Thirteenth Standing Committee on Delegated Legislation
Monday 14 July 2003
[Mr. Frank Cook in the Chair]
Draft Land Registry Trading Fund (Extension and Amendment) Order 2003
The Chairman: I am of a mind to permit male members of the Committee to divest themselves of their outer, upper garments for the period of the sitting if they so wish. It is not compulsory.
The Parliamentary Under-Secretary of State for Constitutional Affairs (Mr. David Lammy): I beg to move,
That the Committee has considered the draft Land Registry Trading Fund (Extension and Amendment) Order 2003.
May I begin by saying how grateful I am that my first Standing Committee since I moved to the Department for Constitutional Affairs is under your chairmanship, Mr. Cook? The order is chiefly a technical and uncontroversial measure, which enables the trading fund to continue to receive income from its principal activity, the whole business of the registration of titles to land. However, that business will soon be conducted under a new Act, the Land Registration Act 2002, the main provisions of which will come into effect on 13 October. It repeals and replaces the Land Registration Acts 1925 to 1986, which set out the current statutory basis for the registration of titles to land in England and Wales.
The Land Registry is an Executive agency. The Secretary of State holds ministerial responsibility for the agency and approves its business plans and key targets from year to year. It was established as a trading fund under the Land Registry Trading Fund Order 1993. Additional assets were added in 1996 under the Land Registry Trading Fund (Additional Assets) Order 1996. Trading fund status means that the Land Registry is able to meet current and capital expenditure from its fee income and from other income retained from year to year. That gives it greater financial flexibility, and that in turn facilitates the successful delivery of its service objectives, set by the Secretary of State.
The Land Registry's move—
Sitting suspended for a Division in the House.
Mr. Lammy: The Land Registry's move to trading fund status in April 1993 gave it greater financial freedom to address its growing business needs and to help it to meet the challenging financial and other performance targets that it had been set. The Government and the wider community rightly believe that the 10 years of its successful operation have proven that the move was wholly justified. The Land Registry has met its efficiency and financial
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targets—the return on capital employed—and reduced statutory fees by 51 per cent. All other key performance targets have been met in full.
The Land Registry was subject, in that context, to a formal quinquennial review in 2001, and the ensuing report endorsed its status as an Executive agency and a trading fund. The report also acknowledged the Land Registry's achievements and made recommendations about how it could improve its services over the next decade and beyond. Importantly, it provided the strategic objectives from which the Land Registry assembled its challenging 10-year strategic plan, which was launched by the then Lord Chancellor in May 2002.
The strategic plan points to the increasing automation of the Land Registry's routine tasks, and it views that as an opportunity to seek new ways to use resources for the good of the community at home and abroad. That is consistent with the Government's policy guidelines to agencies and Departments on selling services into wider markets. The Land Registry therefore felt it appropriate, at the same time as making the necessary technical change to the 1993 order that I have described, to include, as part of the funded operations, the provision of services in wider markets. The draft order limits the scope of those services to the Land Registry's existing operations, and to areas in which it already has considerable expertise, such as the registration of titles to land, and the management and marketing of information relating to land and property.
The Land Registry's international reputation for excellence has led it to be approached by a number of countries for the use of its expertise and skill; doubtless, that will continue.
Mr. Nick Hawkins (Surrey Heath): The Minister talked about the marketing of the Land Registry's operations, and I was interested to read in the explanatory memorandum that, in line with Treasury policy, the Land Registry will charge for services on the basis of cost plus return on the capital employed.
Concerns have been expressed to me—for example, by a business man in my constituency and a national organisation—that, in its charging policies, the Land Registry may not have always dealt with its customers even-handedly. Are there plans to increase substantially the cost at which the Land Registry markets its services? The explanatory memorandum states that there will be no financial effect on Government spending. However, there may be an effect on the Land Registry's customers.
Mr. Lammy: I reassure the hon. Gentleman that the Land Registry will use the Treasury guidance note ''Selling into Wider Markets: A Policy Note for Public Bodies'', which was published by the enterprise and growth unit in December 2002. That note provides clear pricing guidelines that state that the charge will be made on the basis of the full cost of the services that the Land Registry provides, plus the use of supplying those goods and the real rate of return, which is approximately 6 per cent. The Land Registry reviews those rates.
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Mr. John Burnett (Torridge and West Devon): Obviously, these matters are of interest to me as well as to the hon. Member for Surrey Heath (Mr. Hawkins). I hope that, before the debate concludes, the Minister will reflect on the fact that the Land Registry will incur significant capital costs through matters such as electronic conveyancing, stamp duty and land tax. Will he inform us in due course whether those costs will have to be paid on top of the profit and the return on capital that he referred to?
Mr. Lammy: As indicated in the explanatory memorandum, we foresee no additional expenditure. The proposal is a continuation of the measures to allow the trading fund to comply with the new Act, and there are clear guidelines on fee charging. The hon. Gentleman's contribution is on the record, and I know that the chief executive will read the report of today's debate.
