Fines as a deterrent
42. The importance of the level of fine becomes even
more apparent when applied to a corporate body if, as we have
been told, many businesses currently see the payment of fines
as the cheaper option to full environmental compliance, and even
set aside funds for this purpose. The Agency was clear that
this was a problem when it told us that, "the level of fines
really is not sufficient to make much of an impact on the companies."[42]
This sentiment was echoed by the Environmental Industries Commission
in its written evidence when it said,
"Low fines send the wrong message in trying
to create a culture where environmental compliance is taken seriously
by industry. The experience of EIC members is that companies
too often find it more economical to pay a fine than to properly
address their environmental performance […] current fines
for environmental offences are both too low and inconsistent […]
they need to be dramatically raised to have a real economic impact
and deter companies from polluting the environment".[43]
43. The disparity between the fines awarded, and
the turnover of some of the companies involved, was starkly demonstrated
by Thames and Anglian Water. Thames Water told us that in 2003
it accrued fines totalling approximately £70,000 but its
turnover was in the region of £1.1 billion. Similarly, Anglian
Water estimated that it had received fines of approximately £50,000
in 2003 and had a turn-over of some £750 million.[44]
These sums of money are as nothing when compared to the profits
made by these companies. They also enjoy a monopoly in that their
customers cannot vote with their feet and move to another supplier.
44. As we have already seen, the Ministry of Sound
was very clear on the reasons why it no longer used fly-posting
to promote its record releases: it was not because of fear of
prosecution or a hefty fine. As Mr Holman told us, it was "not
because of pressure from local authorities, but because it was
not the most effective way of getting the message across to the
public".[45] This
statement was qualified later in the evidence session when Mr
Holman conceded that the company had "cut back on our activity
in fly-posting because it has become a sensitive issue with the
local authorities."[46]
Asked if fines were a deterrent in his company's particular circumstances
the answer was unequivocally no. Mr Holman went on to say that,
"if there was a penalty regime that was being implemented
quite strongly it would be a bigger incentive not to fly-post".[47]
Mr Holman was then asked whether, as a company director, he was
concerned about the possible use against him or other senior members
of the company of the lifestyle provisions of the Proceeds of
Crime Act 2002, whereby all of an offender's assets may be regarded
as being the benefits of criminal activity. He thought this was
a "fairly extreme penalty" and a "heavy reaction…only
appropriate in cases of continuous failure to observe a more measured
response".[48]
45. The Ministry of Sound is a perfect, but by no
means unique, example of why, for certain companies, the current
system and level of fines simply do not and will never work.
It is sanguine about being contacted by the local council and
being asked to remove illegal posters—it will, it says,
act within 48 hours to get the offending articles removed. The
current level of fine offers no greater threat and is without
doubt insignificant to a business of its size. For the Ministry
of Sound, and for many other companies, the bottom line is the
bottom line, and, unless their profit margin is seriously compromised,
then such companies are unlikely to take action to stop their
illegal activity. When asked whether the company felt under any
pressure to comply with environmental regulations, Mr Holman told
us that the pressures were not very great:
"We are not a public company. It is not that
Ministry of Sound is not high profile but we do not have quite
the sensitivity of large companies with shareholders and there
are not any City pressure groups. Clearly, we do not like paying
fines and we always try to avoid paying fines if we can. If we
are given 48 hours to get the posters down we get them down.
Clearly, if we were being hit on the bottom line and our profit
was being seriously affected by draconian penalties we might react
more rapidly, apart from banning the whole thing, which is presumably
where we might end up."[49]
For those companies and organisations who are
not dissuaded from their illegal activity by the threat of detection,
prosecution and sentencing, whether that be a financial penalty
or, in a very few and extreme cases, a custodial sentence, other
means have to be found to ensure their compliance with environmental
laws and regulations.
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