(1 year, 2 months ago)
Grand CommitteeThat the Grand Committee do consider the Dormant Assets (Distribution of Money) (England) Order 2023.
My Lords, I am pleased to move this order, which was laid before the House in draft on 11 September. The order names community wealth funds as a cause to receive dormant assets money, in addition to the existing three causes in the dormant assets scheme: youth, financial inclusion and social investment wholesalers.
To explain why the order is being made and a new cause is being included in the scheme, it may be helpful if I outline the background. Led by the financial services industry and backed by the Government, the dormant assets scheme is a brilliant example of what can be achieved when the public and private sectors come together to address some of the biggest challenges facing people in this country. The scheme’s priority is always to ensure that customers are protected and able to reclaim what they are owed. Where the asset owner cannot be found, the scheme has allowed hundreds of millions of pounds that have been lying idle to be used to support important social and environmental causes across the UK.
Since it began over a decade ago, the scheme has unlocked almost £1 billion to be spent across the United Kingdom. In England, this has sought to address the barriers that young people from deprived and disadvantaged backgrounds face when trying to gain employment. I am pleased to say that over 22,000 young people across the country have been supported to find meaningful work, thanks to the scheme. It has also supported 150,000 people with no-interest loans totalling over £150 million. This has kept honest and hard-working people out of the clutches of dangerous and manipulative loan sharks and saved them over £50 million in interest payments, ensuring that those who are financially excluded are given a hand up to get back on track.
The scheme has also helped to scale up the social investment market by more than tenfold, giving 5,000 organisations such as charities and social enterprises the investment needed to ensure they can continue to serve the communities and people who need it most. Soon dormant assets funding will also be about supporting communities across the country, placing decision-making into the hands of local residents to enable them to invest in what matters most to them and in a way that works best for their community.
Last year, I had the pleasure of leading what is now the Dormant Assets Act through your Lordships’ House in its final stages. It is thanks to the passage of this legislation that the Government were able to give people and participants in the scheme a voice in deciding how we should use dormant assets funding in England. Last year’s public consultation made it clear that the scheme enjoys widespread support from the public, and it is wonderful to see how this unique policy is bringing people and organisations together.
This order makes good on the Government’s commitment that the scheme will support the four causes that people told us matter most to them. By supporting youth, financial inclusion and education, social investment wholesalers and community wealth funds, we can ensure that the scheme is capable of delivering meaningful change for the next decade and beyond, providing support for those who need it most across the country. I commend the order to the Grand Committee and beg to move.
My Lords, I thank the Minister for presenting this instrument, which is subject to affirmative approval. I declare an interest as a member of your Lordships’ Secondary Legislation Scrutiny Committee.
I welcome the use of dormant funds, particularly being ploughed back into local communities for the benefit of those communities. When I was a Minister in the Northern Ireland Executive several years ago, we set up an arrangement for dormant funds there. It took about 12 years to be realised for investment in local communities, but there is no doubt that they provide that added resource when other resources may not be available to underpin community initiatives.
Thanks to the pioneering investment of dormant assets over the last decade and the work of organisations such as Big Society Capital, Access—the Foundation for Social Investment—and many others, social investment in the UK has grown more than tenfold in 10 years, with £9.4 billion invested into charities and social enterprises. This includes £1.8 billion committed to social enterprises and charities in 2022 alone, which has gone into over 1,310 projects delivering measurable social impact such as affordable homes, community food banks and tech start-ups tackling mental health.
There is no doubt, and we have all seen examples, that social investment has had a transformative effect on communities most in need. Around 43% of social investment deals have gone to levelling up priority 1 areas. Perhaps that is one area where levelling up has worked. But the next wave of dormant assets—I think the Minister was referring to that in talking about the initial legislation and this subsequent legislation on community wealth funds—will build on these foundations and take social investment further. A group of leading social enterprise, voluntary sector and social investment organisations have mapped out a plan for how best to do it. Known as the community enterprise growth plan, it proposes using dormant assets to deliver three proven interventions. Only yesterday, I talked to one of those organisations, and they have exciting initiatives for local communities through the investment of this resource.
There is no doubt that this plan has a number of benefits. It is a proposal to create jobs, boost growth and address regional inequalities, targeting communities affected by long-term economic decline. The plan uses existing systems, which would allow capital to begin flowing quickly and deliver results. Crucially, through social investment, the money invested is repaid and recycled, enabling funds to be used again and again to grow future support.
I am well aware that the Minister brought the initial legislation through your Lordships’ House, but I would like to be assured, as I am sure other noble Lords present would, that the dormant assets fund can continue into perpetuity for whatever that perpetuity means, because it brings much-needed benefits alongside government and other community resources. I would like to see it continue and to receive assurances to that effect.
