Dormant Assets Bill [Lords]

I beg to move, That the Bill be now read a Second time.

Over the past decade, the dormant assets scheme has released more than £800 million to tackle systemic social challenges and to support the communities that need help most. This Bill is estimated to unlock £880 million of additional funding to ensure that the dormant assets scheme can continue to support innovative, long-term programmes addressing some of our most pressing social and environmental challenges. The scheme is led by industry and backed by the Government. Its aim is to reunite owners with their financial assets; where that is not possible, the money supports vital social and environmental initiatives across the UK.

Consumer protection is at the heart of the scheme. Dormant assets remain the property of their owners, who can reclaim any money owed to them in full at any time. However, only a small percentage do so, meaning that the rest of the money lies dormant. The scheme responds to the imperative to put the money to better use.

The Bill marks the completion of a five-year review in collaboration with industry leaders, including an independent commission and a public consultation. The scheme’s success is down in no small part to the commitment and drive of the banks and building societies that have led the charge on unlocking dormant assets for the public good. However, it is only right that the scheme continues to grow and evolve.

Currently, only assets from dormant bank or building society accounts are eligible to be transferred into the dormant assets scheme. The Bill will enable Reclaim Fund Ltd, the scheme’s administrator, to accept a broader range of asset classes in the sectors of insurance and pensions, investment and wealth management, and securities. Of course, there could be even more dormant assets to unlock in future. The Bill will therefore introduce a new power to provide the flexibility to expand the scheme through regulations.

I stress that the four core principles that underpin the scheme—voluntary participation, reunification first, full restitution and the additionality principle—will remain unchanged by the Bill. The Bill will require the Secretary of State to

“carry out periodic reviews of…the operation of the dormant assets scheme and…any use made of the powers”

to extend the scheme.

There are many worthwhile projects that local communities would like to bring forward. How can they feel that they are part of this project and gain advantage from dormant bank accounts?

I thank the hon. Gentleman for his intervention. There will be a consultation; I or the Under-Secretary of State for Digital, Culture, Media and Sport, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), will come to it later.

The Bill makes provision to reflect Reclaim Fund Ltd’s establishment as a Treasury non-departmental public body and names it as the scheme’s only authorised reclaim fund. In addition, the Bill includes a new power for the Treasury to designate additional authorised reclaim funds in future. To guarantee consumer protection, the Bill’s money resolution will enable the Government to cover the liability, in the form of a loan, for reclaims should any authorised reclaim fund face insolvency.

The Bill will amend the approach to distributing dormant assets funding in England, aligning it with the model used in the devolved Administrations, who have powers to focus funding through secondary legislation, provided that it is within the parameters of social or environmental purpose. In England, the Dormant Bank and Building Society Accounts Act 2008 restricts the English portion of funding to youth financial inclusion and social investment. The Bill will enable the current restrictions to be removed from primary legislation and put into secondary legislation so that the scheme can respond to changing needs over time. The Bill will require the Secretary of State, before making an order, to publicly consult on the social and environmental focus of the English portion of funds. No changes to the existing restrictions can be made until and unless a new order is laid.

After 10 years of operation, it is right that we carefully consider how the scheme can deliver the greatest impact once it has been expanded.

With the expansion in the amount of money and the number of areas subject to the scheme, there is a danger that we could end up swamping the economy in those areas. We therefore need to broaden out the scope of the good causes towards which the scheme can work.

I thank my hon. Friend for that point—a legitimate point that will be raised in different ways across the country during the consultation, and one on which the Secretary of State will need to reflect in due course before an order is laid.

It is vital that we afford everyone a fair and open opportunity to have their say, so the Government plan to launch the first public consultation, which will last for at least 12 weeks after the Bill receives Royal Assent. Until we have launched the consultation and fully considered the responses, the Government are not prepared to make decisions or commitments on the ways in which future funds will be used in England. To do so would clearly undermine the validity and transparency of the consultation exercise.

Under the current legislation—the Charities Act 2011—urban regeneration is one of the areas that distributions are allowed to go into, but it is not clear whether they can go to, for example, a regional mutual bank. As my hon. Friend knows, the all-party parliamentary group on fair business banking is strongly in favour of that. Could the point be clarified in the Bill to facilitate a quicker move to fund those regional mutuals?

In short, no; that will not feature on the face of the Bill. However, my hon. Friend is a doughty advocate for that cause, and I am sure he will make a hearty contribution to the consultation which will inform the Government’s response in respect of those future parameters.

