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Third Standing Committee on Delegated Legislation
Thursday 18 March 2004
[Mr. Eric Forth in the Chair]
Draft Driver and Vehicle Licensing Agency Trading Fund Order 2004
The Parliamentary Under-Secretary of State for Transport (Mr. David Jamieson): I beg to move,
That the Committee has considered the draft Driver and Vehicle Licensing Agency Trading Fund Order 2004.
I welcome you to the Chair, Mr. Forth. It is a pleasure to sit on a Committee under your chairmanship. You and I have been on Committees in this House on many occasions facing each other, but on one occasion on the same side. I shall leave the Committee mystified as to why we sat on the same side on one occasion before 1997.
The order establishes the Driver and Vehicle Licensing Agency as a trading fund under the Trading Funds Act 1973. A trading fund is a means of financing customer services activities undertaken by Government and funded by customers. They would previously have been included in the annual appropriations from Parliament in the form of vote funding. A trading fund permits the establishment of a self-accounting unit while remaining under the control and direction of Ministers, who are, of course, accountable to Parliament. It is able to manage its financial affairs with a more businesslike financial and accounting framework.
As a trading fund, the DVLA will continue to operate to the service and performance standards expected by its customers. Financial efficiency and customer service targets will be set by Ministers and the annual report and accounts will continue to show how it performs against those targets. The agency is driving forward a significant investment programme designed to reduce vehicle crime, to improve road safety, to ensure better regulatory compliance and to improve the accuracy of the registers, as well as to e-enable customer services. The successful delivery of those initiatives demands a responsive, flexible and enabling financial framework.
The DVLA's existing unusual and somewhat cumbersome financial regime falls some way short in that regard. A fully developed business case considered the alternatives. Of the limited range of central Government regimes available, our belief, supported by the Treasury, is that a move to trading fund status will give the greatest benefit. It is not intended that the DVLA, as a consequence of moving to trading fund status, should enter new areas of operations in direct competition with private businesses.
The new trading fund will carry out all the functions currently undertaken by the DVLA. They are primarily the provision of registration services for drivers and vehicles and the enforcement of laws relating to those registration services, as well as the
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collection and enforcement of vehicle excise duty. No new functions are to be added as a result of this order.
I am making no alteration to the range and level of fees that the DVLA charges. Fees will, of course, continue to be subject to annual review in line with existing Treasury guidance.
The DVLA has been a successful Executive agency of the Department for Transport since 1991 and works alongside other agencies within the Driver, Vehicle and Operator group. The other two principal agencies within the DVO group, the Driving Standards Agency and the Vehicle and Operator Services Agency, already operate successfully as trading funds. With the development of a common strategy across the whole of the DVO group and a vision for a one-stop service delivery approach to the customer for core services, there will be a greater need for convergence of systems and development projects. The DVLA is at the heart of those initiatives as it supports the majority of the systems and registers involved. The establishment of the DVLA trading fund will aid the seamless provision of better customer access to DVO services.
In accordance with the provisions of the Government Trading Funds Act 1973, a consultation paper on the proposals contained in the draft order was issued to interested parties. A report of the representations received has been laid alongside the draft order.
The consultation generated eight responses. None opposed the proposal to establish the DVLA as a trading fund, and three supported the proposal, while two felt that the change in financial status would have a limited impact on them.
Mr. Christopher Chope (Christchurch) (Con): Does the Minister accept that the consultation list needs to be updated? It does not, for example, include the Association of British Drivers, an increasingly influential pressure group, or Green Flag, an increasingly important motoring organisation.
Mr. Jamieson: I will look into why the list does not include those organisations. Perhaps they did not respond to the consultation in time. I will investigate and report back to the hon. Gentleman.
The remaining three respondents—the AA Motoring Trust, the Federation of Small Businesses and the Road Haulage Association—supported the proposal, while raising specific issues. Those were concerned principally with the need to maintain levels of public accountability and governance and the perceived implications arising from a more commercial outlook for the agency. Responses have been sent to the organisations explaining that the issues are covered in the framework of governance and performance management that is being put in place.
As a trading fund, the DVLA will continue to be an Executive agency of the Department for Transport. It will be required to lay a copy of its annual report and accounts before the House. Its assets will remain vested in my right hon. Friend the Secretary of State for Transport, and its employees will remain civil servants in the Department for Transport. In other words, trading fund status will not alter the
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constitutional or legal position of the agency. Ministers will continue to be fully accountable to Parliament for the DVLA's activities.
