What will 'better regulation' mean for 'low-risk' firms?
A new report on 'low-risk' enterprises is not the calamity that many of its detractors fear, argues Howard Fidderman.
On this page:
The great enforcement divide
Figure 1: Approximate inspection activity, by workplace type
Bridging the divide
Improving assistance
Dispensing with consultants
The need for mutual recognition
Fundamental problems remain unaddressed
Box 1: Low-risk limitations
Box 2: Myths and misperceptions
Box 3: Engaging insurers
Box 4: Distortion and exaggeration.
The government’s Better Regulation initiative is never short of controversy, with detractors – often including these pages – fearing it is little more than an Orwellian cover for business-friendly deregulation. The latest foray into the territory – a report1 from the Better Regulation Executive (BRE) on so-called “low-risk” businesses – has been dismissed with characteristic hostility by unions and safety campaigners. While some of their criticisms are justified, they focus on the report’s narrative rather than its recommendations. In particular, much of the stakeholder response and resulting media coverage has responded to the savings that employers might make – which are in reality paltry – rather than the benefits that they might accrue. In fact, if there is one major reservation about the report, it is that it does not go far enough, not that it is a blueprint for poorer standards.
There are, nevertheless, recommendations in this report – particularly on the illogicality of the division in enforcement responsibilities between the HSE and local authorities (LAs), improved guidance and advice for employers, mutual recognition of pre-qualification schemes, streamlined tendering, and pressure on insurers – that, if implemented in good faith, should do only good. There is also a clear rebuttal of the alleged “compensation culture” and a reminder that 90% of the UK’s workers harmed by work receive no damages at all. Together, these should put paid to this compensation myth once and for all. Poor media reporting, and its role in shaping misperceptions about health and safety, is also examined.
The report from the BRE, which is part of the Department for Business, Enterprise & Regulatory Reform (BERR), follows a November 2007 call for evidence on how the health and safety regulatory regime affects workplaces where the overall risk of injury or ill health “is relatively low”, with a focus on “low-risk smaller businesses”. The BRE report reflects the 120 responses received, 50 meetings held around Britain and specially commissioned research into the views of small and micro-businesses. Two things should be noted at the outset: the BRE’s use of “low risk” remains highly problematic, albeit much improved and explained (see box 1); and there has been a positive and conciliatory shift in the tone and approach of the BRE’s report when compared with its more strident call for evidence.
The great enforcement divide
The BRE notes that the enforcement split between the HSE and LAs – crudely, higher-risk and lower-risk respectively – has changed little since the early 1960s. Not surprisingly, LA-enforced premises generally have lower levels of injury and ill health, although they do contain higher-risk categories, such as warehouses, and jobs that have significant health, but not injury, risks – hairdressing, for example.
The BRE believes that the current split has advantages, allowing stability, the reflection of local influences, and joined-up LA enforcement and services to firms on occupational safety and health (OSH) and other issues. It also allows HSE inspectors to develop specialist skills and deliver consistent and high-quality inspection (which is particularly important in higher-risk premises).
But the existing division is also problematic because:
- there are more LA than HSE inspectors (1,100 and 657 full-time equivalent posts respectively in January 2008), even though they each cover roughly half of the UK’s jobs and premises;
- it limits the ability to target overall resources (HSE and LA) on workplaces where the risk of injury and ill health is highest. Instead, we have a situation in which LAs have three to four times more contact with workplaces where the relative risk of injury and ill health is lower than in the workplaces that the HSE is visiting less frequently (see figure 1). In 2006/07, for example, LA inspectors undertook 121,000 preventive inspections, compared with the HSE’s 36,000 (excluding high-hazard industries). It should be noted, however, that HSE inspections are often more complex and last longer, and that LAs can also include non-OSH issues in their inspections;
- HSE inspectors have less flexibility than LA inspectors in allocating their time between reactive and preventive inspections, not least because they have more serious incidents to investigate;
- determining the split can be complex – most infamously, perhaps, the division between coin and non-coin-operated launderettes – and there is, claims the BRE, “evidence that confusion about the allocation of a workplace can create delays in the smooth running of enforcement action”;
- local coordination between the HSE’s 20 regional offices and 400 LAs can be difficult due to different geographical boundaries;
- it leads to inconsistency in inspection activity, with wide variations between LAs; and
- it potentially limits the ability of the HSE to investigate serious incidents in LA-enforced premises unless its inspectors have warrants.
