Companies (Fees) (Amendment) Regulations 2002

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Fifth Standing Committee on Delegated Legislation

Thursday 7 March 2002

[Mrs. Marion Roe in the Chair]

Companies (Fees) (Amendment)
Regulations 2002

9.55 am

The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): I beg to move,

    That the Committee has considered the Companies (Fees) (Amendment) Regulations 2002 (S.I. 2002, No. 317).

The regulations will apply to England and Wales and to Scotland, but not to Northern Ireland, which has its own company registry. Their main effect will be to increase fees for microfiche products, including the basic search of company records. The aim is to enable Companies House to match as closely as it can the revenue that it generates from that service with the costs that it incurs in providing it. The changes are necessary because so many more people and organisations are taking advantage of the alternative electronic services now on offer. The consequence is that demand for microfiche has declined by a further 33 per cent. since the fees were last changed in April 2001.

The regulations are necessary because of the way in which Companies House is responding to the Government's modernising agenda. It increasingly offers up-to-date electronic services to its customers, who increasingly prefer them to the older paper and microfiche-based services. The balance in the provision of company information services is therefore continuing its speedy shift towards electronic-based services.

Consequently, demand for microfiche is expected to continue to decline. The decline is such that Companies House currently aims to stop updating microfiche late this year or early in 2003. However, the frozen historical microfiche record will still have a role in the marketplace for company information. It will become a specialised product for forensic analysis and historical research, and it should be priced accordingly.

In explaining the reasons for the regulations, I shall not refer to each of the changes being made. Instead, I shall concentrate on microfiche and related products, which cover the bulk of the changes. However, I am happy to respond to any questions that hon. Members may have on individual items.

Companies House is well advanced with its programme of developing systems and services that allow easier access for the electronic registration of statutory information. It will also enable company data to be provided in an increasingly wide range of electronic formats, which is consistent with the Government's modernising ambitions. The success of that strategy is reflected in the declining use of

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microfiche in favour of electronic access as the preferred way to retrieve company information.

In 1996, there was a general reduction in Companies House fees, which was made possible by the agency's success in reducing its operating costs significantly. None the less, it was necessary even then to increase the price of the microfiche search because of reducing volumes. The price of microfiche-based products was increased again in 1998 and 2000 for the same reason. The cost of providing a microfiche service is substantial and essentially fixed; as more customers switch from microfiche to electronic-based ways to access company information, the unit cost of microfiche continues to rise.

By the same token, the cost of electronic access to company information has fallen as demand increases. The cost of the electronic search products that were available in 1996 has broadly halved, and the range available has greatly expanded. Much basic information that is searched for electronically is available free of charge. Individual documents cost 1 when searched for electronically, but convenient packages for customers are massively discounted. However, today's debate is not primarily about the electronic products, but about microfiche.

The number of microfiche searches has declined from 2 million in 1995-96 to just under 600,000 in 2000-01, which represents a fall of more than 70 per cent. in six years. The decline is expected to continue to about 300,000 during 2002-03, which represents a further 50 per cent. drop in the coming year. That is not at all to be regretted, as it is evidence of use of new and better technologies by users of company information. None the less, because of declining demand, Companies House calculates that the cost of producing an income-generating microfiche search has risen from close to 6 a year ago to 8.50 in 2001-02. The predicted cost is just over 11.50 on the fiche sales expected next year compared with the current fee of 6.50.

In spite of that potential loss, the regulations propose increasing the standard microfiche search fee by only 2.50 to 9. That represents a 38 per cent. increase set against a 33 per cent. decline in volume over the past year, and an anticipated 45 per cent. decrease over the next two years. The reason for that unusual approach to cost recovery is straightforward: Companies House is unlikely to be able to recover the full cost, no matter how much it charges, because of expected demand elasticity with price.

Over many years, Companies House has managed the declining trend in microfiche demand with progressive price increases to balance revenue and cost reductions, wherever those can be found. For example, the parallel production of fiche in London was abandoned in 1999--a successful cost-reduction measure. The point has been reached at which sales volumes are so low that further reductions will have a big enough impact on unit costs to provoke a dramatic further decline if those higher unit costs translate into higher sales prices.

