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EE/S3/07/R1

Report on the legislative consent memorandum on the Dormant Bank and Building Society Accounts Bill
(UK Parliament legislation)

Remit and Membership

Remit:

To consider and report on the Scottish economy, enterprise, energy, tourism and all other matters falling within the responsibility of the Cabinet Secretary for Finance and Sustainable Growth apart from those covered by the remits of the Transport, Infrastructure and Climate Change and the Local Government and Communities Committees.

Membership:

Tavish Scott (Convener)
Brian Adam (Deputy Convener)
Gavin Brown
Christopher Harvie
Marilyn Livingstone
Lewis Macdonald
Dave Thompson
David Whitton

Committee Clerking Team:

Clerk to the Committee
Stephen Imrie

Senior Assistant Clerk
Katy Orr

Assistant Clerk
Gail Grant

Report on the legislative consent memorandum on the Dormant Bank and Building Society Accounts Bill
(UK Parliament legislation)

The Committee reports to the Parliament as follows—

Introduction

1. The Dormant Bank and Building Society Accounts Bill (“the Bill”)1, introduced to the House of Lords on 7 November 2007, is currently under consideration in the UK Parliament. As the Bill makes provisions applying to Scotland for purposes that lie within the competence of the Scottish Parliament, or that will alter the legislative competence or the Scottish Government competence of the Scottish Ministers, a legislative consent memorandum (LCM(S3) 3.1)2 has been lodged by the Scottish Government. The memorandum is included as an annex to this report.

2. As the memorandum explains, the UK Government is proposing legislation to enable the collection and distribution of funds in dormant bank and building society accounts for social and environmental purposes.  While the elements of the Bill that consider the collection of funds are reserved matters and fall to UK Parliament to consider, the Bill also proposes a power for Scottish Ministers to direct expenditure in Scotland and outlines the necessary formal structures for exercising these powers in Scotland.

3. The released funds are intended to remain outwith direct public expenditure.  The Bill contains proposals to manage funding by extending the responsibilities of the Big Lottery Fund (BIG) as an appropriate independent and experienced administrator. 

The Committee’s consideration of the Bill

4. At its meeting on 12 December 20073, the Committee considered the legislative consent memorandum and took evidence from Jim Mather MSP, Minister for Enterprise, Energy and Tourism, and officials from the Scottish Government.

5. During the meeting, the Committee explored a range of issues, including:

  • the general merits of the provisions in the Bill; and
  • whether to recommend to the Scottish Parliament to give its consent to the draft motion proposed in the LCM;

6.      In considering the general merits of the provisions in the Bill, the Committee explored a range of issues. The discussions are set out below.

Distribution of funds
7. During the Committee meeting, members highlighted the issue of how the money raised through this Bill would be distributed, both on a geographical basis and the proposed pattern of distribution of funds to the voluntary sector by the size of organisation. Members also raised issues, more generally, with the current procedures in the Big Lottery Fund for distributing lottery funds and consequently raised questions with the Minister as to how the Big Lottery Fund would manage the funding process envisaged in this Bill, and what criteria would be involved in deciding which areas of Scotland and which organisations should receive funds.

8. Members of the Committee had reservations about the Big Lottery Fund’s capacity to distribute the funds evenly throughout Scotland and requested clarification from the Minister as to how he would ensure that these funds were distributed evenly. The Minister indicated that he had met with the Chief Executive of the Big Lottery Fund to discuss these matters. In evidence to the Committee, the Minister stated that the Scottish Government was looking for “even-handedness in the distribution of funds by the Big Lottery Fund”4.

9. The Minister agreed that “it would be seemly, correct and useful for us to get an understanding of the geographical spread of the distribution and that we should raise the issue forcefully with the Big Lottery Fund. Distribution should be even-handed throughout Scotland”5. He also confirmed that the sums involved for Scotland would be in the order of £40 million6.

10. Furthermore, the Minister outlined his plans for an open and transparent consultation process on the procedures that should be followed by the Big Lottery Fund to distribute the new funds available as a result of this Bill7.

Formula to be used to calculate Scotland’s share of the funds
11. As indicated above, the Minister confirmed to the Committee that approximately £40 million will be available in new funds for distribution within Scotland. Members of the Committee asked what formula would be used to calculate the amount that Scotland would receive relative to other parts of the UK.

