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Session 2000-01
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Delegated Legislation Committee Debates

Limited Liability Partnership (Fees) (No. 2) Regulations

Third Standing Committee on Delegated Legislation

Monday 26 March 2001

[Mr. John Maxton in the Chair]

Limited Liability Partnerships (Fees) No. 2 Regulations

4.30 pm

The Minister for Competition and Consumer Affairs (Dr. Kim Howells): I beg to move,

    That the Committee has considered the Limited Liability Partnerships (Fees) No. 2 Regulations (S.I. 2001, No. 969)

It is a great pleasure, Mr. Maxton, to serve under your chairmanship. I apologise for the fact that we must debate the regulations today. We intended to seek the Committee's agreement to the limited liability partnerships regulations on 13 March. Those hon. Members here today who were present then might recall that we discussed similar fees regulations. Due to an administrative error, those regulations were different from the original signed version and we did not move them. As a result, the regulations that we are debating today are similar; there only two differences.

The regulations now show the correct incorporation fee of £95. We have also taken the opportunity to propose a minor change to fee No. 4, which has been reduced from £20 to £10. We have made every effort to ensure that the fees for LLPs are as near as possible to those for companies. Following the revocation of the earlier regulations, we reconsidered fee No. 4 for LLPs and concluded that it should be reduced to bring it into line with that charged for companies.

4.32 pm

Mr. Nick Gibb (Bognor Regis and Littlehampton): We seem to be having a bit of trouble with the limited liability partnership regulations. The original regulations were set down for debate in Committee on 25 January. That sitting was cancelled to allow time to correct errors in the regulations. When we debated them on 13 March, we discovered the error in the LLP fees regulations, and the Government had to vote against them. We are now considering the new, redrafted regulations.

I do not criticise the civil servants; Ministers are responsible for the errors. Perhaps we should get the Army to draft legislation. It would be done more competently and, I suspect, a darn sight more succinctly. The regulations do not deal with the outstanding question of whether the Minister was correct to assert that no criminal offence was created by section 319(5) of the Companies Act 1985 as it applies to LLPs.

It is wrong that there is such a difference between the cost of registering a company and the cost of registering an LLP. The differences are marked; they are not the minor differences alluded to by the Minister. It costs £20 to register a company; the proposed fee to register an LLP is £95. It costs £15 for a company's annual return; it will cost an LLP £35. The fee for registering a charge in the name of a company is £10, compared with £20 for an LLP. The Minister has argued that a dedicated team would be needed to administer those functions and that, because only 8,000 LLPs are forecast to be registered during the first three years, there will be better economies of scale than for companies.

Let us examine those arguments in more detail. Will that dedicated team be operating at full capacity or, because of the lower volume, will it have spare time with nothing to do except to sit in the office, playing computer games? If it will be working at full capacity, the incremental cost will be exactly the same as it would be if the unit were registering companies rather than LLPs. Perhaps the people in that dedicated team are better qualified and receive higher salaries than the teams that deal with companies. Will the Minister confirm whether that is the case? If it is, will he explain the salary differentials, which result in the price differentials of £20 for registering a company and £95 for registering an LLP; almost five times as much?

The Government's argument is completely bogus. Registering LLPs should form part of the activities of the cost centre at Companies House, which registers companies. The same staff could and should be used for both. The price hikes for LLPs are all about raising extra revenue for the Exchequer at the expense of small and medium-sized businesses. All Committee members who are serious about helping business should oppose the regulations.

4.35 pm

Mr. Edward Davey (Kingston and Surbiton): I welcome you to the Chair, Mr. Maxton. My hon. Friend the Member for Torridge and West Devon (Mr. Burnett) would have loved to be able to take part in the scrutiny of both the primary legislation and subsequent regulations. Unfortunately, he is busy on other Committees this afternoon, but he sends his best wishes to the Minister.

Having read the Official Report of a previous Committee meeting at which similar legislation was considered, I share the concerns of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) about the fees that the Government seek to impose for registering LLPs. The sum of £95 seems to be rather expensive, and I have a suspicion that civil servants are acting perversely in setting a ridiculously high fee, so that they can reduce unit costs over the next few years and meet some performance target. By coming up with a large figure to begin with and then miraculously reducing unit costs to business, they will be able to show how wonderfully they have done. The Minister may say that that is a conspiracy theory, but it is a theory that passes the test when applied to many Whitehall Departments, which are acting perversely in response to the important development of target setting in the public sector. Will the Minister explain why the cost is so high?

