests millions each year in reuniting customers with their money. However, despite some of their best efforts to reconnect dormant assets with the customer, sometimes we know it is simply not possible. That said, with the greater move to online banking, customers should be in a far better position to keep track of their finances and securities.
Finally, it is welcome that, following the Government’s public consultation in July 2020, the existing scheme will be expanded to include assets from the insurance, pensions, investments, wealth management and securities sectors. This step will pump even more funding into the dormant assets scheme, in turn supporting some of the most innovative and inspiring work in the third sector.
As the hon. Member for York Central (Rachael Maskell) stated, we know the charity sector has had an incredibly difficult pandemic; £750 million was hugely welcome, but the total shortfall across the sector was £4 billion. Let us hope that some of the redirected resources from this scheme can go towards that third sector, to ensure that they can continue the work they do.
John Nicolson (Ochil and South Perthshire) (SNP)
We in the Scottish National party welcome the Bill and the expansion of the dormant assets scheme. The extra £880 million now available as a result is very welcome, especially in what is an extremely difficult time for so many up and down the country. Already the scheme has delivered £745 million for social and environmental initiatives. By expanding the current list of assets that qualify for the scheme, up to £1.7 billion more could be made available.
The Minister will doubtless be aware of the remarks made in the other place about the Bill. Peers wanted clarity on its potential costs and more detailed impact assessments of the expanded scheme. Baroness Barker specifically warned that such details are important so that the scheme does not become a
“piggyback fund for government when times are tough.”—[Official Report, House of Lords, 26 May 2021; Vol. 812, c. 1039.]
Perhaps the Minister can assuage her concerns and give us the detail that she asked for.
It is good to see that the Bill makes some changes to distribution in England; the Secretary of State will have more freedom to spread assets through secondary legislation, thus allowing England to catch up with Scotland and the other devolved nations. As Lord Triesman pointed out in the other place, the example set by the devolved nations through their innovative thinking about how to spend the funds allotted to them provided the impetus for the expansion of the scheme in England through this Bill.
The pandemic has shown that the needs of the population can change dramatically and suddenly. Flexibility in secondary legislation is a useful tool to deal with such change, but we must also ensure adequate consultation and scrutiny. We welcome the requirement for the Secretary of State to launch a public consultation and to consult the National Lottery Community Fund before replacing or changing an order. However, it may also be desirable to expand such consultation beyond that fund and to include the devolved Ministers responsible for spending in their nations and representatives of the voluntary and social enterprise sectors.
It is reassuring that the expanded scheme will focus on reuniting owners with their assets. With the expanded range of qualifying products, it is estimated that £3.7 billion-worth of financial assets lie dormant. With the elderly and vulnerable—especially those without digital skills—among those most likely to lose access or connection to their accounts in an increasingly digitised world, such efforts are vital. That is why we on the SNP Benches welcome the enhanced tracing and verification measures that could lead to the reclamation of as much as £2 billion.
The Bill should be effective, but if we could get clarity from the Minister on some of the points raised here and in the other place, it would be much appreciated.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to speak in this debate. I am supportive of the Bill and the widening of the jurisdiction of the legislation.
As I said in an earlier intervention, my brief remarks will be centred on community banks, which, as both Ministers on the Front Bench—my hon. Friends the Economic Secretary to the Treasury and the Under-Secretary of State for Digital, Culture, Media and Sport, the Member for Mid Worcestershire (Nigel Huddleston)—know, the all-party parliamentary group on fair business banking believes are at the heart of social purpose. Indeed, the APPG’s recent “Scale up to level up” report makes the case for regional mutual banks and community development financial institutions, which could—and in the case of CDFIs do—play an important role in fairness, making sure that we level up properly, and in regional distribution in terms of regional recovery.
Let us look at how regional mutual banks worked in Germany after the most recent financial crisis. In the five-year period between 2008 and 2013, UK commercial banks withdrew financing to small and medium-sized enterprises by around 25%, whereas in the same period co-operative and community banks in Germany increased lending to SMEs by 20%. That was an incredibly important time for SMEs—they need funding to get through crises of that kind—and co-operative and community banks take a different approach to lending. Commercial banks are important in the UK but regional mutual banks could play an important role by getting patient capital to where it is really needed, which is to SMEs and the productive economy.
Regional mutual banks are not just a feature of Germany, and this is not just a romantic ideal; they are very much part of every G7 economy, with the US, Germany and Japan being examples of where they work very effectively. They are not currently part of the UK banking sector—they used to be—but the APPG sees them as crucial to levelling up because they can have a genuine regional focus.
Similarly, there are some very good examples of CDFIs. A business enterprise fund in Bradford, Yorkshire, is key to making sure that people who are financially excluded are financially included. Regional mutuals are full-service banks. CDFIs are not full-service banks, but they make sure that people on low incomes are properly banked, which again works very much on a relationship-based approach. They also lend quite significantly to small and medium-sized enterprises.
There are 50 CDFIs around the country. They rely very much on grants and loans rather than getting money from the markets, so it is incredibly important that they see more funds going into them. I see this as a real opportunity for some of our less well-off communities to thrive in the future. These organisations are sector-based, making sure, for example, that people from black, Asian and minority ethnic communities and women are properly supported.
One very good example of how CDFIs work is Prima Bakeries in Cornwall, which is featured in our report, “Scale Up to Level Up”. At the time, the business had 19 employees. It was refused banking from its high street bank, so it went to its local CDFI, South West Investment Group, which lent it the money it needed to get through. It now has 96 people employed in that organisation. That shows how CFDIs take a different, relationship-based approach, rather than simply looking at the pure numbers, which the big banks tend to do.
It would be very simple for us to try to expand the current legislation—I take on board my hon. Friend the Minister’s comments about going through a consultation. The difficulty with consultations is the time that they take. I know that it is a 12-week consultation, but this kind of stuff might take months or years to implement. It is quite clear from section 3(2)(c) of the Charities Act 2011 that urban regeneration is an area that qualifies for the distribution of dormant assets, but the people who distribute them, Big Society Capital and Fair4All Finance, currently think that regional mutuals and CDFIs do not qualify for those funds.
If we could put something into the legislation, a simple clarification rather than a wider consultation, on the basis that these sectors could be funded through dormant assets—I know that there will lots of different people trying to pitch for all kinds of different things—it would mean money going to those organisations much more quickly. If they are key to levelling up, which I absolutely believe they are, it would be good to see that consultation. We are looking for about £100 million to pump-prime these organisations with this funding. I will table an amendment to the legislation to discuss this at a later stage, because it would be better to expedite this issue than wait for a long-term consultation. No doubt we will have more time to discuss that at a later stage.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
We have very little time left, so I must ask for very short speeches, please.
Rushanara Ali (Bethnal Green and Bow) (Lab)
May I start by declaring an interest as co-chair of the all-party parliamentary group on philanthropy and social investment and also chair of a national charity that has benefited from dormant assets funding, as well as the many organisations that the all-party group represents?
Since the last Labour Government introduced the Dormant Bank and Building Society Accounts Act 2008, with cross-party support, more than £800 million has been distributed to good causes. The four organisations that have been involved with the distribution—Big Society Capital, Fair4All Finance, Youth Futures Foundation and Access, the Foundation for Social Investment—have a proven track record and an evidence-based approach to investment and support to charities and social enterprises across the country.
It is vital that this Bill builds on the work and the evidence underpinning the allocation of funding. It is also vital that we look at some of the things that these organisations have achieved. Big Society Capital alone has used the £425 million of dormant assets to bring in another additional £2.5 billion of social investment from other investors, so it is vital that we ensure that that is built on and that there is not a power grab by Ministers to allocate funding to their favoured causes. I hope that the Minister will assure us that the consultation will be meaningful and not an attempt to take away the proper accountability, scrutiny and good governance that underpins the current allocation of funding, through these agencies, to good causes in our constituencies up and down the country.
Since 2019, the Youth Futures Foundation, which has a fund of £90 million, has started to allocate funding to young people. I have seen how the charity that I chair has benefited; 70% of the beneficiaries are from working-class and ethnic minority backgrounds in different parts of the country. Many other organisations up and down the country are also doing really great work with young people. Youth Futures Foundation has distributed nearly £19 million to 143 civil society organisations engaging about 18,000 people during the pandemic, and there is much more to do for those who face disadvantage and discrimination. As I have said, the work of Big Society Capital has meant that organisations have been able to build a social economy in their areas, which has had benefits in a wide range of fields such as tackling homelessness and building new social businesses across the country.
Let us build on the achievements reached under the last Labour Government and the cross-party consensus that has underpinned the work of these multiple organisations. I hope that the Government will ensure that lessons are learnt from the scandal of the towns fund. There have been big concerns about funding being allocated when Ministers have more control over it and there is less accountability; funding must not be dictated by political favouritism. Likewise, we hear the scandals of the personal protective equipment contracts, with separate pathways for those who have close connections with the ruling party. We must ensure that we do not fall into those traps, because there is a great deal of cross-party consensus on supporting organisations in our constituencies up and down the country.
During the pandemic, we have seen how vital it is to support charities. I have been fortunate to be able to work with colleagues in the Conservative party, as well as Liberal Democrats, SNP Members and others, through my all-party parliamentary group. I hope that Ministers will take heed of the representation that has been made and ensure that, rather than the duty to consult just being paid lip service to, there is proper protection and good governance in the future allocation of the dormant assets funds, and that they do not just dish out money to their pet causes, dictated by political considerations rather than what is in the interests of community organisations and charities across our constituencies and our country.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
We have less than 20 minutes left, so four minutes each please. I call Gareth Davies.
Gareth Davies (Grantham and Stamford) (Con)
Thank you Madam Deputy Speaker; I will keep my remarks brief.
This fantastic Bill will unlock literally hundreds of millions of pounds to support communities and community businesses throughout the country. The Bill is clear about where the money is coming from, so let me talk briefly about where the money could go to. The Dormant Bank and Building Society Accounts Act 2008 unlocked funding to support our UK social investment sector, and I very much hope that this Bill will do the same. The UK social investment market has tremendous potential to transform communities up and down the country, and to support businesses that have a social benefit and charities that have specific, targeted interventions. While discussing this Bill, it is important that we reflect on the time since the 2008 Bill. In the brief time that I have, I will highlight three points.
First, as has been mentioned by the hon. Member for Bethnal Green and Bow (Rushanara Ali), in 2012 £425 million was taken from the dormant assets pool to form Big Society Capital, which was the world’s first social investment organisation. As she quite rightly pointed out, it has done significant and brilliant work to mobilise social investment capital, and has helped to fund a lot of businesses and charities around the country. However, it is important to point out, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) did, that it is constrained by the very specific, ringfenced scope of the legislation at the time, to the extent that its mandate has almost become overtly philanthropic. If we are really going to unleash the potential of social investment, it is vital that we look at the organisation’s scope to be able to invest in businesses that have a social impact and make money. Their financial track record over the past eight years shows that they have a made a loss in six of those years. If we spoke to the organisations themselves, they would agree that if they were given more freedom to invest across the country in different types of business, they could do a lot better.
My next point is on what are commonly known as social outcome contracts, which were first launched in 2011. These are highly complex, very illiquid and somewhat risky arrangements. We have had 87 launched in this country since 2011. They were billed as a way of mobilising billions of private capital. Unfortunately, they have only mobilised £73 million. I therefore urge caution on the Government ahead of proceeding with allocations in future to make sure that they are not investing in social outcome contracts that may not deliver what they say they will.
However, there is one area that I would encourage the Government to look at as part of their consultation, and that is to bolster our liquid, tradeable social bond funds and the market that is out there. These are issued by corporates and charities to ringfence capital that has a social impact. We are a genuine world leader in this. Last year there was $59 billion of issuance that could multiply quite exponentially given what has happened with green bonds. I encourage the Government to look at that in more detail.
Danny Kruger (Devizes) (Con)
The whole programme of dormant assets and the social investment that it has mobilised has been a great success story. I pay tribute to Sir Harvey McGrath, the outgoing chairman of Big Society Capital, and to his team; and also to Nick Hurd, formerly of this place, who chairs the Access foundation, his colleague Seb Elsworth, and others there. They have done an absolutely tremendous job. Mobilising £8 billion of private money for £800 million of dormant assets is not bad.
I recognise the points made by my hon. Friend the Member for Grantham and Stamford (Gareth Davies). The fact is that some programmes do fail. The whole point of investment is that they do not always work. We have to keep an eye on the overall returns that funds like this generate. However, there are some tremendous success stories, including in social outcome contracts. I declare an interest regarding the one I founded—the West London Zone for Children and Young People, which has leveraged public money through social outcome contracts very successfully, bringing in significant private investment and delivering great outcomes for young people.
I recognise that, as the hon. Member for Bethnal Green and Bow (Rushanara Ali) said, it is not appropriate for us, as MPs or Ministers, to be dictating the objects for these sorts of funds. Nevertheless, I hope she will not mind if I make some suggestions of the sorts of projects that would be useful for this. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) is absolutely right that there is a massive gap in our finance sector in this country where we need small regional banks lending particularly to family businesses. That is absolutely crucial. If this money could support that, I would absolutely welcome it.
Then there is the opportunity for investment in personal debt projects. I particularly reference the suggestion by Fair4All Finance of creating a jubilee debt fund to tackle problem debt. We could do that. Community foundations and existing charities can and should be used as objects for significant capital injections. They distribute money very effectively to small local charities and causes.
Finally, there is the idea of a community wealth fund mentioned by the hon. Member for York Central (Rachael Maskell). I absolutely agree with her suggestion. I pay tribute to Matt Leach and Margaret Bolton of Local Trust, who seem to have got those on both sides of this House pretty much in their pocket when it comes to lobbying for this brilliant idea, which I endorse too. A community wealth fund could do all the things that we are describing to get money to all these projects, whether commercial, charitable or social enterprise. That is the sort of economy we need— a mixed economy that includes all these different and great innovations.
Several hon. Members rose—
Madam Deputy Speaker (Dame Eleanor Laing)
I must try to leave time for the Minister; therefore two minutes will be just fine.
Dr Kieran Mullan (Crewe and Nantwich) (Con)
I broadly welcome this legislation, as it expands a positive initiative. I understand the scheme is voluntary, and I would be interested to hear the Minister’s thinking on whether we could move towards a mandatory system for our larger institutions.
The focus of my remarks is on the use of the funds. As has been stated, today, the money can only be used for youth, financial inclusion or social investment in England. It has been helpful to have those priorities set out in legislation. It gives certainty to funders and guaranteed income streams, so I am wary of the decision to strip it all the way back to consultation. I thank Ministers for the time they have taken to explain to me that the additionality principle is still in place and that the money must still be spent on social and environmental causes. That has given me some reassurance, but I wonder whether there is a halfway house we can reach, where we retain the new flexibility that the Minister would like to have for the Government, while perhaps having a focus on things such as geographical and deprivation-linked spending, so that we can tackle some of the challenges around levelling up at the same time.
I often find that the most deprived areas are the least able to put themselves forward to apply for funding. If there was some kind of linkage to that, it would be welcome. That is why I support some of the suggestions on a community wealth fund for the 225 most deprived or left-behind neighbourhoods in the country, one of which is Crewe St Barnabas in my constituency. I have seen at first-hand the deprivation challenges that that creates. Backing the community wealth fund, even if not through legislation, but in the consultation process later on, would send a powerful message to those wards and those parts of the country that the Government are serious about levelling up. I thank the Minister for his remarks.
Paul Howell (Sedgefield) (Con)
I will try to be as quick as I can. First, I compliment my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake); I agree with everything he said. Primarily, I want to speak to the proposal for the creation of the community wealth fund through the Bill. The Government have made it clear that levelling up is one of their top priorities. That has been demonstrated through the establishment of a Department, new funds for levelling up, the £200 million community renewal fund and so on. That is all very welcome, but it is only part of the story. Those things will not by themselves be sufficient to level up the most deprived or left-behind neighbourhoods. They are focused on shovel-ready physical infrastructure—an excellent starting point—but we should not forget that we also need to build the social capital needed to develop and sustain prosperity in left-behind neighbourhoods.
