HC Deb 02 December 1982 vol 33 cc489-96

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]

10 pm

Mr. D. N. Campbell-Savours (Workington)

I wish to bring before the House a matter of great importance throughout the United Kingdom—the question of access to company information and the proposals to privatise certain functions of the Companies Registration Office.

Parliament has granted to incorporated companies the protection of limited liability and it has balanced that in the interests of the public, including the business community, with a statutory right to the wider public of access to certain information held by the Registrar of Companies. When the process of the harmonisation of European law began, the first directive made it clear that the disclosure of company information was the fundamental principle used to enable the public, including the business community, to safeguard themselves.

With a record 300 limited companies per week going into liquidation, and almost certainly many more ceasing to trade, the existence for all of a service for company information throughout the country without delay was more than ever needed.

It became all too clear on Wednesday of last week why the Government were not prepared to protect the interests of the public in this matter, when the Minister, in a written answer, chose to announce a proposal to privatise the services of the Companies Registration Office. The announcement was made without consultation with the trade unions, which, only 48 hours previously, had been discussing with the permanent secretary the need to maintain good industrial relations in the Department. Furthermore, the Minister was obviously aware of the justified anger that the House would feel at the suggestion that the function of the Companies Registration Office should be privatised.

It is proper that that statement should be made to the House orally, and I shall make it on the Government's behalf and in the absence of their doing so. It said: I am not satisfied that all the functions of the Companies Registration Office need to be carried out by a Government Department. I am inviting a number of companies and organisations to put forward their suggestions for taking over certain of the functions either by themselves or by other parties. At the same time my Department is considering what steps would be beneficial for both user and the taxpayer. Any legislation is unlikely in the present Parliament, but I hope to bring forward proposals as soon as possible."—[Official Report, 24 November 1982; Vol. 32, c. 504.] For many years the Companies Registration Office has been profitable. It has made a surplus in every year since 1976. Last year costs totalled £13.6 million, but revenue amounted to £14.7 million. The only costs that have been created for the taxpayer have arisen from the debts of limited companies in general, which might have been avoided if a proper nationwide company information service had existed in the way that I and my hon. Friends have always suggested.

At no stage during the developments of the past two weeks has the Minister told the House how he sees any benefit to the user arising from this privatisation. That is very important. He should have told the House at the time when the announcement was made. We cannot even be sure that he has a nationwide view of the requirements of the user, who is also the taxpayer in this case.

The users are not just those who have large offices near Companies House in London and use red search tickets. These company search agents, who for many years have received special treatment with desks, office equipment and special rooms provided, have sought to prevent the wider public from getting a proper nationwide service.

The public interest must clearly be set against the narrow private interests of company search agents. Take Mr. Tony Jowett, a company agent, who boasted in the Financial Times last Thursday, when staking a claim to the privatised services, that his company is the largest user of Companies House, with a £4 million turnover and producing 350 publications a year. The trouble is that these agents long ago hijacked Companies House and applied its records for their own personal ends to the disadvantage of the wider public.

Now the Government propose to go even further and hand over major parts of the Companies Registration Office function to these narrow private interests. According to the Financial Times, they have reported that there would be talks with the London Chamber of Commerce. I say to everyone "beware". Every professional and business person in the country should know that when the Registry of Business Names was closed by the Government earlier this year, the London Chamber of Commerce opened a new, privatised, registry, which has no statutory basis. The result of this crass stupidity of the Government is that a search which used to cost 5p now costs—I checked this morning—£11.50. The same will happen to the Companies Registration Office. An article in the Standard last Friday quoted agents saying quite openly they would increase the charges. Prices will go through the roof. What has happened in the one instance of privatisation already seen will inevitably happen in the case of the Companies Registration Office if this nonsense goes ahead.

The press has had nothing good to say about the Government's proposal to privatise the Companies Registration Office. The Standard last Friday described it as the Government's latest and most bizarre privatisation ploy The Observer styled it: the daftest piece of privatisation yet. The public opposition to the proposals is very understandable, but I propose to point out to the House a legal objection which is deeply rooted in the spirit and letter of harmonised European company law.

