Compensation Bill [HL]

I do not know whether any specific studies have been done, but it is part of what I have been discussing with Mark Boleat, who has experience in looking at this. I have the impression that there are different reasons in different sectors. Although I predict that there will be a drop in the number of firms, it is difficult to take one sector and move it across to the other. We know that in general where one regulates, those who do not want to be regulated, particularly those who will not be able to continue doing things that they have been doing before, will leave the market. That is a logical expectation. I have to work on the prediction that the number will drop. We think that there are 500 companies now. Whether that figure will drop substantially, I do not know. We need to have in place a regulatory regime which will allow for that but which will also allow for the fact that, in this particular set of circumstances, the number that leaves could be quite small. We have to be clever about how we set up the regulation. We must have flexibility so that if, in 12 months’ time, it is clear that the vast majority of companies is still operating, we are able to cope with that, but if the number has dropped quite substantially, we can cope with that too. The noble Lord will not be surprised that that suggests to me all sorts of ways of developing a model to enable us to do that. It is a major part of the consideration that we have brought forward. The principle is that, whatever we do, the Government must be willing to pay start-up costs in order to get this up and running effectively for consumers. We have earmarked £0.75 million from our existing funds for 2006–07. We have the same amount available for the next year because there is nothing worse than doing this and then discovering that the money has not been earmarked. We have done that in order to make sure that we have funding available because this is for consumers. The Claims Standards Council has what seems to be, on the face of it, a reasonable income stream from its 170-plus members. We have looked at the way that it has been able to attract resources. On fee scales, we have been trying to identify the different fee structures that organisations use. The Security Industry Authority has a fee structure of between £1,000 and £3,000 and an annual fee of about 0.1 per cent of turnover. The FSA has a minimum fee for insurance intermediaries of £100 per broker with a commission income of £100,000. That increases proportionately at a rate of 0.08 per £1,000. The Gangmasters Licensing Authority is proposing to levy either a single fee of £2,130 or a scale ranging from £660 to £32,000. There are a number of different ways to approach this, but they range from turnovers of about £250,000 having a fee of around £250 to those having a turnover of more than £20 million having a fee of £20,000, and I have lots of different figures in the middle. Depending on the scope and the impact of the regime, the market could yield between £200,000 and £1 million per year. To begin with, there is quite a range that I have to think about carefully. We think that registration income of £300,000-plus is a likely figure, but it could be higher. I am trying to be realistic and to set out all my thinking on finance because it has a huge impact on the way in which we approach the regulator. I hope that it also gives the Committee more confidence that these issues are central to our deliberations, that we have talked to others involved in regulation and that we have used the expertise available to us to consider a range of factors. Ultimately, we are to some degree dependent on what happens in the marketplace. I suggest that the number of companies will decrease, but I do not know by how many. I need to set up a regime that can cope with the extreme ends of that. As a Government, we absolutely have to commit to making sure that the regime is set up properly with support from the Government in order that we protect consumers as effectively as possible. I hope that that gives the noble Lord information to consider and that he will feel able to withdraw his amendment.