I agree with the Government that we need to invest in community-led infrastructure at the neighbourhood level to ensure that the levelling-up agenda is successful. A community wealth fund would complement existing initiatives by addressing the need to help communities develop and sustain the social infrastructure that is the lifeblood of strong communities, building social cohesion and laying the foundations for a strong local economy.
The community wealth fund, which would invest in the 225 most deprived or left-behind neighbourhoods in this country, would repair the social fabric in those communities where it is most frayed. That is the particular focus of the all-party parliamentary group that I jointly chair, and I thank everyone who contributes to it for increasing my motivation. We also need to consider how we deliver this fund and what we do, and I would like us to consider the idea of the late Jonathan Sacks that a social covenant, which is relational and human, is preferable to a social contract, which is transactional and bureaucratic. This Bill has the potential to further strengthen families, communities and the nation, and I would like the Minister to consider that as a methodology for getting it there and letting us trust the people. I will explore that further in my ten-minute rule Bill on Wednesday.
Madam Deputy Speaker (Dame Eleanor Laing)
I thank the hon. Gentlemen for being really brief; that was totally brilliant.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Nigel Huddleston)
I thank all hon. and right hon. Members for their valuable contributions in the debate today, many giving examples of the huge impact that dormant assets funding has had in their constituencies, and we see that right across the country. I am pleased that the Bill has such obvious support across the House and in the other place. It is clear that we all share the ambition to ensure the scheme’s continued success in unlocking dormant assets for public goods.
I would like to address some of the points raised today. Time will not allow me to give full details, and we will be debating the issues and details of this Bill in its later stages. I am also happy to discuss with colleagues across the House issues raised today ahead of the Committee stage, should there be an appetite to do so.
Members have raised a wide range of issues, in particular regarding future spend considerations. Clause 29, as mentioned by the hon. Member for York Central (Rachael Maskell), enables the Secretary of State to launch a public consultation on the social or environmental purposes of the English portion of the dormant assets funding, as the hon. Member for—[Interruption.]—as the hon. Member for Ochil and South Perthshire (John Nicolson) pointed out. Sorry, this is what happens when Members change constituencies. We do not have the flexibility in England that they have in the devolved Administrations, and that is something we would like to correct, as my hon. Friend the Member for Solihull (Julian Knight) mentioned.
The Government plan to launch a consultation that will last for 12 weeks after the Bill receives Royal Assent and clause 29 is commenced. We anticipate that summer 2020 is the earliest that that will be possible. The consultation will enable the public to have their say on how the impact of the scheme can continue to be felt by the people and communities who need it most. We are committed to ensuring that the process is broad and inclusive.
As the consultation is dependent on the Bill passing with the measure included, it is too early to speculate on the causes that may be included, and I would not want to pre-empt the conclusions of the recommendations. As we have heard this evening, however, many suggestions are being put forward by hon. Members in this place and the other place about vehicles or future causes that could be included, and we are certainly open to hearing them.
We are not opposed to considering, for example, community wealth funds, as articulated by several hon. Members. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) mentioned alternative measures involving mutuals and credit unions. My hon. Friend the Member for Grantham and Stamford (Gareth Davies) mentioned alternative measures too. We will consider them all in the consultation.
As outlined by the Economic Secretary to the Treasury in his opening remarks, the Bill is designed to ensure that we continue to have the core principles in mind, such as additionality, as raised by several hon. Members. It is important that that underpins the success of the scheme, as it has for the last decade. The 2008 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. I reassure hon. Members that that principle will remain, which will ensure that funding is directed to causes that fulfil the scheme’s objectives while being additional to central or devolved Government funds.
I reassure the hon. Member for Bethnal Green and Bow (Rushanara Ali), my hon. Friend the Member for Devizes (Danny Kruger) and others that that means that the Government do not have direct access to dormant asset funding and cannot influence it. The money must go to the appropriate causes, as defined in legislation, which have a continuing focus on social and environmental purposes, which is pivotal. As I said, several hon. Members have mentioned alternative measures and we look forward to continuing the dialogue with them about where the funding should go, but the core principles will continue to apply.
We will continue the debate in the future stages of the Bill, but I reiterate that its key purpose is to present the opportunity to significantly expand the scheme—we are talking about hundreds of millions of pounds of additional funding—while protecting participating institutions and rightful owners. We want to continue to make sure that, where possible, money goes back to those who own the funds or are rightful owners of the money.
As a result of the Bill, we hope to release hundreds of millions of pounds of additional funds for social and environmental causes across the nation. I look forward to working together to pass this important piece of legislation, so we can proceed with that expansion as soon as possible to ensure that the UK remains a world leader in deploying dormant assets at scale to society’s benefit across the country.
Question put and agreed to.
Bill accordingly read a Second time.
Dormant Assets Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Dormant Assets Bill [Lords]:
Committal
1. The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 13 January 2022.
3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
7. Any other proceedings on the Bill may be programmed.—(Steve Double.)
Question agreed to.
Dormant Assets Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Dormant Assets Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of sums required by the Treasury for the purpose of making loans to, or in respect of, an authorised reclaim fund.—(Steve Double.)
Question agreed to.
Business of the House (Today)
Ordered,
That, at this day’s sitting, the Speaker shall put the Questions necessary to bring to a conclusion proceedings on the Motion in the name of Mr Jacob Rees-Mogg relating to the Parliamentary Partnership Assembly not later than one hour after the commencement of proceedings on the motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings on the motion relating to the Parliamentary Partnership Assembly may be entered upon and continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Steve Double.)
Dormant Assets Bill [ Lords ] (First sitting)
Tuesday 11th January 2022
(2 years, 11 months ago)
Public Bill CommitteesRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 January 2022 - (11 Jan 2022)
The Committee divided: - Ayes: 10 / Noes: 6 - Question accordingly agreed to.
The Chair
Order. We are now sitting in public and the proceedings are being broadcast. Before we begin, I have a few preliminary announcements. I remind Members that they are expected to wear a face covering except when they are speaking or unless they are exempt, in line with the recommendations of the House of Commons Commission. Please give each other space when entering or exiting the room. I also remind Members that they have been asked by the House to have a covid lateral flow test twice a week if they are coming on to the parliamentary estate. This can be done at the testing centre in the House or at home. Hansard colleagues would be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent, and tea and coffee are not allowed during the sitting.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 11 January) meet—
(a) at 2.00 pm on Tuesday 11 January;
(b) at 11.30 am and 2.00 pm on Thursday 13 January;
(2) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 32; Schedule 1; Clause 33; Schedule 2; Clause 34; new Clauses; new Schedules; remaining proceedings on the Bill;
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 13 January.—(Nigel Huddleston.)
Ordered,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Nigel Huddleston.)
The Chair
Copies of the written evidence that the Committee receives will be made available in the Committee Room and will be circulated to Members by email.
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room and shows how selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or similar issue. Please note that decisions on amendments do not take place in the order that they are debated but in the order they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause to which the amendment relates, and the Member who has put their name to the lead amendment in a group is called first. Other Members are then free to catch my eye to speak on any or all of the amendments within the group. A Member can also speak more than once in a single debate.
At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, they will need to indicate to me whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in a group to a vote, they need to let me know.
Clause 1
The dormant assets scheme: overview
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Nigel Huddleston)
It is a pleasure to serve under your chairmanship for the first time, Ms Ghani. I am sure you will keep us all in order.
I thank colleagues on both sides of the Chamber, and indeed in the other place, for the co-operative and constructive way in which we have proceeded so far with the Bill. There is broad support across the House for the Bill, and although there are some areas of disagreement, I am aware that they tend to be on details of implementation, rather than on the substance, purpose or intent of the Bill. To that extent, I will commit to moving at speed on the non-controversial parts of the Bill while ensuring that there is opportunity for discussion. Indeed, hopefully I will be able to address colleagues’ questions and concerns, some of which I am aware of already. I am sure that others will come up during the course of our discussions.
Clause 1 provides an overview of the operation of the scheme, which enables eligible participants to transfer money from dormant assets to an authorised reclaim fund. Having determined how much it must retain in order to meet any future reclaims, the reclaim fund distributes the surplus to the national lottery community fund, in accordance with part 1 of the Dormant Bank and Building Society Accounts Act 2008. The clause confirms that the scheme will be expanded as a whole, encompassing the new assets alongside bank and building society accounts while ensuring that this does not affect the continued operation of the provisions in the 2008 Act.
Subsection (3) sets out the main features of the dormant asset scheme, which mirror those specified in the 2008 Act. For example, beneficial owners can always reclaim the full amount owed to them. Participants transfer the dormant money to the reclaim fund, and owners therefore engage with participants, rather than the reclaim fund, in order to make a reclaim. The clause also confirms that relevant activities can be undertaken by anyone acting on the institution’s behalf. For example, an insurance provider can outsource tracing exercises to a tracing agency working to find the owner on its behalf.
Alex Davies-Jones (Pontypridd) (Lab)
I am grateful to be able to respond to this important Bill on behalf of the Opposition, alongside my hon. Friend the Member for Manchester, Withington.
I remind colleagues that it was a Labour Government who in 2007 first brought forward two consultations into unclaimed assets residing in banks and building societies. This led to subsequent legislation that would allow for the release of these assets after efforts were made to find their owners. The scheme was first established in 2008 by Labour through the Dormant Bank and Building Society Accounts Act 2008. The scheme has proved to be a huge success, with around £745 million being distributed to good causes across the UK, with funding for the devolved nations being distributed through the Barnett formula.
Currently, 24 banks and building societies participate in the scheme. It was always intended that the dormant assets scheme would broaden the financial products to which the legislation applies. Although the Bill makes some progress and Labour supports the need for consultation, we urge the scheme to go further. With the right safeguards in place to find the owners of assets, unclaimed winnings from gambling, pension assets and physical assets could be considered in the future too.
Labour supports the measures to ensure that all efforts are made to identify asset owners before moving on to the more robust Reclaim Fund Ltd—a public body. The independence of the fund demonstrates confidence in the process, and Labour supports this framework. However, we believe that more can be done to tighten timelines around consultation during the next stages of the Bill, and that greater scrutiny can be brought to assess the rigor of the Reclaim Fund Ltd to prevent it going into any deficit. Robust financial modelling set up under Labour has protected the fund so far, but it must be kept under review.
Labour believes that a community wealth fund should be able to benefit from the fund. Labour is also grateful for the proposed new section 18A in clause 29. This important provision will enable dormant assets to go on to create community wealth funds. These funds are able to make grants and other payments to support the provision of social infrastructure to further the wellbeing of communities suffering from high levels of deprivation. Community wealth funds are integral to levelling up, and the potential for funds generated through dormant assets to transform lives is huge.
The most deprived areas across the country often have the worst third sector infrastructure, and proposed new section 18A in clause 29 paves the way for increased governance and organisation too. Labour believes that the principles of the Bill and the 2008 Act are too broad to provide such a framework without proposed new section 18A and that the principle needs to be framed in primary legislation. We do not need further pilots of consultations, as there are already 150 projects at various stages of development. These projects will continue to be evaluated, whereas clause 29 brings forward the opportunity to pour investment into funds centred around social transformation. I know that many colleagues feel passionately about the benefits that these funds can bring to their constituencies, and hopefully we will hear some of these contributions later. In the meantime I urge the Government to support clause 29, which is absolutely central to their levelling-up agenda.
Labour firmly believes that further scrutiny of the Reclaim Fund Ltd is vital if we are to ensure that assets are used for good causes. New clause 1 is central to ensuring proper scrutiny and calls on the Secretary of State to report to Parliament annually. New clause 2 has the potential to improve how funds are reviewed and distributed to good causes, a move that could see more funding made available to the causes that need it most.
Finally, I am sure that Members will share my thanks to the organisations that have shown their support and have been pivotal in taking the Reclaim Fund Ltd forward. The same sentiments go for those participating in the dormant assets scheme. Their contributions and engagement have ensured that the fund has been made available to a huge range of good causes. Labour has always supported moves to multiply the fund’s benefits and will continue to do so as the Bill progresses.
The Chair
Order. May I just point out that you must speak to the clause that we are debating at any particular time? Mr Grant, you indicated that you wished to speak.
Peter Grant (Glenrothes) (SNP)
It is a pleasure to see you back in the Chair again, Ms Ghani. There is a saying that we would all do well to remember every day of our political lives; it is amazing what we can achieve if nobody cares who gets the credit. I do not hesitate to give credit to a Conservative Government, who I will often oppose vigorously, for improving what was already a good piece of legislation introduced by a former Labour Government.
Some 20 or 25 years ago, a young SNP councillor and local GP in my home town of Glenrothes picked up on this issue through the work she was doing with constituents and patients—in particular with the families of recently deceased patients. She started pestering all the banks and buildings societies in Glenrothes. Crucially, she started asking officials at Fife Council what they could do about it. It may be a complete coincidence that it was a Labour MP, as Chancellor and then as Prime Minister, who eventually took those concerns and sorted them out on the statute book, because it was Gordon Brown who, as Prime Minister, effectively drove this legislation through. It may be a complete coincidence; it may be that that young SNP councillor and GP had nothing to do with it, but given that I have been married to her for the best part of 40 years, Members may forgive me for saying she had part of the credit.
As I said, the 2008 Act was a good piece of legislation, and the Bill carries out welcome improvements and extensions. We have to realise that the days when most people kept most of their money in a bank account have gone. Even people who do not have significant amounts of money to their name will sometimes spread it over a number of different kinds of places. That means that if someone cannot be traced for whatever reason, it is important that any assets that they had are used for a good cause—if the original owner has no purpose for them.
Probably the biggest administrative burden in the Bill comes from the fact that we have to recognise that this money still belongs to somebody. We might not know if they are alive or dead. We might have no idea where they are. But they have to be allowed at any time to come back and reclaim what is theirs. Some of the quite complicated requirements that are put on the funds will sometimes be a nuisance to administrators of the fund, but they are important because this is not money that has been seized or forfeited due to any wrongdoing. It is money that legally and morally still belongs to someone else.
It is appropriate for Parliament to legislate to attempt to use that money for a good cause if all indications are that the person who originally owned it has no further interest in it. On that basis, I will have a few brief comments to make on particular parts of the Bill, but I welcome it and hope it will be given a speedy passage in its remaining stages.
Nigel Huddleston
I will briefly respond. The hon. Members make some important points about why there is such broad support for the Bill. It is because it has such a fundamental impact on improving people’s lives across the country on a day-to-day basis. It is therefore very important, and it is not surprising that it has such support.
It is good to hear from the hon. Member for Glenrothes about not only the political support, but the emotional support that exists for various reasons. He raises an important point about the Bill’s fundamental underlying principles, of reuniting and repatriating the money first and foremost to owners—the principle of always being able to reclaim the money; of course, it is a voluntary scheme and we therefore thank the participants—and of additionality. Those core principles are still pervasive throughout the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Transfer of eligible insurance proceeds to reclaim fund
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clauses 2 to 4 define the insurance assets and participants in scope of the scheme. They also set out an owner’s right to reclaim and the definitions of dormancy for insurance assets. Clause 2 provides that an insurance institution can transfer dormant insurance proceeds to an authorised reclaim fund. It also defines the type of insurance institutions that are not eligible to participate in the scheme.
Clause 3 defines the insurance assets in scope of the scheme. These are dormant proceeds of a long-term insurance contract, provided that it is not a with-profits policy, an industrial branch policy, or a policy that is the subject of a trust. They also cannot be held in a lifetime ISA.
