HC Deb 19 July 1967 vol 750 cc2390-5
Mr. Shaw

I beg to move, Amendment 112, in page 59, line 2, to leave out 'and'.

Mr. Speaker

With this Amendment we shall take Amendment 113, in page 59, line 3, after 'months' to insert: 'and which has been in business for a total period not exceeding 12 months'.

Mr. Shaw

I will not dwell on the Amendment at length because for me the mists are rapidly closing in and I do not claim the expertise in these matters of my hon. Friend the Member for the City of Chester (Mr. Temple). This concerns proportions in special cases. The Amendment makes a slight variation to a special type of company, society or body, a type which has not completed its second financial year and which had a first financial year of less than 12 months. It should be even more closely defined; at the same time it should not have been in business for a period exceeding 12 months. It is a new company in its second financial period and its first financial period was less than 12 months.

Mr. Darling

I am sure that the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) would have been astonished to get this Amendment into the Bill. There may be anomalies, but we feel it best to deal with them administratively. He mentioned a new company—or it might be a company taking over a new kind of business. It might start with a very short financial year and get into the second year, becoming profitable. We see no difference in substance from a rapid expansion produced in subsequent years; it gets the accounting period straight as it goes on. If it started with a three-month financial year, we should say administratively that for this purpose the first year would count as 15 months, not three months.

With a company which had completed a short financial year—for example, outside Great Britain—immediately before authorisation for activities in this country, we would have discretion to require a higher margin of free assets than the Clause specifies if the last available information as to the rate of business showed that to be a reasonable proposition to put forward. It may be that we would get all kinds of different circumstances to deal with and, rather than try to spell out a cover for all the possible circumstances in the Bill, it is better to leave it to the sensible administrative action that we would provide.

Mr. Shaw

I thank the right hon. Gentleman for that explanation. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Graham Page

I beg to move Amendment No. 114, in page 59, line 26, at the end to insert: (6) Any of the monetary sums mentioned in subsections (1), (2) or (3) and any of the fractions mentioned in subsection (2) of this section may be replaced by such other sums or fractions, as the case may be, as the Board of Trade may by regulation prescribe. (7) Regulations made under power conferred by this section shall be made by Statutory Instrument which shall not take effect unless approved by resolution of each House of Parliament. We have been dealing with some difficult Amendments to understand, but we come to a very simple one now. This is a proposal to give the Board of Trade power to cope with the inflation which is about to come under the present Government.

Under Clause 62 a number of figures are given. For example, in subsection (1) there is "the revelant amount", £50,000 and £100,000, and "the relevant amount" is explained in subsection (2) by some further figures. These are figures of assets which the Board of Trade must be satisfied are held by a company before authorisation is given for it to carry on insurance business.

It is no use the right hon. Gentleman saying, "We shall have a second Bill soon and if these figures are wrong we can then alter them." We want to give him power to keep up with inflation by being able to alter the figures as necessary. The Amendment would enable him to alter these figures by Regulations in a proper Statutory Instrument which would be brought before the House and come into effect on receiving approval by Resolution of both Houses of Parliament.

In my post a couple of days ago there was a document which showed that the £ had gone down in value from 20s. 0d. in 1914 to 3s. 4d. now. The figures in Clause 62 may be out of touch with fact and reality in a few years' time. The whole insurance business may change in values. Therefore, it would be fatal to leave these figures as fixed figures to be altered only by legislation. It has taken long enough to reach this stage in this Companies Bill and, having set out a Clause of this sort, I am sure we want it to stand, except for the figures, which could be altered.

I hope that the right hon. Gentleman will accept the offer from this side of the House to take power by regulation to make these amendments to the figures when necessary and to bring the Regulations before the House.

4.45 a.m.

There seems to be a general assumption that there will be a second Companies Bill quite soon and that it would be possible to incorporate all manner of Amendments in that Bill. I gamble a pound to a penny that there will be no insurance section in it. This is why the Amendment is so important. We do not have insurance legislation more than once in a decade, and the Government would be most unwise not to take the flexibility which is here offered to them.

