Memorandum submitted by CBI
EXECUTIVE SUMMARY
1. The CBI represents a wide cross-section
of UK business, significant elements of which are directly regulated
by the Environment Agency (EA).
2. The EA has made considerable improvements
in efficiency, with most permit application times being reduced
and cost efficiency savings being passed on in the annual charging
scheme.
3. Greater clarity is needed as to how the
EA balances and funds its activities, and how it plans to meet
changing demands in the future.
4. The EA needs to improve its advice and
decision making so that it can deliver in a timely manner that
allows for adequate business planning to meet requirements.
5. For business there is a lack of distinction
between the EA and the Department for Environment, Food and Rural
Affairs (Defra) as to which organisation is responsible for developing
policy. The CBI believes that policy making should be distinct
from enforcement and that Defra should be responsible for policy,
and the EA for enforcement.
6. CBI members have reported inconsistencies
in opinions and actions at a local level within the EA. There
are also inconsistencies between central EA policy opinions and
those of staff at a local level.
7. The EA has introduced improved communication
initiatives such as the NetRegs project providing sector guidance.
Many smaller firms would like the EA to provide them with advice,
but are concerned that advice will lead to enforcement actions.
We would like the EA to be able to distinguish between advice
and enforcement.
8. The EA has been identified in the Hampton
review as an example of a risk-based enforcer. Whilst the EA has
adopted some risk-based approaches these appear to be having little
effect in practice.
9. A focus on environmental outcomes as
opposed to regulatory and legal procedures would help the EA to
maximise its resource use in the future.
10. Business would like to be more involved
in the EA's future strategy, for example through better representation
on the board.
CBI EVIDENCE
11. The Confederation of British Industry
(CBI) is the national body representing the UK business community.
It is an independent, non-party political organisation funded
entirely by its members in industry and commerce and speaks for
some 240,000 businesses that together employ around a third of
the UK private sector workforce. Many of our members are regulated
directly by the Environment Agency.
12. We welcome this opportunity to provide
evidence on the functioning of the Environment Agency (EA) and
have drawn on our members' experience in putting together our
comments.
FUNDING, EFFICIENCY
AND BALANCE
OF EFFORT
13. The EA has committed to improving its
efficiency and this has been evident with cost savings passed
on in the annual charging review. In the proposed charges for
2006-07, for example, the EA's predicted cost increase of 4.8%
is reduced by efficiency savings of 2.0% to a total overall increase
of 2.8%. We still have questions regarding the consistency of
charging between regulators for standard charges such as mailings
and phone calls. For example, for processes within the automotive
sector the annual charges associated with a Pollution Prevention
and Control (PPC) A1 process have been estimated by one firm to
be around £900 for the Local Authority (LA) annual charges
and £19,000 for the EA. This is a huge variation in what
should be a standard approach to a piece of legislation common
to the LA and EA.
14. The EA has worked hard to reduce the
amount of time that it takes to deal with some permit applications,
especially those under PPC. However, there are instances where
the EA does not reach a decision in time to allow businesses to
plan and budget for any associated costs accurately. For example,
pilot R&D plants in the pharmaceutical sector were thought
to have an exemption from sections of IPPC, but the EA has yet
to clarify the position. Pharmaceutical companies have to apply
for PPC permits in the first quarter of 2006, meaning that firms
are having to prepare applications assuming that the pilot plants
are to be covered by the permit. This is the type of issue that
we would like to see the EA clarify well before permit application
deadlines.
15. The EA is funded through a combination
of Grant in Aid from the government, and the charges that it makes
for regulating selected activities. Grant in aid is reducing while
the Agency's remit continues to expand (most recently to cover
responsibilities under the Waste Electrical and Electronic Equipment
Directive (WEEE))—leading the Agency to recover more of
its costs through charges.
16. However, this approach is inappropriate
for a number of the activities that companies see as core EA business,
for example the EA recently requested business money (through
the Business Resource Efficiency and Waste Programme (BREW)) for
policing of fly-tipping. The EA's charging regime is meant to
reflect the costs of regulating companies for specific activities
therefore it is not consistent to use revenue raised from business
for the costs of policing unregulated offenders.
