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CHARGING FOR HSE VISITS FULL CONSULTATION FINDINGS

HSE considers public response to government Fee for Intervention proposals

Public consultation on plans to extend the range of activities for which HSE recovers costs ended on 14th October 2011.

We reported early findings in November 2011 and HSE has now published a full account of the public responses and argument considered recently by the HSE Board.

The policy of recovering costs for HSE interventions through a Fee for Intervention (FFI), where there is a material breach of the law, has been agreed by Government and was therefore not in question in the consultation.

The consultation document was intended to elicit views on how HSE would recover the costs of the work it undertakes. The comments received by HSE are included in the argument considered by the HSE Board.

We have reproduced below the argument most relevant to construction.

Distorting HSE Priorities

We made a commitment in the CD that FFI would not change HSE’s decision-making, from setting organisation-wide priorities down to individual inspector behaviour. However, some consultees feel that, over time, we will come to rely on FFI receipts and this will inevitably start to drive what we do.

Our proposed response is to continue to be very transparent about our plans so that stakeholders can see that we remain driven by health and safety outcomes. We have a strategy backed by an annual business plan, soon to become a three-year plan. This sets out, amongst other things, the sectors that HSE will proactively inspect based on evidence of risk and performance. Furthermore, these plans are now underpinned by sector strategies which set out the rationale for HSE’s interventions. Those discrete sectors with well defined representative bodies are well sighted on these strategies e.g. waste and recycling, explosives and quarries although it has been difficult to get the same engagement with diffuse sectors such as public services.

Construction is a good example of this in practice. It is a priority sector because of its injury and ill health record. Our intervention approach has changed over the years based on evidence of health and safety performance. We used to target large contractors and they have made significant improvements. The evidence now tells us that small firms are the least improved part of the sector so they are now the focus of our proactive efforts.

This combination of strategies and plans will be transparent to stakeholders and it will be clear to them if we have delivered on them. We also plan to go further. We propose to produce a publicly available report on the first year’s operation of FFI . This may include, amongst other things, data such as number of letters triggering FFI that HSE has issued and to which sectors and size groups.

At the same time, it is important to recognise that, given the Ministerial statement and shrinking resources, our targeting should mean that we are encountering material breaches more frequently. If not, then we would need to review, but because we were inspecting too many compliant businesses rather than we were not generating estimated receipts. Therefore, there is an in built and entirely proper link between targeting and receipts but the latter is a consequence of the former and not driven by it.

Relationships between HSE and Business

Consultees felt that the possibility of a visit generating an invoice would harm relations between businesses and HSE. They would view HSE as more of a threat and be less willing to raise problems and seek help. Consultees also felt that inspectors would be less likely to give advice.

The key to minimising this risk lies in the other issues discussed in this paper. For example, if business sees HSE not to have changed its priorities and decision-making and staying a proportionate regulator, then their fears may dissipate. Furthermore, they will continue to see HSE working in partnership with representative bodies and individual organisations outside of a FFI environment.

However, it is also true that, as resources decline, HSE must spend a greater proportion of its time on securing compliance from high-risk businesses and poor performers rather than helping more compliant businesses improve. Put starkly, we will be spending more time with businesses where there is not necessarily a healthy and mutually supportive relationship in the first place.

HSE has many years of operating cost recovery regimes in the major hazard sectors. Many of the fears voiced now about FFI were voiced by industry when the earlier schemes were first introduced. However, HSE has maintained a constructive relationship with the major hazard sector which is both challenging and supportive where it needs to be. This is characterised by a healthy debate about the nature and scope of HSE’s interventions sitting alongside partnership work developing standards on key issues such as leadership. There is no reason why the same cannot be true outside of major hazards.

Interpretation of material breach and the role of the inspector’s judgement

Consulteessaid that they were unclear about what might constitute a material breach that would lead to an invoice. Our proposed response to this concern has a number of elements.

Firstly, we propose to use the more familiar term (both legally and in everyday usage) “contravention” in the regulations whilst retaining the term “material breach” in guidance. We will then expand on what we mean by material breach in the guidance. Importantly, we propose to state in the regulations that contravention for the purposes of FFI will be interpreted in the light of such guidance as HSE may produce. The reference in law to the guidance should reassure stakeholders that inspectors will be bound to follow it. The guidance itself will illustrate the sorts of issues that are likely to be a material breach, without purporting to be an exhaustive list, and it will link these to levels of potential harm to reassure stakeholders that they will not be invoiced for trivial matters. We will test this guidance with a range of stakeholders before we finalise it.

Some consulteeswere not comfortable having the inspector’s judgement as the basis for determining whether there has been a material breach, although they suggested no alternatives. Our proposed response to this is to be clear in guidance how inspectors go about forming these judgements.

The CD set out a process whereby the inspector decides what a material breach is, and further defined this as where an inspector felt that they needed to make a formal intervention through a letter, instant visit report, e-mail or notice. The CD referenced the Enforcement Policy Statement and the Enforcement Management Model (EMM) backed by management controls as the framework for ensuring that decisions were consistent and proportionate. It may be that some stakeholders did not reference the EMM or did not understand it when they did.