I am sorry that the economic tycoons on the back benches opposite have left the Chamber. They were in their places earlier and took some part in our debates. It has come to my notice that the economic tycoons on the Government back benches are advocating devaluation. There are other hon. Members who do not, but there is talk today of devaluation. My hon. Friend the Member for Crosby (Mr. Graham Page) said that the figures might have to be altered in a matter of years. Alteration might be needed in a matter of months. I am not saying that it is likely, but it could happen.

In Committee, there were criticisms of the smallness of the figures provided for in Clause 62. The affirmative Resolution procedure would be perfectly suitable. In the present climate of monetary reform, with a Lancaster House conference going on, with the possibility of a floating £ and the possibility of devaluation—I shall not say what other possibilities there are; that would be too depressing to discuss at this hour—the Government would be well advised to accept the Amendment.

Mr, Gresham Cooke

I endorse what has been said. The motoring organisations particularly thought that the £50,000 was too small a sum. They pressed hon. Members to put down Amendments to double it. We did that in Committee, but we listened to the Government's case and reluctantly accepted the £50,000. I am certain that it is on the small side. The demand will come in a year or two, particularly if there are any more scandals, for the Government to raise the figure. They should take the flexibility here proposed.

Mr. Darling

On the last point, it is far more important to have the solvency ratio right than to put an arbitrary figure into the Bill. I agree that £50,000 is quite arbitrary here; it could have been £75,000, or more or less. The great thing is to have the solvency margin requirements correct.

The hon. Member for Crosby (Mr. Graham Page) astonishes me. As Chairman of the Statutory Instruments Committee, he demands more and more work. The problem of inflation has inflicted successive Governments over a period of years. Every Western country from now on has to face it. With the pressure for increased prices, for increased incomes and the rest, it is built into the economy of every Western nation. We have to face it, but we cannot pick out the solvency margin figure here provided for insurance companies and apply the Statutory Instrument procedure to that alone. We should have to go through the whole Bill.

I suggest that, if there is a case for putting into statutory form a provision to allow the figures in all our company law—there are quite a number of them, minimum and maximum figures—we should try to find a procedure for the next Companies Bill which would cover the insurance question is well, instead of taking the Statutory Instrument procedure to cover just one particular case. We could have a form of procedure that would make the task of changing the figures, if they need to be changed by Statutory Instrument, more convenient than having to change each one by itself.

We feel that it would be undesirable to introduce a power, which might be a standing threat to insurance companies, of increased solvency margin requirements, because we could not lay down—it is not laid down in the Amendment—that the purpose of fixing the figure by Statutory Instrument is to deal solely with inflation. We would possibly put into the minds of companies an indication that the Government might keep on chopping and changing the figures for other reasons.

We have, I think, to find a form of procedure to deal with the inflation problem. When we have the Bill on the Statute Book—and it must, for very good reasons, go on the Statute Book as quickly as possible—I would be glad to start to discuss what kind of procedure we need in this form of legislation to deal with the problem of inflation.

Mr. Graham Page

The Minister of State has made a sound point in saying that we might consider the Act and the second Bill which he proposes to introduce to see whether some such provision could be made to apply to all the figures. It may not be needed only for inflation. I would not be frightened of frightening the insurance companies in that respect, because the whole basis of insurance may change rapidly over the next few years, particularly motor insurance. We do not know how the number of motor vehicles on the road, for example, will increase in the years ahead. We might need something much larger in the nature of insurance companies to cope with that.

That could be dealt with by means of Regulations of this sort. I would have hoped that the Minister could suggest trying it on this one subject in the Bill. If it worked well, we could extend it in the next Bill to the rest of company law. I think that it will be necessary in regard to insurance companies, and I wish that the right hon. Gentleman could have accepted it in this case.

Amendment negatived.