Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 1-19)




  1. I will now start this session of our inquiry into the work of the Ordnance Survey. Can I point out that the Committee has received quite a few memoranda and they are on the table at the back if anyone wants to have look at copies of them. Can I also place on record the Committee's appreciation to the Ordnance Survey for looking after us this morning and for their hospitality. We are very grateful. Could I ask you to pass on to all your colleagues our thanks for taking us round and answering our questions. Can I now invite you, Ms Lawrence, to introduce yourself and your team to the Committee.

  (Ms Lawrence) I am Vanessa Lawrence. I am the Director General and Chief Executive of Ordnance Survey.
  (Mr Willey) I am David Willey. I am Deputy Chief Executive of Ordnance Survey and Director of Business Change.
  (Mr Erskine) I am Steve Erskine. I am Managing Director of Graphic Brands at Ordnance Survey. Graphic Brands delivers electronic and paper graphic products to the retail market place for consumers and small businesses.

  2. Do you want to say anything by way of introduction or are you happy for us to go straight to questions?
  (Ms Lawrence) I should like if I may to do an introduction. First of all, may I thank you for visiting us here in Southampton. I am delighted that this morning's tour was of some use. Ordnance Survey has a very long history and a very proud heritage, but we are now very much part of the information content business. The Ordnance Survey brand is known throughout Great Britain and in fact throughout the world. I am delighted to say that in December 2001 there was a MORI poll amongst Members of Parliament in which Ordnance Survey came out as the second best regarded organisation out of 70 organisations considered by MPs. Ordnance Survey is responsible for creating and maintaining the master map of Great Britain and an independent assessment showed that we underpin £100 billion worth of gross domestic product per annum in this country. The master map is a very dynamic database. We make 5,000 changes to it every day, very much reflecting the dynamic landscape of Great Britain. Ordnance Survey produces paper and digital products from it but also our partners in turn take that data and turn it into other products, good examples being A-Z and AA street atlases that you may know, and also many organisations put the data into a computer system and it is sold to people like emergency services, local and central government and used for things like siting new superstores in high streets and so on. Ordnance Survey is a £100 million business employing 1,900 staff. We have to make a profit under our terms of the Trading Fund. We use those profits to invest back into our business, into our infrastructure, and also into our data. In the last 12 months we have completely recreated the master map of Great Britain, very much reflecting the technological changes that are facing both ourselves and our partners. We have reorganised the business to make it more customer facing. We have also strengthened our management team with experts from both the public and the private sector. We have produced and implemented our E-strategy which I think you heard about this morning, and we have also launched our new Partner Programme so that it is easier and more advantageous for our partners to work with us. The first part of that was our Development Partner Programme which came out in November 2001. In December 2001 it was announced that we may move to being a Government Owned PLC. We welcomed that announcement because we do believe we are here in the nation's interest and we are very firm on that. However, we need to ensure that together with partners we are agile enough and have the right kind of products to meet our customers changing needs. We also have to prevent overseas competition from eroding our business and that of our partners, and we believe the Government Owned PLC will give us greater flexibility for things like investment and also help us to recruit and retain staff in scarce resource areas. The geographic information industry is very much growing and the use of location based information is growing. In fact, many of us have said that location is the fourth driver to business along with revenue, time and costs. We also know there are many emerging markets in location using things like the 3G mobile phones and also web-based systems. Our vision is very much that, together with partners, more people will use location based information than ever before. This would not be possible without the dedication of our own staff and also the collaboration that we receive from the trade union side here. We face many challenges but our staff came together absolutely in December (and I think you learned about this this morning) for the OS experience so that we all go forward with one vision very much understanding the challenges that we face and the way we need to work with customers. Finally, I should like to say that I am very proud to head Ordnance Survey and we are delighted that you have come here today so that we can explain more about it. Thank you.

Mr Betts

  3. Coming on to the point you made about the possible change to a Government Owned Public Limited Company, you explained why you thought the change might be beneficial. If we came back to meet you in five years time and that change had taken place, what do you think the impact and effects would be?
  (Ms Lawrence) At the moment we are at the end of phase one of the Quinquennial Review and in phase two we are going to look into all the costs and benefits. From the work that we have done as a team before the announcement we do believe that it will allow us to be more agile at responding to changes that are needed by our customers because back in the early nineties there was a huge amount of under-investment in Ordnance Survey. We are addressing that with a very aggressive investment programme which you have heard about this morning, but the challenges that our customers are asking us to respond to are so great that it is important that we are able to get the investment more quickly than ever before. We are also in a very scarce market for experts. This country does not have enough trained geographic information specialists, so as a result we have struggled to manage to recruit them because of the salary differentials with the private sector. As a result we believe that it will allow us to professionalise a lot of our areas because it will give us a greater opportunity to recruit and retain staff because we will not be so constrained in staff salaries.

