Small Business, Enterprise and Employment Bill
Debate between Lord Popat and Lord Stevenson of Balmacara(9 years, 8 months ago)
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Lord Popat (Con)
I thank the noble Lord, Lord Stevenson, for his amendment and for his comments on the work of the Regulatory Policy Committee. I liked his comment on the “traffic light” solution. Indeed, I give credit to the party opposite for its decision to establish the RPC in the first place. That created an important and enduring cornerstone for the regulatory machinery—one which this Government have continued to develop and improve.
The amendment requires the Secretary of State to review the current regulatory machinery used to consider regulatory and deregulatory proposals. Of course, such reviews already take place from time to time. They look both at the distribution of responsibilities between different bodies, and at the specific rules and requirements. When this Government came into office, they carried out their own review as to what arrangements were required to deliver their key policy priorities for better regulation. Critically, that involved a strengthening of the RPC’s independent scrutiny role.
The Government carried out a further review in 2012, when some useful changes were made, including a “fast track” route for proposals whose impact on business is modest. That change has helped make the system more efficient for both departments and the RPC. I am sure that the Government will ensure that reviews of the system will continue to take place as and when necessary. Given the terms of the amendment, I am equally sure that the Opposition, were they to be in our place, would do the same.
However, the benefit of reviews needs to be balanced against the need for stability in the system. This is why, for example, the appointment of the verification body under the business impact target in Clause 25 is required to be for the duration of a Parliament. An open-ended duty to review, as proposed in this amendment, could potentially undermine that stability and as a consequence put at risk a future Administration’s ability to deliver against the business impact target. It would also generate uncertainty for stakeholders about the wider regulatory system.
The amendment also requires that once a review of the machinery has been completed the Secretary of State must bring forward proposals to enhance the role of the RPC. The Government are by no means opposed to expanding the role of the RPC where it can add value—in 2013, we asked the RPC to scrutinise the new small and micro-business assessment—but it is very odd to create a statutory commitment to a further expansion of the RPC’s role in advance of the review that the amendment envisages.
The noble Lord, Lord Stevenson, asked whether the Government were legislating for the RPC. We are legislating to underpin the business impact target with robust independent scrutiny. Clause 25 requires the Secretary of State to appoint an independent body to perform that verification function. The proposals in the Bill entrench in legislation the verification role currently performed by the RPC but do not change the status or independence of the RPC. As regards the status of the RPC, it is an advisory non-departmental public body of BIS. It is not established in statute and does not have a separate legal personality. Its members are independent from the Government.
There is cross-party support for the RPC, the wider framework within which it operates and the principle that, from time to time, that framework should be reviewed. We can rely on that consensus to secure such reviews when they are needed. We do not need a statutory provision to do so. I hope that the noble Lord will be persuaded by my explanations and will agree to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for that response and also the noble Earl, Lord Lindsay, for his comments. We are at exactly the same place on this. I was only a bit sad that I got caught out trying to have my cake and eat it by sketching out the work which I think we agree is continuing and necessary, which will be to think harder about the regulatory functions, how best they can be delivered and—constructively and creatively—how best to do that work of review and scrutiny. On the other hand, I was taken by the “best show in town” argument: since we need something like this, why not just build on what we have, because it seems to be the best version of the body we all seem to think is necessary?
The Minister is right: the ecology of regulation needs a bit more scrutiny than it sometimes gets. Of course, his work and experience here were instrumental in our thinking on this. Without that scrutiny, we will not be in a very strong place to build on the policy issues we are talking about, and to think harder about the way in which legislation and regulation will bite on individuals, companies and society as a whole. There is not an easy solution. We must just keep it under review.
I note what the Minister said in his response. Maybe we should leave things as they are for the moment, but the lessons need to be taken back to all departments, not just BIS. There may be some argument for BIS perhaps loosening its hold on this and encouraging other departments to have a bigger share of it. Although in some senses that makes it less likely to be effective because there is no champion within government, it might have the impact of raising other people’s game, which would be good. We need more thinking around that—I am not saying that we would necessarily do it at this stage.
The annual report of the RPC is very impressive, as the noble Lord said. The volume of work it does is astonishing, given that it is independent, non-statutory and has no particular locus within government. I do not know how we get these people to do the work they do, but it is a message we might pick up in other areas. With that, I beg leave to withdraw the amendment.
