There is a “strong case” for extending HSE’s controversial cost recovery scheme to cover businesses regulated by local authorities according to a report that confidently sealed the future of Fee for Intervention, saying there was “no viable alternative”.
While FFI has proven “challenging”, the report concludes, it has been effective in achieving the government’s policy aim of shifting the cost of regulation from the public purse to businesses that break the law.
Despite the fact that Martin Temple’s triennial review of HSE, which prompted the report, even went as far to suggest that FFI should be “phased out” unless “the link between ‘fines’ and funding can be removed or the benefits can be shown to outweigh the detrimental effects”, the report concluded that the scheme has proven effective and should stay.
“We can see no viable alternative to it within the current environment for public expenditure and the constraints that continue to be imposed upon HSE,” concluded the panel, which was chaired by lan Harding, professor of public policy at Liverpool University, with participants from the GMB trade union, the Federation of Small Businesses and the Department for Work and Pensions.
Among the report’s six recommendations, it states: “We believe there is a strong case for extending the inspection and investigation regime operated by HSE, via FFI, to businesses and organisations currently covered by other enforcement regimes in the longer term, to further level the regulatory playing field.”
An HSE spokesperson said the regulator was “considering the recommendation but have no formal proposals at this time”.
The report found that, despite some perceptions to the contrary, there has been no impact on how inspectors make enforcement decisions, but concedes the transition to the FFI regime has “been challenging” and that there has been a “cost to pay” in terms of the relationship between the regulator and businesses.
It has particularly affected the advice businesses feel they can seek from inspectors for fear of ending up with an invoice, and in turn the information inspectors feel they can pass on to dutyholders.
Further recommendations include keeping the trigger for an FFI bill at the level of material breach – rather than improvement or prohibition notice – arguing that HSE would lose in the region of £5m a year if the threshold was set higher. This shortfall “would have to be made up from savings and the only place to make this kind of savings would be reductions in staff”, the report states.
It recommends HSE ensures its system for targeting inspections is “robust and able to accurately identify those organisations which seek to gain commercial advantage by failing to comply with health and safety legislation”. An HSE spokesperson said the Field Operations Directorate has a project underway to enhance targeting on inspections.
Additionally, the review panel called on HSE to keep the FFI dispute process under review to ensure it “remains independent”. Martin Temple expressed concern that only HSE officials were involved in the initial stage of the FFI appeals process. In the wake of the report, HSE amended its disputes panel to include an independent member.
On the back of the report HSE will also be releasing simpler FFI guidance, including case studies, and changing the layout of the notification of contravention. The FFI guidance will be reviewed by March 2015.
The report, which was planned to be carried out post-October 2013, but was given its terms of reference by the Temple review, said there was “no compelling evidence” that HSE was using it as a ‘cash cow’ to generate revenue to fill its diminishing government funds.
Construction union UCATT welcomed the findings. Steve Murphy, the union’s general secretary, said: “This report is important as it shows that FFI is being applied fairly. The only people who don’t like it are employers who are being forced to pay for breaking safety laws and putting the lives of workers in danger.
“The message to employers must be stop breaking safety laws and putting workers at risk. If you break safety laws expect to be penalised for doing so.”
“Not many would have predicted an extension of the scheme in light of the comments made by Martin Temple earlier this year,” said health and safety lawyer Laura Cameron of Pinsent Masons. “Notwithstanding the independent review panel concluding that there are ‘challenges’ associated with FFI and also acknowledging that FFI has not been popular with some inspectors and dutyholders, it looks like it is here to stay.
“That said, the need to stave off the perception – or reality – of the scheme becoming a ‘cash cow’ for HSE is highlighted in the panel’s report and it will be interesting to see how that pans out in practice over the next couple of years,” she said.
Judith Hackitt, chair of HSE, said: “Both HSE and the government believe it is right that those who fail to meet their legal health and safety obligations should pay our costs, and acceptance of this principle is growing. This review gives us confidence that FFI is working effectively and should be retained. We will continue to monitor the performance of Fee for Intervention to ensure it remains consistent and fair.”
Manufacturing sector hardest hit by FFI
The manufacturing sector was been hit with nearly £4.2m in Fee for Intervention bills in the first 16 months of the scheme’s operation, the highest of any industry and 40% of the total money recovered.
According to a detailed breakdown of figures contained in the FFI report, the dubious achievement of coming second in the list of the most highly charged industries is construction, which received a total £2.8m in invoices between October 2012 and January 2014.
A little over £10.6m was recovered by HSE under FFI in that time, much under the £43.7m per year, once familiarisation costs had been worked through, originally estimated in the impact assessment for the introduction of the scheme.
At the other end of the scale was agriculture, which attracted £222,079 in invoices.
However, the highest revenue raised from FFI per 1,000 business premises was the extractive and utilities industry, with £64,456. Second was water and waste management, with £41,242 per 1,000 business units. The lowest was the service sector – the largest of the economy – with £1,306 per 1,000 business premises.
Figures contained in the report demonstrate that the material breach rate – the percentage of proactive inspections that resulted in a material breach being identified – has run at around 30% since April 2012. Data was not collected on the rates of material breach prior to FFI being introduced, so no comparison is available.
Of the four divisions of HSE’s Field Operations Directorate – central, southern, SaNE (Scotland and North England) and construction – the southern division has the highest material breach rate, followed by SaNE.
Meanwhile, the enforcement rate – the percentage of proactive inspections that result in an enforcement notice or a prosecution – has been variable, showing no discernible pattern. Between April and September 2012, before FFI was introduced, it was 16.4%; this figure dropped to 15.4% between the following October and March. It hit 19.8% between April and September 2013, before dipping back below 16% between October 2013 and March 2014.
HSE carried out 21,603 proactive inspections in 2011/12, halfway through which FFI was rolled out. The following year, 2012/13, there were 22,240 proactive inspections, and 23,472 in 2013/14. The total time inspectors spent on inspections increased by
16% to 21,533 days between 2011/12 and 2013/14, but dipped to 17,576 in the intervening year.
The number of RIDDOR reports investigated dropped in those three years, from 3,718 to 3,287, while complaints investigated increased, from 2,422 to 3,174.
Based on these figures, the panel concluded that HSE has continued to target its regulatory work in accordance with its published work plans, and that there was “no compelling evidence” that FFI had changed its regulatory decision making.
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