Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 40-59)



  40. Some of them make a very big profit.
  (Mr Erskine) That is across the whole series of sheets. Within that there are individual sheets that do make a profit, you are quite right.

  41. The database that you have got—what is it worth?
  (Ms Lawrence) That has been an interesting debate which you may be aware of. I can see by you smiling that you may be aware of it. We are here to create and maintain the database. I should like to turn to David in a moment to discuss the ongoing discussions on that.

  42. If you are trying to maintain something surely you ought to know what it is worth?
  (Ms Lawrence) I know what the maintenance costs are per year, but regarding its worth perhaps I can ask David to tell you.

Mrs Dunwoody

  43. Before you do that, it actually has a direct impact on your present status and your future status, and at the moment you are capable of doing that and you envisage within your current value you will continue to do that, but this would be radically changed if you were required to look at your assets in a different fashion, would it not? Therefore surely this is something which is of absolutely fundamental importance. It is not an accounting trick. It is actually a policy decision of quite major implications.
  (Mr Willey) I would not call it an accounting trick but, not being an accountant myself.

  44. Oh, I think we may use pejorative terms about accountants but they manage to survive it.
  (Mr Willey) We do not underestimate the value of our database to the business.


  45. But what is it worth?
  (Mr Willey) We do not put a number on it. We make that quite clear in our accounts.

Mrs Dunwoody

  46. You sound like Pooh Bear—"It's a lot."
  (Mr Willey) It is a lot. We recognise that it is a very substantial value to the business and indeed without it the business would not have a future. Where we disagree with the National Audit Office is this. The National Audit Office regard it as a tangible asset, something with some physical substance. We, using accounting standards and new deals and best practice from the private sector, regard the database as continually changing and evolving; 5,000 changes every day, as Vanessa said earlier. As such it is more akin to intellectual property rather than a piece of something that is fixed. As such we regard it as an intangible asset. For that then to appear on the balance sheet it would have to have an absolute defendable value that everybody agrees on and a reasonably defined methodology. There is no methodology to fix a value or to update it.

  47. Equally, to ignore its worth in that sense is to be mildly unrealistic. I bring you back again to the policy decision. If you are required to regard this as a tangible asset and to do the whole of your accounting on that basis, then this will materially affect where you are going in the future.
  (Mr Willey) The reason why it is not on there is because of the accounting standards and if accounting standards change then of course we will follow accounting standards. The change in status from Trading Fund to Government Owned PLC will not of itself bring about a change in the accounting policy. To come to your point about the return on capital employed, indeed when we moved into a Trading Fund it was quite clear it was not going to appear on our balance sheet. If it had appeared on our balance sheet and if some reasonably defendable sum had been put alongside that, then the Treasury may well have set a different figure for return on capital employed. I cannot second-guess that.

  48. Then why is it you are unable to convince the National Audit Office of this, who are on the whole quite good on accountancy, I am told?
  (Mr Willey) Yes, and those people in the private sector that we have also sought advice from are renowned for their accounting standards too and have a different view from that of the National Audit Office.

  49. It costs rather more, I suspect, but ignore me. You carry on.
  (Mr Willey) That was my point. We have an argument between two sets of accountants and neither one nor the other can be said to be wrong. It is a case of different interpretation between different professionals.


  50. It is different interpretation by different professionals but it is this question of whether you achieve the return on the investment that the Treasury was asking you to achieve, is it not?
  (Mr Willey) The return we were asked to achieve was on the understanding that our database was not on the balance sheet. I cannot second-guess it but it may well have been a different matter had a number appeared as being a value for the database.

Ms King

  51. You say that you have recently introduced "even more simple and transparent pricing". What is meant by "transparent" in this context? Do you think that this policy is going to reassure major customers who, as you know, have been concerned about unfair pricing?
  (Ms Lawrence) First of all we make sure that all our prices are published and available for people to look at. We also, with our new OS MasterMap, which you may have been shown this morning, have made sure that now it is a very simple way of pricing how much information you wish to buy from us. It is very much done on the basis that you choose your area, you choose which themes you require and, depending on the themes, pricing by TOID, so as a result if you choose more themes you will have more TOIDS. It is on length of licence: one year, two year or three year, and on number of seats[3] that you wish to use the data. We have been very clear on that and there is a calculator available on the web for people, once they have an account with us, to make sure that they can see that.
  (Mr Willey) I know that some people understand transparency and pricing as relationships between costs incurred and the prices charged to the market. For example, with a chocolate bar we can price the cost of the ingredients, the cost of manufacture, we know that we will be producing a thousand chocolate bars and we can work out what the cost was and we can relate that to the price. Our costs do not accumulate so transparently and so easily as that. Indeed nearly half of our total costs, £90-odd million, are directly about updating our database and keeping it maintained. From that database a number of different products are spawned, everything from the paper maps that Steve Erskine was talking about earlier to some of our digital data. The model that one uses then to apportion half of all our costs to individual products and hence looks at profit and loss on individual products is an accountant's judgement about how one apportions it. That really is perhaps the dilemma that some people do not see, or maybe a transparency they thought they might be able to see if we were just producing chocolate bars.

