Free Our Data: the blog

A Guardian Technology campaign for free public access to data about the UK and its citizens


Internal transfer pricing: the justification for OS charging. But is it right?

Steven Feldman has put up a new post at his Giscussions blog, where he’s pulling together a series of comments he and I left about the FOD concept, and particularly the Ordnance Survey role in it.

As he notes, some good economists would be useful. You can comment here or there.

Steven writes, at his blog:

Lots of organisations in the commercial sector use internal transfer pricing mechanisms between divisions. Sometimes this is to allocate revenue between tax jurisdictions (can be tax avoidance but can be legitimate and reasonable) and in other circumstances transfer pricing ensures sensible investment and commercial strategies, good rates of return and avoids waste and inefficiency. OS charging public sector clients for the use of its data is just a form of transfer pricing within the public sector, there are loads of other examples. Describing it as a money-go-round is overly simplifying the topic.

In theory (and I stress the word theory) the endeavour to establish a market price for the supply and maintenance of the national map will help to ensure that the public sector achieves best value from its expenditure. With the private sector snapping at OS heels there will be some limited pressure on pricing although I recognise that scale prevents any serious competition at the moment. Perhaps some company will decide to take OS on head to head, then we might see an interesting tussle – but no free data.

As Pete commented the concept of treasury funding to OS took a bit of a bashing with the withdrawal of the NIMSA. I cannot see how anyone who cares about the quality and currency of the national map could advocate placing the whole lot at the whim of a treasury mandarin in a budget crisis.

Are we talking our way into a sell off? Would that matter?

In order, my responses: internal transfer pricing can be justified as “putting a commercial value on something internal”. That’s what the BBC did with “Producer Choice”. It wasn’t popular, but equally some of the things it did – like getting internal BBC divisions to compete directly against outside ones – did focus the mind. OS though is intimately tied to the public sector. Are there many other organisations out there offering what it does? Does the MOD call up Google or TeleAtlas for some maps?

Placing OS at the whim of a Treasury mandarin – well, that’s the point about ring-fencing. I’m sure it’s how we’ve ended up with the situation we have at present, where OS is a trading fund so that it very specifically doesn’t trouble the Treasury when spending rounds come, er, around. And OS works very hard – driven by Vanessa Lawrence, who saw all this rapidly on joining (to give her her due: she’s evidently an able political animal, in the best sense) – to stay out of the Treasury’s way.

But while that’s convenient for the Treasury, and for Gordon Brown in the short term, it’s not to everyone’s benefit overall. It’s rather like health insurance vs universal health care. Why don’t we pay directly for health care, as in the US? Because we’ve judged that it actually has effects we don’t like.

As for talking our way into a selloff – I think Vanessa Lawrence would lobby very hard against that, and would probably get backing in that view from DCA (Dept for Constitutional Affairs), which wouldn’t want the vast hassle and distraction of readying a privatisation. Notice how OS didn’t put the National Geographic Database into the National Asset Register that Treasury has just drawn up. Nice way to stay out of the spotlight, again. (Of course, the NGD doesn’t appear in the OS accounts, so it’s the most intangible of intangible assets.)

Equally I think there is some gradual movement within government towards cheaper data. Quite how one squares that circle with the OS being a self-sufficient body is tough. I agree. There aren’t easy answers. But there are better ones.

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