As the DVLA is a demand-led body, its operations are ideally suited to a trading fund regime. The majority of its income will derive from fees levied for the provision of registration and ancillary services for drivers and vehicles. The costs of its operations on vehicle excise duty collection and enforcement will be covered through service level agreements with the Department for Transport, with those linked directly to transaction volumes and with stretching efficiency and service delivery targets linked to related funding.
The order creates a financial structure for the DVLA that will better enable it to meet the challenges ahead. I am convinced that the establishment of the DVLA trading fund will be in the interests of the improved efficiency and effectiveness of the management of the DVLA's operations. It will help to accelerate its investment in customer service improvement and to facilitate more efficient working with partner organisations in the public and private sectors. I believe that motorists and other users of the DVLA and DVO services will welcome the advantages that will be enabled by this change of financing status.
I commend the order to the Committee.
Mr. Chope: I welcome you to the Chair, Mr. Forth. It is a great privilege to serve under your chairmanship.
I am grateful to the Minister for introducing the order. I ask him why there has been so much delay. The consultation paper issued last June said that it was envisaged that the trading fund would start on 1 December 2003. Rather than taking less than six months, the process has taken more than nine. Is this an example of Government inefficiency or is there another explanation?
I am grateful to the Minister for expanding on the reasons for becoming a trading fund. He has identified what are, essentially, shortcomings in the civil service structure. As the consultation paper makes clear, only with a trading fund can it be ensured that appraisal and career development are framed to reward controlled risk management rather than risk avoidance. He obviously accepts that there is too much emphasis on risk avoidance at present and that there can be more emphasis on controlled risk management in the future as a result of becoming a trading fund.
The consultation paper also says that capital funds are, at present, allocated on the basis of Department for Transport priorities, not the needs of the DVLA's customers. That will change for the better, but perhaps the Minister can explain why the whole of his Department should not be moved to trading fund status so that it can deal in the best interests of its customers rather than itself.
The Minister mentioned fees and said that the purpose of the trading fund would be to achieve full cost recovery. He has also said that the consultation paper states that the trading fund will have to produce
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an annual rate of return of 6 per cent. in real terms on capital employed before interest and dividend payments. Why does it have to do that when trust ports, which are public corporations in the Department's remit, do not have to produce any rate of return? That seems to be an inconsistency.
What will happen to the way in which the money raised from the sale of marks is used? You, Mr. Forth, and I were members of a Government that introduced that imaginative scheme. It is a privatisation that has now generated more than £750 million for the Exchequer. At the moment, a lot of that money goes straight into the Exchequer, so the DVLA is unable to use it. Will that regime change in any way when the trading fund begins?
All the cherished number plates that the DVLA currently has, but has not yet exposed for sale, are assets. Have they been valued? Is the rate of return on assets expected to include the notional value of those unused, cherished number plates? Is it reasonable that the income from those number plates should go straight back to the Treasury rather than being used in the trading fund?
What effect will the regime have on the costs of congestion charging? One of the problems identified in the Comptroller and Auditor General's report on the last set of accounts is that the DVLA cannot recover in full the running costs of supplying information to Transport for London on congestion charging. When it is a trading fund, will the DVLA be able to recover those costs in full, and thereby prevent the cross-subsidy that currently takes place? The congestion charging scheme is generating much less revenue than was expected, but there are also hidden costs that are being borne by the DVLA, not the scheme.
What progress has been made on linking the motor insurance database run by the Association of British Insurers with the DVLA system? The consultation paper refers to that. I would welcome any sign from the Minister that that process is nearing completion. It seems anomalous that the police and other organisations have currently to interrogate two separate systems when they could be linked to benefit the public and the enforcement authorities.
I have those few questions for the Minister, but overall we welcome the move to trading fund status. I congratulate the DVLA on being one of the more efficient Government agencies. That was true in the days when I was the Minister for Roads and Traffic and it has maintained a high level of performance. It is an organisation that, as a matter of course, can respond to the substance of letters from Members of Parliament in seven days in more than 95 per cent. of cases, which stands in stark contrast to the performance of a heck of a lot of other Government agencies. They should try to emulate that standard.
I congratulate all those involved in the organisation, and hope that their move to trading fund status on 1 April enables them to get bigger and better bonuses based on harder and more effective work on behalf of the public.
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