Mindful of time and the need for contributions from so many Members on both sides of the House, I will end by reiterating that the Government are committed to supporting industry efforts to reunite more owners with lost money, and to provide a practical way for unclaimed and unwanted funds to be put to good use. The dormant assets scheme has achieved that, and we are determined to ensure that it continues to be a success. I hope that the Bill will command cross-party support this evening, and that we will be able to work together on expanding the scheme to unlock hundreds of millions of pounds more for good causes throughout the country in the years to come. I commend the Bill to the House.

In 2008, Labour set out a new principle in the House: to put dormant assets from bank and building society accounts to work, first by trying to reunite owners with their accounts but then, when connections failed to materialise, by moving assets to address social and environmental good causes. Labour’s vision has since released nearly £8 million to infrastructure bodies which, in turn, have multiplied the investment and expanded the work of civil society. I continue to argue that the pounds spent by civil society organisations stretch much further than those spent elsewhere in the economy.

This is a success to celebrate, but the last two years have been tough. As the sector's campaign slogan in response to the pandemic says, charities have been “#NeverMoreNeeded”. Demand went up and funding down as shops were shut and fundraising dried up. That is why this legislation is really “never more needed”, but it also furthers Labour’s ambition to introduce other assets into the reclaim fund, now that the principle has been established and the scheme has proved successful.

The three-year review should have taken place a decade ago, and the legislation before us today should have already released millions of pounds. If it had, the sector might have survived the last two years more securely rather than ending up where it is today. Today we are urging the Government to press on while also ensuring that the Bill is in good shape.

Charities have been tested throughout the last decade as the state failed to give the sector the back-up that it needed. Charities and Labour have shared values and a shared sense of purpose. We want to do all we can to transform our society, and that is why we value charities so highly. Bursting with dedication and expertise, civil society really is the heartbeat of all our communities.

Does the hon. Lady acknowledge that the Government put more than £150 million into the charity sector last year, and does she think that that was welcome, not enough or too much?

As I was going on to say, that money reached only 14,000 charities out of 169,000. As we see demand spiralling, we are seeing charities struggling. The Government could have been far more generous, as they have been to many other sectors during the pandemic.

Every organisation has had to reinvent itself, digging deeper into its reserves, borrowing where possible, and appealing to the ever-generous public for help. We saw charities and mutual aid groups spring up in every corner of every community. Where the state stopped, charities took their service ever more deeply into our communities. That is why this legislation really matters, and why Labour will support its passage through the Commons today. It arrives in a better state thanks to the extensive work undertaken in the other place, and I particularly thank Lord Bassam of Brighton for his skilful handling of it, to help it to reflect the priorities of civil society.

In looking at the detail of the Bill, we are pleased to see that the principles that Labour set out in 2008 remain, including that of reuniting assets with their owners through extensive tracing processes and ensuring that the owner will always be able to claim the value of their asset in full if they seek to do so. The principle of this being a voluntary scheme will remain, whereby participants can opt in, and I encourage everyone to do so. When dormant assets have been through thorough tracing processes, the asset then transfers to the reclaim fund, which is responsible for any reclaim that might occur, moving surplus into the hands of identified organisations. Labour is most grateful to Big Society Capital, Access, the Youth Futures Foundation and Fair4All Finance for the way in which they have multiplied the value of these assets and invested them wisely to help people in our communities. Likewise, we are grateful to organisations in the devolved countries.

Part 1 of the Bill expands the opportunity for the inclusion of other financial dormant assets. The consultations to get to this point have been thorough, and each new product carries its own racing mechanisms and timescales to reduce risk. We welcome the inclusion of all the named assets, but I want to press the Minister further on pension schemes. While there is some inclusion, I know that he is making the case that until the pensions dashboard has been thoroughly tested, he is reluctant to expand in this area. I appreciate that there has been significant delay in the introduction of the dashboard, which has caused the Government significant embarrassment. This delay is denying good causes the assets that they want to put to work.

I declare an interest as chair of the all-party parliamentary group on financial education for young people. Several key supporters of the APPG have benefited from the dormant assets scheme, in which I know my hon. Friend the Economic Secretary to the Treasury takes a keen interest. His has often been a lone voice in the wilderness when it comes to financial education for young people, and we are grateful for his support.

It would be fair to say that the current dormant assets scheme has far exceeded expectations since the passage of the Dormant Bank and Building Society Accounts Act 2008. I was a financial journalist at the time, and I well remember that it was seen as revolutionary but relatively small-scale—a staging post. The then Government thought it would raise about £400 million, but it has raised £800 million. I also remember that there were a lot of questions about exactly how it would be brought about, how fair it would be and whether people would get their money back.

