§ 11.41 a.m.
§ Lord Lucas of Chilworth
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee.—(Lord Lucas of Chilworth.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD MURTON OF LINDISFARNE in the Chair.]
§ Clause 1 [Fees]:
Lord Bruce of Donington moved Amendment No. 1:
Page 2, line 1, after ("shall") insert ("(a)").
§ The noble Lord said: With the Committee's permission, I propose to deal with Amendments Nos. 1 and 2 together.
Amendment No. 2: Page 2, line 6, at end insert—
§ (b) set out, within such regulations a statement showing the detailed categories of expenditure to be taken into account in computing the cost referred to in paragraph (a) of this subsection.").
In the course of his reply to the debate on Second Reading, the noble Lord, Lord Lucas of Chilworth, was good enough to say:
It would not be our wish to let the control of the costs get out of hand to an extent that would have such a marked effect on the premium that the policyholder—who is the beneficiary of the supervisory nature of the work for which we are now seeking payment—would grumble".—[Official Report, 7/6/85; col. 953.]
I fully accept the general purpose of the noble Lord, but I am concerned lest the figure of £2.5 million, which I believe was the figure mentioned as being the total costs recoverable, is a figure that has been taken, as it were, arbitrarily out of the hat.
§ It would be interesting to know—and this is the reason for putting forward this amendment—just how the Government propose to calculate the costs of the various services comprised within the original Bill: services that the Government department provides in receiving and examining the various reports that it gets under the 1982 Act; costs that are undoubtedly incurred, or should be incurred, in following up information arising from Section 83 of the Insurance Companies Act 1982; costs, I should imagine, which have increased quite appreciably as a result of what we can only term as scandals occurring in some sections of the industry two or three years ago.
§ I can fully understand the purposes of the Bill. If the Government are put to extra trouble by reason of having extra work they should seek to recover some of the cost, but it is a principle which is open to abuse. After all, Governments are there to govern. Their Civil Service is paid for exercising the functions that it performs in accordance with various pieces of legislation that have gone through both Houses in the past, and continue to go through. It is a service generally provided for the whole of the community. Therefore it is not right as a general principle that where individuals or indeed a company are supervised or, as a result of legislation, have to give information to the Government—and the assembly and giving of information is in itself a costly operation—they should at the same time be charged for the time and the effort of the Government in examining the information and performing their various functions under the Act.
§ The principle of the Bill has already been dealt with at Second Reading but I venture somewhat into that field again (and trust that the Committee will forgive me for doing so), in order to elicit from the Government just how they arrive at their figures and what kind of costs they intend to include within the ambit of this particular little Bill. I have no intention, of course, of pressing this amendment. As I gave notice to the noble Lord, it is moved only for the purpose of obtaining information and I hope that today the noble Lord will be able to go into a little further detail than, for quite proper reasons, he was able to do at Second Reading. I beg to move.
§ Lord Banks
I should like very briefly to say that I think the noble Lord, Lord Bruce of Donington, has performed a service by tabling this amendment, although he does not intend to press it. It is important to know precisely what is the burden that it is felt necessary to put on the insurance industry in order to pay for the supervision of that industry. I shall be most interested to hear what the noble Lord the Minister has to say in answer to that important point.
§ Lord Lucas of Chilworth
I am most grateful to the noble Lord, Lord Bruce of Donington, on two counts: first, for having given me notice of his intention to use the Committee stage this morning as an opportunity to probe a little further into our Second Reading debate earlier in the month; and, secondly, for his explanation this morning of what gives rise to this probing. In the light of this prior notice I have had the opoportunity to prepare a somewhat lengthy reply which I think may be of benefit to the Committee.
We do not think that it is appropriate to include in the regulations material on matters of fact. 913 Regulations are, in effect, the expansion of primary legislation and they are not therefore a suitable means for recording factual material such as details of administrative costs. Moreover, the combined effect of subsections (4) and (6) of the new Section 94A of the Insurance Companies Act 1982 will be that fees payable will have to equal the costs incurred by the Secretary of State in exercising relevant functions; and relevant functions means those functions prescribed in regulations to be made under the Act. In other words, rather more simply put, it will be necessary under the Bill as it stands to state in the regulations the functions in relation to which the charges are calculated. These regulations, as is the case with all regulations made under the Act, will be subject to annulment by the House.
