Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of Witnesses (Questions 202 - 219)




  202. Good afternoon. I am very glad to have you here this afternoon. Could I ask you, please, to identify yourselves for the record?
  (Mr Austin) My name is Gary Austin, I am the Chief Executive of the Driving Standards Agency.
  (Ms Manley) My name is Laraine Manley, I am Finance Director of the Driving Standards Agency.

  203. Do you have anything you particularly want to say to us?
  (Mr Austin) I think it is true to say that this Committee rightly criticised the performance of the Agency when it last saw it, and I have to say quite rightly. What I have also to say is that I joined the Agency last February and found an Agency that dug itself into a big hole. Since that time I have been struggling to get it out of that hole. I am very pleased to say that the results we have had by the end of December actually show we are making a lot of progress on that on the IT front, waiting times, et cetera. I am very conscious the data we sent was dated back to July, which did not show those improvements.

  204. I have no doubt we will be asking some questions about that. If you are digging yourself out of a hole, I can only say that is a form of experience that makes you very much at home in this building. What is the fee for a practical driving test? Has it risen more than twice the rate of inflation since 1990?
  (Mr Austin) I do not know what the fee was in 1990. What I can tell you is the reasons behind the increase. We have to start with the volumes. In 1990 we were conducting somewhere in the region of two million tests, we are now down to the just under 1.2 million.

  205. Down to 1.2.
  (Mr Austin) There has been quite a considerable reduction in the volume. At the same time one of the things that has happened is we have extended the test. An examiner now does seven tests a day rather than eight, because of the extended nature of those tests. That would have reduced efficiency at that time simply because of the length of the test.

  206. That is a very big difference, is it only the length of the test? Is it the price?
  (Mr Austin) The price itself has not gone up since May 1999, so from our point of view we have held those prices for nearly two years now. It has increased, I have to acknowledge that. One of the other reasons for the increase is that since we became a trading fund we have to show a return on the capital invested.

  207. Of eight per cent.
  (Mr Austin) It has to be more than six per cent. That will account for somewhere in the region of 50 pence per test just in terms of that transfer.
  (Ms Manley) In 1990 the Agency was making a loss of three million, so that was a contribution factor, it was not covering its costs.

  208. £300 on each test.
  (Ms Manley) £3 million in total.

  209. If one is going to make a loss one might as well make a loss! The theory was that you would recoup all of this from the people taking the driving test?
  (Mr Austin) That is the only place we can require the money from.

  210. Have you asked the Treasury to take note of the fact?
  (Mr Austin) Every five years we have a discussion with the Treasury about the trading fund status. We are due to reopen those discussions for the next five years this year. They would have given us targets and the targets we have had have been no fee increases above the rate of inflation for the first three years. Then for the last two years, which finished this year, it was the retail price index minus one per cent. We stayed within that.

  211. Do you have any evidence about the cost of the driving test? You will remember this Committee reported on the number of young drivers not taking the test and how worried we were about it. Has that rise encouraged young drivers to go ahead without a full licence?
  (Mr Austin) I do not have any evidence at the moment to prove that it has not. I am conscious that the DETR have launched a research project into unlicensed drivers to understand the motivation behind it. If I can just say in mitigation, as it were, the cost of £36.75 for a practical test is very small by comparison to the amount of money they would have spent on potential driving lessons. It would depend on which instructor you use or whether it is a large company that charges more than the average, but it could be anywhere from £400 to £600, at the very least. It is a small percentage. I have no indications that that in itself, which is for many of them a price of a computer game, would put them off. If it has put them off then I am surprised, but it is probably part of a symptom of them being put off a lot of things.

  Chairman: They may not get quite the same buzz out of a test as from a computer game.

Mr Stevenson

  212. Can I ask a couple of questions about the trading status. I think you said you are required to show a return on capital invested of at least six per cent, what capital are we talking about?
  (Ms Manley) In the balance sheet assets the worth of the Agency is primarily in property and computers, plus fees in advance.

  213. Plus fees in advance.
  (Ms Manley) Yes, less creditors.

  214. Could you explain that? It seems simple what they are, but could you just explain what that is?
  (Ms Manley) Somebody will book a driving test and they will pay us for the driving test. If they have booked before the end of our financial year and they have not yet received the test, we have the money but we have not incurred the cost of conducting the driving test.

  215. In effect you have to show, in part, a six per cent, at least, return on bookings on an annual basis that you are not sure of because it is dependent on a calender month procedure.
  (Ms Manley) In effect what we have is money in the bank and we will offset that by the amount we owe the individual fee-payers. Although the two are not equal they do net off to a smaller amount. Our balance sheet assets at the moment are about 21 million, of that 18 million is fixed assets, which is computers and property.

  216. Nevertheless it is ten per cent. That is not a small percentage.
  (Ms Manley) No.

  217. When you say your buildings and so on, the rest of it, presumably the Agency has looked at its asset base and got an up-to-date valuation of that?
  (Ms Manley) Yes.

  218. The trading status, every five years you discuss it with the Treasury. A lot of things can happen in five years. Do you think that is a reasonable sort of time limit or timing for these discussions to take place?
  (Ms Manley) The very nature of a trading fund and the way that the Treasury has set this out is that you have a five year agreement. If there are any instances where circumstances change, for instance when the driving test became longer there was a loss of efficiency in relation to driving examiners because they could only undertake seven tests a day as opposed to eight, so we went back to the Treasury and renegotiated part of the deal.

  219. You say you have an up-to-date asset based valuation, what is it?
  (Ms Manley) Of the fixed assets?

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