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

Memorandum by Christopher Roper, Landmark Information Group (OS 01)

  1.  Landmark Information Group's business is built around the use of Ordnance Survey's large-scale digital mapping. This business, founded less than seven years ago, employs over a hundred people in three offices, and is turning over around £20 million a year. Some 25 per cent of this money goes to Ordnance Survey, making a significant contribution to Ordnance Survey's business. Any changes in Ordnance Survey's business practices are of vital concern to Landmark.

  2.  Under its present Director General, Vanessa Lawrence, and her immediate predecessor, Ordnance Survey has been undergoing a radical transformation of its business. Ordnance Survey's customers, partners, employees and political masters have broadly welcomed these changes. However, they have raised questions and will continue to raise questions that deserve public debate and the open consideration of all concerned. We hope that many of the issues involving Ordnance Survey will have been considered in its Quinquennial Review, whose publication is currently awaited by the industry Ordnance Survey serves.

  3.  No detailed consideration of its pricing policies, along the lines proposed by the Urban Affairs Sub-committee of the House of Commons Select Committee on Transport, Local Government and the Regions, can make progress without setting those policies in the context of, first, the particular challenges faced by Ordnance Survey as a Trading Fund, and second, the general framework that the government is establishing to make Public Sector Information more accessible under the regulatory control of HMSO.

  4.  For the past 20 years, Ordnance Survey has been under increasing pressure from successive governments to pay its own way, as a commercial enterprise, through the sale of paper maps and the licensing of digital data to customers in both the private and public sectors. It operates under rules established by the Treasury, supervised by the National Audit Office.

  5.  There are two ways in which it could reduce its charges for maps and data:

  6.  Ordnance Survey could reduce the range and degrade the quality of mapping that it produces. It has been argued that Ordnance Survey's mapping is over-specified. Other countries get along with smaller National Mapping Agencies, producing maps of lower quality. It would, however, seem a retrograde step to reduce the quality of a service that is admired around the world. Furthermore, any reduction in the range and quality of OS products would, if the intended savings were to be realised, have to be accompanied by a substantial reduction in the number of people employed. However, any drastic and sudden reduction in headcount would be very expensive, given the age profile and average length of service of Ordnance Survey staff.

  7.  The government could increase the annual "National Interest" payment made to Ordnance Survey so as to subsidise the services by Ordnance Survey to particular interest groups. At present this payment is not designed to subsidise the cost of Ordnance Survey maps, but to guarantee certain activities (eg rural revision) that might have low priority if strictly commercial criteria were applied.

  8.  There is plenty of evidence that official thinking is sometimes confused where Ordnance Survey is concerned. For example, in the Quinquennial Review of HM Land Registry, published last year, Andrew Edwards, the author of the Review, wrote:

  9.  "In financial terms, the Land Registry may have been paying somewhat over the odds for the OS's services. The annual bill to the LR in the current year, 2000-01, is around £6.5 million a year, comprising in round terms: Purchase of maps £3 million; Royalty payments £2.5 million; and Surveyor services £1 million. A new agreement for next financial year, 2001-02, however, reduces the budgeted LR spend to some £5 million . . . From a broader perspective, I hope that the Land Registry and the Ordnance Survey will not devote too much resource in future to conducting quasi-commercial negotiations about precise levels and conditions of charge. The public will ultimately fund the two bodies (apart from DETR 's public interest payment to Ordnance Survey), as being the ultimate customers of OS products, land searches, information and registration services. The important points are that the financial terms are reasonable and should give both bodies the right incentives. If there should be difficulties in future, a sensible approach might be to commission an outside micro-economist or Intellectual Property expert to adjudicate a reasonable level or formula for the payments."

  10.  Looking at this objectively, from the outside, it is hard to understand the basis for the judgment that HMLR has been paying "over the odds". The operation of the Land Registry is totally dependent on the provision of accurate large-scale plans of registered properties. If HMLR had to produce its own mapping, it would spend perhaps four or five times as much as it currently spends with Ordnance Survey.

  11.  Neither a micro-economist nor an intellectual property expert would be able to resolve the issue, as the ultimate arbiter of what Ordnance Survey has to charge is the Treasury. The government decided recently that data arising from the 2001 Census (unlike the data produced for the 1991 Census) should be freely available to all comers, even though it cost £250 million to collect. It could make a similar decision with respect to OS data, but that would be a political decision requiring a major change in the way in which Ordnance Survey was funded.

  12.  Unlike HMLR, which has a guaranteed income from land registry fees on every property transaction in England and Wales, or the Hydrographic and Meteorological Offices, which receive substantial defence and civil aviation funding, Ordnance Survey does not have any guaranteed income (other than NIMSA) to cover the costs of data collection, maintenance etc. OS must cover heavy costs from a far less stable income base.

  13.  Another example of confused official thinking was provided last year when Sir John Bourn, the head of the National Audit Office, qualified his opinion on the 1999-2000 accounts of the Ordnance Survey. In his report to Parliament on the Agency's first set of accounts as a Trading Fund, Sir John said that he had taken this step because the Ordnance Survey's decision not to set a balance sheet value on its database had resulted in a significant understatement of the Agency's tangible fixed assets. It may also have distorted the view given by measures of reported financial performance (eg the return on capital employed) used by The Treasury to set financial objectives for Trading Funds. The dispute between The National Audit Office (NAO) and Ordnance Survey (OS) over the latter's practice of not placing a value on its mapping database in its Balance Sheet has profound implications for everyone interested in encouraging the emergence of an information-based economy in this country. Sadly, it was presented as a technical issue, whereas it is really a political issue that will have real impacts on Ordnance Survey and its customers.

