HOUSE OF COMMONS
Fourth Standing Committee on Statutory Instruments, &c.
DRAFT LAND REGISTRY TRADING FUND ORDER 1993
DRAFT LAND REGISTRATION (DETERMINATION OF COSTS) ORDER 1993
Monday 29 March 1993
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The Committee consisted of the following Members:
Chairman: Mr. Martyn Jones
Boateng, Mr. Paul (Brent, South)
Browning, Mrs. Angela (Tiverton)
Churchill, Mr. Winston (Davyhulme)
Conway, Mr. Derek (Shrewsbury and Atcham)
Dickens, Mr. Geoffrey (Littleborough and Saddleworth)
Dover, Mr. Den (Chorley)
Evans, Mr. Jonathan (Brecon and Radnor)
Forman, Mr. Nigel (Carshalton and Wallington)
Knight, Mr. Greg (Lords Commissioner to the Treasury)
Maclennan, Mr. Robert (Caithness and Sutherland)
Porter, Mr. Barry (Wirral, South)
Raynsford, Mr. Nick (Greenwich)
Simpson, Mr. Alan (Nottingham, South)
Smith, Mr. Llew (Blaenau Gwent)
Steinberg, Mr. Gerry (City of Durham)
Taylor, Mr. John M. (Parliamentary Secretary to the Lord Chancellor s Department)
Tipping, Mr. Paddy (Sherwood)
Williams, Mr. Alan W. (Carmarthen)
Mr. R. G. James, Committee Clerk2 3 Fourth Standing Committee on Statutory Instruments, &c. Monday 29 March 1993
[MR. MARTYN JONES in the Chair]
The Parliamentary Secretary to the Lord Chancellor's Department (Mr. John M. Taylor: I beg to move, That the Committee has considered the draft Land Registry Trading Fund Order 1993.
The Chairman: With the agreement of the Committee, it will be convenient to discuss at the same time the other order before us, namely, the draft Land Registration (Determination of Costs) Order 1993.
Mr. Taylor: Please may I on behalf of the Committee welcome you to the Chair, Mr. Jones? This is the first time that I have had the pleasure of appearing under your chairmanship. I want to make a few introductory comments on the two orders because I have a feeling that I shall be speaking to a larger audience than that in the Committee Room. At this crucial crossroads for the Land Registry, I hope that my comments will reassure its many employees. Her Majesty's Land Registry maintains an up-to-date register of legal estates and interests in land and is a separate Government Department for which the Lord Chancellor is responsible. It was first established in 1862 and became an executive agency on 2 July 1990. Under the provisions of the land registration Acts, the Chief Land Registrar alone has power to grant title to land and other registrable interests in England and Wales. The Land Registry handles virtually all conveyancing and secured credit business and provides a range of land information services to those concerned with interests in property and ownership. Certainty of title is the cornerstone of efficient and confident dealing in property. By maintaining an up-to-date and authoritative register of interests in land, the Land Registry is able to provide the essential pre-contract and pre-completion services and statutory guarantees that enable a free market in property to operate. The Land Registry provides guarantees to those whose interests are registered and to those who rely on the certificates and search results which it issues. It also provides important services to the law enforcement agencies and its register is open to the public. The cardinal features of the Land Registry are its neutrality, its freedom from any conflict of interest and its authoritative public register of legal title backed by indemnity. The operational characteristics of the Land Registry are that its work is demand led, responding to fluctuations in the property market, and that it is self-financing. The Lord Chancellor, with the concurrence of the Treasury, sets fees by order at a level which ensures that the amounts raised will meet all the Land Registry's outgoings. 4 Throughout the 1980s the rapid growth in conveyancing and secured credit generated massive workloads for the Land Registry. Despite increased resources and improved productivity the workload continued to exceed its productive capacity. Within the existing constraints of annual accounting the Land Registry was obliged at the end of each financial year to surrender substantial surpluses of income over approved expenditure to the Consolidated Fund. At the same time large amounts of unprocessed work, for which fees had been paid, were carried over into the following financial year. When the level of activity in the property market began to decline and fee income fell, the Land Registry was unable to draw on past surpluses but was required to raise fees to finance the processing of accumulated arrears of work. A revival in property activity would once again put stress on the existing financial framework. It has been clear for many years that as a self-financing body which aims to reduce the net cost of registered conveyancing while providing effective customer services in a fluctuating market, the Land Registry needs to operate within a more responsive financing regime. Such a move was recognised by the Public Accounts Committee in its report on the Land Registry in 1991. The proposed move to a trading fund, with an accrual