It is now three years since the Health and Safety Executive introduced its controversial Fee for Intervention (FFI) scheme. Brought in following budget cuts made by the coalition government, the HSE went about implementing the new cost recovery regime in October 2012.

FFI has been designed to charge businesses an hourly rate of £124 if a contravention of health and safety law, or ‘material breach’, is discovered during inspections. Such breaches can range from inadequate machine guarding to not providing hot and cold running water for workers on site. The fee is then calculated based on the time it takes HSE to identify and conclude its regulatory action, including administrative work. Companies found to be complying with regulations are not charged for the time. 

The introduction of FFI was met with concern by industry. In particular, organisations feared that it would be used to generate revenue, with inspectors pressured to issue more frequent or higher fees due to money-making targets. 

Mike Calcutt, head of unit for the HSE’s Field Operations Directorate, is quick to explain that inspectors do not have targets for income generation. He says: “FFI will not generate a profit. It will only recover the costs of HSE’s regulation of those who fail to comply with the law. In addition, if HSE recovers more costs than an agreed level, it will go to the Treasury. The agreed levels are capped at £10 million in 2012-13,
£17 million in £2013-14 and £23 million in 2014-15.”

Terry Woolmer, head of health and safety at EEF, the manufacturers’ organisation, says that, despite this, the fear of fees being used to generate revenue is one that many in industry still express. However, while the initial reaction to the fee scheme was largely negative, he believes the dust has slightly settled and people do generally understand the reasoning behind these sort of “pollute to pay” systems used by the Environment Agency that the FFI is modelled on. “The argument was that the Environment Agency had had this similar type of scheme in operation for many years and it was right that the HSE should follow,” says Woolmer.

Cost breakdown

But just how much money has been raised by the fees so far? Looking at a breakdown of FFI invoices by value, invoices issued during the last five months of the financial year, from October 2012 to March 2013, came to more than £2.5 million. The whole of the second financial year, 2013-14, saw the total value of invoices reach just over £9.5 million, and this financial year has already reached more than £10.5 million. While this looks like a healthy stream of revenue, the average costs of single FFI invoices fall consistently in the £500-£600 mark, so inspectors have not been sticking organisations with particularly large fees.

Woolmer says that these smaller fees has meant that most organisations don’t appeal and simply accept it as another small business cost, or inconvenience. “The attitude is it is easier to pay it, rather than appeal against the invoice,” he adds. However, there is evidence that the size of fees is slowly creeping up, with invoices between £1,000 and £10,000 growing from 140 issued between October and November 2012 to 366 between December 2014 and January 2015.  

One of the biggest concerns, more than the fees themselves, says Woolmer, has been that FFI would change the nature of the relationship that had existed between the HSE and industry. “It had very much been a situation where companies felt they could ask for advice of the HSE without fear of being followed up with enforcement action,” he says. “In the same way, when an inspector visited they could have a discussion about what needs to be put right and by what date and the company would get on and do it.” Since the changes introduced by FFI, members of the EEF have told Woolmer they feel less inclined to co-operate or actively invite HSE onto the premises. “There is a lot of negative feeling about it,” he says. 

Discretion preferred

In addition, according to feedback EEF received from Prospect, the union that represents HSE staff, inspectors were reluctant to implement FFI. Instead, they preferred to apply a discretionary approach, resorting to fines only when recommendations are not followed. This, says Woolmer, may explain why revenue from the scheme has not been as high as expected.  

In contrast to these reports, an independent panel review of FFI last June found that it has not impacted significantly on the relations with businesses. The review, chaired by Alan Harding, professor of public policy at Liverpool University, included representatives of the GMB trade union, the Federation of Small Businesses and the Department for Work and Pensions. They concluded that initial concerns voiced about FFI had not manifested themselves to a serious extent and “generally, inspectors and dutyholders continue to work together in improving health and safety management”.

Calcutt says the findings show that there is an appreciation and respect for HSE and its inspectors. “Inspectors were perceived to be helpful and offering a fresh perspective on how to improve health and safety,” he says. However, he does admit that some participants who have had a material breach did perceive that HSE’s remit had changed from “being solely focused on improving health and safety to also generating revenue”.

The report acknowledges that while FFI has not necessarily been popular with some inspectors and dutyholders, they still “embedded the scheme and applied it consistently”.

The panel’s report also notes that organisations have said they realise the potential financial implications “may encourage employers to comply and be more proactive in managing health and safety”. But has FFI really made a positive impact on health and safety compliance?

Incentive to improve

The review concluded that its success in this area was difficult to judge given the short time the scheme has been running. It did, however, say there is “some evidence” that FFI provides an incentive to improve health and safety management and consistent application “produces a level playing field” among companies found to be in a material breach so far.

Some organisations may disagree with the “level playing” field comment, with Woolmer explaining that some feel their sector has been unfairly targeted. Not only does manufacturing receive the highest number of invoices compared to the extractive, agriculture and construction sectors, but it often gets stuck with the highest bills. Invoice values range between £300,000 and £700,000 generated in a two-month “run”. This is closely followed by the construction sector, with just slightly lower level of fees in each run, with the highest peaking at just over £650,000. In contrast, fees for the extractive utilities sector range between £20,000 and £37,000 per run. 

Calcutt maintains that the general approach to targeting of HSE interventions “concentrates its work where the risks are likely to be highest and where it will have the greatest impact”. However, Woolmer argues, if the HSE were targeting the industries with the greatest risk, then you would expect them to be looking more closely at agriculture, construction and extractive industries. 

Despite the voices of dissent speaking out against FFI, and a call from the triennial review of the scheme, led by EEF chair Martin Temple, for HSE to explore alternative funding mechanisms, the overall message is pretty clear: FFI works and is here to stay.

Calcutt says the HSE will continue to monitor the performance of FFI. “The independent review panel was clear that FFI is meeting its policy objective of shifting the cost from the taxpayer to those not complying with health and safety law. It was also very clear that potential concerns raised by the triennial review were being minimised because of the professional and consistent approach of our inspectors.”