INESS Policy Note 2/2012: Real sense of stricter PTIs missing

While some of new regulations can be easily overlooked by a common mortal, there is a group of them that strikes almost every citizen. This is clearly the case of a new regulation of technical inspections of automobiles coming out of the Brussels stable which is about to withdraw something about 30 mil euro out of the wallets of Slovak drivers with a questionable benefit. 

A new roadworthiness package has been set out with a price-worthy aim: to decrease the number of fatalities on the roads caused by bad technical conditions of vehicles. From the standpoint of Slovak drivers, a major change introduced by the new directive is a duty to carry out the PTI (periodic technical inspection) every year for vehicles older than 6 years. In the following text we shall discuss the assumptions on which the directive is based and we conclude asserting that it will have limited benefits which will not exceed the allocated resources.

How to regulate

In the case of a regulative intervention that will both influence the trade environment and make each and every owner of a vehicle duty-bound (what particularly occurs under the regulation of our concern), it is not sufficient to merely refer to a well-selling slogan about lifesaving.

Every regulation should consider these three aspects:

-          objective which is to be achieved

-          means used in order to achieve the objective

-          sustained costs

Objective

The accompanying materials communicate that the objective of the regulation is to reduce the number of fatalities on the roads and that the main problem which requires a remedy is the high share of vehicles with technical faults on the roads. Hence from the very beginning we are directed towards an uncertain path. In other words, it is much easier to observe the relation between the new regulation and the technical standard of operating cars. For example, when the cars without the ABS are banned, the technical standard is very likely to rise. However, to find the relation between the reduction in the number of fatalities and the new regulation is far from easy. We shall demonstrate later on how scientific studies often come up with contradictory results. In one document from 2006, the Commission itself asserts that technical improvements of vehicles are deemed to account for the main cause of the decrease in the number of fatalities on the roads. The courageous objective to cut down the number of fatalities to a half has been set up politically, what admits also the Commission. Understandingly, it is expected to act.

Through this sort of identification of the problem (focusing on the technical state), the directive sets sail for a very heterogeneous field. There will be some profound differences between an average technical level of vehicles in Luxembourg and in Romania which are mainly brought about by the diametrically different purchasing power of citizens which remains unaffected by the regulation.

It is far from arguing that the decrease in the number of fatalities would not be a noble objective. But the fact remains that the number of fatalities on the roads has had a significantly decreasing tendency over the last two decades in the EU.

The best performing country in this regard is Estonia which between 1991-2011 managed to lower the number of fatalities by 81%, leaving the remaining countries just a step behind. As a result it is questionable to what extent we can consider the future decrease a straightforward outcome of the new regulation.

Fatal accidents (left axis), injuries and overall accident rate (right axis)
Source: Road Safety Evolution in EU

As the number of fatalities decreases, by the same token, there is also a reduction in the number of accidents caused by technical failure which are the subject of this regulation. In Slovakia, the occurrence of these accidents has declined sharply too. This meliorating trend is observed foremost thanks to enrichment of population that is subsequently able to afford to acquire a better-safer vehicle and maintain its good technical condition at the same time. Nevertheless, an insight from the statistics concerning the mentioned accidents can take us somewhat by surprise as the number of accidents (representing the subject of the regulation) in case of Slovakia equalled only to 64 in 2010 and to 43 in 2011. There have been no fatalities (at least) for the last six years. 

Overview of traffic accidents according to their causes, technical faults of a vehicle

Source: Police Force of the Slovak Republic

Technical inspection as a solution

A following inquire is about the modality in which we are willing to achieve the lower accidental rate i.e. by increasing the number of and toughening of technical inspections. However, there are no sufficiently robust statistics which could show that periodic inspections in a substantial way prevent those technical faults that are behind accidents. Namely, whether or not neglected maintenance (where inspections can be of help) or an unpredicted failure of the material (a low effect of inspections) are responsible for accidents. Material fatigue, a failure of car lights, a tear in tyre - foreign studies point out that a tyre fault has been the cause of 61% of the fatal accidents brought about by technical failure[1]. A German study cited in the proposal itself admits the 30% share of accidents under the previously mentioned cause. 

