Banks slam account raid plans

BANKS and building societies have questioned the legality of plans by both Labour and the Conservatives to use millions of pounds sitting in dormant bank accounts to prop up their spending plans.

The Chancellor, Gordon Brown, said in the Budget that the money will be used to fund charitable causes in place of income lost by the launch of the National Lottery.

And last week, Shadow Work and Pensions Secretary David Willets told the Conservative Party conference that the money would be diverted to top up compensation for people whose pension schemes had gone bust.

But both the Building Societies Association and the British Bankers Association said such a move could be illegal - and pointed out that neither of the two main political parties really knows how much money is sitting in the dormant accounts anyway.

Estimates as to the amount of money sitting in unclaimed accounts vary hugely between £33m and £15bn. The Treasury, which has been holding informal talks with the banks and building societies, acknowledged that it doesn't know the precise amount held in old dormant accounts.

A Treasury spokesman added: 'There isn't a Government figure and I've no idea what the right number is. The process is that we're talking to the banks to see what course of action we can put together. We're not talking about appropriating money, the banks would retain the liability to repay it if customers came back years in the future.'

Adrian Coles, director-general of the BSA, said that besides disputing the figures cited by politicians he did not believe the money could be relied on to meet spending commitments.

'We strongly question the right of any organisation, government or otherwise, to take money from building society members. In addition, it is not clear under existing law whether this is even possible. But, most importantly, to promise pensioners compensation on the basis of an uncosted policy proposal is misleading and unfair.'

The BSA estimates that about £33m is held in unclaimed accounts within the building society sector. But the BBA has no figures.

A BBA spokesman said talks with the Treasury had not yet resulted in any firm proposals: 'All sorts of tax, accounting and legal issues need to be considered. The real issue is that the money belongs to the customers, not the banks and not to Government.'

A Conservative Party spokesman insisted that using the money properly was the important issue. He added: 'The key thing is that we‘re offering a solution to the pensions problem. It‘s good that the BSA and others are joining the issue and having a debate. The Government's own compensation scheme for pensioners whose schemes have gone bust is worth just £400m, about 10% of what's needed. We think it's important that money from dormant accounts goes to this worthwhile cause.'