Small Business, Enterprise and Employment Bill
Debate between Lord Popat and Lord Stevenson of Balmacara(9 years, 10 months ago)
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Lord Stevenson of Balmacara
My Lords, in moving Amendment 61ADE, I will also speak to Amendment 61ADF, which is in my name and that of my noble friend Lord Mendelsohn, who is sadly still absent. I am thinking in terms of search parties, particularly if my noble friend Lord Mitchell is proposing to stand in his place, which, of course, he is perfectly entitled to do.
As the law stands, in order to receive a dividend in an insolvency, a creditor must first submit a claim to the officeholder, who, where necessary, will request further evidence to verify that claim. Clauses 128 and 129 simplify the process for what the Government term “small debts”, so that in future such creditors do not have to prove their ownership of the debt in the same way. Clause 128 takes care of company insolvencies, while Clause 129 takes care of individual insolvencies. We do not object to the principle behind such moves, but I am quite concerned that the figure of £1,000 that the Government have floated for the prescribed amount is a little too high, and I would be interested to hear how the Government arrived at £1,000. I appreciate that provisions will remain in place for the insolvency practitioner to require further information where they have suspicion or doubt, but the clauses seem to set a dangerous precedent that a business can claim amounts of up to £1,000 without any evidence.
We all know that in the event of a corporate insolvency, or even a personal insolvency, there is a certain amount of chaos around. In the corporate case, employees are often desperately attempting to find alternative employment, with the pressure of their mortgages hanging over their heads and the business that they expected would be capable of paying them, and to which they were dedicating their careers, looking increasingly vulnerable and unable to do so. Under those circumstances, many normal practices might go out of the window. It is also the case that insolvent companies have been in a less than ordered state in the run-up to declaring themselves insolvent or bringing administrators in, and they are often scrambling around to find anyone that they are not on stop with to purchase supplies in order to stay afloat. Purchase order numbers and other systems may well become irregularly used. In those circumstances, it is a very dangerous step for any business to be able to say, “We have an outstanding invoice for £826, can you send it to us? We do not need to provide any evidence under the new law, and documentation is not required to show whether the goods were received”.
I understand the thinking behind this, but I am just a bit worried about some of the issues. The particularity of this applies more to personal insolvency, as we are talking about claims up to £1,000, which is obviously quite a significant amount in those circumstances. Again, is it right to remove the need for proof for any bill up to £1,000 in a personal bankruptcy when some of the limits are relatively small, particularly in relation to DROs? It is clear that we should all try to make sure that costs are taken out of bankruptcy administrative processes. Where these are small amounts, there may well be a way that they should be dealt with that does not require too much effort and red tape. However, a bar of £1,000, particularly for individual insolvency, is quite significant. I would be grateful if the Minister could respond to us on these points. I beg to move.
Lord Popat
My Lords, I thank the noble Lord, Lord Stevenson, for tabling these amendments to Clauses 128 and 129.
Clauses 128 and 129 are part of a package of measures designed to streamline and modernise insolvency proceedings and remove unnecessary burdens. Creditors will be the ones to benefit from efficiency savings as lower costs will mean increased dividends.
Clauses 128 and 129 will provide a power to make rules that will allow an insolvency officeholder to pay a dividend to a creditor without the need for the creditor to submit a formal claim. This may be done on the basis that the creditor’s debt has been recorded in the insolvent’s accounting records or statement of affairs. As a safeguard, the officeholder will still be able to require a creditor to provide a claim and, if necessary, supporting evidence, before accepting that a debt is owed and paying a dividend.
During debate in the other place, the Government agreed to undertake further consultation on what the limit for a small debt should be. I would not want to pre-empt that process now by setting the limit before stakeholders have had a chance to put forward their views. We will invite views from stakeholders shortly and will carefully consider the responses submitted before setting out in secondary legislation what the limits will be. The noble Lord quoted a figure of £1,000 for both corporate and personal insolvencies. We believe that draws the right balance between delivering efficiency savings and ensuring that adequate scrutiny is undertaken, but we will, of course, listen to what stakeholders have to say. The stakeholders will give us evidence of what the amount should be. I will also add for the sake of clarity that the small debt limit relates to the amount of the debt and not the actual dividend that the creditor is likely to receive, which is likely to be a significantly smaller sum. It seems inevitable, however, that at some point, whether due to inflation or perhaps something else that is less foreseeable, the limits will need reviewing. Setting the limits in secondary legislation will provide greater flexibility to amend them where it is considered appropriate without needing to amend primary legislation on each occasion.
