Dormant Assets (Distribution of Money) (England) Order 2023

Lord Young of Cookham Excerpts

Tuesday 24th October 2023 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, I have been following the issue of dormant assets principally in relation to the 2022 Act. My concern has always been to emphasise that this is not free money; it is somebody’s money and out there there are people—some may no longer be around—and the primary objective of restoring the money should always be in our minds. That is why I have followed closely the progress of the Act and these regulations.

I have a few questions for the Minister. First, one of the main points of the Act was to include orphan pension assets. Does this order arise because of those additional assets, or is something still coming down the road? It would be useful to have some indication of the relationship between them. I make it clear that I do not oppose the order; my concern relates to the issue of additionality. What we always want is for this money to be doing things which would not otherwise be done, but which could—and should—be done by public authorities. By way of definition, the Explanatory Memorandum says that a community wealth fund

“will give local people the power to make decisions about how to improve their neighbourhood and community”.

That is where the issue of additionality becomes difficult to assess. Are these things which the local authority, central government or other bodies should be doing in any event? Can the Minister give us some assurances on the issue of additionality?

On the question of restoring the money to the individuals who really own it, during the passage of the Act there was some discussion of the pensions dashboard. It has got bogged down and is taking much longer to appear than anticipated, but it illustrates the complexity and difficulties as to what priority the Government are prepared to give to the restoration of assets to their real owners, rather than to the orphan assets fund. Is this issue being discussed, either generally or in the context of this order?

Finally, what responsibility do the Government have? What supervision do they employ over how this money is being used? Do they just hand it over, wave it goodbye and feel they no longer have any further responsibility; or do they accept responsibility, despite the advisory bodies and the contracts they have with the bodies that distribute the money? What responsibility do the Government accept for overseeing this money? I always make that point in this context. My experience, having been responsible for distributing grants along these lines, is that it is all too easy to give capital grants but to pay insufficient attention to the revenue consequences of doing so. Do the Government recognise this issue? What responsibility do they have to ensure that we do not encounter problems?

Finally, on the issue of the reserve ratio, which was raised, during the passage of the Act I had some correspondence with the grant-giving body and I was not entirely clear about the basis on which the ratio was decided. Further explanation could be given and further time devoted by the Minister in his crowded schedule to assessing the reserve ratio, to see that it is set at a proper level.

[Lord Young of Cookham (Con)]

My Lords, I intervene with some trepidation on this subject because, unlike the noble Lord, Lord Davies, and my noble friend Lord Hodgson, who have clearly lived with this subject for some time, my interest has essentially been dormant. Then I got an email from Big Society Capital, which I am sure we all got, which drew my attention to the SI. In one of the quieter moments during consideration of the levelling up Bill yesterday, I picked up the SI and followed some of the links.

I have no difficulty with the policy at all—it is a very successful policy—but a number of questions arose in my mind. The first was about the public consultation, referred to in Paragraph 10.1 of the Explanatory Memorandum, which in turn led to the SI before us confirming the original three objectives but adding an extra one. I read the consultation document, which was structured in such a way that it inevitably led to the conclusion we have arrived at. The first question it asked was whether it was right to continue to support the three objectives we are now supporting. Then there was a long list of some very successful projects, which no one could disagree with at all. After that was another section on what would happen if support was cut off—and then, obviously, there would be a lot of disappointment. At the end of that, when one’s mind was already predisposed towards supporting the three existing ones, was another question, asking whether wealth management should be added; and then it set out all the benefits of including wealth management. Right at the end, the document asked about other objectives. The consultation showed that there was no consensus at all about any other objectives, so it concluded that they should carry on with these three and add the extra one.

The question raised in my mind was that the original three objectives were set out in 2008, 15 years ago. Are they really the same objectives that we should be applying today? Instead of the review starting off with a preconceived notion of carrying on from where we are, should it not have started with a totally blank piece of paper? A whole lot of issues have arisen that simply were not around in 2008, such as childhood obesity and non-attendance at schools, social harms from the media and increased awareness of the environment. I was slightly worried when my noble friend said, in introducing this measure, that the objectives would go on for the next decade and beyond. I hope that there will be another review, and perhaps he will say that the next one will be slightly more open-ended than the one that has just concluded, to take account of the fact that we now live in a different world and the priorities of objectives may well have changed.

That was the first thing that struck me. The second thing was what my noble friend said about the reserve ratio. Some 40% of the money in the reclaim fund is retained. That may have been right at the beginning, when no one knew exactly what was going to happen, but all the banks and financial institutions that have signed up to this scheme voluntarily follow a protocol to identify who owns the assets—and it is quite a rigorous protocol. After 15 years, if no one has claimed it, the money goes to the reclaim fund, which then retains 40%. I was reading the Government’s response to the consultation document, which came out in May. It says that

“only a small percentage do so”—

in other words, claim the money from the reclaim fund. It went on to say that there were

“consistently low levels of reclaims following transfer”.

If so, why on earth are they sitting on 40% of the money, given that it is hundreds of millions of pounds that could go through to worthwhile causes.

This proposition may be too much for my noble friend but, if you lose the deeds of your house or your share certificates, you can take out an insurance policy, which is actually quite cost effective, to insure yourself against somebody else suddenly popping up with the deeds of the House or the share certificates that were yours. Have the Government considered insuring themselves—or the reclaim fund insuring itself—against these claims? How many Rip Van Winkles are there are out there waiting to claim their money after 15 years? If they could insure themselves against that small minority of claims, all the money could be released.

Related to that second point, the document says that a portion of the money is invested. Are the Government happy to see hundreds of millions of pounds held in gilt-edged securities to help them with their borrowing requirement, rather than having that money paid out to voluntary organisations? My noble friend may not want to go down that path, but what is done with that money, the hundreds of millions of pounds that it says is invested? What is it invested in?

I have two final points. I think the scheme was recently extended to include pension funds. Has that money started flowing in? This point was raised by the noble Lord, Lord Davies. Are there plans to extend access to the scheme to any more institutions, which would obviously require primary legislation?