My Lords, I congratulate the Government on bringing this proposal forward. As my noble friend pointed out, we discussed it in the final knockings of the Dormant Assets Bill on 9 February 2022, nearly two years ago. I thank my noble friend for adding community wealth funds to the list of bodies which can receive distributions from the dormant assets fund.
I will add a quick word on why I think community wealth funds are so important. Some noble Lords may recall that about 10 years ago I was asked by the Government to undertake an official review of the Charities Act 2006. That Act was the biggest change in charity law since the Elizabethan statute of 1601, so 400 years of history were wrapped up in a new Bill. There was concern on all sides of the House and in the sector as to how matters would work out, so we needed a review to see how the new system was settling down.
Assisted by a terrific team from the Cabinet Office, we undertook visits around the country, which were interesting in two senses. First, you saw just how much could be done by really small groups of men and women dedicated to their community and the area where they lived; they were small, passionate, hard-working and deserving of support. Secondly, you saw the very different levels of social capital around the country. After we had a session in the south-east of England, we had to have a second, because so many people wanted to come to the first, but we could not fit them all in—but it was not quite the same in Newcastle, where there were much smaller numbers. It seemed to me then that community wealth funds could hit both those targets: they could help to level up social capital in different parts and they could reach in and get to those small groups of men and women who are doing interesting things in tune with their communities.
Those two factors bring their challenges. The first is the distance between the distributor of the funds and the recipient. I shall use an aeronautical analogy: the distributors of the funds are flying at 30,000 feet, while the people I am talking about are hedge-hopping at 100 feet, because they have to be right down at the grass roots. So Big Society Capital is brilliant—I have not a word of criticism about it—but its handouts are in the tens of millions and its access grants are in the tens of thousands. We will have to find a way to make sure that there are plenty of intermediate layers so that what leaves the big groups at the top trickles all the way down and reaches the really small organisations in this new regime—because, with community wealth funds, they will be really small organisations. We must also find new little acorns, which may grow well, and not fall back, as is too often the case, on the usual suspects. That will be the challenge for the structure going forward for this important decision.
There are some challenges for the sector, which are worthwhile putting on the record today. There is now a pot of money—as David Jason used to say in “Only Fools and Horses”, “lovely jubbly”—but there will be some hard decisions to be made on what to support and what not to support and, even more painfully and hard, when to stop supporting something because it is not providing the answer to the question or demand for which it was set up. That, in turn, will mean a second challenge to the sector. The weather in the charity sector is too often made not by the thousands of men and women doing their stuff and being successful but by the outliers—the crass, the illegal and the stupid who end up on the front page of the newspapers and therefore begin to bring the sector into less good odour. Therefore, on behalf of those Members of your Lordships’ House, most of whom are not here today but who spoke in favour of this from across all parties, I say: we are looking to the sector not to let us down. There was a degree of cynicism at times about whether these small organisations would be able to deliver, and I hope that they will prove those of us who went in to bat for them that our confidence was well placed.
That takes me to the next important point. Because you are small, it does not mean that you do not need to have your impact measured. Every charity has a public benefit objective, and the Charity Commission is supposed to ensure that you are meeting that and that you have a proper impact. It will be very important, with these small bodies, that we do not forget that, because the dormant assets fund and all the other providers of funding are entitled to have a level of confidence about what is going on. I hope that the Oversight Trust may have a role here. It is chaired by Sir Stuart Etherington, who was for many years chairman of the NCVO. I hate to say it like this, because Stuart Etherington is a good fellow, but he is—I say this as a compliment—a wily old fox, so he will be able to find out what is going on. I hope that he and his board will be able to dig into these sorts of things to make sure that we can have all confidence in what going on in this new sector.
My Lords, I have been following the issue of dormant assets principally in relation to the 2022 Act. My concern has always been to emphasise that this is not free money; it is somebody’s money and out there there are people—some may no longer be around—and the primary objective of restoring the money should always be in our minds. That is why I have followed closely the progress of the Act and these regulations.
I have a few questions for the Minister. First, one of the main points of the Act was to include orphan pension assets. Does this order arise because of those additional assets, or is something still coming down the road? It would be useful to have some indication of the relationship between them. I make it clear that I do not oppose the order; my concern relates to the issue of additionality. What we always want is for this money to be doing things which would not otherwise be done, but which could—and should—be done by public authorities. By way of definition, the Explanatory Memorandum says that a community wealth fund
“will give local people the power to make decisions about how to improve their neighbourhood and community”.