The Land Registry's contact with other Departments indicates that it may be able to offer them support in future; for example on the potential for the exploitation and sharing of its IT and back-up facilities. As has already been mentioned, the Land Registry will also play a crucial role in implementing and operating electronic conveyancing. As a result, it expects that property professionals and the public will turn to it for information and help.
Where appropriate, the assistance on electronic conveyancing could be provided without charge. However, circumstances are likely to arise where, in common with other services already referred to, it would be right to seek a full cost recovery, including, as part of that cost, a rate of return on the capital employed in line with the policy guidelines. The Land Registry would like to exploit those opportunities, which would achieve a modest but helpful supplementary income and provide attractive staff opportunities.
The order will simply ensure that the Land Registry continues its main operations after 13 October 2003 with trading fund status. It makes minor technical and regularising changes that are in the interests of improving its effective operation. The overall trading regime remains unchanged. I commend the order to the Committee. [Interruption.]
Mr. Hawkins: I welcome you to the Chair, Mr. Cook. Despite the attempts of the hon. Member for Nottingham, North (Mr. Allen) to truncate our proceedings, I have one or two more questions for the Minister. I said that the concerns expressed to me were about how the Land Registry operates in relation to its commercial customers. Will the Minister confirm that if the concerns expressed by the people whom I have met—a national organisation and a constituent of mine—need to be addressed further, he will be happy for me to write to him? If necessary, perhaps we can meet him. I am not sure that a meeting will be necessary, but it would be helpful to have the Minister's confirmation on the record.
Conservative Members do not oppose the order. A Conservative Government introduced the Government Trading Funds Act 1973, and the
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previous Conservative Government introduced the Land Registry Trading Fund Order 1993. Both those Governments can be proud of their actions, because trading funds have worked well. The fact that, 10 years later, this Government are extending and amending what we did in 1993 reinforces that. We therefore welcome the order.
I hope that, even though there will be an extension of the operations of the Land Registry trading fund, when the Government consider how the fund operates, they will consider the interests of the Land Registry's customers and not simply the desire to balance the Government books, as the explanatory memorandum seems to do. It states that the Land Registry
''is not taking on any additional assets or liabilities and the Order will, save as stated above, have no financial effect.''
The effect on the customers is what concerns me. If we can be reassured that the Government will keep in mind the interests of customers and the even-handedness with which they need to be treated by a national organisation as important as the Land Registry, things will go on successfully, as they have for the past 10 years.
Mr. Burnett: I, too, welcome you to the Chair, Mr. Cook. I have had the privilege of serving under your chairmanship many times before, especially one summer on a Finance Bill. I cannot remember which one, but it was one of the many long ones that we have had since 1997.
I have two preliminary points. The Government confirm in the explanatory memorandum that the Treasury has been consulted and has approved the order. I wonder who else has been consulted. The Law Society is a principal user. I am also thinking of any organisation of estate agents, the Royal Institution of Chartered Surveyors and so on. I should be grateful if the Minister would let us know whether there has been consultation. If he cannot give a quick résumé now of the main points raised by outside organisations, perhaps he can write to us.
The Minister said that the Government were satisfied with the return on capital that they receive from Land Registry operations. They have referred to the Land Registry's excellence and the fact that it might export its services, thereby making a supplementary profit. I have no objection to that, but what about the services that it provides in the United Kingdom, where of course it is a monopoly and has a captive market? I think that the Minister said that the level of profitability was return on capital employed plus 6 per cent. Perhaps he will confirm that when he replies to the debate or in writing. Does he think that an excessive level of profit, and is this monopoly supplier always in profit? What happens to its profit? Does the Treasury take it as additional funding or does it go, for example, into a fund for future Land Registry investment in plant and machinery?
As I said in my short intervention, given the advent of electronic conveyancing and stamp duty land tax, the Land Registry must invest heavily in the next few years. It would be unfair if users had to pay for that
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expensive investment in one go. How will such significant capital investment be funded?
On profitability, I wonder whether the Land Registry has made a loss in the past 10 years. Does the Exchequer meet the agency's losses? Can the Land Registry borrow money and gradually pay off the debt through future profitability? Are losses carried forward to subsequent years, as they would be in a commercial company? Would the Treasury bail out the Land Registry if it made a loss? Value for money and fair competition are important, and we do not want a system by which the Land Registry and its fees become just another tax.
I look forward to hearing from the Minister, particularly on the profitability of the Land Registry's services in the UK, where it has a captive market and a monopoly. I hope that he can satisfy me on that matter. I hope that he annually reviews the agency's profitability—the profitability that the Government expect from the Land Registry would be considered generous in the private sector. I hope that the Minister examines the matter carefully to ensure that the British public are not being fleeced.