Dormant Assets Bill [HL]

Lord Triesman Excerpts

2nd reading
Wednesday 26th May 2021 Lords Chamber

[Lord Triesman (Lab) [V]]

My Lords, it is a real pleasure to follow the noble Lord, Lord Hodgson of Astley Abbotts, not least because I feel at one with a number of the sentiments that he expressed. I thank the Minister for introducing a very good Bill with such clarity. I also send my good wishes to the noble Lord, Lord Field of Birkenhead, and hope that he recovers from his illness speedily. It may not be convention, but since London generally gets a very bad press and I am an unrepentant Londoner, I welcome the noble Baroness, Lady Fleet, and anybody who has edited the London Evening Standard.

This is a welcome extension, through the Bill, to what has been a very good and useful scheme. The original concept was strong and very careful in what it set out to do. The safeguards for those who, for one reason or another, had left funds dormant, avoided them facing unnecessary mistakes and that has given great confidence to the processes which have been in existence. Confidence increased because everyone in 2008 could understand and applaud the objectives which were set out: the funding of social investment, of youth schemes and of helping people up the first rungs of the financial ladder. The variations of practice in Scotland, Wales and Northern Ireland are, in their way, testimonials to the varied thinking of devolved inspiration that has also added confidence in what we might now do as a result of this Bill. The somewhat broader schemes that they have demonstrated that there was no threat in extending a good idea. I am convinced that the extension will work equally in England.

The concept will reach further into areas of need through access to and use of a wider pool of dormant funds. They will obviously be subject to the same safeguards, although, like the noble Lord, Lord Hodgson, I think the Government should be very careful and could be unwise to change confidence in this bit of the bedrock by, as they put it, laying a new order to vary the restrictions. As we have all observed, orders are typically not subject to the same scrutiny as, for example, this primary legislation, and the changes may be thought to provide wriggle room which we would not intend.

Of course, new circumstances may occur—Covid is demonstrating this on a daily basis—but the restrictions should not become potentially so elastic that they distort the intention of the Bill. Confidence and consent are built around the good sense and cultural appeal of the existing restrictions. Perhaps the Minister could provide some real-life illustrations of the variations that the Bill when enacted would permit and how they would be identified in future.

None the less, I start by welcoming the sequence of prioritising restrictions on funds. The first of course is the restitution of the funds to their owners if they can be identified; and restitution if the owners of assets reappear. I also welcome the exclusively voluntary involvement of the financial industry players. The Explanatory Notes set out the sums that have been released by the scheme, and they are reasonable, but not decisively significant.

My main reason for wanting to see more deployed is that, in any vibrant and modern economy, or in an economy which sometimes can struggle to modernise for all its members, in the face of the greatest need the last thing you want is significant pools of dormant assets. While it is obviously prudent to hold something in reserve for inclement times, idle resources never motor growth and change. That is something we understand broadly in the economy. In general, even assets thought of as being in safe reserve, often in the form of savings, are in fact actively deployed. They may be deployed with great caution and little risk appetite, but the institutions that deploy our savings are actively, if modestly, putting money to work. Idle money helps neither its owners nor anyone else. Unlocking nearly £900 million is a very prudent step, even if it has been the case that relatively small amounts have been given in any one year, but it will be a much more significant step if the sum is larger.

I wonder whether I might suggest two concrete ways, wholly in the spirit of the legislation but possibly requiring modest amendment, through which this could be achieved. I would welcome the Minister’s observations and at least an undertaking that they could be considered. I first draw your Lordships’ attention to my entries in the register, as they bear on some of what I want to say. It follows from the view of my noble friend Lord Blunkett that we are looking for base-up change. For several years, I had the privilege of chairing an organisation developing new social housing for housing associations, which, post 2008, had unusual difficulties in raising new capital for building.

Post 2008, housing was an unpopular and probably oversized asset class in the experience of financial institutions. They had caught a cold from a lot of it, and they did not want to do so again. It was also unpopular for short-term investors. Indeed, there is still a mismatch between their preferred exit timetables and the intrinsic long-term nature of returns in social housing. The cornerstone in the investment of the funds was the quite remarkable financial organisation Big Society Capital, to which I was introduced by the equally remarkable Sir Ronald Cohen. They shared our aspiration for incremental provision rather than simply the replacement of an existing source of money. It was new money for new provision, and therefore very unlikely to be done in the normal markets with the quoted REITs—it needed a new approach.