I have mentioned the first directive of the European Communities on company law already If one looks at article 3, paragraph 3, in the official French text—it was published in 1968 and there is no official English text—one sees that it is clearly and unequivocally stated that for public companies—"plc's" as they are now known—the information held at the registry must be obtainable by correspondence"— that is by post— at a price"— and this is most important— not exceeding the administrative costs thereof. The HMSO unofficial English translation has introduced an ambiguity that does not exist in the official text. The original French text etre obtenue par correspondance was mistakenly translated as must be obtainable by application in writing". The correct translation is "by letter", not "in writing".

I have three different dictionary references for the words "par correspondance". One is from the Oxford Concise English-French dictionary, which refers to "correspondance" as "letters". The second comes from Harraps French-English dictionary, which refers to "verte par correspondance", meaning "postal trade". The third is another reference in Harraps French-English dictionary which refers to "avec correspondance" which means correspondence with someone "by letter". In a direct translation "correspondance" means "mail" or "post"; and there is another reference to "ouvrir la correspondance", meaning "to open the mail".

Of course, the price must not provide a profit. That is what is meant by at a price not exceeding the administrative costs thereof or, in the French text sans que le coût de cette copie puisse être supérieur au coÛt administratif". By the fourth directive in 1978 that principle was extended to medium and small-sized companies. As a result of the implementation of the European Communities Act 1972, those directives are already part of our law. Where there can be no profit—that is how I understand a real translation of the original French text—it is unlikely that there can be privatisation.

The beginnings of a nationwide public service operating at cost, as in the stated principle in the directive, was in sight earlier this year but was ultimately prevented by the private interests of company search agents and the Government. As a result of written questions that I asked, to be found in Hansard on 29 January 1982 and 22 March 1982, it transpired that the demand for company microfiche at the Companies Registration Office had dropped significantly, following changes at Companies House, to just over half the previous level of demand. Even at that, 83 per cent. of searches at Cardiff and London Companies House were carried out by agents mainly for their publications, which is not the reason why Companies House came into existence.

Those changes resulted in an agreement, reached on 25 May at a meeting of four provincial public librarians with a representative of the Companies Registration Office and the senior library adviser at the Office of Arts and Libraries, to provide a postal sales service to six public libraries initially and for company records on microfiche to be made available. Microfiche are cheap to reproduce and to post. The six public libraries were Aberdeen, Birmingham, Liverpool, Manchester, Sheffield and Shropshire. All welcomed the agreement, recognising its importance to the whole country. The service was to be later expanded to more public libraries

The new service was to be based on a service that had operated for six months at Liverpool city libraries in 1978, which, in the words of the librarian, Mr. Edwin Fleming, had been extremely successful, and which had been terminated suddenly by the Registrar of Companies because of a sudden dramatic increase in demand for company microfiche from the agents in London. Some people believe that they deliberately set out to undermine the library scheme. The agents had successfully terminated a service that the Registrar admitted had been a success in many replies to complainants from the North-West who wrote to him when the service ended. It was stopped none the less. Again the public interest suffered.

Therefore, it was not surprising when, at the beginning of October, a company search agent in Cardiff, Mr. Farr, telephoned two of the libraries involved in the latest agreement to say that the Companies Registration Office agreement to provide the postal service through non-profit-making public libraries was off. That is understandable, I suppose, when in the minutes of the meeting of the users group committee with the Registrar on 14 September the objections of the agents to the library service are clearly noted. That service would have been within the principles of the clearly stated requirements of harmonised European company law. The European objective is clear. It is to create conditions under which Community-wide trade can operate in the safe knowledge that the public, wherever they are in the Community, can get the company information that they need at the lowest possible cost, or at a price not exceeding the administrative costs thereof", to quote the 1968 directive.

Therefore, I appeal to the Minister to reconsider his hasty decision on privatisation of the Companies Registration Office and not to hold further discussions with company agents on the subject. It is contrary to the spirit and letter of EC company law and against the public interest. It is also an affront to those of us who have lent our support to the Community over the years.

Additionally I should like to take the opportunity of this debate to appeal to professional and business groups throughout the United Kingdom to write to me to express their views on the Government's proposal. If the Government insist on proceeding, we intend to press our objections to the utmost. Any help that the business community can provide will be appreciated by my hon. Friends.

It has been brought to my attention that some Members of this House have commercial links with search agent firms. May I have a clear assurance from the Minister that, whatever the result of his deliberations, no part of the CRO's activities will be sold to those organisations with which hon. Members have commercial connections? May we also be told whether legislation is required by any Government to proceed with this privatisation?