17. The latest EA consultation on increased
charging for contentious licences is an example of where this
trend is heading. Whether or not a licence is contentious has
little to do with the operator, more often than not it is to do
with the location of the operations, rather than the operational
history of the site. In addition to the proposed increases in
charges, the operator also incurs costs, such as administrative
and consultancy costs, in dealing with contentious licences and
other requests for information. In the current consultation there
is no clear definition of what constitutes a contentious licence,
or a process as to how decisions will be made. If the EA is to
decide on whether or not a licence is contentious there is an
obvious financial incentive for it to declare the application
contentious and levy a higher charge. There must be a balance
between the need for consultation and involvement and business'
liabilities in this area.
18. In order to achieve greater transparency
in how the EA prioritises and finances its activities, we would
like the EA to make a clear statement as to how it will resource
its enforcement and policing activities now and in the future.
19. The government has pledged to improve
regulatory efficiency and to minimise red tape. If as a result
of this there are going to be fewer and simpler regulations in
the environmental area then in the future the EA should need less
resource to fulfil its existing functions. This should be addressed
in the EA's corporate strategy.
20. For complex processes, industry often
invests a great deal of time in helping the EA inspector to understand
the details of the process. It is incredibly frustrating for companies
who have done this when the inspector moves on and they have to
devote a similar effort to their replacement. The EA could help
to minimise additional costs to business in this area by improving
their corporate knowledge retention.
INTERACTION WITH
OTHER ORGANISATIONS
21. The EA does not act in isolation. Many
of its responsibilities require interaction with other organisations.
We view the EA's relationship with Defra as the most important
to business. This is a complex relationship and there are a number
of points to comment on.
22. There often appears to be tension between
the EA and Defra as to which one is responsible for developing
policy, this has increased since the "BRITE" reorganisation
of the EA's structure which put in place more policy functions
in the EA than before. This tension is exposed most often when
regulations are delayed, meaning that the EA has to develop guidance
without the reference to the regulations. Whilst businesses are
keen to understand their responsibilities, lack of communication
between Defra and the EA can lead to guidance going into more
details than the requirements of the regulations. The CBI believes
that Defra should be the lead on determining policy, with the
EA contributing its expertise through Defra as required. Policy
making and enforcement should be distinct to provide an appropriate
system of checks and balances.
23. The other side of this issue is where
Defra does not involve the EA in discussions early enough, thereby
potentially missing out on some of the practicalities of regulatory
enforcement. For example, we have requested that the EA join the
Defra stakeholder consultation group on the transposition of the
Environmental Liability Directive to advise on key business concerns
such as the permit defence, but this has not happened so far.
24. The EA only covers England and Wales,
but it is important that it maintains strong relations with the
Scottish Environmental Protection Agency (SEPA) and the Department
of Environment in Northern Ireland. This is especially important
where the EA is looking to take on a UK-wide role, such as their
bid with the Health and Safety Executive (HSE) to be the UK competent
authority for REACH. It is also crucial that decisions which affect
UK-wide markets are consistent to avoid distortions.
25. Local Authorities are responsible for
regulating a number of environmental areas, such as Part B processes
under PPC (usually process where air quality is the main environmental
area of concern). The relationship between the EA and Local Authorities
seems to vary. There have been instances where the EA appears
to want to take over some LA competencies, for example at sites
where there are both Part A (process regulated by the EA) and
Part B processes under PPC. If this goes ahead, this could mean
that businesses have to submit a new application and bear the
associated costs for no environmental benefit.
26. In the future, under regimes such as
the Environmental Liability Directive, there may be cases where
a number of regulators are involved, for example, the EA, LA and
English Nature. We would like to see a transparent process established
for how regulators interact and ensure that they take a consistent
view.
INTERACTION WITH
BUSINESS
27. At a national level the EA has consulted
with business regularly. In the past this sometimes has been perceived
as a "tickbox" exercise to show that consultation has
occurred, but this does seem to be changing. For example, in the
past year the CBI and EA have established a forum where CBI members
can raise their concerns directly with the EA. Whilst this and
other initiatives have proved to be useful, we would still like
to see the EA discuss more of the key substance involved in implementing
environmental regulation, as well as the high level principles.
The EA needs to cascade improved consultation and communication
practices and culture throughout the organisation.
28. The EA's annual "Spotlight on Business"
report which reports on the environmental performance on business
has improved significantly in recent years. We feel that this
report is more balanced and reflects the environmental priorities
that the EA should be addressing.
