Supplementary memorandum from the Department
for Transport (DAR 01A)
TRANSPORT SELECT
COMMITTEE HEARING—24
OCTOBER 200
At the Transport select Committee to discuss
the DfT Annual report on the 24 October 2007 we agreed to supply
further information on the following topics:
(1) Possible Audit Commission challenge
to local authority bus patronage figures.
(2) Impact of reform of Air Passenger Duty
on air freight (including impact on regional airports).
(3) Details of spending on Logistics and
Maritime and whether these figures included spending on the MCA.
(4) Further information on the cost of EASA
certification activities.
(5) Further information on the UK's position
with regards to the financial implications of Galileo.
1. POSSIBLE AUDIT
COMMISSION CHALLENGE
TO LOCAL
AUTHORITY BUS
PATRONAGE FIGURES
— The bus and light rail patronage
data used to assess progress towards the PSA target are National
Statistics, and the Quality Assurance Review of 2003 confirmed
that they are fit for purpose.
— The National Audit Office reviewed
the quality of the data in 2006 and made some comparatively minor
recommendations on how to improve them further. DfT acted on their
recommendations, and improved the collection, analysis and time
series of bus patronage. In particular, DfT commissioned research
on levels of reporting of bus patronage by drivers. Because of
this, adjustments were made to bus patronage estimates from 1985-86
to allow for the under-reporting of non-cash fare passengers.
It is expected that the next NAO report, in December, will reflect
the range of improvements that have been made.
— More specifically, the data used
to compile DfT's estimates of bus and light rail patronage outside
London are largely based on the survey responses from bus and
light rail operators. They are not based on local authority estimates.
For London, DfT primarily uses data obtained by TfL from ticket
sale data and information on usage of season tickets and other
tickets that they collect from passenger surveys. Adjustments
to the TfL estimates are subsequently made by DfT for passengers
boarding TfL buses outside the Greater London boundary and for
non-TfL services inside London.
— Local authorities collect their own
bus patronage data which they submit to the Communities and Local
Government Department and which are checked by the Audit Commission.
Apart from the Metropolitan Areas, this is done by collecting
the data from operators. In the Metropolitan Areas, the Passenger
Transport Executives, like TfL, do not rely on operator estimates,
but commission on-board bus surveys for this purpose.
— The differences between the local
authority estimates and DfT's internal estimates are now quite
small, partly because DfT has liaised with local authorities in
recent years to eradicate them. In terms of total passenger journeys,
the two sets of figures now only differ from each other by about
1%.
— The Audit Commission has the responsibility
of auditing the Best Value Performance Indicator (BVPI) estimates
submitted by local authority estimates, including the indicator
for bus passenger journeys (BVPI102). The challenges mentioned
by the Committee refer to the routine enquiries made into the
data and there is no suggestion that the Audit Commission regards
any estimate as bogus at this stage.
2. IMPACT OF
REFORM OF
AIR PASSENGER
DUTY ON
AIR FREIGHT
— The Government understands that replacing
Air Passenger Duty (APD) with a duty paid per plane rather than
per passenger may have different impacts in different areas of
the industry, such as freight or regional airlines. Considering
the impacts of a per plane tax is one of our priorities for consultation.
An informal consultation with other Government Departments and
industry stakeholders started after the Pre-Budget Report with
the emphasis on investigating impacts on freight and transit/transfer
passengers, as well as discussing the basis of the duty and ways
to make it better correlated to distance travelled. A formal consultation
will be published in the new year, in which we will be seeking
views from the industry and other stakeholders on the details
of the per plane duty and a clearer understanding of these impacts.
— The DfT is working closely with HM
Treasury on this issue and will be involved in the informal stakeholder
discussions leading to the publication of the consultation. Additionally,
the consultation will be accompanied by a partial Impact Assessment
that will provide preliminary information and analysis relating
to the costs and benefits of the proposal. It is worth reiterating
that the change aims to send a signal more aligned with environmental
impacts and ensures that aviation pays a fair contribution towards
the Government's spending priorities including public transport
and the environment.
3. DETAILS OF
SPENDING ON
LOGISTICS AND
MARITIME AND
WHETHER THESE
FIGURES INCLUDED
SPENDING ON
THE MCA
— The figures for Logistics and Maritime
and MCA are presented separately in the Annual Report and these
are reproduced for your convenience below.
| 2001-02
Outturn
£'m's
| 2002-03
Outturn
£'m's
| 2003-04
Outturn
£'m's
| 2004-05
Outturn
£'m's
| 2005-06
Outturn
£'m's
| 2006-07
Outturn
£'m's
| 2007-08
Plans
£'m's |
| Resource Budget | |
| | | |
| |
| Logistics and Maritime | 14 |
11 | 17 | 15 | 29
| 46 | 34 |
| Marine and Coastguard Agency | 94
| 105 | 111 | 119
| 118 | 121 | 120
|
| | |
| | | |
|
| Capital Budget | |
| | | |
| |
| Logistics and Maritime | 17 |
6 | 10 | 14 | 8
| 40 | 12 |
| Marine and Coastguard Agency | 11
| 16 | 9 | 8 |
8 | 6 | 8 |
| | |
| | | |
|
| Total Budget | |
| | | |
| |
| Logistics and Maritime | 31 |
17 | 27 | 29 | 37
| 86 | 46 |
| Marine and Coastguard Agency | 105
| 121 | 120 | 127
| 126 | 127 | 128
|
| | |
| | | |
|
— The increases in the Logistics and Maritime line
between 2001-02 and 2004-05 are within the boundaries of normal
year on year increases.
