Contracting Out

HC Deb 30 March 1995 vol 257 cc1199-217 4.23 pm

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Jonathan Evans)

I beg to move, That the draft Contracting Out (Functions in relation to the Registration of Companies) Order 1995, which was laid before this House on 6th March, be approved. The order is made under section 77(2) of the Deregulation and Contracting Out Act 1994. It is the first use of this important power, which enables certain statutory functions to be discharged by contractors where at present they may be discharged only by public servants. That power was introduced as part of the Government's drive to ensure improvements in the quality and efficient delivery of public services. The Government's "competing for quality" programme has produced a sea change in the way in which such services are delivered, and has ensured two important matters—better value for money for the taxpayer, and higher standards for customers.

Companies House has been a part of that success story. Since it became a "next steps" agency in 1988, and achieved trading fund status in 1991, it has shown continuing improvements. However, it is worth making the point that the decision to move to agency status in 1988 was not without its critics. Not the least of those was Ron Webster, the chairman of the civil service unions at Companies House, who claimed that the real purpose of agency status was to fragment the service and to expose it to privatisation.

Interestingly, the move to trading fund status has also been recognised latterly as a success, although it is of some interest that, when the matter came to be debated in Committee, the Labour members of that Committee—the hon. Members for Workington (Mr. Campbell-Savours) and for Redcar (Ms Mowlam)—opposed that proposal.

It is worth underlining the fact that, since agency status and trading fund status were granted, improvements have taken place. In 1992, Companies House received its charter mark for excellence in the provision of public services. In 1988, it took 30 days for a document to be processed and made available to the public. It now takes less than five days.

Mr. Dafydd Wigley (Caernarfon)

Does the Minister accept that, in the case of Companies House, one must be careful on any question of privatisation, because much of the information held there is extremely commercially sensitive, and the way that that is handled must be seen and felt by all concerned to be beyond reproach?

Mr. Evans

The issues turn not upon privatisation but upon contracting out certain services. The hon. Gentleman is wrong in terms of the function of Companies House, which exists not to keep information confidential but to disseminate information about directors of companies and about annual reports. The line that the hon. Gentleman has taken is some way wide of the mark.

I was speaking about the improvements that have been brought about as a result of changes which the Government have introduced, in the face of some opposition. The proportion of companies which meet their annual filing obligation has risen from 80 per cent. in 1988 to more than 90 per cent. this year. I consider that a significant achievement.

Companies House is now deservedly held in high regard by its users, but that was not always so. I happily pay tribute to the management and staff of the agency for the improvements they have achieved. However, like every organisation, Companies House must strive for continual improvement. The timely incorporation and dissolution of companies, the proper keeping of company records, and the pursuit, compliance and speedy and accurate dissemination of information are all essentials of our commercial system.

Hon. Members will be aware that it is our standard practice in Government to review the status of each agency periodically. The review of Companies House was undertaken to see how best we could build upon that record. The Government's decision following the review was announced by my right hon. Friend the President of the Board of Trade on 20 December. We concluded that the best way of achieving further improvements is through closer involvement of the private sector in the running of Companies House.

Mr. Roy Hughes (Newport, East)

Have the Minister and his colleagues considered the bad effect of these changes on staff morale? I should have thought that that would be highly detrimental to the whole operation.

Mr. Evans

Since my appointment, I have had the opportunity of meeting the unions at Companies House—certainly before 20 December, when the President of the Board of Trade made the announcement. At that time, there was substantial concern about the prospect of "full contractorisation", as it was described, but the announcement, which is reflected in this order, does not go down that route at this time. In those circumstances, it is important to draw a distinction between the fears that have been whipped up and the proposals that are before the House today.

The business information industry is in the early stages of a major technological change, as microfiche is replaced by digital technology. We plan, therefore, to proceed on a progressive basis. Companies House will remain an executive agency and will work in partnership with the private sector to develop new technologies. At the same time, it will work through a programme of contracting out a number of areas, putting each out to tender to private providers. I envisage that about 270 jobs out of a total of 950 will have been transferred to the private sector by 1996. Just over 100 of those will be in Cardiff, and the rest will be mainly in London and Edinburgh.

The programme involves a number of statutory functions, which is why this order is necessary. They are presently carried out at Companies House in London, the satellite offices in Leeds, Birmingham and Manchester, Companies House in Edinburgh and, in the case of postal search, at Companies House in Cardiff.

In London and the satellite offices, the statutory functions are to provide facilities for inspecting company records and to receive documents for filing. The offices also undertake same-day incorporation and changes in company names. The Edinburgh office carries out the full range of Companies House functions in Scotland, including the recording and retention of company information. The fact that strategic decisions, including technical change, will continue to be managed from Cardiff makes it feasible to include the Edinburgh office in the programme at this time.

The order sets out the statutory functions that the contractor may be employed to carry out, but it is by no means the whole story. In the first place, under section 72 of the Deregulation and Contracting Out Act 1994, in all cases where statutory functions are contracted out, the registrar or the Secretary of State, as the case may be, remains legally responsible for anything that is done, or not done, in connection with that function.

I emphasise that contractorisation is a process of testing. Potential bidders will be required to demonstrate that they can offer and deliver better value for money than would be achieved if the activity were not contracted out. By value for money, I do not mean merely a lower price—it is essential that the contractor maintains, and where possible improves upon, present levels of service. Unless that can be demonstrated, contracting out will not go ahead.

Our intention is to make rapid progress with the programme and to have it completed by 1996. We expect to issue an information memorandum and to invite expressions of interest in respect of the contract for London and the satellite offices soon after the making of the order, with an invitation to tender following before the summer. Details of the contract for postal search and Edinburgh will follow later.

The information memorandum for the other non-statutory activities in Cardiff will be published during the spring and summer, and those activities include building management and cheque processing.

We believe that the contracting-out programme offers the best way of building on the excellent record of Companies House. The agency plays a crucial role in this country's commercial system. Our aim is to ensure that it operates as efficiently as possible and that, as taxpayers and users, we get the best value for money. I commend the order to the House.

4.33 pm

Mr. Stuart Bell (Middlesbrough)

I am grateful to the Minister for taking us through the order so quickly and promptly, and for making a number of points with which we would concur to some extent, and others that we want to consider.