That is where the issue of additionality becomes difficult to assess. Are these things which the local authority, central government or other bodies should be doing in any event? Can the Minister give us some assurances on the issue of additionality?
On the question of restoring the money to the individuals who really own it, during the passage of the Act there was some discussion of the pensions dashboard. It has got bogged down and is taking much longer to appear than anticipated, but it illustrates the complexity and difficulties as to what priority the Government are prepared to give to the restoration of assets to their real owners, rather than to the orphan assets fund. Is this issue being discussed, either generally or in the context of this order?
Finally, what responsibility do the Government have? What supervision do they employ over how this money is being used? Do they just hand it over, wave it goodbye and feel they no longer have any further responsibility; or do they accept responsibility, despite the advisory bodies and the contracts they have with the bodies that distribute the money? What responsibility do the Government accept for overseeing this money? I always make that point in this context. My experience, having been responsible for distributing grants along these lines, is that it is all too easy to give capital grants but to pay insufficient attention to the revenue consequences of doing so. Do the Government recognise this issue? What responsibility do they have to ensure that we do not encounter problems?
Finally, on the issue of the reserve ratio, which was raised, during the passage of the Act I had some correspondence with the grant-giving body and I was not entirely clear about the basis on which the ratio was decided. Further explanation could be given and further time devoted by the Minister in his crowded schedule to assessing the reserve ratio, to see that it is set at a proper level.
My Lords, I intervene with some trepidation on this subject because, unlike the noble Lord, Lord Davies, and my noble friend Lord Hodgson, who have clearly lived with this subject for some time, my interest has essentially been dormant. Then I got an email from Big Society Capital, which I am sure we all got, which drew my attention to the SI. In one of the quieter moments during consideration of the levelling up Bill yesterday, I picked up the SI and followed some of the links.
I have no difficulty with the policy at all—it is a very successful policy—but a number of questions arose in my mind. The first was about the public consultation, referred to in Paragraph 10.1 of the Explanatory Memorandum, which in turn led to the SI before us confirming the original three objectives but adding an extra one. I read the consultation document, which was structured in such a way that it inevitably led to the conclusion we have arrived at. The first question it asked was whether it was right to continue to support the three objectives we are now supporting. Then there was a long list of some very successful projects, which no one could disagree with at all. After that was another section on what would happen if support was cut off—and then, obviously, there would be a lot of disappointment. At the end of that, when one’s mind was already predisposed towards supporting the three existing ones, was another question, asking whether wealth management should be added; and then it set out all the benefits of including wealth management. Right at the end, the document asked about other objectives. The consultation showed that there was no consensus at all about any other objectives, so it concluded that they should carry on with these three and add the extra one.
The question raised in my mind was that the original three objectives were set out in 2008, 15 years ago. Are they really the same objectives that we should be applying today? Instead of the review starting off with a preconceived notion of carrying on from where we are, should it not have started with a totally blank piece of paper? A whole lot of issues have arisen that simply were not around in 2008, such as childhood obesity and non-attendance at schools, social harms from the media and increased awareness of the environment. I was slightly worried when my noble friend said, in introducing this measure, that the objectives would go on for the next decade and beyond. I hope that there will be another review, and perhaps he will say that the next one will be slightly more open-ended than the one that has just concluded, to take account of the fact that we now live in a different world and the priorities of objectives may well have changed.
That was the first thing that struck me. The second thing was what my noble friend said about the reserve ratio. Some 40% of the money in the reclaim fund is retained. That may have been right at the beginning, when no one knew exactly what was going to happen, but all the banks and financial institutions that have signed up to this scheme voluntarily follow a protocol to identify who owns the assets—and it is quite a rigorous protocol. After 15 years, if no one has claimed it, the money goes to the reclaim fund, which then retains 40%. I was reading the Government’s response to the consultation document, which came out in May. It says that
“only a small percentage do so”—
in other words, claim the money from the reclaim fund. It went on to say that there were
“consistently low levels of reclaims following transfer”.
If so, why on earth are they sitting on 40% of the money, given that it is hundreds of millions of pounds that could go through to worthwhile causes.
This proposition may be too much for my noble friend but, if you lose the deeds of your house or your share certificates, you can take out an insurance policy, which is actually quite cost effective, to insure yourself against somebody else suddenly popping up with the deeds of the House or the share certificates that were yours. Have the Government considered insuring themselves—or the reclaim fund insuring itself—against these claims? How many Rip Van Winkles are there are out there waiting to claim their money after 15 years? If they could insure themselves against that small minority of claims, all the money could be released.
