Dormant Assets Bill [HL]

Baroness Barker Excerpts

Consideration of Commons amendments
Wednesday 9th February 2022 Lords Chamber

[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.