New Clause 2 - Authorised Reclaim funds: Apportionment of expenditure

Dormant Assets Bill [Lords] – in a Public Bill Committee am 11:00 am ar 11 Ionawr 2022.

Danfonwch hysbysiad imi am ddadleuon fel hyn

“(1) An authorised reclaim fund may conduct a review of the proportion of dormant asset money that may be spent on particular causes.

(2) Following a review under subsection (1), an authorised reclaim fund may make an assessment and recommendation as to whether this proportion should be increased.

(3) The Secretary of State may, by order, make regulation to change the proportion of dormant asset money that may be spent on particular causes, in line with any recommendation made pursuant to subsection (2).”—

This new clause would allow reclaim funds to review the proportion of funds they are able to give towards good causes, and make an assessment and recommendation as to whether this proportion should be increased. It would also give the Secretary of State power to implement such a recommendation.

Brought up, and read the First time.

Photo of Alex Davies-Jones Alex Davies-Jones Shadow Minister (Digital, Culture, Media and Sport), Shadow Minister (Tech, Gambling and the Digital Economy)

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

The central focus of our work in Committee has been ensuring that money trapped in dormant assets, whatever their form, can be put to good use. Such money has the power to transform the work of charities, as we have heard. I know from contributions from colleagues just how significant the impact of such funding can be on local communities and the people who benefit from it.

The new clause would give a reclaim fund the power to review the current proportion of moneys in the fund available for good causes. Labour would like as much money to be used as is safely possible, to support good causes up and down the country. The new clause would, following proper review and recommendation, give the Secretary of State the power to increase the proportion. That has the potential to increase significantly the amount of money available to support the good causes and charities up and down the UK.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

This is not made explicitly clear in the wording of the new clause, so would the hon. Member clarify whether the intention is that it would apply only in England or to the devolved Administrations as well? There is acceptance throughout the Bill that anything in the Bill that directs or indicates how money is to be apportioned applies in England and that the devolved Administrations have the autonomy to take their own decisions. The wording of the new clause as it is now would appear to change that and give the Secretary of State the right to give direction that would apply to the devolved Administrations as well. That would clearly be something that I and, I think, a lot of my colleagues would be uncomfortable with.

Photo of Nigel Huddleston Nigel Huddleston The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

To allow sufficient time for my official to provide me with a direct response to the hon. Gentleman’s response, I will comment briefly on this area. I understand the intent of the proposal from the hon. Member for Pontypridd. Determining what it is prudent to release to the National Lottery Community Fund and what must be retained to meet reclaims has been intentionally separated from the processes and institutions around distributing funding, to ensure that there is no conflict of interest. It is a matter for Reclaim Fund Ltd: it is responsible for determining the appropriate proportion of funding that it can prudently release. As I mentioned, it currently holds 40% of the dormant account assets that it receives and distributes 60% of the surplus funding to the National Lottery Community Fund. The amount that RFL reserves for future repayment claims is rightly based on actuarial modelling and assessment of appropriate risk factors, following guidance from the Financial Conduct Authority.

There is no reason why this should not continue, as RFL is best placed to determine what it is prudent to release, and it is only right that RFL makes its decisions independently of Government and on the advice of those with professional expertise. None the less, RFL continuously assesses and reviews its reserving policy over time to ensure that it is releasing as many funds as possible to good causes. When RFL was established, there was no historical data on which to base its model. As RFL has built its experience of handling dormant accounts, it has reviewed its reserving rate, with a view to releasing more money to good causes, which is what we all want. For example, in 2016, Reclaim Fund Ltd decreased its reclaim provision from 60% to 40%. The fundamental principle that underpins RFL’s current approach to its reserving rate is that it is required to meet reclaims in perpetuity and therefore has to account for any future stress scenarios that may occur and model those accordingly.

The Government agree that as many dormant funds as possible should be channelled onwards to good causes, but this amendment would perhaps set an unhelpful precedent and risk the scheme’s reputation. Industry stakeholders might be less willing to voluntarily participate if they felt that RFL’s reserving policy was unduly influenced, so there would be a risk to the scheme’s continuation should the Government encroach on RFL’s operational independence by having the power to decide what portion of funding it should release.