Related to that second point, the document says that a portion of the money is invested. Are the Government happy to see hundreds of millions of pounds held in gilt-edged securities to help them with their borrowing requirement, rather than having that money paid out to voluntary organisations? My noble friend may not want to go down that path, but what is done with that money, the hundreds of millions of pounds that it says is invested? What is it invested in?
I have two final points. I think the scheme was recently extended to include pension funds. Has that money started flowing in? This point was raised by the noble Lord, Lord Davies. Are there plans to extend access to the scheme to any more institutions, which would obviously require primary legislation?
My Lords, when I looked at this, I thought I had one or two clever questions, but they have both been asked. It is one of those SIs which is basically a good idea but there are a series of “Yes, but what if it happens?” questions. The final point made by the noble Lord, Lord Young, that if you insure against this then maybe you could get the money out there and would be covered anyway might be an answer. I certainly had not thought of it, but it deals with the problem of getting the money, which is designed for a good cause and which you are holding, out there and letting it do the work.
I appreciate that we should hear about how everyone who is paid from this is using the money, benefiting from it and reporting back. Can the Minister say something about that? I declare a small interest as a trustee of the Atlas Foundation, which does this on a very small scale from privately arranged funds. Reporting back is very important to what we do because we have to know what has happened, usually in youth projects based around rugby football abroad. We have reports back so that we can see what is going on. The Government should let us know how this is happening.
The noble Lord, Lord Davies, made a point about additionality and the National Lottery. I wonder how many times that has been breached and whether it has now become the National Lottery’s normal activity to cover certain activities. It has been a great success and done positive things, but has it let the Government off the hook? I do not know. If we want a pointless activity, let us go through that and put the balancing scales up. My attitude is that we do not need to, as long as it gets done and we do not try to overload it.
How it is administered seems to be the major cause of concern. I do not know whether we are holding too much money back—whether for 15 or 20 years—and then giving the whole thing away. Are the Government or the Opposition thinking about whether they will challenge this in future? What is the Government’s long-term thinking on this? Helping good causes, most of which do well, and making sure you find out which ones do not is basically a win-win. It has been a successful scheme, so what are the Government doing to make sure that this momentum is maintained and that we continue to have good results? That is the only thing that could cause any controversy. It is a question of how they are monitoring it and making sure that it is doing this properly. There is also the principle of additionality. Is it doing something that other bits of legislation say are government activity, either local or national? With those caveats, which sound rather miserable as I look back at them, this should probably be supported.
My Lords, like everybody else, I am grateful to the Minister for the way in which he introduced this. It is a short SI. That has not stopped noble Lords this afternoon asking a plenitude of questions, but all of them are highly relevant. Many of them are repeats from when we discussed the Bill back in 2021-22, but they are nevertheless highly relevant today.
This is of huge importance to community organisations and individuals who will benefit from the funding. I thought that the testimony of the noble Baroness, Lady Ritchie, was very good on that point because she gave very good examples of the benefits of using the funds in the way in which they are used. I am sure that the Minister will fondly remember his many hours taking the Bill through the House; I have a feeling that it was his first Committee, and he did it very well and with tact and skill.
During the passage of the Bill, we had a lot of discussion about the potential inclusion of community wealth funds as beneficiaries of the dormant asset moneys. In the best tradition of the Lords, there was cross-party support, including in particular from the noble Lord, Lord Hodgson of Astley Abbotts, the now-retired Bishop of Newcastle, and, speaking on her behalf, the right reverend Prelate the Bishop of Ely. That collaboration gave rise, as I recall, to an amendment that many of us signed, which led to a shift in the position of the Government. It was initially resisted by the Minister, who stressed that
“current evidence for community wealth funds, as well as concrete designs for how they would operate, are relatively sparse”.
He did, however, go on to say that
“there is more work to be done in this area before a commitment can firmly be made”. [Official Report, 16/11/21; col. 177.]
In a refreshing break from tradition, the Government have followed through with their promise. I congratulate them on that, because it is a very important and significant one.
Based on the outcomes of their consultation, which saw 71% of respondents agree or strongly agree that community wealth funds should be included as a cause for dormant assets, they have rightly included them on the list in this instrument. This is, without doubt, a very exciting time for those involved in the creation and scaling up of community wealth funds. However, the Minister will know that some in the sector are concerned by the direction indicated in the recent technical consultation document published jointly by DCMS and DLUHC. We understand the need to build the evidence base for community wealth funds. Limiting their work to smaller towns of fewer than 20,000 people appears counterintuitive to us—I will not say counterproductive. Some of the most deprived areas across our country have populations larger than 20,000, yet for a variety of reasons they lack the type of social infrastructure that these funds could provide. The noble Lord, Lord Hodgson, gave a very good case example of where that sort of community capacity can be missing.