We propose to retain the current EMM as now, but to “translate” the document for an external audience and make it a central feature of the guidance on the regulations. This will sit next to the expanded guidance on material breach so that stakeholders can see how decisions are made generally, and then how this will be applied to the concept of material breach. We can emphasise with this approach one particularly important issue. That is, if the risks are not very high, then the factors that an inspector will take into account in the action he or she takes are what are called in EMM “duty holder factors” i.e. is the business generally compliant, does it have a positive attitude and is it providing generally good working conditions. Duty holders and their trade associations have told us consistently that they particularly value this discretion.

The Trigger for FFI

Many consultees would prefer the trigger for FFI to be Enforcement Notices rather than letters. To support this they cite greater clarity of application, a better relationship between seriousness of breach and fee, an independent appeal process (though it would not be considering cost recovery per se) and greater transparency. Interestingly, some have said that this would overcome their concerns of reliance on inspector’s judgement (or “opinion” in legal parlance) even though a Notice is no different to a letter in this respect.

There are several arguments against going down this route. HSE typically uses a letter to record formally witha duty holder a significant failure to comply with the law and, in general terms, what must be done to rectify it. It is at this level, as a matter of policy, that Ministers and HSE judge that the changes in transferring costs to where they are most appropriate, incentivising compliance and levelling the competitive playing field should begin to apply. Furthermore, if it was perceived, either by business or by inspectors, that a contravention could not be regarded as significant unless it resulted in an enforcement notice, there would inevitably be a pressure to serve more notices. The proportionality that comes from being able to use a wider variety of influencing and enforcement tools would be lost and this is something that business greatly values.

We will be clear in guidance about what constitutes a material breach (see paragraphs 20 – 24) to indicate that it is for significant health and safety failings and we propose to introduce an independent element to the disputes process (see paragraphs 45 – 47). Together these should satisfy some of the objections to our original proposal.

Local Authorities

The position on LAs was not clear going in to the consultation. We have had comments from individual LAs, groups of LAs, LGA and from some business organisations. The majority are against inclusion. Even where they support the principle, such as the LGA, they do not want the scheme to be mandatory for them. Furthermore, those in favour, including LGA, say that they would not be in a position to implement it by next April. Finally, business groups have expressed strong opposition to LAs being included. Keeping LAs out of the scheme will mean that many low risk, small businesses will not be within scope of the scheme

Licensed Asbestos Work

The fee currently paid to HSE for a licence to undertake asbestos work under the Control of Asbestos Regulations includes an element for inspection and an element for assessment of the application. As a matter of law and policy, we need to avoid double charging. We also need to consider more fundamentally what type of cost recovery scheme should apply to licensed asbestos work. We therefore propose to disapply FFI to the licensable work of licensed asbestos contractors until we can identify a sustainable solution.

Financial Impact and the Hourly Rate

Some consultees are concerned about the financial impact of FFI, particularly for SMEs. They feel that the costs, now estimated at £124 per hour, could be difficult for businesses struggling to survive in a harsh economic environment. Some have suggested that we should factor in an ability to pay or company size or that there should be a flat rate fee.

We are bound by Treasury rules to recover our full costs provided they are reasonably incurred. Similarly, the hourly rate reflects the cost base of the organisation, though we might expect it to reduce as we get smaller, rationalise the estate, and reduce corporate support. Linking the invoice to an ability to pay would divorce the amount recovered from the effort HSE expends, and introduce a criterion that was open to irresolvable argument. So too would a flat rate fee, given that an investigation or inspection can range from half an hour to many hours.

There are two fundamental factors that will limit the financial impact of FFI. The first is the scope of HSE’s interventions. There are approximately 2.5 VAT and/or PAYE based enterprises in the UK. Of these 1.5 million are regulated by LAs and therefore are out of scope of FFI. Given HSE’s plans for proactive inspections and estimates of reactive investigations, the businesses potentially affected by FFI (the number actually affected will depend on their compliance) compared to the total population of businesses is likely to be around 1% or less of all UK enterprises.

The second factor is the way in which businesses manage health and safety. If they comply with the law, they incur no cost. If they rectify breaches quickly, their costs will be lower as a result.

Disputes

The CD set out a two-stage disputes process, both internal to HSE. However, there was a strongly held view that a disputes process without input independent of HSE is not credible. Consulteescommonly used the phrase “judge and jury” to describe HSE on this point.

We therefore propose to introduce a disputes process that has independent input. We propose a staged process whereby a business can complain about an invoice in the first instance to a senior manager in HSE. If their complaint is not upheld at that point, they have can ask that their case is considered by a disputes panel. This panel would consist of senior HSE staff sitting alongside an external business representative. Depending on your decision, we will publish more detailed guidance on this as part of the general guidance that will explain how FFI operates.

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