On 12th June 2023, the Health and Safety Executive (HSE) opened a consultation on proposed changes to Cost Recovery. The consultation and opportunity to respond will be open until the 4th September 2023.
Background
The HSE introduced its Fee For Intervention (FFI) scheme in October 2012, for its regulatory activity where organisations are found to be in contravention of the relevant statutory provisions in the Health and Safety and Work etc. Act 1974 and associated regulations. Under FFI, the HSE recovers its costs for work associated with the identification of 'material breaches' of the law. The time incurred by the Inspectors is charged to an organisation currently at an hourly rate of £166. The total amount of an invoice depends on the complexity of HSE's investigation, but we often see our clients being issued with invoices for total costs exceeding £10,000 where they have been found to be in material breach of multiple legal duties.
When presented with a FFI invoice, an organisation should give careful consideration as to whether it should be paid or challenged. For example, the organisation should think about how payment of the invoice might affect its business in the longer term. The HSE may rely on the fact that an organisation has paid an invoice and, in effect, accepted the material breach to support a prosecution for health and safety offences. Thought should therefore be given at an early stage as to the potential for enforcement action following the finding of a 'material breach' and tactics employed to minimise risk as much as possible.
The HSE has already expanded its cost recovery regime into specific 'major hazard' business sectors. They currently charge for their regulatory activity in relation to onshore chemicals through The Control of Major Hazards Regulations 2015 (COMAH) and The Offshore Installations (Safety Case) Regulations 2005 (both SCR05 and SCR2015) in cases where the duty holder requirements are made out. In these instances; it is not necessary for a 'material breach' to be found for the HSE to recover costs; the scheme is separate from FFI and covers a wider range of activities (including desk based examination of safety reports and work with linked establishments to avoid domino effect from major incidents). The scheme also covers areas where typical FFI would have come into play; such as investigations and enforcement following incidents.
The hourly rate for recoverable activity for Offshore Installations is £262 from April 2023 and £192 for COMAH. If the HSE reclaim costs under the expanded scheme the fees are not then duplicated under FFI.
What is proposed in the Consultation?
The HSE state that they are playing an important role in implementing the transition to net zero, and this will involve seeking to ensure that health and safety risks associated with relevant business activities are managed effectively during this period of growth.
The main proposal is that the HSE recover the full cost of all its regulatory activities in the following three sectors:
1) Oil, Gas and Chemicals Pipeline Systems
2) Onshore Oil, Gas and Geothermal Exploration and Production
3) Wind and Marine Energy (Renewables)
DAC Beachcroft Analysis
The HSE seeks to justify this move by highlighting how highly specialised and hazardous the work is, as well as the complex and novel health and safety challenges these specific industry sectors present. HSE also refers to the relevance of 'national importance' in terms of social and economic infrastructure as a reason why its full costs should be recoverable from these sectors. This goes beyond the need for the HSE to show a 'material breach' before reclaiming costs and further expands the existing non-breach cost reclaiming activity currently operated under COMAH and for Offshore Installations.
From the consultation briefing, it appears that the HSE is keen to ensure it remains an effective 'check and balance' to these new and evolving areas of energy production. For the HSE to effectively regulate, it requires an equality of resource by way of specialised staff to maintain regulatory proficiency in the field. The HSE outline an existing cost gap where these sectors already require it to conduct specific activities for which the cost cannot currently be recouped.
The proposed further widening of the scheme, so as not to require proof of a material breach in these sectors, is a concern in the context of the lack of substantive independence in the existing queries and dispute process; i.e. the HSE will still be marking their own homework in a situation where costs recovery is proposed to be even more open ended.
For organisations operating within these sectors, or for any others with an interest, a response can be made to the consultation by completing the online survey before the 4th September 2023.
For more information or advice, please contact a member of our Regulatory Team.