Clause 4 defines dormancy for insurance assets. Insurance assets are classed as dormant if any of the following four conditions are met: first, that the person whose life is insured is deceased and the participant is satisfied that there is no owner; secondly, that at least seven years have passed since the participant was notified that the person whose life was insured has died, and there has been no communication from the owner, anyone acting on their behalf, or anyone administering the deceased person’s estate; thirdly, that records indicate that the person whose life was insured would be at least 120 years old; or, fourthly, that at least seven years have passed since the end of the contractual term and there has been no communication from the owner or anyone acting on their behalf since that time. I therefore beg to move that clauses 2 to 4 stand part of the Bill.
Jeff Smith (Manchester, Withington) (Lab)
It is a pleasure to see you in the Chair, Ms Ghani.
I will be very brief. It can be a temptation in Committee for the Opposition spokespeople to get up and repeat what the Minister has said, and say, “We agree”—so, we agree. [Laughter.]
In the section on insurance assets, there is a lot of potential to use money for good causes. We therefore support all the clauses in this section and indeed in the other sections in part 1, so we will not repeat the fact that we think these clauses are generally appropriate safeguards and appropriate processes to go through to ensure that these assets are used in the right way. We support this clause and future clauses.
Nigel Huddleston
indicated dissent.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clauses 3 and 4 ordered to stand part of the Bill.
Clause 5
Transfer of eligible pension benefits to reclaim fund
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clauses 5 to 7 define the pensions assets and participants that are in scope of the scheme. They also set out an owner’s right to reclaim pensions assets and the definitions of dormancy for pension assets.
Contract-based defined contribution personal pensions will be included in the scheme, in line with industry’s recommendation, with the exception of any products in which the policyholder has been automatically enrolled. Income withdrawals as a stand-alone product, as well as when they are owed as part of a personal pension scheme, are also included. Occupational pension schemes are out of scope of the Bill.
Clause 5 provides that a pension institution can transfer dormant pension benefits to an authorised reclaim fund. Clause 6 defines the pension assets that are in scope of the scheme, which are: dormant income withdrawals that have become payable; personal pensions with money purchase arrangements that have become payable; and personal pensions with money purchase arrangements available to become payable.
Personal pension schemes whose owners were automatically enrolled are excluded, as is any scheme with sums invested in with-profit funds. As I have mentioned, occupational pension schemes are out of scope of the Bill. Personal pension schemes are only in scope of the scheme if the conversion to cash happens because the owner is deceased.
Clause 7 defines dormancy for pension assets, in a way that is consistent with the principles that I outlined in my previous speech.
I therefore beg to move that clauses 5 to 7 stand part of the Bill.
Alex Davies-Jones
I am grateful to the Minister for introducing these clauses. We welcome the first step towards inclusion of pension assets in this legislation. However, I will press him on the potential for expansion of the clause to include further pension assets, as he has outlined. After all, broadening the Bill to include further pension assets will allow further funding to reach the huge range of good causes that are currently benefiting from this process.
As the Minister knows, pension assets were recommended for transfer in consultation. However, the Government have instead decided to restrict the Bill to just cash assets for the time being. I understand from exchanges on Second Reading and in the other place that the Government are reluctant to make this expansion while we wait for the pensions dashboard to be properly up and running, but given the long delays around the introduction of the pensions dashboard, I would be grateful if he could make some commitment as to the timetable for the further widening of this scheme with regard to pension funds.
Nigel Huddleston
Very briefly.
Of course, further on in the Bill there are processes in place, which I am sure we will come to, to enable the further expansion of additional assets into the scheme. I understand what the hon. Lady is saying. On Second Reading and elsewhere, the potential expansion to other schemes, including to non-cash and non-financial assets, has been proposed. There is a mechanism to enable that expansion to happen in the future. Therefore, this Bill will enable that to happen. However, I am afraid that at this moment in time we cannot make a commitment to that in the Bill. Nevertheless, I certainly understand the hon. Lady’s intent. Again, I think that there is cross-party support for us to investigate those options in the future.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clauses 6 and 7 ordered to stand part of the Bill.
Clause 8
Transfer of eligible amount owing by virtue of a collective scheme investment to reclaim fund
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clauses 8 to 11 define the investment assets and participants in scope of the scheme. Clause 8 provides that an investment institution can transfer a dormant eligible amount owing by virtue of a collective scheme investment to an authorised reclaim fund. Clause 9 defines the investment assets in scope of the scheme. These are dormant proceeds of shares or units in collective scheme investments, and distributions, redemption proceeds and orphan moneys attributable to collective scheme investments. Client money is also in scope, but is covered separately in clauses 12 and 13.
Clause 10 defines dormancy for investment assets. Reflecting market practice and Financial Conduct Authority rules, this clause provides that share or unit conversion proceeds can be classed as dormant if the shareholder has been “gone-away” for 12 years. The clause defines “gone-away” broadly to accommodate a range of industry practices that are expected to evolve over time.
Clause 11 defines the right to payment that the owner of a dormant investment asset has against an authorised reclaim fund.
Peter Grant
I have no objection to these clauses standing part of the Bill, but will the Minister clarify one query? The Bill excludes lifetime ISAs, if their transfer would incur any kind of tax liability to Her Majesty’s Revenue and Customs, which is understandable. Will the Minister explain in what kinds of circumstances that might happen? On the face of it, there appears to be an inconsistency in that a lifetime ISA might be liable to tax on transfer, when the whole assumption is that the person who owns that lifetime ISA is probably dead, although we cannot prove that for certain. Is there an inconsistency there? If not, what are the circumstances in which there might be a tax liability that would emerge from the transfer of an asset belonging to somebody when, in the eyes of the law, that person is probably dead?
Nigel Huddleston
There was extensive consultation on what should and should not be included. The hon. Gentleman raises the point that some assets may in the future be potentially included. We want to be careful at this stage and not include things where potential liabilities could incur. We got to this point after extensive consultation with industry, and I think we are comfortable with it. As I said to the hon. Member for Pontypridd earlier on, there is potential scope to change what assets and financial products may or may not be included, but given the advice of the industry, at the moment, we are being cautious; I think that is the appropriate approach.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clauses 9 to 11 ordered to stand part of the Bill.
Clause 12
Transfer of eligible client money to reclaim fund
Nigel Huddleston
Clauses 12 and 13 define the client money assets and participants in scope of the scheme. Clause 12 provides that an investment institution can transfer dormant client money to an authorised reclaim fund. Client money is only captured by clauses 12 and 13 if it is held by an investment institution and cannot be transferred to the scheme under any other provisions in the Bill.
Clause 13 defines dormancy for client money assets. Again, this clause defines “gone-away” broadly to accommodate a range of industry practices that are expected to evolve over time.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13 ordered to stand part of the Bill.
Clause 14
Transfer of eligible proceeds or distribution to reclaim fund
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clauses 14 to 16 define the securities assets and participants in scope of the scheme. Clause 14 provides that a traded public company can transfer dormant proceeds or a distribution relating to a share to an authorised reclaim fund.
Clause 15 defines the securities assets in scope of the scheme: dormant share conversion proceeds; cash distributions from a share; and proceeds from corporate actions. As practice varies, share conversion proceeds in the securities sector are in scope only on the condition that the terms governing them enable a gone-away shareholder to reclaim the price of the share at the point at which it was converted to cash.
Clause 16 defines dormancy for securities assets. Share conversion proceeds or a distribution can be classed as dormant if the shareholder has been defined as “gone-away” for at least 12 years. This clause defines “gone-away” broadly, to accommodate a range of industry practices that are expected to evolve over time, as with other products.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clauses 15 and 16 ordered to stand part of the Bill.
Clause 17
Transfers: general
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
The proceedings so far may have seemed very dry, but I can assure hon. Members that actually what we have done is to enable potentially hundreds of millions, if not billions, of pounds to be expended from the scheme to go to good causes. The clauses may sound dry, but actually that was a fundamentally important aspect of the Bill.
Clause 17 makes cross-cutting provisions on transfers into the scheme. This clause provides that a transfer into the scheme is not in itself a breach of trust or fiduciary duties. The clause also confirms that the right to reclaim accommodates situations in which that right has been passed on after the previous owner has died. Finally, if an institution has been succeeded by another—for example, through a takeover—following a transfer into the scheme, the transfer provisions in clauses 2, 5, 8, 12 and 14 will apply to the successor.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Interpretation of Part 1
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
I will try, Ms Ghani. Very simply, clause 18 defines and clarifies terms used in part 1 of the Bill that are relevant to more than one section.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19
Power to extend the dormant assets scheme to cover new dormant assets
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Thank you, Ms Ghani. Clause 19 is an important clause. It provides a power to the Secretary of State or the Treasury to bring additional asset classes within scope of the scheme, as we alluded to earlier. That might include ones that have already been proposed for inclusion but whose suitability needs further exploration, new ones, or ones where dormancy has not yet been identified as an issue. The power also enables the Secretary of State or the Treasury to amend the current asset classes so that they can cover new types of assets, and make consequential amendments.
This clause allows the Secretary of State or the Treasury to amend part 1 of the Bill or the 2008 Act by regulations for that purpose, and makes further provision about what such regulations must and can include—for example, identifying when dormancy exists and ensuring that the owner has a right to payment against an authorised reclaim fund. It provides that the Secretary of State or the Treasury may make regulations to enable participants to convert a dormant non-cash asset into cash in order for it to be transferred into the scheme where the asset’s terms do not provide for this. It then makes further provision about the use of this power—for example, that it can be used only with a view to the cash being transferred into the dormant assets scheme.
The clause also ensures that all assets currently in scope cannot be excluded or have their associated definitions of dormancy altered using this power. Finally, it provides that any regulations made under the power must be approved by both Houses of Parliament.
Jeff Smith
As the Minister says, this important clause goes to the heart of the Bill and what we are trying to achieve with it, and we supports its aims. Like the Minister, I welcome the millions of pounds that could go to good causes as a result of the assets that we have just agreed, as well as those that could be agreed as a result of the clause.
Having seen the success of the scheme, we want to build on and expand it. We agree that it makes sense to give the Secretary of State or the Treasury the ability to expand the potential of the fund not by bringing back primary legislation, but by consulting—that is important—and proposing new assets to add to the scheme by regulations. We welcome the approval and the important oversight of those regulations by both Houses of Parliament. Indeed, the clause has the potential to save future generations of MPs from sitting in a future Bill Committee for another dormant assets Bill. [Laughter.]
We particularly welcome the measures as a first step towards the potential inclusion of future pension assets in the legislation. May I press the Minister a little more on that? I think the Minister agreed in principle to the inclusion of additional pension assets, but my hon. Friend the Member for Pontypridd asked for an indication on when those might be included, because we are keen to expand the fund appropriately. The Minister talked about a mechanism for that inclusion, but he did not want to put a commitment on the face of Bill. It would be nice to know what sort of timescale we are looking at for including future pension assets.
The clause really goes to the heart of the Bill’s purpose: how can we expand the good work the scheme has done, and what other assets can we use to benefit good causes? People have talked about all kinds of different assets that could be included in future, including foreign currency cash balances, empty properties, national savings, proceeds of crime, trust funds and lifetime ISAs, which the hon. Member for Glenrothes mentioned.
We are keen for all those ideas to be explored to build on the good work of the scheme, and we hope to hear in future suggestions that we have not yet discussed. We agree that the Government should be free to explore them, and we believe that the Bill contains appropriate safeguards and oversight, so we welcome this clause.
Peter Grant
It is important to place on the record that I—and, I hope, every Member of Parliament—have a very strong presumption against the concept of Henry VIII powers. It should be an important principle that when Parliament passes primary legislation, only Parliament should be allowed to change it by actively and positively choosing to do so.
In this particular circumstance, the proposed solution is appropriate because it is very tightly constrained. As the hon. Member for Manchester, Withington, pointed out, there are strict limits on the circumstances in which and the process by which the powers can be used. Just as a lot of careful drafting has had to go into the extensions to the scheme that are included in the legislation, it is important to recognise that none of us knows what kinds of financial assets people will hold in 10 or 15 years’ time. People might have significant amounts of money in assets of types that we cannot imagine. For those circumstances, secondary legislation is the more appropriate way to bring those assets in scope.
There are two fundamental requirements in the Bill that have to stay there. First, if Henry VIII are being used, the scheme must always be entirely voluntary, and secondly, the owner must always retain the absolute and indefinite right to come back and reclaim assets that are rightfully theirs. As long as those two requirements are in the Bill, I think that, on this very rare occasion, the use of Henry VIII powers is appropriate and justified.
Nigel Huddleston
As discussed, the Bill includes a provision to allow expansion into new asset classes by secondary legislation in the future. As the hon. Member for Glenrothes suggested, it will not therefore require primary legislation; therefore we may save colleagues from some painful processes in the future. However, it will still have the scrutiny of both Houses, which is really important.
Before any power is extended, further work will need to be undertaken to identify new asset classes and facilitate their inclusion, and regulations are subject to draft affirmative procedure, allowing for parliamentary scrutiny. I cannot commit to a particular timeline at the moment, but of course the overall operation of the Bill will be reviewed three years and five years after Royal Assent. However, that does not preclude ongoing activity or review; when we debate later clauses and proposed new clauses, we will discuss in detail the scrutiny and review, annual reporting and so on that can take place. Those will enable review to happen, and therefore proposals for change could happen organically.
I cannot outline a specific timeline at the moment, because of course that will depend on what is proposed by the House and others, but there is a mechanism for ongoing review in the Bill for the important reasons that hon. Members have outlined. There may well be future asset classes, perhaps products that we are not even aware of or do not even exist at the moment, that should and could be included in future versions of the dormant asset scheme.
Question put and agreed to.
Clause 19 accordingly ordered to stand part of the Bill.
Clause 20
Return of surplus alternative scheme assets
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 20 introduces a means for the reclaim fund to transfer additional surplus money from the alternative scheme back to the participant to be distributed to its chosen charity, in accordance with section 2 of the 2008 Act. The alternative scheme enables firms with balance sheets below £7 billion to transfer an agreed proportion of dormant account funds to the reclaim fund, and nominate a local or aligned charity to receive the surplus. As it has with the main scheme, Reclaim Fund Ltd may review, in time, the proportion of assets it reserves from the alternative scheme on an ongoing basis and, where prudent, reduce reserve rates to release surplus funds.
Currently, such surplus funds from the alternative scheme can go only to the National Lottery Community Fund. Clause 20 will ensure that the funds are directed to charities of the participants’ choice for the benefit of local communities, in line with the principles of the alternative scheme. Aside from this, the alternative scheme will remain as it is. I commend clause 20 to the Committee.
Jeff Smith
Labour supports the provisions in clause 20 relating to the alternative scheme, which enables eligible smaller building societies and banks to support local causes of their choice. It is right that, if an authorised reclaim fund remodels the proportion of funds that it reserves for reclaims, any surplus money should go back to organisations participating in the alternative scheme, to be distributed to their chosen local charities.
We actively encourage authorised reclaim funds to assess whether a greater proportion of the fund could go to good causes, based on what we now know about how many people are likely to reclaim their assets and how they can manage their funds. That is the intention of Labour’s new clause 2, which we will discuss later. We support measures in the Bill that will allow that to work in practice.
Nigel Huddleston
I do not have much further to add. I know that this topic will be debated later in Committee, but I completely agree with the principles that the hon. Gentleman outlines.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Unwanted assets
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
The dormant assets scheme requires participants to have attempted to reunite an asset with its owner before it can be classed as dormant and transferred to the scheme. When reunification efforts are successful, the owner may decide that they no longer want their asset. That could be, for example, because the asset is of low value and the owner does not want the administrative effort of reclaiming it—such as, say, £5 in a deposit account, a share worth £2 and so on. Clause 21 enables these unwanted assets to be donated to the scheme. The owner must declare that no other person has a right in or over the asset, and an authorised reclaim fund must consent to the transfer. Finally, this clause provides that unwanted assets cannot be reclaimed from unauthorised reclaim funds, given that they have been donated by the owner.
