HC Deb 24 January 1974 vol 867 cc2028-40

10.5 p.m.

Mr. Edward du Cann (Taunton)

I had thought that Shochetim was a girl's name—that is what it sounded like—and could hardly be a candidate for the slaughterhouse—which only goes to show that there are two views about everything in the House of Commons. Be that as it may, I am grateful for the opportunity to raise a subject which has given concern to many professional people and informed commentators, namely, the transfer of the work of the Companies Registration Office from London. A selection of newspaper headlines makes the point. The Guardian: Why Companies House should be in London. The Sunday Times: Moving Companies House is absurd and dangerous. And, again: A worse service which will cost more. The Times: Keep it where it is. and so on.

I have yet to read a newspaper article in favour of the move, and strong language has been used in many of the articles: "Misguided" ; "Government's decision to be condemned" ; "Scandal", and so on. That is the sort of expression which has been used. What is more, the articles in question have been given much prominence, and have as their authors City journalists of substantial experience, though I cannot claim that I have always agreed with the authors about everything that they have ever written—indeed, quite the reverse. One is struck by the penetration and the amount of detail in those articles. One comes to the conclusion that in their authorship a service has been rendered.

Nor is that all. Just as I do not have time tonight to quote every headline, I quote only a small selection of other informed comment of representative professional bodies whose witness is as impressive as it is forthright. For example, so anxious have City of London institutions become about the projected move that at the end of last November, under the leadership of the Deputy Governor of the Bank of England, no less, a deputation saw my right hon. and learned Friend the Minister for Consumer Affairs about the matter. The deputation included representatives of the clearing banks, the finance houses, the British Insurance Association, the acceptance houses, the Stock Exchange and the legal professions. It is impossible to imagine a body more representative of the City of London than that.

Other bodies, such as the Society of Investment Analysts and the Institute of Chartered Accountants, have made their views clear. Again, I quote an extract from a memorandum of a joint working party of the Law Society's Standing Committee on Company Law and the Company Law Sub-Committee of the City of London Solicitors Company: The removal of the Companies Registration Office from London will give rise to major difficulties in the conduct of business affairs which are likely seriously to impair the efficiency of the City of London as a financial centre. Other stern phrases were used in the memorandum, such as "serious delays are envisaged" and "troublesome problems". The memorandum also says: The change will detract seriously from the existing advantages of a complex which should not only constitute one of our country's major assets in inter-Common Market competition but which has for many years been the major contributor to this country's persistently favourable balance of trade. The House well knows about that. Tribute to that has been paid on several occasions. The House will agree that all this is, indeed, strong and impressive testimony.

Nor is the complaint a matter of mere assertion. In an appendix to the memorandum which I have described are listed no less than six carefully analysed areas of potential difficulty.

Thus, there is a concern—this is the point that I wish to make—which is widely shared, which appears to be unanimous, and which I suggest cannot be ignored by my right hon. and hon. Friends who are Ministers nor by the House. My purpose tonight is simple ; it is to state this concern plainly and give Ministers an opportunity to allay it if they will and if they can.

I am grateful to my hon. Friend the Under-Secreary of State for being here tonight and for taking the trouble to answer this debate. This I greatly appreciate. The anxiety is serious, responsible and sincere and it must indeed be answered.

I found that I was asking myself various questions. They begin with the obvious question: why do we suddenly experience such uproar among the newspapers and commercial people?

Two questions derive from that which I should like to put to my hon. Friend. I should be grateful if he could tell me which of these bodies, whose interests are so much affected by this decision, Sir Henry Hardman's Committee consulted before its recommendation, already debated in this House, was made. For example, was there any contact with City editors, among others, and whom did the Government consult before the recommendation was accepted?

I am sure that there is common ground between Ministers, Parliament, City editors, to whom I have already made reference, commercial and professional people, first, that the Companies' Registration Office needs modernisation, and has done so for some years. Anybody who has used it over the years, as others besides myself have done, will be only too well aware of the drawbacks of that place, for all the devoted or attempted service that is given by those who work there. But the organisation is fundamentally unchanged since Victorian times.

My right hon. Friend the Secretary of State, in his speech on Second Reading of the Companies Bill, was entirely right to say that the state of the Companies' Registration Office's systems was appalling.