  4. So there are two issues really. Currently you are constrained from borrowing the amount that you require to invest and you are constrained from paying people the salaries you think you have to pay to get the right people.
  (Ms Lawrence) Amongst other things. I do not know whether my colleague David would like to give some greater insight into some of those issues.
  (Mr Willey) To build on your first point, the ability to borrow for investment has not been an issue for us in our first two or three years now as a Trading Fund. We have enough money in the business to be able to invest where we need to. However, that will not be for ever and a day. The ability to be able to borrow to invest will be very important in this business as we continue to grow. I might also look at it five years ahead from a different perspective and say, "What would happen if we continue as a Trading Fund in five years time?" There I do think that the crucial bit is having the right staff to lead the organisation, having the right skills, particularly in some of the scarce areas of sales and marketing, for example, and some of the technology areas. If we continue as a Trading Fund, if we continue under some of the restrictions that exist for us as a Civil Service department, it does mean that we are less likely to be able to attract, retain and recruit those sorts of people. That is where I think we will see the difference. In five years' time we will see an even more customer focused organisation.

  5. But you are moving to a more commercial environment. There is this inherent conflict, is there not, in your business between the public interest element of it and the commercial requirements on you? If you look at what has happened to Consignia which has gone down this route already, it has not exactly been a completely smooth path for them. Do you anticipate similar problems?
  (Ms Lawrence) I do not think I am well qualified to discuss Consignia's business but certainly we are very much working not so much at the technological edge, because I would never want to be quite at the technological edge, but close to having technologically revolutionalised Ordnance Survey over a 15-year period. Our staff numbers are considerably less. They have reduced from nearly 4,000 twenty years ago, 2,500 ten years ago down to 1,900 today. Currently NIMSA covers our national interest work that we do.


  6. Could you tell us exactly what NIMSA is? It makes it is easier for the record to be kept.
  (Ms Lawrence) NIMSA stands for National Interest Mapping Services Agreement. It is an agreement with Government at cost and it covers such examples as the mapping of the uneconomic areas of this country in the rural areas. It covers our 24 hours a day, seven days a week service for mapping in emergencies. David may wish to give further details on NIMSA.
  (Mr Willey) NIMSA is a contribution to those activities which are essentially non-commercial, those things that we would not do if we were an out and out commercial organisation. It includes a contribution to mapping areas of the country where there is not really any commercial need for that mapping to the degree that we require it.

Mr Betts

  7. Once you have got the public interest elements clearly tied down by agreements and you are free to move off into the commercial field to make your rates of return and so on, to be freed up from borrowing, to be free to pay your staff what you want, is there anything to stop you from going to a privatised or partially privatised organisation?
  (Ms Lawrence) As a Board we do not think privatisation is optimal for this organisation. We believe we are here in the nation's interest and if we were fully privatised and at the vagaries of reporting to the Stock Market we do not think it would be in the nation's interest. You mentioned our move into the commercial end of the business. We are in a situation where we face competitors from overseas, so it is important that, together with our partners here in Great Britain, we work together to continue ensuring that we are here and our business is sustainable.

Mrs Dunwoody

  8. Are they state or commercial opposition?
  (Ms Lawrence) They are commercial.

  9. Are they subsidised by their governments?
  (Ms Lawrence) Some of their holding companies are subsidised but I believe that in the majority of their investment they are doing global activities rather than just national mapping work.

  10. Which would be the biggest of your commercial opposition?
  (Ms Lawrence) I would prefer if I may to write to you, Mrs Dunwoody, regarding our competitors because naturally it would be indiscreet of me to mention them publicly.


  11. You do not want to give them any publicity?
  (Ms Lawrence) However, it has to be said that their interest is mapping countries throughout the globe, whereas we believe we are here to be responsible for Great Britain.

Mrs Dunwoody

  12. The United Kingdom or Great Britain?
  (Ms Lawrence) We are actually responsible for only Great Britain. Ordnance Survey Northern Ireland maps Northern Ireland and Ordnance Survey Ireland maps the Republic of Ireland. The three Director Generals meet at least every six months and our own teams meet. Two things we have done are that we make sure that when global companies want to work with the British Isles it is important that there is a consistent message coming from us all and also this morning you heard about the importance of TOIDS (topographic identifiers), and I do believe that Ordnance Survey Northern Ireland and Ordnance Survey Ireland will be adopting the TOIDS system.

Mrs Ellman

  13. Is cost recovery the best way of funding the National Mapping Agency?
  (Ms Lawrence) There are lots of different models you can use for funding national mapping. When considering other models around the world certainly our model seems to be a very effective one. We have recently seen examples in the United States, for instance, where they moved into a situation where they were more like vote funded 25 years ago. When they moved to that situation they were promised that there would be considerable government funding continuing for a very long time. Things changed and they became very under-funded. Their Director General has quoted that much of their data is eight years out of data and in many places it is up to 27 years out of date. They are now putting together a programme in which Congress has asked them to consider how they can get their mapping back up to a reasonable maintenance programme. We currently guarantee that if you are in an urban area of Great Britain your change to the landscape would be on our maps within six months and in rural areas within five years, and so we very much represent the landscape of this country.