I hope that the noble Lord has found my explanation reassuring and, on this basis, will withdraw his amendments.
Lord Stevenson of Balmacara
I am grateful to the Minister for his comments. I understand the point that while consultation is going on, obviously it would be premature to come to a resolution on this. However, I suggest that it might be sensible to think about a different approach for the corporate to that for the personal. They are completely different beasts. Presumably we are talking about personal insolvencies at the DRO level and I think that there should be some relationship to the new limits that have been brought in for that, which give us a sense of what the amount—admittedly reduced by the proportion that will be available for reallocation to creditors, which might be as low as 10, 15 or 20 pence in the pound—should be. I understand where the Government are coming from. This is a matter that should be borne in mind but, after those comments, I would be grateful if this amendment could be withdrawn.
Manufacturing
Debate between Lord Popat and Lord Stevenson of Balmacara
Lord Popat
My Lords, we look at emerging markets very carefully, particularly the BRIC markets and especially India and China. In fact, both the Chancellor and the then Foreign Secretary were in India meeting the new Prime Minister, Narendra Modi, to see what we can do to export more to India. Our trade with India is to the tune of about £17 billion now in a two-way bilateral relationship. This is the area we want to increase year after year. Our target for 2015 is £25 billion.
Lord Stevenson of Balmacara (Lab)
My Lords, can the Minister confirm it is still the Government’s intention to double exports to £1 trillion by 2020? Given that, can he assess the contribution to that target that is going to be made by the £5 billion export refinancing scheme, which was launched in July 2012 and is yet to help a single company, and the £1.5 billion direct lending scheme launched seven months ago, which has received only one application?
Lord Popat
My Lords, it is true that the Government’s target is to achieve the £1 trillion export level by 2020. That is quite a challenging and ambitious target, and we will continue to work towards it. We are developing an economic road map to the £1 trillion target and we will draw on this to inform our priorities for the future. We are also investing huge sums of money in UKTI, which is actively pursuing measures to make sure that British companies are able to export abroad. Most importantly, the recent initiative of onshoring—bringing production back from other countries to the UK—will help our export ambition.
Banks: Lending
Debate between Lord Popat and Lord Stevenson of Balmacara(10 years, 9 months ago)
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Lord Popat
My Lords, when I first came to this House, I set up an ad hoc committee to see what we could do to help SMEs to export more and have access to finance. The report was published in this very House, and we now have a large number of schemes, with UKTI working to help our SMEs to export more and to make funds available for exporting.
Lord Stevenson of Balmacara (Lab)
My Lords, the National Audit Office recently reported on borrowing to SMEs. It said:
“the flow of new bank term lending to SMEs fell by 23 per cent between 2009 and 2012 … the ‘funding’ gap (the difference between the funding required by SMEs and the funding available) … may reach £22 billion by 2017. … There is no formal research programme joining BIS, HM Treasury and other departments that have an interest in SMEs. As a result, emerging insights are not as joined-up as they should be”.
Will the Minister tell the House when he last met with Treasury officials and when he intends to meet them to talk about SMEs in the future?
Lord Popat
My Lords, gross bank lending has gone up for the past 12 months, although net lending has fallen in three out of the past 10 months. Overall lending is a lot more than it was in 2012. I am pleased to say that, although net lending has dropped, there are other sources of finance available to SMEs and businesses from which they can borrow money. The recent responses to the Bank of England credit conditions survey reported that the overall availability of credit to the corporate sector increased significantly in the final quarter of 2013. I normally stick to my own department, and I have not had any meetings with the Treasury.
Children and Families Bill
Debate between Lord Popat and Lord Stevenson of Balmacara(11 years ago)
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Lord Stevenson of Balmacara
My Lords, we had been led to believe that this session would finish at 8.15 pm but I have not been briefed about what will happen, so I am in something of a quandary. I wonder if the noble Lord would explain what the position is so that we can understand better what our responsibilities would be to the Bill, before I speak.