The Minister mentioned the agency, trading status and the reduction from 30 days to five in the time necessary for processing a document. We would all accept that things have changed at Companies House during the past 10 years. Essentially, the industry was labour-intensive, and it has been harnessed to the information technology age. In 10 years, things have changed considerably, which has brought us to the present situation.

My hon. Friend the Member for Newport, East (Mr. Hughes) mentioned the specific matter of the morale of those who work in Companies House, and I shall deal with that in my structured and prepared speech. I remember a phrase by Pierre Mendès-France many years ago: that we cannot treat people as tools; they must be treated as individuals. In our debates in the House, we sometimes get carried away and forget that, ultimately, we are dealing with people. My hon. Friend the Member for Newport, East made that clear.

I was struck by the Minister's definition of the order. We have heard much during the past 15 years about privatisation. We have debated the question of partial or public privatisation, and we now have privatisation defined as "a closer involvement of the private sector in the running of Companies House". We are not entirely clear what that means. It turns out not to be full contractorisation at this time, although we might get there eventually by 1996. We might not get there, because, if the testing process does not work, we shall not have better value for money, and therefore privatisation will not go ahead.

Does that smack of firm government, decisiveness and belief in the projects of partial privatisation and contractorisation? Again, the Government are dithering. Their uncertainty will, however, satisfy Conservative Back Benchers. I often have to come to the House late on a Thursday night and make a great speech with the serried ranks behind me. Tonight, they are not as serried as they should be—indeed, they are fewer than normal.

But so little is Conservative Members' interest in privatisation and so exhausted have they become as a result of their 16 years in office that not a single member of the Government, who will soon be the Opposition, has bothered to come to discuss a matter that concerns Cardiff, Edinburgh—I hope that my hon. Friend the Member for Midlothian (Mr. Clarke) will catch your eye, Mr. Deputy Speaker—and London.

Mr. Rhodri Morgan (Cardiff, West)

Perhaps they have already been privatised.

Mr. Bell

Some of us may say that they have been vaporised rather than privatised.

The Minister told us that 270 jobs will be transferred from the public sector to the private sector, 100 of which will be in Cardiff. At the outset of what I called my "structured speech", I thank the Minister for being courteous enough to meet my hon. Friends and me to discuss this privatisation. He took us through the arguments, and said that he would consider the points that we made.

However, we know, as he knows, that he is not responsible for tonight's order, as it is the result of a long review. The review of the future of Companies House shows how the Government have unravelled themselves over the months and years, because their approach was never firm, set or determined. The review has been on-going since October 1992, the second phase was launched in May 1993, and the current phase started in July 1994.

A remarkable feature of the review is that our dynamic President of the Board of Trade dithered over the future of Companies House. Did he believe in privatisation or partial privatisation? Was he an optimist or a pessimist? Lord Healey told a story from this House which applies to the President of the Board of Trade. This dynamic man of action who goes on a pleasure cruise is trying to put up his deck chair. Is he facing the bow or the back of the boat? Is he an optimist or a pessimist? What does he believe in: full or partial privatisation? In the end, he cannot get the deck chair up.

So it is with the President of the Board of Trade—that mighty man, that great figure in the Conservative party. In his book "Where There's a Will", he vaunted how he had defended privatisation throughout the years of Labour Government from 1974 to 1979, and how he fought tooth and nail to prevent nationalisation. He tells us how wonderful privatisation is, but what, ultimately, does he do? He comes to the House, through his Under-Secretary of State, and speaks of a contractorisation process that may or may not end in a successful contractorisation of Companies House by the year 1996.

We do know—and the Minister has confirmed it—that specific parts of the organisation have been selected for contractorisation, such as the whole of the Scottish companies registry, involving about 50 jobs. One may ask, with thousands of jobs lost here, 3,000 jobs lost there, jobs lost throughout the country with the aim of becoming competitive, why should we concern ourselves with 50 jobs in Scotland? In the London search room, about 50 jobs are involved. Why should we concern ourselves with the 150 jobs that will go from Companies House in Cardiff? Where are the snows of yesteryear? Francois Villon asked that question in the 15th century. Where are the major privatisations of the present Government? What has happened to the Government in 17 years, that their privatisation programme ends with the semi-contractorisation of Companies House?

The President of the Board of Trade wrote a chapter about privatisation in his fantasy novel, "Where There's a Will". It did not read as well as that of the Conservative Member who wrote a novel recently. I forget the name of her constituency, but she is well known to the House. [HON. MEMBERS: "Derbyshire, South".] "Where there's a Will" certainly does not compare with the novel of the hon. Member for Derbyshire, South (Mrs. Currie).

Nevertheless, in that novel, the President of the Board of Trade vaunted privatisation; he promulgated it; he sang its praises; and at the end of the day, he privatises the London search room of Companies House. Opposition Members believe that this is a fag-end order of a fag-end Government.

The President wrote in his book: The Tory philosophy must build upon the individual". We are entitled to ask, which individual supported the contractorisation of services in Companies House? Where does the desire come from? [Interruption.] We know that it does not come from Companies House staff, as my hon. Friend the Member for Cardiff, West (Mr. Morgan) says from a sedentary position, partially sotto voce and partly not. It does not come from the business community. The Institute of Credit Management, on behalf of its 8,000 members, made a strong representation to the management consultants who made their privatisation study. It wrote repeatedly to the President of the Board of Trade and to the predecessor of the Under-Secretary of State for Corporate Affairs.

The management consultants also canvassed the opinions of other organisations. They concluded that there was no significant user demand for privatisation of any type. So why have the Government proceeded? Why bother with a consultation exercise if the results are to be ignored and the Government are to ride roughshod over the wishes of the business community?

Opposition Members hear a great deal about how business is big; business is beautiful; it is all about capitalism; it is all about consumerism; it is all about setting businesses free; but when the business community shows no interest whatever in privatisation, full, partial or contractorisation, of Companies House, nevertheless that is what we get.

I hoped to hear from the Minister, but did not hear, that that is part of a deregulation drive. If he had had a motive for his order tonight and it was deregulation, we might at least have tried to understand that and ask for an explanation.

