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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.

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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.

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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.

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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

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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

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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

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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

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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.

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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


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Ainsworth, Peter (East Surrey)

Aitken, Rt Hon Jonathan

Alexander, Richard

Alison, Rt Hon Michael (Selby)

Allason, Rupert (Torbay)

Amess, David

Arnold, Jacques (Gravesham)

Arnold, Sir Thomas (Hazel Grv)

Atkinson, David (Bour'mouth E)

Atkinson, Peter (Hexham)

Baker, Nicholas (North Dorset)

Baldry, Tony

Batiste, Spencer

Bellingham, Henry

Bendall, Vivian

Body, Sir Richard

Booth, Hartley

Boswell, Tim

Bottomley, Rt Hon Virginia

Bowden, Sir Andrew

Bowis, John

Boyson, Rt Hon Sir Rhodes

Brandreth, Gyles

Brazier, Julian

Bright, Sir Graham

Brooke, Rt Hon Peter

Brown, M (Brigg & Cl'thorpes)

Browning, Mrs Angela

Burns, Simon

Burt, Alistair

Butler, Peter

Carlisle, John (Luton North)

Carrington, Matthew

Carttiss, Michael

Cash, William

Channon, Rt Hon Paul

Chapman, Sydney

Clappison, James

Clark, Dr Michael (Rochford)

Clarke, Rt Hon Kenneth (Ru'clif)

Clifton-Brown, Geoffrey

Coe, Sebastian

Colvin, Michael

Congdon, David

Coombs, Simon (Swindon)

Cope, Rt Hon Sir John

Couchman, James

Cran, James

Currie, Mrs Edwina (S D'by'ire)

Davis, David (Boothferry)

Day, Stephen

Devlin, Tim

Dicks, Terry

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