Yes, we need to build the evidence base for community wealth funds over time, but I hope the department will consider whether this rather arbitrary threshold is wise. If the pilots are run in the wrong areas or to the wrong criteria, we may never see an accurate picture of the role these funds can play in improving communities and people’s lives and livelihoods. Will the department reflect further on this? This design principle is not even subject to consultation, and I think that needs to be given some urgent thought. At the least, we would like to see the Minister prepared to welcome views on the point and the issue.
While we are glad that community wealth funds have been named as a cause, we are equally pleased to see the existing three causes keep their place in the list. Dormant assets have funded a variety of important services for young people and those with debt or financial inclusion issues, which the Minister referenced. It is vital that their work is able to continue, particularly at a time where our economy continues to struggle and inflation remains a problem for people up and down the country. The Minister will be familiar with the work of organisations such as Big Society Capital, Local Trust and so on, that fall under the third category on the list. As I am sure the Minister is well aware, Big Society Capital has come up with a community enterprise growth plan, which aims to put dormant asset funds to even better use by leveraging additional private capital and multiply the impact that the initial investment generates. While I understand that the Minister will not be able to announce individual allocations today, will he commit to looking closely at least at that plan?
Some questions will remain over elements of the Government’s approach, but we are generally pleased to support this SI. As I have already noted, there is cross-party support for the scheme, and we should harness that energy. At the same time, there are legitimate concerns over particular aspects of the policy. Ministers like to talk about levelling up but, despite the fantastic work of social enterprises across the country, it is not clear that we are yet seeing it on the ground. With that in mind, I hope the Minster can commit to further discussions in the months to come.
For me, the dormant assets scheme is an original great Labour success story. It started in 2008 and was authored by Gordon Brown. The current Government have taken it a stage further and broadened the range of options for paying into that fund. It has put millions of pounds to good use around the country. We are happy to support the expansion of the asset categories through the 2022 Act. Once the finer details have been ironed out, we hope that even more will soon go to good causes.
A number of questions that colleagues asked were particularly important, such as on additionality. Ensuring the restoration of money to the right place is important. The size of the reserve fund seems questionable. We must ensure that we get the right distribution of funds and that they deliver additionality, rather than just paying for things that would otherwise be paid for by government programmes through local government.
This has been an impressive and useful debate. I hope this is an issue that we can keep at the forefront of the House’s consideration. Perhaps we could return to the point about monitoring and analysing the impact at some stage in some form or other. It might be the sort of thing that could be the subject of a Lords’ report, because this is an exciting opportunity. It is all about building capacity, providing opportunities and getting funds to communities that most require them.
I certainly agree with the noble Lord, Lord Bassam of Brighton, that this has been an important and useful debate. I am very grateful to all noble Lords who have contributed to it. I am grateful to the noble Baroness, Lady Ritchie of Downpatrick, and her fellow members of the Joint Committee on Statutory Instruments for the work they have done in this regard. I reassure her that we do indeed want this scheme to continue long into the future. The expansion of the dormant assets scheme is expected to unlock a further £738 million for England alongside the almost £1 billion which has already been unlocked, as I mentioned in my opening contribution. We are committed to ensuring the success of this expansion so that ample funding can be distributed across the four causes. That is what the primary legislation—the 2022 Act—and the secondary legislation intend to promote and protect.
I can also reassure the noble Lords, Lord Davies of Brixton and Lord Addington, and other noble Lords who underlined the importance of the additionality principle that it will be adhered to. Ensuring additionality is an essential criterion of the dormant assets scheme. The Government are committed to ensuring that a community wealth fund is designed and delivered in a way which does not replace or undercut central or local government funding. We specifically sought views on how to embed the principle of additionality in the design of a community wealth fund in the technical consultation, which closed on 19 October and which we are working our way through at the moment. That will include ensuring that any interventions provided to communities to support their decision-making will exclude statutory duties. We will work with the National Lottery Community Fund as the main distributor. Lottery funds are also subject to the additionality principle, so the National Lottery Community Fund already has its own policies and practices in place to maintain that important principle.
The noble Lord, Lord Davies, asked about the pensions dashboard. Ensuring that efforts are made to reunite dormant assets funding with its rightful owner remains the first priority of the scheme. A number of ongoing initiatives are aimed at preventing pension assets reaching dormancy, including pensions dashboards, which will enable people to access their information online, securely and all in one place.