We know from the Government that theirs is only a paper drive to deregulation. The Government have made so little impact in their so-called deregulation that few people in the business community believe it. If they are strangled by red tape, they know who put the red tape around their necks. If they are bogged down in paperwork, they know who gave them the paperwork. I was going to say in my prepared speech that it was no use hon. Members shaking their heads in dissent, but none of them is there to shake his head in dissent.

I attended a dinner at which the President of the Board of Trade made a speech. He said that the Government had cut 3,500 regulations, only to find that they were duplicate regulations. Nothing had changed. One can cut 3,500 regulations from the statute book and make no progress in deregulation.

When the previous Under-Secretary of State for Corporate Affairs, the hon. Member for Honiton, whom I had hoped would be here tonight because he took a strong interest in the subject, was in the post presently occupied by the Minister, he brought to a Committee of the House two bookloads of consolidated regulations, most of them—[Interruption.] Would the hon. Gentleman like to intervene?

Mr. Peter Luff (Worcester)

It was Tatton, not Honiton.

Mr. Bell

I had misunderstood the hon. Gentleman. I thought that he said "tacky" rather than "Tatton". That is why I wanted him to give way, but I am grateful to the hon. Gentleman.

The hon. Member for Tatton (Mr. Hamilton), had two books of consolidated regulations, which he brought to Committee and which he freely admitted had been placed on the statute book by a Conservative Government from 1979. In many respects, the Government pay lip service to regulation. They work the numbers game. They hope that no one will notice that, although they cut a series of regulations, many were duplicates. None of that penetrates the psyche of our ordinary business man and woman.

So it is with the order, as I said in response to my hon. Friend the Member for Newport, East. Is it privatisation? Can anyone tell us whether the order before the House is a privatising order? Is it a deregulation order? Is it designed to cut paperwork? Is it designed to help companies who send their reports regularly to Companies House? Is it to do with competition? Are the Government saying that there will now be competition in paperwork; that firms can compete to supply the services? They are not saying that either.

What is the order? Is it simply a weak, limp gesture of a Government who are falling in upon themselves with their incompetence, their uncertainties, their lack of will and their lack of belief in themselves?

To return to the argument of my hon. Friend the Member for Newport, East, the Government have done in that organisation what they have in so many others; they have spread uncertainty in Companies House. They have spread insecurity, doubt and unease. That is hardly the way in which to instil a feel-good factor into an essentially skilled work force.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

Surely one of the things that worries all of us is that, with a civil servant, who is held responsible by straightforward rules of conduct, the state has some protection for important aspects of information which are held at Companies House, and which affect every person in the country. If, for any reason, that procedure becomes not only privatised but open to all types of problems with confidentiality, frankly, many people will not have as much confidence in the system.

Mr. Bell

I am grateful to my hon. Friend for the two arguments she makes. First, the protection of the civil servant is lost, because the Government are trying to move civil servants from that profession into the private sector.

Secondly, my hon. Friend argues that there is confidentiality in the system. We suppose that, when the Minister puts contracts out to tender, replies will come from large firms such as Dun and Bradstreet, which will have to defend that confidentiality. We are not sure whether there will be a conflict of interest, let alone whether the confidentiality to which my hon. Friend referred will be protected.

Mr. Jonathan Evans

Simply for the sake of the record, will the hon. Gentleman tell us what confidential functions he has in mind?

Mr. Bell

Most people know that a great deal of information that is passed to Companies House is of a confidential nature. The Minister has read the briefings on the subject that others have read. Although we agree that we want a great deal of transparency in the system, nevertheless certain information is treated on a confidential basis. I should be glad, in the terms of a Minister of the Crown, to refer that to my civil service, and give a proper answer in writing when the time comes.

The Government long ago abandoned the unskilled workers in our free market economy. What they are now doing, up and down the country, is abandoning the skilled workers as well, such as those at Companies House. Those workers carry, if not the mark of Cain upon their brow, certainly in their pockets the mark of the short-term contract.

When the Government talk about a feel-good factor, they should realise that they will never achieve it while skilled workers up and down the country are on short-term contracts, with the insecurity that that breeds in them. I imagine that that sense of insecurity—which has now been instilled in Companies House, as it has throughout the rest of the country—will come back to haunt the Government the closer we come to an early general election.

I mentioned the search room at the London end of Companies House. Its future and fate have, rightly, long exercised my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). He wrote a letter to the President of the Board of Trade on 21 December 1994, after the announcement on the future of Companies House had been made in response to a written parliamentary question. He said:

It is not only the potential loss of job that matters, important though that issue is in an area of very high unemployment. It is the loss of the first rate service which is provided at the moment by Companies House. There is no guarantee that the level of service provided, especially to companies based in the City, will be maintained. Indeed there is every likelihood that under contracting out, the drive will constantly be to provide a basic service and nothing else. It would be useful if the Under-Secretary of State would tell the House that the services will not decline through contractorisation. It would be useful if he could tell the House now that he intends to keep the organisation as it is and where it is. It would be useful if he could tell the House now that it is not his intention to reduce the London office to a deposit-only facility. Those are genuine questions asked by a Member of Parliament on behalf of his constituents, and demanded by the Opposition to reassure those who will be contractorised.

Whatever the ideological and doctrinaire basis for privatisation, it can hardly be extended to Companies House. My hon. Friends and I, and those who are following the debate, know that it is an enforcing body. It has the power to fine defaulters and to operate discretionary powers on behalf of the Secretary of State. I believe that the Minister touched on that in his opening statement. When the contractorisation is completed, Companies House will always be more of an arm of Government than a private enterprise. As Companies House has a monopoly over the collection and supply of certain sorts of company information, it is appropriate that it should remain in the public sector.

The Government are trying to create another private monopoly—not on the same scale as British Gas or electricity or water. The Government are trying to create, between now and 1996, a private monopoly or series of private monopolies out of a public monopoly. I have some sympathy with the Minister, who has had to come to the House today with the order. He has climbed the giddy heights of ministerial office in a short time.

As Longfellow wrote: The heights by great men reached and kept Were not attained by sudden flight". But the Minister has moved fast. However, having reached ministerial office, he must face the precipice of a defeat at the next general election.

When the Minister retires—I am not talking about his seat, but his post at the Dispatch Box—in the none too distant future, he may open his Red Box for the last time, put his hand on his heart and ask himself what he has done in his years in Parliament, and how he will be remembered as a Minister of the Crown. He may ask himself what he will say to the grandchild on his knee who wants to know what his grandfather did, not in the great war, but in the House of Commons, in Parliament and in a Tory Government. He will be able to say, truthfully and candidly "I contracted out the services of Companies House." What an epitaph that is.

