Spending other peoples' money: the dormant account issue
Yet in all the debate there has been no recognition of who actually owns the money.
There is an estimated £15 billion in dormant accounts across the UK. Essentially these are accounts that people have forgotten about. They might have been set up for children by parents or relatives, or else were savings accounts neglected and the owners have changed address several times, or got married and changed their name. Some of the owners may have mental ill health and lack the capacity to recall their investments and to retrieve them. In many other cases the account holder will be dead and the account missed in the probate process.
What is important is that the money does not belong to the banks (who used to register dormant accounts on their financial returns as assets) or the government, or indeed to charities. They are financial lost property, owned by whoever’s name is on the account. If you find an umbrella in a bar or a tenner on the pavement, it may well be impossible to find the owner, but it is not your money.
It is, of course, perfectly conceivable that the super rich and financially savvy have dormant accounts – but it is much more likely that the vast majority are owned by people who have low levels of financial literacy and are themselves financially challenged. This should be an important first principle in dealing with this money – it is a great shame that this has not been the case to date.
Banks have different criteria to determine the point at which an account is deemed dormant. To qualify for redistribution to good causes they must be dormant for 15 years, hence the discrepancy between the £15 Billion quoted above and the potential £2 Billion ultimately available. This minimises the prospect of them being reclaimed - although this still does happen.
Dormant accounts can be reactivated and reclaimed at any time. There is a formal mechanism to do this although it is rarely publicised. It can be accessed here. The fact that dormant monies can be restored to their owners is important and necessary, but it does not alter the underlying principle.
The delay in releasing dormant funds in Northern Ireland is unacceptable and inexcusable. The only positive is that it does give us the opportunity to put any funding mechanism on a sound ethical basis.
Before the dormant account funds were set up these monies were held in banks and treated as assets, generating interest and banks were profiting from them.
The laudable aim of using dormant accounts to support good causes is to ensure that unclaimed monies are used for the public good. But this does not and should not mean that they are simply spent.
Instead they should sit in a trust fund – and the interest which accrues should be used to support good causes.
This would ensure that dormant account money would be deployed indefinitely for the public good. Charities, however worthy, should not be spending money which does not belong to them. It is a matter of principle, which really should be beyond debate. The system proposed here would allow us to utilise other peoples’ money without appropriating it.
It may well be that as digital technology continues to improve, so will the number of dormant accounts and the monies in them reduce as people find it easier to find lost monies held on deposit. So the dormant accounts should be seen as a one-off opportunity to create a lasting fund with a perpetual legacy.
However in the short to medium term much more cash should go into the pot. The Westminster government has identified a further £2 billion, held in investment, pensions, security funds and the like. A £2 billion pound UK- wide fund would generate significant interest and make a genuine contribution to voluntary and community groups. Monies could then be distributed on a local and regional basis.
Whilst publicity this week has concentrated on the failure of Stormont to deliver on a funding commitment, an even bigger failing on the part of Westminster is still unresolved which has even greater ramifications for the sector.
Back in 2007 £425 million was diverted from monies which should have been allocated to good causes by Big Lottery to pay for infrastructure at the Olympic Park, in the build up to the London Olympic Games. This stripped charities of vital funds just as recession and the resulting spending cuts started to bite.
In response government promised to pay back the money from the proceeds of asset sales once the Games were finished. These assets are now owned by the London Legacy Development Corporation. It has since signed over the Olympic Stadium to West Ham United Football Club which is paying just £2.5 million a year on a 99-year lease for its use.
The commitment to pay back the £425 million still exists but the latest position is that it is still outstanding – the refund will only begin in the mid 2020s and may not happen in full until the 2030s.
This is perverse – it is hard to imagine that people playing the National Lottery in 2007 and in previous years could have anticipated that their contributions would end up subsidising a wealthy football club and tangled up in Olympic legacy assets for 30 years. We are not all West Ham fans.
The Directory of Social Change is leading a campaign on this which can be accessed here
Join the Conversation...
We'd love to know your thoughts on this article.
Join us on Twitter and join the conversation today.
Join Our Newsletter
Get the latest edition of ScopeNI delivered to your inbox.