The
Committee consisted of the following
Members:
Donohoe,
Mr. Brian H.
(Central Ayrshire)
(Lab)
Fitzpatrick,
Jim
(Parliamentary Under-Secretary of State for
Transport)
Goodwill,
Mr. Robert
(Scarborough and Whitby)
(Con)
Hollobone,
Mr. Philip
(Kettering)
(Con)
Hunter,
Mark
(Cheadle) (LD)
Leech,
Mr. John
(Manchester, Withington)
(LD)
MacShane,
Mr. Denis
(Rotherham)
(Lab)
Scott,
Mr. Lee
(Ilford, North)
(Con)
Sharma,
Mr. Virendra
(Ealing, Southall)
(Lab)
Stewart,
Ian
(Eccles) (Lab)
Strang,
Dr. Gavin
(Edinburgh, East)
(Lab)
Tami,
Mark
(Alyn and Deeside)
(Lab)
Turner,
Mr. Andrew
(Isle of Wight)
(Con)
Turner,
Mr. Neil
(Wigan)
(Lab)
Williams,
Mrs. Betty
(Conwy)
(Lab)
Wilson,
Mr. Rob
(Reading, East)
(Con)
Edward Waller, Eliot Barrass,
Committee Clerks
attended
the Committee
First
Delegated Legislation
Committee
Monday 2 March
2009
[Bob
Russell in the
Chair]
Draft Department for Transport (Fees) Order 2009
4.30
pm
The
Parliamentary Under-Secretary of State for Transport (Jim
Fitzpatrick): I beg to
move,
That
the Committee has considered the draft Department for Transport (Fees)
Order
2009.
I
can confidently say, on behalf of the Committee, that it is a pleasure
to see you presiding this afternoon, Mr.
Russell.
This
order and the Department for Transport (Fees) Order 1988, which this
order partly replaces, set out in detail the functions and costs that
can be taken into account when fixing particular fees. Those fees are
levied for services provided to the road transport industry by a number
of executive agencies to the Department for
Transportprincipally the Vehicle Certification Agency, the
Vehicle and Operator Services Agency, and the Driving Standards Agency.
The 2009 order will remove provisions relating to VOSA and VCA from the
1988 order, but the provisions relating to the DSA will
remain.
I
emphasise at the outset that the 2009 order does not create any new,
free-standing fee powers, nor does it set any new fees or create any
offences. In general, the power to charge fees is granted in primary
legislation, but section 102 of the Finance (No. 2) Act 1987 allows an
order to be made that adds to the specific functions and matters that
those fees may cover. A function is a type of activity,
such as VOSAs work inspecting vehicles at the roadside, and a
matter is an item of cost relating to that activity.
For example, for many years, the 1988 order has permitted the cost of
enforcement functions, such as roadside inspections, to be taken into
account when fixing certain fees and when the primary fee power does
not expressly refer to
enforcement.
It
may be helpful if I give an example of operator licensing to illustrate
further the relationship between fee powers in primary legislation,
Treasury guidance on fees, a section 102 order, such as the 1988 order,
and the current order. Those operating lorries or buses are required to
obtain and maintain an operators licence from a regionally
based traffic commissioner. Traffic commissioners charge different fees
for that service, and the fees are collected for the traffic
commissioners by VOSA. For example, they charge a fee for applications
for and the issue of operators licences, and primary
legislation permits that. Certain functions are obviously covered by
that powerfor example, consideration by the relevant traffic
commissioner of whether an applicant is suitable to be issued with a
licence, and the cost of processing the application and issuing the
licence document, if the applicant is
successful.
In setting the
fee for that service, Treasury guidance permits related items of cost
to be taken into account, such as staffing, insurance and office
overheads. Therefore, fee powers in primary legislation do not need to
spell out the details of such matters. However, other legitimate
functions are not expressly covered by the fee power in primary
legislation, and their associated costs are not generally allowed for
in Treasury guidance. Traffic commissioners carry out a wide range of
functions, and it could be argued that some already fall within the
primary fee powerfor example, considering the suitability of an
operating centre is not a function explicitly mentioned in the primary
fee power, but it is relevant to considering a licence application. One
of the purposes of the existing section 102 order is to put that beyond
doubt.
The existing
order also extends the fee powers to include important enforcement
functions, which do not otherwise fall within the
scope of the primary fee power. If compliance and enforcement activity
could not be taken into account when fixing fee levels, we could not
charge for the work involved in that vital functionfor example,
helping vehicle users and owners to understand their obligations,
checking vehicles at the roadside and on operators premises to
ensure they are safe, and revoking the licences of unsuitable
operators.
Under
the present powers, that work is funded partly from fees paid by
operators and partly from general taxation. However, the 1988 order is
out of date and needs some consolidation. It also needs extending to
cover enforcement for new statutory functions that have arisen since
1988, such as new functions under the Disability Discrimination Act
1995, and to facilitate the operator fee reform that we are seeking and
which I am about to explain further. Without the 1988 order or this new
order, we would either have to seek more funding from general taxation
or reduce enforcement activity to the level currently funded from
general taxationaround £18 million.