accounting regime, will enhance sound financial planning and enable the Land Registry to anticipate better, and to respond to, the uncertainties of the property and credit markets. It will enable the Land Registry to plan its finances by taking one year with the next—thereby allowing resources, income and expenditure to take account of fluctuations in the market. I believe that there are many benefits to Land Registry from trading fund status. It will be able to maintain the momentum towards the simplification of conveyancing and readier access to land information which rapid computerisation will make possible in this decade. Importantly, it will ensure that over any period of years the level of land registration fees need be no higher than the cost of maintaining and developing a sound land registration system and delivering prompt and effective services. The Chief Land Registrar, who is also the chief executive of the Land Registry Agency, will continue to be accountable directly to the Lord Chancellor for financial results and the agency's performance. Interested parties have been consulted on the trading fund proposal and have responded favourably. A report on that consultation has been laid before the House. Since its establishment as an agency, the Land Registry has, despite the difficulties faced by all those involved with property and conveyancing, continued to meet all its speed of service and quality targets while improving output per head and reducing manpower by over 2,300 posts. Last summer it was awarded a charter mark for its services to the customer. I am confident that trading fund status will allow that progress to be sustained in a rising property market, leading the way to improved and simplified conveyancing. In association with this order there is a requirement to make a further order under section 102(4) of the Finance (No. 2) Act 1987. That order is required to permit fees to be fixed to include a return on average capital employed of 6 per cent. The relevant Treasury minute required to be laid 5 under section 4(1)(b) of the Government Trading Funds Act 1973, as amended, in connection with the previous order, expressly requires such a rate of return. It is with pleasure that I commend the Land Registry Trading Fund Order to the Committee.
Mr. Nick Raynsford (Greenwich): I, too, am pleased to have the opportunity to speak on the orders under your chairmanship, Mr. Jones. I do so because my hon. Friend the Member for Brent, South (Mr. Boateng) cannot be present this afternoon and has asked me to take his place on the Committee. The Opposition do not intend to oppose the orders, but we shall ask some important and pertinent questions about them. The first relates to the consultation carried out by the Lord Chancellor's Department under section 1(3) of the Government Trading Funds Act 1973, which requires the Lord Chancellor to consult intrested persons and gives them an opportunity to make representations prior to the introduction of proposals such as the order. The Lord Chancellor's report on the representations states that he has consulted the Law Society, the Council of Mortgage Lenders, the Royal Institute of Chartered Surveyors and the Council of Mortgage Lenders. Either the Council of Mortgage Lenders has been given an unreasonable advantage in being given two bites of the cherry or, more likely, there was a typing error and the fourth body consulted was the Council for the Licensed Conveyancers. That raises the question of whether the consultation report is accurate. That matter also raises a more substantial question: why were not representatives of consumer organisations and the public consulted, instead of professional bodies? There is no objection to consulting professional organisations, which is right and proper, but it is strange that no organisation which might be more likely to represent the public interest has been given an opportunity to comment on the consultation paper from the Lord Chancellor's Department. No invitation to comment was extended to the National Association of Citizens Advice Bureaux, the National Consumer Council, Shelter or any other organisation likely to consider the matter from view of the public who might have an opinion on the process. The Minister told us that the Land Registry was awarded the charter mark. Is it in keeping with the citizens charter not to give the public an opportunity to comment on proposed changes to such institutions? Surely, it is important that the public, rather than professionals should be given the first say. The consultation document issued by the Lord Chancellor's Department states: "It is believed such a move from cash-based…accounting—as now required, to accrual accounting will be of benefit to Her Majesty's Land Registry customers." That is a clear statement showing that the Lord Chancellor believed that that was in the customers' interests. Why were the customers not consulted? Is it compatible with the citizens charter that people are to be told that a proposed change is in their interest but that there will be no opportunity to comment on that change? Has the Chancellor of the Duchy of Lancaster been consulted? Has he expressed an opinion as to whether the procedure conforms with normal expectations of the citizens charter? 