In answer to the question asked by the hon. Member for Glenrothes, the amendment as drafted would have an impact on the UK as a whole. RFL releases all surplus funds to the National Lottery Community Fund, and only then is it apportioned. However, it would not change the proportion contributed to each nation, which is, I think, what the hon. Gentleman is concerned about. Hopefully that explanation provides him with reassurance. As I said, RFL has reviewed and will continue to review its reserving policy on a regular basis, to ensure that it is fit for purpose. In fact, RFL is currently undertaking a review of its reserving policy, also known as the reclaim—

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary)

I am sorry to interrupt the Minister. It seems to me that he is responding to a different new clause from the one that has been introduced. My reading of the proposed new clause is that it is about decisions as to how the available distribution money is distributed to particular good causes. The Minister is talking about the decision as to how much of the total fund can be made available. That to me would seem to be a professional judgment matter and not a matter for the Secretary of State. Can he perhaps clarify what the actual meaning of this new clause is? I do not think the new clause says anything about how much should be reserved to cover any reclaims. I think it is about deciding how the available money is allocated across individual causes or, potentially, across individual organisations.

Photo of Nusrat Ghani Nusrat Ghani Ceidwadwyr, Wealden

Mr Grant, I do not think the Minister’s response was out of order. He may not be responding to the point that you raised, but I do not think he was not speaking on the new clause. Minister, would you like to clarify the matter?

Photo of Nigel Huddleston Nigel Huddleston The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

Yes, Ms Ghani. In terms of the distribution of funding, as I think we discussed earlier, Scotland has flexibility, and flexibility is changing for England. As I understand it, the new clause is proposing some points about transparency and the proportions of expenditure, so the points that I have raised are relevant.

As I have said, Reclaim Fund Ltd is conducting a review of reserving policy with the aim of having a refreshed model in place for 2022, and I do not believe that the new clause would introduce any practicable changes that have not already been undertaken. For those reasons, I ask the hon. Lady to withdraw the motion.

Photo of Alex Davies-Jones Alex Davies-Jones Shadow Minister (Digital, Culture, Media and Sport), Shadow Minister (Tech, Gambling and the Digital Economy) 11:15, 11 Ionawr 2022

I am grateful to the Minister for his response to new clause 2, which we will not pursue. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Photo of Nusrat Ghani Nusrat Ghani Ceidwadwyr, Wealden

I am grateful for the good nature and speed of the debate, which was meant to run for four sittings. There is still a bit of formal business to get through, and the Minister and the Opposition may wish to say some quick words of thanks.

Question proposed, That the Chair do report the Bill, as amended, to the House.

Photo of Nigel Huddleston Nigel Huddleston The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport

Briefly, Ms Ghani, may I thank you, the Clerks and officials for all your work on the Bill, as well as all colleagues across the House and in the other place for their contributions? I also thank industry and many other stakeholders.

As I said at the beginning of the sitting, there is broad support for the Bill. I understand and have taken on board many of the comments that hon. Members have made today. I hope that I have provided reassurances where they were sought, and that we can continue to work productively and co-operatively on this really important Bill, which will make such a big difference to so many people’s lives. I really appreciate the support that it has received so far.

Photo of Nusrat Ghani Nusrat Ghani Ceidwadwyr, Wealden

If the Opposition do not have any comments to make, we will proceed.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.

Written evidence reported to the House

DAB01 Youth Futures Foundation

DAB02 Community Wealth Fund Alliance

DAB03 The Centre for Financial Capability

DAB04 Access – the Foundation for Social Investment

DAB05 The Oversight Trust – Assets for the Common Good

DAB06 Big Society Capital

DAB07 Big Society Capital, Access – the Foundation for Social Investment, Fair4All Finance, and Youth Futures Foundation (joint submission)

DAB08 Fair4All Finance

DAB09 Association of British Insurers (ABI)

DAB10 The National Lottery Community Fund

DAB11 The Investment Association