There are also
costs that Treasury guidance does not generally consider should be
taken into account when setting a fee, but they can be included if they
are specified in the order. Schedule 2 to the 1988 order included a
long list of matters that could be taken into account. In fact, most of
them are covered by more recent Treasury guidance, which was published
in 2007. Schedule 2 to the 2009 order therefore includes a very short
list of matters, the most significant of which is the recovery of past
funding deficits. That was specified against some fee powers in the
1988 order, but not all. We now propose that past deficits can be
recovered against all fee powers listed in the 2009
order.
The
new order replaces elements of the 1988 order and mainly covers fees
payable to the Vehicle Certification Agency and the Vehicle and
Operator Services Agency. The functions of VCA that are subject to
statutory fees relate primarily to the pre-registration type approval
of new road vehicles and their systems, in accordance with national and
international
standards.
VOSAs
responsibilities include vehicle testing, support to the traffic
commissioners in their role as licensing operators of commercial
vehicles, including fee collection, and carrying out checks to ensure
the safe and legal operation of goods vehicles, buses and
coaches.
Much
of the 2009 order simply restates what was in the 1988 order. None the
less, references and drafting style are updated and some terms are
clarified. As I
have said, providing for enforcement is nothing new, although the
enabling of such enforcement is a key feature of both orders. I shall
focus on the more significant changes made in the 2009 order rather
than on the parts that simply consolidate existing practice.
First, article
2 defines enforcement and compliance functions. It makes it clear that
the relevant DFT agencies can recover the cost of providing services to
educate and assist their customers as well as applying sanctions when
necessary.
Secondly,
the order allows the cost of operator licensing functions for buses and
lorries to be taken into account when setting vehicle testing fees.
That is provided for in articles 5(2) and 5(4) together with paragraphs
24 and 31 of schedule 1. The change is necessary to implement
VOSAs fee simplification programme, which was announced by the
Department in December 2006. The programme will enable us to lessen
administrative burdens on businesses by reducing the number of times
that they have to make payments to VOSA. For example, a typical lorry
operator currently has to pay up to seven different fees to VOSA. We
want to abolish two of those fees, which relate to payment for the
operator licence windscreen disc that must be displayed on each vehicle
to aid enforcement. Instead, discs will be issued free of charge, and
the lost income will be levied through the vehicle testing fee, which
has to be paid anyway. Although the transport industry will not pay any
less overall, savings to business will arise from abolishing the
financial transaction for the
disc.
The
reform will also achieve greater fairness. At present, there are about
340,000 vehicles and trailers that do not contribute towards the costs
of enforcement. That is because they are either exemptfor
instance, horse boxes and fairground vehiclesor because they
operate on the margin, by which I mean during the one-month grace
period that is allowed before a new vehicle, either hired by or bought
by the operator, needs a windscreen disc. Moreover, trailers do not
have to pay a vehicle disc fee even though they need to be checked for
enforcement purposes. Under our proposals, all lorries and trailers
will contribute towards enforcement costs via their vehicle test
fees.
This order
will not, of itself, deliver that example on its own. That will require
further fee regulations to be made. None the less, this example cannot
happen without the additional flexibility that this order provides. A
number of fee powers not included in the 1988 order are included in
this order. For example, article 6(3) and article 8 deal with fee
powers relating to reduced pollution certificates for lorries, buses
and coaches under the Vehicle Excise and Registration Act 1994 and bus
and coach accessibility certificates under the Disability
Discrimination Act 1995. The fee powers have been included to enable
the enforcement and other costs to be charged in relation to the
certificates. Paragraph 2 of schedule 2 enables past deficits to be
taken into account in setting fee levels for all. Without that
flexibility, VOSA or VCA may need to build in larger margins of error
when setting fees, and charge higher fees as a result, in order to
avoid future deficits.
Finally, some
parts of the 1988 order remain in place, with minor amendments. Those
relate either to the work of the Driving Standards Agency or to fees
charged under section 56 of the Finance Act 1973, which covers
international agreements and arrangements, including
Community obligations. I anticipate that those residual parts of the
1988 order will be amended and consolidated in the near future, but to
deliver VOSAs fee simplification programme and the 2009-10 fee
changes within the necessary time scale, we have to proceed with the
new order as it
stands.
4.41
pm
Mr.
Robert Goodwill (Scarborough and Whitby) (Con): I echo the
Ministers comments, Mr. Russell, in welcoming you to
the Chair. Having shared a billet in Helmand province, it is great to
share the Committee
today.
I
thank the Minister for explaining in such detail the proposals before
the Committee. The Opposition support them in principle; it cannot be
said that they will lead to a bonfire of red tape, but it could
certainly be described as a campfire. I imagine that the proposals
could be described as the application of the Severn bridge
conceptpeople have to pay to go in one direction, but going in
the other direction is free. Fees are being collected for a variety of
services, but the number of services will be reduced, which will
certainly reduce the administrative burden. The cost of HGV operator
licensing will therefore be covered by HGV testing through VOSA, and
there will be similar arrangements for buses and coaches.
Paragraph 4.5
of the explanatory memorandum states that
the ultimate
pool of fee payers is essentially the same.
