Memorandum from the Department
of the Environment, Transport and the Regions
1998 (S.I. 1998/1671)
1. At its meeting on 21 July the
Committee requested a memorandum about this instrument on the
Given that the fees shown
in the Table substituted by regulation 3 were last altered by
the corresponding Regulations of 1997 (No. 82) as from 3 March
1997, explain why these Regulations increase them by 10 per cent.
2. The testing of all heavy goods
vehicles is undertaken by the Vehicle Inspectorate which is an
Executive Agency of the Department of the Environment, Transport
and the Regions. In 1991 the Inspectorate became a Trading Fund
and fees from statutory testing schemes, of which the testing
of heavy goods vehicles is one, were prescribed on the basis of
3. The need for a 10 per cent increase
in the fees has been caused by a shortfall in the anticipated
level of income for 1998/99. This shortfall is due to a combination
of the following factors.
(a) Statutory testing
volumes did not reach the level of growth anticipated.
(b) The initial cost
of setting up the single vehicle approval scheme was not matched
by fee income due to both a delay in implementing the scheme and
a reduction in the number of vehicles subject to it.
(c) Small demand-led
statutory schemes and miscellaneous income did not meet planned
(d) Loss of rental
income from the Driving Standards Agency.
4. The Inspectorate considered several
options but decided to adopt a twofold solution.
(a) To increase fees
so as to resolve the short term cash flow problem and provide
for long term investment planning.
(b) To get Treasury
approval to a higher working capital limit thereby giving the
Inspectorate a more robust base on which to manage sensitivities
and the ability to avoid a repetition of the current situation.
5. Two approaches were considered
in relation to fee increases.
6. The Inspectorate decided to follow
the second approach. The benefit of the lower rate of increase
is that it removes the potential need for a decrease in fees in
a couple of years or so which would result from the achievement
of further efficiency gains over time.
7. The current 10 per cent increase
should however be seen in a historical context because the fees
have not been increased since 1992/93 and were in fact reduced
by 5 per cent in January 1994 and by a further 3 per cent in March
1997. This is against annual GDP figures of between 1.51 per cent
and 4.20 per cent over the same period. A straight addition of
the annual GDP inflation and the fee reduction gives the equivalent
of a 25 per cent decrease since 1992/93. The overall increase
between 1994 and the present time is therefore less than the rate
of inflation by 18 per cent.
27th July 1998