Lord Popat (Con)
My Lords, I have spoken to the Chief Whip, and we need to complete the Bill today.
Lord Stevenson of Balmacara
I am glad to hear it, but what has that got to do with me?
Lord Stevenson of Balmacara
I find this very unsatisfactory. As the noble Baroness said, we are all losing our marbles, if not our words. Trying to get through the Bill at this late hour when there are still two very substantial amendments to go is not what was agreed through the usual channels and certainly was not the basis on which we came into this discussion. I continue, but I do so with the feeling that this is not in the spirit of the best use of our time, and your Lordships’ House will be the worse for having to debate late into the night issues that should have seen the fresh light of day—perhaps next Monday, when of course there will be time.
Clause 104 was in my mind when I started the debate earlier—it seems a long time ago now but was in fact earlier this afternoon—by saying that while the Opposition were broadly happy with the measures contained in Parts 6, 7 and 8 of the Bill, there were one or two bits of grit, and this is one of them. Amendments 267L and 267M and the clause stand part Motion are grouped together in one place so that we can have a debate about them. While they all bear on the same area, they obviously have different impacts. My preference would be for the clause to stand part because I believe that what the Government are trying to do here is antipathetic to the very spirit of British law, which has always recognised the need for a person with a legal case to have the chance to make that case in a court of first instance but, where there have been problems or difficulties with that, the person would then have the right of appeal against decisions taken in the first instance. However, the Bill as it is drafted removes the process by which an employer must respond to an employee’s flexible working request and replaces it with a requirement to respond in a reasonable manner and within a timeframe of three months. We had a debate earlier about the word “reasonable”, and on that occasion the Minister felt unable to accept that word because he felt it was not appropriate for the context in which we were discussing it, although it has come back several times since and he has been quite happy with it. We have a situation here where reasonableness, which in the earlier amendments was a burden on employers, is now okay for employers to use.
The current processes include the provision for an appeal by an employee, and this obviously provides a useful opportunity to discuss why things have not worked out in terms of the process, but the Bill removes that. The history to this is interesting. ACAS consulted on a draft code of practice for the extended right to request flexible working, and employer bodies such as the CBI, the FSB, recruiters, the TUC, EHRC, Opportunity Now and Working Families acted as advisers on the draft code. The group agreed, and the draft code recognised, that an appeal is important. The draft code said:
“If you reject the request you should allow your employee to appeal the decision. It can be helpful to allow an employee to speak with you about your decision as this may reveal new information or an omission in following a reasonable procedure when considering the application”.
Anybody reading that would recognise its antecedents in criminal law and civil law where clearly those who have cases—as I have said—can make them in the first instance and then, if there are difficulties, can appeal against some of the decisions in order that they can be better refined and reconsidered. We believe it is important that the Bill and the code are consistent to provide clarity to employers and certainty to employees that appeals are to be allowed. The amendment would make it clear on the face of the Bill that appeals remain an important part of the process of considering flexible working requests.
In Committee in the Commons, the Government argued that the amendment would mean that an employee always had a right of appeal, and that this would be burdensome and bureaucratic in a very small organisation. If it was an absolute right of appeal, that might be the case, but appeals are usually constrained by matters of fact or law and one would expect that normal processes would be applied. We argue that a very small organisation would be able to deal swiftly with an appeal, but allowing an appeal is important for procedural fairness and may reduce the use of grievance procedures instead. Sometimes employers do not give a statutory business reason for refusing a request, and that could give rise to an appeal. In addition, once the employee understands the employer’s business reasons for refusing a request to work flexibly, they may be more able to negotiate a solution, so it is a win-win all round.
I would ask the Minister to think again about this issue. It is important to retain what we normally expect as the right approach towards consideration of these quasi disciplinary matters. I beg to move.
Small and Medium-sized Enterprises
Debate between Lord Popat and Lord Stevenson of Balmacara
Lord Popat
My Lords, it is a pleasure to answer the first question from my noble friend, who brings a wealth of experience from both the private and public sectors. As your Lordships know, the Government have introduced a moratorium on all new domestic regulations for three years for new start-ups and businesses with fewer than 10 employees. In addition, in January we introduced a “one in, two out” rule on all domestic regulations affecting businesses and voluntary organisations. The Government are absolutely committed to creating a culture in which all businesses, including SMEs, can thrive.
