House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Seventh Report

The Agency's roles and activities

Managing the Agency's various roles and responsibilities

12. The Agency's various responsibilities and functions fall under five overarching "strategic roles", as outlined in the Agency's Corporate strategy 2002-07, Making it happen.[12] The Agency describes its five strategic roles as:

Efficient Operator - we take direct action locally to safeguard and improve the environment, for example by building flood defences to reduce the risk of flooding to vulnerable homes and businesses, managing navigation on our major rivers and looking after wildlife on sites we own.
Modern Regulator - we deliver for the environment by taking a risk-based, proportionate approach that drives improvements and rewards good performance, but takes tough action against those who fail to meet acceptable standards.
Influential advisor - we advise government, in the EU, nationally, regionally and locally on the development and implementation of environmental policy and strategy, based on our scientific knowledge and our wide operational and regulatory expertise. We take an independent knowledge-based approach. We provide advice to all those partners and others who need to act if our environmental outcomes are to be achieved.
Active communicator - we promote information about the environment in ways which highlight the need for change. We report on the state of the environment on a regular basis. We are active in public debate, persuading key stakeholders that environmental change is needed, for example through World Environment Day, the Spotlight Report on business environmental performance. We target our communications e.g. to people at risk of flooding. We actively engage with local communities and authorities, regional bodies, industry and other stakeholders.
Champion of the environment (within the context of sustainable development) - our primary purpose is to promote the safeguarding and improvement of the environment, but we ensure that we understand the social and economic implications of our decisions and policies.[13]

THE AGENCY'S ROLES AS A REGULATOR AND 'CHAMPION OF THE ENVIRONMENT'

13. Some witnesses representing the business community and waste management sector told us that the Agency was struggling to manage its various roles and responsibilities, and was suffering from 'mission creep'.[14] The Waste Recycling Group believed that the Agency's "very wide range of responsibilities" was having a negative effect on its performance, which it described as "patchy at best".[15] In particular, business witnesses were concerned that the Agency was struggling to balance its roles as a regulator and that of a 'Champion of the Environment'. The Environmental Services Association (ESA) told us the Agency's role as environmental champion "risks conflict with its central function as a regulator".[16] It said that, as other organisations were able and willing to champion the environment, the Agency should concentrate on being "one really effective and focussed environmental regulator".[17] Severn Trent was concerned that this dual role could result in "environmental improvements being made where the benefits do not justify the costs".[18]

14. Environmental witnesses, on the other hand, emphasised the importance of the Agency's role as a 'Champion of the Environment'. RSPB witnesses told us they were "strong proponents of the need for a strong, independent champion and regulator of the environment".[19] The Campaign to Protect Rural England (CPRE) believed it was "important that we have the knowledge which [the Agency] can provide in terms of monitoring the state of the environment" because the environment was so broad and interconnected.[20] The Environmental Industries Commission believed that the Agency had been "broadly successful" in combining its regulatory role and its role as a 'Champion of the Environment'.[21]

15. We questioned the Agency on the perceived tension between its regulatory role and its role as a 'Champion of the Environment'. The Chairman of the Agency believed the conflict was "not marked".[22] He told us that the Agency had experienced difficulties determining what exactly the term meant but the Board had decided that "it should never get further than a logical connection back to [the Agency's] statutory remit would take you".[23] He therefore considered the role as essentially being a "spokesperson … for things that are related to our functions within sustainable development"—such as climate change—but not as a "campaigning body".[24] He made it clear he did "not believe that we are neglecting any area of our brief".[25]

16. In its written evidence, Defra did not provide any analysis of how successful it believed the Agency had been in managing its various roles, or how it expected the Agency's role to change in the future in relation to climate change in particular. In oral evidence, however, Elliot Morley, the Minister for Climate Change and the Environment, was confident that the Agency was managing its various roles and responsibilities adequately, although he stressed there was "always scope for improvement".[26]

17. The Agency's involvement in environmental protection and conservation has increased considerably over the past ten years. We note the concerns of some stakeholders that the Agency is experiencing difficulties managing its wide range of responsibilities and, in particular, that the Agency is struggling to combine its regulatory role with that of 'Champion of the Environment'. In this context, we were disappointed that Defra, in its written evidence to the Committee, did not include any robust appraisal of whether the Agency had achieved the objectives it was designed to achieve. Neither did the Minister set out the Government's ideas as to whether the role and responsibilities of the Agency should change to take into account the Government's commitment to the sustainability agenda. Given the range of cross-cutting environmental issues faced by Government, we strongly support the Agency's role as a 'Champion of the Environment'. However, it is important that there should be clarity between all the Agency's different functions, particularly between its regulatory and environmental champion roles.

