The
Committee consisted of the following
Members:
Austin,
John
(Erith and Thamesmead)
(Lab)
Blunt,
Mr. Crispin
(Reigate)
(Con)
Browne,
Mr. Jeremy
(Taunton)
(LD)
Cawsey,
Mr. Ian
(Brigg and Goole)
(Lab)
Clegg,
Mr. Nick
(Sheffield, Hallam)
(LD)
Coaker,
Mr. Vernon
(Parliamentary Under-Secretary of State for
the Home
Department)
Dobson,
Frank
(Holborn and St. Pancras)
(Lab)
Herbert,
Nick
(Arundel and South Downs)
(Con)
Reed,
Mr. Jamie
(Copeland)
(Lab)
Ruddock,
Joan
(Lewisham, Deptford)
(Lab)
Shepherd,
Mr. Richard
(Aldridge-Brownhills)
(Con)
Singh,
Mr. Marsha
(Bradford, West)
(Lab)
Spink,
Bob
(Castle Point)
(Con)
Tami,
Mark
(Alyn and Deeside)
(Lab)
Taylor,
Ms Dari
(Stockton, South)
(Lab)
Wareing,
Mr. Robert N.
(Liverpool, West Derby)
(Lab)
Wilson,
Mr. Rob
(Reading, East)
(Con)
Susan
Griffiths, Committee
Clerk
attended the
Committee
The
following also attended, pursuant to Standing Order No.
118(2):
Mercer,
Patrick
(Newark) (Con)
Fifth
Delegated Legislation
Committee
Wednesday 28
February
2007
[Mr.
Frank Cook
in the
Chair]
Draft
Private Security Industry (Licence Fees) Order
2007
2.30
pm
The
Parliamentary Under-Secretary of State for the Home Department
(Mr. Vernon Coaker):
I beg to
move,
That the
Committee has considered the draft Private Security Industry (Licence
Fees) Order 2007.
A draft of the
order was laid before Parliament on31
January.
I
welcome you to the Chair, Mr. Cook. I also welcome hon.
Members, including my neighbour, the hon. Member for Newark (Patrick
Mercer); in whatever capacity, it is good to see him in the
Committee.
The
Private Security Industry Act 2001 provides for the regulation of the
private security industry, which is carried out by a non-departmental
public body, the Security Industry Authority, through the licensing of
individual security operatives. Section 8(7) of the 2001 Act enables
the Secretary of State to prescribe a fee to be paid on application for
an SIA licence. The current licence fee is
£190.
As
an NDPB providing a service, the SIA is required to be self-funding,
and its fee must therefore be kept under review. However, when setting
a fee under a statutory power, the costs to be recovered are considered
to be those incurred in the accounting period in which the function is
exercised. That is relatively easy to cope with when the income stream
is even, but the SIA is not in that position, for a number of
reasons.
First, the
SIA has been in existence only since 2003; licensing has been phased-in
since 2004 with that of the largest group of operatives licensable
under the Act, contracted manned guards, becoming mandatory in March
2006.
Most licences
last for three years and although the flow of applications is expected
to level off, it is too soon for that to happen. Based on projected
numbers of future applications, it is expected that the SIAs
intake of new applications will fall in 2007-08 and rise in 2008-09 as
renewal applications start to increase. The SIA cannot readily shrink
and expand to adapt to such fluctuations. As a result, in-year unit
costs are expected to rise in 2007-08 and fall in 2008-09. In those
circumstances, strict adherence to in-year recovery of costs in the
case of the fee prescribed under section 8(7) would require the licence
fee to be raised to about £280 in 2007-08 and then reduced to
about £220 in 2008-09. That is not an acceptable position. The
order is therefore needed to enable a fee to be set based on an
estimate of unit costs over the two years. The order is laid under
section 102(5) of the Finance (No. 2) Act 1987.
I said that when setting a fee
under a statutory power, the costs to be recovered are considered to be
those incurred in the accounting period in which the function is
exercised. The proposal in effect requiresthe Secretary of
State, when setting the licence fee for the financial years 2007-08 and
2008-09, to take into account the costs that the SIA will incur in
carrying out its licensing functions in both those years rather than
only the financial year in question. In so doing, it smoothes the
effect of fluctuations in the numbers of licence applications on the
SIAs income from licence fees and therefore on unit
costs.
On the basis I
have outlined, in order to achieve a full-cost basis for the SIA
licensing function, we intend to increase the licence fee from
£190 to £245 with effect from 6 April 2007. The order
will enable the fee to be held at that level over the two-year period.
