Transfer of Functions (Dormant Accounts) Order 2010

Lord Hunt of Kings Heath Excerpts

Tuesday 15th March 2011 Lords Chamber

Moved by

[Lord Hunt of Kings Heath]

To resolve that this House regrets that the Transfer of Functions (Dormant Accounts) Order 2010 (SI 2010/2967) makes a very limited amount of money available to the big society bank in comparison to the cuts being made to voluntary organisations and youth services.

Relevant document: 19th Report from the Merits Committee.

[Lord Hunt of Kings Heath]

My Lords, I make it clear that I support the use of dormant bank accounts for socially useful objectives. It was the previous Labour Government who took through the Dormant Bank and Building Society Accounts Act 2008 to make provision for the Big Lottery Fund to distribute dormant account money to meet expenditure that has a social or environmental purpose. The big society bank clearly originates from those proposals. We proposed then that dormant money would be distributed to meet expenditure on or connected with the provision of services to support opportunities, to meet the needs of young people, to support the development of individuals’ ability to manage their finances, or to a social investment wholesaler. Let me say that we welcome the Government’s decision to continue the work of the social investment wholesale bank. However, it is currently unclear how the big society bank will be set up and on what terms it will receive capital from UK banks. I hope the Government will be able to explain how they will guarantee the social mission of the bank and ensure that it does not become just another mainstream lender.

There are serious questions about how the big society bank will function. What form will the capital from the Royal Bank of Scotland, Barclays, HSBC and Lloyds take? Will it be legally incorporated? What working rate of return are the Government expecting to provide to the banks? What interest rate will the big society bank charge? Will it be allowed to issue bonds and raise additional wholesale finance? What kind of social enterprise will the big society bank favour? Will the big society bank have paid employees? What salary levels will be paid? What bonus structures will be used? When the funds are passed to the community groups and voluntary organisations on the ground, will they represent the total sums of money put into the big society bank?

I also ask the noble Lord what he has to say in response to your Lordships’ Merits Select Committee, which reported on this statutory instrument. He will know that it made the comment:

“The infrastructure of the Big Lottery Fund is already up and running, and using it as a conduit offered potential economies of scale”.

The Merits Committee wanted to know, and invited the House to ask, whether the policy proposals that the Government are bringing forward will result in an additional administrative cost. I would be grateful to the noble Lord for his response to that.

Going beyond the specific questions that I am asking the noble Lord, there is a more substantive issue at the heart of my Motion. In the face of tens of billions of pounds in spending cuts, which are more likely to be cut from public service contracts that impact directly on the voluntary sector—it holds many of those contracts—the limited amount of money that the big society bank will receive is very small beer. In fact, it is hard not to conclude that the big society is a misnomer for what this Government are all about. They are embarking on a destructive assault on our welfare state. It is clear that the voluntary and charitable sectors are taking a massive hit as a result.

Over the past few weeks, I have mentioned the situation of Birmingham on a number of occasions in your Lordships’ House. In Birmingham, the CAB is threatened with closure and it is not alone. Many of the city’s voluntary services are similarly threatened as a result of decisions made by the Conservative-Liberal Democrat council. At the same time, we are seeing large reductions being made in legal aid services. All those decisions will have a dramatic impact on the most vulnerable people living in Birmingham. What is happening in Birmingham is happening up and down the country. Libraries, children’s centres, the youth service and the charitable sector—all are being adversely affected.

When the Government’s big society policy concept emerged, the role of the voluntary sector was said to be crucial. Since then there have been various interpretations of what the big society has meant but I believe, from my reading of the various enunciations from Ministers, that the voluntary sector is still at the core of what it is about. I support and embrace the role of the charitable and voluntary sector.

When Labour was in office we took important steps to support the charitable sector and volunteering. But no one can volunteer at a library, the CAB or a children’s centre if it is closed. No wonder many charity heads have warned that the speed and depth of the cuts imposed by local councils make the big society impossible to deliver. The director of Eaves and the POPPY Project, Denise Marshall, said:

“David Cameron, I get what he’s trying to do … but he needs to understand that groups like mine can’t function without that funding. We can’t go from year to year hoping that people will fill our begging bowls. We have to have proper funding … domestic violence victims don’t storm the town hall saying don’t close down the refuge because they can’t”.

She said that the Government,

“needs to understand that and so do the others who are in charge of this funding”.

That was only four weeks ago. She concluded:

“We are going to really mess up more services and we’re going to make women’s lives more difficult”.

The reality is, as the Association of Chief Executives of Voluntary Organisations has estimated, that the voluntary sector will face a reduction in funding of £1.14 billion this year, rising to £3.1 billion per year by 2014. The Society of Local Authority Chief Executives has said that,

“in the short term, there are real fears that spending cuts will impact adversely on the capacity of the charitable/not-for-profit sector. Far from taking on more, and providing capacity to enable a shift away from the state, it may be able to do rather less”.

--- Later in debate ---

[Lord Taylor of Holbeach]

The bank will be operating in the market, and it is unlikely that the bank is going to be able to provide finance at a subsidised rate. None the less, the most important thing to secure is the availability of the funding. That is the direction of travel of the bank at this time.

[Lord Hunt of Kings Heath]

My Lords, I am very grateful to the noble Lord, Lord Taylor, for his response and for some of the details he gave to noble Lords. However, from what he said, it seems that it will be some months before money starts to flow and the amounts seem likely to be modest. His contribution was, as ever, meant to be as constructive as possible—until at the end when we heard from him about the deficit and the financial position of the public sector. He made no mention of the global financial context in which the last Government had to move to protect the economy. Also, the Government do have a choice—they can slavishly carry on as now, or, as I hope, they can take steps to deal with faltering growth in our economy; establish a plan to create jobs in the private sector to deal with the crisis of youth unemployment; and take steps to support the voluntary and charitable sector.

I appreciated the comments of the noble Lord, Lord Newby, and his tour de horizon on the passage of the 2008 Act. I agree that social enterprises are invaluable and that we want to support the sector. I also agree with his point about access to finance. However, as my noble friend Lady Pitkeathley says, the voluntary and charitable sector is running short of cash now. At the very least, it needs an injection of resources and time to adapt. As my noble friend Lord Beecham suggested in his question about commercial rates, that is highly pertinent. I know that access to capital is an issue, but when very little revenue is available from traditional sources of funding, the cost of capital becomes a major inhibition on the very organisations the noble Lord is relying on.

The noble Lord is ambitious for the future, for the proposals contained in the order and for the role of the voluntary and charitable sector. I applaud that ambition. However, many of the organisations on which he wants to rely are not going to survive. That is why I continually come back to the situation of the CABs in Birmingham. Of all the organisations on which one would have thought the Government would have depended to provide that kind of infrastructure support, I cannot think of a more important organisation than the CAB. Indeed, that is why in the Public Bodies Bill we are seeing the CAB being asked to take on the responsibilities of a number of consumer organisations. How can the Government say they are supporting and relying on the sector when a key part of that structure in this country’s second city is under threat of complete closure?

I respect the noble Lord, Lord Taylor, enormously. We support the use of dormant accounts but the context in which we find ourselves is that the very organisations on which the Government depend so much are being obliterated by the impact of the cuts taking place. I commend the Motion.