Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence


Examination of Witnesses (Questions 220 - 239)

WEDNESDAY 17 JANUARY 2001

MR GARY AUSTIN AND MS LARAINE MANLEY

  220. When I asked the question about capital investment you said buildings assets.
  (Ms Manley) Our balance sheet of 31st March 2000 was 21.3 million.

  221. I think Mr Austin said that the only way that you can meet these financial targets is to increase the fee, the test fee.
  (Mr Austin) I was trying to explain the difference between 1990 and now and to take into account the various things that have happened, yes. We have no direct funding as such from government. We are entirely self-sustained in terms of whatever we spend must come from the people who use that service.

  222. Do you have any efficiency targets? As a non-economist I assume that there are a number of ways in which you can, if you like, show a return, one is to increase your charges, the other is to be more efficient.
  (Mr Austin) There is a whole series of targets. In terms of the two financial ones, one is the return on the capital invested, the second is that fees should not increase by whatever percentage, below the rate of inflation.

  223. I understand that but what about efficiency? Some organisations have a two per cent annual efficiency target, some have three per cent. Do you have any of these at all?
  (Mr Austin) We had those some time ago but since then we have moved into a much more complex system, some of which we reported in the paper sent to you, which examined the examiner utilisation figures, how many calls are answered within certain times.

  224. I understand that. If I may repeat my question. I can understand it is complicated, not too complicated for me, I hope. In fact the return that is expected is going to come in the main, if not entirely, from the income you derive, which is mainly, if not entirely, the test fee.
  (Mr Austin) Almost exclusively the various fees.

  225. You have no external, ie government, efficiency targets. You have a complicated system but no internal or external efficiency targets?
  (Mr Austin) Not that I can express in those terms, no.

  226. You either have or you have not. I am just confused as to why you feel it might be difficult to say yes or no?
  (Mr Austin) We have a whole series of targets that we design around customer services in terms of our utilisation of resources. They do not come in as efficiency targets as such. They are designed around that.

  227. If they are not efficiency targets they are not, presumably, included in the answer to my question. Have you, yes or no, either external or internal efficiency targets on an annual basis?
  (Mr Austin) Not expressed in a simple way.

  Chairman: Mr Bennett wanted to ask some questions.

Mr Bennett

  228. If you were running a market stall you would have gone out of business. If we go back to 1990 the fee was £19. How much were you losing in 1990?
  (Mr Austin) About £3 million.

  229. How much would you have to put up the fee in 1990 to cover that £3 million?
  (Ms Manley) About £1.75.

  230. About £1.75. That was all you needed to put it up by but you put it up by a huge amount.
  (Mr Austin) What I am also trying to argue for the stall holder is what they are trying to sell now is a different product. Because of the change in the test itself we now have a much longer process of testing people, it is 40 minutes now, it was not before, so from that point of view it is a fair price.

  231. You put your prices up far more than was necessary to cover your deficit and far more than was necessary to cover the fact that the testers did only seven rather than eight, and you also put on the fee for the written test, and a very substantial number of people have stopped taking the test; is that right?
  (Mr Austin) I cannot confirm whether people have stopped taking it.

  232. Let us put it the other way around, how many people were taking the test in 1990 and how many are taking it now?
  (Mr Austin) Just under two million in 1990.

  233. How many now?
  (Mr Austin) Just under 1.2 million.

  234. That is a very substantial number of people who appear not to be taking the test. You told us, just a few minutes ago, you do not have a clue why they stopped taking it. The department is actually doing an inquiry. Do you not think you should have started to ask the question why people appear not to be taking the test?
  (Mr Austin) There are two reasons really why those figures would have dropped. The first one is the demographic change.

  235. How many should have dropped because of demographic change?
  (Mr Austin) That is very hard to know. What I have is the demography of the country over that time period but what I do not know is how many people in certain groups have a desire to want to drive but do not have a licence. That is the key.

  236. Do you think the desire to drive has changed dramatically between 1990 and now?
  (Mr Austin) I think there is more acceptance that people will expect to drive and have to get a licence.

  237. You would have thought more people would be taking the test. Actually it is worse than you told us in those figures.
  (Mr Austin) No. What I would have said is there was quite a backlog of people who had not got a licence who would have required it over the last ten years. I think we have more or less finished with the people who are 25 years and above who had not got a licence first time round, as it were.

  238. You are planning for 1.2 million people taking the test each year. Do you think that is the right figure?
  (Mr Austin) In terms of our forecasts, what we have is a slight increase in 17 and 18 year olds in the next two years, but if we look five years ahead I think we will find that the numbers coming up for test will probably stay at about 1.3 million for the first two years and then it will decline to 1.2 again. It is fairly static.

Mr Stevenson

  239. Your figure does not really matter because the driving schools charge so much. Everyone does not have to go the driving school, do they?
  (Mr Austin) No, they do not. It is no more than one or two per cent who actually present themselves at a test having not had any instructions from a professional at all. One of the key things in terms of this is that in terms of why the fees are so low is that it is a very competitive market for the instructors. If you look at it, there were about 35,000 instructors in the year 1990 dealing with about two million tests per year. Now we are down to 1.2 million and there are still just under 30,000 instructors on the register. The market force, sadly, is holding down the cost of their fees.


 
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