12. The Bill itself refers to a division of the fund between England, Scotland, Wales and Northern Ireland on a “per capita basis”.8This is contrary to the advice given the Committee by the Minister’s officials who suggested that the Bill refers to a “population-based formulae”.9  The Committee requests that the Minister clarifies this issue during any debate in the Chamber on this LCM.

Procedures within the Big Lottery Fund for handling these funds
13 Members of the Committee asked whether the Big Lottery Fund would treat the money as separate, and with a separate bank account, than the rest of the funds it distributes. The Minister confirmed that these funds will be treated as a totally separate fund by the Big Lottery Fund with separate records and reports to Parliament10.

14. Finally, the Committee questioned whether the procedures in the Big Lottery Fund could lead to an easier application mechanism for external organisations. In his evidence, the Minister said that he was very positive of achieving that outcome11.

Consideration of the points raised by the Subordinate Legislation Committee

15. The Subordinate Legislation Committee (SLC) considered the memorandum at its meeting on 4 December 2007. The SLC indicated that it is satisfied with the powers of the Bill and content with the powers to instruct in Schedule 3, Part I, paragraph 3. However, the SLC made two recommendations to the Economy, Energy and Tourism Committee. Firstly, that the subject Committee considered whether clarification should be sought in relation to clause 19 of the Bill. Secondly, to consider whether further information was required in relation to clause 21(5).

16. In evidence to the Committee, the Minister told the Committee that any proposed orders brought forward by Ministers to give direction to the Big Lottery Fund as to what to spend the funds on would “be subject to the affirmative resolution procedure and we will consult further with the Big Lottery Fund before laying it before the Parliament for debate”12.

Recommendations to the Parliament

17. The Committee draws to the attention of the Parliament to the oral and written evidence received by the Committee on the legislative consent memorandum and the issues highlighted by members of the Committee in this report.

18. The Committee recommends that legislative consent on the Bill be granted by the Parliament.

ANNEX

LEGISLATIVE CONSENT MEMORANDUM

 THE DORMANT BANK AND BUILDING SOCIETY ACCOUNTS BILL

Draft Legislative Consent Motion

1. The draft motion is:

The UK Dormant Bank and Building Society Accounts Bill: That the Parliament supports the principle of clauses in the Dormant Bank and Building Society Accounts Bill, introduced to the House of Lords on 7 November 2007, providing for the collection and distribution of sums released from dormant bank and building society accounts for social and environmental purposes and agrees that the provisions in the Bill that relate to the distribution of such sums in Scotland should be considered by the UK Parliament.

Background

2. This memorandum has been lodged by John Swinney, Cabinet Secretary for Finance and Sustainable Growth, under rule 9B.3.1a of the Parliament’s Standing Orders.  The UK Dormant Bank and Building Society Accounts Bill was introduced in the House of Lords on 7 November 2007.  The Bill can be found at: http://www.publications.parliament.uk/pa/pabills/200708/dormant_bank_and_building_society_accounts.htm

Legislation

3. The UK Government has been in discussion with the banking industry on the possibility of accessing funds from dormant bank accounts to invest these back into society.  Dormant bank accounts are defined as those which have seen no customer-initiated activity for at least 15 years.

4. The UK Government now proposes legislation to enable the collection and distribution of these funds for ‘social and environmental purposes’.  While the elements of the Bill that consider the collection of funds are reserved matters and fall to UK Parliament to consider, the Bill also proposes a power for Scottish Ministers to direct expenditure in Scotland and outlines the necessary formal structures for exercising these powers in Scotland.

5. The released funds are intended to remain out with direct public expenditure.  The Bill contains proposals to manage funding by extending the responsibilities of the Big Lottery Fund (BIG) as an appropriate independent and experienced administrator. 

6. BIG is a UK NDPB distributing 50% of all National Lottery funding for meeting expenditure that is charitable or is connected with health, education or the environment.  The Fund has extensive devolved arrangements under the National Lottery Act 2006.  A Scottish Member on the UK Board chairs the separate Scotland Committee of 10 members, appointed by the Fund subject to the consent of Scottish Ministers.  The Scotland Committee distributes the Scottish devolved budget for the Fund (£257m over 3 years to spring 2009) under policy directions issued by Scottish Ministers. 

7. The Bill proposes use of this structure and incorporates an order making power for Scottish Ministers to indicate priority areas for expenditure.  This will remain completely separate from Lottery fund distribution and BIG will prepare separate reports and keep accounting records for distribution of funding linked to dormant bank and building society accounts.