I suggest that
essentially is probably not the best word, as there are
a number of losers. I declare an interest as the owner of a private
HGV. The Minister has referred to horse boxes and other types of
vehicles, and my low-loader is a private HGV. What degree of
consultation has there been with the owners of private
HGVsthose engaged in equestrian sports and other
hobbies?
Mr.
Lee Scott (Ilford, North) (Con): Will my hon. Friend tell
the Committee how many privately registered HGVs there
are?
Mr.
Goodwill: The Minister may be in a better position to give
an answer, but the number of HGVs is essentially the same as in the
1930s. However, we have seen a dramatic increase in the number of
people using them for moving horses and for other hobbies, including
those engaged in the preservation of many cherished commercial
vehicles, which are maintained for the public to enjoy at various
events free of charge to the taxpayer. Has the Minister taken any
account of this new stealth tax on private HGV
owners?
Two
other groups will be affected. The first is vehicle dealers. Vehicle
dealers may not register their vehicles with the transport
commissioners, but they often sell vehicles with a current MOT
certificate, so they will lose by paying the fee, but they will not be
among the gainers. The other group to have made representations during
the consultation process is leasing companies. Possibly because of the
straitened times in which we live, many HGV operators are leasing
vehicles and trailers, but the cost of the annual vehicle
inspectionthe MOTis paid by the leasing company,
although those companies will not have to deal with the transport
commissioners. In many cases, they will not be able to pass on the cost
to their customers, because the customers
themselves are facing severe financial constraints. Does the Minister
share my concern that, in the current economic climate, the order will
put pressure on vehicle leasing companies that cannot pass on the
increased
cost?
Paragraph
4.5 of the explanatory memorandum states
that
enforcement
work...is not normally included as an element of cost, when
setting
fees.
The
change, as stated in paragraph 7.3 of the memorandum, is that
full cover now
needs to be given for enforcement functions.
That will transfer the
burden of some of the costs from the taxpayer to the operator. What
will happen to fines levied as a result of such enforcement action? In
many cases, enforcement action results in prosecution that results in
fines. Will money from fines be thrown into the pot to cover
enforcement, or will it be a windfall gain for the
Government?
VOSA
test fees take into account past deficits, as the Minister has said,
which industry is unhappy about. There is a beliefit is
mentioned in the consultationthat that allows VOSA to operate
inefficiently, with poor forecasting, before recouping its costs by
retrospectively setting fees. VOSA says that it needs to be able to do
so because, otherwise, it would have to set fees at a rate high enough
to remove all risk to its operating plans, which it believes would
perhaps penalise hauliers unnecessarily. Does that reward inefficiency
and provide a safety net for poor forecasting and budgeting within
VOSA? Despite the fact that test fees have consistently risen above the
rate of inflation in the past few years, the agency is still running at
a considerable deficit. Will giving VOSA the ability to set fee levels
based on previous poor financial performance ingrain poor budgetary
discipline?
I
can give some examples of cost increases. Recruitment costs rose from
zero in 2006-07 to £1.483 million in 2007-08. What were the
benefits of that increase? Did the increase simply result from using an
external agency to carry out recruitment? Why did legal and banking
costs rise from £1.504 million in 2006-07 to
£2.101 million in 2007-08? Why did wages and salaries
rise from £63.574 million to £64.683 million
in the same period? At the same time, agency and staff costs rose by
nearly £2 million, from £5.848 million to £7.704
million.
Those
costs increased when there was a decrease of 0.7 per cent. in the
number of HGV annual tests, from 462,820 to 466,215, and a reduction in
the number of operators licences in issue of 1.5 per cent. In the same
period, there was a decrease of 15.2 per cent. in the number of HGV
fleet checks, and the number of vehicle spot checks fell by 8.9 per
cent. although, last year, there was a big increase in those because of
the problem of foreign trucks. Also, the number of tachograph checks on
UK vehicles fell by 8 per cent. Despite the fact that the number of
tests, checks and other work by VOSA declined, there were
above-inflation increases in its budgetsVOSA expenditure rose
by 4.7 per cent. to £193.569 million. How can that be explained?
Should we conclude that VOSA is doing less work for more money, which
will eventually be charged back to hauliers through higher
fees?
Is it
appropriate to discuss the closure of VOSA test stations in the context
of the order? VOSA has stated that 85 per cent. of test centres will be
shut down within three years. The haulage industry is concerned that
while test stations are being closed, private sector alternative
authorised testing facilities will not be open to replace them.
Consequently, in the interim, hauliers will incur additional costs
because they have to travel longer distances to their nearest centre.
What does the Minister consider to be a reasonable distance to expect
an operator to travel to access a test? The costs associated with a
test include not only the fee for the test, but the cost of fuel and
labour associated with getting a vehicle to a test centre. Has he taken
into consideration the environmental impact of longer journeys for
tests?
Mr.
Andrew Turner (Isle of Wight) (Con): Does my hon. Friend
know what the Minister plans for the Isle of Wight? People will have to
travel still further for tests and cross the Solent, which will incur a
considerable additional
tariff.