Lord Stevenson of Balmacara (Lab)
My Lords, in September 2012, having failed to persuade the Treasury to break up RBS, the Secretary of State announced the formation of the British Business Bank. However, it was not until 17 October 2013 that the first chair was appointed and then we were told that the bank was in a “substantial expansion phase” and that it was on target to unlock £10 billion for expanding companies. Last week we learnt that the bank finally made its first investments, when it gave £45 million to two financial institutions, Praesidian Capital Europe and BMS Finance. When will we see funding actually flowing to the small and medium-sized businesses that need it and when do the Government expect the bank to reach its £10 billion target?
Lord Popat
My Lords, on 1 November RBS committed to a new direction that will lead it to being a boost to the UK economy, rather than a burden. It will be dealing decisively with the problems from the past by separating out the good and the bad and putting the bad loans in an internal bad bank. RBS will now focus on its core British business, supporting British families and companies. It will sell off more of its overseas operations and go on shrinking its investment bank so it has more capital to support lending to the British economy. RBS is committed to becoming the number one bank for small and medium-sized enterprises, as judged by customers, measured by the newly created survey to be run by the Federation of Small Businesses. On growing SME lending, RBS continues to be the number one bank for SMEs.
Enterprise Act 2002 (Part 8 Domestic Infringements) Order 2013
Debate between Lord Popat and Lord Stevenson of Balmacara(11 years, 9 months ago)
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Lord Popat
My Lords, this is a short but not insignificant order that will enable the effective enforcement of the Consumer Protection (Payment Surcharges) Regulations 2012. The regulations implement into UK law Article 19 of the European Union consumer rights directive. They prohibit traders from charging consumers above-cost payment surcharges. The Government have had concerns about the level of card surcharges that exceed the real costs in several sectors of the economy. Such surcharges are typically employed as a form of drip pricing, whereby the consumer does not see the final transaction cost until after completing several forms. That can make it more difficult for consumers to shop around. Under the regulations, surcharges for using a particular form of payment will become cost-reflective.
The provisions of the directive need to be implemented in UK legislation by December 2013 and brought fully into force by June 2014. Given the concerns that have been raised about these practices—notably by Which? and in a report by the Office of Fair Trading—the Government have decided to implement this part of the directive early. The payment surcharges regulations were made and laid before Parliament on 19 December last year under the negative resolution procedure. As with this order, they come into force on 6 April 2013. They are not of course the subject of the Motion today but they are directly related.
Article 2 of the order provides for the enforcement framework in Part 8 of the Enterprise Act 2002 to apply in relation to the regulations. This enables the relevant enforcement bodies to apply to the courts for enforcement orders against traders that have engaged, are engaging or are likely to engage in conduct that breaches the regulations, if that conduct harms the collective interests of consumers in the United Kingdom. Taken together, the regulations and this order will provide an effective enforcement regime in fulfilment of the directive’s requirements that adequate and effective means exist in national law to ensure compliance with the provisions of the directive and that penalties laid down for breaches of the directive are effective, proportionate and dissuasive.
Although the payment surcharges regulations implement an EU directive, Article 2 of the order specifies them as a domestic infringement rather than a community infringement for the purposes of the 2002 Act. This is because the obligations in the regulations take effect from April 2013, whereas the EU directive requires them to take effect only from June 2014. The order does not therefore strictly relate to infringements of EU law in the period up to June 2014. For this reason, and unlike the regulations, the order is subject to approval by both Houses of Parliament. I beg to move.
Parental Leave (EU Directive) Regulations 2013
Debate between Lord Popat and Lord Stevenson of Balmacara(11 years, 9 months ago)
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Lord Stevenson of Balmacara
My Lords, I am pleased to welcome this proposal. It is exactly what the Government should be doing and seems to do what is required. As the Minister said, it has been welcomed by those who have been consulted in the round. However, there is one caveat. The Minister explained why certain measures had to be brought forward at this point because of an EU directive requirement, but the general thrust of the approach to parental leave and to regularising the broader position is based on doing them at the last rather than the first possible moment. I do not need a response on that but I would like to record that it is obviously a matter of some regret that some of the good things that we see in this change to the regulations are going to be delayed, to the disbenefit of those who will be affected by them.