Bridging the divide
The BRE is not, of course, the first body to suspect that the HSE and LAs could deploy their resources more effectively. In 2004, for example, the HSC, HSE and LA representatives agreed a “statement of intent” that committed the bodies to work together and focus resources on certain priorities. This has led to: HSE–LA partnership managers; LA secondments to the HSE; trial transfers of HSE-enforced areas to LAs; joint HSE–LA inspections at local levels; expansion of the lead authority partnership scheme; “flexible warranting”, in which HSE and LA inspectors are given the power to inspect in each other’s areas; and national initiatives such as Moving Goods Safely.
These initiatives have, said the BRE, been a “success”, but their scale has mainly been small. New guidance under s.18 of the HSW Act, published earlier this year, builds on the partnership to increase the amount of joint enforcement and deliver joint training and a joint competency framework for inspectors. But there has not, the BRE emphasises, been a fundamental revision of the division itself – a move that many respondents to the call for evidence would support.
With so clear a diagnosis, the BRE slightly pulls its punches on a prescription that, while probably the strongest that it could get away with without ruffling too many HSE feathers, merely recommends that the HSE and LAs:
- launch pilots to test where an increase in working together – flexible warranting and joint inspections, for example – would be most effective; and
- consider – as part of their ongoing strategic review – revision of the split in enforcement.
In respect of the latter, the BRE notes that expanding the HSE’s control would reduce inconsistency but jar with the partnership approach and cause practical difficulties. Alternatively, an expanded role for LAs would reflect the 1972 Robens report that gave rise to the current system and, while issues around training and consistency would need addressing, “the potential benefits would be large: more enforcement and inspection activity, more closely linked to local knowledge, harnessed where it can be more effective in protecting workers and the public; more joined-up inspection and enforcement activity, including provision of more face-to-face advice to relatively higher-risk workplaces; and an ability for HSE to concentrate even more on specialist and expert activity where risks are highest.” One important question that the BRE does not address in the report, however, is whether it envisages high-risk enterprises (for whatever reason) in low-risk sectors transferring over to LA enforcement.
Improving assistance
The BRE accepts that the UK’s goal-setting regulatory regime has secured significant improvements and that, in terms of outcomes, the UK has “one of the most successful health and safety records in the world”. Although the system benefits the regulators and many of the regulated, it can, states the BRE, “give rise to challenges for individual firms, especially smaller ones”, which can struggle with carrying out a risk assessment. The reasons include:
- a lack of specific criteria to reassure firms of their compliance, which can increase misunderstanding of what is required;
- some firms don’t know how to find information, “making it harder for them to challenge the opinions of professed experts, especially those who are attempting to sell them health and safety training or other support services”;
- “a few employers” find some of the language describing their obligations confusing; and
- smaller firms are less likely to have in place management systems to keep significant records.
The BRE recognises that the HSE and LAs have done a lot – in addition to their normal work – to address these hindrances, including producing sample risk assessments and online checklists. Although business has welcomed the initiatives, the BRE claims its consultation suggests there is scope to improve “knowledge and understanding of them, especially among smaller firms”. The BRE therefore recommends improving the provision of telephone and web-based support for businesses where the risk of injury or ill health is low, drawing on Scotland’s Healthy Working Lives initiative. This offers Scottish small and medium-sized enterprises (SMEs) a free and confidential OSH service, with simple, tailored, single-page guidance on specific issues, downloadable forms and interactive risk assessments. The initiative, according to the BRE, has reached 8%–9% of Scotland’s 277,000 businesses, with significantly increased penetration in the past year: 16,500 model forms and documents were downloaded in February 2008 alone. The BRE believes that similar penetration in England and Wales would treble the distribution of information such as example risk assessments.
The BRE also wants to see the HSE:
- train operators on its Infoline to provide more specific, tailored support and advice;
- promote the support it provides to start-up businesses through first points of contact, such as Company House and trade associations;
- review its guidance regularly and consider whether more should be free to download; and
- consider revising the Management of Health and Safety at Work Regulations (MHSW) to clarify when businesses should or should not seek paid external support.
Dispensing with consultants
“Paid external support” is clearly an issue that preoccupies the BRE, which notes that “employers are increasingly turning to trade and professional bodies and business networking bodies – some with specific health and safety consultancy arms – as key sources of health and safety advice.” Other sources include business consultants, health and safety professionals and trade unions.
The BRE estimates there may be more than 1,500 specialist OSH consultancies in the UK. The percentages of employers paying for OSH support range from under 20% to over 70%, depending on size and sector, and the BRE believes the OSH business support market “may be approaching £1 billion”, with SMEs an important growth area. Much of the support tends to focus on management systems rather than on more specialist or technical support.
