§ 5.19 p.m.
§ Lord McIntosh of Haringey rose to move, That the regulations laid before the House on 10th December 1998 be approved (S.1. 1998/3087) [Fourth Report from the Joint Committee].
§ The noble Lord said: My Lords, with the leave of the House, I shall speak also to the Companies (Fees) (Amendment) Regulations 1998.
§ The main effect of the Companies (Fees) (Amendment) regulations is to increase fees for microfiche-based products, including the basic company search, as well as the fees for a number of labour-intensive services. The basic company search currently costs £3.50. The effect of these regulations would be to raise it to £5. The price of searches made by post would rise correspondingly. Currently, about 1.5 million microfiche searches are made each year. The numbers involved in the labour-intensive services are much smaller, closer to 15,000 a year.
§ The increase in prices of microfiche products arises because the costs of running these services are substantial and essentially fixed. As customers increasingly use better and more modern ways of accessing information, demand for microfiche falls. That leads to a rise in unit costs. The alternatives to which customers turn are mostly electronic, and Companies House is providing an increasing range of information electronically. The charges for these are not being increased.
§ The last increase in microfiche services fees was in 1996. Despite a continuing fall in demand since then, it has been possible to postpone any increase until now. The new fees will allow Companies House to break even on provision of microfiche services. It is obliged to ensure, so far as practicable, that there is no cross-subsidisation of costs by revenue from other areas of activity.
§ A fee of £10 for registration of a charge has also been introduced in order to eliminate an element of cross-subsidisation from the fee charged each year for registration of a company's annual return. Some 10 per cent. of the 1.25 million companies on the company register have a registrable charge to be entered each year.847
§ The Open-Ended Investment Companies (Investment Companies with Variable Capital)(Fees) Regulations introduce equivalent fees for similar services provided by Companies House to those provided for companies.
§ The overall aim of these fee changes is to prevent Companies House going into deficit in the next few years. During that period, Companies House will be investing heavily to complete the transition to electronic information collection and dissemination. Its progress can be seen and experienced at first hand at its new information centre at 21 Bloomsbury Street, which I am pleased to say opened for business today. At the end of the current period of investment, there is likely to be little demand remaining for microfiche. In the meantime, it is to be expected that there will be further increases in years to come in fees for microfiche services, but reductions elsewhere as demand for newer services increases. I commend the regulations to the House.
§ Moved, That the regulations laid before the House on 10th December 1998 be approved (S.I. 1998/3087) [Fourth Report from the Joint Committee].—(Lord McIntosh of Haringey.)
§ Baroness Denton of Wakefield
My Lords, I thank the Minister for presenting the two statutory instruments. Perhaps I may join with him in speaking to both on this occasion.
I imagine that not many in your Lordships' House know what an open-ended investment company is. I would have been one of those people a week ago. However, having investigated the matter, I am delighted to say that they are an area of growth and they offer flexibility, simplicity and transparency, all of which seem to me to be key issues in financial matters.
The microfiche service is required at the moment but I share the Minister's hopes that it will not be needed for long. I worry that every time prices increase, they do so largely to the detriment of small firms. It seems to me that Companies House may be going backwards. I suspect that the Minister will say that that is due to investment costs. However, I am pleased to say that under our administration in 1994 to 1996, costs fell by 12 per cent. I would be interested to know the benchmark of cost reduction that is looked for now. Because of that fall in costs, fees were able to be decreased. I imagine that there was some consternation in industry to receive a statement from the Government that fees were decreasing. That probably happens rarely.
Do these regulations apply also to Scotland, Wales and Northern Ireland? It is bureaucratic to go all through this process each time to increase fees by the percentage that we are doing. Is it not possible to increase fees by a percentage unless it is voted against? I believe this is the sort of saving for which Mr. Milburn may be looking.
What is being done to benchmark and control the costs of Companies House? I find it strange that one can ask for costs to decrease and to be managed without targets, objectives or benchmarks. Unless this is managed well, costs will rise. We have seen something 848 of much greater importance today concerning national insurance where a change in the systems management has really increased costs which will, in the end, be paid by taxpayers.
I have no objection to this Motion being passed. However, as the Minister said, there must be no cross-subsidisation. I hope that the Minister will give a positive answer in relation to Scotland, Northern Ireland and Wales.
§ Lord Razzall
My Lords, I do not claim to be an expert on open-ended investment trusts. However, I would claim to be somebody who comes from a generation of solicitors who, when in training, spent a considerable amount of time, in the pre-electronic age, poring through documents with the Registrar of Companies at Companies House. I am sorry that the noble Lord, Lord Mishcon, who I am sure did exactly the same, has just left his place.
