Examination of Witnesses (Questions 202
WEDNESDAY 17 JANUARY 2001
202. Good afternoon. I am very glad to have
you here this afternoon. Could I ask you, please, to identify
yourselves for the record?
(Mr Austin) My name is Gary Austin, I am the Chief
Executive of the Driving Standards Agency.
(Ms Manley) My name is Laraine Manley, I am Finance
Director of the Driving Standards Agency.
203. Do you have anything you particularly want
to say to us?
(Mr Austin) I think it is true to say that this Committee
rightly criticised the performance of the Agency when it last
saw it, and I have to say quite rightly. What I have also to say
is that I joined the Agency last February and found an Agency
that dug itself into a big hole. Since that time I have been struggling
to get it out of that hole. I am very pleased to say that the
results we have had by the end of December actually show we are
making a lot of progress on that on the IT front, waiting times,
et cetera. I am very conscious the data we sent was dated back
to July, which did not show those improvements.
204. I have no doubt we will be asking some
questions about that. If you are digging yourself out of a hole,
I can only say that is a form of experience that makes you very
much at home in this building. What is the fee for a practical
driving test? Has it risen more than twice the rate of inflation
(Mr Austin) I do not know what the fee was in 1990.
What I can tell you is the reasons behind the increase. We have
to start with the volumes. In 1990 we were conducting somewhere
in the region of two million tests, we are now down to the just
under 1.2 million.
205. Down to 1.2.
(Mr Austin) There has been quite a considerable reduction
in the volume. At the same time one of the things that has happened
is we have extended the test. An examiner now does seven tests
a day rather than eight, because of the extended nature of those
tests. That would have reduced efficiency at that time simply
because of the length of the test.
206. That is a very big difference, is it only
the length of the test? Is it the price?
(Mr Austin) The price itself has not gone up since
May 1999, so from our point of view we have held those prices
for nearly two years now. It has increased, I have to acknowledge
that. One of the other reasons for the increase is that since
we became a trading fund we have to show a return on the capital
207. Of eight per cent.
(Mr Austin) It has to be more than six per cent. That
will account for somewhere in the region of 50 pence per test
just in terms of that transfer.
(Ms Manley) In 1990 the Agency was making a loss of
three million, so that was a contribution factor, it was not covering
208. £300 on each test.
(Ms Manley) £3 million in total.
209. If one is going to make a loss one might
as well make a loss! The theory was that you would recoup all
of this from the people taking the driving test?
(Mr Austin) That is the only place we can require
the money from.
210. Have you asked the Treasury to take note
of the fact?
(Mr Austin) Every five years we have a discussion
with the Treasury about the trading fund status. We are due to
reopen those discussions for the next five years this year. They
would have given us targets and the targets we have had have been
no fee increases above the rate of inflation for the first three
years. Then for the last two years, which finished this year,
it was the retail price index minus one per cent. We stayed within
211. Do you have any evidence about the cost
of the driving test? You will remember this Committee reported
on the number of young drivers not taking the test and how worried
we were about it. Has that rise encouraged young drivers to go
ahead without a full licence?
(Mr Austin) I do not have any evidence at the moment
to prove that it has not. I am conscious that the DETR have launched
a research project into unlicensed drivers to understand the motivation
behind it. If I can just say in mitigation, as it were, the cost
of £36.75 for a practical test is very small by comparison
to the amount of money they would have spent on potential driving
lessons. It would depend on which instructor you use or whether
it is a large company that charges more than the average, but
it could be anywhere from £400 to £600, at the very
least. It is a small percentage. I have no indications that that
in itself, which is for many of them a price of a computer game,
would put them off. If it has put them off then I am surprised,
but it is probably part of a symptom of them being put off a lot
Chairman: They may not get quite the same buzz
out of a test as from a computer game.
212. Can I ask a couple of questions about the
trading status. I think you said you are required to show a return
on capital invested of at least six per cent, what capital are
we talking about?
(Ms Manley) In the balance sheet assets the worth
of the Agency is primarily in property and computers, plus fees
213. Plus fees in advance.
(Ms Manley) Yes, less creditors.
214. Could you explain that? It seems simple
what they are, but could you just explain what that is?
(Ms Manley) Somebody will book a driving test and
they will pay us for the driving test. If they have booked before
the end of our financial year and they have not yet received the
test, we have the money but we have not incurred the cost of conducting
the driving test.
215. In effect you have to show, in part, a
six per cent, at least, return on bookings on an annual basis
that you are not sure of because it is dependent on a calender
(Ms Manley) In effect what we have is money in the
bank and we will offset that by the amount we owe the individual
fee-payers. Although the two are not equal they do net off to
a smaller amount. Our balance sheet assets at the moment are about
21 million, of that 18 million is fixed assets, which is computers
216. Nevertheless it is ten per cent. That is
not a small percentage.
(Ms Manley) No.
217. When you say your buildings and so on,
the rest of it, presumably the Agency has looked at its asset
base and got an up-to-date valuation of that?
(Ms Manley) Yes.
218. The trading status, every five years you
discuss it with the Treasury. A lot of things can happen in five
years. Do you think that is a reasonable sort of time limit or
timing for these discussions to take place?
(Ms Manley) The very nature of a trading fund and
the way that the Treasury has set this out is that you have a
five year agreement. If there are any instances where circumstances
change, for instance when the driving test became longer there
was a loss of efficiency in relation to driving examiners because
they could only undertake seven tests a day as opposed to eight,
so we went back to the Treasury and renegotiated part of the deal.
219. You say you have an up-to-date asset based
valuation, what is it?
(Ms Manley) Of the fixed assets?