Will the Minister rehearse the timing of the extension to the age of 18? I ask that because the matter was raised when these regulations were considered in another place; there was an exchange about this of which I am sure the Minister is aware. I quote the Minister on that occasion, who said in response to a question from a Labour Member:
“The hon. Gentleman posed a fair question about why we are not raising the age to 18 at the same time”,
as the rest of the regulations which were going through with this order. The Minister said that the reason was straightforward—although it may be to the benefit of the Committee if it listens hard, because it is not at all straightforward to me—and that,
“we understand from the business community that having all the changes on shared parental leave and on pay and leave for parents in one go is easier in terms of familiarisation costs. For this small, discrete change, there is an earlier European Union deadline, and we want to make sure that massive changes do not happen at various times”.
That seems clear, and I understand its logic. She continued:
“However, I give the hon. Gentleman the firm commitment that the Government’s policy is to raise to 18 the age at which the regulations apply”.—[Official Report, Commons, First Delegated Legislation Committee, 28/1/13; col. 7.]
Although she said that it was not going to happen at this point, the guarantee which the Minister wished to give was that the Government would move this forward. This has been repeated by the Minister again today.
Why have these things not been brought together? If the Government wanted to minimise the impact of familiarisation costs on business, it would seem more sensible to do all these, and apply them, at the same time, yet they chose not do to so. Perhaps the Minister could respond on that point.
Lord Popat
I thank noble Lords for their comments. I thank, as always, the noble Earl for his comments on children who are being adopted. Adoptive parents will be entitled to 18 weeks, as is everybody else, with leave to be taken within five years of the date of adoption; others would be from the date of birth. If somebody adopts a child of six years, the right will expire five years thereafter or when the child is 18, whichever is sooner.
The noble Lord, Lord Stevenson, asked why we did not bring the 2015 date forward. Consultation was done on a range of time limits: five, eight, 12, 16 and 18 years were proposed. Around 30% of the respondents called for no change, whereas 31% called for the age limit to be increased to 18. There was not much support for eight, 12 or 16 years. We therefore made the age 18. In order to minimise the cost to business, this change will only be introduced alongside the other changes in the system for maternity, paternity and shared parental leave. The change will therefore not be made through these regulations. Primary legislation is required, and will be included in the Children and Families Bill. I trust that I have responded to the noble Lord’s questions.
Companies Act 2006 (Amendment of Part 25) Regulations 2013
Debate between Lord Popat and Lord Stevenson of Balmacara(11 years, 9 months ago)
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Lord Stevenson of Balmacara
My Lords, I hope it is in no way a measure of the interesting comments made by the Minister in his introduction that the only other noble Lord who was present has fled quickly from the room and is therefore not in a position to respond to his kind invitation to speak, but that leaves the burden on me. I appreciate the way in which he introduced this change and want to make it clear from the start that we broadly welcome it. It is a good idea, but possibly rather later than perhaps it could have been, as the Minister hinted at in his introductory comments.
This has obviously had a troubled background in the sense that, as we discovered, the original consultation was in March 2010 and had to be reissued for further consultation a couple of years later before the department was able to come forward with a modified proposal. Therefore, my first question to the Minister is whether we ended up with a situation in which we have the least worst solution rather than the best solution. Just to amplify that, most people seem to want—and the majority of the responses within the impact assessment suggest this—a fully operable system, with all the detail. There were, however, a significant number of people who felt that that was going to be burdensome and difficult, so the compromise is neither one thing nor the other. I would be grateful if he could make a few remarks to illustrate what he thinks is the end result and how it meets the benefits specified in the documentation.
Secondly, I was having difficulty following the figures, possibly because there were two different consultations and two different levels of issuing comment. The summary document which accompanies the impact statement says that the impact on businesses is expected to be a reduction in the burden on those filing charges, generating a net savings of £21 million a year. However, the impact assessment itself says that the net cost to business will be about £21 million as well; I may have misread that, but I would like a comment on that from the Minister. It seems like a modest reduction, given the amount of effort that goes into registering charges. As the Minister said, this is at the heart of all business transactions involving inter-business acquisitions and sales; any lending going on will always require some sort of assessment of the overall capacity of the organisation to which it is being lent. Therefore, we are saying that this is a very modest change.