  14.  If the NAO's criticism had been accepted, Ordnance Survey would have had to increase its prices all round in order to deliver a cash surplus commensurate (in Treasury terms) with its asset base. Since the NAO answers directly to Parliament and not to the Government, it is up to Parliament to decide what to do about this challenge to the way in which OS manages its affairs. For the past 20 years, it has been determined that Ordnance Survey should be run as an efficient business, not cross-subsidising one activity with profits derived from another. It is asked to service a wide variety of different customers with very different requirements. It cannot charge one group of customers £x and another group £2x, just because the former group are more deserving and less able to pay than the latter.

  15.  It would, of course, be possible to fund all of Ordnance Survey's data collection and data processing operations out of taxes, and to provide paper maps and digital data for the marginal cost of producing and delivering the maps and data to the end user. This is the model adopted in the United States. The problem then is for policy makers to decide just how much mapping is required for good government. The National Mapping Agency's budget would be likely to rise and fall according to the whim of the government of the day, and in the long run this may be considered contrary to the national interest.

  16.  Historically, collection of Geographical data of this kind was funded out of military budgets, the Hydrographic Office by the Navy; the Ordnance Survey by the Army; and the Meteorological Office by the Air Force. Although Ordnance Survey still enjoys some military funding, this represents a far lower percentage of their income than in the cases of the Hydrographic and Met Offices. This military funding provided their budgets with a degree of protection from the cost-cutting zeal of civilian officials. However, this has also meant that civilians have very little idea of either the technical complexity of the tasks these agencies carry out or of the economic value of the fruits of their labours.

  17.  Most citizens going about their everyday business see only the small part of these agencies' activities that directly affect their own lives, as ramblers, weekend sailors, or simply consumers of the weather forecast on radio or television. The biggest users of Ordnance Survey data, for whom its currency, completeness and consistency are essential, are architects, engineers and surveyors in the public and private sectors, working on major infrastructure projects, or to deliver essential services to our villages, towns and cities. OS mapping is also essential to the emergency services and to departments and agencies involved in managing the countryside, DEFRA and the Environment Agency, for example.

  18.  Pricing doesn't seem to me to be the principal issue. If Ordnance Survey simply halved the price of its maps and data, we would not see a doubling of demand. In most activities involving maps, the cost of the mapping is generally a relatively small part of the total expenditure, whether we are talking about hill walking, producing a guide book, developing a brownfield site, building a new airport, organising a planning enquiry or selling a house.

  19.  The real issues are: whether Ordnance Survey's mapping is well used across government (I think you would discover that it wasn't); whether Ordnance Survey's current activities fully meet national requirements; whether Trading Fund status is right for Ordnance Survey; whether "cost recovery" is the best way of funding the National Mapping Agency; whether the current division of labour and responsibility between OS and HM Land Registry or between OS and the Office of National Statistics works as well as it should; how HMSO should regulate the activities of OS and the other Trading Funds in the wider national interest; and how Ordnance Survey should work with other European National Mapping Agencies to deliver the Europe-wide datasets that European integration surely requires. These are big questions and worthy of the attention of Parliamentary select committees.

  20.  I would be very happy to appear as a witness before the Sub-Committee to answer any questions you might have on these wider issues. Potentially, two of your areas of interest raise very wide questions: "the cost of updating and maintaining databases, the effect of new technology on costs". I presume you are referring to Ordnance Survey's costs, not the costs facing users of OS data. It isn't completely clear. The issue of replacing old technology with new is always complicated. It would have been a mistake to simply use the new technology to produce the outputs of the old system, yet the old products (paper maps) still have many uses. New technology impacts on Ordnance Survey in a wide variety of ways (See Paras 21-23):

  21.  Surveying methods have been revolutionized by the introduction of the Global Positioning System over the past 20 years. Although this has greatly reduced the cost of surveying, it has also required massive investment in new technology and retraining staff. Ordnance Survey's staff have halved in number over this period and virtually all the present staff have technical skills that were not required in the old days.

  22.  Digital mapping has opened many new markets for OS mapping, without removing any of the old ones. The production of paper maps is now a relatively small part of the OS business. The United Kingdom was one of the first countries in the world to develop national coverage of large-scale digital mapping. We (Ordnance Survey, its partners and customers) are now about to embark on a major round of investment in the next generation of digital mapping, OS MasterMap, which will create many new applications that will benefit a wide range of public and private sector activities.

  23.  The market for Ordnance Survey mapping has grown rapidly and we expect the cost of raw survey data to continue to fall over the next 5-10 years, but the cost of producing a paper Landranger or Explorer Map and putting it into a bookshop is unlikely to fall as far or as fast. Furthermore, we expect to see more investment in processing the raw data to generate a wide range of new services. Pressure will grow on Ordnance Survey to update its databases more frequently, and to make the updates available in real time to customers.

  24.  Anyone in the industry will tell you that I have been an critical observer of Ordnance Survey's evolution over the past decade. They still have a great deal to do to make up for time lost in the mid-1990s, when there was a clear failure to address some pressing problems. However, we have a new management in place, and I believe it would be helpful for Parliament to understand the challenges facing OS in order to give it the critical and informed support that it needs if it is to successfully make the transitions that will be required over the next few years. The process of change is likely to continue for a decade at least.

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