If the Government are to proceed with this scatterbrained scheme, may we be given an assurance that no jobs will be lost, as the loss of employment is of deep concern to the trade unions involved?

10.15 pm
The Minister for Consumer Affairs (Dr. Gerard Vaughan)

I congratulate the hon. Member for Workington (Mr. Campbell-Savours) on raising this important subject in the House tonight. However, some of what he said is peripheral to the main issues that we need to consider.

When considering what might—I stress "might", because that is all it is—be done, it is important to have the views of hon. Members. My hon. Friend the Member for Cardiff, North (Mr. Grist) and my ministerial colleague the Under-Secretary of State for Wales have discussed these matters with me. I am glad to see the hon. Member for Norwood (Mr. Fraser) here.

The hon. Member for Workington used the word "decision". I have to tell him—he knows this—that no decision has been made. However, it may surprise hon. Members to know that there has been no fundamental reappraisal of the functions of the Companies Registration Office since 1844.

Surely it is reasonable to consider the work done in those offices in 1982. It is a long time since 1844. On the contrary, the functions have been widened by all subsequent Companies Acts. The offices have grown and they now account for a significant proportion of the staff and resources of the Department of Trade. While no one would want to pursue change for the sake of change, it is at the heart of our philosophy to update and adapt to meet present-day needs. That is what this exercise is all about.

It is in that context that we have decided to examine some of the work of the Companies Registration Offices in London, Edinburgh and Cardiff. That in no way reflects on the quality of the work done in those offices, which is high.

In many ways the offices are essential to the commercial life of Britain. Indeed, they are a pivot on which much of our modern company law depends. About 1,000 people are employed in those three offices. They look after the affairs of over 900,000 companies in the essential tasks of initial registration, the examination and recording of statutory documents and the presentation of documents for public inspection.

About 40,000 documents are received each week, which, after examination, are added to the records available to the public. To give an idea of the scale of those records which are now on microfilm—not all the records because those from an earlier date which are rarely referred to are not on microfilm—they form an archive of 150 million pages. The whole archive is the largest single collection of company documentation in the world.

As the hon. Member for Workington has said, the public use the records. In 1980 over 2½ million searches were made in England and Wales alone, either by the public or their agents. The hon. Gentleman referred to those agents. They account for some 60 per cent. of the searches. Without them, we would need more resources because the applicants would have to come individually.

The public need to know the financial position of companies with which they deal. Indeed, it is fundamental to our system of company law that providing this information to the public is part of the price a company pays for the substantial benefit of limited liability.

The hon. Gentleman is right when he says that the whole service is cost beneficial. It runs at a profit. The report to Parliament showed that, in 1981, the cost was £13.6 million. The income was £14.7 million. This year, it may be over £16 million. However, in any organisation, efficiency can be maintained only by continuous scrutiny and updating of the way in which the work is carried out, particularly at a time of technological advance. That is why we are considering the possibility of privatising or contracting out some of this work.

I have already had a considerable number of letters of inquiry, including several from chambers of commerce. One that I found particularly interesting was on behalf of London, Birmingham, Cardiff and Merseyside chambers of commerce, which had already discussed the matter amongst themselves.

In talking about particular areas, I want to make two issues clear. First, we are doing no more than canvass views on possibilities. No decisions are being made, as I said earlier. We are simply inquiring about possibilities. We are inviting people to see whether they are interested in any changes in this work, and to hear their views.

Secondly, the work falls broadly into two sections. One section includes the various kinds of searches, making available to the public information which is already on the public record. That in itself is a huge undertaking, which needs to be done rapidly and efficiently. The data that is made available to the public is in no way confidential. That is the area which I suggest may be considered for possible privatisation.

The other section, which is particularly relevant to Cardiff, for example, where most of the work is carried out, is the registration of companies trading with limited liability. For some of this work, the registrar acts in a quasi-judicial role. For example, he has to consider objections to a name which is likely to be confused with an existing company name. Work of that kind must surely continue to be that of a Government Department responsible to this House.

So it is the public record work which is available to anyone to see—that vast mass of work—that we are considering in these proposals. As I said, we are open to suggestions, but surely the first stage is to find out the views of those who use the service and who have a direct interest in it, and also of course the views of the staff. That is exactly what we are doing.

