Draft Vehicle and Operator Services Agency Trading Fund Order 2003
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Tom Brake (Carshalton and Wallington): May I say what a pleasure it is to see you in the Chair for today's proceedings, Mr. Griffiths? I have a few questions for the Minister. He said that a single management board will be set up to run the agency. Are there any staffing implications? Is the number of staff likely to increase, be reduced or stay the same? He mentioned that bus inspections for London will not be covered by the agency. Are there any other implications for London? Has consideration been given to handing over some of the other vehicle checks to London government? Given that the Government seem content that bus services should be dealt with at London level, might it not be appropriate for other vehicle inspections to be dealt with in the same way? To give me a feel for the organisation's fees income versus running costs, can the Minister give three, four or five years' worth of figures for the organisation as it stands so that we can see how its profile has changed? What does he think that the change might be once the new agency has been set up? To pick up on the points made by the hon. Member for Christchurch (Mr. Chope), is the Minister in a position to provide guarantees on what the fee increases might be in future years? Are they likely to be pegged to inflation, or is there an arrangement relating to the retail prices index? Column Number: 7
2.46 pmMr. Robert Syms (Poole): It is a great pleasure to serve under your chairmanship, Mr. Griffiths. I would like to declare an interest listed in the Register of Members' Interests: a family business with some interest in road haulage. The order states that there is currently a deficit so the Treasury is putting money into the fund. It states that eventually the objective is to bring the fund into balance by means of fees. Is there any objective to repay the money that the Treasury is currently putting into the fund, or is the objective purely to put the fund into balance? In other words, will licence holders have to repay the money that is being loaned to the fund in the short term, or is the objective to write off that money, and assume that it is not covering costs? Will there be moneys to pay the Treasury back as the fund moves into a healthier position over the next four or five years? I hope that the Minister will take the opportunity to rule out the Government taking a dividend by taking income out of the fund in the future. The fund should be purely intended to pay for area traffic officers, who do a pretty good job on the whole. We could do with a little more detail about what is likely to happen over the next four or five years to funding and licence fees for road hauliers.
2.47 pmMr. Jamieson: I am grateful for the general support of hon. Members for what we are doing, although the hon. Member for Christchurch seems to see a bogeyman behind every pillar. I shall run through some of the questions raised by the hon. Gentleman. He asked about how efficiency is measured in the new organisation. VOSA will develop an efficiency measure for the agency as a whole during 2003–04, but in the meantime the Vehicle Inspectorate's existing index of performance gain as an effectiveness measure will be applied to the plans of the VI and TAN to shed somewhere in the region of 20 posts on 1 October 2003. We would probably see that as natural wastage, but it is part of the general efficiency that will be derived from bringing the two bodies together. Questions were asked about whether trading fund status will mean large increases of the O licence fees. As I said in my opening remarks, the fees would have had to increase anyway to cover costs, whether VOSA had been established as a trading fund or not. That would have been necessary to comply with Treasury fees and charges rules. A strategy for bringing things into balance has already been developed in liaison with the Treasury. The current forecast is that the O licence fees will increase by 5 per cent. from 1 April 2004, which should recover the cash deficit by March 2008. That issue stands regardless of whether the new trading fund is set up. Mr. Chope: We are told that 79 per cent. of the costs are covered by income from fees and charges, and that the Department directly funds the 21 per cent. needed for enforcement activities. I understand that the 21 per cent. will have to be funded from the fees and charges Column Number: 8 from now on. How will that be done if the charges are to increase by only 5 per cent?Mr. Jamieson: That would have to have happened because the fund was in deficit. The increases over a period would have to have reflected the deficit, regardless of whether we went into a trading fund. The increases, which we have identified, are sufficient to cover the deficit. If I understood the hon. Member for Carshalton and Wallington (Tom Brake) correctly, there seems to be some confusion between the roles of the VI and the traffic area network. The traffic commissioners, who operate in the rest of the country, do not extend to London buses. On inspecting vehicles, however, the VI does extend that far. There will be no change in terms of