Jeff Smith
I am starting to do what I said I would not do. We agree with the clause, and think that it will encourage more charitable giving, resulting in more money going to the scheme and meaning more money for good causes. We support the clause—I am going to stop repeating and agreeing.
The Chair
Agreement is good, Mr Smith.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Clause 22
Third party rights and interests
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 22 ensures that third-party rights and interests are preserved when an asset is transferred into the scheme. A participant or the reclaim fund will not always know whether third-party rights or interests exist in relation to an asset. Therefore, if a third party legitimately asserts their rights or interests in relation to a dormant asset following transfer, they will have an equivalent right of reclaim.
Jeff Smith
Briefly, this clause and the following two are essentially tightening up the arrangements for the management of the scheme, and we are very happy with them. In some cases, they are firming up in legislation what is already happening in practice. We think these provisions have an appropriate level of processes and safeguards and we support them.
The Chair
I assume, Mr Smith, that you will not be commenting on the next two clauses as you have made your contribution now?
Jeff Smith
That is correct.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clause 23
Arrangements between reclaim fund and institutions
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
I have no problem with the Opposition agreeing on things—it is quite nice to hear. I think that it speaks to the broad support for the Bill, and therefore it is important that we get on record that there is such agreement in so many areas of the Bill.
Clause 23 introduces requirements on the reclaim fund and participating institutions to have appropriate arrangements in place before the transfer of funds into the dormant assets scheme. The Government want to ensure—as do the Opposition—that only genuinely dormant assets are transferred into the scheme. The clause therefore specifies that the agreements must require participants to take steps to reunite asset owners with their lost assets. The requirement is not new, but making provision for it in the Bill will strengthen existing practices that have ensured the scheme’s success over the past decade.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Clause 24
Effect of insolvency etc of institutions
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 24 sets out the effect of a participating institution becoming insolvent on an owner’s right to reclaim. The reclaim fund will be liable for meeting a reclaim for an asset it receives, even if the participant that transferred it becomes insolvent or winds up. However, in those cases, an owner’s entitlement will be limited to the amount that they would have received from the participant in its insolvency. That may result in the owner’s entitlement being reduced.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Disclosure of information
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Very simply, clause 25 provides that common law or other obligations relating to confidentiality do not prevent the disclosure of information.
Question put and agreed to.
Clause 25 accordingly ordered to stand part of the Bill.
Clause 26
Meaning of “authorised reclaim fund”
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 26 names RFL as the authorised reclaim fund and provides the Treasury with the power to add, substitute and remove the name of reclaim funds from the Bill in the future, should that be required.
Jeff Smith
We accept the definition of authorised reclaim fund and Reclaim Fund Ltd being conferred with that status. It makes sense, I guess, for the Treasury to be able to add or remove companies as appropriate or as required. Can the Minister clarify as to whether he foresees that being used only in the event of Reclaim Fund Ltd ceasing to function or becoming insolvent, or whether he would wish to give several companies at a time the status of an authorised reclaim fund? If it is the latter, what are the merits of that process?
The clause also gives the Treasury the power to specify which assets a reclaim fund can manage through secondary legislation. We agree that is necessary but believe that any changes must be made following a proper and timely consultation and in line with the overarching principles of the Bill. That is the intention of amendment 5 to clause 29, which we will discuss shortly.
Nigel Huddleston
The hon. Gentleman is right; we will discuss some of those features later on in the Bill. The definition of an authorised reclaim fund came into effect under the 2008 Act. Since then, RFL has been the only company to fulfil that function and therefore plays an integral role in the scheme’s success. In recognition of that and given RFL’s new status as a Treasury arm’s-length body, the clause names RFL as the only current authorised reclaim fund for the purpose of the dormant assets scheme. Naming RFL as the only authorised reclaim fund in that way prevents additional competing reclaim funds being set up without Treasury consent and ensuring that the reclaim fund for the scheme is fit for purpose and is essential in maintaining the principle of customer protection.
The clause allows the Treasury to remove RFL as an ARF in the future, in case RFL ever became unable or unwilling to fulfil the function of a reclaim fund. It also enables the Treasury to add the name of a new reclaim fund to the Bill, should another reclaim fund ever need to be set up in the future for circumstances which, again, we may not be aware of at the moment. The clause also gives the Treasury the power to specify which assets a reclaim fund is responsible for managing. As for some of the other features mentioned by the hon. Gentleman, we will discuss them later.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27
Treasury loans
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
In recognition of Reclaim Fund Ltd’s new status as an NDPB of the Treasury, clause 27 enables the Treasury to provide a loan to RFL or any authorised reclaim fund that may be established in the future, as just discussed, if it ever becomes or is likely to become unable to meet its reclaim liabilities. That would support the reclaim fund until such a time as it is able to cover its cost with its own income. At that point, the Government would look to recoup their costs. That will ensure that customers continue to reclaim their assets in full at any time.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Exclusion of repayment claims from financial services compensation scheme
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
In the light of the Reclaim Fund’s establishment as an NDPB, it is no longer appropriate for RFL’s activities to be covered by the financial services compensation scheme. Clause 28 therefore removes repayment claims from that compensation scheme and clause 27 replaces that protection with a Government guarantee in the form of a Treasury loan.
Peter Grant
If we take the two clauses together, it is clear why clause 28 is there. My concern is that clause 28 in isolation may be seen to be removing protection from investors. I know the answer to this question, but for the purpose of the record, I would be grateful if the Minister could confirm that clauses 27 and 28, taken together, do not create any circumstance in which an investor’s money would be any more at risk than it would be if it were left in the original investment. Can the Minister give that assurance?
Nigel Huddleston
The hon. Gentleman is correct. The Treasury loan replaced the protection established through clause 27 of the Bill, which RFL can use if it becomes, or is likely to become, unable to meet its claims. Therefore, that protection is in place between clauses 27 and 28.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clause 29
Distribution of dormant assets money for meeting English expenditure
Jeff Smith
I beg to move amendment 5, in clause 29, page 22, line 11, at end insert—
“(1A) An order under subsection (1) must be consistent with criteria published by the Secretary of State setting out the principles to be used when making a determination as to whether restrictions, or no specific restrictions, are to be applied to distributed dormant assets money for meeting English expenditure.
(1B) Prior to publishing the criteria under subsection (1A), the Secretary of State must consult on the purposes for which the dormant assets money may be distributed, and the criteria to be applied therein.
(1C) A consultation under subsection (1B) must conclude not more than 3 months after it is announced.”
This amendment would require the Secretary of State to publish and apply criteria to be used when determining the purposes for which dormant assets money can be distributed. The criteria must be the subject of a consultation which must last no longer than 3 months.
I will also speak briefly to amendment 4, which stands in my name and that of my hon. Friend the Member for Pontypridd; to Government amendment 1; and to amendment 3, which stands in the name of my right hon. Friend the Member for Kingston upon Hull North.
Amendment 5 is a probing amendment to test the nature of consultation. The Secretary of State is committed to consultation on the social and environmental focus of the English portion of the funds before making changes to the causes that could be supported by the scheme via secondary legislation. Labour supports the need for consultation: we want to ensure that it is carried out thoroughly and properly, but also promptly. Progress on expanding the dormant assets scheme has been slow over the years. The scheme has worked well, but given that it was set up in 2008, it has taken a long time to come forward and be expanded. We want to make sure that more good causes can benefit more quickly, so we do not want further delays, which is why we support a quick, broad-based consultation when there are proposals to bring new assets forward. We think that the consultation should conclude no longer than three months after it has been announced.
We are also conscious that “social and environmental causes” could mean a number of different things to different people. It could be argued that the lobbying work of a political think-tank could be defined as advancing a social or environmental cause and so, too, could the spending of a Government Department, but I think we would all agree that those would not be appropriate uses of this money. To clarify those issues, amendment 5 requires that the Secretary of State uses the consultation period to define criteria for future uses of the fund, and publishes and keeps to those criteria. We agree that specific causes should be decided upon based on consultation and responding to need, but those decisions can be focused and guided by set principles that will ensure that inappropriate causes are not set up to benefit by the Government of the day, whoever they may be.
Labour is conscious that the four organisations that have so far benefited from the scheme in England, which are Big Society Capital, Access—the Foundation for Social Investment, the Youth Futures Foundation and Fair4All Finance, have all done a really good job. We want those organisations to be able to continue carrying out their important work, so can the Minister assure us that in the event of the Government making future changes to how the money should be spent, those organisations would have nothing to fear, and can he put on record that the broad aims of the scheme remain the same?
I also want to address Government amendment 1. We are disappointed that the Government are proposing to remove the sections relating to community wealth funds. The amendments that were made in the Lords allow the Secretary of State to include community wealth funds—
The Chair
Order. We are moving on to amendment 1 later. Do you want to wait for that discussion?
Jeff Smith
I beg your pardon; I thought we were debating them all together. In which case, I will—
Peter Grant
I feel a bit of a charlatan: after debates on 28 and a half clauses, we finally come to a vote, but it is on something that, ethically, I should not vote on, because it applies to England only. I will make a couple of comments by way of friendly advice to colleagues from all sides of the House before they consider this amendment and others.
First, as the hon. Member for Manchester, Withington mentioned, a fixed amount of money is available to distribute, so any additional purposes can only be implemented if the existing purposes get less money. Allowing new organisations to bid for money can only mean existing organisations run the risk of less funding. That does not mean that that should not be done, but we need to understand the implications. Secondly, it is important to distinguish between the good purposes for which the funding is used and the interests of the organisations that will either deliver the services or administer the funds. Understandably, someone involved with an organisation will think that organisation is the best in the universe at doing a particular thing, but that will not always be the case; there may sometimes be circumstances where a different organisation could deliver the benefits more effectively.
As I say, I do not intend to vote on clause 29 or any of the amendments. I am quite happy now to sit back and watch my friends from England decide on the best way for England to copy the excellent practice that has been in place in Scotland and Wales for a number of years.
Nigel Huddleston
I thank the hon. Members for Pontypridd and for Manchester, Withington for tabling amendment 5. I hope to be able to reassure them that the Bill, as introduced, already broadly accomplishes their desired effects, and therefore that the amendment is not necessary. I also appreciate the comments from the hon. Member for Glenrothes, who highlights that Scotland does indeed have greater flexibility at the moment. One purpose of the Bill is to rectify that, so that England can also have some flexibility in how future moneys are disbursed.
I should probably give the warning, or caveat, that while we all expect—in fact, we are very confident—that large amounts of money will be raised through the expansion of the scheme as proposed in the Bill, we of course cannot commit 100% that entities will receive a certain amount of money. We do not currently know how much will be distributed. No individual entity can bank on having a specific amount, although historically the scheme has raised more money than forecast. We cannot plan on that, but I think we are all confident that significant amounts will be raised.
I will give a brief overview of how the scheme works, in the context of amendment 5. The current system works by industry participants voluntarily transferring funds to the dormant assets reclaim fund, the body that administers the scheme, which reserves 40% of these funds in order to meet any future customer claims, with the remaining 60% of surplus then released for social and environmental purposes via the National Lottery Community Fund, the named distributor of dormant assets funding in the UK. It apportions the money among the four nations and then distributes it in line with legislation and any directions given to it by relevant Ministers or Departments.
The devolved Administrations can decide on the focus of their funding so long as it is within the parameters of social or environmental purposes, as the hon. Member for Manchester, Withington mentioned. In England, expenditure is ringfenced for initiatives focused on youth, financial inclusion and social investment through section 18 of the 2008 Act. Currently, funding flows from the National Lottery Community Fund to four independent specialist organisations that work across the three areas. Clause 29 introduces new section 18A to be inserted into the 2008 Act, replacing the current section 18, as the hon. Member for Pontypridd mentioned, which will enable the Secretary of State to consult on the purposes of the English portion and to then set the purposes through an order.
Amendment 5 has three core objectives: first, that there should be considered thought behind choosing the future purposes of dormant assets funding in England; secondly, that the public should be consulted before those purposes are set and should be able to have their say on the logic behind the purposes; and thirdly, that the consultation should not push progress into the long grass but must be proportionate and efficient. I understand the intent of the amendment.
Over the last decade, the scheme has been working to level up the communities that need it most,, supporting frontline organisations to tackle deprivation, developing strong social infrastructure and initiatives at local level, and directing funding to some of the most left-behind areas of the country. Those are some of the broad criteria by which the scheme has distributed funds in England. Those principles have operated successfully within the overarching three purposes set for the English portion to date: tackling youth unemployment and financial exclusion and investing in the nation’s charities and social enterprises. Part of the unique strength of the scheme in England is that the funding has been distributed through four specialist organisations. Within the boundaries of appropriate governance systems, those independent organisations have been free to determine the most impactful and appropriate ways to deliver on their missions, including deciding what criteria to apply and when. We are proud of the impact they have had, and echo the numerous supportive comments made by hon. Members on Second Reading.
The scheme has built a compelling evidence base for these types of intervention and we are committed to ensuring that it continues to benefit the people and communities who need it most. We are also committed to affording everyone a fair opportunity to have their say on the purposes for which funds can be distributed. Proposed new section 18A(6)(a) of the 2008 Act provides that the Secretary of State must consult the public about
“the purposes for which, or the kinds of person to which”
the English portion should be distributed before an order can be laid. The first of those consultations will be launched as soon as possible after Royal Assent; we estimate that it could be as early as this summer. The Government will set out our thinking in that consultation document, and we are committed to inviting all those with an interest to have their say.
In the other House, noble Friends of the Member for Manchester, Withington pressed the Government for a commitment to open the first consultation for at least 12 weeks. We agree that is a proportionate amount of time and have already committed to that. I assure hon. Members that we share the ambition to ensure that the money is released as efficiently as possible. We have no intention of delaying the impact we all want the scheme expansion to have. I am grateful for the spirit of collaboration the House has shown in helping us to achieve that ambition. For the reasons I set out we are not able to support the amendment.
Jeff Smith
I thank the Minister for his comments and his reassurance that the Government will continue to uphold the principles and “unique strength” of the current ways of working. Given those assurances, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Nigel Huddleston
I beg to move amendment 1, in clause 29, page 22, line 12, leave out subsections (2) to (4).
This amendment removes provisions relating to community wealth funds that were added to the clause at Report stage in the Lords.
The Chair
With this it will be convenient to discuss amendment 3, in clause 29, page 22, line 37, at end insert—
“specifically consult on the merits of establishing a community wealth fund or funds under the dormant assets scheme, and”.
This is a probing amendment intended to ensure the scope of any Government’s proposed consultation process also encompasses full consideration of the merits of establishing a community wealth fund or funds under the dormant assets scheme.
Nigel Huddleston
I acknowledge the support expressed by many in the House for using the English portion of dormant assets funding to support, through community wealth funds, the left-behind communities, which experience high levels of deprivation and low levels of social infrastructure. Amendment 1 is not intended to disregard the support for that approach; instead, it is designed to protect the integrity of the consultation process, which offers the most appropriate route to make that a reality.
I thank the right hon. Member for Kingston upon Hull North for tabling amendment 3, seeking a commitment to consult on community wealth funds. I thank hon. Members for taking the time last week to meet me, alongside local trusts, to discuss the proposal. We are content to place on the record our commitment that the first consultation under this clause, which will be launched as soon as possible after Royal Assent, will explicitly include community wealth funds as an option to consider for the English portion.
The scheme has spent the last decade working to tackle systemic social challenges and to level up communities who need it the most, particularly by targeting and benefiting left-behind areas. In England, the impact is delivered through four independent organisations that distribute funding to tackle youth unemployment and financial exclusion, in addition to growing a thriving social investment market. To date, more than £465 million from the scheme has been invested in charities and social enterprises, often in areas or communities that may not have benefited from sustained investment in the past. For example, the growth fund is a £46 million partnership between the National Lottery Community Fund, Big Society Capital and Access. It has significantly expanded the reach of investment to charities and social enterprises that are unlikely to have taken on social investment before. The largest number of investments have been made to target support for vulnerable young people, those not in employment, education or training, and people experiencing poverty, financial exclusion and long-term unemployment. A quarter of all growth fund investments have been in the most deprived 10% of neighbourhoods.
