Dormant Bank Accounts

Dormant Bank Accounts
Scottish Government
28.08.09


Background


1. The Dormant Bank and Building Society Accounts Bill was enacted on 26 November 2008 and commenced in March 2009.  The Act concludes the primary legislative process and confirms the opportunity for Scottish Ministers to specify, via an Order, priorities for the expenditure of funds released from Dormant Bank and Building Society Accounts (DBAs).    The legislation prescribes that funds will be distributed through the Big Lottery Fund (BIG) and must support expenditure which has a social or environmental purpose. 


2. DBAs are defined in the Act as those which have seen no customer-initiated activity for a least 15 years.  In November 2008, the British Bankers’ Association and the Building Societies Association estimated that there was approximately between £250 million and £350 million of unclaimed funds in banks and up to £130 million in building societies.  These figures, however, are likely to fall as a result of ongoing industry led initiatives to reunite customers with their accounts. 


3. In January 2008 the BBA, BSA and National Savings and Investments launched an on-line gateway for customers to trace dormant accounts at www.mylostaccount.org.uk. Money from dormant accounts will flow into a Reclaim Fund set up by the banks and building societies.  The Reclaim Fund will decide what proportion of funds can be passed on to the Big Lottery Fund (BIG) and the proportion which will be held back to meet repayment claims from customers.


4. Scotland’s share of the fund, if the Barnett formula applied, could be up to £40 million in the first year and about £4 million year on year thereafter as more accounts fall within the ‘dormant’ definition.  Actual funding levels will depend on the participation levels of banks and building societies taking part in the scheme (participation in the scheme by banks and building societies will be voluntary), and on the effectiveness of other industry-led initiatives to reunite customers with their accounts .


5. In England the funds will be distributed among priority areas defined in the Act:  providing opportunities for young people, improving financial inclusion and supporting institutions involved in social lending.  However, the Act provides for delegated powers to Scottish Ministers to issue directions to BIG on the priorities for distribution in Scotland.  These may differ from those outlined in England.  These directions will set out matters which BIG is required to take into account when drawing up funding programmes and to deliver specific objectives within the priority spending areas – similar to the process for distributing Lottery funding. 


Consultation


6. In May 2008 the Scottish Government jointly organised with the Scottish Council of Voluntary Organisations (SCVO) an initial scoping seminar with national umbrella and intermediary bodies.  Following this seminar a finalised list of six consultation questions was agreed with SCVO and BIG.  During June and July 2008 a series of four local consultation sessions hosted by local Councils of Voluntary Service (CVSs) were held in Paisley, Galashiels, Aberdeen and Fort William.  In addition, the Scottish Government launched a 12 week on-line consultation exercise.  SCVO ran a parallel consultation exercise on its website over the same period to reach out to the wider third sector.  76 responses were received by the Scottish Government and 194 by SCVO.  Reports summarising the consultation responses were prepared by a consultancy company to provide an independent record of the consultation process.


7. Although it was possible to identify some commonality on governing principles for the Fund through the consultation process, there was no clear consensus about how the DBA Fund should operate.  This is perhaps unsurprising given that the third sector in Scotland is a large, dispersed sector, consisting of around 45,000 organisations, and ranging from multi-million pound national organisations to small local volunteer-led organisations at community level.


8. A grants based approach was the most commonly favoured funding model.  However, many consultees highlighted the scope to maximise the sustainability of the fund by investing a proportion of it to generate long term income; views on the proportion to be invested ranged from around 30% to 90%.  There was some support for loans and endowment funds.  Funding was requested for both capital and revenue uses.


Next Steps


9. A Scottish Parliamentary debate will be held in the Autumn setting out in a Draft Order proposed priorities for Scotland.  The Order will set the scope for Ministers to direct BIG, as the nominated third party, on spending priorities.  Further details will be available as soon as possible.


Fiona Malcolm
SG Third Sector Division
26 August 2009