There were also questions about whether people would find their money was just taken, whether it would be an example of the state effectively piling into people’s lives, but we have seen a huge amount of fairness. No one can complain—even those from 1864 who lost money from their National Savings and Investments account have not come forward to say they have been mistreated in that respect.

I have seen in my constituency the huge amount of good this scheme has done. Ordinary Magic, a group based in Shirley, received £60,000 through the fund this year, and it is providing support to local children—we know from the tragic events this weekend exactly how welcome this is in my community—who are suffering from mental health conditions by providing psycho-education workshops to teach parents how to enable their children to get through these difficult times and difficult situations. It also provides personal, social, health and economic education sessions in schools, enrichment holiday clubs and breaks for children and carers, which is hugely important.

As Chair of the Digital, Culture, Media and Sport Committee, I believe it is incredibly important for our young people, particularly those living among some of our most deprived communities, to have access to the performing arts. I make reference to the Citizens Theatre, based in Glasgow, which is fantastic in its outreach. I know for a fact that it goes out into the local community; I believe it even tries to recruit young actors in chicken shops, cafés and other such places. The distribution of the dormant assets scheme is therefore providing enrichment experiences that young people in Glasgow need to expand their confidence and explore their identities through the stage. That would not be the case had it not been for this legislation, which has cross-party support.

We in the Scottish National party welcome the Bill and the expansion of the dormant assets scheme. The extra £880 million now available as a result is very welcome, especially in what is an extremely difficult time for so many up and down the country. Already the scheme has delivered £745 million for social and environmental initiatives. By expanding the current list of assets that qualify for the scheme, up to £1.7 billion more could be made available.

The Minister will doubtless be aware of the remarks made in the other place about the Bill. Peers wanted clarity on its potential costs and more detailed impact assessments of the expanded scheme. Baroness Barker specifically warned that such details are important so that the scheme does not become a

“piggyback fund for government when times are tough.”—[Official Report, House of Lords, 26 May 2021; Vol. 812, c. 1039.]

Perhaps the Minister can assuage her concerns and give us the detail that she asked for.

It is good to see that the Bill makes some changes to distribution in England; the Secretary of State will have more freedom to spread assets through secondary legislation, thus allowing England to catch up with Scotland and the other devolved nations. As Lord Triesman pointed out in the other place, the example set by the devolved nations through their innovative thinking about how to spend the funds allotted to them provided the impetus for the expansion of the scheme in England through this Bill.

The pandemic has shown that the needs of the population can change dramatically and suddenly. Flexibility in secondary legislation is a useful tool to deal with such change, but we must also ensure adequate consultation and scrutiny. We welcome the requirement for the Secretary of State to launch a public consultation and to consult the National Lottery Community Fund before replacing or changing an order. However, it may also be desirable to expand such consultation beyond that fund and to include the devolved Ministers responsible for spending in their nations and representatives of the voluntary and social enterprise sectors.

It is a pleasure to speak in this debate. I am supportive of the Bill and the widening of the jurisdiction of the legislation.

As I said in an earlier intervention, my brief remarks will be centred on community banks, which, as both Ministers on the Front Bench—my hon. Friends the Economic Secretary to the Treasury and the Under-Secretary of State for Digital, Culture, Media and Sport, the Member for Mid Worcestershire (Nigel Huddleston)—know, the all-party parliamentary group on fair business banking believes are at the heart of social purpose. Indeed, the APPG’s recent “Scale up to level up” report makes the case for regional mutual banks and community development financial institutions, which could—and in the case of CDFIs do—play an important role in fairness, making sure that we level up properly, and in regional distribution in terms of regional recovery.

Let us look at how regional mutual banks worked in Germany after the most recent financial crisis. In the five-year period between 2008 and 2013, UK commercial banks withdrew financing to small and medium-sized enterprises by around 25%, whereas in the same period co-operative and community banks in Germany increased lending to SMEs by 20%. That was an incredibly important time for SMEs—they need funding to get through crises of that kind—and co-operative and community banks take a different approach to lending. Commercial banks are important in the UK but regional mutual banks could play an important role by getting patient capital to where it is really needed, which is to SMEs and the productive economy.

Regional mutual banks are not just a feature of Germany, and this is not just a romantic ideal; they are very much part of every G7 economy, with the US, Germany and Japan being examples of where they work very effectively. They are not currently part of the UK banking sector—they used to be—but the APPG sees them as crucial to levelling up because they can have a genuine regional focus.