It is by the small things in life that we know others. As the Bible states: By their fruits ye shall know them". But it is by the small things that the Government give themselves away. The order is the epitaph of a Government who have not so much lost their way, not so much misled the public, are not so much riddled with incompetency, as failed on their own privatisation front.

The Government of the day—a Conservative Government elected in 1979 on a privatisation programme reinforced in 1983—have come to the House with an order on Companies House that talks not of full privatisation or partial privatisation, but of contractorisation on a trial period. The Government have ended up privatising the search room of Companies House in City road, and the Scottish companies registry. What better epitaph could we want for such a Government?

4.55 pm

Mr. Jon Owen Jones (Cardiff, Central)

I pay tribute to the efforts of the staff of Companies House, who, for 18 months and two years, have campaigned unceasingly against the threat to their jobs and to the services that they provide. It is not only the staff and the Opposition who have opposed the privatisation measures. Is it not true that the Government's own advisers told Ministers that contracting out would be expensive and was not wanted, and that there was concern about supplying documents to the private sector contractor?

Can the Minister quote one unequivocal argument from the SRU report in favour of contracting out? The taxpayer has spent £283,000 for the advice, yet it is to be ignored. Is that the value for money that the contracting-out process is supposed to bring?

The customers of the services provided by Companies House have been almost unanimous in their support for Companies House remaining in the public sector and against the creeping process of privatisation. The SRU report—the Government's own report—states: There is concern … about supplying documents to a private sector contractor, rather than to civil servants. This audience values the civil service virtues of impartiality, reliability and public service … Overall, large users' attitudes to contractorisation were that the case for making this change was not obvious". Perhaps even more damning was the comment: the overwhelming majority of those to whom we have spoken, as of those who have written to us, have a very positive view of what Companies House now does: they regard Companies House as providing an essential service efficiently and at modest cost and incomparably better than it provided a few years ago". If that is the view of the people who use the services of Companies House, what is the purpose of altering and tinkering with the excellent service with which the business community is happy?

The argument, if there is an argument, must be on a value-for-money claim—that somehow we can obtain better value for money. The Government claim that value for money will be the deciding factor—the Under-Secretary made that claim earlier today. But does the Minister not agree that contractorisation will increase costs, because of the extra monitoring that has to be done to ensure that contractors do what they are supposed to do?

There are other add-on costs. New and elaborate procedures will have to be set in place at the interfaces between the contracted functions and those which are retained within the public sector.

For example, can the Minister tell the House the cost of the enhanced audit procedures which will be needed if remittance processing work is ultimately contracted out? Will incidental monitoring costs and those at interfaces be included in the Minister's value-for-money calculation, or will they be conveniently overlooked—in the same way as the consultancy costs of more than £250,000 have apparently been overlooked?

Companies House has earned the support of its customers because of its willingness to meet changing needs. That willingness for advancement continues, as the Minister has admitted already. Will not contracting out inhibit the changes and the innovations which are currently occurring?

How will the Minister proceed if a contractor cannot or will not agree to changes during the life of the contract? Will the Minister pay off the contractor and waste even more public money, or will he offer short-term contracts and bring in contractors who lack both loyalty and dedication—thus endangering the dedication and the loyalty of the staff who currently work within the public sector but who are now possibly expected to work for short-term contracts? Such questions understandably worry the customers of Companies House. If the Minister is concerned about those matters, he will withdraw the order this evening.

The overwhelming result of the Government's review of Companies House was a clear endorsement of the efficient, accountable and innovative work of its staff. The private consultancy firm SRU Ltd. found that there was no customer demand for wholesale privatisation—indeed, the business consumers of the services were very vocal in opposing any change. I believe that wholesale privatisation would have been carried out before now—the desire was there—had it not been for the tremendous effort on the part of the staff in campaigning and gaining support for their work.

Furthermore, wholesale privatisation would have required primary legislation, and it would have involved protracted debate in the House and in another place. During that debate, it would have become increasingly clear that the business community did not support the Government's policies, and that the Government majority could not be guaranteed in this place. Instead of an open and honest privatisation measure, we have a back-door, creeping privatisation in the form of contractorisation.

The order allows for the piecemeal contracting out of the services, and will involve about 30 per cent. of staff in Edinburgh, London and Cardiff. Why are the Government pursuing that policy when we have demonstrated that there is no demand for it? Twelve months ago, the President of the Board of Trade—the Minister's boss—promised to sweep out civil service jobs in an orgy of privatisation. In the Post Office, and in agencies such as Companies House, he has faced defeat. The case for the privatisation revolution has been tested and it has been found wanting, not least by the lack of public support throughout the country.

Tonight's order is not about efficiency or value for money; it is simply a face-saving device for the President of the Board of Trade, who has his eyes fixed upon the leadership of his party. The Opposition have no intention of saving the face of the President of the Board of Trade.

5.4 pm

Mr. Nick Harvey (North Devon)

I must probe briefly the question of in-house bids. Why will the Minister not allow in-house bids for any of the services that are to be contracted out? As the Minister knows, Companies House previously made an in-house bid for a contracted service—the directors register—which it won. In those circumstances, it is all the more surprising that the Minister has decreed that there will be no in-house bids for contracts under the order unless the staff who make the bids resign from the civil service if their bids are successful.

That seems to confirm the idea that the Government are preoccupied with reducing the number of people employed in the civil service. Ministers have made it clear that this measure is to be just the first part of progressive contractorisation. Is there not a risk that bids from outside will be artificially low and will be used as loss leaders by companies which have designs on getting other work in the future? If the Government were to accept unnecessarily low bids, the idea of a level playing field would be lost, as would any true value for money.

Relatively few companies which are involved in this sort of work could, on the basis of their existing activities, bid for the functions that will be covered by the order. Therefore, there seems to be an inherent danger of creating a private sector monopoly if the contract goes to any of the current leaders in the field.

Will the Minister reconsider his decision not to allow in-house bids for the services, or will he confirm that one of the main objectives of the process is to reduce the number of people employed in the civil service? Is he not concerned about the real risk of creating a private sector monopoly?

