Dormant Assets Bill [HL]

Baroness Noakes Excerpts

2nd reading
Wednesday 26th May 2021 Lords Chamber

[Baroness Noakes (Con)]

My Lords, it is a pleasure to follow my noble friend Lord Bates, because it gives me an opportunity to wish him a very happy 60th birthday.

If my noble friend Lady Fleet will forgive me, I am going to stick with the guidance in the Companion that my noble friend Lord Vaizey’s congratulations to her were made on behalf of the whole House. I have noticed recently that noble Lords seem to have forgotten that this is the way we used to do things.

This is a Bill that the whole House can celebrate. It harms no one and will do much good. When the Dormant Bank and Building Society Accounts Act 2008 was considered in your Lordships’ House, I led for the Opposition. We fully supported the Bill’s principles, but our main critique was that its scope was too restricted, covering only bank and building society accounts. It was known then that there were other significant dormant asset classes, and we wanted to include them. Despite the welcome addition of extra assets with this Bill, the same basic criticism applies.

I particularly single out dormant accounts held with National Savings & Investments. Some 14 or 15 years ago it was estimated that around £1 billion was sitting in dormant National Savings accounts. If that was the correct figure then, it must be very much higher now. Can my noble friend the Minister say how much is now held in dormant National Savings accounts?

The Treasury’s position has been that the money has already been used, in its words, for public benefit—but that is a weaselly formulation. The Treasury borrowed money from you and me and used it to finance public expenditure, some of which will have been of dubious public benefit. If people forget about their savings—which is easy to do, especially for things such as premium bonds and prizes, and certainly before the advent of online accounts and apps—the Government get to keep that money in perpetuity. I believe that the right destination is the good causes supported by the dormant assets scheme.

The Bill includes a power in Clause 19 to widen the scope of the dormant assets scheme, and I welcome that. The Labour Government rejected our modest request for that power in 2008. Will my noble friend the Minister say when the Government next plan to review further dormant assets? It seems to me that the Bill ought to provide for this, to ensure that we can maximise the assets within the scope of the Bill.

As has been pointed out, the asset classes in this Bill are more complex than those to which the 2008 Act applied. That is likely to mean that there will be more disputes about the value an owner will receive if an asset is reclaimed. It is not clear to me that all the assets now coming within the scheme will be covered by the Financial Ombudsman Service. Can my noble friend say how disputes about amounts due to asset owners will be dealt with?

The main issue I want to raise today concerns the structure of the scheme and whether it is unduly restricting the amounts released for good causes. The 2008 Act envisaged that there would be several reclaim funds, all independent of government. In the event, the Government had to rely on the Co-operative Bank to set up the company known as Reclaim Fund Ltd, or the scheme might not even have got off the ground.

After another eight years or so, the Office for National Statistics decided that Reclaim Fund Ltd had to be classified to the public sector, and it is now an NDPB. Since then, the Treasury, as we heard earlier, has become the legal owner of the company and it is now going to be the only officially recognised reclaim fund. Since it is now clear that the body handling the dormant assets is a public sector one, it is not clear to me that the fiction of a separate legal entity needs to be maintained. My question to the Minister is why they are keeping this separate legal entity. The importance of this question lies in the way in which huge sums of money accumulate in Reclaim Fund Ltd and are not transferred for distribution to good causes—my comments echo those of the noble Baroness, Lady Bowles of Berkhamsted. Some £1.4 billion has been transferred from banks and building societies since the scheme got going, but only £800 million has been released for good causes. As we heard from the noble Baroness, Lady Bowles, the difference mainly lies in the reserves that the company maintains against the legal obligation to repay when owners come forward. At the end of 2020, that reserve amounted to £475 million.

In the context of private sector reclaim bodies, it was obviously right that the reclaim reserves were set with prudence. That is how, initially under the supervision of the Financial Services Authority and more recently of the Financial Conduct Authority, highly conservative reserving policies were determined. Despite the fact that only around 7% of the £1.4 billion has been reclaimed to date, for every £1 that is transferred to the reclaim fund, only about 60p gets transferred for good causes—40% gets held back. And due to very conservative investment policies within Reclaim Fund Ltd, the amount earned on those reserves is very small. This is highly inefficient.

If we were starting again, I am not sure that a limited liability company would be the vehicle of choice, given that it is now in the public sector, although obviously some kind of organisation is needed to gather the money in and distribute it. The public sector does not need conservative reserving policies. If the Minister says that, legally, restructuring is off the table, the same result could be achieved if the Treasury issued a formal guarantee to meet any shortfall in the company. In practical terms, now that the Treasury owns Reclaim Fund Ltd, it already stands behind it under normal public sector principles. The sums that could be released are huge. Nearly £500 million is already sitting there and another £800 million is likely to be reserved and could therefore be released under this expanded dormant assets scheme.

While I am on the subject of Reclaim Fund Ltd, will the Government now switch from using private sector auditors to using the Comptroller and Auditor-General, like they do for most other public sector bodies? I believe that several areas of Reclaim Fund Ltd’s operations would benefit from a value-for-money audit from the NAO. It would be the right thing to do now that the company is in the public sector, and it requires only an order under Section 25 of the Government Resources and Accounts Act 2000.

Lastly, I welcome the removal of restrictions on how the released moneys can be spent. The 2008 Act reflected the priorities of the then Labour Government. It was short-sighted to restrict it in that way, and I support the replacement of those restrictions, as proposed in the Bill.