New bill could lead to a windfall for good causes

New bill could lead to a windfall for good causes



Regeneration and Renewal
20.07.07


Cash in unclaimed bank accounts could be released to help tackle financial exclusion under a bill announced last week, says Jamie Carpenter.


Proposals to sweep money lying forgotten in unused bank accounts into youth services and projects to tackle financial exclusion moved a step forward last week. Prime Minister Gordon Brown announced that there will be a bill to enable the banking industry to ‘transfer unclaimed assets in the banking system so that they may be reinvested in society’ in the next session of Parliament (R&R, 13 July, p3).


Brown’s announcement that the scheme will go ahead – subject to the bill’s passage through Parliament – is a significant step. The process began three years ago when Matthew Pike, chief executive of national charity the Scarman Trust, published a report calling for unclaimed assets to be invested into a new fund to help tackle inequalities and finance the voluntary and community sector (R&R, 19 November 2004, p1). ‘It’s been a long haul,’ says Pike. ‘We’re absolutely thrilled that the Government has made a public commitment to legislation.’


The principal purpose of the bill will be to make it possible for banks and building societies to transfer dormant funds into the scheme without having to show a loss on their balance sheets. Should the bill gain royal assent, banks and building societies will first launch a major exercise before the scheme begins to help customers track down any money they may have in dormant accounts. Financial institutions will then be able to transfer any unclaimed assets to a ‘central reclaim fund’, which will keep a proportion of the funds on its books in order to cover the costs of any reclaims from consumers.


Finally, it is proposed that any surplus assets not needed to cover reclaim costs will be transferred to good causes distributor the Big Lottery Fund for disbursement. Toby Eccles, manager of the Government-backed Commission on Unclaimed Assets, which was set up in 2005 to examine how cash lying in dormant bank accounts might be used, says that this could take up to two years. ‘My sense is that the earliest it could be up and running … is 18 months to two years’ time,’ he says.


The amount of money that will be available for good causes when the scheme begins is currently unknown. ‘People genuinely have no idea about how much money will come through,’ says Eccles. A Treasury spokeswoman says that banks and building societies estimate that a ‘stock of several hundred million pounds’ may currently lie unclaimed and that ‘perhaps tens of millions of pounds’ may become available each year through the scheme. But venture philanthropist Sir Ronald Cohen, chair of the Commission, told a meeting of the Treasury select committee last month that the banks’ calculations were ‘conservative’. This view appears to be backed up by estimates from chartered accountants Grant Thornton – advisers to the Irish government on a similar scheme – which suggest that as much as £2.3 billion could lie unclaimed.


Pike says that the pot of cash that becomes available for good causes may also be limited by the fact that the Treasury has opted to allow the banking industry to itself regulate compliance with the initiative. In other countries with unclaimed assets schemes, financial institutions that fail to comply typically face legal action. But banks will voluntarily transfer unclaimed cash under the UK scheme. Pike warns: ‘A self-regulated regime is unlikely to yield as much money as a government-regulated scheme.’


The amount of dormant funding that finally emerges will ultimately determine how far down the Government’s wish list of good causes the cash will spread. The Government has made it clear that youth services and financial inclusion projects are its top priorities in England (in Wales, Scotland and Northern Ireland the priorities will be decided by the respective devolved administrations), but the Commission wants the dormant funds to be invested in a ‘social investment bank’ to support the growth of third sector organisations. However, in a current consultation on the scheme, the Treasury says that the social investment bank will only receive funding ‘if resources permit’.


Nevertheless, the unclaimed assets scheme represents a brand new pot of money for good causes across the UK. Four years before Ireland’s unclaimed assets scheme was launched in 2001, it was estimated that £2 million would be available for good causes – the amount turned out to be £133 million. Good causes will be hoping for a similar increase on this side of the Irish Sea.


Source: http://www.regen.net