Increase in fees for public service vehicle operators

Print Print page   Download PDF PDF image

Purpose and Intended Effect of the Measures

Issue

1. The need to increase fees for operators of passenger service vehicles (O-Licence fees), permits used by the voluntary sector to run minibuses (the permit system), and fees to register, vary or cancel a local bus service. It is planned that fees will increase from 30 July 2002. This will contribute to the increased costs of administering these systems by the Traffic Area Network (TAN).

Objective

2. Fees should normally be set to recover full costs. However fees are now in significant deficit due to the fact that they have not been increased since (a) 1986-7 for the permit system (b) 1993 for bus registrations and (c) 1996 for PSV O-Licensing. There is also a need to recover amortised IT investment costs and increased enforcement activity. Under the existing fees structure, many operators pay some fees 5 years in advance. As a result, full cost recovery cannot be achieved quickly, even if fees were substantially increased. Realistically, therefore, the immediate objective must be to set in train a course of action to tackle the issue of cost recovery over a period of years. The proposed approach is to consult on the basis of an interim flat rate increase, pending a full review of fee rates and structure during 2002-03.

Risks

3. An immediate fees increase of 16.1% (whilst keeping PSV vehicle fees unchanged because they are in surplus), is well above the current norm for fees increases. However, it reflects the increase required to bring fees in line with inflation (as measured using GDP deflators) since TAN fees were last increased in January 1996. In addition, the investment made in modernising TAN services are expected to lead to significant customer service improvements and savings to industry.

4. The O-Licence fee accounts are forecast to be in overall deficit in 2001-02 to the tune of £4.56m, although this will be reduced to £1.66m as a result of a cash injection of £2.9m from the Road Haulage Modernisation fund. The shortfall is currently being funded by DTLR, which is not desirable in the longer term. If fees are not increased in 2002-03, the overall deficit is forecast to increase to £6.13m, though this will be reduced to £4.45m as a result of a further cash injection of £1.5m from the Road Haulage Modernisation fund. An increase of 16.1% from 30 July 2002, as proposed, would reduce this overall net deficit by a further £1.68m, leaving around £2.95m to be funded by DTLR during 2002-03.

Failure to increase fees would:

  • Make it impossible to sustain ministerial commitments made to the road transport industry to improve customer services unless DTLR agreed to fund the increasing deficit on fees;
  • Increase the size of the fee deficit and therefore delay efforts to achieve full cost recovery;
  • Delay the need to rebalance individual fees to achieve a more equitable position for all operators. Balanced fees would also support DTLR's aspirations to move TAN to trading fund status.

Options

5. There are two options:

  • Do nothing - maintain existing fees.
  • Increase fees - the only way to bring fees in line with inflation. A table showing the effect of a 16.1% increase on existing fee levels is at paragraph 6 below.

Proposal

6. With the exception of PSV vehicle fees, the proposal is to increase all permit, registration and O-Licence fees by a flat rate 16.1% from 30 July 2002, pending a full review of fees. It has been decided to use the last fee increase in January 1996 as the baseline for calculating the overall fee increase. Since then the cumulative rate of annual inflation has been 16.1%. The bus registration fee was last increased in 1993, and would require an increase of nearly 25% to reflect inflation since then. However, it is proposed that this fee, and the permit fees and registration fees, should also be increased by 16.1% pending full consultation. PSV vehicle fees are forecast to be in surplus in 2002-03, so it is proposed that this fee rate should remain unchanged.

These proposals would impact on current fee rates, as follows:

 

Current position

Proposed Rates

PSV Administrative fees

 

 

Standard International/National application fee

£150

£174

Restricted Application fee

£100

£116

Grant / Continuation Fee Annual

£20

£23

Grant / Continuation Fee 5 year

£100

£116

Variation fee

£75

£87

Large Bus Permits

£14

£16.50

Small Bus Permit

£7

£8

Community Bus Permit

£37

£43

Restricted O-Licence for taxis & continuation in force

£40

£46.50

Duplicate Disc

£10

£11.50

 

 

 

PSV Vehicle fees

 

 

Per vehicle paying 5 years in advance

£270

Not Applicable

Per vehicle paying annually

£63

£63

 

 

 

Bus Registration fees

 

 

Bus Registration & Variation fee

£38

£44

The revised fees for small bus permits would only apply to those issued by the Traffic Commissioners. Local authorities and designated bodies that issue permits on behalf of their own organisations are free to set their own fee levels.

