HSE Costs Recovery: fees for intervention
There has been much discussion and concern regarding the soon-to-be imposed Health and Safety Executive charging scheme. The idea of HSE inspectors charging for ‘their services’ has caused consternation from many industry representatives. The government sees it as a cost saving scheme, but its effects may change the way in which health and safety is policed in this country.
The idea of a cost recovery scheme in relation to health and safety is nothing new. Such schemes already exist in major hazard industries i.e. for licensed nuclear sites, offshore oil and gas production and certain onshore chemical manufacturing and storage facilities. The new Fees for Intervention (FFI) scheme is due to come into force on 6 April 2012, through the implementation of the Health and Safety (Fees) Regulations 2012, which will replace the 2010 Fees Regulations. The new law will carry over the existing cost recovery schemes, while introducing the new charging scheme for many other industries.
In brief, the new Regulations will place a duty on the HSE to recover costs where duty holders are found to be in material breach of health and safety law. If there has been a material breach that has resulted in the HSE having to formally request rectification in writing (e.g. by way of an enforcement notice, email or letter), the HSE will be able to recover all of the costs of that intervention up until the involvement of court time. “Technical breaches” that do not elicit a written response by the HSE – such as the failure to display a health and safety poster – will not fall within the scope of the new Regulations.
R v Associated Octel (Costs) established the present position on costs recovery for non-major hazard sites. This case stated that the HSE is entitled to recover their “just and reasonable” costs from the defendant following a successful prosecution. This usually covers the HSE’s legal fees associated with court time plus the inspector’s reasonable costs of investigation.
In March 2011, the Department for Work and Pensions issued a paper detailing the “next steps in the Government’s plans for reform of the health and safety system in Britain” headed ‘Good Health and Safety, Good for Everyone’. The comments in this paper, together with the recent government cuts, led to the HSE launching a consultation paper (between 22 July and 14 October 2011). This outlined the HSE’s proposals for recovery of their costs in relation to all enforcement action taken following a “material breach” of health and safety law, up to the commencement of court proceedings.
Breach of health and safety law
One of the HSE’s key principles underpinning this proposal was that a change in the method of cost recovery would shift the costs associated with a breach of health and safety law from the taxpayer back to the duty holders. Another principle was that the threat of costs recovery would act as an effective deterrent to those who would otherwise fail to meet their obligations.
As predicted, the consultation period attracted many responses. Most of these recognised (at least in principle) the HSE’s need to recover costs. The concerns raised included:
- The HSE potentially changing its priorities to maximise its income;
- The possible harm to the constructive relationship between the HSE and businesses;
- The definition of “material breach” and reliance on “inspector’s opinion” or judgement;
- The trigger for FFI being a letter dealing with a material breach;
- The financial impact on businesses, particularly SMEs; and
- The integrity and transparency of the disputes process.
What constitutes a ‘material breach’?
As explained above, a “material breach” will arise where a requirement to rectify a breach stimulates inspectors to commit themselves to paper, covering anything from a letter, email, visit report, notice or prosecution. This wide definition is an obvious cause of concern for many, because it creates an early trigger for fees to start accruing and worries about the risk of inconsistency in approach by inspectors from different areas and industries.
Cost recovery scheme
The HSE has stated that the new cost recovery scheme is not intended to punish those who take their regulatory law obligations seriously. However, many fear that the costs of intervention will be disproportionately excessive for SMEs – the proposed charging rate currently stands at £124 per hour (reduced from the originally proposed £133 per hour). This is of particular concern to smaller enterprises, as it is proposed that the scheme will impose a legal duty on the HSE to recover costs, giving them very limited discretion over whether to apply the fee or not, whatever the resources of the organisation being inspected. Also, the basis for the proposed rates is queried, especially in light of HSE inspectors’ usual charge out rates of between £66 and £80 per hour.
Current estimations indicate that an inspection resulting in a letter will cost the duty holder approximately £750, an inspection resulting in an Enforcement Notice will lead to costs of approximately £1,500 and, in extreme cases, an investigation may impose fees on the duty holder that go into the tens of thousands of pounds. The HSE proposes to issue invoices to duty holders on a monthly basis as costs are incurred, with the expectation that payment will be made within 30 days. There is currently no option for duty holders to pay by instalments. If fees are not paid, the HSE will be under an obligation to take enforcement action.
Those who believe they have been unfairly charged under the new Regulations will have the opportunity to appeal against the fees. TheHSE initially proposed a two-tier internal process for dealing with disputes. This approach, unsurprisingly, raised concerns that the absence of any independent input would effectively make the HSE both ‘judge and jury’ of any appeal. As a result, the appeals procedure has been slightly modified to include two levels of review. The primary review will be undertaken by an HSE senior manager and only if the appeal remains unresolved will it continue to a second review. This will be heard by a panel, consisting of senior HSE staff alongside an external business representative. Where an appeal is upheld, it is proposed that the costs will be offset against any outstanding invoice or refunded in full. Should the challenge prove unsuccessful, the HSE will recover their costs of the dispute from the duty holder. This again has caused disquiet, as it is likely to have the effect of deterring duty holders from disputing the recovery of fees.
There are real concerns about the new scheme: apart from the financial implications, the relationship between inspectors and duty holders is likely to be put under increased strain. Pressures that are absent now will be placed upon both the inspector and the inspected. It is unknown how this will impact on the HSE’s effectiveness. Also, it is known that there is already chronic under-reporting of RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) incidents and the introduction of FFI has the potential to exacerbate this situation further, reducing a crucial source of intelligence that informs all HSE strategy.
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Posted on Feb 14th, 2012 by Lyons Davidson