These proposals have aroused a good deal of interest. In considering any proposals that are put to us, we shall have in mind three criteria. First, there must be fair treatment for all companies and for members of the public. Second, the service to the public must be at least as good as that now provided. Third. the service must provide an assurance of continuity, with no hiatus in any changeover that might take place.

I have already hinted that legislation may be required to implement any scheme. I said that in the answer to the question that led to this debate. Our law contemplates the whole registry function as a Government function, and it may not be possible to separate parts without tackling the legal structure, as well as the organisation itself. Inevitably, the time scale may have to be somewhat extended. It does not mean, however, that the preparatory thinking cannot go ahead. Nor does it mean that consultation with users and the staff concerned should be postponed indefinitely. We are extremely anxious to know the views of the people working in those departments and the views of the people who use it.

The hon. Gentleman is quite wrong to suppose that the pillars of State will be pulled down about his ears. We are not proposing any cataclysm. The cataclysm exists only in the hon. Gentleman's mind. We are proposing something much more pragmatic and sensible. It takes 1,000 staff to run the three registration offices. They look after the affairs of between 800,000 and 900,000 companies.

We want the operation to be as effective and economic as possible. The task is partly one of regulation and partly one of service to the public. The two are not indissolubly linked and we have had signs from firms and organisations that they are interested in the public side of the subject. There are no firm proposals; the Government have reached no conclusions. Any decisions may require legislative action.

Mr. Campbell-Savours

The hon. Gentleman says that he is open to suggestions. May I suggest that the Government ensure that Companies House complies with the spirit of the two directives to which I have drawn attention?

Dr. Vaughan

I noted what the hon. Gentleman said about that matter. We are aware of the first directive constraint, but it relates only to inspection of copies of documents. I am advised that there are other ways of passing information that is contained in documents. That should be explored.

Any decisions may require legislation. Long before then, we shall have discussed all this with the people concerned, the staff. The House will also have to be informed of the findings and plans, if any. Only then can final decisions be made.

The hon. Gentleman is in danger of making the staff unnecessarily anxious. He is stirring up insecurity where it need not exist. We want to improve our service to the public. We are determined to ensure that the present service is maintained. It is fundamental that whatever happens must be of advantage to the public and the companies that use the service.

Mr. Campbell-Savours

Will the hon. Gentleman give an assurance that, having invited suggestions, whatever happens, it will not lead to an increase in search fees at Companies House?

Dr. Vaughan

The hon. Gentleman knows that he is speculating on completely hypothetical thoughts. They are from his own imagination. I cannot possibly say until we have proposals. One of the fundamental criteria is that there must be a good service. The present standards must continue and we want to have full consultations before any proposals are made.

Mr. John Fraser (Norwood)

The Minister has been extraordinarily vague about what the proposals are. There is not enough time to set them out now, but will he make a fuller statement, perhaps in reply to an arranged written question, about what possibilities for privatisation exists? It is so vague at the moment that it is extremely difficult to make a judgment. I have the gravest possible reservations on the subject. The House is entitled to more information about what is in the Minister's mind, other than his being in for bids from the private sector.

Dr. Vaughan

The hon. Gentleman is exposing the foolishness, although it is of value to the House, of raising the issue at this stage. There are no proposals that we can discuss sensibly with the hon. Gentleman. He knows that. We are talking to the people who use the service. We are asking them whether they feel that some of these things could usefully be done differently, whether they believe that some of those functions are really the functions of Government—as we suspect—and whether they would like to make any suggestion about how to improve the service. The hon. Gentleman does not do justice to the House when he says that they are vague when there are no proposals.

10.29 pm
Mr. Campbell-Savours

With the leave of the House, may I say that the hon. Gentleman's response was unsatisfactory. It has been made clear by civil servants in his Department that the Government intend to proceed with privatisation. No amount of assurance from the Dispatch Box and no amount of accusation against my hon. Friend the Member for Norwood (Mr. Fraser) and me that we are being irresponsible in any way undermines the case that those people are advancing—that the Government intend to proceed with privatisation.

The hon. Gentleman would do well to go to the offices of Companies House and discuss with trade union representatives their anxieties. He should also go out into the country and discuss the anxieties of British industry about the increased charges that will inevitably be introduced if the Government proceed. When he says that my hon. Friend and I exaggerate when we refer to the effects, it is clear from the London Chamber of Commerce's decision to increase charges—as it has in the past few months—

The Question having been proposed at Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.