Road Vehicle (Registration and Licensing) (Amendment) (No 3) Regulations 2003

Regulatory Impact Assessment

Introduction

1. The purpose of this assessment is to set out the likely impact on business of the Road Vehicles (Registration and Licensing) (Amendment)(No. 3) Regulations 2003 on business. The purpose of the regulations is to implement the Government's proposals for a system of penalties for those who fail to licence their vehicles on time.

Background

2. The Government announced on 22 May 2003 its intention to make secondary legislation to introduce a system of continuous registration by early 2004. This means that the registered keeper of a vehicle has statutory responsibility for licensing it, and retains that responsibility until DVLA has been properly notified of the vehicle's disposal. It means that it will be possible to take enforcement action without the need to prove that the vehicle has been used or kept on a public road. The primary powers for this system were introduced by the 2002 Finance Act.
3. The purpose of this package of reforms - of which this measure forms a part - is to reform the vehicle registration and licensing system to deal with the growing problem of tracing the keepers of vehicles involved in crime and motoring offences, and of abandoned cars. The vehicle register, held by the Driver and Vehicle Licensing Agency (DVLA), is estimated to be about 92% accurate in terms of the ability to trace the keeper of a vehicle spotted on the road. The remaining 8% can be broken down into those whose details have recently changed but have yet to inform DVLA and would normally be expected to do so - about 5-6% - and those who may be evading their responsibilities - about 2-3%. Continuous registration is designed to put the onus on the disposing keeper to notify changes of keeper more quickly, and therefore target both categories.
4. Reasons why this has happened include:

• VED evasion - this currently runs at 4.5% in revenue terms. Acting against evaders has hitherto meant sighting the vehicle on the public road and then bringing enforcement action. In recent years, DVLA has developed initiatives such as joint campaigning with the police and the introduction of wheel-clamping and removal of unlicensed vehicles, but there remains a problem in particular of "month-skipping", i.e. leaving gaps between the expiry of one licence and the taking-out of another. Prosecution is often difficult as the registered keeper of the car will often claim no longer to be the keeper of the vehicle.
• Exchange of vehicles - a collapse in the value of second-hand vehicles has meant that many older vehicles are changing hands without documentation in an informal market. These are the vehicles that are most likely to be involved in fail-to-stop accidents, crime (often as "pool cars" for criminals), motoring and parking offences, and will eventually be abandoned with no possibility that local authorities will be able to recover the costs of dealing with them.

5. Following the announcement in April 2002 of measures to help local authorities deal more effectively with abandoned cars, the Government also announced its intention to overhaul the vehicle registration and licensing system to deal with these problems. Furthermore, amendment made by the 2002 Finance Act will, for the first time, establish a clear statutory duty on the registered keeper of a vehicle to license it (in contrast to the current position, which is simply that a vehicle must be licensed). That duty would only expire when DVLA was formally notified of disposal of the vehicle or the police were notified of its theft. The amendments also establish a new offence of being the registered keeper of an unlicensed vehicle, and give the Secretary of State powers to levy a penalty in respect of such vehicles. The overall effect of these measures is that where VED is not paid it will be possible to take action against registered keepers in reliance upon the vehicle record, without the need to sight the vehicle on the road, leading to more cost-effective and efficient sanctions against offenders.
6. In formulating proposals to implement these measures, the Government has adhered to the fundamental principle that the costs of implementing changes should fall firmly on the offender

Description and purpose of measures

7. These regulations represent one element of the package of measures to implement continuous registration and will introduce a late licensing penalty of £80 - reducing to £40 if paid within 28 days - for those who fail to license their vehicles, or make the appropriate SORN declaration, on time, using the powers in Section 7A of the Vehicle Excise and Registration Act 1994, as amended by the Finance Act 2002. These regulations provide that a supplement is payable by the registered keeper of a vehicle that has been unlicensed for more than one month. It will not be necessary for the vehicle to be seen unlicensed on the road.

Consultation

8. The package of reforms to vehicle registration - including the proposals for continuous registration - has been developed over a long period in consultation with a wide range of stakeholders. The proposals were first floated in the Government's consultation paper on Abandoned Cars, issued in November 2002, and met with general support. They have been developed through the Modernising Vehicle Registration Implementation Board - a body set up in June 2002, chaired by Government but with members drawn from the motoring organisations, motor manufacturers, the police and the insurance industry, with a remit to advise Ministers on the implementation of measures recommended to government in a report on vehicle crime commissioned from the Jill Dando Institute of Crime Science.
9. In August this year, the Government consulted with a range of stakeholders on the proposals to implement changes, including the arrangements for the late licensing supplement set out in these regulations. That consultation showed general support for the principle of the measures, with general acceptance of the level of penalty set out in these regulations.