18. We recommend that Defra examine whether the Agency is adequately equipped for the cross-cutting environmental challenges facing it today, not least its important role as environmental champion and how it balances this with its regulatory role. In particular, the Agency's capability to address the challenges that climate change poses for its areas of responsibility should be fully explored. As part of this examination, Defra should also hold a series of stakeholder workshops with the Agency's main contacts and customers to critically appraise the Agency's ability effectively to deliver its current regulatory functions.

THE AGENCY'S ROLES AS A REGULATOR AND ADVISER

19. Another common theme raised in evidence was the perceived tension between the Agency's role as a regulator—or an enforcer—and that of an adviser to business. A number of witnesses representing the business community told us that the Agency should focus less on the enforcement aspect of its role and instead place greater emphasis on advice services for companies trying to comply with legislation.

20. EEF, the manufacturers' organisation, told us that the Agency was sometimes "overly focussed on 'policing'", which could lead to a perception of its being "a non-pragmatic enforcement authority working against the interests of business".[27] EEF gave the example of one of its small member companies which had suffered an internal spill of low risk.[28] The company wrote to the local Agency inspector to inform them of the incident. The reply from the inspector "thanked the company for reporting the incident and informed them that next time a spill occurred they would be fined".[29]

21. EEF believed this kind of attitude discouraged companies from reporting incidents, which ran counter to the Agency's aim of protecting the environment.[30] Instead, EEF wanted a "balanced approach" with more emphasis on "advice services for companies trying to comply with legislation".[31] The Agency should help companies to "put improvement programmes in place to rectify situations, rather than just going for the red card".[32] The Confederation of British Industry (CBI) made similar points.[33]

22. We questioned the Agency on the allegations that small and medium-sized enterprises (SMEs) were discouraged from asking for advice from the Agency for fear of prosecution. Baroness Young believed there was a "bit of a bogeyman feel" about such concerns.[34] Nevertheless, she recognised a need to work more with some of the umbrella bodies for SMEs "to try and assure them that we are not out to catch them out".[35] In general, she believed the Agency had made considerable progress in improving its advisory services to companies, particularly to SMEs.[36] For example, the Agency's web guidance tool 'NetRegs' aimed to help SMEs "to understand the complex environmental regulations that can affect them".[37] Baroness Young told us that NetRegs—which is free to use and accessed anonymously—had doubled in size over the last year and, to date, had been used by quarter of a million of the four million SMEs in the UK.[38] She acknowledged there was "still a lot to do" to improve advisory services, but finding funding for such work was "challenging".[39] NetRegs, for example, had only been established with the aid of a Capital Modernisation Fund grant from the Treasury.[40] The Agency was therefore working on "future funding mechanisms" to develop NetRegs and other advisory services.[41]

23. The Chief Executive told us that the Agency could not be held completely responsible for the environmental performance of business.[42] She generally preferred a "partnership advisory approach" with business, but made it clear that the Agency could not be "the consultancy service to the whole of British business".[43] She told us:

24. We note the views of business witnesses that the Agency should focus more on providing advisory services for companies trying to comply with legislation. Small and medium enterprises (SMEs) in particular often require greater attention, especially in areas where there is new environmental legislation. We were concerned, therefore, to hear that some SMEs are discouraged from approaching the Agency for advice because they fear prosecution. The establishment of the NetRegs web-guidance tool is one effective means by which SMEs can obtain advice, as it can be accessed anonymously and for free. We recommend that the Agency continue to develop its NetsRegs web tool and to increase awareness amongst SMEs about its existence. The Agency should also remember that not all small businesses will turn automatically to the internet for information, and therefore consider other forms of dissemination as well. This would also improve its image amongst SMEs. We recommend that Government provide additional ring-fenced funding for the development of NetRegs and other advisory services aimed at SMEs.