In the accompanying document to this directive there are two underpinning statistics in terms of the correlation between accidents severity and vehicle age. The former is misleading and does not justify the toughening of the inspections

Source:  MEMO/12/555

The accident severity increases naturally with age also in the case of an excellent technical state of a used car. This happens due to the fact that under technical development newly produced cars are safer in comparison which the 10-years-old ones. The cars older than 8-10 years account for a substantial part of the vehicle fleet of young drivers who are the most likely to cause an accident. Of course, this cannot be solved by the PTI itself. In addition, the PTI does not automatically give a better guaranty for safer roads.  It is not only the matter of laxity of the PTI controllers working “against the payment” when 96% of vehicles has passed the inspection tests. For instance, a vehicle whose ABS warning light is not working properly will not pass, whereas another vehicle which does not even possess the ABS will.

The second statistic supports the theory, however, creates a paradoxical situation. It shows that as far as the 4-5 years-old cars are concerned, the faults causing an accident will fall by roughly 30% (in comparison with new cars) just to rise again later. If we were to follow this statistic carefully we would have to adopt inspections for new vehicles as well and subsequently ease them for a while, then toughen them again. Nevertheless, according to this graph the occurrence of severe accidents as of the 5th to the 9th year rises minimally, therefore, an increase in inspection frequency would have sense only as of the 9th year of a vehicle (the directive increases the frequency as of the 6th year).

Relative occurrence of technical faults in relation to vehicle age

Source: Final Report of Contributions

Existing studies consider the benefit of the obligatory technical inspections to be controversial at best. Such findings were reached by A Report For FORS, 1999. One older American study Wolf,O’Day,1985, had examined 41 various assessments which were focused on effects of the obligatory inspections. As a result, it came with the summary conclusion that even if it is possible to observe a mild improvement in the technical state of a vehicle, yet no fundamental proof was found to pave the way for the fact that the periodical inspections account for the lower accident rate. Rechnitzer, Haworth, Kowadlo (2000) drew the conclusion that the adopting of technical inspections as such contributes to the lowering of the accident rate owing to technical causes by 0-50%. A large number of studies (sharing the perspective with Haworth, Kowadlo from the page 4) has dealt with the comparison between the regions with the inspections and those without them (the case of the USA), or between before-after the adaptation of obligatory inspections. Once again the outcomes diverge substantially – from practically a zero lowering of accident rate to more significant one (tens of percent). I remind again that these studies primarily deal with the existence of inspections themselves, not with their toughening (what is our case).

One of the issues is an implicit assumption of these regulations that a technical fault threatening the safety of a vehicle needs a sufficient amount of time to “mature” and in that  period it is possible to spot it. The above-mentioned report FORS quotes on page 35 a study of McMinn, 1974, according to which the occurrence of faults in vehicles was 23% one month after an inspection, and 35% four months later. In other words, even if a driver maintains his vehicle in the thick-skinned conditions as required by the PTI and eliminates the faults to pass it, in doing so he decreases the subsequent demands for maintenance. The aforementioned high share of the tyre failures is an indispensable fact vis-à-vis the main causes of accidents. Furthermore, to estimate the probability of a tyre failure apart from a simple measurement of tread depth and pressure (which can be carried out by a member of police during a regular roadside inspection) is practically impossibly in terms of individual vehicles. Finally, the simplicity of a temporary change of tyres for the needs of passing the inspection is not to be taken for granted.

A chapter by its own is the implementation of obligatory technical inspections of small trailers which are not supported by any statistics of their accident rate. In a similar way we can also discuss the benefit of technical inspections of small motorcycles and mopeds. These are involved in many severe accidents, however, by implementing of this regulation ad absurdum we can start to demand the technical inspections for bicycles as well whose accidents have also some serious consequences.

Analysis of costs and benefits

The decrease in the number of fatalities on the roads can be relinquished to technical advancement or to the increasing of regulative flow which is not for free. The directive itself was preceded by a preparation of analysis of impacts and a comparison between costs and benefits.