Jeff Smith
I thank the Minister for his comments. We are disappointed that the Government are proposing to remove the subsections relating to community wealth funds. The amendments made in the Lords that allow the Secretary of State to include community wealth funds as recipients of funding had cross-party support and have generally been welcomed by the sector.
The provisions specify that money from the dormant assets scheme can go toward a community wealth fund to
“support the provision of social infrastructure to further the wellbeing of communities suffering from high levels of deprivation”.
I am surprised that the Government want to remove a measure that empowers communities and surely goes to the heart of the alleged levelling-up agenda. There are Members on both sides of the Committee who represent areas that will benefit from this kind of initiative. The most deprived areas often have the weakest third-sector capacity and infrastructure, which adds to a cycle of disadvantage. Community wealth funds aim to halt that cycle. They are aligned with the aims of the levelling-up agenda and have the potential to transform communities and lives.
Community wealth funds give real power to local people to support local priorities and capacity building. The noble Lord Bassam, who moved the amendment, said that
“the proposal could act as a powerful tool in boosting deprived areas, putting small sums of money in communities’ hands so that they can invest in the facilities or services that would have the most local benefit—perhaps subsidising a community hall, running adult learning classes, supporting skills and training hubs and sports facilities, and improving digital connectivity.”—[Official Report, House of Lords, 16 November 2021; Vol. 816, c. 168.]
We see the amendment as part of the levelling-up agenda and a way of empowering communities, as well as an opportunity to trial new and innovative ways of funding.
I note that the amendment itself was a compromise. It simply allows the Secretary of State to include community wealth funds. In Committee in the Lords, there was a more substantial proposal to include local trusts. Because the Government said there was still work to do on the proposals, the amendment was passed, and it is essentially permissive. The decision on when to move forward is with the Secretary of State, which makes it all the more disappointing that the Government want to block what I think is quite a modest and sensible measure.
I thank the Minister for his comments on the consultation. I am grateful for his commitment that the community wealth fund will be an option to consider in that first consultation; that is good news. However, we believe that this is an important measure, and we would like to see the principle of it written into primary legislation. As my hon. Friend the Member for Pontypridd said, the principles of this Bill and the 2008 Act are generally too broad to guarantee that the community wealth fund is included; the principle must be framed in primary legislation. I therefore urge Members to reject the Government’s amendment, notwithstanding the welcome comments from the Minister on the consultation.
They always say that the first rule of politics is to learn to count. I appreciate that the Opposition might not defeat the Government on this one, so as a greater compromise, I also urge Members to support the cross-party amendment, which I think the Minister has effectively accepted as the right way forward. I leave it to my right hon. Friend the Member for Kingston upon Hull North to speak to her amendment.
Dame Diana Johnson (Kingston upon Hull North) (Lab)
It is a pleasure to serve under your chairmanship, Ms Ghani. I rise to oppose Government amendment 1 and commend amendment 3.
As we know, Government amendment 1 removes the provisions to create a community wealth fund as a means of tackling deprivation and building social infrastructure in left-behind communities. The Bill was amended in the other place to include those specific provisions. As we know, that amendment enjoyed significant cross-party support, including from Lord Hodgson from the Conservatives, Lord Bassam and Baroness Lister from Labour, Baronesses Kramer and Barker from the Liberal Democrats, Baroness Bennett from the Greens, and the Lord Bishop of Ely.
I oppose Government amendment 1 for two reasons. First, the Bill, as a piece of primary legislation, is an excellent opportunity to set out clearly not only the mechanism for the acquisition of dormant assets, but some of the priorities for their distribution. It is worth noting, as my hon. Friend the Member for Manchester, Withington just set out, that the clauses inserted by the other place are permissive, allowing the Minister and the Government if they so wish to enable the creation of funds to be established for community wealth funds.
That helps to set out the current thinking of this Parliament—that we recognise the importance of community wealth funds, and that we would like to see Government investment in that area. If the distribution of dormant assets is not identified with clear markers at this stage in proceedings, after so many years of discussion and debate, that would be a missed opportunity.
I do not believe that the Minister is correct in claiming that secondary legislation is the most appropriate mechanism for deciding on the distribution. We all understand that there is limited opportunity for debate on secondary legislation, and there is, of course, no opportunity to amend it. That means Parliament’s role will be limited to rubber-stamping the Government’s proposals.
With the expanded scheme expected to generate close to £1 billion of new funds for good causes, decisions about those causes are important and should be subject to proper debate and scrutiny in Parliament, rather than just introduced in secondary legislation. I know that Members across the House will want an opportunity to make the case for funding for their own constituencies and for many other good causes—of course they will; of course we all will.
I would argue that the creation of a community wealth fund is a matter of some importance to the Government themselves, with their levelling-up agenda for the most disadvantaged and left-behind areas. We hear so much about that from the Government, and it is really in their interest to have that on the face of the Bill.
There is, of course, a precedent here. It should be noted that the first causes to benefit in England—social investment, financial capability and projects for young people—were all written into the original 2008 Act. I therefore believe that it would be beneficial to keep provisions relating to the community wealth funds in this Bill to make clear what the money will be used for, and that it is the clear will of Parliament. I know the Government do not want dormant assets to be used to supplement their day-to-day spending, but without direction and clarity in the Bill, that could be one unintended side effect. We need a very clear direction of travel, which clause 29 currently provides.
The second reason I oppose the Government’s amendment to remove the provisions for a community wealth fund is that any consultation process on how assets should be distributed could take some time. In his opening remarks, the Minister referred to the summer and talked about a 12-week consultation period, so it seems likely that the rest of 2022 will be gone before we get to the point of any secondary legislation being brought to Parliament.
If the Government really are serious about their levelling-up agenda, keeping the provision for community wealth funds in the Bill is an opportunity that helps the Government. The community wealth fund commands broad support. Polling research shows that the proposal would have support among senior leaders in the financial services industry, whose endorsement the Government have said is key. Were the fund to remain written into the Bill, the Community Wealth Fund Alliance could start the process of securing match funding and planning to get money into the most left-behind communities as soon as possible after Royal Assent.
I ask the Minister to reconsider on the basis of those arguments. I genuinely believe that this measure would assist the Government with one of their flagship policies.
I move on to amendment 3, in the name of my hon. Friend the Member for Sedgefield (Paul Howell), my co-chair of the all-party parliamentary group for “left behind” neighbourhoods. If amendment 1 is passed, amendment 3 offers an alternative approach, as it would require the Government to
“specifically consult on the merits of establishing a community wealth fund”.
As drafted, the Bill was silent on the purposes that the cash from this next wave of dormant assets would be spent on. As we know, the Government estimate it could be as much as £900 million. As I just set out, that lack of clarity contrasts very clearly with the original legislation, the Dormant Bank and Building Society Accounts Act 2008. The causes that would be supported—social investment, financial inclusion and projects for young people—were very clear in that legislation, so it makes sense to me, given the amount of money at stake and the enormous contribution that the dormant assets scheme will make to good causes, that the matter of where the money is spent should be debated in and ultimately determined by Parliament.
In response to efforts to assist the Government by putting in the Bill powers to establish pilot community wealth funds, the Minister is arguing that the Bill should not cover the specifics and set out the purposes that the funding should be directed to, and that such important detail should be left to the secondary legislation, albeit informed by public consultation. I note what the Minister has committed to do. He said that the community wealth fund would be a part of the first round of consultation, but I would like to push him a little further. Will he meet me and the others who are advocating the establishment of a community wealth fund halfway? Amendment 3 is probing at this stage. I am not going to force the issue to a vote today, but I want to test the Minister further on whether he might be minded to include the community wealth fund as a named and clearly identified object category in that first consultation by putting it in the Bill, if not at this stage, perhaps on Report.
The noble Lord Parkinson, the Under-Secretary of State for the Department for Digital, Culture, Media And Sport in the other place, said
“the Government will consider including community wealth funds in the first consultation launched under Clause 29.”—[Official Report, House of Lords, 16 November 2021; Vol. 816, c. 192.]
The Minister has reiterated that commitment today, but I would like a bit more reassurance from him. I hope we might be able to persuade him to go one small step further and to confirm that it would be written into the Bill, which would be really helpful. That would give those of us in the House who have advocated for this proposal a great deal of comfort, and I think it would be a really popular measure for the Government. It is clearly established as a principle that dormant assets should be used for good causes—in other words, for voluntary and community action, independent of the state—and the voluntary and community sector has already signalled its support for the community wealth fund.
Nigel Huddleston
As I mentioned earlier, this may be an area where we share the intent and end goals but disagree, albeit slightly, on the route by which we get there. I hear what the right hon. Lady is saying and I appreciate the work that she and others have done with the APPG. I have met many members of the APPG, and I appreciate their work, but I hope that the Committee is reassured to hear the commitments that I have made today, including on an explicit option on community wealth funds in the consultation, which will launch as soon as possible after Royal Assent. I know that the right hon. Lady is asking for that to be on the face of the Bill, but I hope she is reassured that the commitment I have made is on record. As I have noted, depending on the passage of the Bill and its commencement, the consultation could be launched as soon as this summer and will be open for 12 weeks.
We have heard the strength of feeling, both here and in the other place, about the community wealth fund and the important proposal to assess it when determining the best use of the English portion under the scheme. We agree that it should be given due consideration, not only by the Government but by the public and the industry participants that underpin the scheme’s success, but we do not believe it is appropriate to include it in the Bill. We have consistently committed to the consultation being fair and open, and we have reiterated the importance of not pre-empting the outcomes.
The scheme has enabled long-term systemic change to be effected in tackling youth unemployment and financial exclusion and growing a thriving social investment market to support our nation’s charities and social enterprises. Those causes have enjoyed public, civil society and industry support for the past decade, and it would not be right to name any new cause in legislation before we consult them on doing so.
Although we cannot accept amendment 3 for those reasons, I hope I have provided sufficient reassurance about our commitment to ensure that community wealth funds will be given full consideration. I therefore hope the right hon. Member for Kingston upon Hull North will be minded not to press the amendment and that hon. Members will support the Government’s amendment.
Question put, That the amendment be made.
Jeff Smith
I beg to move amendment 4, in clause 29, page 22, line 41, at end insert—
“18B Distribution of money for meeting English expenditure: Requirement to report annually
(1) The Secretary of State must lay before Parliament an annual report detailing how dormant assets money has been distributed in England.
(2) The first report under subsection (1) will be laid 12 months after—
(a) any restriction imposed under section 18A(1)(a) of that Act comes into force, or
(b) the provision in section 18A(1)(b) of that Act comes into force,
(3) A report under subsection (1) must include—
(a) how much dormant assets money has been distributed,
(b) the causes to which money has been distributed, and
(c) the Secretary of State’s assessment of the value for money of the expenditure.”
This amendment would require the Secretary of State to report annually on how monies from the Reclaim Fund have been spent in England, including an assessment of the value for money of this spending.
This is another probing amendment, and would require the Secretary of State to report annually on how moneys from the Reclaim Fund have been spent in England, including an assessment of the value for money of the spending. The Labour party believes in the values of transparency and good value for money. Annual reporting on the spend would help to demonstrate whether the funds were being used effectively and for good causes, as intended. It would allow better scrutiny of which causes were being supported and the impact they were having. It could also help to inform future changes that the Secretary of State might want to make through secondary legislation, and would clearly show what is being delivered in practice. We urge the Minister to take this suggestion on board.
Nigel Huddleston
I thank the hon. Member for Manchester, Withington for the amendment and his contributions to the debate so far. As numerous reports are already conducted on the distribution of dormant assets funding, including annual reports from the National Lottery Community Fund and each spend organisation in England, I hope to reassure the Committee that amendment 4 is not necessary.
To date, in England, dormant assets funding has been distributed through the National Lottery Community Fund to four independent specialist organisations. The spend organisations’ operations are regularly reviewed by the Oversight Trust, an independent organisation that ensures accountability and transparency around each of the spend organisations’ activities. The Oversight Trust commissions quadrennial reviews of each organisation to examine their effectiveness in delivering against their respective missions.
As the main distributor of dormant assets funding across the UK, the National Lottery Community Fund already publishes annual statements on the impact of the scheme, alongside annual reports conducted by each of the spend organisations and the quadrennial reviews published by the Oversight Trust as the parent body. There are also annual reports by Reclaim Fund Ltd, the scheme’s administrator. Another review will be published as part of the overall scheme within three years of the Act passing and every five years thereafter. That is on top of the annual reporting I have outlined.
We feel that that is the most appropriate route to avoid placing repetitive, cumbersome and unnecessary further requirements on the organisations entrusted with dormant asset funding. With that explanation of the existing reviews, I hope the hon. Member will withdraw the amendment.
Jeff Smith
I thank the Minister for his comments and I appreciate the fact that he has outlined the number of reviews that currently take place and the excellent work of the Oversight Trust and the various organisations involved. The Bill does give Parliament flexibility in terms of a way forward. We think that these reports should directly inform Parliament, which is why we proposed annual reports to Parliament. However, having listened to the Minister’s comments and assurances, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29, as amended, ordered to stand part of the Bill.
Clause 30
Periodic review and report to Parliament
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 30 provides that the Secretary of State must review and report on various aspects of the dormant assets scheme on an ongoing basis. That will ensure momentum for further scheme expansion, greater transparency over the use of funds, and reporting on how the principle of additionality has been met. The results of the review must be laid in a report before Parliament within three years of the Bill receiving Royal Assent and every five years thereafter. The report must also include information about the uses of dormant assets money, including the principle of additionality, and will build on reports already published. I commend clause 30 to the Committee.
Jeff Smith
We do not oppose the broad principle of reviewing the scheme. We support a wide-ranging review of all aspects of the scheme, which is why we tabled amendment 4 regarding annual reviews. Holding a review more frequently than the proposed three and subsequent five years would be beneficial, and I ask the Government to look at that in future. However, we will obviously not oppose the clause.
The Chair
That is very welcome, Mr Smith.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Clause 31
Regulations: general
Question proposed, That the clause stand part of the Bill.
Nigel Huddleston
Clause 31 makes further provisions about the regulation-making powers in the Bill. I therefore commend it to the Committee.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Clause 32
Repeals in the 2008 Act and other minor or consequential amendments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 1 be the First schedule to the Bill.
Nigel Huddleston
Clause 32 sets out the provisions in the 2008 Act that are repealed by the Bill. It introduces schedule 1, which makes minor and consequential amendments as a result of the Bill. I therefore commend clause 32 and schedule 1 to the Committee.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clause 33
Index of defined terms
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 2 be the Second schedule to the Bill.
Nigel Huddleston
Clause 33 introduces schedule 2, which presents a table listing various terms defined or explained in the Bill and the sections in which they are set out. I therefore commend clause 33 and schedule 2 to the Committee.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 34
Extent, commencement, construction as one with 2008 Act and citation
Nigel Huddleston
I beg to move amendment 2, in clause 34, page 26, line 3, leave out subsection (8).
Clause 34 sets out various final provisions, such as the geographic extent of the Bill, when the provisions come into effect and how the Bill may be cited. I commend the clause to the Committee.
Amendment 2 agreed to.
Clause 34, as amended, ordered to stand part of the Bill.
New Clause 1
Authorised reclaim funds: Duty to assess and report
“(1) The Secretary of State must make an annual assessment of the health and governance of authorised reclaim funds. The assessment must be reported to Parliament.