25. Proper implementation of environmental legislation is the antidote to prosecution. Therefore, we further recommend that the Agency undertake survey work with a representative range of SMEs to ensure that the right balance is achieved between the Agency's roles as an advisor and as a prosecutor.

The Agency's performance as a regulator

26. One of the Agency's five strategic roles is as a "modern regulator".[45] The Agency is responsible for more than 1,600 authorisations in process industries, more than 100,000 consents to discharge to inland waterways and more than 7,500 waste management licenses.[46] In addition, the Agency manages 49,000 water abstraction licenses ranging from those for water companies to individuals.[47] The following issues were raised in evidence: the Agency's commitment to a risk-based approach to regulation; inconsistencies in its approach between different geographical locations; the lack of specialist staff within the Agency; the transparency of regulatory charges; the use by the Agency of income from regulatory charges; and environmental prosecution. We cover each of them below.

THE RISK-BASED APPROACH

27. In line with initiatives such as the Hampton Review of inspection and enforcement[48] and the Government's Better Regulation Agenda, the Agency is committed to a "risk-based, proportionate approach [that] drives improvements and rewards good performance". Risk-based regulation involves targeting regulatory effort at higher-risk operators with the worst environmental performance.[49]

28. The vast majority of witnesses supported the Agency's commitment to a risk-based approach to regulation. However, business witnesses argued that few benefits of such an approach were yet evident. The CBI said that, whilst the Agency had adopted some risk-based approaches, they appeared to be having little effect in practice.[50] For example, "a particular dimension of the Landfill Directive" required a risk-based approach but CBI's member companies affected by the legislation had found that the Agency was adopting a "dirigiste" approach across all the sites it inspected.[51] The CBI believed this degree of prescription was not in the "spirit of the Directive" and caused "some significant disbenefit" to affected firms.[52] In a similar vein, the Environmental Services Association (ESA) told us waste operators had experienced a "great deal of dissatisfaction" in obtaining landfill permits because the conditions attached to the issuing of such permits "should be risk-based [but] are often not risk-based".[53] The Chemical Industries Association wanted the Agency to concentrate "more on operators with the 'worst' performance while giving a real regulatory dividend to operators with good environmental performance".[54] The Association of Electricity Producers and the EEF made similar points.[55]

29. We questioned the Agency on its commitment to risk-based regulation. The Agency told us that it was at the "forefront" of this approach and that the benefits were already evident.[56] Agency witnesses cited the fact that the number of low-risk waste inspections had decreased from 120,000 to 80,000 a year, as part of the Agency's Modernising Regulation Change Programme.[57] The Agency had also decided that 500,000 potential new low-risk hazardous waste producers did not need to register with the Agency, which "saved the producers around £14 million a year".[58] At the same time, the Chief Executive told us that its focus on "the big, bad and ugly, the illegal end, the companies or individuals who flout environmental regulation" had increased considerably.[59]

30. In response to the claims made by industry representatives that compliant operators were still burdened with too much regulation, the Chairman of the Agency stressed that it was impossible to reduce the regulatory effort to zero.[60] He acknowledged, however, that there was "not as much gradient … between the lowest and highest performing operators as there might be", and that the Agency was "trying to extend this the whole time".[61]

31. We strongly support the Agency's commitment to a risk-based approach to regulation. Not only does such an approach target those operators with the worst environmental records, it also reduces the regulatory burden on compliant operators and, by providing financial incentives to companies to improve their environmental performance, improves standards across the board. However, we recognise the force of the criticisms from some operators that the full benefits of this approach are still yet to be realised. We recommend the Agency continue to hone its risk-based approach to regulation. In particular, it should emphasise the financial benefits businesses can gain by improving their environmental performance.

INCONSISTENCIES IN APPROACH

32. Problems relating to inconsistencies in the Agency's approach—either between geographical regions or between the policy centre and inspectors on the ground—have been a long-standing issue for the Agency, and were raised in the Environment, Transport and Regional Affairs (ETRA) Committee's 1999 report.[62] A number of witnesses to our inquiry believed inconsistency remained a problem.[63] Augean, a waste management company, said the Agency was "much segmented with each area applying different standards of regulation".[64] The CBI told us that the quality and experience of local inspectors "varies considerably, as do their opinions on environmental issues".[65] This resulted in a degree of uncertainty that decisions would be upheld, and also made it "tempting for business to 'shop around' for the answer that suits them best".[66] Wyecycle claimed that the Agency operated a "pick 'n' mix" attitude towards the Waste Management Licence rules.[67] For example, some community groups were allowed to sell compost without a licence, while others had been threatened with enforcement action.[68]