  14. Concerns have been expressed to us that the charges may be or may become too high because of the funding arrangements. Would you agree with that?
  (Ms Lawrence) I find that quite a difficult statement to agree to. Since September 2000 our data prices have been held and we have seen many prices come down quite considerably. LandLine, which is our large scale database, the precursor to OS MasterMap, had a 5 per cent reduction in prices; I believe in September 2000 we held the price. For our service level agreement we are under the terms of the agreement able to put the prices up by RPI. We did not do that last year. In our business, geographics, they have continued to fall progressively and there are some data sets (a good example being Address Point) where we have completely looked at the market and the way that people wish to use the data and did some renegotiation with our partners in that, who are Royal Mail/Consignia, and now we have dropped the price for a site licence from £800,000 to £120,000 per year.


  15. What you are telling us is that the maps were overpriced and the services were overpriced and by bringing the price down you are able to sell more and therefore increase your income. Is that right?
  (Ms Lawrence) I would refute that. In certain instances perhaps the pricing was inappropriate, but, as in Address Point, there are others which it has reduced. I was a user of Address Point in my previous private sector life. I was a user of all Ordnance Survey products in that life. Certainly in things like LandLine coming down by 5 per cent, I do not think that was saying it was overpriced. I think it is just reflecting all the changes and the way we are able to use technology. We certainly are ensuring that we always have a fair and equitable price.

Mrs Ellman

  16. The Quinquennial Review sees great opportunities for you in becoming a Government Owned PLC. Do you agree with all the things they say, that it will be easier for you to have joint ventures, that you will be able to attract private sector candidates, that you could be more effective in innovation? Do you accept all that?
  (Ms Lawrence) That report was published on 19 December. We were very aware of the outcome some time before of the potential hook-up. While it was in discussion we did a lot of work as a team to understand both the costs and the benefits of it. From our findings we do agree with everything that has been said, but Stage 2 will be starting in February and at the moment there is an OJEC notice out to find the new consultants to undertake Stage 2 on behalf of the Minister. It may of course be the same consultants who did the first Quinquennial Review, Stage 1. Certainly what they were looking to was the costs and benefits of looking at the whole change and further work will be done at that stage. We agree with it at the moment but there is a lot of further work to be done.

  17. Have you been held back at the moment by your current status?
  (Ms Lawrence) We have been with our current status since April 1999 and certainly in that time we have met our agency performance monitors and have developed the business, but we are finding it incredibly difficult to recruit staff in the professional areas. I have recruited three new directors this year and it has been a struggle. For one of the directors I had to go out on four occasions to find a person who would join us and this was because of constraint by salary; there are great constraints on salary. On all of them we had to go out twice, so it involves a huge amount of work. We do now have a complete team. One of our directors has decided to retire so we once again are facing the struggle of recruiting people, and at senior manager level we face the same problems.

  18. Do you have a problem in holding the same staff?
  (Ms Lawrence) We do have a problem regarding staff who join us as graduates. If you have a geographic information degree it is normally at MSc level and you will have done three years at university doing your base degree and then one year doing your MSc. Often people join us at that level but our pay rates even at that stage have quite a discrepancy with the private sector. We often might be paying somewhere in the region of, say, £17,000. Even at starting salary it would be between £20,000 and £25,000 in the private sector. Within six months in the private sector they would be expecting to earn in the region of £32,000 to £35,000 whereas they would still be on £17,000 with us, or maybe a little bit more. We are in the situation where we are having to negotiate large contracts, even multimillion pound contracts, and certainly in account management areas we find it very difficult to recruit the staff who are able to form those relationships with the customers. Our staff in those areas are often being paid, say, £30,000. In the private sector which is quite developed in this country. Certainly nearing six figure sums in some cases. We struggle and we do lose staff often to the private sector. We are an excellent training ground, which is a positive and also has a negative side.

Ms King

  19. Returning to the National Interest Mapping Service Agreement, NIMSA, are NIMSA funds used solely for non-commercial services and products?
  (Ms Lawrence) Yes, they are. Perhaps I could ask my colleague David to expand on NIMSA.
  (Mr Willey) They are not actually used for any services or products. They are used for maintaining the mapping of Great Britain. Through this we can maintain national standards of consistency in terms of quality, currency and specification. It does not directly fund products or services. There are then products and services which are available to everybody which are consistent whether you buy them in the north of Scotland or in central London because we have NIMSA underpinning that specification.

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