Distribution of Dormant Account Money (Apportionment) Order 2011

Baroness Royall of Blaisdon Excerpts

Tuesday 5th July 2011 Grand Committee

[Lord Maclennan of Rogart]

My Lords, my noble friend Lord Higgins has raised a number of the points which I would otherwise have raised, but we wish to reinforce his inquiries. I note that the money is being handled in Scotland, Wales and Northern Ireland by the Big Lottery Fund. What prioritisation, if any, is being indicated by the Governments of the countries to which power has been devolved? What relationship is there between the views of the Governments in these countries and the Big Lottery Fund? Will it be open to them to seek to influence the judgment of what is apparently being described as money for the public sector? It is to my mind rather odd that no public consultations were deemed necessary to consider this matter, or other matters related to the distribution of the dormant account moneys, since the amount is not negligible. I would be very interested to know if—in the course of the discussions about how the money might be divided up—any representations were made by the devolved Governments about how the money ought to be spent. Were they content with the proposal that it should be left to the discretion of the Big Lottery Fund?

So far as the reliance upon the Barnett formula is concerned, there have been many occasions—some recently in our House—when the limitations of the formula have been considered. Perhaps this is not the occasion to reopen that question, but it is a little disappointing that we have received an indication that the Barnett formula is considered to be the best method of financing the Governments of the devolved countries, without any indication that any sort of inquiry has been made by the Government.

It appears that some interesting suggestions have been canvassed by experts in this area. I draw attention in particular to the views of Professor Iain McLean of Nuffield College, Oxford, on how other countries tackle this problem. He drew attention to the example of how the Australian provinces meet to decide these issues. The time has come at least to put in hand significant research, because there is a widespread perception that the Barnett formula’s outcomes are not just inequitable. However, it would be a mistake, on the back of this order, to carry that out as far as it has been carried out in other forums.

The question of the amounts of money available is of great interest, and I am happy to have heard from my noble friend that the sums anticipated for this year are in the order of between £60 million and £100 million. Have any assessments been made as to whether those sums will be a one-off, or whether they will continue and, if so, at what level? I realise that that is a difficult issue to hypothesise about, but if any work has been done, it would be interesting if it could be shared with the Committee. I am grateful to my noble friend for what she has said.

[Baroness Royall of Blaisdon]

My Lords, I, too, am grateful to the Minister for her introduction. I certainly support the order and I am glad that the money will be distributed. I recognise that now is not the time to discuss how the dormant accounts money is to be spent, nor is it the time to have a discussion about the big society bank. However, I have reservations about the big society bank because, while I believe that it will help some people and organisations, it is a very small answer to the problems that they will encounter as a result of cuts in local authority services.

The noble Lord, Lord Maclennan, asked whether the noble Baroness thought that the £60 million to £100 million that it is estimated will come from dormant bank accounts this year will be a one-off, or if such an amount of money can go into the big society bank every year. If it is a one-off, my concern about the viability of the big society bank is exacerbated because, if there is to be a bank that will really fulfil what is likely to be an important role in supporting charities and civil society, it has to be more sustainable than something that will get possibly £60 million next year—or possibly not. Who knows? That raises some concerns.

I hear what the noble Baroness says about the Barnett formula. Discussions have taken place on whether or not there are other options and, clearly, the decision has been taken and has come down in favour of the Barnett formula. It would be interesting to know what discussions have taken place, and with whom, in order to reach that decision. I am concerned about its specific impact on Wales because it is widely recognised that Wales tends to lose out as a consequence of the Barnett formula.

As I said, I am glad that the money is to be distributed and welcome the order. However, it raises profound concerns which must be addressed, if not today then in the future.

[Baroness Verma]

I thank my noble friends and the noble Baroness, Lady Royall, for their broad warm welcome for the order. I expected the order to raise questions, on some of which, I am afraid, I shall have to write to noble Lords.

My noble friends Lord Higgins and Lord Oakeshott raised concerns around the use of the Barnett formula and asked why not other formulas. It was found that the Barnett formula was the most robust way of allocating the money. The Big Lottery Fund’s way of distribution is not a government formula and therefore does not have a wider standing beyond the distribution of lottery funds. The Government recognise that concerns have been expressed about the system of devolved funding; however, their position remains that the priority is to reduce the budget deficit and that any decision to change the current system must await the stabilisation of public finances. However, we have to find an alternative and, until we do, noble Lords will have to accept that the Barnett formula has its strengths.

My noble friend Lord Higgins asked about the term “social investment wholesaler”. The big society bank will be a social investment wholesaler. It is a term used in dormant accounts legislation and is one of three areas where English dormant accounts can be spent. The other two are youth provision and financial inclusion and capability.

My noble friend Lord Clement-Jones asked about public consultation on the distribution of dormant accounts. The Government carried out a public consultation on how the English portion of the dormant accounts should be spent prior to the 2008 Act. As a result, the dormant accounts Act allows the English portion to be used for youth provision, financial inclusion and capability or a social investment wholesaler.

I was asked about the monies going into the big society bank and whether this would be a one-off. We have £60 million to £100 million that we are going to allocate. However, there is a reclaim fund and we need to see how much of that is drawn on. Of course, if money is then still left, it is only right and fair that it is put to positive and good use through the big society bank so that people and smaller organisations can draw on it. The decision will, of course, be made after the independent reclaim fund has looked at how the progress of reclaim has worked.

The questions that were asked today centred basically around confidence in ensuring that the monies reach the right people and that we are making the best use of the dormant accounts. I think there is agreement over the framework that we are using, which was passed in 2008. Since taking office, the Government have worked hard, taking the necessary steps to make sure that money from dormant accounts made available for public spending is put to good use as soon as possible. A reclaim fund has been established by Co-operative Financial Services and authorised by the FSA. As I have indicated from the outset, the estimated £60 million to £100 million from dormant accounts will be released by the fund over the first year. It is imperative that we are able to spend this money as soon as possible.

In taking the decision, the Government have considered thoroughly some of the concerns that noble Lords have raised today. I stress to the Committee that we understand that there are criticisms of the formula we are using. However, it has proved to be currently the most transparent and easily understood formula of all those that are around. I hope noble Lords will be satisfied. I know I have not been able to respond to all questions but I undertake to ensure that all noble Lords are written to. On that basis, I commend the order to the Committee.