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Mr. Andrew Love (Edmonton): I should say at the outset that I sympathise with the hon. Gentleman's arguments, but those at the Financial Services Authority
say that the charges simply reflect the costs that arise from that section of their organisation. How do we respond to that?
Mr. Chope: The hon. Gentleman makes a fair point, but I submit that we should ask ourselves why the costs to the FSA of regulating clubs should be 10 times as high as the costs to Companies House of regulating companies. There must be something very odd about the FSA's fee structure or about the way in which those at the FSA allocate their costs across their organisation if they can come up with the conclusion that it costs 10 times as much to obtain an annual renewal for a club compared with the annual renewal for a company. That is the point.
Like several other regulatory authorities, the FSA is self-financing; it sets fees to cover its costs. It has enormous scope to limit costs in areas where there is no need for great regulation. Given the very large number of clubs, I am amazed that it should be reasonable to charge each of them up to £200 for the privilege of renewing their membership every year. It would be different if they wanted to change their rules, as that would incur a lot of costs, administration and so on.
If the clubs just want to obtain annual renewals in the same way as companies obtain annual renewals from the Registrar of Companies, the point that my right hon. Friend makes in his new clause is absolutely in accordance with common sense. Unless the House uses such opportunities to take control over those self-financing regulatory authorities, we will cede to them the power to impose burdensome charges on clubs, which they cannot afford to bear.
Mr. Mark Hendrick (Preston): Does the hon. Gentleman agree that that figure was probably plucked out of thin air?
Mr. Chope: I am sorry, but I do not understand the hon. Gentleman's reference to a figure plucked out of thin air.
Mr. Ken Purchase (Wolverhampton, North-East): My hon. Friend is referring to the increased fees.
Mr. Chope: It is a fact that there is a threat of increased fees of £200. There is no doubt that that is the reality of the FSA's proposal. If the hon. Member for Preston (Mr. Hendrick) is suggesting that the FSA perhaps reached that conclusion on the back of an envelope and produced a nice round figure, I am unable dispute the point.
10.15 am
Mr. Greg Knight: I did not understand the hon. Gentleman's intervention either. I am not sure whether he was seeking to be supportive and helpful to my case in suggesting that the FSA had plucked the figure out of thin air, or whether he was accusing me of having plucked it out of thin air.
Mr. Hendrick indicated dissent.
Mr. Knight: The hon. Gentleman shakes his head and I am delighted that he corrects that last point. On Tuesday
this week, I spoke to an FSA employee, who confirmed that the fee is likely to be about £200 a year. My hon. Friend is absolutely right to say that that fee will not be charged for changing the rules, but simply for the annual renewal of registration.
Mr. Chope: I am grateful to my right hon. Friend for making that clear. The hon. Member for Harrow, West (Mr. Thomas) has arranged a meeting with the FSA on Monday next, but my fear is that if we do not take the opportunity presented to us today to control the fees that the FSA can charge, it will deploy the same arguments as those that it has used in correspondence—it will say that it needs to impose those costs to meet its own internal charges.
Rob Marris: I am sure that many of my hon. Friends are sympathetic to the hon. Gentleman's concerns, but I wonder whether he can clarify a technical point. Off the top of my head, I can think of four types of limited companies: public limited companies, companies limited by guarantee, private limited companies and a different type of private limited company, such as C&A was, that does not have to disclose as much information. However, the new clause seems not to differentiate in that way. Perhaps he can explain how it would operate if it were included in the Bill.
Mr. Chope: I understand that the fee to register a small company is £15 a year and that the fee to register a new company is £20. My right hon. Friend's new clause would limit the annual renewal fee to £15 for small clubs and industrial and provident societies in the same way as it is limited to £15 for small companies. Obviously, if the fee for the renewal of company registrations were to rise from £15 to £20, the fee that the FSA charges for the renewal of industrial and provident societies' registration could also rise.