Big Society Capital, which was largely created to invest dormant funds in incremental social intervention, with some funds from other sources, had exactly the impact you would hope for in a cornerstone investment. It encouraged other investors and in my view was even more dynamic than simple philanthropy, however welcome; it did a great deal more. It potentiated greater private investment in social housing. The scale of social issues will inevitably demand more than £900 million, large as that amount in general will be thought—although maybe not in this day and age. This must mean encouraging impact investors to come hand in hand with organisations such as Big Society Capital, for example. The cornerstone that it provided led to over £172 million of additional social housing—new housing. It rehoused 1,431 families, and 40% of our projects were in 20% of the most deprived areas.

I will give one example from Tottenham, the area I come from. In Tottenham, a class in what is usually a well-run, well-organised school at the beginning of the year will have 30 students in it—not more, not fewer—and you will find by the end of the year that three-quarters of them have gone to another school. As you travel across Tottenham by bus, with every bus stop you can calculate that, roughly speaking, half a year will be knocked off your life expectancy. Many of the issues around schools and health are to do with the really impoverished housing, with people not having settled or firm places to live.

The impact of course means that the impact on people with pressing needs is not met. However, it is also not just the impact on them but the impact on investors, and on their willingness to impact invest over long periods. Some outstanding organisations, such as Philanthropy Impact, without doubt build together charitable giving with the private capital concept of an element of long-term return at very modest levels, rather like bonds. The value created can be reinvested to do still more; even if on occasions a very modest dividend is paid, it encourages more investment.

Impact has to be evidenced, and we found with Big Society Capital that it demanded that—and it was quite right that it did so. We had to measure outcomes. What we did had to be demonstrable: not marking our own homework but showing that you do what you say you will do—a point that the noble Baroness, Lady Barker, made very well. We got an organisation, The Good Economy, to measure, manage and report on the social impact of investments in affordable housing. One of the impacts that we set for ourselves and which was measured by The Good Economy was the formation of tenants’ associations so that people in the houses would be authors of their own futures—in short, building from the base up.

That impact inspires investment, including matching investment, or increases the scale of investment. So I wonder, in the context of this legislation, whether it can consider how partnership between the deployment of dormant assets and impact-led philanthropy could be encouraged? This may need some careful choreography around charity law, but the attraction could be a major inflow of funds for socially critical projects.

Aside from supporting the noble Baroness, Lady Noakes, in her excellent points on National Savings dormant assets, my other proposal concerns the investment demanded of high-net-worth individuals who are seeking the right to remain in this country. Broadly, these incoming funds are sent in the direction of holdings in bonds. That is a very reliable method of logging in funds, and of course these funds are used by the nation for a variety of purposes. However, it lacks the dynamism that is plainly needed for incremental provision in the most challenging social needs, where it is needed the most.

It could be a strong addition to the Bill if a formal mechanism could be introduced with the following characteristics. First, it would permit incoming sums from those seeking the right to remain, who have a requirement to invest in the United Kingdom, if this could be added to the pool created by the dormant assets. Secondly, the Government could guarantee a level of return at an appropriate duration matching a specified government-issue bond, and therefore at no disadvantage to the person coming in and making the investment. Thirdly, in the event that the Government achieve this outcome through a bond itself, it should be a hypothecated bond stating the special purpose for which the bond is issued, so it would be used for the purposes that the Bill wishes to see matured and advanced.

I know that the Treasury does not like hypothecated bonds—but then, the Treasury always feels it knows best, and perhaps on this occasion it does not. If it did, social housing would not be the unresolved, still-growing problem that we see. The Treasury has always failed to resolve these kinds of problems over the decades. If it understood them better, it would see that businesses can grasp how to do these things better and in far more timely ways. A big-society capital methodology has a huge amount to commend it: more focus; more direct social value. It may make this branch of immigration more transparent and attractive, both to the host population and to wealthy immigrants. It is hard to disrespect people contributing to reducing homelessness or keeping kids on the right side of the law. Let us try to build on the opportunity the Bill provides to achieve those social outcomes.