Benefits

Option 1 - keep existing fees

7. This would benefit the PSV industry because, of course, operators would not need to bear the cost of the proposed fees increases.

Option 2 - increase fees

8. As noted above, the main benefits to be derived from increasing fees are:

  • It provides increased funding to support DTLR's commitments to improve customer service to the road transport industry;
  • It starts the process of rebalancing fees in line with costs to achieve a more equitable position for vehicle operators;
  • It also starts the process of achieving full cost recovery, in line with Treasury's Fees & Charges guide;
  • Balanced fees would also support DTLR's aspirations to move TAN to trading fund status.

Compliance Cost for Businesses, Charities and Voluntary Organisations

Option 1 - keep existing fees

9. Obviously, there would be no compliance costs if existing fees were maintained.

Option 2 - increase fees

Policy costs

10. The fees increase will be automatically levied by the Traffic Area Office when an operator makes an application for a service that requires a fee (e.g. to vary an existing bus registration). This will not require operators in any way to make adjustments to their existing payment mechanisms.

Implementation costs

Business Sectors Affected

11. The following business sectors and the number of businesses will be affected directly by the proposed increases in fee rates:

Operators of public service vehicles

  • Approximately 8,000

Voluntary Sector operators of permit vehicles (issued under sections 19 and 22 of the Transport Act 1985)

  • The total number of permits currently in issue is not known. However, some 5000 organisations currently run buses under permits and Traffic Commissioners issue around 2,000 new permits each year.

Registered local bus services

  • The total number of local bus service registrations currently in existence is not known (it is hoped this will be addressed as part of the TAN IT project). However, there are over 20,000 registration changes a year, of which a quarter are new applications.

Compliance costs

Recurring costs

12. Fees for licences to operate a road transport business currently recur either annually or 5-yearly in advance. In addition, fees charged in respect of each vehicle disk similarly recur annually or 5-yearly in advance. It is proposed to suspend the option to pay vehicle fees five-yearly. Such costs will therefore recur annually.

One-off costs

13. Fees charged for considering applications for a PSV licence to operate are one-off and are non-refundable. Fees for section 19 and 22 permits are also only levied at time of application. Once granted, such permits are continuous. Fees to register a local bus service are one-off, although the operator must pay an additional one-off fee to vary or cancel the registration.

Total Compliance Costs

14. The total additional cost burden for operators in 2002-03, stated in accruals terms (i.e. relating costs to the services/ benefits to be received in 2002-03) is estimated to be £1.68m. This increased cost will impact on:

  • new operators (both PSV and permit);
  • operators who are renewing their PSV licences,
  • obtaining additional PSV vehicle disks,
  • or applying for, varying or cancelling a registration.

The costs will be spread across heavy goods vehicle operators and passenger service vehicle operators. Those operators who chose to transact with TAN using the full e-business capabilities of TAN's modern systems (expected to be available this summer) should be able to make efficiencies on their existing administrative processes.

Consultation with the Industries

15. Formal consultation on these proposals will be carried out.

Other costs

16. There are no additional costs as a result of these changes.

Results of Consultations

17. To be completed following period of formal consultation, which will be for 12 weeks.

Enforcement, Sanctions, Monitoring and Review

18. The TAN will enforce the increases. PSV operators who do not pay O-licence fees when due will ultimately have their licences to operate removed. Permit and registration fees are levied at time of application.

Declaration:

I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs.

Signed by the responsible Minister..................................................
Date...................................................

Contact Point:

Ann Godfrey
BT
Zone 3/12
Great Minster House
Telephone: 3533 2284
Facsimile: 3533 2279
E-mail: ann.godfrey@dft.gsi.gov.uk