If he does not envisage the existing market leaders as the most likely bidders for the contract—taking up the point that the hon. Member for Cardiff, Central (Mr. Jones) made—how does he expect the technological advances, which have proved so successful in the recent past, to continue into the future? If contracts are short-term, how will high-quality service, to which several hon. Members have referred, be retained? Those questions must be answered, and it will be interesting to hear how the Minister will respond to them.

5.7 pm

Mr. Eric Clarke (Midlothian)

I intend to concentrate my remarks on the Scottish registry. Edinburgh is obviously a very important city in Scotland, particularly as a financial and commercial centre, together with Glasgow and other cities. The Scottish registry in Edinburgh employs 46 staff, and it performs, in microcosm, all the functions of its larger counterpart for England and Wales. If the Scottish registry is contracted out successfully, we believe that the Government will use that experience as a testbed for contracting out or privatising all Companies House services at a later date.

Furthermore, the functions of the Scottish registry include discretionary powers which are presently held by the Secretary of State and relate to special dispensations—for example, allowing delays in the delivery of company accounts. The laws of Scotland are different from those of England and Wales, so the order will have a particular effect in Scotland.

The customers of the Scottish registry are overwhelmingly opposed to its transfer into public hands. Across all four user categories in Scotland, there appears to be a great uniformity of view. In summary, the view is sceptical—much as it is south of the border. Users' arguments against the contractor-run system in the illustrative proposition also fall along similar lines.

The arguments are as follows: very impressed with CH progress over the last few years"; little scope seen for a private sector contractor to make further improvements"; much scope for someone ignorant of the business to make it worse; concern about the excessive rigor in the enforcement of civil penalties, and more widely about the substitution of commercial interests in cutting corners for civil service impartiality and objectivity; concern about the loss of direct customer access to the Registrar for Scotland in Scotland, and about the Registrar's potential loss of the pool of expertise he draws on among senior staff on the interpretation of the Companies Acts, notably in relation to the registrability of charges (the question was raised of whether the boundary between the public sector and the contractor could be moved to leave such expertise with the Registrar); strong belief that individual access should continue to be available as a matter of statutory right through a search room, in Scotland, to current standards; a strong belief that the issues of conclusive certificates (eg Certificates of Incorporation, Change of Name, Re-registration and Registration of Charges), the pursuit of compliance targets and ensuring that information is available to the public on request at all times should be the responsibility of a public official. Those are the views of the customers of the organisation.

If the order is approved, it is likely that the regulation and the overseeing of corporate affairs in Scotland will be by a English facilities and management company, as there are no Scottish companies in the requisite field, according to my advisers. Companies will probably tender for the Scottish operation with an eye on the ball to take over the whole scheme at a later date.

Once again, Scotland is being used for an experiment, as we were with the poll tax. Here, we are being used in a political experiment, for a practice run before London and Cardiff, and we do not like it.

We know that the Government have abandoned the electorate north of the border, but the wishes of the companies, the firms, the business and the commercial interests in Scotland are another matter. I ask the Government to reconsider their attitude totally.

The measure also means that the key discretionary powers, including the timing of the delivery of company accounts, will be put in the hands of the private sector. Have the Government failed to learn the lessons of Maxwell and Blue Arrow? If the private sector cannot be trusted properly to regulate itself, how can the Minister propose allowing a successful bidder for the Scottish registry to regulate the affairs of other companies? Has the Minister never heard of a conflict of interest, or does propriety in business affairs no longer matter?

Finally, I ask the Minister to tell his future grandchild, "I was the man who had the courage to withdraw the order," bearing in mind the argument that was put up not just by Opposition Members, but by the whole of society, including the City of London. He should stop it on that basis and prevent the potential corruption of corporate regulations, particularly in Scotland.

5.13 pm

Mr. Gordon Prentice (Pendle)

I shall be brief, but I want to pick up a couple of points that were raised by my hon. Friends. They concern the support for the proposal outside, and the costs and benefits involved. The whole exercise is ideologically driven. If we look at it objectively, it does not stand up.

Last week, the Minister circulated to the hon. Member for Isle of Wight (Mr. Field), who chairs the deregulation committee, this report by the Anglo-German Deregulation Group. It sets out a checklist of questions that need to be taken into account if a Government want to deregulate something. I shall mention just a few of them. The report asks: Why is the legislation necessary? Is the legislation justified? … What are the economic costs and benefits? … What are the proposal's effects on business? … Which organisations have been consulted and what are their views? The British Government have put their hand to the document, but, if we substitute contracting out for deregulation, there are already many unanswered questions. I apply the last one: Which organisations have been consulted and what are their views? to the proposal to contract out the services of Companies House.

My hon. Friend the Member for Midlothian (Mr. Clarke) mentioned the report that the DTI commissioned from SRU, which states very clearly that there is absolutely no support for what the Government are proposing. The Minister shakes his head, but let me refer directly to the summary of the report.

The consultants commissioned by the Government say: We have taken soundings from over 150 organisations on Government proposals". I should like to know how many of those 150 organisations support the proposal and how many are against it. The report states that there is no significant user demand for such a move. Presenters and searchers are sceptical about possible gains and are concerned about the possible degradation of a vital public service. The report continues: Market concerns about value for money focus on quality standards … not cost. We heard earlier that, in the past five or six years, Companies House has turned the position around and is producing a gold-plated service that people value.

Finally, the consultants say:

The process of contracting out would be expensive and complex. When the Minister replies to the debate, will he tell us what are the costs and what are the benefits that are flagged up in the document that he circulated to the hon. Member for Isle of Wight and myself only a few days ago?

5.17 pm

Mr. Bell

With the leave of the House, I am grateful for the opportunity to add to my earlier comments. The Minister asked me what confidential matters were covered by Companies House and, through my own civil service, I am able to advise him that they concerned enforcement.

I was glad to see the hon. Member for Cardiff, North (Mr. Jones), the Under-Secretary of State for Wales, in his place earlier, as Companies House is in his constituency. I was sorry that he could not stay for the full debate and listened for only five minutes, but I am sure that he will read it all with great interest in Hansard tomorrow.

My hon. Friend the Member for Cardiff, Central (Mr. Jones) talked about value for money. He is perfectly right to say that, if one were to accept the Government's criteria for value for money, we would accept that, over the years, and certainly now, value for money is, has been and will be given by Companies House.