6 Would the charter mark awarded to the Land Registry be withdrawn if it were discovered that the public were not being consulted about such proposals? Those questions gain greater significance from the timescale. The order is being considered on 29 March, and comes into effect in three days, on 1 April. That allows no time for comments other than those made by Members of the Committee, who are the only people able to speak on behalf of the public interest. I hope that the Minister will answer those pertinent questions. Will the Minister also explain why the limit for the borrowing level for the Land Registry trading fund has been set at £130 million? How was that figure determined? A number of pertinent questions arise about the Land Registration (Determination of Costs) Order 1993, which establishes a new framework for the fees to be charged by the Chief Land Registrar. The order includes a requirement that the fees should be set at a level that will secure a return on the resources employed. Does that requirement cover all fees? Will its application vary according to the type or class of fee involved? For example, will fees charged for public inspection of the Land Registry be affected in the same way as those for registration of title? The Chief Land Registrar is obliged to protect against the misuse of the right of public access to the Land Registry. That requires more detailed procedures and bureaucracy, but treating it as a separate cost centre, with charges set accordingly, could result in a disproportionate impact on the fees charged to members of the public seeking access to the Land Registry. Will the change contained in the order result in disproportionate increases or variations in the fees charged for certain classes of activity? What will be the impact on the scale of fees of the requirement that the Land Registry must secure a return on the resources employed? Do current fees provide such a return? The Minister said that fees were currently set to cover outgoings. Is that the only objective or its there a requirement to make a return? What rate of return is envisaged under the order? What profit will be made by the Land Registry under the new arrangement? What will be the impact on fees? Will they increase, and, if so, by how much? Will such an increase be disproportionate for any class of fee? Those important questions deserve an answer from the Minister before the order wends its way.
Mr. Den Dover (Chorley): I rise to support the hon. Member for Greenwich (Mr. Raynsford). It is essential for an organisation operating on a trading fund basis to raise a profit, as I know from my experience with Royal Ordnance plc at Chorley. That company was taken over by British Aerospace after privatisation. It owned an enormous amount of land that was heavily contaminated. I pay tribute to the work force and its liaison over many years with the Ministry of Defence, but there had been a total lack of investment under the trading fund. As a result, there were no modern production facilities and the organisation had not been brought up to date. For the Land Registry, a forward-looking organisation orientated towards property development whose customers require a swift, accurate and efficient response, it is all the more important that profitability is achieved, as any possible future privatisation will mean that more funds will be paid into the coffers of the Government and the taxpayer.7
Mr. John M. Taylor: I shall deal in reverse order with the points of my hon. Friend the Member for Chorley (Mr. Dover) and the hon. Member for Greenwich. I thank my hon. Friend for his parallel observations, gained from experience of an important undertaking in his constituency. I think that we both converge on the conclusion that there is no virtue in making a loss. However, in the name of fairness I should say to my hon. Friend that privatisation of the Land Registry is not on any agenda known to me—although, of course, nothing is excluded from consideration as a future option—partly because of reasons regarding the Crown indemnity of titles. That is a unique service provided to the public which could not be guaranteed in the same way by the Prudential insurance company, for example. I shall now deal with the questions of the hon. Member for Greenwich. He represents a constituency where various tariffs and measurements are secured and guaranteed, so perhaps there is a vestige of a parallel there. Regarding consultation, the Land Registry is a pretty open organisation. It is not located covertly, and its public relations are extraordinarily good. People are welcome to visit the public parts and, in general, those working with land registries are free to register their views with willing members of staff. I had 22 years experience as a high street practitioner in a general practice. I would hazard a guess that in well over 99 per cent, of cases, the mechanics of land