Companies (Fees) (Amendment) and Open-Ended Investment Companies (Fees) (Amendment) Regulations 2000

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Mr. Nick Gibb (Bognor Regis and Littlehampton): I also welcome you to the Chair, Mr. Benton. I am grateful to the Minister for that explanation, although while I fully understand that the rules prevent Companies House from subsidising one area of its activities through another, it is nevertheless odd that it should be seeking a 30 per cent. increase in its fees for microfiche-based information services when its accounts look healthy. For the year ended 31 March 2000, Companies House made a surplus three times that of the previous year, rising from £1 million in 1998-99 to £3.2 million in 1999-2000, the latest period for which accounts have been published.

In both those years, Companies House paid a dividend to the Exchequer of £1 million, yet despite that, the only price decreases I have been able to spot are a 50p decrease from this April in the cost of retrieving a document and a slightly cheaper bulk purchase of 12 documents for £5, increasing to 25 documents. Those reductions are all minor and some other marketing mechanisms result in slightly cheaper pricing, but no decrease, as the Minister confirmed, in registration or filing fees, as far as I can tell.

Note 2 to the accounts, which analyses the income into the various categories, makes it clear that income from company searches delivered in accordance with fees orders resulted in a loss of £1.1 million in 1999-2000, which is broadly similar to but slightly less than the loss of £1.4 million in 1998-99. It is also clear from that note that the income from registration of annual documents and mortgages and from incorporation, change of name and dissolution and liquidation have given rise to a huge surplus of £2 million each, compared with £2 million for both in the previous year. In other words, the surplus has doubled. Will the Minister spell out to the Committee how the £2 million decrease in revenues that he is talking about will mean lower prices for customers?

All that follows a hefty increase in the fees two years ago almost to the day, when the same Minister demanded and obtained a 40 per cent. increase. The increases are far higher than the rate of inflation and will have to be sustained by small businesses and individuals more often than by big businesses, which will no doubt be able to use the more electronically based services of Companies House.

I understand that Companies House is an executive agency and a trading fund and must make a return of 6 per cent. on its assets. According to the annual report, however, it met its financial targets for 1999-2000. It achieved a 3 per cent. reduction in the unit costs of processing documents—bang on target—and a return of 8 per cent., which is about 2 per cent. more than the 6 per cent. target. Indeed, the chief executive of Companies House, John Holden, said:

    As it is, we have been able to keep costs down so that, even with today's lower demand levels we are able to contemplate only moderate and manageable price increases for fiche.

I should not have thought that many people would regard the 30 per cent. increase proposed by the Minister as moderate or manageable, particularly as it follows a 40 per cent. increase two years ago.

We understand that because of the significant fixed costs involved, as demand for fiche services falls, the unit cost will rise. The Minister gave the figures for the fall in demand—from £1.4 million to £0.7 million this year. Aside from the closure of the City road office, an office that I remember fondly from my days as a trainee chartered account—that has closed and is a cost saving—what effort is being made, and with what success, to reduce those fixed costs as demand falls?

My concern is that, as demand falls further, the Government will make even more demands to increase the fees further, almost exponentially. Fees could be prohibitively high, while demand is still low but significant. The Minister hinted that a different approach would be taken in future to the problem of the fall in demand. Will he spell out that approach and give a guarantee that there will be no further significant hikes in fees for fiche services? What calculations have the Government made, based on their estimate of demand for microfiche services in the next few years, of how much fees would have to increase to cover the costs of those services?

The Minister may think that I am making a fuss about relatively small sums of money, but the regulations require the affirmative procedure because they are a form of taxation. It seems very Thatcherite to insist that every Companies House service make a 6 per cent. return on capital, but given that the services are the exclusive monopoly of Companies House and that much of what it does is required by law, it is a form of tax. Members of the Committee are beholden to scrutinise such demands carefully, therefore.

