Committee of Public Accounts

Press Notice No. 28 of Session 2003-04, dated 1 July 2004


Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today it was disappointing that the DVLA had not been able to reduce vehicle excise duty evasion, and said that he hoped the sort of mistake which led to the Agency wrongly charging drivers and wasting £200,000 would not be repeated.

Mr Leigh was speaking as the Committee published its 28th Report of this Session, which examined whether the Driver and Vehicle Licensing Agency (the Agency) was doing enough to tackle the incidence of Vehicle Excise Duty (VED) evasion; the financial impact of the various enforcement activities that it deploys to counter VED evasion; and whether the Agency had done all that it could to introduce electronic means of payment of VED for the motoring public.

In 2002-03, the Driver and Vehicle Licensing Agency (the Agency) collected gross VED revenues of £4.6 billion, a reduction of 5.6% on the previous year. A further £193 million of gross revenues from 1.75 million vehicles that should have been collected in that year was lost to the Exchequer through evasion. The 2002-03 estimated evasion rate of 4.5% is 0.6% higher than the 1999 estimate.

The Agency failed to notice a change in legislation in 1997, and as a result more than 300,000 drivers were incorrectly charged a total of £3.35 million in fees for the renewal of medical driving licenses. Once this error was detected in 2003, the Agency swiftly made arrangements for repayment, but the cost to the public purse of identifying the affected drivers and processing the refunds was nearly £200,000.

The Committee found that despite increasing its enforcement efforts the Agency has not been able to reduce vehicle excise duty evasion. It has research in hand to help it identify the causes of evasion and recently launched a new 'continuous registration' initiative to help validate its vehicle database records. The Agency's target to reduce the evasion rate to 2.5% by 2007 needs to be pursued vigorously as do its efforts to improve the accuracy of its database. In particular, the Agency should use the data provided by the roadside use of Automatic Number Plate Reading (ANPR) equipment to develop frequent statistical updates on the level of VED evasion, in order to inform optimum deployment of its portfolio of anti-evasion activities.

The Agency should look to maximise the effectiveness of its portfolio of enforcement activities. The Agency plans to double wheel clamping activity-the least cost effective enforcement measure-in 2004-05 in preference to more cost effective approaches such as the use of ANPR equipment which has the additional benefit of being able to provide real-time data on the incidence of evasion.

There is considerable scope for the Agency to expand its partnership working, particularly with local authorities and the police, to combat VED evasion. Less than 2% of local authorities across Great Britain are using 'devolved' Agency powers to tackle evaders. Yet those that have done so have found it both quicker and cheaper than using their own statutory powers in respect of abandoned untaxed vehicles.

The Agency needs to be resourced adequately to support any future expansion of local congestion charging schemes. Although in the case of the Central London Congestion Charge, Transport for London met half the capital cost and all of the ongoing running costs, the Agency is statutorily obliged to supply information to local authorities free of charge. This is unsustainable unless the Agency is able to recoup its costs from the local authorities operating congestion charging schemes.

There is considerable scope for the Agency to enhance the range of VED payment channels for motorists and for accelerating the plans to introduce electronic methods of payment. Electronic licensing was introduced for Fleet Operators in 1994; whereas the general motoring public are only just now being offered a similar service for vehicles less than three years' old.

When re-tendering its IT/IS contract in 2002-03, the Agency took the opportunity to put in place a more flexible partnership approach. Although the cost of switching supplier was some £4 million more than the £29 million maximum cost originally anticipated, the Agency's management of the process offers lessons for others. Its insistence on transparency in the new contract arrangements will help identify the potential 'switching costs' when this new contract expires. The Agency also conducted a detailed evaluation of the skills and knowledge that had to be transferred to the new supplier from its predecessor in order to achieve a smooth transition.

Mr Leigh said today:

"It is disappointing for the taxpayer that the DVLA has not been able to reduce vehicle excise duty evasion. The Agency must focus on those enforcement measures that are most cost effective. It is hard to understand why the Agency should be doubling wheel clamping rather than, for example, making more use of automatic number plate reading equipment at the roadside. Clamping may have an important deterrent effect, but it costs more than £4 for every £1 of direct revenue collected.

It is unbelievable that that the Agency should have wrongly charged drivers for the renewal of medical driving licences for six years because of its own failure to spot a change in legislation. This may have been sorted out in the end but £200,000 was wasted in the process. I hope this sort of mistake will not be repeated."

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