As the Minister said in his opening remarks, because of the changes made at Companies House, the agency and training arrangements were and have been independent of the Treasury for some time. It was a successful arrangement, which was helpful to all. Everyone knew where they were, and had a sense of security. Only since the reviews has the sense of security disappeared.

In a speech that was cogent and to the point the hon. Member for North Devon (Mr. Harvey) mentioned the in-house bid for a contracted service. He was right to do that, because in the past there has been a bid for a contracted service—the directors register. The in-house work force bid successfully for that. I understand that the Minister—he may contradict me or confirm this—is prepared to accept in-house bids on contracts under the order, but wishes the staff who are part of the bid to withdraw or resign from the civil service. That is a significant point.

My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) referred to the protection of the civil service. There is a contradiction in trying to privatise a private function such as Companies House. It is run by civil servants and will be taken out, through contractorisation, into the private sector. Yet an in-house bid cannot, according to the Government, be allowed, because the staff would still be civil servants. The Minister might wish to take that into account when he reviews the process of tendering.

The debate may end a little earlier, and our right hon. and hon. Friends are waiting with bated breath in the Corridors of the House to rush in and vote on this significant—from the Government's point of view—measure. I see that the Government Whip has arrived to marshal the troops.

The arguments against the order may be summarised as follows. Contracting out runs contrary to the advice by the Government's own consultants. I made that point in my earlier remarks. Those consultants were engaged to reflect the views of users and customers, and users and customers were satisfied with the service. There was no grass roots demand for a contracting out, a privatisation, partial or public. Contracting out is a costly exercise, with public money being spent on monitoring the contracts and setting up new procedures at the interface, with functions kept within the public sector.

A view was expressed that contracting out will introduce the profit motive into what is essentially a public service. Indeed, the Minister spoke earlier of value for money. As a result of the profit motive, functions may not be carried out even-handedly or with adequate concern for the public good, which will lead to job losses and poorer service for customers, and will have an adverse effect on business confidence.

In all the privatisations of public sector monopolies, there has never been a proper accompanying regulation. The process of privatisation creates more problems on regulation than the actual privatisation. In privatising gas, electricity and water, no one foresaw the difficulties and the problems. The Labour party's submission is that this order, this contractorisation, this step to partial or full privatisation between now and 1996, will be extremely difficult for the Government to regulate, or even for them to have it regulated within the framework of their own Acts of Parliament.

The Minister said earlier that the discretionary powers of the Secretary of State, which are laid down in statute in the House, will continue whether Companies House is in the private or the public sector. How does one regulate or supervise such a privatisation or contractorisation?

My hon. Friend the Member for Midlothian (Mr. Clarke) made a bold point: the Minister should stand at the Dispatch Box and create history by saying to the House, "I am so convinced by the arguments of the Opposition that I am withdrawing this order and we are not going ahead. We will take into account the views and anxieties that have been expressed and the concerns of the work force." I do not believe that he will do that. I have a sixth sense that that will not happen.

The Minister will have to direct his constructive mind—I speak as a fellow member of his profession—and think carefully about how the contractorisation will take place and about the arguments that the Opposition have made. If he did that, in the spirit of democracy, something constructive might come out of the debate.

5.24 pm

Mr. Jonathan Evans

I am glad that the hon. Member for Middlesbrough (Mr. Bell) made reference to the presence in the House of my hon. Friend the Member for Cardiff, North (Mr. Jones), the Under-Secretary of State for Wales, who has been in touch with me in relation to this issue during the time that the matter has been under consideration.

While listening to the hon. Member for Middlesbrough, it was difficult to know exactly where he stood. He began by criticising the Government for not going further. In a way, I rather thought that we would have had an easier ride from the Opposition if the proposal today had been for full privatisation of all the functions at Companies House. That would truly be a face of new Labour.

The hon. Gentleman referred to this as a fag-end order. It was difficult to understand why he referred to matters in that way, until I had the opportunity to see a letter that has come from the trade unions at Companies House and was sent to all Labour Members. It invites people to write to the President of the Board of Trade, concerning this issue. It has an interesting last paragraph: If you are writing to a Labour MP, insert the following paragraph. Can you stress the importance of this matter to the Labour Trade and Industry team? That seems to indicate that in spite of the fact that most of the Labour trade and industry team are sponsored by trade unions. In relation to this order, they could not work up much enthusiasm. That is clear from the remarks of the hon. Gentleman.

What were the hon. Gentleman's complaints? He complained about confidentiality, and tried to suggest that there are dark and secret papers, all held at Companies House, which some wicked contractor is going to put out into the public domain. The fact is that, even after taking advice, the best he was able to come up with is that somebody might be writing to Companies House to explain why they were late filing papers. That was the best he could put before us in terms of the confidential information that he says might go into the public domain if we were to proceed with the order.

After a time, the hon. Gentleman gave up altogether, perhaps because he recognised that both agency and trading fund status were opposed at the time that the Government introduced them, but that they have contributed to improving delivery of services at Companies House. The excellent performance of Companies House has been brought about as a result of reviews and changes that the Government have made in the face of opposition from Labour Members. The hon. Gentleman did not want to talk about Companies House at all then, but got into a diatribe about how the Government have not done enough on deregulation.

The hon. Gentleman offered to be the champion of small business and to help the Government in deregulating. He will know that I have a special responsibility for deregulation. I will note carefully his remarks in that regard in Hansard, and will certainly be looking to his support when the Government introduce a whole range of changes—as we intend to do—to alleviate the burdens on small business. Bearing in mind his strong remarks today, we shall be looking for support from Opposition Members. While, privately, it is possible that the hon. Gentleman would be supportive, I am not so sure that the same could be said of those who sit on the Benches behind him.

We heard from the hon. Member for Cardiff, Central (Mr. Jones), who was rather more bullish in his condemnation of the Government. He had taken a line from the same union hymn sheet. We know how inaccurate the trade unions in Companies House have been in the information that they have put into the public domain.

I had to deal in January with an allegation that the Government were sitting on a confidential report that had been leaked to the Western Mail, until we were able to point out to the Western Mail that the SRU report was in the public domain, had been in the House of Commons Library since December, and was in the public libraries in Wales as well.

