Examination of Witnesses (Questions 20-39)
COMPANIES HOUSE,
BERR
26 MARCH 2008
Q20 Chairman: And to make a modest
but useful contribution to Her Majesty's Treasury. That is an
important point, on top of the surplus you declare, so actually
last year it was £3.3 million, the combination of the dividend
and the surplus. I know you stand to make a loss this year, so
I understand that.
Mr Jones: No, we are not going
to make a loss this year, we are going to make a loss next year,
I expect, Chairman.
Q21 Chairman: Okay. That is forward
looking. The point Mr Binley was exploring with you a little was
this point about competition with the private sector. We have
had a number of complaints in writing from witnesses saying that
you do not restrict yourself to providing statutory services and
that you compete with the private sector. Do you agree with that
analysis?
Mr Jones: No, I do not. We believe
we provide raw data, either to those who are searching for the
information via the website or to a number of bulk customers,
and we have about 26 or 27 major bulk customers who take basically
huge amounts of data from us either on a daily or weekly basis,
and we do not want to get into the business, I do not want us
to get into the business of competing for a market share. There
is a number of bulk producers who take information from us, add
value to it and then sell it on to their customers and do a very
good job indeed, and form a very useful part of the underlying
economic infrastructure. So I think if one looks at, for example,
the OFT report which came out last year in which they said they
believed we were both charging appropriately for our services
and providing appropriate services, that is testament to the fact
that actually what we are doing is providing raw information.
There is a question about whether or not providing that raw information
in unusable formats is acceptable or not, and I would argue that
my responsibility is to move with the times in terms of how we
provide that information to people. So, for example, our website
is constantly improved and modernised so that we are providing
information in a very readable format. We have considered other
ways of providing information and I am aware that there are registries
around the world which are, for example, providing information
via SMS texting. I would still argue that that is raw information
that we are providing. We are simply providing it in a more digestible
form.
Q22 Chairman: Do you think there
are any products you offer which are not statutory products, any
products at all?
Mr Jones: There are no products
that we are offering which do not have a statutory basis.
Q23 Chairman: Because the suggestion
has been made to us that actually what you do is you think of
a new product you quite like and then put it on a statutory footing,
so it actually was not a statutory and that you add it to the
statutory list and, hey presto, it is statutory suddenly.
Mr Jones: I would argue that we
are certainly trying to do what we can to serve our customers
as best we can but within the limits of the statutory framework
that we operate within. The things we do which are not statutory
are largely in terms of helping customers understand our services,
helping customers understand how our services are going to change
in the future, trying to encourage the behaviour of customers
in different directions so that they, for example, file their
information electronically with us rather than on paper because
there are key efficiencies there for us and therefore key costs
savings that we can pass on to our customers. So we do engage
in a large number of information days, exhibitions, focus groups,
web filing seminars, all of which are intended to try and help
our customers both understand us and work with us in a way which
is more cost-efficient for the long-term.
Q24 Chairman: I know that your data
can be used in a whole stack of different ways by us and organisations
that want it, but are there any services related to the use of
your data which you think Companies House should not offer in
principle?
Mr Jones: As I have said already,
I do not think we should be getting into the business of adding
value to the information which is on our register. I think our
responsibility is to register that information and make it available
in as accessible a form as we can to as many people as want it,
and to charge for those services sufficient to cover the costs
of providing them.
Q25 Mr Binley: Have you read your
website lately, Mr Jones?
Mr Jones: Yes.
Q26 Mr Binley: And you recognise
that as a marketing tool, do you? Let me quote you three lines
from it, because I think this really highlights the problem you
have, both hiding behind the thing about being a registration
only organisation whilst really being out there and selling. Let
me just highlight three phrases. "You can use WebCHeck to
purchase companies' latest accounts and annual returns as well
as a selection of company reports all online". "Companies
House Direct is your premier research tool for assessing and downloading
company information directly to your own pc". "You can
keep an eye on your competitors or even your own company and monitor
which documents are being filed". Now, the whole thrust of
that—and I am a marketing man—is that you really provide
vital information to deal with your business and deal with your
competitors. That is the feel of it, the ambience you are creating,
and I understand why, because you have got a very valuable tool
indeed. I want to come on to that later, but do you understand
why people see that there is a real tension between your arguing
that you are simply a registration organisation and your marketing
activity, which is about the business side of information and
list creation, and so forth?
