Revealed: how Gordon and the banks hoard Britain’s ‘dormant’ billions

Revealed: how Gordon and the banks hoard Britain’s ‘dormant’ billions

Nick Mathiason
The Observer

There is more than  £2.4bn lying unclaimed in Britain’s banks and savings institutions, a figure which dwarfs the pounds 400m estimated by the British Banking Association (BBA).

The bulk is in National Savings accounts and Premium Bonds. The Treasury-backed savings schemes confirmed this weekend that they have dormant funds totalling pounds 1.8bn. The figures, uncovered by The Observer, have come to light following recent changes in international accounting standards, forcing banks to classify dormant accounts as liabilities instead of assets. Until now, most British banks have used dormant accounts – those untouched for more than 15 years – to inflate their profits.

In transitional accounts, Barclays has admitted using dormant funds to flatter its profits over recent years by pounds 140m. Lloyds TSB used the same technique to increase its profits by pounds 184m, Royal Bank of Scotland included funds totalling pounds 177m and Alliance & Leicester by pounds 55m.

HSBC accounts have not disclosed how much profits have been lifted by dormant funds but it said that over the last 15 years some pounds 50m had built up. Bradford & Bingley confirmed that its dormant funds total pounds 10m.

The investigation was triggered after the Commission on Unclaimed Assets led by Sir Ronald Cohen, the venture capital tycoon, outlined its vision last Wednesday for a social investment bank which would use dormant funds to help inner-city businesses, fund social enterprises and alleviate poverty in Britain.

But the pounds 2.4bn found by The Observer will inevitably be only a part of the cash mountain as banks such as Abbey, HBOS, Allied Irish, Clydesdale and the Co-operative have not yet been included.

Matthew Pike, secretary of the Com mission on Unclaimed Assets, said: ‘We have no more information about the true level of dormant funds than is in the public domain. But we are very confident that even with estimates given by the banks and government of several billion pounds, we can realise our vision of a social investment bank.

‘We believe that the third sector of voluntary groups, community groups and social enterprises has a major role tackling disadvantage across the UK but it is undercapitalised. A social investment bank not only makes unclaimed assets available. It can also draw in private capital from banks, building societies and pension funds which can multiply each pound the bank receives.’

Once dormant pension funds, life insurance policies, shares and lottery cash are included, the overall amount of unclaimed cash could exceed £6bn.

The BBA said that the most important issue was ensuring the public can access their cash, and that in recent years it had launched a money-tracing service. The BBA said it would step up this campaign over the next 18 months.

A spokeswoman for National Savings, said: ‘Much of the £1.8bn is very old holdings where there has been no customer contact for a number of years or where NS&I knows that it has lost contact with the customer. Unclaimed assets held by NS&I are different to those held by banks and building societies in that they are already invested in society.’

But the Treasury will face calls from banks for NS&I funds to be included in a social investment bank. The banks will argue that there should not be one rule for them and another for a Treasury-backed savings scheme.

Banks have long fought against an outside agency getting hold of unclaimed money but the Treasury has been persuaded by Cohen that the move would help tackle economic disadvantage.

It is expected that more detailed proposals on how the cash can be transferred to a social investment bank will be put forward later this year. Funds could be disbursed within 18 months, although there is a possibility that legislation may be required which could slow the process down.