Written by Kunal Sawhney, CEO, Kalkine
The UK government will launch a public consultation this summer to consider good causes to use the additional £880 million from dormant assets. The government’s Dormant Assets Bill will expand the present scheme being used by 35 banks and building societies to institutions like investment and wealth management, insurance, pension, wealth management, as well as securities sectors.
The government’s aim is to figure out which all causes should get the support to make a level playing field for young people and communities across the nation. The benefits of the scheme were realized during the pandemic when millions of pounds were granted to charitable and social enterprises, which channelled them to the needy to mitigate the harshest effects of the pandemic.
Under the current scheme, the dormant accounts are classified as those which have been in existence for 15 years, but there have been no dealings during that time by or on the orders of the account holder of banks and building societies. As per current legislation, these funds are used for financial inclusion or funding a social investment wholesaler and supporting young people. In its new form, the scheme will provide the government with more flexibility and make them more responsive in the allocation of funds considering the changing needs of the country.
Scheme getting popular internationally
The UK’s dormant assets scheme is now over a decade old. Since its launch in 2011, it has released around £800 million of funds from dormant accounts held by participating banks and building societies. The value-worthy scheme that targets financial inclusion has not only got wider acceptance at home but is now being replicated internationally.
Japan took the initiative of dormant assets utilization in 2019 that is modelled on the basis of the UK to use the dormant funds in providing grants to private organizations that are striving to solve social issues in the country. Some other nations where the scheme is in existence in similar or other forms include Canada and Ireland.
Voices of dissent as well
The new bill faced criticism from Liberal Democrat Peer Baroness Barker, who raised concern about the use of the funds. While asking for more information on the future use of the dormant funds, she said that it should not be used by the government as a piggybank fund during tough times.
Voices have been raised on the allocation of the risk of grants becoming more political, with longer-term change compromised at the cost of short-term impact. Seb Elsworth, Chief Executive of the Access Foundation, has said that during the government’s consultation, one should be ready to oppose the use of dormant assets as a short-term fix for the sector’s financial challenge.
A wider consultation required
As the bill intends to include a lot of financial industries in a potentially expanded scheme, the dormancy criteria will be set in legislation for each different asset class. There would be a lot of practical challenges for the inclusion of the new assets, and only a wider consultation can make things clear for the planned broader scope of the scheme. There has been an increasing need to solve the social issues, including Sustainable Development Goals, which requires resources like dormant assets; at the same time, it should be considered as a precious resource and be used for the long-term challenges.