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

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Dr. Howells: I would love to meet the limited liability partnerships that have been ripped off, as not one has yet been formed; they do not exist and cannot be formed until our business today is concluded.

We have had to make appropriate modifications to companies legislation as it applies to LLPs. I tried to explain why that was last time but, clearly, I failed to do so to the satisfaction of the hon. Member for Bognor Regis and Littlehampton. I tried to point out to him that 1.4 million companies are registered in Companies House, and that 200,000 new companies are registered each year. We have carried out what we consider good, exhaustive market research on just how many limited liability partnerships there may be. We think that there may be about 8,000 during three years.

Mr. Fabricant: Will the Minister give way?

Dr. Howells: No, I will not for a moment; I will first explain the position. I am not sure that the likes of Arthur Andersen will lose much sleep because of a charge of £95 instead of £20, but clearly such companies could face difficulties.

Companies House, as a Department of Trade and Industry agency and a trading fund, is set strict public targets. Civil servants do not set them; we set them. Among those targets is a requirement for it to recover its operating costs from the fees that it charges for its services. In that way, it is self-financing and makes no demand on the public purse. During the past four years, it has made efforts year by year to reduce by almost 20 per cent. in real terms the unit cost of processing information. I have been to Companies House several times to check it out for myself, and it is a superb organisation; it has good people working for it who do a good job.

The result of that is that fees for incorporation of companies and registration of returns are exceptionally modest; they are the best by far in Europe. Hon. Members should not slag off Companies House; it does a superb job. The previous Government set it strict targets, which we have tightened. Companies House staff have met them.

Mr. Fabricant: The Minister said that his Department estimates that there will be 8,000 partnerships applying for LLP status. First, as that is a small proportion of the number of companies registered at present, why is it so difficult to extend the database? Secondly, of course he is right to say that Arthur Andersen can afford the fees. However, with 8,000 applicants during the next two years—his figures, not mine—does he accept that many partnerships will be small and will be unable, or will find it difficult, to pay the fees?

Dr. Howells: No, I certainly do not; if I did, I would not have agreed to the figure of £95. To address some of the issues raised by the hon. Member for Kingston and Surbiton, the initial consultation included much higher figures. A discrete system could well have cost even more to run.

I know that Liberal Democrat Members know everything about everything, but, believe me, I sat on the Public Accounts Committee for two or three years, and I know what can happen when a new computer system or piece of software goes wrong or does not meet requirements. We think that the proposed system will meet the requirements and will serve well what is, after all, the only new commercial vehicle for almost a century; limited liability partnerships.

Last time, we argued exhaustively that such costs must be imposed. Companies House is not allowed cross-subsidy; I do not know if the hon. Member for Kingston and Surbiton knows that.

Mr. Davey: Can the Minister assure us that the option of developing the existing software system was properly considered? Why was it rejected?

Dr. Howells: Yes, it was exhaustively examined, and we concluded that, until the volume of limited liability partnerships began to grow, the best way forward was a discrete system with a properly trained staff to take it forward.

For those reasons, I commend the regulations to the Committee.

Mr. Gibb: I am very unhappy about that answer because the Minister did not answer my specific questions. First, will those administering the LLP unit be operating at full capacity, or will they have spare time on their hands? Secondly, will the team that operates the LLP registration be paid higher salaries than staff elsewhere in Companies House; those who register companies?

We have also been given the excuse that the cost of setting up the computer system must be recaptured through extra fees for LLPs. I did a few calculations while I listened to the Minister. He said that 8,000 LLPs were likely to be registered during the next three years, compared to more than 1 million companies registered a year. At £95 a time, that comes to £760,000. If that money could be recouped over about 3 million company registrations, it would come to less than 25p per registration.

The notion that having a trading fund means that every miniscule aspect of Companies House has to be self-financing is nonsense. There will not be a separate unit for the annual charge of a company, or for the catering section. That is nonsense. A unit handling 8,000 registrations during three years costing £760,000 will be a tiny unit within Companies House. The notion that that will be a separate cost accounting unit is absurd; it clearly should be part of a larger cost unit of company registration. Raising £760,000 by a £95 fee during the first three years is absurd, and is an example of how many Government policies do not bear logical scrutiny for more than five minutes. On that basis, I urge the Committee to vote against the regulations.

Question put:—

The Committee divided: Ayes 9, Noes 4.

Division No. 1]

Bailey, Mr. Adrian
Banks, Mr. Tony
Buck, Ms Karen
Curtis-Thomas, Mrs. Claire
Dalyell, Mr. Tam
Darvill, Mr. Keith
Howells, Dr. Kim
Lewis, Mr. Ivan
Pope, Mr. Greg

Davey, Mr. Edward
Fabricant, Mr. Michael
Gibb, Mr. Nick
Gray, Mr. James


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

        Committee rose at eight minutes to Five o'clock.

The following Members attended the Committee:
Maxton, Mr. John (Chairman)
Bailey, Mr.
Banks, Mr.
Buck, Ms
Curtis-Thomas, Mrs.
Dalyell, Mr.
Darvill, Mr.
Davey, Mr.
Fabricant, Mr.
Gibb, Mr.
Gray, Mr.
Howells, Dr.
Lewis, Mr. Ivan
Pope, Mr.

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