(2) The first report under subsection (1) must be laid 12 months after—
(a) any restriction imposed under section 18A(1)(a) of that Act comes into force, or
(b) the provision mentioned in section 18A(1)(b) of that Act comes into force,
(3) An assessment under subsection (1) must include an evaluation of the risk of insolvency of the fund.”—(Alex Davies-Jones.)
This new clause would require the Secretary of State to assess the health and governance of reclaim funds regularly in relation to the risk of insolvency, and to report on this annually to Parliament.
Brought up, and read the First time.
Alex Davies-Jones
I beg to move, That the clause be read a Second time.
Briefly, we can all recognise the importance of parliamentary scrutiny over the spending of funds, and it is vital that the Government are held to account on the health and governance of reclaim funds, especially in relation to the potential for insolvency. At the moment, there is no such formal process. New clause 1 is therefore vital to ensure that a regular assessment of authorised reclaim funds is undertaken.
It is our job in this place to scrutinise and ensure that funds are fit for purpose, and I hope that colleagues of all political persuasions can see the benefit of an annual report brought before Parliament. Such a report, with a thorough assessment and prediction of the future of the fund, would be a step forward for transparency, which is crucial to parliamentary scrutiny, particularly in relation to the Bill.
Nigel Huddleston
New clause 1 requires the Secretary of State to make an assessment of the health and governance of authorised reclaim funds and to report the assessment to Parliament annually. As we have discussed, RFL publishes its audited annual report and accounts on its website annually, and proactively raises awareness and increases transparency of its work by engaging with industry through stakeholder events and its online presence. Now that RFL is an arm’s length body, Parliament will have greater oversight of its operations and final information. RFL is now directly accountable to Parliament by virtue of its new status. As such, RFL’s chief executive officer has been designated as accounting officer.
RFL has been consolidated into HM Treasury’s accounts, which are laid before Parliament yearly. In July 2021, RFL was included in HM Treasury’s 2020-21 annual report and accounts for the first time. Furthermore, it is standard practice for the annual report and accounts of ALBs, together with any report of the auditor on them, to be laid before Parliament by the sponsor Department. That will happen for the first time this year. Therefore, Parliament will have the opportunity to review RFL’s full statutory accounts, and RFL, like all ALBs, cannot publish its accounts until they have been laid before Parliament. I therefore do not believe that there is any need for a bespoke arrangement for RFL in the Bill. I hope that that explanation demonstrates that Parliament will have greater oversight of RFL’s operations and financial information, so I ask the hon. Member for Pontypridd to withdraw the motion.
Peter Grant
It is no great comfort that the accounts will be assimilated into the accounts of HM Treasury because they will get lost in there. We regularly see instances where Government Departments will point to failures in a specific part of their operations that are almost invisible as a percentage of their overall expenditure but can have a significant impact on people’s lives. Any serious problem with this fund will start to have such an impact. That is why, certainly in the early days, it is reasonable for Parliament to want to be a bit more actively involved in its oversight than it would normally be for a long-established fund, particularly given that the fund has been established through an Act of Parliament for a specific purpose. I hear what the Minister says, but for a temporary period of two years, until the House can be reassured that the new arrangements are working well, something a bit more than the usual scrutiny and oversight provisions would be perfectly reasonable.
Alex Davies-Jones
I welcome the Minister’s commitment on increased parliamentary scrutiny and oversight. I still feel that an annual report being brought to Parliament as a written statement, or to the Treasury Committee or the Digital, Culture, Media and Sport Committee, would be welcome to ensure oversight and parliamentary scrutiny; however, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Authorised Reclaim funds: Apportionment of expenditure
“(1) An authorised reclaim fund may conduct a review of the proportion of dormant asset money that may be spent on particular causes.
(2) Following a review under subsection (1), an authorised reclaim fund may make an assessment and recommendation as to whether this proportion should be increased.
(3) The Secretary of State may, by order, make regulation to change the proportion of dormant asset money that may be spent on particular causes, in line with any recommendation made pursuant to subsection (2).”—(Alex Davies-Jones.)
This new clause would allow reclaim funds to review the proportion of funds they are able to give towards good causes, and make an assessment and recommendation as to whether this proportion should be increased. It would also give the Secretary of State power to implement such a recommendation.
Brought up, and read the First time.
Alex Davies-Jones
I beg to move, That the clause be read a Second time.
The central focus of our work in Committee has been ensuring that money trapped in dormant assets, whatever their form, can be put to good use. Such money has the power to transform the work of charities, as we have heard. I know from contributions from colleagues just how significant the impact of such funding can be on local communities and the people who benefit from it.
The new clause would give a reclaim fund the power to review the current proportion of moneys in the fund available for good causes. Labour would like as much money to be used as is safely possible, to support good causes up and down the country. The new clause would, following proper review and recommendation, give the Secretary of State the power to increase the proportion. That has the potential to increase significantly the amount of money available to support the good causes and charities up and down the UK.
Peter Grant
This is not made explicitly clear in the wording of the new clause, so would the hon. Member clarify whether the intention is that it would apply only in England or to the devolved Administrations as well? There is acceptance throughout the Bill that anything in the Bill that directs or indicates how money is to be apportioned applies in England and that the devolved Administrations have the autonomy to take their own decisions. The wording of the new clause as it is now would appear to change that and give the Secretary of State the right to give direction that would apply to the devolved Administrations as well. That would clearly be something that I and, I think, a lot of my colleagues would be uncomfortable with.
Nigel Huddleston
To allow sufficient time for my official to provide me with a direct response to the hon. Gentleman’s response, I will comment briefly on this area. I understand the intent of the proposal from the hon. Member for Pontypridd. Determining what it is prudent to release to the National Lottery Community Fund and what must be retained to meet reclaims has been intentionally separated from the processes and institutions around distributing funding, to ensure that there is no conflict of interest. It is a matter for Reclaim Fund Ltd: it is responsible for determining the appropriate proportion of funding that it can prudently release. As I mentioned, it currently holds 40% of the dormant account assets that it receives and distributes 60% of the surplus funding to the National Lottery Community Fund. The amount that RFL reserves for future repayment claims is rightly based on actuarial modelling and assessment of appropriate risk factors, following guidance from the Financial Conduct Authority.
There is no reason why this should not continue, as RFL is best placed to determine what it is prudent to release, and it is only right that RFL makes its decisions independently of Government and on the advice of those with professional expertise. None the less, RFL continuously assesses and reviews its reserving policy over time to ensure that it is releasing as many funds as possible to good causes. When RFL was established, there was no historical data on which to base its model. As RFL has built its experience of handling dormant accounts, it has reviewed its reserving rate, with a view to releasing more money to good causes, which is what we all want. For example, in 2016, Reclaim Fund Ltd decreased its reclaim provision from 60% to 40%. The fundamental principle that underpins RFL’s current approach to its reserving rate is that it is required to meet reclaims in perpetuity and therefore has to account for any future stress scenarios that may occur and model those accordingly.
The Government agree that as many dormant funds as possible should be channelled onwards to good causes, but this amendment would perhaps set an unhelpful precedent and risk the scheme’s reputation. Industry stakeholders might be less willing to voluntarily participate if they felt that RFL’s reserving policy was unduly influenced, so there would be a risk to the scheme’s continuation should the Government encroach on RFL’s operational independence by having the power to decide what portion of funding it should release.
In answer to the question asked by the hon. Member for Glenrothes, the amendment as drafted would have an impact on the UK as a whole. RFL releases all surplus funds to the National Lottery Community Fund, and only then is it apportioned. However, it would not change the proportion contributed to each nation, which is, I think, what the hon. Gentleman is concerned about. Hopefully that explanation provides him with reassurance. As I said, RFL has reviewed and will continue to review its reserving policy on a regular basis, to ensure that it is fit for purpose. In fact, RFL is currently undertaking a review of its reserving policy, also known as the reclaim—
Peter Grant
I am sorry to interrupt the Minister. It seems to me that he is responding to a different new clause from the one that has been introduced. My reading of the proposed new clause is that it is about decisions as to how the available distribution money is distributed to particular good causes. The Minister is talking about the decision as to how much of the total fund can be made available. That to me would seem to be a professional judgment matter and not a matter for the Secretary of State. Can he perhaps clarify what the actual meaning of this new clause is? I do not think the new clause says anything about how much should be reserved to cover any reclaims. I think it is about deciding how the available money is allocated across individual causes or, potentially, across individual organisations.
The Chair
Mr Grant, I do not think the Minister’s response was out of order. He may not be responding to the point that you raised, but I do not think he was not speaking on the new clause. Minister, would you like to clarify the matter?
Nigel Huddleston
Yes, Ms Ghani. In terms of the distribution of funding, as I think we discussed earlier, Scotland has flexibility, and flexibility is changing for England. As I understand it, the new clause is proposing some points about transparency and the proportions of expenditure, so the points that I have raised are relevant.
Alex Davies-Jones
I am grateful to the Minister for his response to new clause 2, which we will not pursue. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
The Chair
I am grateful for the good nature and speed of the debate, which was meant to run for four sittings. There is still a bit of formal business to get through, and the Minister and the Opposition may wish to say some quick words of thanks.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Nigel Huddleston
Briefly, Ms Ghani, may I thank you, the Clerks and officials for all your work on the Bill, as well as all colleagues across the House and in the other place for their contributions? I also thank industry and many other stakeholders.
As I said at the beginning of the sitting, there is broad support for the Bill. I understand and have taken on board many of the comments that hon. Members have made today. I hope that I have provided reassurances where they were sought, and that we can continue to work productively and co-operatively on this really important Bill, which will make such a big difference to so many people’s lives. I really appreciate the support that it has received so far.
The Chair
If the Opposition do not have any comments to make, we will proceed.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Dormant Assets Bill [Lords]
Monday 31st January 2022
(2 years, 10 months ago)
Commons ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 31 January 2022 - (31 Jan 2022)
Alex Davies-Jones (Pontypridd) (Lab)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to consider Government amendments 1 and 2.
Alex Davies-Jones
I rise to speak to new clause 1 in my name and that of my hon. Friend the Member for Manchester, Withington (Jeff Smith). As the Bill has moved through this House and the other place, I have been pleased by the progress that has been made, although there is still work to be done to ensure that dormant assets are distributed and governed effectively. Colleagues will be aware that the Bill will expand the current dormant assets scheme, which was first introduced by a Labour Government in 2008. The Government define dormant assets as a financial product, such as a bank account, that has not been used for many years and which the provider has been unable to reunite with its owner, despite efforts aligned with industry best practice.
In 2008, the Dormant Bank and Building Society Accounts Act was passed to provide a system to distribute dormant assets to good causes. Currently, 24 banks and building societies participate in the reclaim fund scheme, but Labour has always intended that the dormant assets scheme would broaden the financial products to which that legislation applies.
Although the Bill makes some progress and Labour supports the need for consultation, we urge that the scheme go much further. With the right safeguards in place to find the owners of assets, unclaimed winnings from gambling, pension assets and physical assets could be considered in the future, too. While I am grateful to the Minister for his frankness throughout the passage of this Bill, I must once again put on record that while Labour is generally supportive of the Bill, we urge that further consideration be given to incorporating pension assets into the scheme. While I recognise that the Minister has highlighted that occupational pension schemes and personal pension schemes whose owners were automatically enrolled are excluded, or out of scope of the Bill, I hope that in the future those assets will receive further consideration.
The core principles of any scheme must remain clear. Attempts should first be made to reunite assets with their rightful owners before transferring them. Owners should always be able to reclaim their funds, and participation must ultimately be voluntary. Labour is also clear that any funds released to the dormant assets scheme must not be used as a substitute for Government spending. We know that the increasing cost of living is impacting so many people across the country, and this Bill presents an important opportunity to release further funding and to put right some of the wrongs. On that point, I pay particular tribute to colleagues on the all-party parliamentary group for “left behind” neighbourhoods, who have been closely focused on the importance of dormant asset funding for vital community projects in the most left-behind parts of the country.
With that in mind, I place on record Labour’s thoughts on community wealth funds, which the Minister knows I feel passionately about. In the other place, Labour secured an amendment that would have allowed the Secretary of State to include community wealth funds as recipients of funding. That amendment had cross-party support and was generally welcomed by the sector. The aim of including community wealth funds as recipients of funding is clear. The designated money would be designed to go towards social infrastructure to further the wellbeing of communities suffering from high levels of deprivation. I was disappointed and also surprised that the Government chose to remove a measure aimed at empowering communities, which is also at the heart of the Government’s well-rehearsed levelling-up agenda. That said, I welcome the Minister’s collaborative and candid approach throughout the latter stages of this Bill, and Labour welcomes the Government’s commitment to including community wealth funds as part of the first round of consultations, as outlined in the Government’s amendment 2.
We must now make sure that momentum is not lost on that important development, as community wealth funds are central to reviving so many communities up and down the country. With that in mind, central to any spend is the importance of governance and sustainability in ensuring that funds of this nature are maintained and in good health.
The Minister knows, and I believe agrees, that scrutiny of the reclaim fund is vital. That is why we have tabled new clause 1. Recent events have highlighted the need for a transparent approach to decisions made in this place and the other place, and it is therefore vital that the Government are held to account on the health and governance of reclaim funds, especially in relation to the potential for insolvency.
Mr Toby Perkins (Chesterfield) (Lab)
I endorse entirely what my hon. Friend is saying. Does she agree, given the lack of confidence in some of the decision-making processes that the Government have undertaken before allocating funds, that it is all the more reason why new clause 1 would have real public confidence?
Alex Davies-Jones
I wholeheartedly agree with my hon. Friend. Part of the reason we tabled new clause 1 is for openness and transparency, so that the public and this House can scrutinise exactly where this funding is being placed. Scrutiny is at the very heart of our jobs here in this place, and an annual report brought forward to Parliament, as new clause 1 stipulates, would be a crucial step forward.
Lastly, on Government amendment 1, I am pleased to see the clarification around collective scheme investments. It is vital that such investments remain eligible for incorporation into the reclaim fund. I hope to see further assets incorporated in the future, as I stipulated earlier.
Ultimately, Labour supports the Bill as our priority remains expanding the dormant assets scheme in line with our commitments first made in 2008. The programme so far has been extremely successful, and predictions suggest that expanding the scheme in such a way would identify about £3.7 billion of unclaimed assets, of which about £1.7 billion would be eligible for transfer to the reclaim fund. From that, £880 million would be repurposed for good causes across the UK. Labour supports that extremely welcome step, and I look forward to continuing to work with the Minister to tackle the challenges around extending the scheme to other assets. I hope that he will take on board our concerns about future governance of the fund, too.
Danny Kruger (Devizes) (Con)
I congratulate the Government on bringing forward the Bill. I recognise that, as the hon. Member for Pontypridd (Alex Davies-Jones) said, the release of dormant assets started with Labour and has been a cross-party achievement. My thanks, congratulations and appreciation also go to the financial institutions that have made the money available.
I am pleased with the Government’s proposals, including the consultation on the potential introduction of a community wealth fund. My congratulations and appreciation to the Minister for including that as a possibility, and to my hon. Friend the Member for Sedgefield (Paul Howell) and the right hon. Member for Kingston upon Hull North (Dame Diana Johnson) for their work in bringing that idea forward.
There are other great ideas—we could abolish personal debt by capitalising credit unions with this money or distribute it direct to community foundations in our constituencies—but I think that the community wealth fund is the best idea. I hope that we will see the money going into civil society and social infrastructure and into supporting the great levelling-up agenda to which the Government are committed. This is a tremendous Bill, and I very much support what the Government are doing.
Jim Shannon (Strangford) (DUP)
It is always a pleasure to speak in these debates. I thank the Government and the Minister for all they have done to make this Bill happen. Clauses 12 and 29, to which the Minister’s amendments refer, indicate things that the Democratic Unionist party wish to see, and I let him know that our party will support the Government tonight. However, I now wish to speak to new clause 1.