On Second Reading, I referred to a letter that I received from the Village Retail Services Association—ViRSA—which is the organisation that deals with small rural communities that wish to revive or resurrect their retail facilities. As is stated in column 1149 of the Hansard report of that debate, I said that Mr. Peter Jones, the director of ViRSA, gave some examples of the cost of the fee structure for those very small organisations.
A couple of hundred pounds is probably more affordable for a club with a large turnover than for a small village shop co-operative, where every penny counts. So the new FSA fee structure will affect not only clubs, but a lot of smaller industrial and provident societies with very small turnovers. The FSA has expensive premises in one of the most expensive capitals in the world and has extremely well paid staff.
Mr. Love: The hon. Gentleman refers to the FSA, but surely it will argue that, because industrial and provident societies are more complex than companies and because there are not as many such societies as companies, we cannot make a direct comparison between the fees charged for the two groups. How do we respond to that criticism?
Mr. Chope: I am not sure that the FSA has made that criticism. There are large numbers of industrial and provident societies, but that does not mean that they
should face their current cost structure. For example, there is no reason why the FSA should not set up a subsidiary in a part of the country where the costs of staff and premises are much lower. It could have a regulatory regime that is funded at a level of expenditure that is more consistent with those whom it seeks to regulate.
Mr. Purchase: Will the hon. Gentleman extend his thesis a little further and recognise that, although London is a relatively high-cost area, the FSA is also profligate? That forms most of the problem. If the FSA were to set itself up in the west midlands—in Birmingham or Wolverhampton—it would find that people work efficiently, effectively and economically. It would not be as profligate as it is in London. He may agree that there is a total disconnection between what happens in London where the high rollers pay whatever they want for whatever they want and other areas of the country where reality has to break out from time to time.
Mr. Chope: I agree with the hon. Gentleman, but I would not limit the areas to the ones that he specified. I would certainly include Christchurch, Ferndown and Verwood and other parts of Dorset. Ministers have referred to costs elsewhere, but the costs of employing people in Dorset are significantly lower than the costs of employing people in London. The wages and salaries that secretaries command in Christchurch, which is just under 100 miles from London, are significantly lower than the salaries that can be commanded in London. However, there is no reason to suppose that the efficiency of secretaries in Christchurch is any less than that of those in the City of London. In fact, I suspect that it is much higher, partly because they enjoy a much better quality of life.
Mr. John Butterfill (Bournemouth, West): Does my hon. Friend agree that, just as there is great variety in the type of societies that are the subject of the Bill, there is much greater variety in the type of company? Small companies that perform local community functions can be set up as limited companies and the range extends through to medium-sized companies and huge corporations. Complexity is not an issue. There is much greater variation between types of company than there can possibly be between the societies that are the subject of the Bill.
Mr. Chope: My hon. Friend makes an excellent point. We are talking about the simple process of registration. It costs the same to register a child irrespective of the complications of the parentage, and it should cost the same to register a company or an industrial and provident society. It is a straightforward issue of equity and getting control over the costs of the regulatory authorities.
The FSA has deployed the argument that, under the previous regime, the Registrar of Friendly Societies received a cross-subsidy from the Treasury. If that is so, one of the consequences of the new clause is that it would allow the FSA to put a good case to the Treasury if it had one. However, I am sceptical about the need for the FSA to be subsidised beyond the income that it would receive if it charged a fee for registration in line with the fee for the renewal of company registration. That is why I am an enthusiastic supporter of the new clause moved by my right hon. Friend the Member for East Yorkshire (Mr.
Knight). Although the gap may be tenfold at the moment, if things carry on as they are, the annual registration fee for friendly societies may be £500 or £1,000 in two or three years' time when people are trying to expand that sector. That would be a crippling burden on this important part of the community.I hope that the Paymaster General and, more importantly, the House will accept the new clause. It would provide reassurance to all the small clubs and societies that feel insecure because of the threat of increased burdens and costs of regulation.
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