However, costs are not symmetrically based; they will fall on those who have to prepare and generate the new input documents which the document says will be recouped through efficiency savings over an estimated period of four years, but no evidence about that is given. I just want to be sure that these are really modest savings and would like it on the record that that is correct.
My third point is about the costs burden arising from moving to a new electronic system. We are all sceptical about the claims that are often made for these systems but this is by all accounts a rather simple one. It is a register that is not capable of doing very much more than simply holding data. Can the noble Lord give a bit of context for how much testing of this new register has been done and whether he is confident that it will be up and running and ready? Quite a lot of time has been spent preparing for it, after all, so I hope that it will be but I would like to be confident.
Finally, I trained as an accountant in Scotland, where one of the things that was drummed into me early on in my studies was the difference between the charging register system in Scotland and that in the rest of the country. In Scotland, it is not necessary to register all charges. There is very little mention of that in the Explanatory Memorandum while there is some comment on it in the impact statement. It would be for the benefit of the Committee if the Minister could simply mention what exemptions there are for Scotland and how they will be accommodated given that the overall aspiration of this move, which I do not dissent from, is to try to provide a simple system for the whole of the country despite the differences in responsibilities between the various territories.
Lord Popat
I thank the noble Lord for a number of the issues that he has raised on these regulations. First, let me explain the cost versus the benefits side. Currently, to register a charge the fee is only £13 but there is a huge cost to the businesses and companies when it comes to dealing with a large number of forms through their accountants, solicitors or agents for registration. Electronic transmission will be much easier, as when we do our tax returns and VAT returns electronically. A company can in fact register electronically a director or company secretary. Having business knowledge and a business background, I suppose that this is something that should have been done many years ago.
This is a welcome move for a number of organisations, in particular credit reference agencies, lawyers and accountants but, most importantly, the lenders themselves. It gives a lot of security to lenders because we can register a charge electronically within one day. Currently, the system takes as long as eight days. Lenders will be pretty well secured on day one of release of the money to the companies to which they are lending, so it is a much safer system than we have now.
In the old days, I remember that we used to rush to Companies House in London. Now, Companies House is based in Cardiff and there is also a 21-day time limit, so in that respect the cost saving to the companies is quite huge. Even if it takes roughly half an hour for the lawyers and their secretaries to do the necessary paperwork for company registration, that half an hour is charged as a cost to the client so that will be a saving. That is what the £21 million saving is all about. With regard to the cost of putting it in practice, which is something like £750,000, if you can imagine the time saved by Companies House staff in Cardiff in processing manual applications compared to electronic applications, I would guess that that £750,000 will be recouped in four years’ time. A lot depends on the number of applications going through electronically, which is currently about 90,000. If the numbers go up, recouping the cost will probably take less than four years.
This was taken to be a compromise on future lenders’ requirements and to simplify the particular archive held in their own system. I will explain what I mean by that. When their auditors come, companies are required to do company registration, with its charges. The auditors can actually get information electronically and that screen saves audit fees for the companies, so there is that advantage too. I am afraid that it was not a compromise.
On why this took so long, we obviously had a number of reports on this and took the necessary time, as it is a complex area. We engaged all the stakeholders, who are now largely satisfied, including the Law Society and firms of chartered accountants.
With regard to Scottish companies, this provision will apply to the United Kingdom throughout. The system is not different for Scotland in this respect. I believe that I have answered most of the noble Lord’s questions.
Lord Stevenson of Balmacara
My Lords, I do not think that the Minister quite got the grasp of what I was saying about Scotland. Scottish law does not require the automatic registration of all charges. In England and Wales you have to register them automatically. Therefore, given the Government’s drive for simplicity, I was asking whether the Minister could say a little more about how there can be a very simple and universal system, yet also allow Scotland the discretion to not register where that is appropriate. For instance, unincorporated companies do not need to register charges in Scotland.
While I am on my feet, I might add that the Minister did not answer my question about whether the system had been tested and to what extent he felt that it was fit for purpose and ready to implement.
Lord Popat
The draft form has been tested with the stakeholders and other learned registrars and the system works well.