the traffic area network, because it does not affect London buses. He asked about the number of staff, and I hope that there are no plans to increase or to decrease staff. I gave him a rough idea of what I think the changes will be, and if I drop him a line to give him a few details on the five-year financial forecast, he can give the matter more thought. There was a question about VOSA being under pressure to maximise its income. The fee increases will, of course, always be open for consultation and will require parliamentary approval. The issue will not only concern pumping up the fees because, as is currently the case, fee increases will have to go through Parliament. The hon. Member for Poole (Mr. Syms) asked about licence holders, who should not notice any difference following the change, apart from the organisation becoming more efficient. The comments in the consultation suggested that the licence holders expect a more efficient organisation, which will be more customer oriented than is currently the case. Apart from that, they will not notice a great deal of difference. I therefore hope that the Committee will accept the order. Mr. Chope: I am not like a dog with a bone, but we deserve a clearer explanation of the costs. Currently, some 21 per cent. of the Vehicle Inspectorate's operating costs for enforcement activity are funded directly by the Department for Transport. The Minister seems to be saying that when the VI and TAN are amalgamated, they will have to operate on the basis that 100 per cent. of their income will come from fees and charges and that none of it will be by way of a departmental subvention. That opens up the prospect of, for example, operators and others paying substantially increased fees as a result of the amalgamation. Effectively, the main purpose of the amalgamation is to save the Department the subvention, which it currently makes into both the VI and TAN. I should be grateful if the Minister would explain in more detail the guarantees that the DFT subvention will continue. Is my suspicion correct that the amalgamation is basically a recipe to do away with the DFT subvention and to make the new, combined trading fund wholly dependent on fees and charges? Mr. Jamieson: What I was trying to say is that regardless of whether we bring the two organisations Column Number: 9 together as a trading fund by order, we have to address the deficit in the fund. As the hon. Gentleman said, the deficit was not caused by the amalgamation.The VI costs of some £18 million are currently funded by the DFT from the O licence fees, which will become VOSA's future income. We could go round in circles, but the issue is that some of the costs to the operator would have to be recouped through increased fees. That issue will have to be tackled on another occasion. It is not reflected in this order so it is not relevant to our discussion. Mr. Chope: I am going to have one more go at this—I hope that it will be only one more. Can the Minister, then, say whether the trading fund, when it is set up, will receive any subvention whatever from the Department? That is bearing in mind that the Vehicle Inspectorate currently receives a subvention of some 21 per cent. of its costs. Mr. Jamieson: The shortfall on the TAN fund is about £18 million, part of which will be made up by a loan from the Department, as I said in my opening remarks, on which some interest will be payable. The account will come into balance over a period. We will not allow it to go into profit and it will not be reflected in an extra burden on the people who receive the services. Those issues will be returned to Parliament later, and we will have other opportunities to examine them over time. Mr. Chope: I think that someone is furiously writing a note, which I hope that the Minister will take hold of and use to illuminate our discussions. Perhaps he can be allowed a chance to read it. Column Number: 10 Mr. Jamieson: Yes, I can read the note to the hon. Gentleman. Notwithstanding what I have said, which was correct, in the interim period—in the years until the account is in balance—the Department plans to continue to pay towards enforcement costs. The Chairman: May I just point out that that note appeared out of thin air and from nowhere else? Mr. Syms: The Minister just said something interesting: that the subsidy from the taxpayer will have interest paid on it because, in effect, it will be a loan. Over a five-year period, the plan is to raise income until there is a balance. If that money is a loan rather than a subsidy, those who pay fee income will have to pay back the current subsidy of 21 per cent. over a number of years. We will inevitably, therefore, have fee levels well in excess of the rate of inflation. Even 5 per cent. a year, compounded, is a fairly hefty increase. Mr. Jamieson: The subsidy is not a loan. The grant payment for 2003–04, as I said, will be £2.8 million. On current estimates, that could be zero by about 1 April 2008. Question put and agreed to. Resolved,
Committee rose at two minutes to Three o'clock.
The following Members attended the Committee:
The following Member also attended, pursuant to Standing Order No. 118(2):
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