I agree that there must be further provision for dormant assets. Why not make good use of funds that would ultimately lie dormant unless further action was taken? The Bill aims to expand the current criteria, which will come with some great benefits, so it is great to speak on an important issue such as this. I welcome the Bill and look forward to the debate’s conclusion.
The Bill’s core purpose is to extend the dormant assets scheme to other financial assets, which could generate an additional £880 million of contributions. The figures are gigantic when we think on them, and they indicate where the Bill is going and what it can achieve. The Bill has three main functions: to track dormant account owners and reunite them with their account; to allow account owners to reclaim any amount they would have been eligible for; and to allow firms to partake as a voluntary process. The Bill will expand the assets involved further, creating a more sustainable economic success rate, make it a requirement for firms to get involved, and remove further financial restrictions. It is a win-win for the Government and for the Minister in particular.
The dormant assets scheme currently supports and boosts, by some £800 million, innovative, long-term programmes that aim to address some of the most pressing social and environmental issues. As I said, its expansion through the Bill will unlock an additional £880 million. It is stated that the Bill’s benefits will be felt across the whole of the United Kingdom of Great Britain and Northern Ireland. I for one would like reassurances from the Minister that it will extend to Northern Ireland and that we will benefit as well. The potential for benefit in the UK mainland is great, but we also want to see it, if we can, in Northern Ireland.
Thus far, the scheme has benefited many foundations. The Youth Futures Foundation, which has undertaken significant work to tackle youth unemployment, got some £90 million, and Big Society Capital got over £400 million to tackle homelessness. These are great projects. The Bill makes money available to address social issues; how could anyone not say that that is great?
Also at the heart of this scheme is securing protections for those who own any of the financial assets involved. Dormant assets remain the property of their owners, who can reclaim any money owed to them in full at any time. In Northern Ireland, the Dormant Accounts Fund NI works to support the voluntary, community and social enterprise sector, and we can see the benefits immediately. In Northern Ireland more than 44,000 staff are employed in the sector, which accounts for 6% of the total Northern Ireland workforce. I would encourage all organisations to contact the National Lottery Community Fund to take advantage of the wonderful scheme that Northern Ireland has to offer.
I thank Members who have already contributed, and those who will contribute later, to a debate that has made clear the potential for a great economic impact following this expansion. I want to ensure that the devolved institutions can take advantage of this scheme as well, and that the funds generated in England are greater than those generated in Scotland and Northern Ireland. There must also be further engagement with local communities and smaller organisations to ensure that they are not left behind.
I acknowledge the benefits that the Bill has introduced so far, and I shall welcome further discussion and expansion to ensure that financial assets are not wasted and the money is put to good use. We have seen what the scheme can do; it can do more.
Claire Coutinho (East Surrey) (Con)
I support the Government’s proposal for a public consultation on distributions to a new community wealth fund. We talk often and rightly in this House about levelling up, particularly on the Government side of the House. It is right that this a priority for the Government, but too often we talk as if the work of levelling up were a job for Government alone. I firmly believe that the best decisions for communities are rarely made for them rather than by them. That is why we should treat communities across the country as the legitimate decision makers that they are. We all know that strong community leaders can transform a local community We will all have seen that on our patches. I could name many from East Surrey, including Janine Battersby in Woldingham, and Kay Hammond and the Calvers in Smallfield. With their dedication, charisma and get-up-and-go, they forge friendships, support those who need extra help, and put the local needs of their communities in front of those who might be able to meet them.
Let me give the House a brief example of this in action. I recently visited the residents group Ambition Lawrence Weston. On the edge of Bristol, Lawrence Weston had for too long had been used as a dumping ground for social housing tenants with complex needs. They were trapped in a negative cycle. Low housing costs made it attractive for the council to use it to temporarily house people, often with complex needs. That created disruption and fracturing within the community, which in turn drove low housing costs—and so the cycle went on.
However, with the support of the Local Trust’s Big Local community fund programme, the residents decided that they had had enough of things being done to them instead of for them. With some initial capital support from the community fund, they have transformed the area by building a new community centre, bringing in a new supermarket, introducing a local lettings policy, and bidding directly for Government funds themselves. They have a solar farm and even a wind turbine to tackle fuel poverty. I am in awe of that team. I have seen similar developments on my own patch: we have a community fund, Your Fund Surrey, and I am working with some brilliant people in Whiteley, Dino, Sarah and Marcus, who are pushing to set up their own community centre and are doing it brilliantly.
It was a relatively small amount of funding that made these developments possible, but that funding unleashed the really important thing: the leadership, ambition and energy of a group of remarkable, community-minded individuals, which has made such a difference. Without these funds, that would have been wasted. I believe that the community wealth fund can unlock that level of ambition and energy from individuals up and down the country, and I am pleased to support amendment 2.
Dame Diana Johnson (Kingston upon Hull North) (Lab)
I welcome amendment 2 to clause 29. Those who have followed the passage of this Bill from its introduction in the other place to its Report stage today will know that along with other members of the all-party parliamentary group for “left behind” neighbourhoods, including my excellent co-chair, the hon. Member for Sedgefield (Paul Howell), I have long been advocating the establishment of a community wealth fund as part of the extended dormant assets scheme. The Government’s amendment proposes that a national consultation on the distribution of dormant assets should include consultation on the distribution of these moneys to a community wealth fund through including them on the existing list of beneficiaries set out in the original legislation on dormant assets. Such a fund would be aimed at developing social infrastructure in the most left-behind neighbourhoods of the country—neighbourhoods such as Bransholme and Orchard Park in my constituency of Hull North. They are communities that not only suffer from extreme levels of disadvantage and deprivation, but experience significant deficits in their local community fabric. As research from the all-party group has found, residents of these communities experience well-below average outcomes across a whole range of indicators. For example, our recent report on health inequalities found that people living in left-behind neighbourhoods have among the worst health outcomes in England, with growing disparities between them and the rest of the country, including the most shocking statistic that a person from one of those neighbourhoods was 46% more likely to die during the covid pandemic.
Paul Howell (Sedgefield) (Con)
I thank my hon. Friends the Members for Devizes (Danny Kruger), and for East Surrey (Claire Coutinho), the hon. Member for Strangford (Jim Shannon) and the right hon. Member for Kingston upon Hull North (Dame Diana Johnson) for the comments they have made already. I cannot state how much I welcome the Bill being brought to the House and how successful and efficient its passage has been. I thank the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), for tabling his amendment to clause 29. It represents an important step towards establishing a community wealth fund that would level up the social fabric of our most left-behind neighbourhoods across England.
I wish to say a few words on behalf of the all-party group. I know that the Government are committed to regenerating communities that suffer from both extreme levels of poverty and high levels of community need—communities such as Ferryhill, Trimdon and Thornley in my Sedgefield constituency, and communities across the country, from the north of England, through the midlands and down to the coastal communities on the south coast where residents often feel forgotten and cut off from support or funding.
I thank the Minister for meeting me and my right hon. Friend the Member for Kingston upon Hull North, my fellow co-chair of the all-party group for left-behind neighbourhoods, to hear our representations and to understand the importance of what we are trying to achieve and how we can address this through the community wealth fund. Together, with other members of our all-party group, I look forward to a continued dialogue with Government and with colleagues across the House and in the other place on how such a fund can quickly be rolled out on swift passage of the Bill and the planned national consultation.
Numerous evidence sessions and research conducted by the all-party group since it was established in June 2020 have shone a light on the high levels of need and deprivation that exist in these communities and neighbourhoods and the issues faced by the residents who live there. Most recently, a report found that the people in these communities live shorter lives and spend more years in ill-health than those in the rest of the country. These findings have rightly captured the interests of national media and are another sobering testament to the fact that action is urgently needed to level up social, economic and environmental outcomes in deprived communities across the country. I look forward to what the levelling-up White Paper has to say about that, and I know that our all-party group will be keenly following those developments.
It is clear that transforming left-behind neighbourhoods is a long-term job. To deliver on that agenda, we need to go beyond physical infrastructure investment—welcome though that is in bringing hope to an area, as I know from my campaign work to restore local rail links such as Ferryhill station. Good local transport provision is key to levelling up, because it boosts connectivity in disconnected areas.
To level up successfully, however, and truly make a long-lasting difference to people’s lives, we must address the rebuilding of social infrastructure. Social infrastructure —places to meet, exchange ideas and take part in civic life—glues communities together. It underpins the vibrant local life that everyone seeks to be part of in their communities; it cements our trust and pride in our local heritage and the places where we live; and it provides us with something to rely on in times of crisis.
As the amendment explains, a community wealth fund would give long-term financial support for the provision of local amenities and other social infrastructure in a way that is led from the bottom up. As was said earlier, we must allow it to be done by people, not to people. As the Government have acknowledged on several occasions during the Bill’s passage, local people are best placed to identify what is needed to make their communities a better place to live.
In our evidence sessions, we heard first-hand the amazing work being done by communities up and down the country, and how powerful an impact local people can have when they work together to improve local outcomes with the right resources and support. We heard truly inspiring stories of communities in neighbourhoods from Bristol to Hartlepool taking the lead in levelling up their local area through widening access to opportunities and employment outcomes for young people, tackling fuel poverty and community led climate action.
Climate action is, of course, an increasingly important focus of activity, given the transition to net zero, and one where left-behind neighbourhoods are particularly at risk of falling further behind as a result of the economic restructuring under way. We therefore need to equip them with the confidence, capacity and resources through patient and long-term support to take action on what matters most to them and to transform their communities for the better. The community wealth fund proposal serves exactly that purpose. It builds on research and learning from previous regeneration policies, which all support the notion that community involvement is essential in achieving lasting change.
As already said, the community wealth fund is supported by more than 470 private, public and civic society organisations that have joined forces to form the community wealth fund alliance to call for the creation of such a fund. To reiterate what I said when presenting my ten-minute rule Bill in December, I believe that it would supercharge the levels of community confidence and capacity in left-behind areas.
In the long run, the social capital that is developed will be reflected in residents’ ability to create and lead sustainable strategies on how they can make change happen locally and tap into the wider opportunities offered on a regional level. In short, the investment would pay significant dividends in the longer run through funding from dormant assets at no extra cost to the public. We are presented with the opportunity to create a permanent endowment for communities in need.
For much of the hard work on the community wealth fund, I thank Local Trust and its team, particularly its chief executive Matt Leach. I know that the work is not over—in many respects, the real work starts now—and that I and others will no doubt be working closely with Local Trust to ensure that the fund becomes a reality.
I finish by thanking the Minister again for tabling the amendment to clause 29. It is heartening to hear the Government emphasise the importance of hyperlocal decision making for levelling up. I look forward to working with the Minister, the Government and our APPG to develop social infrastructure and boost civic pride in communities across the country.
John Nicolson (Ochil and South Perthshire) (SNP)
I know that the Westminster press corps has been waiting for something exciting to happen in Parliament today, so I am glad to be able to help to provide it. It is good to see the Secretary of State in her place fresh from her “Channel 4 News” interview triumph.
The SNP welcomes the Bill and the expansion of the dormant assets scheme. The extra £880 million available as a result is welcome. The scheme has already delivered £745 million for social and environmental initiatives. By expanding the list of assets that qualify for the scheme, up to £1.7 billion more could be available for use.
I draw the Minister’s attention to the remarks made about the Bill in the other place, although I am sure that he is aware of them. Peers wanted clarity on its potential costs and more detailed impact assessments for the expanded scheme. Baroness Barker specifically warned that these details were important, so the scheme does not become a
“piggyback fund for government when times are tough.”—[Official Report, House of Lords, 26 May 2021; Vol. 1039, c. 812.]
SNP Members welcome the Labour party amendment proposing an annual assessment of the health and governance of authorised reclaimed funds; this will, I think, help to assuage Baroness Barker’s concerns. Also, as a principle, the more scrutiny is given to this legislation, the better it will function.
It is good, of course, to see that the Bill makes some changes to distribution in England. Now the Secretary of State will have more freedom to spread assets through secondary legislation. That allows England to catch up with Scotland, which already has such an ability. As Lord Triesman highlighted in the other place, it was the example set by the devolved nations, whose innovative thinking in how they spend the funds allotted to them, that provided the impetus for the expansion of the scheme that the Bill presents. What the pandemic has shown is that the needs of the population can change dramatically and suddenly. Flexibility in secondary legislation is a useful tool to deal with that, and we must continue to ensure that there is adequate scrutiny.
We welcome the requirement for the Secretary of State to launch a public consultation and to consult the national lottery. The Community Fund must always be consulted before replacing or changing an order. However, it may be desirable to expand this consultation beyond the national lottery Community Fund and to include devolved Ministers responsible for spending in their nations, and representatives of the voluntary and social enterprise sectors.
It is reassuring to see that the expanded scheme will focus on reuniting owners with their dormant assets. With the expanded range of qualifying products, it is estimated that £3.7 billion-worth of products are lying dormant. For all the good that the schemes do for various charities, it is of the utmost importance that people are reunited with their assets. With the elderly and the vulnerable, especially those without digital skills, among those most likely to lose access or connection to their accounts in an increasingly digitised world, reunification efforts are more important than ever. That is why the SNP welcomes the enhanced tracing and verification measures, which could lead to £2 billion being returned to members of the public.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Nigel Huddleston)
I thank all right hon. and hon. Members for their contribution to the debate and for the constructive way in which everyone has engaged with the Bill throughout its passage. I thank in particular those who have spoken this evening. My hon. Friend the Member for Devizes (Danny Kruger) has made his points about community wealth funds frequently and passionately, as have the hon. Member for Sedgefield (Paul Howell) and the right hon. Member for Kingston upon Hull North (Dame Diana Johnson), whom I will acknowledge again later. I can confirm for the hon. Member for Strangford (Jim Shannon) that the expansion will cover Northern Ireland. My hon. Friend the Member for East Surrey (Claire Coutinho) again spoke passionately about the impact that dormant assets funding will have on local communities. We should never forget that.
The hon. Member for Ochil and South Perthshire (John Nicolson) mentioned the principle of additionality, as did my opposite numbers on the Labour Front Bench, the hon. Members for Pontypridd (Alex Davies-Jones) and for Manchester, Withington (Jeff Smith). That principle underlies the Bill absolutely and completely. Regarding expansion, the Secretary of State is to conduct periodic reviews—within three years and then again in five years. The hon. Member for Ochil and South Perthshire mentioned that Scotland currently operates on a different basis, and that is one of the reasons why we have sought to expand where dormant assets money can be used.
I particularly thank my opposite numbers on the Labour Front Bench for their constructive contributions. Throughout, we have agreed on the principles. It is nice and good to see a Bill through its various stages with such a degree of consensus. Although we sometimes disagree on elements of detail, on the Bill’s overwhelming purpose and underlying principles there is complete agreement, and I appreciate the constructive way they have engaged with me.
However, I am afraid we do not believe that new clause 1—a proposal we debated in Committee—is necessary, largely on the basis that there is considerable oversight already, as I have explained before. Although the new clause refers to “authorised reclaim funds”, in practice it refers specifically to Reclaim Fund Ltd, as it is currently the only authorised reclaim fund in the United Kingdom. RFL publishes its audited annual reports and accounts on its website annually. In 2019 the Office for National Statistics classified RFL to the central Government subsector, and in April 2021 it therefore became a Treasury-owned arm’s length body.
Alex Davies-Jones
I wish to put on the record my thanks to hon. Members. I am encouraged by our collegiate debate, in stark contrast to the scenes on the Floor of the House earlier today. This evening’s debate shows that Parliament is at its best when we all work together across parties to deliver for our communities. More needs to be made of what we can do when we choose to work together.
As I mentioned, it was a Labour Government who first advanced legislation to place dormant assets from bank and building society accounts into the reclaim fund after significant efforts were made to contact the owners of those assets. For this reason, we are broadly supportive of the Bill and its main aims to expand the scheme. We therefore continue to welcome attempts to incorporate a commitment to community wealth funds, which have the potential to support communities across the nation that have been left behind in recent years.