A great deal of work is transacted there. In the last decade more than 250,000 new companies have been registered. It is reasonable to say that everyone who uses that place—everyone to whom I have referred who is appearing to complain about the Government's proposals—is most sympathetic to the problem. It is a big problem, and everyone is sympathetic about the scale of it: I certainly am. After all, I understand that the workload is increasing by 25 per cent. per annum. There is an average of nearly 40,000 searches per week, and that figure is going up by about 15 per cent. per annum.

The limited liability company is today and will continue to be in the foreseeable future the mainspring of commercial activity in this country. It is indeed the most effective vehicle that has yet been designed to harness brain, hand and capital in commercial partnership.

I have devoted my commercial life, if I may claim it, to the popularisation of the limited liability company, to its development and, where necessary, on occasion to endeavouring to effect its reform. But its efficiency obviously depends on an atmosphere of competition and adventure, and equally, for a multitude of reasons—social, economic, legal and matters of investment judgment—it is agreed by everyone that it must operate entirely openly in our democracy. There must be opportunity and easy facility for scrutiny. That opportunity is essential to its health and to public confidence.

The White Paper written by my right hon. and hon. Friends put the matter extremely well: Disclosure of information is the best guarantee of fair dealing and the best antidote to mistrust. Secondly—and on this I believe we are all agreed, both in the House and outside—there is overriding need for a modern information storage and retrieval system.

Thirdly, we are all also agreed and decided upon the policy of dispersal of private and public organisations followed by successive Governments since the war. The Government which I am proud to support have been more successful in this term than have any Government in the past. I am glad to see continued a policy in which I had a moderate hand when I was a Minister. I think I am right in saying that about 57,000 of the headquarters staff of the Civil Service already work outside London, and it is good to know that further moves are envisaged. It must be a matter of particular satisfaction that well over half of the work has gone to or is planned for the assisted areas, especially Scotland and Wales. I think we all agree with the policy in general, but what is in question here is its application in this instance.

It must be right to insist that moves should be made from the capital only if they can be effected with no material disadvantage to the efficient working of government, the professions or the commercial world. In this case, as yet I do not think that has been proven to public satisfaction.

It must be recognised and admitted that many businesses, organisations and structures, governmental or commercial, must remain in London. Some must even expand and, I would say, be encouraged to do so. For instance, employment, efficiency and the British balance of payments have all benefited greatly from the expansion of the banking facilities in the City of London. In the years after the war when I first started working in the City as a clerk, I dare say that there were not more than 50 different banks at home and abroad there represented. Now the number is about 250.

The maintenance and development of this and other services and markets—legal, insurance, charter, shipping, commodities, the Stock Exchange and merchant banking—are crucial to our economy's health. For this reason I strongly deplored the short-sighted policies of the Labour Government in artificially restricting modern building in the City. That policy has recently been re-introduced by this Government—I hope only temporarily, for it is not the fault of any developer or landlord that rents here at £20 per sq. ft. are the highest of any commercial centre in the world. It is largely the fault of the previous Labour Government. I hope that policy will not be perpetuated for too long. It is against all common sense.

Thus, the onus is on the Government today to prove certain things in relation to this proposed move. Item: that of all the potential dispersals of groups of Government workers in London this move of the CRO truly merits as high a priority as apparently it is being given. Item: that there is no practical alternative to this move. Item: that, if it is accomplished, the service available to the professions and the public will be at least as good as if not better than that available hitherto. Perhaps I may be more specific about this. I hope it will mean that complete files will be available, that is to say, historically complete files and files including all information, not only the information that might be expected to be in most regular or urgent need.

As I have said, I know that many detailed matters are under discussion between the representatives of the professions and my hon. and right hon. Friends I hope that the Minister will be able to give me an assurance on all the points which have been seriously raised by these distinguished and learned people and that they will be answered completely as time goes on.

I expect and hope that one of the results of the change will be that the service will be improved. One inevitably has read in the newspapers and has heard in conversations in the City of London about the fear that the service may not be improved. However, I hope that my hon. Friend will be able to say that after a reasonable period we shall have a faster and better service, and at any rate as full a service as we have had up to the present. I hope, too, that in the ultimate, perhaps not immediately, there will be savings in staff, accommodation and money.

If assurances on all these matters can be clearly and specifically given, I shall be content. If those assurances cannot be given, I must request—with all possible politeness, but none the less firmly—that the Minister should rescind his decision. That is what the House would expect. I have no doubt that a majority of right hon. and hon. Members on both sides of the House would endorse that opinion. I hope that it will not be necessary for that course to be taken.