Mr Jones: I was quite heartened
to hear the way in which you read those out from the website,
I have to say. It seems to me that what we are doing on the website
is encouraging people to use the information.
Q27 Mr Binley: You are selling.
Mr Jones: We are selling inasmuch
as we have to cover our costs, but we are encouraging people to
use that information. Let me, just as an aside, I think demonstrate
that the proof of the pudding is in the eating. You talked about
the website. We are one of the biggest website providers in government
in the UK. In January this year we had over 50 million hits on
our website. So people do see it as a very important source of
information, and it is a very important source of information,
and the way in which I think we were encouraging people to use
the services of WebCHeck and Companies House Direct, and indeed
Monitor services, which was the other one you referred to, I think
is absolutely right because Monitor is a very important tool in
the fight against fraud, and perhaps we will come on to that later.
WebCHeck and CHD (Companies House Direct) are very clear and easy
to use access points into the information we have got. I can see
where your line of questioning is going and where it is going
is, "Well, if you are going to encourage people to use that
information so much, shouldn't you make sure it's more accurate?"
Q28 Mr Binley: My very next question!
You are absolutely right.
Mr Jones: My difficulty in that
is two-fold: (a) I do not have the powers to assess the accuracy
of the information, and (b) I think I have demonstrated that the
volumes of information that we get into Companies House would
mitigate very strongly against our being able to check in any
more than just superficial detail the quality of the data that
we get.
Q29 Chairman: Before I hand over
to Michael Clapham to take this argument slightly further, just
one last little detail point on late filing. We have had very
little evidence from users of your service, individual users,
but one small organisation wrote and said—and I have some
sympathy with this point. I know you said they have ten months
to file and I understand that context. "They seem very sharp
to catch late filing and charge the £100 penalty. One of
my returns was delayed in the post but the fine still stood and
we were charged because of another government department's inadequacies",
is the exact quote. Now, is evidence of posting, proof of posting,
sufficient defence?
Mr Jones: No. I would say two
or three things to that, Chairman. The first thing I would say
is that we encourage people to file their information electronically
anyway, so if people would file their information electronically
they would not have problems with postal strikes.
Q30 Chairman: Can I just deal with
that point? He does not have web access. It is a small charitable
organisation.
Mr Jones: The second point I would
make is that postal strikes are advertised pretty well in advance.
Q31 Chairman: This is lost in the
post. This is not a strike, it is a delay in the post.
Mr Jones: If the individual thinks
that he has had stuff lost in the post, the first thing I would
say is that they should first of all send us information which
enables us to get back to them as and when we have received it.
The second thing I would say is that if they have an issue with
the Royal Mail then they would need to take it up with them.
Q32 Chairman: So the advice would
be, if you are filing late or towards the deadline use a proof
of postage, special delivery, recorded delivery, something like
that to make sure?
Mr Jones: Absolutely, Chairman.
Actually, my advice would be to file on-line.
Chairman: If you possibly can. Thank
you very much.
Q33 Mr Clapham: Mr Jones, you have
said that you are a repository of UK company information and an
important repository, as you have explained. Given that information
is there, you are bound to attract, of course, the information
companies, dissemination agents, et cetera. Do you see that really
as being a main function that you provide? Is it something you
would give priority to? Do you see it as being a priority service?
Mr Jones: Do you mean marketing
companies and the like?
Q34 Mr Clapham: Yes, I mean the companies
that seek that information in order to be able to, as you say,
add to that, enhance it, and then pass it on.
Mr Jones: Yes, I would see our
role as providing raw information to a number of companies that
do add good value to it and sell it on to their customers. In
the context of, for example, a company that is buying the information
off us to use it as a mailing list to directors to sell their
services, for example, I would not see us necessarily as fulfilling
that role. Indeed, the new Companies Act will prevent that happening
because directors' residential addresses will not appear on the
public register. Service addresses will appear, but individual
directors' residential addresses will be protected. I think there
is a number of companies that buy our services and information
that have very laudable aims and a good customer base and are
doing a good service.