Consultations

Consultations preceded the directive in preparation and were undertaken in a number of phases. The first round in the form of public discussion brought 9653 reactions from various associations but mostly from citizens (more than 9000). 88% of all initiatives came from Britain, France and the Netherlands. A single one came from Slovakia, there were all together 118 reactions from the countries outside the old “fifteen”, what testifies about an extraordinarily low interest in legislative happening in the EU. In the final result it accounts for a very elemental and incoherent group of testimonies, starting with simple phrases such as “Please, do not adopt additional inspections in the Netherlands,” and ending by instructions on a couple of pages about how to ameliorate the testing of electronic security features. It is not clear what this sort of consultations ought to and could bring. The Commission can never be sure whether the obtained opinions are sufficiently representative. Subsequently, negotiations were held between expert groups and involved parties and in conclusion the proposal was evaluated by Impact Assessment Board.

Script without changes

An indispensable step for the evaluation of meaningfulness of the new regulation is its comparison with an alternative script. This could not only be an alternative regulation but also an evolution in this field without the adoption of a new regulation. The alternative scripts should be simultaneously quantified so that it would be possible, after a time, to evaluate the effectiveness and (un)intended influence of the new regulation on the community. The formal analysis of costs and benefits is usually a part of European regulation but its individual processing and quality is often a question of administrative capacities or sufficiency of scientific studies in the field. We shall look closer at its robustness.

The basis is constituted by both an impact study called Final Report of Contribution (by a consulting firm Europe Economics) and its derivative Impact Assessment which is an attachment to the proposal. It contains the estimate of impacts and costs of various alternatives which are diverse in terms of periodicity, accuracy of technical inspections and changes in accident rate which they should bring. Subsequently, a script with the best ratio of costs and benefits is chosen. It is a relatively complex network of measures and impacts, however, the accuracy of quantification ought to raise some questions. In particular, the script without any interventions poses the biggest questions. The Commission ponders in it only upon the soft policy measures (therefore media campaigns in the first place) and under expenses of 280 000 euro they should bring benefits of 184 mil euro. As a disadvantage of this extremely advantageous procedure it considers a low number of prevented fatalities, equal to 41, what is likely to ascribe to edification. Nevertheless, from unknown reasons the Commission left out in this script the decrease in the number of fatalities owing to technical advancement while in a different analysis (section 1.9) it estimated that under unchanged conditions the  decrease in fatalities on the roads by 2020 would be from 23% (the most pessimistic script) up to 58% – as the matter of fact the decrease in fatalities by a half is the quantitative objective of the regulation.

“The winning script” with the inspection frequency of 4-2-1 was not paradoxically evaluated in the impact assessment that only handled those scripts which considered the first inspection already as of the 3rd year of vehicle age. The calculations themselves in the impact assessment have a fundamental deficiency that is the Commission considers in them the EU as one homogeneous space with an equal level of prices. The price of a saved life, of a serious injury or limited traffic jams is significantly different for each country inside the union. Whereas the Commission ponders upon the price of a saved life to be 1.5 mil euro, Transport Research Institute in Žilina while calculating the benefits of motorways in Slovakia considers the price of 332 000 euro. Therefore, when the Commission calculates the expenses of the regulation including the price for the PTI of 50 euro (which is roughly the same in both the EU and Slovakia), then by counting in the “European” price of a life (not the Slovak one) the beneficial side of the regulation will raise fivefold for Slovakia. Put it simpler – it is true for Slovakia that its costs of the regulation will be similar to the rest of the union (with an exception of the price of the lost time) but the benefits will be considerably lower. Moreover, it is true that the high age and worse technical state of Slovak vehicles is not an objective of Slovak drivers but first and foremost the consequence of their purchasing power. Harmonisation of rules, which directly or indirectly creates additional cost of a car fleet, will de facto impoverish the population of the less developed countries as it increases the cost of mobility. Hence, the comparison between the scripts should contain the quantification for each country.