It might be helpful were I to remind your Lordships' Committee that the Department of Trade and Industry is responsible to Parliament in accounting for both income and expenditure. The annual appropriation accounts prepared by the department and signed by the departmental accounting officer and the Comptroller and Auditor General are presented to Parliament by the Comptroller and Auditor General together with his report. The Public Accounts Committee may call the departmental accounting officer to give evidence before it in connection with the accounts and the report of the Comptroller and Auditor General. The accounts and the report are of course published, and not only Parliament but others interested can pursue further any specific points that arise from these accounts.
I should say that the Annual Supplementary Estimates presented to Parliament by the Financial Secretary to the Treasury currently state the provision for staff salaries and general administrative expenses for the insurance and financial services and companies divisions. As from the next financial year they will include provision for receipt of fees from insurance companies. At the end of the year the relevant outturn figures are examined and presented to Parliament by the Comptroller and Auditor General as part of the appropriation accounts. An explanation is provided in the accounts for all variations between provisions and actual expenditures of more than 10 per cent. or £500,000, whichever is the greater.
Turning perhaps a little more closely to the substance of the amendment of the noble Lord, Lord Bruce, and the comments made by the noble Lord, Lord Banks, I can give further information on the costs involved in the fees scheme. Currently, the total staff in the insurance division within my department is 84, and at present some 75 per cent. of staff costs for the division are expended on the supervisory functions. Staff costs consist of salaries and general administrative expenses. An allowance is also made for the cost of the computer operations and for the cost of legal and accountancy advisers. Expenditure incurred by the Government Actuary's Department has also been included in the estimate of the cost to be recovered, which, as I said earlier this month, is some £2.5 million annually. Your Lordships' Committee will remember that at that time I also suggested that that would equate to about £3,000 to the companies involved.
I would certainly envisage that the insurance annual report would also state the secretary's functions in 914 relation to which the charges had been calculated. It would then go on to indicate the number of staff who were principally engaged on the work from which those charges arose. I think that it would be an unwise exercise to make guesses during this Committee stage of what all that may amount to.
With that explanation, I hope that the Committee will be assured that there is a control on the costs which are to be transferred to the industry. The estimates will be placed before Parliament; the outturn is equally placed before Parliament. There is then ample opportunity for parliamentarians of both Houses, of course, or indeed other outside interests, to raise questions if they feel that we have the matter wrong.
I add that it would be our intention for information along these lines to be included in the Secretary of State's annual report upon the exercise of his powers under the Insurance Companies Act 1982. Again, this will help to explain how costs recovered relate to costs incurred in applying to insurance the Government's general policy that in cases where a service is provided or an activity carried out in connection with an identifiable group, that group should bear the proper costs involved.
I merely repeat what I said during the Second Reading of the Bill so that there is no misunderstanding as to the Government's policy. I might perhaps remind the Committee that that policy is very much in line not only with the United States procedures but also with those of many European countries, and most particularly in the connection with which this matter is concerned.
With that rather lengthy explanation I hope that the noble Lord, Lord Bruce, will feel reassured. I thank him for raising the question, and I hope that he will not need to pursue it further.
Lord Bruce of Donington
I am most grateful to the noble Lord for his reply. In the first part he dealt with some of the safeguards, including, for example, the Public Accounts Committee and the Comptroller and Auditor General. Of course I accept that. The only thing is that the attention of the PAC in another place would not in practice be drawn to matters of relatively minor significance of this kind. I very much doubt whether the issues would ever be sufficiently important to be deemed by the Comptroller and Auditor General to be worthy of the attention of the PAC. It deals with billions rather than comparatively small sums of this kind.
Having said that, however, somewhat uniquely for me, I think, I have to express my complete agreement with the noble Lord and my complete satisfaction with the answer that he gave. It will be most helpful to those of us who are interested in following up the detail of these matters. I am most grateful to him. I ask the leave of the Committee to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 2 not moved.]
§ Clause 1 agreed to.
§ Remaining clause agreed to.
§ House resumed: Bill reported without amendment: Report received.