HOUSE OF COMMONS
First Standing Committee on Delegated Legislation
COMPANIES (FEES) (AMENDMENT) REGULATIONS 1996
Tuesday 18 June 1996
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The Committee consisted of the following Members:
Chairman: Sir John Hunt
Baker, Mr. Nicholas (North Dorset)
Body, Sir Richard (Holland with Boston)
Campbell, Mrs. Anne (Cambridge)
Hoon, Mr. Geoffrey (Ashfield)
Devlin, Mr. Tim (Stockton, South)
Dunn, Mr. Bob (Dartford)
Evennett, Mr. David (Erith and Cray ford)
Faber, Mr. David (Westbury)
Fox, Dr. Liam (Lord Commissioner to the Treasury)
Hannam, Sir John (Exeter)
Harvey, Mr. Nick (North Devon)
Campbell, Mr. Ronnie (Blyth Valley)
Martin, Mr. David (Portsmouth, South)
Clapham, Mr. Michael (Barnsley, West and Penistone)
Oppenheim, Mr. Phillip (Parliamentary Under-Secretary of State for Trade and Industry)
Cunningham, Mr. Jim (Coventry, South-East)
Purchase, Mr. Ken (Wolverhampton, North-East)
Simpson, Mr. Alan (Nottingham, South)
Sutcliffe, Mr. Gerry (Bradford, South)
Mr. E. P. Silk, Committee Clerk2 3 First Standing Committee on Delegated Legislation Tuesday 18 June 1996
[SIR JOHN HUNT in the Chair]
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Phillip Oppenheim): I beg to move, That the Committee has considered the Companies (Fees) (Amendment) Regulations 1996 (S.I. 1996, No. 1444). The main aims of the regulations are, first, to reduce prices overall for a range of Companies House services and, secondly, within that overall reduction to increase certain charges where higher unit costs have become unavoidable. I do not propose today to refer to each of the amendments made through the regulations. I shall confine my remarks to describing and justifying the main classes of change, which account for most of the revenue covered by the amendments. As a background, it might help hon. Members if I remind them that the functions of the Registrar of Companies are carried out by Companies House executive agency. Companies House has been an agency since 1988. It publishes a full set of commercial style accounts each year, which are audited by the National Audit Office. The accounts for the financial year 1995–96 are due to be laid before Parliament shortly by the Comptroller and Auditor General. Subject, of course, to the outcome of his audit, they are expected to show a surplus of some £ 2 million on an annual income of some £ 35 million. Companies House has a target to reduce unit costs in real terms by 5 per cent. a year. So, without action to reduce fees, and assuming that there are no major changes to the pattern of demand, that surplus will continue to rise. The previous amendments to the present fees were made in 1994. The principal changes were a reduction in the annual return fee and the incorporation and change of name fees. The nature of the powers in the Companies Act 1989 is such that reductions may be made by negative procedure. The need for resolutions of each House arises only when fees are being introduced for the first time or are being increased. It is the need for a small number of increases now that creates the requirement for the resolution today. Since 1994, Companies House has continued to reduce costs significantly. More precisely, it has reduced unit costs by 12 per cent. in total real terms over the past two financial years. The reduction of £ 3 in the annual return fee in the regulations represents the largest single change and, on its own, is expected to reduce Companies House income from that service by £ 2.5 million each year. 4 The reductions are partly offset by increases that Companies House is required to seek when the unit costs of some of its services are rising because demand is falling and running costs are substantially fixed. The most important such case is the basic company search conducted by microfiche. The full range of documents that companies are required to file with the Registrar of Companies are maintained at present on files of microfiche. The most common company search is satisfied by Companies House providing a microfiche duplicate of the company file. The regulations provide for the price of that service to rise from the level of £ 3, which was set in 1991, to £ 3.50. Over the past few years, Companies House has been capturing some of the information on the statutory forms filed by companies on computer databases. That produces two benefits. First, it has allowed Companies House to pre-print much of the information required from companies on their annual returns, thus reducing the burden of form-filling for those companies. The second benefit is that that information is increasingly available directly to people searching for company information by computer. For example, the process of finding out about the directors of a company can now be carried out entirely electronically from an office anywhere in the country and for less than the price of a company search by microfiche. The changes will also mean that we shall probably seek to take a different approach to fees regulation in future. We might expect, in due course, to have a set of regulations that reflect the changing balance of services towards electronic technology. At some stage during the next few years, Companies House will need to decide whether a sufficient proportion of its demand has moved from the microfiche system to justify the step of winding down that system. Such a step would be taken only after careful consultation with those who depend on Companies House for information about companies. I hope that my explanation of the reasons for the fee adjustments has been helpful to hon. Members and I commend the regulations to the Committee.