Costs of the directive in Slovakia

As the average age of a vehicle in Slovakia is 11 years, this change will affect perhaps 1.2 mil vehicles from the total number of 1.8 mil. Converted into smaller amounts, this means extra 600 000 inspections per year. At the average cost of 40 euro for an inspection it accounts for 24 mil euro that is a relatively decent transfer of wealth from the vehicle owners to the managers of technical inspections bodies. To this we have to add the lost productive time and fuel which a driver has to give up on his way to and by waiting for the PTI. Rather optimistically, if we take the average of two hours of an average salary and one litre of fuel, we can add to the original sum additional 7 mil – all together 31 mil euro. Ulterior costs are caused by an increase in the equipment of the PTI bodies due to the complex inspections and increased state supervision upon them – those we did not estimate. In accordance with the above-mentioned directive, these costs should lead to 60% decrease in mortality caused by technical faults which account for the 6% of fatalities on the roads in the EU. Two methods can be used in order to gather Slovak statistics. As for the first one, if we reflect the assumptions for the whole EU (6% share of accidents, decrease in fatalities by 60%), then in Slovakia under an annual mortality rate of 320 peoplethe new measure would save 12 lives . The second method is much simpler insofar as it is sufficient to open the websites of Statistic Institute and search for the number of accidents caused by the technical state of vehicles – this graph is at the beginning of our analysis. In 2011 there were 43 accidents! The number of fatalities has been 0 for many years by now and in 2011 the accidents caused by the technical fault of a vehicle called for one severe injury. However, in average there is one fatality in  every 50th accident, talking about one life. A similar kind of statistics showing the low level of accident rate caused by the technical shortage of a vehicle have been reported by insurance companies.

Put in more cautiously, the question now is not if 31 mil euro is too much or too little in order to save one life (alt. 12) but whether or not these lives could be saved in a different way with lower costs. Regarding the road transport, for example, wild and domestic animals caused 723 accidents in 2010. The options of how to save lives on the roads differently are many – more transparent and safer pedestrian crossings, deceleration rate, more frequent measuring of speed on critical spots etc. Yet these alternatives have not been considered by the Commission. 

Though the public is not fond of the evaluation of a life, the publicly accessible information about the cost or price of unavailable medical care for the severely ill indicates that 31 mil euro (or 2.6 mil if we decide to use the less accurate access deriving from European statistics)  for one life on the roads would save for instance in healthcare many more patients at the same time. “Lifesaving” by the global increase of inspections is a too costly way in the case of Slovakia. It has also high opportunity cost in the form of the larger number of lost lives which could have been saved more cheaply. 

Alternative solutions

This regulation stems from the automatic presumption of guilt as it presumes that the owners of vehicles are not interested in protecting health of their crew and therefore it is necessary to enforce the inspections – notwithstanding the objective guilt (consciously drive an unsuitable vehicle). If we are at last to increase the level of technical state of a vehicle above the one which would be in the unregulated market (would it be really lower?), there are other tools that can serve our purpose. The most natural way would be to allow the connection between voluntary inspections and the level of insurance. Insurance companies have got the data about causes of accidents and naturally they are interested in motivating by bonuses (or maluses) those who maintain their vehicles in good technical condition. Obviously under the assumption that there is a relation between the high number of inspections and the safer operation (similarly to the healthcare system where it is not true that every preventive checkup means the saving of future costs). Today, this offer of a bonus does not exist perhaps due to low trustworthiness of inspections themselves. An alternative solution could be also a higher deductible insurance sum in accidents caused by negligence of the technical condition of a vehicle.

Conclusion

Politicians have set for themselves a pleasing objective and the Commission had the underlying study and consulting process prepared so that they would satisfy formal requisites including the cost-benefit analysis. However, the whole process has a lot of problematic spots which are typical for the formulation of (not only) European regulations:

• overlapping of the means and the ends (the increase of technical quality of automobiles)
• objective does not take into consideration the heterogeneity of member states
• consulting process without any tangible influence on the result
• unclear monitoring of effectiveness and drawing conclusions in the case of unconfirmed results
• lack of sufficient analysis of causality concerning the up-to-date accident rate
• mechanical cost-benefit analysis which does not take into account alternative scripts (investments into lifesaving or other ambients of life protection)
• comparison does not consider redistributive impacts of the regulation, additional costs will have certain impacts in developed countries and other ones in catching-up countries – what raises the question of subsidiarity and justness of “Brussels” centralised control over this ambience.

Recommendations

The Slovak representation ought to be more active in the field of the EU and enter the process of directive preparation demanding the quantification of the directive costs and benefits for each country separately. Such process of directive preparation would be more transparent and it would put members of the European as well as Slovak parliament into substantially different situation that could, for the future, limit the amount of succeeded legislative with a label: “Brussels wanted it that way”.

INESS, Bratislava, 30 July 2012

Revised 6 August 2012

Translation: Jakub Betinský