Mr. Jon Owen Jones

Talking of trade union accuracy, when I wrote to the Minister asking how much the SRU report had cost, I was told that it had cost £189,000. Two weeks later, I received a letter saying, "Sorry, we made a mistake: it cost £100,000 more than that." There are other areas where we can look for inaccuracy.

Mr. Evans

I am sure that the hon. Gentleman will wish to take advantage of this opportunity to congratulate the Government on putting that information in the public domain.

The order reflects the Government's response to the SRU report. Much of what Opposition Members have said relates to a question with which we are not dealing. We have heard some quotations, but the report states: We have taken soundings from … 150 organisations on Government proposals"— let me stress this to the hon. Member for Pendle (Mr. Prentice)— to contract out most Companies House … functions". The order does not do that.

The statement by my right hon. Friend the President of the Board of Trade on 20 December reflected the report, and particularly a part of it from which no Opposition Member has quoted. Paragraph 6.9, on page 32, makes it clear that user preference was for Companies House to remain a public agency, but that that should include the right to contract out operations that CH management consider can be better undertaken by specialist contractors. That provision appears in the report itself, and it is the provision to which the Government are giving effect in the order. I commend it to the House.

Question put:—

The House divided: Ayes 219, Noes 139.

Division No. 122]	[5.31 pm
AYES
Ainsworth, Peter (East Surrey)	Dorrell, Rt Hon Stephen
Aitken, Rt Hon Jonathan	Douglas-Hamilton, Lord James
Alexander, Richard	Dover, Den
Alison, Rt Hon Michael (Selby)	Duncan, Alan
Allason, Rupert (Torbay)	Dunn, Bob
Amess, David	Durant, Sir Anthony
Arnold, Jacques (Gravesham)	Eggar, Rt Hon Tim
Arnold, Sir Thomas (Hazel Grv)	Elletson, Harold
Atkinson, David (Bour'mouth E)	Emery, Rt Hon Sir Peter
Atkinson, Peter (Hexham)	Evans, David (Welwyn Hatfield)
Baker, Nicholas (North Dorset)	Evans, Jonathan (Brecon)
Baldry, Tony	Evans, Nigel (Ribble Valley)
Batiste, Spencer	Evans, Roger (Monmouth)
Bellingham, Henry	Evennett, David
Bendall, Vivian	Faber, David
Body, Sir Richard	Fabricant, Michael
Booth, Hartley	Fenner, Dame Peggy
Boswell,Tim	Field, Barry (lsle of Wight)
Bottomley, Rt Hon Virginia	Fishburn, Dudley
Bowden, Sir Andrew	Forman, Nigel
Bowis, John	Forsyth, Rt Hon Michael (Stirling)
Boyson, Rt Hon Sir Rhodes	Forth, Eric
Brandreth, Gyles	Fox, Dr Liam (Woodspring)
Brazier, Julian	Fox, Sir Marcus (Shipley)
Bright, Sir Graham	Freeman, Rt Hon Roger
Brooke, Rt Hon Peter	French, Douglas
Brown, M (Brigg & Cl'thorpes)	Fry, Sir Peter
Browning, Mrs Angela	Gale, Roger
Burns, Simon	Gardiner, Sir George
Burt, Alistair	Gill, Christopher
Butler, Peter	Gillan, Cheryl
Carlisle, John (Luton North)	Goodlad, Rt Hon Alastair
Carrington, Matthew	Goodson-Wickes, Dr Charles
Carttiss, Michael	Gorman, Mrs Teresa
Cash, William	Gorst, Sir John
Channon, Rt Hon Paul	Grant, Sir A (SW Cambs)
Chapman, Sydney	Greenway, Harry (Ealing N)
Clappison, James	Greenway, John (Ryedale)
Clark, Dr Michael (Rochford)	Griffiths, Peter (Portsmouth, N)
Clarke, Rt Hon Kenneth (Ru'clif)	Hague, William
Clifton-Brown, Geoffrey	Hamilton, Rt Hon Sir Archibald
Coe, Sebastian	Hamilton, Neil (Tatton)
Colvin, Michael	Hampson, Dr Keith
Congdon, David	Harris, David
Coombs, Simon (Swindon)	Haselhurst, Alan
Cope, Rt Hon Sir John	Hawkins, Nick
Couchman, James	Hawksley, Warren
Cran, James	Heald, Oliver
Currie, Mrs Edwina (S D'by'ire)	Heathcoat-Amory, David
Davis, David (Boothferry)	Hendry, Charles
Day, Stephen	Hill, James (Southampton Test)
Devlin, Tim	Howard, Rt Hon Michael
Dicks, Terry	Howell, Rt Hon David (G'dford)