Benefits

10. The main purpose of the programme of vehicle registration reform is to improve the accuracy of the DVLA vehicle record, thereby contributing to the battle against vehicle crime and the anti-social use of vehicles by ensuring that offenders can be more effectively traced, and to reduce VED evasion, which, according to the latest DfT survey, cost of £193 million in 2002/3 - some 4.5% of total VED revenue. It will in particular provide both a greater incentive to those disposing of vehicles to notify DVLA properly that they have done so, and to ensure that there is an effective sanction against those who currently evade VED, often for short periods. The former will help ensure that the current flow of vehicles out of registration can be stopped up, ensuring that vehicles can more easily be traced in the event of vehicle crime or in relation to traffic offences. It will also in the longer term help local authorities to track those responsible for dumping vehicles, enabling them to collect the cost of dealing with dumped cars from a greater number of offenders than at present.
11. These regulations, by bringing into effect a penalty enforceable from the vehicle record, will increase the incentive for those disposing of vehicles to notify DVLA properly, and will improve enforcement against those who fail to relicense their vehicles. It is currently estimated that, using the new powers, it will be possible to serve notices against 120,000 VED offenders per month at the outset, although that figure is likely to fall as the new sanctions begin to bite.

Costs

12. The principal costs arising from the implementation of continuous registration will fall on the DVLA, where it is estimated that the costs of implementation will, over three years, be £65 million. These costs will be met through penalties levied on VED offenders, under a netting-off arrangement agreed with HM Treasury.
13. The main impact of the changes, including those set out in these regulations, will be to improve enforcement against VED offenders and will not fall on business. However, consultation has identified some areas where businesses who deal in large numbers of vehicles may face additional costs in bringing existing practice up to the appropriate standard to avoid the risk of incurring a tax liability for vehicles that have been taken off the road. In particular, fleet operators who buy or sell significant numbers of vehicles may need to change processes in order to ensure that they discharge their liability to license the vehicle, involving staff training and other operational costs. These costs are likely to be small and those businesses that are already operating best practice are unlikely to be affected.

Competition

14. It is not believed that these measures will have any impact on the UK's competitive position.

Impact on Small and Medium Enterprises

15. The Government does not believe that the measures, including those included in these Regulations, will have a detrimental effect on small or medium businesses. As noted above, there will be some businesses that may be required to make changes to their processes for disposing of vehicles to bring themselves into line with best practice, but there is no reason why this should place a particular burden on smaller enterprises. The requirement to provide further information when imported vehicles are registered will not affect smaller businesses disproportionately.

Risks

Continuous registration

16. The main risks arising from continuous registration are related to public understanding of the proposals and the need to ensure that the new regime operates in a fair and effective way. Particular risks include:

• Risk of unfairness - there is a risk that the proposals will be seen to affect those who allow their vehicles to become unlicensed for short periods, through oversight or other difficulty, rather than the hard-core evader. The Regulations provide that a supplement is payable when a vehicle has been unlicensed for a month or more (although enforcement action under Section 29 of the Vehicle Excise and Registration Act may still be taken if a vehicle is detected unlicensed on the road during that initial month).
• Risk that proposals will increase incentive to evade - the conceptual base of continuous registration is that the registered keeper will remain responsible for licensing a vehicle until DVLA has been notified of that vehicle's disposal (or the police have been notified of its theft). These proposals therefore increase the attractiveness of remaining outside vehicle registration, particularly for those vehicles that have already fallen out of the system. The Government intends to tackle this through increased roadside enforcement, involving both the increased use of DVLA's powers to wheel-clamp and crush unlicensed vehicles - in particular through joint working with local authorities - and increased use of police ANPR cameras to detect unlicensed vehicles on the road. It also intends to introduce enhanced checks at DVLA on the identities of new keepers notified to DVLA.

Declaration

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

Signed by the responsible Minister

Date

Contacts

Responsibility for these issues lies with DVLA. Queries on this notice should be directed to DVLA Press Office.