It is expected that after 2008-09, the SIAs intake profile will
have levelled to a point at which the fee can be set, based on in-year
self-funding in respect of licensing. We do not raise the fee lightly,
but it is clear that an increase is necessary if the SIA is to be
self-funding in respect of licensing. When the fee was originally set,
reliable and comprehensive data were difficult to obtain, despite the
efforts of the SIA and Home Office officials. Subsequently, it became
clear that numbers in the industry and the rate of people leaving and
joining it were not as high as had been indicated. That meant that
fewer fees had come in than was expected. As a result, it is now clear
that a higher fee is needed to fund the SIAs licensing
function. Without that increase, the SIA will face a shortfall in
licence fee income of about £350,000 a month. I would add that
the SIA has made considerable efforts to reduce its costs, including
cutting its staff by 30 per cent., moving to cheaper offices and taking
other economy measures.
I make it clear, in closing,
that the order does not increase the fee. Provided that the order is
made, a separate statutory instrument will be needed to be made by
negative resolution procedure under the 2001 Act. That will increase
the fee to be paid on application for an SIA licence, and will come
into force on 6 April
2007.
2.37
pm
Patrick
Mercer (Newark) (Con): It is a privilege, Mr.
Cook, to be working under your hand again. It is very pleasant to see
the Minister opposite and so many colleagues from the Liberal Democrats
and other colleagues of my own. I am going to be extremely brief,
Mr. Cook, you will be pleased to hear. I am grateful to the
Minister for making it clear, particularly in his last few statements,
that the legislation will require a negative resolution, as part of the
2001 Act, to raise the fee. I am grateful for that. However, I would
like to quote one thing back to the Minister: we do not raise the fee
lightly. That is absolutely crucial and goes to the heart of the
matter. It looks as if the fee will be massively raised: nearly 30 per
cent. I would grateful if the Minster could give some detailed
answers.
The predicted
expenditure for the next few years, from which the proposed 29 per
cent. fee increase emanates, causes me concern. Paragraph 4.28 of the
regulatory impact assessment shows that there are still many risks that
could result in a reduced income, but states
that
It is
believed that the new forecast is accurate within a range of 10 per
cent.
May I press the Minister on how accurate
he thinks that that is? Is it 9 per cent., 0.5 per cent., or what? I do
not know that it is difficult to assess, or whether the Minister is
aware of that. However, how accurate did he think that the previous
forecast was going to be, which has led us to the current
situation?
Paragraph
4.26
states:
Expenditure
does not currently include repaying grant in aid to the Government,
however, it has been agreed that the level of deficit will be
calculated and will be recovered
gradually
that
is the crux
over
future years and in keeping with normal
practice.
Can the
Minister make it clear, if he knowsI accept that it is early
dayswhat gradually means? How definite or
indefinite a statement is that?
Next, the
model for the fee itself is supposed to cover the next two-year period,
at which point it is expected that the SIA will obtain cost recovery.
However, if there is no cost recoverythere have been several
miscalculations so farhow will that affect the
fees?
The British
Security Industry Association estimates that there are some 35,000 to
40,000 in-house security personnel, who are unregulated. Many of them
work in schools, hospitals or universities, and apparently the
Government have no appetite for increasing regulation over those
people. Industry, however, is not keen on an extension of the licensing
base for the BSIA; on the other hand, the organisation itself is indeed
keen. In-house personnel are an obvious risk. Should they be included
or not? What assurances can the Minister give about the intention to
include or exclude that group in the licensable
base?
Lastly,
I believe that there is still quite a large black economy sector in the
industry, on which I should be interested to hear the Ministers
view. That gives rise to uncertainty about numbers. Also, as it is the
individual employees who are registered rather than the companies, it
is hard to determine exactly how many operators there are. For
instance, some security companies have only a mobile phone as a point
of contact. What will happen if the SIA collects too much money with
the increased fees? If it does collect too much, will the charges be
reduced?
Those are
detailed points, but I hope that they are not unreasonable. I guess the
Minister will be able to answer most if not all of them. I do not
intend to oppose what he has said, but some clarity would be most
welcome.
2.41
pm
Mr.
Nick Clegg (Sheffield, Hallam) (LD):
It
is a delight to be here, Mr. Cook, not only because the
purpose of the order has been so well explained in the material
provided to us and set out with great clarity as ever by the Minister,
but because unless I have missed something, the order is almost
entirely bereft of political controversy. That is a blessed relief in a
policy area that is almost always disfigured by political
controversy.
The
hon. Member for Newark has already posed many of the questions that
sprang to mind when I read the order. I look forward to the answers
provided to them by the Minister. However, there remains the question
of why the gap between cost and income has been as great as it has now
emerged to be, without remedial
action being taken by the SIA. I wonder whether the Minister would care
to comment on the original projections that were made in 2003 when the
SIA was first created. The purpose of the order is to enable a fee to
be set based on estimates of unit costs over two years. That seems
eminently sensible, given the fluctuating nature of the applications
that are likely to be made over the next few years, and adheres to the
most basic principles of sound financial administration.
Notwithstanding the more vexed issue of the level of fee setthe
decision on which I accept is taken separatelyI assume that the
provisions must provide at least a degree of predictability over two
years, which would be welcome to the industry. I do not seek to place
any further obstacles in the way of the
order.