— The increases between 2004-05 and 2005-06 and
then 2006-07 was primarily due to a transfer of responsibilities
for freight grants from SRA to DfT in June 2005. The other major
increases were due to increased funding costs for Galileo borne
by the Department and to increased borrowing by Trust Ports (which,
although scored on our balance sheet, is not controlled by the
Department).
4. FURTHER INFORMATION
ON THE
COST OF
EASA CERTIFICATION ACTIVITIES
— The Fees and Charges Regulation (EC Regulation
593/2007), which sets the fees that the European Aviation Safety
Agency can levy for its certification activities, came into force
on 1 June 2007. Its adoption followed a consultation involving
EASA's Management Board, on which the UK Government is represented.
— The Regulation represents an improvement on the
previous fees and charges system, which did not provide the Agency
with enough income to cover its certification activities, as required
by the European legislation governing the Agency. However, the
Agency's fees and charges will be refined in due course as the
financial and management information available to the Agency improves.
The Government will continue to work closely with the CAA, to
ensure that the Agency invests in the necessary IT systems to
provide this information, so that the fees and charges set by
the Agency accurately reflect the work done by its staff.
5. FURTHER INFORMATION
ON THE
UK'S POSITION
WITH REGARDS
TO THE
FINANCIAL IMPLICATIONS
OF GALILEO
— The design and development phase of Galileo, which
is jointly funded by the European Union and member states of the
European Space Agency is currently estimated to cost €1.6
billion (£1.1 billion). The European Commission estimates
that the subsequent deployment of a full operational capability
through a public procurement will cost a further €3.4 billion
(£2.37 billion). The UK and other Member States have concerns
over the robustness of this estimate, especially in relation to
the allowance for project risks, and we are therefore seeking
to ensure that if the project proceeds the budget is capped with
the risks managed within a firm limit.
— The Commission estimated in 2006 that the operating
costs for a PPP arrangement, with the concessionaire seeking a
return on their capital employed in deploying the system, might
be in the order of €10 billion (£6.94 billion) over
a 20 year period. The Commission's latest estimates are that with
a public procurement, with the Community providing the capital
investment, operating costs might be around €6 billion (£4.16
billion)over a 20 year period to 2030. This would give a total
cost of around €11 billion (£7.6 billion). These costs
might be offset by a revenue stream from chargeable Galileo services.
The Commission estimate these revenues as being in the range of
€4.6 billion-€11.7 billion (£3.1 billion-£8.1
billion) over the same period.
The British contribution
— As a member of ESA, the UK's committed subscription
to the ESA element of the design and development of the programme
to date has been €142 million (£96.7 million).
— The EU's contribution to the design and development
phase of the programme is estimated by the Commission to be €790
million (approx £546 million). The Commission has further
estimated that the cost of the next—deployment and initial
operation—phase of Galileo will be €3.4 billion to
2013.
— The UK makes its contributions to the EC budget
as a whole and not to individual projects. There is therefore
no specific United Kingdom contribution to Galileo. The UK contribution
to the EC budget in 2007 is estimated to be about 17.3% before
abatement. With the abatement it is about 12.6%.
— Ministers have made it clear at both the Transport
Council and ECOFIN that the UK believes the additional up-front
costs of a public procurement should be found through reprioritisation
under 1A (Competitiveness for growth and employment) and that
we do not believe the Commission has explained why this is not
possible. We have requested that the Commission provides Council
with an explanation of how an alternative solution which would
involve funding Galileo by reprioritisation could work.
Whether the issue would be decided through qualified Majority
voting at the Transport council
— The decision on the Commission's public procurement
proposal for Galileo will be an integrated one based on discussions
within the Council of Ministers in all the relevant configurations,
including the Transport Council and ECOFIN. Voting on transport
issues is on a qualified majority basis. Decisions on the Financial
Perspective are taken by unanimity, unless the proposed change
to the Financial Perspective is less than 0.03% of EU GNI (Gross
National Income—approximately €3.76 billion), at which
point a decision is be taken by QMV. The additional €2.4
billion being requested by the Commission for Galileo, to be found
principally from the margins of Headings 2 (Preservation and Management
of Natural Resources, ie Agriculture) and 5 (Administration) would
represent approximately 0.02% of GNI in 2008.
November 2007
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