The Parliamentary Under-Secretary of State for Transport (Jim Fitzpatrick): I beg to move,

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 Transport—principally 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 VOSA’s 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 operator’s 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 power—for 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 power—for 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 function—for 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 taxation—around £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.

VOSA’s 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 VOSA’s 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 exempt—for instance, horse boxes and fairground vehicles—or 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 VOSA’s 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.

Mr. Robert Goodwill (Scarborough and Whitby) (Con): I echo the Minister’s 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 concept—people 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

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 HGVs—those 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 inspection—the MOT—is 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

The change, as stated in paragraph 7.3 of the memorandum, is that

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 belief—it is mentioned in the consultation—that 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 budgets—VOSA 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.