  52. Does another part of the dilemma come from the contradiction between your role as a public service provider in some respects and a commercial entity in another? How do you think that the conversion of OS to a Government Owned PLC will affect pricing?
  (Mr Willey) I really do not see that a change to a Government Owned PLC will change our pricing. Whether we remain as a Trading Fund or whether we become a Government Owned PLC will not of itself have an effect on our pricing.

  53. Do you foresee any risk that a transparent pricing policy will mean that charities and educational institutions will lose some of the benefits they currently have?
  (Mr Willey) No.
  (Ms Lawrence) Perhaps I could also mention that there is currently a consultation paper out from HMSO regarding regulatory information where it is suggesting that there should be one price fitting all organisations and all nature of use. We have suggested in our response to the consultation that that does not fit education, does not fit charities and those sorts of organisations. We have done a lot ourselves over the last 15 months to make data available for those kinds of bodies in an easier manner than ever before and at prices that mean that they are just taking the data they require for whatever they are requiring it for. One size fitting all perhaps is not what we are suggesting is best for us.


  54. You are very keen to provide maps for schools at a pretty subsidised rate in order that you encourage people in the future to use maps. Is that right?
  (Ms Lawrence) I think I should refute that things are subsidised in that way.

  55. Exam extracts are pretty cheap, are they not?
  (Mr Erskine) I am sorry, Chairman, I do not have the specific costs. We can make those available to you.[4]

  56. But you are encouraging schools to use maps to build up your future market.
  (Ms Lawrence) Actually, Mr Bennett, I am not sure it is about building up our future market. It is about ensuring that all children in this country understand location. I do believe that geography and location are key tools that children need to have for their own safety and for their enjoyment of the landscape. Yes, we are investing very heavily in educational products for projects. One of them, which I think you saw this morning, was launched last week called "Our Favourite Places" which is to help children be able to record what is their favourite place and for other children and adults then to use that information. We will also later on this year be introducing a scheme which we fully expect to help map education in this country quite considerably.

Christine Russell

  57. You have just said there that you are committed to the free flow of information but yet in the responses from a number of our respondees they were making the point that they felt that your copyright charges have gone up to unacceptably high levels. How do you comment on that?
  (Ms Lawrence) I am surprised at some of the points made. We introduced a licence for copying paper maps for internal business use. Its price is £47.50 per office so, for instance, people like estate agents now are able to put our maps on the back of estate agents' details for a price of £47.50 per annum. The same goes for organisations who require to copy a paper map for internal business use.
  (Mr Erskine) There are a number of different ways that we make the copyright available. There is the £47.50 licence but we also make the copying of paper maps available for publications for small groups, for instance. If a small group is making a leaflet of an area of interest and they want to use a section of Ordnance Survey map, say, A5, they will pay 45p for that. If they are redrawing it effectively so that they want to make their own sketch map from that, they can pay as little as a penny for each copy that they produce. We reduced copyright charges quite significantly about 15 months ago.
  (Ms Lawrence) September 2000.
  (Mr Erskine) Now it is £47.50 we charge.

  58. So in regard to the representations of, for instance, local ramblers' groups who pay you for doing their sketch maps, you think those representations are unfair and in fact the costs to small groups who just want to do basic little sketches have not increased substantially?
  (Mr Erskine) I would not sit here and say that has not been an issue in the past. What we have done is listen to those comments and concerns that people have had.


  59. Do you think people have not caught up with the changing situation?
  (Mr Erskine) I think there is an element of that. On the paper copyright business I think we have addressed the issues there and we have also addressed some of the issues around the availability of the data. We have introduced a pay-as-you-use service into our Superplan agents which has reduced the cost of small extracts of mapping. That is as a direct result of listening to customers' comments.

3  "The number of [computer] terminals that are loaded with software capable to accessing and manipulating OS MasterMap within a business." [OS MasterMap V1 R1 data pricing. Customer information leaflet]. Back

4   Ordnance Survey produces Examination extracts under contract for a variety of examination boards. These are at a variety of scales and of various sizes and formats. We always print more than required by the exam board so that additional copies may be provided at short notice should a board have a higher than anticipated number of entrants. Once an examination has closed and after authorisation from the relevant board any surplus copies are sold primarily through our network of approved educational stockists for £1.00 per copy. We also produce 23 Project maps at 1:50.000 scales covering a 20x20Km area. These are currently available through the same source for £1.20 per copy. These are currently being phased out through lack of demand. Back

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