Provisions which relate to Scotland

8. The main body of the UK Dormant Bank and Building Society Accounts Bill is divided into two parts.  This section summarises each part and highlights the provisions made which will impact on Scottish interests. 

Part 1: Transfer of Balances in Dormant Accounts

 Main Purpose:

  • to enable the transfer of balances in dormant accounts to a reclaim fund;
  • to propose and outline the form of an alternative scheme for smaller institutions; and
  • to outline the role of the reclaim fund.

9. Part one of the Bill covers issues wholly reserved to the UK Parliament.  This section sets out the proposals to allow assets in dormant accounts to be collected and transferred to a new intermediary body (the reclaim fund) which would take responsibility for repayment of assets and any interest due where legitimate claims are made to reclaim transferred assets.  This body would be responsible for maintaining adequate levels of assets to meet future claims, and in turn for making funds available for onward distribution through the methods proposed in Part two of the Bill.

10. Since the provisions in Part one are reserved Scotland has no particular additional interest and no LCM is required in relation to these provisions in the UK Bill.

Part 2: Distribution of Money under the General Scheme

Main Purpose:

  • to enable the Big Lottery Fund (BIG) to act as an independent distributor of funds from dormant accounts;
  • to outline the mechanism for apportioning funds between the UK Government and devolved administrations for distribution;
  • to confer functions on UK Ministers, Scottish Ministers and Ministers of other devolved administrations to make orders directing distribution; and
  • to confer functions on UK Ministers, Scottish Ministers and Ministers of other devolved administrations to issue directions to BIG and to instruct BIG to prepare strategic plans.

11. Part two of the Bill contains provisions for the onward distribution of excess funds transferred to the reclaim fund.  These confer additional functions on Scottish Ministers to set priorities for the distribution of funds in relation to Scotland.  It is considered that the conferral of these functions would alter the executive competence of Scottish Ministers and consequently requires a Legislative Consent Motion. 

Legislative Consent Motion

12. Ministers consider that a Legislative Consent Motion (LCM) is required in this instance as the proposed functions in Part one of the Bill are wholly reserved matters where the Scottish Parliament cannot legislate.  An LCM will allow the UK Parliament to confer functions on Scottish Ministers to make orders directing the distribution of funds, and to instruct BIG to prepare a strategic plan for Scotland.  This approach would allow coordinated action across the UK in developing a coherent approach for collection and distribution and ensure earliest possible access to an additional and independent funding stream for Scotland.

If accepted, the provisions in the UK Bill will:

  • Provide Scottish Ministers with an order-making power (subject to affirmative procedure) to set priorities for expenditure;
  • enable Scottish Ministers to direct expenditure through BIG; Ministers will be required to consult with BIG before issuing any direction;
  • empower Scottish Ministers to instruct BIG to prepare, adopt, review, modify or replace a strategic plan in relation to the money available for Scotland;
  • require Scottish Ministers to lay the BIG annual report on action before the Scottish Parliament;
  • require BIG to send a copy of its accounts to the Scottish Ministers.  The Comptroller and Auditor General are then to examine, certify and report on these accounts and lay a copy of the statement of accounts and report before the UK Parliament;

Financial Implications

14. The UK Bill as proposed will result in an income stream that will remain outwith Government financial systems, and is not expected to affect Government finances.  While the level of funds to be released is not clear at this stage, Scotland’s share will be apportioned in accordance with standard Government funding mechanisms.

Consultation

15. The anticipated funding is not expected to become available for distribution until late 2009/early 2010, subject to Parliamentary process.  While priorities for expenditure in England have been announced by UK Ministers to be youth volunteering and financial inclusion, no decision has been made on Scotland’s priorities.  The Scottish Government intends to consult on spending priorities shortly after the conclusion of the legislative process.


Footnotes:

4 Economy, Energy and Tourism Committee, Official Report, 12 December 2007, c390.

5 ibid

6 ibid

7 Economy, Energy and Tourism Committee, Official Report, 12 December 2007, c392.

8 Explanatory Notes, Dormant Bank and Building Society Accounts Bill, paragraph 72.

9 Economy, Energy and Tourism Committee, Official Report, 12 December 2007, c391

10 ibid

11 ibid

12 Economy, Energy and Tourism Committee, Official Report, 12 December 2007, c394