The BRE accepts that there is a role for paid consultants – for example, those with a detailed sector or specialist knowledge or those able to handle issues outside of a firm’s normal needs. But the evidence indicates that firms’ experiences of consultants are “variable”, with some employers paying for support they could have handled in-house or taking expensive actions that the law did not require. The BRE believes that many employers “struggle to act as informed consumers of consultancy support” because they believe the cost of an in-house approach – and consequently the benefits of outside help – are greater than they actually are. This is particularly the case among smaller employers, which may not know what the law requires or what help is available. The BRE estimates that if 10%–20% of the enterprises in its four low-risk sectors turned to the HSE, LAs and other government support instead of paying for a day’s basic OSH consultancy, they would save between £70 million and £140 million a year (this assumes that 40% of those enterprises currently pay for such support, and at £350 a day).
The need for mutual recognition
The BRE notes that third parties such as procurers, insurers (see box 3) and training providers “are increasingly imposing their own [OSH] requirements on businesses” through assessments, demonstration of compliance and pre-qualification schemes. “For many of the employers that face them,” notes the BRE, “these requirements have become a significant source of health and safety bureaucracy.”
In theory, firms should benefit from such schemes. The BRE states that: “Instead of having to go through the same (or a very similar) process every time they bid for work, firms can point to their membership of a scheme to demonstrate that they meet the health and safety standards required.” But the BRE notes work carried out by the Royal Society for the Prevention of Accidents (RoSPA)2 that found “multiple different pre-qualification schemes covering different industry sectors and client groups that rarely recognise each other”. This, the BRE points out, “means a business may be able to show the required health and safety standards under one scheme but there is generally no recognition of this under the criteria of a second scheme. The result is firms paying to submit the same or similar supporting evidence on different forms to different schemes.”
The BRE believes that “the assessment process undertaken by pre-qualification schemes has the potential to drive up standards of health and safety.” But it points out that such schemes can also serve as a barrier to some firms, especially smaller ones, bidding for work. Most of the schemes charge fees ranging from £100 to well over £500, and require significant amounts of supporting documentation; moreover, the process can lead to the application of different standards. “The burden pre-qualification schemes generate for firms could be eased by the development of mutual recognition and a more common approach between schemes. This would remove unnecessary bureaucracy for firms while also helping them to improve workplace health and safety,” the BRE argues.
The BRE recommends that an ongoing BERR-commissioned review of the barriers to SMEs winning government contracts consider the extent to which OSH pre-qualification schemes act as a barrier. The review is led by Anne Glover, CEO of Amadeus Capital Partners. Further, “public sector procurers should have a presumption that SME bidders for their contracts who are members of any health and safety pre-qualification scheme meet their requirements. Exceptions should be limited to cases where the contract clearly requires an assessment of standards only available from a specific pre-qualification scheme.” Regrettably, the BRE has not extended a similar logic to the private sector, although RoSPA is currently investigating precisely this possibility through mutually accepted core criteria.
In a similar vein, the BRE recommends that the Local Better Regulation Office (LBRO), HSE and the Local Authorities Coordinators of Regulatory Services design a single scheme to allow small firms to demonstrate compliance in OSH-related areas, including food safety, fire safety and trading standards. It also recommends that the LBRO work with LAs to come up with benefits for firms that comply with the scheme.
Fundamental problems remain unaddressed
The hostility that the BRE’s report engendered in groups campaigning for workers’ health and safety is hardly surprising given that BERR’s “headline” statement launching the report was: “Small businesses could save up to £300 million a year with better advice and support on health and safety.” Thereafter, BERR talked about red tape and unnecessary safety measures, but did next to nothing to publicise the more interesting aspects of the report.
BERR’s decision to focus on savings might have been a political necessity, but it has put what is a surprisingly constructive report on a back footing. Even the financial “savings” themselves represent little more than a drop in the ocean for conscientious employers: the claim, for example, that reducing the time it takes enterprises in relatively low-risk sectors to comply with MHSW administrative requirements from 20 to 15 hours a year will save more than £150 million annually sounds impressive at first. But will a firm really notice the £90 saving or the five hours released over a year?
Little wonder, then, that a “disappointed” TUC general secretary, Brendan Barber, said that the report did “nothing to address the appalling health and safety record of Britain’s small businesses”. The report, he pointed out, would have been an ideal opportunity to argue for “greater resources” for inspectors to visit SMEs, which get a visit on average of “once every 20 years”.
While many of the recommendations should help willing employers address health and safety issues at work, the BRE has not addressed some of the more significant difficulties that it identifies. In particular, given it accepts that goal-setting legislation can be a problem for small firms, it does not explore how this might be redressed – admittedly a dangerous and problematic area to explore – beyond improved assistance. And, as with its call for evidence, it still gives too much weight to anecdotal and often confused comments: it beggars belief that an employer that runs one of the BRE’s so-called “low-risk” businesses, with all that that involves, nevertheless becomes a lost child when faced with conducting a simple risk assessment to ensure its employees’ health and safety.