Howell, Sir Ralph (N Norfolk)	Richards, Rod
Hughes, Robert G (Harrow W)	Robathan, Andrew
Hunt, Sir John (Ravensbourne)	Robinson, Mark (Somerton)
Hunter, Andrew	Rowe, Andrew (Mid Kent)
Hurd, Rt Hon Douglas	Rumbold, Rt Hon Dame Angela
Jack, Michael	Ryder, Rt Hon Richard
Jenkin, Bernard	Sainsbury, Rt Hon Sir Timothy
Jessel, Toby	Shaw, Sir Giles (Pudsey)
Johnson Smith, Sir Geoffrey	Shephard, Rt Hon Gillian
Jones, Gwilym (Cardiff N)	Shersby, Michael
Jones, Robert B (W Hertfdshr)	Sims, Roger
Key, Robert	Skeet, Sir Trevor
King, Rt Hon Tom	Smith, Sir Dudley (Warwick)
Kirkhope, Timothy	Smith, Tim (Beaconsfield)
Knapman, Roger	Soames, Nicholas
Knight, Mrs Angela (Erewash)	Speed, Sir Keith
Knight, Greg (Derby N)	Spicer, Sir James (W Dorset)
Knox, Sir David	Spicer, Michael (S Worcs)
Lait, Mrs Jacqui	Spink, Dr Robert
Lang, Rt Hon Ian	Spring, Richard
Lawrence, Sir Ivan	Sproat, Iain
Legg, Barry	Squire, Robin (Hornchurch)
Leigh, Edward	Stanley, Rt Hon Sir John
Lester, Jim (Broxtowe)	Steen, Anthony
Lidington, David	Stephen, Michael
Lilley, Rt Hon Peter	Stem, Michael
Luff, Peter	Streeter, Gary
MacGregor, Rt Hon John	Sweeney, Walter
MacKay, Andrew	Sykes, John
McNair-Wilson, Sir Patrick	Tapsell, Sir Peter
Madel, Sir David	Taylor, Ian (Esher)
Maitland, Lady Olga	Taylor, John M (Solihull)
Malone, Gerald	Temple-Morris, Peter
Mans, Keith	Thomason, Roy
Marshall, John (Hendon S)	Thompson, Sir Donald (C'er V)
Martin, David (Portsmouth S)	Thompson, Patrick (Norwich N)
Merchant, Piers	Townend, John (Bridlington)
Mitchell, Andrew (Gedling)	Townsend, Cyril D (Bexl'yh'th)
Mitchell, Sir David (NW Hants)	Tracey, Richard
Moate, Sir Roger	Trotter, Nevillie
Monro, Sir Hector	Twinn, Dr Ian
Montgomery, Sir Fergus	Vaughan, Sir Gerard
Neubert, Sir Michael	Viggers, Peter
Newton, Rt Hon Tony	Waldegrave, Rt Hon William
Nicholls, Patrick	Walden, George
Nicholson, David (Taunton)	Walker, Bill (N Tayside)
	Waterson, Nigel
Nicholson, Emma (Devon West)	Watts, John
Norris, Steve	Wells, Bowen
Onslow, Rt Hon Sir Cranley	Wheeler, Rt Hon Sir John
Oppenheim, Phillip	Whitney, Ray
Paice, James	Whittingdale, John
Patnick, Sir Irvine	Wilshire, David
Peacock, Mrs Elizabeth	Winterton, Mrs Ann (Congleton)
Pickles, Eric	Wolfson, Mark
Portillo, Rt Hon Michael
Powell, William (Corby)	Tellers for the Ayes:
Rathbone, Tim	Timothy Wood and
Renton, Rt Hon Tim	Derek Conway.

NOES
Adams, Mrs Irene	Boateng, Paul
Ainger, Nick	Brown, N (N'c'tle upon Tyne E)
Armstrong, Hilary	Byers, Stephen
Ashton, Joe	Callaghan, Jim
Austin-Walker, John	Campbell-Savours, D N
Banks, Tony (Newham NW)	Clapham, Michael
Barnes, Harry	Clarke, Eric (Midlothian)
Bayley, Hugh	Coffey, Ann
Bell, Stuart	Cook, Frank (Stockton N)
Benn, Rt Hon Tony	Corbett, Robin
Bennett, Andrew F	Corston, Jean
Benton, Joe	Cox, Tom
Bermingham, Gerald	Dalyell, Tam
Betts, Clive	Darling, Alistair
Blunkett, David	Davidson, Ian

Davies, Bryan (Oldham C'tral)	Maxton, John
Denham, John	Meale, Alan
Dewar, Donald	Michael, Alun
Dixon, Don	Michie, Bill (Sheffield Heeley)
Dobson, Frank	Milburn, Alan
Dunwoody, Mrs Gwyneth	Miller, Andrew
Eastham, Ken	Morgan, Rhodri
Etherington, Bill	Morley, Elliot
Fatchett, Derek	Morris, Rt Hon Alfred (Wy'nshawe)
Flynn, Paul	Morris, Estelle (B'ham Yardley)
Foster, Rt Hon Derek	Mudie, George
Foster, Don (Bath)	Mullin, Chris
Godman, Dr Norman A	Murphy, Paul
Grant Bernie (Tottenham)	O'Brien, Mike (N W'kshire)
Grocott, Bruce	O'Brien, William (Normanton)
Gunnell, John	O'Hara, Edward
Hain, Peter	Olner, Bill
Hanson David	Orme, Rt Hon Stanley
Harvey, Nick	Pendry, Tom
Henderson, Doug	Pickthall, Colin
Heppell, John	Pike, Peter L
Hill, Keith (Streatham)	Prentice, Gordon (Pendle)
Hinchliffe, David	Prescott, Rt Hon John
Hoon, Geoffrey	Purchase, Ken
Howarth, George (Knowsley North)	Raynsford, Nick
Howells, Dr. Kim (Pontypridd)	Rendel, David
Hoyle, Doug	Roche, Mrs Barbara
Hughes, Kevin (Doncaster N)	Rooker, Jeff
Hughes, Robert (Aberdeen N)	Rooney, Terry
Hughes, Roy (Newport E)	Ross, Ernie (Dundee W)
Hutton, John	Sedgemore, Brian
Illsley, Eric	Shore, Rt Hon Peter
Ingram, Adam	Short, Clare
Jackson, Helen (Shef'ld, H)	Skinner, Dennis
Jones, Jon Owen (Cardiff C)	Smith, Andrew (Oxford E)
Jones, Lynne (B'ham S O)	Smith, Chris (Isl'ton S & F'sbury)
Jones, Martyn (Clwyd, SW)	Soley, Clive
	Spearing, Nigel
Jones, Nigel (Cheltenham)	Spellar, John
Jowell, Tessa	Stevenson, George
Keen, Alan	Sutcliffe, Gerry
Khabra, Piara S	Taylor, Mrs Ann (Dewsbury)
Kilfoyle, Peter	Taylor, Matthew (Truro)
Lestor, Joan (Eccles)	Thompson, Jack (Wansbeck)
Lewis, Terry	Timms, Stephen
Livingstone, Ken	Tipping, Paddy
Loyden, Eddie	Walker, Rt Hon Sir Harold
Lynne, Ms Liz	Wicks, Malcolm
McAvoy, Thomas	Wigley, Dafydd
McCartney, Ian	Williams, Alan W (Carmarthen)
McKelvey, William	Winnick, David
Mackinlay, Andrew	Wise, Audrey
McMaster, Gordon	Worthington, Tony
MacShane, Denis
McWilliam, John	Tellers for the Noes:
Madden, Max	Mr. John Cummings and
Marek, Dr John	Mr. Jim Dowd.

Question accordingly agreed to.

Resolved, That the draft Contracting Out (Functions in relation to the Registration of Companies) Order 1995, which was laid before this House on 6th March, be approved.