Joint Committee on Statutory Instruments Twenty-Ninth Report

Appendix 5

S.I. 2003/2003: memorandum from the Department for Transport

Motor Vehicles (Driving Licences) (Amendment) (No. 4) Regulations 2003 (S.I. 2003/2003)

The Size Of The Increase In Theory Test Fees

Regulation 4: Increasing the theory test fee from £18 to £20.50 (14%)

1. The increase in the fee will help pay for the costs of developing and delivering the moving-image Hazard Perception Testing (HPT) element of the theory test, which was added to the existing multiple-choice question theory test in November 2002 by the Motor Vehicles (Driving Licences) (Amendment) Regulations 2002 (S.I. 2002/2641). The Agency spent over £5 million developing the overall theory test, mainly on the introduction of HPT, but also on developments to the multiple-choice question element linked to higher European standards for driving tests.

2. These developments added to the unit cost of delivering the theory test, though the precise amount depended on post-introduction test volumes, which in turn would be affected by pass-rates. As a first step in recouping the cost, the theory test fee was increased by £2.50 when HPT was introduced. DSA advised then that the actual unit costs, and the fee, would be reviewed as part of the 2003/04 Business Plan.

3. DSA also spent some £1.4 million sending information videos about how the new test event works free of charge to all test candidates in the run up to the introduction of HPT and for six months afterwards. The Agency also spent some £0.25 million on giving copies of a package of HPT training material to all driving instructors.

4. As part of the Agency's Trading Fund Agreement with HM Treasury, for each financial year starting on 1 April 2002, the weighted average increase in fees charged is limited to the rise in the Retail Price Index (RPI) measured by reference to the twelve month period ending in the previous September.

5. The weighted average increase is based on a fee basket comprising DSA's main activities (the theory test, weekday practical driving tests for car, lorry, bus and motorcycle learners, and fees related to the statutory Approved Driving Instructor scheme) and fees are set to the nearest fifty pence.

6. If a change occurs in the length, type, or content of a test or service which affects its unit cost, the cost of that change is excluded from the calculation of the weighted average increase. As a new service, the element of the theory test fee relating to HPT falls outside the weighted basket of fees that are linked to inflation. The £2.50 increase in the theory test fee for 2003-2004 is made up of £1 for the existing multiple-choice question element and £1.50 for the HPT element. The £1.50 is therefore excluded from the calculation of the weighted average.

7. Regulation 6: Increasing the theory test pass certificate charge from £7.50 to £10 (33%)

8. The increased theory test pass certificate charge more accurately covers DSA's standards supervision responsibilities in respect of persons authorised to conduct theory tests. DSA incurs extra expense providing and supervising an in-house theory testing service, which requires separate software and additional system requirements.

9. The introduction of HPT increased those costs. When the charge for theory test pass certificates was increased in November 2002, DSA advised that the costs, and charge, would be recalculated as part of DSA's 2003/04 Business Plan. The current £7.50 charge takes no account of the specific costs of upgrading the software to enable users of the service to deliver HPT. That cost DSA some £300k for the delivery of some 36,000 tests annually, some £8.33 per test.

10. DSA does not charge for unsuccessful tests, though those tests also create costs for the Agency. The current overall pass-rate is around 80% for tests delivered through this route, so DSA incurs costs in relation to 20% of the test volume for which there is no charge. That is in addition to the costs of HPT development. Unless the certificate charge is set at a suitable level, the costs of this service are subsidised by theory test candidates generally, rather than paid for by the users of the service.

11th August 2003

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