Finally, the BRE does not address one of the most fundamental of problems, which is not that too many firms are doing too much at the insistence of greedy or misinformed consultants, but that too many firms do nothing at all.
1 BERR (August 2008), Improving outcomes from health and safety (external website). Responses to the call for evidence (external website).
2 Fidderman H (November 2007), Core criteria in pre-qualification schemes (on RoSPA website).
Howard Fidderman is a freelance journalist and editor of HSB.
Box 1: Low-risk limitations The BRE defines four sectors as “relatively low risk, based on injury and ill health outcomes”: finance and business; hotels and restaurants; wholesale, retail and repair; and education. The four contain two million enterprises, 12 million workers and 45% of all small businesses. The use of the term “low risk” and its conflation with small and medium-sized enterprises is highly problematic and, not surprisingly, provoked criticism – not least in HSB – when the BRE issued its call for evidence. The resulting report shows that the BRE has tried to address these concerns, with 14 of the report’s 92 pages devoted to justifying the use and derivation of “low risk”. The BRE has analysed data on injury, ill health, enforcement notices and prosecutions. It even notes that the “worker perception” in two of the sectors – retail and hotels – is that employers’ health and safety arrangements are below average. Despite these efforts, the use and determination of “low-risk” sectors remains controversial, not least the BRE’s admission that when it refers to low risk, it is “sometimes only considering the likelihood of harm, and not severity”. In the end, as the BRE itself admits, the definition is a “broad brush”, with high-risk categories within the low-risk sectors. While it is easy to pick holes in the BRE’s use of “low risk”, the refinements and qualifications since the call for evidence give some statistical basis to the report’s observations and recommendations. Much work remains to be done, however, before such determinations can be used for shaping regulatory policy. |
Box 2: Myths and misperceptions The BRE found that while there is strong support for the objective at the heart of health and safety regulation, business owners are “frequently critical”, with some of the small firms “extremely negative”, about health and safety in general terms. Conversely, there is less criticism of individual aspects of health and safety regulation, and evidence that those who have had contact with regulators are less likely to be negative. The BRE cautions, however, that the “confusion” apparent in some of the responses to its call for evidence on what the HSE is and is not responsible for makes the responses difficult to interpret. For example, some companies appear to lay concerns about disability discrimination, food hygiene and trading standards at the altar of health and safety. But the BRE insists that, far from ignoring such comments, it should treat them as “important, because they show how the actions of organisations and individuals outside of the control of the HSE can influence business views of health and safety”. To its credit, the BRE emphasises that there has been no significant change in the regime since the MHSW Regulations were first introduced in 1992, with the quantity of health and safety legislation almost halving – 12 Acts and 175 sets of Regulations remain. (This should not, however, be interpreted as a halving of what employers have to do: much of what has been repealed comprised outdated and outmoded legislation that had sat on the shelves for decades gathering dust – Orders from the early 20th century, for example, on lampshade manufacture and homeworking.) The past 18 months have also seen the HSE discontinue 60% of the forms it previously required of employers. Part of the employers’ negative view stems, the BRE believes, from new legislation on issues that are not the responsibility of the HSE, including fire, smoking and food safety (although it should be noted that the HSE does have some responsibilities in some of these areas, and that local authorities have clear enforcement duties in many, in addition to health and safety). |
Box 3: Engaging insurers The BRE report notes, like so many reviews before it, that insurers and their brokers offer a route for influencing employers, although it accepts that insurers are unlikely to match premiums to risk management or to visit a firm if the annual premium is less than £10,000. This means that “for small firms with good records, it can be very frustrating to be assessed alongside other firms in their industry with less good records when insurance prices are set.” The BRE therefore recommends that:
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Box 4: Distortion and exaggeration The BRE devotes one of the report’s four chapters to the media, noting that there are around 48,000 articles a year that refer to health and safety in the UK, with three times as much coverage as for food safety and red tape combined. Local press and radio coverage is likely to be less “trivial” than national press coverage. “Nonetheless, journalists often portray health and safety in a trivial way or as either unnecessarily bureaucratic or overly complicated, especially in written articles in the national press,” argues the BRE. Some “exaggerate or appear to distort facts”, often using OSH “as a convenient tagline to convey arguments on broader issues like levels of bureaucracy or the burden of regulation”. The report notes that international coverage is better. While the BRE accepts that it is hard to demonstrate a causal link between media coverage of OSH and the behaviour of companies, it believes that media coverage is important because:
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