As the hon. Member for Bognor Regis and Littlehampton said, the Minister was clutching at straws in putting forward arguments about economies of scale. He said:

    ``The fees charged for LLPs must recover the associated costs, included the costs of developing the necessary computer systems and the provision of LLP information to the public.'' —[Official Report, Sixth Standing Committee on Delegated Legislation, 13 March 2001; c. 9.]

First, the provision of LLP information to the public cannot be that expensive. Once it has been prepared, it can be put on the internet, which does not result in a high cost. We are going backwards if it takes Government Departments huge amounts of money to provide information to the public.

On 13 March, the Minister referred to the cost of developing the necessary computer systems. Is he referring to a separate, stand-alone computer system?

Dr. Howells: Yes.

Mr. Davey: The Minister affirms that, but it worries me that people at Companies House are not being rather more innovative and concerned about the costs that will be imposed on business. Why can the computer system not be bolted on to the existing system because, presumably, much of the information required to register an LLP is not dissimilar to that which is required to register a company? I cannot imagine that the information is so dissimilar that there cannot be a joint arrangement and development of existing computer systems.

We know not just from ``Yes, Minister'' but from the Public Accounts Committee that Whitehall Departments are good at purchasing expensive computer systems that tend not to do the job for which they were commissioned. The Minister should justify the fee that is proposed to pay for a new and probably unnecessary information technology system.

Clearly, setting up a new regime, with dedicated staff, will involve costs.

Dr. Howells: Surely not.

Mr. Davey: The Minister is trying to be ironic. Of course the Opposition—and I hope, for the present purpose, that I may speak for the Conservative Opposition—accept that there will be extra costs. However, will those run on annually? Will they be one-off costs? Will the Minister tell the Committee that, in two years, a Committee will consider reducing the fees? I doubt it.

We are right to argue on the side of business, and for a reduced fee. Unless Companies House is going to be incredibly and consistently efficient in the next few years, the fee should be reduced at the outset, not in three or four years' time. It is right that both the Liberal Democrats and the Conservatives are opposing the high fee.

Mr. Michael Fabricant (Lichfield): May I say, Mr. Maxton, what a pleasure it is to serve under your chairmanship? You and I have known each other for a long time and this is the first Committee in which I have served with you as Chairman.

I agree with my hon. Friend the Member for Bognor Regis and Littlehampton and the hon. Member for Kingston and Surbiton (Mr. Davey). The fee is yet another Labour stealth tax. I welcomed the introduction of limited liability partnerships. I expect that all hon. Members recognise the importance of providing some protection under the law to large partnerships. I remember Ministers at the time saying that it would be relatively easy to introduce such arrangements once the general principle had been agreed, because the structure would be similar to that for limited liability companies and public limited companies. That implied, of course, the use of the same systems. The Minister represents the beautiful constituency of Pontypridd, an area that I know well that is not a million miles from Cardiff. Immediately after the Committee rejects the measure, he should take a trip to Cardiff to see why it is so costly to introduce the system that we are considering, whereas the arrangements for public limited companies and limited companies can be run at much smaller cost.

The difference is a major one. Why does it cost £20 for a plc to incorporate, but £95 for a limited liability partnership? Why does it cost £15 to deal with the annual return of a public company when, for a limited liability partnership, it costs more than twice that—£35? Furthermore, it costs £10 for a change of name for a plc. Heaven knows we have seen enough on that score. Let us put the matter into perspective. It cost the British Steel Corporation £10 to change its name to Corus, after which, under a Labour Government, it made a great many steel workers redundant. It will cost twice that—£20—for a limited liability partnership to change its name. That is unacceptable and it demonstrates Government incompetence.

The Government seem to be unprepared to visit Cardiff to study the software. The hardware does not, of course, need to be literally bolted on. A mere extension of the database is what is meant. I know that the Minister is more than familiar with databases in use by Siemens and the other organisations that supply systems to Companies House. It would be fitting for him to give an answer now to the Opposition and to limited liability partnerships, which feel ripped off—I use that term advisedly—by the Government, who are successful in one thing only; introducing one stealth tax after another.

4.44 pm


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Prepared 26 March 2001