10.22 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Cranley Onslow)

I welcome this debate and I am grateful for the clear, concise and moderate way in which my right hon. Friend the Member for Taunton (Mr. du Cann) stated his case. I hope that I shall be able to cover all the ground he outlined, and I am glad to have this opportunity of putting the record straight in some important respects. It is self-evident that there is, and may still be, a good deal of misunderstanding. It follows that there has been some communications failure. We can only regret that, but I stress that we are not depriving—and do not intend to deprive—the City of London of essential services.

It is necessary for me to dwell a little on some of the background and to deal with the history of events that led to the decision to move the bulk storage of original records to Cardiff.

The programme for putting the company records on microfilm, which has received a good deal of attention in the Press, originated back in 1970 before the question of moving the location of Companies House came under consideration. The fact is that the oldest of the records in Companies House is now well over 100 years old and the original documents inevitably deteriorate, particularly when they are subject to frequent movement from storage to search rooms and to handling by members of the public.

In 1970 the Department began to examine modern methods of microfilm which were then available for information, storage and retrieval. The decision to put the Company records on microfilm was taken in June 1972. This decision was taken on its own merits and in order to preserve the integrity of the records. I stress that, wherever the original papers are to be stored, it is a necessary decision.

A separate study of the possibility of moving the location of Companies House was begun in 1971 by an internal working party within the Department. The study began because of the ever-growing load of work at Companies House. Between 1968 and 1973 the number of incorporations of new companies increased from 20,000 to 63,000. The number of files produced for the public rose from 1 million to 2 million and the number of photo copies from 700,000 to 2,300,000. The search rooms are already overcrowded, and within the next two years all the available space for file storage in the present building will be taken up. It would, therefore, have been necessary to provide additional accommodation.

It was, however, the staffing situation which was the most decisive factor. In order to keep up with the growth of business the staff has been increased from around 600 in July 1970 to nearly 900 today. The conclusion was inescapable that in the longer term, and given the inexorable growth in work load, it would be impossible to provide the numbers of staff needed to maintain an efficient service in London.

The internal studies were commissioned both as to method and location best suited to the future. There have been complaints about inadequate consultation and my right hon. Friend has reminded the House of them. Sir Henry Hardman consulted my Department, but I suggest that it is not for me to answer for the other evidence Sir Henry took in his study.

So far as my Department is concerned the facts are that in 1971 the Registrar of Companies formed a users committee. It was comprised of all the main users of the register. The remit of the committee was to consider ways and means of improving the service of Companies House, but the committee was not involved in discussions on location. The users committee was told about the proposed microfilm process. In its report to the Department in 1972 it recommended that it should be introduced. In all it made about 12 recommendations, others of which, on procedural matters, are being implemented in the Companies Bill which is at present before the House. One example is the method of simplifying the notification of mortgages. In July 1973 two meetings were held in London at which a total of 80 representatives of the main users were told by the Registrar what Hardman had recommended—namely, the move of Companies House either to Cardiff, Newport or to Newcastle and that the microfilm system would definitely be introduced.

At the meeting there were representatives from the Law Stationers' Association, the Institute of Chartered Secretaries, the Institute of Chartered Accountants, the Association of Certified Accountants, the Law Society, the Institute of Credit Management and credit agencies and banks. It also included the agents but not journalists, who were not invited mainly because they were thought not to be the main users of the Register. Following the meeting, at which the Registrar invited those present to put forward afterwards any points they wished to make, I understand there was virtually no response to the invitation. I understand that about half-a-dozen letters were received, one of which was from one of the major agent's firms which indicated a willingness to move from London. Perhaps I may remind my right hon. Friend that Hardman in his report at page 187 made the clear recommendation that the whole of Companies House should be moved from London.

On 16th October my hon. Friend the Parliamentary Secretary to the Civil Service Department, in the course of the debate on the Hardman Report, announced the Government decision on the move to Cardiff. That is reported in column 57 of HANSARD of that day. He made it clear that, contrary to the recommendation which was implicit in the Hardman Report to move the whole organisation, a reading room would be retained in London. I concede in retrospect that it might have been a good thing if some more detailed information had been made available. It is true that a lively interest was swiftly aroused. My Department sought to meet the need for further information by issuing an explanatory paper on 13th November which set out the proposed new arrangements in full and gave detailed answers to some of the points which had been particularly criticised.

