Attachment A - Option A – increases fees to cover planned costs

Proposal

The proposed 5% increase, together with re-investing the savings made by streamlining our processes will allow VOSA to:

• continue our programme to bring our facilities up to standards necessary to meet current and future needs;
• develop IT systems to deliver a better and wider range of electronic support and services for both customers and staff;
• meet increased loan repayments and interest where past improvements in our facilities and systems were funded by loans from the Department of Transport; and
• cover the costs of the development and ongoing support of the electronic portal through which we will enable the electronic delivery of services to our customers.

These proposals contribute to the Department for Transport’s strategic objectives and develop the Secretary of State Targets outlined in VOSA’s Business plan. In particular the proposals aim to maintain and improve customer satisfaction, increase the range of electronic services available to customers, improve the consistency of testing services, contribute to road safety through better targeting of non-compliant operators, contribute to more reliable journeys on the strategic road network, reduce the burden of commercial operation, deliver modernised support services to the Traffic Commissioners and increase the take-up of existing electronic services available to customers.

These plans align with the principles and recommendations set out in recent reviews both within the DfT and wider government such as the Hampton Report – from Enforcement to Compliance, the Eddington Transport Study and the Stern Review on the Economics of Global Warming.

The increase proposed to the fees for Single Vehicle Approval of cars and light goods vehicles, at about 30%, is greater than the proposed 5% increase for other fees. This larger rise is needed to ensure that the scheme fully covers its costs in 2008/09, though it still carries forward a deficit. The SVA scheme has been adversely affected by reducing volumes. It must also be remembered that the SVA fees remained unchanged from August 2001 until April 2007. The proposed increases, therefore, represent an annual growth rate since August 2001 of only 4.85%.

As usual fees are adjusted to full pounds. This year, our proposal differs slightly from normal rounding rules (up to 50p rounded down – over 50p rounded up) to counter the effects of compounded rounding (i.e. in recent years, some fees may have been rounded up more often than down or vice versa distorting differentials).

A full list of the proposed new statutory fees is at Annex A. It includes, for completeness, those fees which we do not propose to change because of the effects of rounding down.

The main reasons for the increases are to cover:

• Inflation cost increases;
• Testing facility costs:
• • increased use of private sector test facilities which increases VOSA’s unit costs and decreases productivity (from additional travel, lower levels of support and lower utilisation of our own facilities) but allows a better balance of customer services;
  • full site upgrading or relocation - the largest development here is expected to be the replacement of the present poorly located Bristol test station at a new location in Avonmouth with much better access from the motorway network – building work is currently underway with the new facility expected to become operational early in 2008/9;
  • refurbishment or replacement of equipment and facilities on individual test lanes – current planning is based on 13 test lanes being refurbished in 7 locations;
• Electronic services – improving customer access to VOSA services such as test bookings, and making existing systems such as the Operator Licensing Business System more resilient;
• Investment in the development of the portal for the provision of electronic services to current and future customers, loan repayments and portal operating costs;
• More effective targeting of enforcement by redirecting resources towards operators considered most likely to be operating in an unsatisfactory manner whilst continuing sufficient monitoring of other operators to confirm that their lower risk rating is still justified. Enforcement investments include:
• • additional enforcement sites and equipment (such as weigh in motion sensors and automatic number plate recognition cameras) in locations to maximise the targeting of vehicles that appear to be overweight, overdue test, have outstanding prohibitions or to be operated by those believed to have a higher risk of non-compliance;
  • implementing new powers to issue fixed penalty notices and require deposits to be paid by those who cannot provide satisfactory proof of a UK address;
• Improving working methods to improve consistency of decisions and turnaround time for vehicles at testing stations or examined at the roadside;
• Simplifying customer paperwork, such as O licence applications and improving availability and quality of advice over the telephone;
• Reviewing test content and methods to cater for changing vehicle technologies and to improve consistency of testing, whilst staying within EU requirements.

Financial case

Details of the income and costs for each statutory fee area are at annex B.

Modelling the effect on costs to businesses

A model to establish the effects of the proposed fee increases on various sizes of typical HGV vehicle operating businesses is at Annex C. Based on this model, the total effect on vehicle operating businesses represents no more than one fortieth of one percent (exact figure 0.025%) of fleet operating costs.

We were unable to locate published data on operating costs for PSVs. Nonetheless we do not believe that the effect of proposed changes in VOSA statutory fees as a proportion of total operating costs would be significantly different to that estimated for HGVs.

Similarly, data to model the effects on other businesses such as bus and coach builders and converters or importers of used vehicle from outside the EU was not available. The cost to these businesses from the proposed increases in VOSA fees is considered to be a relatively small proportion of their total operating costs.

The assumptions and derivation of the figures in the HGV model are based on:

• Cost of VOSA services:
• • The proportion of new applications to continuation and variations per licence derived from planned volumes for 2007/8 published in VOSA Business Plan for 2007/8.
  • Licensing fees payable which may be paid either annually or 5-yearly are paid 5 yearly.
  • Proportion of retests derived from planned volumes for 2007/8 published in VOSA Business Plan for 2007/8.
  • Trailer to tractor ratio derived from published figures on number of articulated motor vehicles from DfT publication “Vehicle Licensing Statistics 2005” table showing numbers of licensed goods vehicles by gross weight and axle configuration and actual trailers tested in 2005/6 from VOSA Business Plan for 2007/8.
  • Specialist inspections related to particular vehicle usage such as international carriage of dangerous goods, carriage under TIR carnets or reduced pollution certificates have not been taken into consideration.
• Vehicle operating costs
• • Operating costs and average annual mileages taken from FTA “Manager’s Guide to Operating Costs 2007” and RHA “Goods Vehicle Operation Costs 2007”. The lower of the operating costs for each vehicle group from these sources was used. Whilst these represent typical costs, it must be recognised that the costs for individual businesses may vary considerably depending on mileage covered, vehicle retention policy, financial structure of business, etc.
• Fleet size
• • Small fleet size based on figures published in Traffic Commissioner’s Annual report. Other fleet sizes chosen to illustrate the scaling effect.
  • Mix of vehicles within fleets derived from DfT publication “Vehicle Licensing Statistics 2005” table showing numbers of licensed goods vehicles by gross weight and axle configuration choosing sample weights as best fit for operating cost data used.