Q35 Mr Clapham: Given, as you say,
it does become a priority and you employ just above 1100 people,
providing that kind of service down the line to information companies,
et cetera, must take quite a lot of servicing and quite a lot
of the input of your staff, does it not?
Mr Jones: Not a huge amount. The
bulk outputs that we produce are largely produced automatically
from our IT systems. We do have a very good customer liaison centre.
We have good relations with our bulk purchasers and also good
relations with our other customers, but there are not large numbers
of staff beavering away to aggregate the information we have got.
By and large, what happens is that bulk producers buy from us
the changes to the register that day and then apply it to the
total of information they have already got. So they effectively
keep a mirror image of the register and then they manipulate it
in the way they wish.
Q36 Mr Clapham: Is it a service that
does sort of generate a revenue and helps to keep Companies House
operating?
Mr Jones: Yes. We cover our costs
by charging bulk customers the amount that their service costs
us. We actually halved the cost to bulk purchasers in our last
major fees order, which was in 2005.
Q37 Mr Clapham: Just coming back
to the question before the last that I asked in relation to the
amount of staff who are actually engaged in providing the service,
one of the reasons I asked that is because according to some of
the information we have got bulk data files are now delivered
to dissemination agents later than they were when they were operating
the old system and I just wonder why that was.
Mr Jones: It is true to say that
we implemented our new computer system on 25 February and it is
true to say that in the first couple of weeks of operation we
had a few teething problems. In particular, we had a few teething
problems producing some of our bulk outputs. As of yesterday,
my customer liaison staff tell me that in their discussions with
the bulk output takers they are now content with the information
they have got and that they are getting it accurately and timeously,
and things seem to be back on track. So I would accept that in
the first couple of weeks there were some issues with some outputs,
yes.
Chairman: One of the frustrations about
this inquiry, I should tell you—and this is one of our routine
investigations for MDPB, so we are not here for a particular reason.
Nothing actually has happened to bring you before us now. We do
this and it is your turn in the spotlight, as it has been ACAS
and the MDA and others in the past, but awareness of the inquiry
has been growing latterly and we had calls yesterday which disagreed
with your analysis in the office, so this is a matter to which
I think we may have to return. We shall see.
Q38 Mr Weir: One of our witnesses
raised the concern that you are planning to offer what they call
a citizen's company registration service. Can you tell us if this
is the case, and if so what does it mean?
Mr Jones: Yes, I can. At the moment,
anybody can incorporate or register a company with us. Last year
we had something like 440,000 companies incorporated on the register
in Great Britain. There is a number of good and a number of not
so good incorporation agents out there who will do that job for
you. If you want to incorporate a company, you can go to an agent
and they will effectively fill the forms in for you and often
provide an ongoing secretarial service subsequently. We provide
an electronic incorporation service, but the only people who can
currently access that electronic incorporation service are incorporation
agents because there is specific software that is required to
do it. Something like 90% plus of companies are currently incorporated
electronically via incorporation agents. I have had a number of
discussions with the incorporation agents and their umbrella body,
ACRA, about our plans to offer a direct incorporation service
to companies who want to incorporate with us electronically not
via incorporation agents. I have made it clear to them that it
is my strategic objective to provide that service because I am
not in business to provide a living for incorporation agents,
I am there to provide a service to companies in the UK, but what
I have also said is that we will not seek to compete with incorporation
agents in terms of an ongoing business relationship with companies.
So they have a lot to offer to companies in terms of advising
on the constitution of the company, advising on how the company
might run its meetings, advising on how the company might be structured,
advising on future secretarial services as well as doing the basic
electronic incorporation with Companies House. I am never going
to get involved in competition in that broad range of services,
but I have made it clear that our stated aim is that we will provide
a direct electronic service to individuals, and I have also said
that that is unlikely to be before 2010.
Q39 Mr Weir: Have I picked up correctly
that individuals can presently incorporate companies without going
through incorporation agents?
Mr Jones: On paper.
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