2.43
pm
Mr.
Rob Wilson (Reading, East) (Con): It is a great pleasure
to serve under your chairmanship again, Mr. Cook. The
Committee will be pleased to hear that I shall keep my comments brief
and try not to repeat any of the information that my hon. Friend the
Member for Newark gave.
The SIA seems
to have suffered from poor planning from the outset. The blame seems to
have fallen on an unreliable base data source, which falls into the
same category of excuses as I ate a dodgy curry, when
one has had too much to drink late one night. I wonder whether we could
hear more from the Minister about the dodgy data source and why we got
things so badly wrong in the first place. The SIA has got off to a
particularly bad start in its short life. That makes me wonder how
reliable the other predictions in the documentation are, such as those
concerning the licence applications in 2007-08 and 2008-09. If we are
not very careful indeed, there is a prospect of the increase resulting
in fewer applications and therefore of less money coming into the SIA,
because the increase is significant. What consideration was given to
increasing the frequency of the charge rather than the amount, to the
£245 that the Minister talked about? Will the Government provide
help for those who need a licence to continue their employment, but
cannot afford it? Do the Government have any way of evaluating those
who can afford to pay, and those who
cannot?
2.45
pm
Mr.
Coaker:
I am glad that hon. Members support the order.
They raised a number of detailed, but fair
points.
The
Government fully support the SIA. It has done an excellent job, working
with the BSIA and the security industry in general, to drive up
standards in this country, and it is important to put that on the
record. It has made a significant difference to what was an unregulated
sector about which many MPs had serious concerns. We can debate some of
the issues, and I shall respond to specific questions in a moment, but
it is important to put on the recordI see from the nods around
the Room that I have the support of the Committeethe fact that
the SIA has made a significant contribution to regulation of the
industry and has done so not in opposition to the industry, but with
its support. I commend all those who work for the SIA who made that
possible, and all those in the security industry, including the BSIA,
who worked so hard to deliver that improvement.
Turning to
some of the specific questions, it is important to reiterate that the
order allows the SIA to calculate the cost of licensing over a two-year
period2007-08 and 2008-09rather than annually. That
will allow us to equalise the licence fee. If we did not do that, we
would have an astronomical rise next year, and would then have to
reduce the fee the following year. That would not be sensible. In reply
to the hon. Member for Reading, East, non-departmental public bodies
are required to be self-funding, and without the order next
years fee would have to be much
higher.
In reply to
the hon. Member for Newark who asked about grants in aid, we expect
that if the order is accepted the SIA will not require grant over those
two years. Without it, there will not be equalisation of income to the
SIA, and we do not want fluctuations in fee levels because of peaks and
troughs in
applications.
Pages
13, 14 and 15 of the regulatory impact assessment set out the figures
that led us to conclude that we need the fee increase. In reply to the
various questions asked by the hon. Gentleman, I am confident that with
our experience of the SIA operating with the industry, we have a much
clearer idea of the likely number of applications and, therefore, a
much clearer indication of the level of activity and of income. The
licence fee is based on the expected number of licence applications,
set against the authoritys running costs. I explained how it
tried to reduce costs through staff reductions, a move to cheaper
premises and so on in order not to impact too greatly on the licence
fee.
The hon. Members
for Newark and for Sheffield, Hallam asked what influenced the cost of
the licence fee. As I said, it is the operating costs of the SIA and
the churn ratethe number of people applying for new licences
and leaving or entering the industry. To be fair,
that is quite difficult to determine. It is not science, but we now have
a much clearer view of what is happening. To calculate the size of the
licensable populationhow many people are standing in front of
clubs or involved in all the other sectorsis quite difficult,
but we have a much clearer idea
now.
Mr.
Wilson:
Is the calculation made on a break-even or surplus
basis?
Mr.
Coaker:
We require the SIA to be self-funding, so at the
very least we would expect it to be break-even. In the event of a
surplus, my expectation is that it would be reinvested into the SIA. As
the fee will be annual after the two years, we expect that the SIA
would not require an increase from the sector after 2008-09. The SIA is
required to break even, not to have a surplus. If there is a surplus,
it will be the SIAs business decision to reinvest in itself or
ensure that the fee to the industry is kept at a reasonable level.
After the period, we expect the SIA to review the licence
annually.
We now have
a much clearer idea of the size of the licensable sector. The fee,
although it will increase next year, has not risen in the three years
since the SIA was established. With that clearer picture, we can now
fix a fee, albeit an increased one, that will enable the SIA to be
self-funding. It will also enable us to work to extend the SIA into
Scotland during the next few months, and the SIA to function
effectively and efficiently, being self-funded and able to work with
the industry to continue to drive up
standards.
Question
put and agreed
to.
Resolved,
That the Committee has
considered the draft Private Security Industry (Licence Fees) Order
2007.
Committee
rose at seven minutes to Three
oclock.