Cameron Raids Dormant U.K. Accounts as Minister Attacks Banks

U.K. Prime Minister David Cameron announced plans to use “hundreds of millions of pounds” from dormant bank accounts to fund community projects, while Business Secretary Vince Cable said lenders “ripped off” customers.

Cameron said he will press ahead with a proposal set out in the coalition government’s program to establish a “Big Society Bank” to finance moves by charitable groups and not-for-profit companies to take over jobs currently done by the government.

“These unclaimed assets, alongside the private-sector investment that we will leverage, will mean that the Big Society Bank will over time make available hundreds of millions of pounds of new finance to some of the most dynamic social organizations in our country,” Cameron said in a speech in Liverpool, northwest England, today.

Cameron said the idea ties in with his plans for a general overhaul of the public services, as the government tries to narrow a record budget deficit. The new Office for Budget Responsibility forecasts that 490,000 public-sector jobs will be lost by April 2015.

“We’ve got to get rid of the centralized bureaucracy that wastes money and undermines morale,” Cameron said. “In its place, we’ve got to give professionals much more freedom and open up public services to new providers like charities, social enterprises and private companies so we get more innovation, diversity and responsiveness to public need.”

Existing Legislation

A law passed in 2008 under Gordon Brown’s Labour government allows the government to use money from dormant bank and building-society accounts “for social or environmental purposes.” An account is dormant if the holder has made no transactions over a period of 15 years.

The British Bankers’ Association, a lobby group, estimates that about 400 million pounds ($610 million) is unclaimed in bank accounts. The government will set up a fund to be administered by Co-operative Financial Services that will hand over money to Cameron’s Big Society Bank by the end of this year, the Treasury said. The Co-op expects as much as 100 million pounds to be disbursed.

A senior Labour lawmaker, Tessa Jowell, said in an e-mailed statement that Cameron’s proposals are “simply a brass-necked rebranding of programs already put in place.”

The coalition of Conservatives and Liberal Democrats elected in May is maintaining pressure on the financial-services industry following the bailout of Royal Bank of Scotland Plc and Lloyds Banking Group by Labour.

Banking Probes

Parliament’s Treasury Committee announced a probe into banking to run alongside a government panel looking at the future of the industry. Cable has attacked the level of interest charged by banks, saying lenders in Britain face less competition now and can keep costs higher.

“One of the negative side effects of this crisis is that our banking system that was already very concentrated, is now even more concentrated so there’s less competition, less choice and a bigger temptation for banks to earn margins at the expense of their customers,” Cable told BBC television’s Panorama program, which will be broadcast this evening.

“When we talk about restructuring the banks, what’s going to come out of this is a more competitive system where the customers are not ripped off,” Cable said.

He went on to attack the culture of bonuses. “Unacceptable bonuses are continuing and that is something we want to try to stop,” he said. “That reflects the lack of moral compass.”