Dormant Assets Bill [HL]

Debate between Lord Parkinson of Whitley Bay and Baroness Kramer

Report stage
Tuesday 16th November 2021 Lords Chamber

[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.

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[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.

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[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.

Dormant Assets Bill [HL]

Debate between Lord Parkinson of Whitley Bay and Baroness Kramer

Committee stage
Monday 21st June 2021 Grand Committee

[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.

Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020

Debate between Lord Parkinson of Whitley Bay and Baroness Kramer

Monday 16th March 2020 Grand Committee

[Lord Parkinson of Whitley Bay]

I am grateful to noble Lords for their words of welcome. It is a privilege to be intimate among the geeks, as the noble Baroness, Lady Kramer, said. This debate has illustrated the rigorous approach that your Lordships’ House brings to legislation, including where it can be improved post facto. It was also helpful that in all their speeches, noble Lords referred to striking the important balance between providing help to people who have suffered an unpleasant accident and fairness to those who must bear the cost, which is what this boils down to fundamentally.

My noble friend Lord Hodgson and the noble Baroness, Lady Kramer, asked about the discount rate and how it is calculated. The current rate is, as was touched on, minus 0.25% as of August 2019, using calculations set out in the Civil Liability Act. That was set by the Lord Chancellor at the time, David Gauke, who had the benefit of expert advice and reached his decision on the rate, having taken this analysis and the requirements of the Act into account. He was assured that this was the fairest outcome for the claimants. That included expert advice from the Government Actuary’s Department. Moving forward, an expert panel will be convened to review the rate. As the noble Baroness, Lady Kramer, said, panels such as that can form an important part of the process as we move forward.

[Baroness Kramer]

It might help the Minister to know that 0% to 1% was the recommendation of the Government Actuary’s Department.

[Lord Parkinson of Whitley Bay]

I am grateful. Not having had the benefit of being here during the passage of the 2018 Act, I am not as au fait with it as other noble Lords.

My noble friend Lord Hodgson and the noble Lord, Lord Tunnicliffe, both touched on the gap between the Act receiving Royal Assent and the Treasury reporting back. There are some good reasons which contribute to the time period. The Treasury believes that the reporting period of three financial years is an appropriate time period to make a thorough assessment of insurers’ costs and premiums, following reforms instigated by the 2018 Act, and to observe any trends which emerge over time. After the reporting period, firms will have six months to complete their actuarial and audit processes and to submit their data to the FCA. The FCA will then have six months to review and aggregate the data before passing it on to the Treasury to complete its evaluation.

We are confident that each stage of the reporting process has been allocated a fair and proportionate amount of time given the level of data processing and analysis required, but of course the report represents just one way in which the Treasury continues to ensure that the insurance market is working well for insurers and consumers alike. I can assure noble Lords that our objective of ensuring good consumer outcomes will be as relevant in 2025 as it was when the Act was passed.

My noble friend Lord Hodgson raised periodical payment orders, or PPOs. These are and will continue to be used in those cases where they are an appropriate remedy, but they are not suitable in all cases and the discount rate addresses this fact.

My noble friend also asked about coronavirus. I will certainly take away the points he has raised and discuss them in more detail, as he suggested would be useful. I can say to him and other noble Lords that the Government understand people’s concerns about insurance cover in respect of coronavirus and are in close daily dialogue with the insurance sector, which I hope covers firms such as that which he mentioned, as well as with the Financial Conduct Authority and the Prudential Regulation Authority. In these difficult times, we encourage insurance companies to do everything they can to support other businesses and ensure open conversations with their clients. Government will continue that dialogue. Of course, the potential implications of Covid-19 for the wider UK economy and the economic response were addressed by my right honourable friend the Chancellor in his Budget Statement. We stand ready with a series of measures to support the public health response and the economy. These include financial support for small businesses in difficulty, which may be of some consolation to my noble friend’s company.

The noble Lord, Lord Tunnicliffe, followed up an issue raised in the other place by his honourable friend: how we can make sure that insurers comply with the requirement and the penalties for non-compliance. The penalties are included in the Financial Services and Markets Act 2000. Section 11 of the Civil Liability Act makes the necessary changes to that Act, empowering the FCA to use its full suite of supervisory and enforcement powers to bring about compliance with the requirements of these regulations. I shall consult Hansard afterwards. If there are any other issues which I have missed, I shall certainly undertake to follow them up with the small but select group of noble Lords who are here.

The regulations will allow the Treasury and in turn Parliament to assess whether the cost benefits of the Civil Liability Act reforms have been passed on to motor insurance customers, and they will make a technical fix—which I am grateful to noble Lords for recognising —to the Risk Transformation Regulations 2017 to make it clear that insurance-linked securities can be offered to qualified investors. I therefore commend the regulations.