Hon. Members were warned of the likely increase in the price of microfiche products in the Companies

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(Fees) (Amendment) Regulations 2000. That increase may be the last for microfiche. Companies House aims to stop updating microfiche towards the end of the year. It will then rely principally on electronic products, or electronic-derived products, to satisfy all demands for company information. When that happens, Companies House will provide a suitable alternative product for users of microfiche who, for whatever reason, are unable to use electronic-based search services. Microfiche in its current form has served its purpose well, but it has reached the end of its economic viability.

Since October 2000, searchers have been able to purchase documents over the worldwide web using credit cards, which is quite novel in the provision of Government information. Increased demand for such services will lead to lower prices for easily accessible, high-quality data in an electronic format. That will apply equally to bulk customers, professional users of the Companies House subscription service, Companies House Direct and casual users on the internet. No other changes to the statutory fees for any other incorporation or document registration activity are proposed.

In summary, Companies House fulfils a clear function of being the key statutory registry for companies in Great Britain. The agency has an enormously important role in information provision because of its recently introduced worldwide web company information service, which is now available at the touch of a button to anyone, across the world. I hope that my explanation of the reasons behind the fee changes has been helpful to hon. Members and I commend the regulations to the Committee. I confirm that they are compatible with the European convention on human rights.

10.2 am

Mr. Nigel Waterson (Eastbourne): It is a pleasure to meet under your chairmanship, Mrs. Roe.

I do not think that we need detain or divide the Committee. This is not one of the biggest pieces of legislation that the Government are introducing in the current Session, so, unless cleverer people than me have noticed nuances and subtleties that I have failed to see, I need not speak for long. I cannot, of course, speak for the Liberal Democrats, because of their impertinent and wholly implausible ambition to present themselves as the main opposition party. They may want a Division, but that is a matter for them.

We are, of course, discussing another new burden on business from the Government, and I am rather puzzled by the logic of the charges. As the Minister pointed out, we are debating a price increase of nearly 39 per cent. for one service, and, by my arithmetic, the price of the other service will increase by 26 per cent. Those are substantial increases, and, as I understand it--the Minister went over this ground in several different ways--they are occurring simply because demand for microfiche-based information has been falling for some time and Companies House wants to recoup its costs.

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There are familiar arguments along those lines concerning prescription charges and exemptions, so, if exemptions are widened too much, we may end up with one individual using microfiche who pays a couple of million quid for each piece of information. There must come a point at which such an approach to pricing is abandoned.

Rather surprisingly, the Minister said that some 600,000 searches were carried out in the last year for which figures on the microfiche system are available. I am sure that she finds the figure as surprising as I do. One suspects that within it are some souls, conservatives with a small ''c'', who could use electronic access, but are simply used to the old ways and may be deterred by new, higher charges. Presumably, the last bastion of those who use microfiche-based access to company records is people who are unwired--I think that is the current expression--and do not have access to the electronic super-highway. They will be hardest hit by sharp increases in charges.

I question the logic behind the regulations. The Minister used the word ''only'', but in the context of a 39 per cent. increase it is not entirely appropriate. What amazes me is that microfiche technology was already somewhat established, if not ageing, when I was a law student some years ago. It is very old technology. My eight-year-old son informs me that he contacted a person called Britney Spears through her website and received a personal reply. If my eight-year-old son can achieve that, what on earth are people doing using microfiche technology to access company records?

Companies House should have geared up to the electronic information revolution and set a cut-off date for microfiche technology much earlier. The vast majority of people ought to be able to access such information electronically, and much more cheaply, as the Minister pointed out. If a few are unable to do that, there should be mechanisms to facilitate it, perhaps even personal visits to Companies House, which I presume are still possible.

One has the impression that Companies House, rather than moving forward rapidly and enthusiastically, is being dragged kicking and screaming into the 21st century. It has not moved fast enough, which is plain from figures that the Minister helpfully gave us. A few people who are rather marginalised in electronic terms will pay a heavy price for the slowness of Companies House in getting to grips with technology. Having said that, we are not minded to divide the Committee. We simply want to express our concerns.

10.7 am


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