29. EA consultation at a national level
can be selective. For example, the recently launched chemical
sector plan covers much of the chemicals supply and use chain,
but consultation on constructing the plan outside the upstream
chemicals sector has been limited. Despite the launch of the plan,
which could have significant benefits for businesses in the sector,
many stakeholders are still unaware that the plan covers them,
and that they currently have an opportunity to consult. The EA
could make more use of national associations and frameworks to
improve their national communications.
30. Regional REPACs have been in place for
a long time where the EA consults on regional issues with a range
of stakeholders. We have heard mixed reviews from our members
as to the effectiveness of these groups and lack of confidence
that their recommendations are being taken on board. We would
like to see a clearer structure of how the REPAC's views are fed
into the EA's forward strategy and approach.
31. The local level is where the greatest
variation in EA interaction is reported. The quality and experience
of local inspectors varies considerably, as do their opinions
on environmental issues. The HSE operates a "single point
of contact" for firms for all enquiries. This approach could
help the EA to deal with business enquiries more efficiently and
consistently.
ENFORCEMENT
32. The EA has to balance its role as an
enforcer, with its other function as an adviser on environmental
issues. It has tried to develop this dual role, for example through
the development of the NetRegs website which provides a summary
of applicable legislation on a sector by sector basis. Many companies,
especially smaller firms with fewer dedicated resources, would
like the EA to be able to advise them more. However, many are
put off asking for advice as they are concerned that a visit from
an inspector to give advice may lead to enforcement actions. We
support strong and consistent enforcement. This will only be derived
from clear policies that are given ample time to be communicated
and digested by the organisations involved. We would like the
EA to adopt a system that distinguishes enforcement and advisory
activities where possible.
33. There are still issues around inconsistent
opinions from the Agency at local levels, and between local and
central functions, such as inspectors and policy staff. These
inconsistencies do not help business or the EA, making it tempting
for business to "shop around" for the answer that suits
them best, but leaving them with a degree of uncertainty that
decisions will be upheld. Initiatives that the EA has put in place
such as strategic permiting groups have helped to address this
problem to some extent, but we think that EA staff could benefit
from further training to improve consistency and that the EA's
internal communication and performance auditing could be improved.
MODERN REGULATION
34. We welcome the EA's commitment to the
modern and better regulation initiatives. In the Hampton report
on enforcement they were identified as a good practice example
of risk-based regulation. Whilst the EP OPRA scheme does have
a risk basis, CBI members report that this currently does not
extend to the EA's enforcement activities. Currently sites can
expect to receive roughly the same number of inspections as in
the past, whether or not they have a good compliance record or
not. The EA must continue to extend their risk based approach
to inspection and enforcement.
35. The EA is currently reviewing its permiting
system under the Environmental Permiting Programme (EPP). This
appears to be a good initiative which will make the permiting
process simpler and hopefully cheaper. We would like to see the
EA develop the EPP to promote the widest possible take-up by business.
In order to do this, there must be a strong business case underlying
the proposals to allow businesses to justify making the change.
36. In addressing the modern regulation
agenda, the EA will need to change the current process approach
to issues, which in many cases does not benefit the environment,
and focus on environmental outcomes. For example, a company operating
a plant which generates power from chicken bedding material and
sells the ash produced in the process as fertiliser must now treat
this ash as waste. This means that each farm that buys the fertiliser
must be licensed as a waste disposal site. This not only makes
the sale of the fertiliser and possibly the operation of the plant
uneconomic, but also means that perfectly usable fertiliser will
be disposed of to landfill and new fertiliser products bought
in its place. This is not the best economic or environmental option.
We would like to see the EA's commitment to become more outcome
focussed delivered in practice.
CORPORATE STRATEGY
37. We would like to see better representation
of business on the Environment Agency board. Businesses have been
keen to become involved, but in the past, applications from senior
business representatives have been turned down with no explanation.
As businesses are among the EA's key customers and a major source
of its funding, they should have a greater say than currently
in the strategic management of the EA. This will help the EA to
focus on delivering its key environmental objectives in ways which
are more sensitive to the ways in which businesses operate.
38. Following the Hampton review on enforcement,
the Environment Agency seems to be keen to expand its remit through
consolidation with other enforcers, such as the Pesticides Directorate
and the Drinking Water Inspectorate. Care needs to be taken to
ensure that the EA does not "spread itself too thinly"
and in the process undermine its key competencies.
CBI
December 2005
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