Can the HSE's cost recovery scheme ever be self sufficient?
On 6th April 2019, the Health and Safety Executive (HSE) increased their Fee for Intervention, otherwise known as FFI, to £154 per hour. The reasoning behind this 20% upturn is to ensure that the FFI scheme is a self-funding model. But first, a little background.
What actually is FFI?
In March 2011, the government launched a new approach for reforming the health and safety system in Britain. This led to measures to shift the cost of health and safety regulation from the public to the businesses themselves. From the 1st October 2012, the cost recovery scheme known as fee for intervention came into effect.
Who does it apply to?
FFI only applies to duty holders where the HSE is the enforcing authority such as construction, factories, educational premises and emergency services to name a few. So, if your business is inspected by another Health & Safety regulator, like the Environmental Health Officer, you won’t face any FFI fees. However, fines would still be applicable upon conviction by other enforcing authorities.
What does it apply to?
FFI is fee imposed by the HSE to cover any costs incurred when an inspector finds a material breach within a business.
Material breaches fall under four headings:
Why the fee increase?
A 2011 impact assessment that accompanied the HSE consultation on FFI estimated that the scheme would recover up to £43.6m from non-compliant businesses. Therefore, when FFI was launched in 2012 the hourly fee was set at £124. More than enough to pay for the costs of operating the scheme, or so they thought.
As we all know from managing personal finances, there is a very simple algebra equation. If A is income and B is outgoing then A needs to be more than B in order to be sustainable. If its not then we can increase A (Through getting highly paid promotions or winning the lottery) and decrease B (Like shopping at a cheaper supermarket or going on two holidays per year).
However, if increasing A meant that B also increases exponentially then that would almost certainly lead to a potentially algebraic equation we wouldn’t dare to even attempt to put down on paper.
We’ll just try to explain in plain English instead.
For the first six months up to April 2013 the scheme succeeded in its goal of self-sufficiency although slightly underperforming on revenue. This was no doubt explained by the pains of implementation.
From then on, the shape of the finances began to slightly resemble a pear. By April 2016, the income from the scheme stood at a meagre £14.7m. With staff and operating costs of the scheme totalling £17.4m, the shortfall stood at a whopping £2.7m.
So, by 2016 the fee had increased to £129 per hour, a rise of 4%. This increase was successful in reducing the deficit, to just £1.9m by 2018. The equivalent of attempting to reduce your energy bill by taking the bulb out the light on the inside of the fridge.
Hence the 20% hike to £154 per hour.
So, the big question is, will this finally make the scheme self-funded?
As FFI is a cost recovery scheme, the treasury places a “cap” on the fees generated that can be retained by the HSE to pay for its own costs. So even if the costs recovered by the FFI scheme far exceeded the cap, the scheme would still run at a loss should the operating costs also exceed the cap.
This is the equivalent of giving a large percentage of your monthly salary to charity, only then to borrow the money to pay your living costs. It’s totally unsustainable and eventually everybody would lose out.
Applying the 4% increase in 2016 would not have made the income generated by the scheme in 2015–16 match its costs. To cover its operating costs, the HSE would have had to increase the hourly fee by around 18% to £147 per hour. Now they have reached that magic number, except its three years later with more costs and inflation to take into account.
This is all before you take into account the fact that central government funding for the HSE has halved over the last ten years leaving them a little bit strapped for cash through no fault of their own.
As it stands, the hope is FFI should start to cover its own costs and maybe leave a little bit of money to go back into the treasury. But with funding issues elsewhere I wouldn’t rule out another substantial increase in the coming years.
Posted on: July 2nd, 2019 by