Results of the Trading Funds Review

APRIL 23, 2009

The Government announced last summer a further review of how trading funds supply PSI. The results of this review had been expected with the budget.

However, instead of the results of a review, trading funds were included in the report of the Operational Efficiency Programme in the section on “Asset management and sales” in the “final report”. Box 3A p.41 summarized the trading fund assessment exercise:

The first phase of the Trading Fund Assessment considered how a number of Government businesses could open up the information they create or hold as a result of carrying out their core public duties. The businesses were Met Office, Land Registry, Ordnance Survey, Companies House, Driver and Vehicle Licensing Agency and UK Hydrographic Office.

The Assessment identified key principles of good practice relating to information produced by all Trading Funds. These principles are:

  • information easily available – where possible at low or marginal cost;
  • clear and transparent pricing structures for the information, with different parts of the business accounted for separately;
  • simple and transparent licences to facilitate the re-use of information for purposes other than that for which it was originally created; and
  • clearly and independently defined – with input from customers and stakeholders – core purposes (“public tasks”) of the organisations.

The Office of Public Sector Information will provide enhanced oversight and governance to ensure application of these principles across the Trading Funds that create significant amounts of information.

A new business strategy for Ordnance Survey has been developed (see Box 3.H) which also will ensure easier and simpler access to high-quality information. Further work on the future business plans and models for specific Trading Funds - as well as consideration of the effectiveness of the Trading Fund model – will now be incorporated into the Operational Efficiency Programme.

So what we have is:

  • A vague (“where possible”) commitment to “low or marginal cost” pricing but with “low” undefined – thereby leaving plenty of ‘wiggle room’. In any case the main PSI trading funds are explicitly excepted from this it seems – see below.
  • Some centralization of oversight in OPSI (though not clear what power OPSI will have)
  • Public tasks that are clearly and independently defined (though not clear who ensures independence)
  • More pricing transparency within trading funds (though again little detail as to how this will be managed or enforced)

There were separate, specific, assessments for 3 of the trading funds mentioned in Box 3A: the Land Registry (box 3.E p.45), the Met Office (box 3.F p.46) and Ordnance Survey (box 3.H p.47). Each of these assessments consisted of just a few paragraphs (the assessments are excerpted in full below).

The Land Registry and Met Office assessments were, in essence, “pats on the back” with clear endorsements of their current operational model – albeit with an encouragement to expand commercial operations and be more efficient. Pricing policies weren’t mentioned.

For Ordnance Survey the tone was slightly different with a stated need for the OS to be “more customer-focused and commercially driven”. However, again there was no mention at all of pricing policies.

Where was the assessment of marginal cost pricing (or other pricing model) for “raw” bulk data – the recommended option from the Cambridge study (of which I was a co-author)? Where the detailed discussion of the regulatory model that needs to put in place to ensure that the system works well? Entirely absent! This is truly disappointing and one can only feel that the a serious opportunity has been missed here.

Trading Fund Assessments from the OEP Report

Box 3.E Land Registry

Land Registry maintains and develops a stable and effective land registration system throughout England and Wales, providing the cornerstone for the creation and free movement of interests in land. Giving a state-backed security for title to registered estates and interests in land for the whole of England and Wales, and ready access to up-to-date and guaranteed land information, enables confident dealings in property and security of title.

In addition, Land Registry produces property price reports and delivers a range of non- statutory added-value products and services. Land Registry is committed to providing high quality, cost-effective services which are delivered promptly to all customers. A review of the business model was undertaken as part of the OEP. This concluded that in light of current market conditions and recognising the need to retain responsibility for the creation, recording and guaranteeing of title to land within Government, the following improvements to the operating framework of the business have been identified and will be delivered;

  • realising significant efficiency savings through a programme which includes estate and operational rationalisation and market testing of support functions that will result in a more streamlined, resourceful organisation;
  • developing opportunities for the provision of wider commercial services and products;
  • identifying synergies with the functions and data requirements of other public sector bodies with a view to achieving efficiency improvements through greater collaboration; and
  • exploring opportunities to accelerate these initiatives through joint ventures and/or outsourcing of activities to third party providers.

Box 3.F Met Office

The Met Office is a world-leading provider of weather forecasts and climate change modelling and advice to the general public, specialist customers throughout the public sector and an increasing number of private sector customers.

It is essential that the Met Office’s unified approach to short, medium and long term forecasting and climate modelling, which is the most efficient and sophisticated in the world, is preserved. The Met Office also performs a number of key government roles, especially in international data collaboration and UK representation. In order to maintain the quality of its services it will require long-term investment and the freedom to develop its operations. There remains potential to expand commercial operations at the Met Office beyond those already provided, possibly through the introduction of private capital in some areas.

Over the coming months the project team will:

  • work closely with the MOD as the owner department and HM Treasury to identify improvements to its business model, ownership structure and financial framework in order to reduce the administrative burden, maximise its development and to fully exploit the market opportunities open to it;
  • work with other public sector bodies to achieve efficiency improvements through greater collaboration or transfer of functions;
  • explore increased commercial activities, for example weather warnings to industry and helping business understand the impact of climate change;
  • seek opportunities for private sector partners to develop specific services to complement the Met Office’s business; and
  • maximise operational freedoms and reduce bureaucracy in the interface between the Met Office and the MOD.

Box 3.H: Ordnance Survey

Ordnance Survey collects, maintains and publishes high quality and up-to-date geographical information for the whole of Great Britain. Ordnance Survey provides data and services to customers both directly and indirectly through its network of commercial partners. The Government is committed to stimulating innovation in the geographical information market, increasing competition where it would be beneficial to consumers and to making geographical data and services more easily available.

The OEP has concluded so far that Ordnance Survey needs to be more customer-focused and commercially driven. The Government is therefore publishing a new commercial strategy for the Ordnance Survey on their website. The new strategy balances the requirement to maintain the highest quality standards with the need to significantly enhance ease of access to geographic data and services for both commercial and non-commercial use.

The new strategy seeks to equip Ordnance Survey to thrive in and better support competition and innovation in a wider geographical information market that is being transformed by advances in technology. It is a significant and ambitious programme of change. The Government has set key milestones for delivery in 6 and 12 months’ time and beyond, as well as a process for independent review and challenge of progress. If sufficient progress is not made to promote competition and innovation in these timescales, the Government will consider further reforms. Opportunities to accelerate the delivery of initiatives through introducing further commercial experience and capabilities will be fully explored over the coming year.