What is more important is that the paper also served as a consultative document for the further and most important meeting which my right hon. and learned Friend the Minister for Trade and Consumer Affairs held on 20th November. He has reminded the House that the group was led by Mr. Hollam, the Deputy Governor of the Bank of England, and included a number of other distinguished representatives of the institutions and the City as a whole. They put their anxieties to my right hon. Friend, and it is fair to say that the group showed an understanding of the problems which faced the CRO. They raised on their part a number of points of concern and made suggestions as to how some of the difficulties which they foresaw could be overcome.

The matter to which they attached the greatest importance was the need for facilities in London for the lodging, examination and acceptance of documents relating to prospectuses, other types of public issues of shares or other securities, associated reconstruction of capital, orders of court and takeovers. They put forward other suggestions of which we are making a thorough study.

The matters which have been raised by the group are well in hand. My right hon. and learned Friend the Minister for Trade and Consumer Affairs expects to meet Mr. Hollam and his colleagues next month. He will then report fully on the results of their representations. I hope that I shall be forgiven if I do not try to anticipate what may be said at that meeting. We are taking these representations seriously. I hope that my right hon. Friend will be glad to know that the meeting is taking place.

The Registrar will hold further meetings with the users of the Register to go over details of the proposed changes. The meeting which was to have taken place this month has naturally had to be postponed to allow account to be taken of the study of the proposals and comments arising from the meeting of Mr. Hollam's group with my right hon. Friend.

I stress that it remains our conviction that the broad outline of the scheme must go ahead, even if it is refined in certain details, if the whole system of company registration is not to grind to a halt, with devastating results. Part of the answer I have to give to my right hon. Friend in reply to the question whether the new arrangement will be better is that we see no possible alternative in the circumstances except the kind of collapse which I am sure he would wholeheartedly deplore.

There will continue to be available in London all the new information which comes in. It will be on film. This would include much existing information including annual returns, annual accounts, directors' lists, shareholders' lists, for the past three years, particulars of directors and registered offices for the last seven years, the basic documents relating to companies as legal entities, their memoranda and articles of association, and all documents relating to their financial structures, mortgages and charges. These will provide all the information needed by the great majority of users of Companies House. They will find that the service they have is an improvement over the present arrangements in several important respects.

In the first place, microfilm will preserve the quality and integrity of the records. They will not be liable to disintegrate or disappear. It will enable users to obtain information on demand and without delay instead of waiting, as they may have to do at present, for several days if the file is in use by someone else. The user will be able to take away his own copy of the microfiche. Photocopies of pages will be available on demand. The man who knows what he wants will almost always be able to find it in London. If he cannot, a telephone call to Cardiff to contact the agents based there should enable him to get the information he needs in almost the same time.

It is true that those who wish to browse will have to go to Cardiff if they want to go on browsing, through confidential Press search facilities will still be available there as in London. In this marginal respect I concede that the service may not be so good.

My right hon. Friend may feel that this is not too high a price to pay for the other benefits and not least for the benefit of the new jobs which will go with the dispersal of employment. He has already stressed this point. I hope that what I have said will help to dispel some of the misunderstandings which have centred around this subject hitherto. I will not deny that the misunderstanding may be partly our fault. It is also fair to say that the apparent absence of any reaction on the part of the users at the meetings last July constituted some justification for assuming that they were in agreement with the idea of a move.

I hope, too, that some other misunderstandings will be cleared up. When I went to Companies House this week, in the candlelight of Wednesday, I was surprised to find that some people thought that the move was to an old Army barracks, that some thought that no reference facilities would be left in London and that many even supposed that Cardiff was a cultural desert. It may be that the City of Cardiff has a part to play in selling itself, and I know that it is ready to do so.

I join my right hon. Friend in paying tribute to the staff and all who work at Companies House. It is remarkable to see how they are carrying on in their present difficulties, considering the conditions of what might be described as normality. Of those to whom I spoke I found some who were actively looking forward to an opportunity of getting out of London, not because they thought they were shuffling off responsibilities but rather because they thought they would be better placed to discharge them and would be doing so in better surroundings.

We are dealing with a great institution. I am sure that it can continue to serve London, the world's financial centre, even if it has, inevitably, to move with the times. I hope that when the considerations I have mentioned and the future meetings to which I have referred have taken place, my right hon. Friend and all those who have expressed anxiety on the subject will recognise that the decision to move was a responsible and right one.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes to Eleven o'clock.