In 1996, when the Conservative Government sought a similar increase, there was an accompanying reduction in charges for other services. To judge from the 1999-2000 accounts, there is scope for reductions. I confess to some surprise that it has not managed to reduce costs further still in providing the fiche services. It is, after all, an information-based operation, where computer technology is most able to achieve enormous cost savings. I know that Companies House is engaged in transforming itself, but I would have expected to see evidence of significant savings by now.

It is easy for Ministers to pass on costs to the poor suffering public, but it is much more difficult to ensure that the agency is paring costs. Indeed, in stage one of the quinquennial review, the accountants Pannell Kerr Forster expressed concern that insufficient systems were in place to monitor the costs incurred by Companies House. In its report to the review team, Pannell Kerr Forster said:

    Companies House lacks a detailed analysis and understanding of the costs involved with the business. This has consequences in terms of understanding where, specifically, investments should be made to reduce costs and improve efficiency, and may result in the maintenance of systems of practices where true costs are hidden.

Why, for example, has Companies House significantly increased staffing levels in the past few years? According to the chart on page 24 of the accounts, in 1996-97 there were 889 staff; by the following year there were 904; in 1998-99 there were 934; and in 1999-2000 there were 975. Given that Companies House is involved in the information sector, there ought to be significant reductions in manpower. Can the Minister explain what is happening? Why, moreover, have fees in category 11a increased by 100 per cent., and fees in category 11b by 62.5 per cent?

Briefly, on electronic filing, chapter 5 of the quinquennial review, which was published last November, states:

    Stage 1 of the Review concluded that Companies House was well on track to meet the target for all business to be capable of being transacted electronically by 2005.

However, in his annual report statement, the chief executive says that electronic filing

    remains as yet little used.

It remains little used for the same reason that the Inland Revenue has failed completely in its use of electronic communications. Today's Financial Times states:

    The Inland Revenue has received barely 32,000 self-assessment tax returns through online means, despite being more than half way through a £2 bn, 10-year programme of information technology investment.

It points out that that is far

    short of its 200,000 target.

In respect of Companies House, has there been a significant improvement in this area since March 2000? What percentage of documents is filed by e-mail?

The conclusion of chapter 5 of the quinquennial review makes the following important point:

    With new technology, the internet and e-commerce, costs of disseminating information are falling.

It continues:

    We recommend that Companies House should review the principles governing its pricing and the allocation of costs in the light of those changes and seek legal advice with a view to enabling it to reduce significantly its charges for information provided electronically.

I look forward to the Minister's response to those points, but I detect a loud note of complacency in the cost management of Companies House in general, and in fiche operation in particular. This Committee would serve the public well if, for once, it turned down this request for a price increase and put additional pressure on the agency further to cut fiche operation costs, so that significant savings—not the small savings that the Minister hinted at—arising from improvements in technology could be passed on to customers, along with significant price reductions in other areas.

4.53 pm

Dr. Howells: I very much welcome the constructive approach taken by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). He has posed proper questions, but I am confident that Companies House and I can answer them.

Companies House has done well in terms of improving its performance. It is reducing the cost of electronic information by 20 to 25 per cent. from 1 April. We have concentrated on providing better value for money by reducing charges for second and subsequent documents on any company search, and by introducing packages such as 12 documents for the price of three or four. I do not know if the hon. Gentleman saw the special deals, but they impressed me.

I fondly remember the Cardiff office of Companies House because, in the early 1980s, I went there to dig out—almost literally—what I could on small mines and the companies that own them. In those days, as I am sure the hon. Gentleman can recall, records were entirely on microfiche. Those trips to Cardiff cost me and the National Union of Mineworkers a lot of money. We should remember that because something remarkable has been achieved since he and I used the facility.

There are now 25 documents in the £5 package, instead of 12. The pre-scanning packages will be available from the end of January at the same £5 price, which will be reduced to £4 from 1 April. We have also extended the opening hours: service hours are now 7am until midnight for six days a week, which is no mean feat.

We aim to go much further in our contribution to the knowledge economy—for example, we are increasing the use of websites. About 55 per cent. of companies—that is about 800,000 out of a total of 1.4 million—have been registered electronically since March 1995, when scanning began. The huge number of companies incorporated represents significant progress.

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