The world has progressed significantly since those days of non-electronic searches. However, I believe that the most significant point about these regulations is that, notwithstanding the development of the electronic search and the other sophisticated search mechanisms now available, the two fundamental principles remain the same. This is not just a question of companies having to undergo an obligation to file documents for which they are charged a fee; there is also the public service element of company searches, to which the noble Baroness referred.
Before we pass these regulations today, as undoubtedly we will, can the Minister confirm that that public service element is dealt with in this pricing structure on the basis that a profit is not being made by the Registrar of Companies, by Companies House, as regards these fees? In particular, the second regulations represent a significant increase in fees. The Minister indicated that that was on the basis that the Registrar of Companies would be able to use the money to invest in new processes. I think I heard him say that that would not be effected at a profit.
However, bearing in mind the importance to the public, and in particular to small businesses and creditors who need to use the services frequently, can the Minister confirm that this is not being done to increase profit for the Treasury but simply to cover the cost of the service?
§ 5.30 p.m.
§ Lord McIntosh of Haringey
My Lords, I am grateful to both the noble Lord, Lord Razzall, and the noble Baroness, Lady Denton of Wakefield, for their reception of the regulations. In response to the noble Baroness, perhaps I may advise her that an open-ended investment company with variable capital is an investment vehicle in corporate form which can buy and sell its own shares. It is quite rare. Usually, it is a way of investing in this country from abroad. I believe that the noble Baroness identified it correctly.
The noble Baroness is also right that the use of microfiche is declining. For those of us who, like the noble Lord, Lord Razzall, have had the misfortune of 849 having to use such things and to set little metal arrows skittering across sheets of glass in order to find the pages of an annual report, annual return, memorandum or articles, which have been photographed and which have dust around the edges, the sooner that microfiche goes, the better for all concerned. However, some people—notably the London agents—find microfiche more convenient than electronic searches. Therefore, it is not possible for us, without withdrawing a public service, to withdraw microfiche searches altogether.
I said in opening that this is the first increase in fees since 1996. That was accompanied by a decrease in the cost of electronic searches. So, for most people, there is no particular loss.
The noble Baroness asked whether in a sense Companies House was not going backwards. That is certainly not the case. The noble Baroness applauded the efficiency of Companies House under the previous administration. That efficiency has continued and, indeed, increased. For several years, Companies House has had a target unit cost reduction of 3 per cent. per annum. In the past two years, it has achieved a unit cost reduction of between 5 and 6 per cent. per annum. Therefore, there is no question but that Companies House is continuing its efforts to provide an economical as well as an effective service to the community.
The noble Lord, Lord Razzall, asked me for an assurance that the public service element is still dominant at Companies House. I can give that assurance without any qualification. The intention of Companies House and the basis on which it was set up as a trading fund is that it should break even; in other words, it should not make a profit out of its activities. At the same time—this is the reason for the change—it is not supposed to cross-subsidise one service from the profits of another because that would raise questions as to favouritism for one type of customer as against another. Indeed, it would probably be against European Community regulations as it would involve an illegitimate subsidy.
The only qualification to what I have just said is that, as I said in opening, Companies House has a substantial capital investment programme at present for both electronic services on its own intranet, for which customers pay an entrance fee and a monthly fee and are then billed at the end of the month for their use of it, and for the much more limited internet facilities which it provides. At the moment, very limited facilities are available on the internet, including access to the register of disqualified directors and guidance to Companies House services. So investment is included in the calculation of the break-even provisions which Companies House is obliged to obey.
§ Lord Razzall
My Lords, without wishing to labour the point, I am sure that the noble Lord appreciates that cross-subsidies become complicated when the allocation of capital and of central overhead come into question. I am certain that the principle adopted is exactly as the 850 noble Lord indicates; I merely wanted him to re-confirm the principle that this will be done on a break-even basis.
§ Lord McIntosh of Haringey
My Lords, I hope that I have done that adequately. I believe that the assurances for which the noble Lord asked are contained in government policy and in the accounting procedures of Companies House. On that basis—
§ Baroness Denton of Wakefield
My Lords, before the noble Lord sits down, he has not yet replied to my question about whether the provisions cover Scotland, Northern Ireland and Wales. With a Scottish DTI Minister sitting on the Bench next to him, I imagine that we know the answer.
§ Lord McIntosh of Haringey
My Lords, I thought that I had got away with that. The provisions certainly cover Wales. As the noble Baroness knows, Companies House is based in Cardiff. I do not think that the provisions cover Scotland and Northern Ireland, but, if I am wrong, I shall write to the noble Baroness. That is my fail-safe procedure. I commend the regulations to the House.
§ On Question, Motion agreed to.