registration— familiarity with the forms and procedures necessary for effecting a first registration, the registration of a transfer, the registration of a charge or the removal of a charge, not to mention the fees charged for those forms—make up the day-to-day occupations of the conveyancing legal profession. Therefore, the profession is probably one of the most valuable sources of consultation. In consulting the practitioner, the Land Registry consults the informed agent of the consuming public. The public need not know about the intricacies involved but they are represented on all material transactions by the conveyancing legal profession, which certainly is consulted. The hon. Gentleman then asked me about the figure of £130 million. It was chosen in an informed way, to be deliberately beyond the boundary of any immediate requirement because it would take, at the very least, secondary legislation to revisit and alter that maximum sum. It is rather like buying too large a pair of trousers for a rapidly growing boy in the sure and certain knowledge that he will grow into them. It is anticipated that in the medium term, the Land Registry will grow into a borrowing requirement of £130 million. Meanwhile, the figure comprises two amounts—a temporary borrowing limit of £30 million and long-term borrowing of £100 million. Temporary borrowing is available to cover fluctuations in a year in which income is out of step with expenditure. The sum is repayable within the year in which the borrowing took place. The long-term borrowing limit is an upper limit which the Land Registry may not reach for many years, if at all. Long-term borrowing is available primarily to fund the purchase of capital assets such as land and buildings. 8 The hon. Gentleman next asked whether one area of fees would be predatory on another area of fees. I assure him, first, that trading fund status will not cause fees to increase. Any necessary increases in future will cover all the Land Registry's services as they are based on cost, including the 6 per cent, return on average capital employed. Increases will not be made in one area of fees at the expense of another. I am happy to put that assurance on the record. The hon. Gentleman also asked what the required return was on the borrowed component of the initial capitalisation of the Land Registry. The Land Registry must achieve 6 per cent, and it knows that it must work to that figure. The hon. Gentleman rounded off his questions by asking whether trading fund status would mean an increase in land registry fees. Fees will continue to be set at a level to recoup expenditure and no more. With the removal of the need to surrender any surplus at the end of the financial year, the Land Registry will be able to ensure that in any period, the aggregate fees paid by customers need be no higher than the aggregate expenditure necessary to maintain land registration services. I have endeavoured to do justice to the questions of my hon. Friend the Member for Chorley and the hon. Member for Greenwich and I commend the order to the Committee.
Mr. Raynsford: As I said earlier, it is not the Opposition's intention to oppose the order. Apart from a couple of observations on the Minister's response, I propose to say no more. I welcome the assurance that privatisation is not on the agenda for the Land Registry. If that were to change, we would consider the matter with a different view, but we are pleased with the Minister's assurance. The Minister's view that the Land Registry is not a secret organisation is not convincing to those of us who campaigned for a long time in the House and outside for public access to the Land Registry, which was achieved only recently. Before that it was a secret organisation. His explanation that it is as good to consult professional people as to consult the public is unconvincing and does not satisfy the requirements of the citizens charter. I cannot believe that the Government accept that consulting railway professionals instead of railway users about British Rail's standard of service, or housing managers instead of tenants about the standard of service for people living in rented accommodation would be adequate. I hope that if there is consultation on matters relating to the Land Registry, the interests of consumers—the public—will be taken into account and their representatives will be consulted instead of just professionals. Finally, I welcome the Minister's assurance that there will be no disproportionate increase in any category of fees in any transfer between one class and another. I confirm that the Opposition will not oppose the order and I have nothing further to add.
Question put and agreed to.
Resolved, That the Committee has considered the draft Land Registry Trading Fund Order 1993.
Resolved, That the Committee has considered the draft Land Registration (Determination of Costs) Order 1993.—[Mr. John M. Taylor.]10
Committee rose at Six minutes to Five o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Jones, Mr. Martyn (Chairman)
Evans, Mr. Jonathan
Knight, Mr. Greg
Taylor, Mr. John M.