Mr. Geoffrey Hoon (Ashfield): I thank the Minister for the clarity and brevity of his explanation. The Labour party will not oppose the proposals.
Mr. Ken Purchase (Wolverhampton, North-East): I do not rise to oppose the regulations—in a sense, they are of small importance—but to ask why so many changes have been made in so short a time. I believe that this is the third change in five years—yet for many years the fees were virtually set in stone. The cost of filing a set of returns was outrageously increased to—32, which provoked some controversy, but I note that that fee has now returned to a more sensible level. That reduction is, of course, welcome. I seek an assurance that the profits made not long ago will be steadily reduced. The Minister said that the surpluses will continue, but he has not yet said how large they will be. He may, of course, ask us to wait 5 until the accounts are published in a few weeks. The Minister should assure us also that the functions of Companies House will remain those of a service industry, simply making sufficient money to cover its costs and to fund the investment in technology to which he referred. Is this change the last the will be made for some time? Given that there is a continuing surplus, why are some charges being increased? I should be grateful for answers to those questions.
Mr. Oppenheim: My notes say to thank hon. Members for a useful debate. It was not quite a debate, but the hon. Member for Wolverhampton, North East (Mr. Purchase) asked valid questions and I shall do my best to answer them. Companies House exists primarily to provide a service. I endorse that. It is not a profit-making body and it is not meant to make a huge profit for the taxpayer or the Treasury by providing a monopoly service. However, it must be recognised that Companies House is a monopoly and that must therefore ensure, as best we can in the absence of competition, that it is run as efficiently, flexibly and effectively as possible, so that those who have to use its services are not unfairly overburdened. The great thrust of our public sector reforms—it applies as much to Companies House as to other bodies—is to ensure that public institutions are as effective as possible. Sometimes that involves competitive tendering and contracting-out, sometimes it means using agency status and sometimes it needs a combination of those. We have put Companies House through a series of tests. By and large, the in-house staff have proved to be highly effective, efficient and 6 resilient. The savings that were found have allowed us to reduce the cost to businesses, which is the reason for the regulations. The only significant increase is in the fees for the inspection of microfiche copies. The problem is that, in the old days, pretty well all the filing was done on microfiche. That system is now rapidly winding down and we have a choice—we can either insist that those who use the computer database system cross-subsidise the microfiche users, or we can ensure that the real cost of the microfiche is paid by those who use it. It is not a massive increase, but as the system is winding down it is fair and justifiable that those who still insist on using it pay a commercial rate—hence the relatively small rise in the microfiche fee. The problem is that microfiche has high fixed costs, so as its usage falls the fees have to be increased. Some of the Companies House surplus is being returned in cost reductions to users. Some of it is being invested in computer technology and Companies House is considering accelerating that investment to ensure that it is at the forefront in giving business users and researchers a good service. After that, whatever small surplus is left goes to the Consolidated Fund. I am sure that the hon. Member for Wolverhampton, North East is aware of that, so I shall say no more on that subject. Obviously, it is not the aim of Companies House to plonk huge sums of money into the Consolidated Fund every year. I hope that I have answered not only the hon. Gentleman's questions, but those that other hon. Members may have been thinking of asking—although, of course, I shall be happy to answer any further questions.
Question put and agreed to.
Resolved, That the Committee has considered the Companies (Fees) (Amendment) Regulations 1996 (S.I. 1996, No. 1444).
Committee rose at twenty minutes to Eleven o 'clock.7
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Hunt, Sir John (Chairman)
Baker, Mr. Nicholas
Hannam, Sir John
Martin, Mr. David