The Minister knows that Labour Members outlined our concerns at length in Committee and on Report, and my colleagues and I made particular reference to some of the flaws in the Bill that we ultimately sought to correct. It is therefore somewhat disappointing that our concerns on the health and governance of the reclaim fund have not been taken on board, particularly as transparency and scrutiny are such essential facets of our work in this place.
In Committee, the Minister argued that Reclaim Fund Ltd is
“responsible for determining the appropriate proportion of funding that it can prudently release… The amount that RFL reserves for future repayment claims is…based on actuarial modelling and assessment of…risk factors, following guidance from the Financial Conduct Authority.”––[Official Report, Dormant Assets Public Bill Committee, 11 January 2022; c. 34-35.]
Of course, independence from the Government is vital but it is also important that the Secretary of State makes a regular assessment if this fund is to be available for future generations. I sincerely hope the Minister will take on board our concerns and discuss with the Secretary of State, who is in her place, and departmental colleagues the potential for an annual report, which would be extremely beneficial for those who rely on funds from this important scheme.
Although Labour supports the Bill, we believe the Government have missed several opportunities. I urge the Secretary of State to speed up the timetable to allow for these much-needed funds to reach the communities that need them most. I look forward to closely following the development of the first public consultation. I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Clause 12
Transfer of eligible client money to reclaim fund
Amendment made: 1, page 12, line 9, at end insert—
“(4A) The reference in subsection (4)(b) to money that could be transferred as mentioned in section 8(1)(a) includes money held by an investment institution that is not within the definition in section 8(3) which—
(a) is proceeds of the conversion by the investment institution of a collective scheme investment into a right to payment of an amount, and
(b) could, if it were held by an investment institution falling within section 8(3), be transferred as mentioned in section 8(1)(a).”—(Craig Mackinlay.)
This amendment clarifies that money held by an investment institution not within clause 8(3) is not client money if it is the proceeds of a conversion to cash of a collective scheme investment and would be capable of being transferred to a reclaim fund if the holder was an investment institution within clause 8(3).
Clause 29
Distribution of dormant assets money for meeting English expenditure
Amendment made: 2, page 22, line 21, at end insert—
“(3A) In carrying out the first public consultation under subsection (3)(a) the Secretary of State must invite views as to whether the permitted distributions should be, or include, any one or more of the following—
(a) distributions for the purpose of the provision of services, facilities or opportunities to meet the needs of young people;
(b) distributions for the purpose of the development of individuals’ ability to manage their finances or the improvement of access to personal financial services;
(c) distributions to social investment wholesalers (within the meaning of section 18);
(d) distributions to community wealth funds.
(3B) For the purposes of subsection (3A) “community wealth fund” means a fund which gives long term financial support (whether directly or indirectly) for the provision of local amenities or other social infrastructure.”—(Craig Mackinlay.)
This amendment requires the first public consultation under section 18A to include the options of permitting the English dormant asset money distributions currently permitted by section 18(1) and distributions to community wealth funds, whether or not in addition to other permitted purposes or recipients.
Bill read the Third time and passed, with amendments.
Business of the House
Ordered,
That, at this day’s sitting, the Speaker shall put the Questions necessary to dispose of proceedings on the motion in the name of Mr Jacob Rees-Mogg relating to the Independent Parliamentary Standards Authority not later than one hour after the commencement of proceedings on the motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings may continue, though opposed, until any hour, and may be entered upon after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Craig Mackinlay.)
Dormant Assets Bill [HL]
Wednesday 9th February 2022
(2 years, 10 months ago)
Lords ChamberRead Full debate Dormant Assets Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 31 January 2022 - (31 Jan 2022)
Lord Parkinson of Whitley Bay
That the House do agree with the Commons in their Amendments 1 to 4.
“(4A) The reference in subsection (4)(b) to money that could be transferred as mentioned in section 8(1)(a) includes money held by an investment institution that is not within the definition in section 8(3) which—
(a) is proceeds of the conversion by the investment institution of a collective scheme investment into a right to payment of an amount, and
(b) could, if it were held by an investment institution falling within section 8(3), be transferred as mentioned in section 8(1)(a).”
“(6A) In carrying out the first public consultation under subsection (3)(a) the Secretary of State must invite views as to whether the permitted distributions should be, or include, any one or more of the following—
(a) distributions for the purpose of the provision of services, facilities or opportunities to meet the needs of young people;
(b) distributions for the purpose of the development of individuals’ ability to manage their finances or the improvement of access to personal financial services;
(c) distributions to social investment wholesalers (within the meaning of section 18);
(d) distributions to community wealth funds.
(6B) For the purposes of subsection (3A) “community wealth fund” means a fund which gives long term financial support (whether directly or indirectly) for the provision of local amenities or other social infrastructure.”
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, with the leave of the House, I will move that the House do agree with the Commons in their Amendments 1 to 4. In doing so, I will briefly summarise the changes which have been made to the Bill since last it was before your Lordships’ House. All of the amendments which have been made were brought forward by Her Majesty’s Government and garnered support across all parties in another place. Commons Amendment 1 is minor and technical, responding to a drafting issue that was helpfully highlighted by the Investment Association in its written evidence to the Public Bill Committee. Amendments 2 and 3 respond to the lengthy debates on how dormant assets money should best be spent, and specifically the calls to establish a community wealth fund. Amendment 4 is wholly procedural and removes the privilege amendment made in your Lordships’ House, as is the procedure in these cases.
First, I will speak to Amendment 1. This is a minor and technical government amendment which is required to uphold the key principle of full restitution: to ensure that people can reclaim the amount owed had the transfer to the scheme not happened. This amendment clarifies that money derived from collective scheme investments cannot be transferred into the scheme as client money. This is in response to feedback we received from the Investment Association during the passage of the Bill, and we thank it for its helpful feedback on this issue.
Without this amendment, there would be an unintended loophole where ISA fund managers and investment platforms that hold collective scheme investments, and are able to convert them to cash, would be able to transfer this money into the dormant assets scheme under client money clauses. The investment and wealth management clauses of the Bill recognise the fluctuating market value of investments by entitling owners of dormant collective scheme investments to reclaim the value of the share or unit at the point of reclaim. In contrast, the right to reclaim under client money clauses does not account for the market value, as the asset is already held in cash. We believe that this applies to a small number of cases. However, if relevant institutions have the contractual cover to sell the asset on behalf of its owner and transfer the funds to the scheme as client money, this would mean that the owner would be treated differently from if their dormant asset had been transferred under the investment and wealth management clauses. Remedying this discrepancy protects the vital principle of the scheme: full restitution. It ensures that the collective scheme investments are excluded from the client money clauses, so that the owners of these dormant assets will not be treated differently depending on which type of investment institution happened to hold it for them. Unfortunately, this will have the effect of excluding collective scheme investments held by investment platforms and ISA fund managers from the scheme at this time. Bringing them into scope would require complex technical work, and we are working with the industry to understand if and how this can be accomplished in future under the power to extend the scheme through regulations. We thank our industry partners again for their thoughtful and very helpful feedback on this issue.
I now turn to Amendments 2 and 3. As noble Lords know, a key topic of debate throughout the passage of the Bill has been the proposal to use dormant assets funding to establish community wealth funds in England. We have heard, both here and in the other place, the merits of considering this model, not least from the former Bishop of Newcastle before she left your Lordships’ House. This is a model whereby left-behind communities are empowered to make their own decisions on how best to develop vital social infrastructure in their local areas. This kind of devolved and very local decision-making is, of course, a key tenet of the Government’s levelling-up White Paper, which was published last week. We agree that this important proposal warrants careful consideration—not only by the Government, but by the public and voluntary industry participants that underpin the scheme’s success. In Committee in the other place, the Government made a formal commitment to include community wealth funds as an explicit option in the first consultation launched on the purposes of the English portion.
My honourable friend the Minister for Sport, Tourism, Heritage and Civil Society met Her Majesty’s Opposition and the co-chair of the All-Party Parliamentary Group for “Left Behind” Neighbourhoods to discuss this commitment. With their support, the Government brought forward Amendment 3 to place this commitment in legislation. This responds to calls heard in both Houses to refer to community wealth funds on the face of the Bill—making a clear statement that the Government are considering this model and are supportive of its underlying principles, while protecting the integrity of the consultation process. We maintain that an open and fair consultation, without predetermining its outcomes, is essential to securing the expanded scheme’s impact.
The Government are clear that Amendment 3 is the furthest that the legislation is able to go in this area, and that is why Amendment 2 removes community wealth funds from being pre-emptively named as a possible option in a future order, in favour of Amendment 3.
I thank noble Lords on all sides of the House for the constructive debate that we have had on this issue. I am very grateful for the spirit of positive collaboration shown throughout the passage of the Bill. It is in this spirit that the Government brought forward their amendments. I am also grateful for the scrutiny it has received in the other place, and I believe that this has presented your Lordships’ House with a strengthened Bill. I hope that noble Lords will, therefore, support the Government in these amendments, as was the case in the other place. Sending this Bill on its way to the statute book will enable the Government to shift our focus more swiftly to the implementation of the scheme expansion, including launching the consultation and unlocking hundreds of millions of pounds more across the UK. I beg to move.
Baroness Barker (LD)
My Lords, I thank the Minister for his explanation of these amendments. It was most helpful, particularly about Amendment 1, which is very technical. Since it has come from the industry and the whole thrust behind the Bill came from the financial sector, which wishes to see many more assets unlocked in this way, we should accept his explanation and stand behind that.
Lord Bassam of Brighton (Lab)
My Lords, I express the gratitude of the Labour Benches to the Government for the progress made on the Bill and the valuable update that the Minister has given us this afternoon. I am particularly pleased that the Government have brought back an amendment covering the dormant assets scheme, although I rather agree with the noble Baroness, Lady Barker, that it is a shame that it was watered down, particularly regarding community wealth funds.
When the Bill was in your Lordships’ House we were able to reach agreement over periodic reviews of the dormant assets scheme and subsequent reporting to Parliament, which will keep us abreast of how much has been raised and how those funds have been put to good use, which is valuable information for us. During its passage through the Commons, the Government outlined some of the options to be explored in the forthcoming consultation that the Minister referred to, including making a specific reference to community wealth funds. Like the noble Baroness, Lady Barker, I would have liked to have seen work beginning on that, but at least we have got it into the consultative framework.
For our part, we continue to believe that community wealth funds should have significant value in communities across the country, particularly in those areas underserved by other government schemes and/or third-sector organisations. I remain grateful to the noble Baronesses, Lady Kramer and Lady Barker, the noble Lord, Lord Hodgson, and the right reverend Prelate the Bishop of Ely, who spoke in favour of the community wealth fund amendment on Report, as well as to the former Bishop of Newcastle, who I hope is now enjoying the first fruits of the early stages of her retirement.
Lord Blunkett (Lab)
Is this an appropriate moment to reflect on the roots of where we are today on dormant assets, and to put on record again the part played by Frank Field—the noble Lord, Lord Field—all those years ago in pressing to get this off the ground and to get the original legislation that we are now updating?
Lord Bassam of Brighton (Lab)
I am grateful to my noble friend for his support on that point.
We on our Benches look forward to the consultation in due course and hope that the department will continue to engage with proponents of community wealth funds. Such funds could play an interesting and, we think, valuable role in levelling up and empowering local communities seeking their own solutions to local problems, a feature of the White Paper that we very much endorse.
May I use this occasion to ask the Minister what the Government intend to do to ensure that we continue to widen the potential scope for unlocking other dormant assets? Here I am thinking of Oyster cards, proceeds from crime funds, unclaimed pensions and unused insurance. It is worth reminding ourselves that the independent commission report identified some £715 million from investments and wealth management, £550 million from the pensions and insurance sectors, £150 million from securities, and £140 million from banks and building societies. Unlocking that sort of wealth unlocks a lot of power and gives great potential for social benefit. These are not inconsiderable sums of money, and if put in the right place and adapted, used and adopted for levelling up, they could leverage in bigger sums still for the hard-pressed communities that we want to see levelled up in the next few years.
We are again grateful to the Government for what they have done in improving the Bill. Your Lordships’ House played a valuable and valid part in that process. We are slightly underwhelmed by what has come back, but we are extremely grateful.
Lord Parkinson of Whitley Bay (Con)
My Lords, I thank the noble Lord and the noble Baroness for their remarks, which reflect the cross-party work that has improved this Bill throughout its passage and the interest that it has garnered from all corners for the benefits that it will bring. I am grateful to the noble Lord, Lord Blunkett, for reminding the House of the contribution of the noble Lord, Lord Field of Birkenhead, and indeed many others who have played close attention to this issue for a long time.
To respond to the questions and points raised by the noble Baroness, Lady Barker, we recognise that the provisions that were inserted on Report in your Lordships’ House were permissive, but the Government contend that Amendment 3 is preferable in three main ways. First and foremost, it fulfils our commitment to consult openly; we have emphasised throughout the passage of the Bill that the consultation must be fair and transparent, and we remain mindful of the need to bring industry along with us alongside civil society and the general public. We cannot therefore agree to any amendment that would suggest that the process would be undercut.
Secondly, it recognises the widespread support and positive impact that the current causes of youth, financial inclusion and social investment have had. I am sure that noble Lords did not intend to imply that those would be disregarded, but the provisions that were inserted on Report in your Lordships’ House were silent on those and thereby afforded community wealth funds more legislative attention than those initiatives.
Lord Flight (Con)
My Lords, who is intended to select the investment managers for these funds?
Lord Parkinson of Whitley Bay (Con)
My noble friend asks a good question, on which I will have to write to give him the answer and the full list, if he will forgive me for doing so.
I was just coming to the third reason why Amendment 3 is our preferred way of proceeding. The provisions inserted in this House would not achieve their objective of speeding up the pace of delivery. We must reiterate that releasing this money will not be immediate; indeed, we anticipate it taking several years for the £880 million to be released, and we do not expect any funds to be available for some time. Undercutting the consultation process would not materially affect the pace of that funding release. The Government have committed to launching the first public consultation on the purposes of the expanded English portion as soon as possible after Royal Assent. We anticipate that it could be live as soon as this summer and will be open for at least 12 weeks.
I repeat my commitment to write to my noble friend with the answer to his question, and I beg to move.
Lord Moylan (Con)
My Lords, before my noble friend sits down, does he agree that, especially in current circumstances, it would be wholly inappropriate to transfer funds from the TfL balance sheet by way of seizing what are alleged to be surplus Oyster assets, many of which are there because people, often from abroad, choose to leave assets on their Oyster card for when they visit London, which may be only once every few years?
Lord Parkinson of Whitley Bay (Con)
My noble friend raises an interesting point that has not been made hitherto during the passage of the Bill, but I know that he speaks with considerable experience from his time working with TfL. If he allows me, I will write to him with further information about the implications for Oyster cards, which is a matter that has not been covered. It may have been covered in another place, but I have not seen whether that is the case.
Lord Bassam of Brighton (Lab)
I remind the noble Lord that he did not answer my last question regarding reviewing the future of other dormant assets. If he is unable to do so at this point, I am happy to receive correspondence on the topic.
Lord Parkinson of Whitley Bay (Con)
I apologise to the noble Lord, Lord Bassam, for not responding to his question. We share the view that it is important to consider how dormant assets funding can be used most effectively. We are keen to get a wide range of views to help shape our position from Parliament through the Select Committees in both Houses. I will certainly write to him with further details if I am able to provide them.
I can tell my noble friend Lord Moylan that Oyster cards are not in scope of the Bill, which is why the point has not been raised hitherto. I will, however, take it back, and if there is any further information to furnish him with, I will do so. I repeat my thanks to noble Lords for the cross-party working on the Bill.
Royal Assent
Thursday 24th February 2022
(2 years, 9 months ago)
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