33. One factor that witnesses felt contributed to inconsistencies between regions was poor communication between the policy centre and inspectors on the ground. The UK Petroleum Industry Association (UKPIA) believed the role of the inspector was "diminishing" because inspectors were "less well informed of developments at national level, resulting in less consistency".[69] Water UK told us communication problems had been exacerbated by the Better Regulation Improving The Environment (BRITE) reorganisation within the Agency, which moved policy responsibility away from local staff to the supra-regional level.[70] In the past, negotiation on issues such as statutory drought plans had been with the relevant regional official; now it was necessary for water companies to consult three different layers of the Agency.[71]

34. Another factor said to contribute to inconsistency was the large degree of movement of staff between the various functions of the Agency.[72] Water UK told us there had been a different member of Agency staff at every six-month meeting it had attended.[73] Staff appeared to be on short-term contracts which did "not help continuity or building knowledge".[74]

35. On the other hand, some evidence acknowledged that the Agency was attempting to make improvements in this area. One development particularly welcomed was the establishment of Strategic Permitting Groups (SPGs) in relation to waste permits. The Chemical Industries Association recognised that the use of SPGs had "considerably reduced" the delivery time of Pollution Prevention and Control (PPC) permits and "improved consistency of output".[75] ESA was "reasonably pleased" with the efforts the SPGs were making.[76] CBI also welcomed the initiative, although believed its full benefit had "not yet fully worked through the system".[77] The Agency noted that SPGs had reduced the determination time for permits by about 40%.[78]

36. We asked the Agency about consistency. The Agency's Chairman told us that this remained a "key issue" for the Board, but stressed the Agency had come "a tremendously long way" since the ETRA Committee's report, and considerable organisational change within the Agency over the past five or six years had made "a huge impact on consistency of process".[79] Baroness Young told us about some of these organisational changes, which included:

a new process management system, which established "a single consistent process for each regime established on a national basis". The system included a telephone help-desk to ensure that "anybody with any doubts about a particular regime can get definitive advice on a particular issue, which is the same advice right across the country";
the establishment of SPGs for the major permits (noted above);
training for new staff in new regimes and externally-accredited training and development programme for front-line staff and environmental officers that specifically focus on consistency in enforcement and inspection;
standardised site inspection forms and guidance;
the introduction of a standard compliance assessment process, to ensure "a common nationally consistent benchmark to assess whether individual sites are complying or not";
a national risk assessment system to ensure companies' risks were being assessed in a standardised fashion.[80]

37. Baroness Young stressed, however, that there was "always going to be a struggle between national consistency and local flexibility".[81] Therefore, the Agency had incorporated into all these processes "the ability to take account of individual circumstances, of companies and their locations and the particular circumstances of their activities".[82]

38. We welcome the measures taken by the Agency over the past six years to improve consistency in its regulatory and enforcement functions. Real progress has been made with initiatives such as the establishment of Strategic Permitting Groups in respect of issuing waste permits. However, we remain concerned that inconsistencies still occur because of poor communication between the policy centre and the inspectors on the ground. Variations in policy and practice between the different regions of the Agency should be limited to those areas where they are a result of a genuine need for local differences in approach, rather than a lack of policy clarity or a failure to communicate national policy and standard working practices to local staff. The Agency must continue to improve its communication processes to ensure a consistent approach across the country to regulation and advice. It should also publish a work plan to indicate what steps it plans to take to further address the problem.

SPECIALIST STAFF

39. Witnesses told us that inconsistencies in the Agency's approach were partly caused by a lack of specialist staff. The Chartered Institution of Wastes Management believed the Agency suffered from employing too many "generalist" staff and not enough specialists.[83] The ESA also noted that Agency officers tended to be generalist, and wanted the Agency to "develop teams of specialist waste regulators".[84] Water UK believed the Agency needed to "build on their science base" in order to adapt to changing demands in water resources management, but was doubtful whether the Agency could recruit and retain the right level of staff to provide the kind of advice that was needed.[85]

40. Witnesses agreed that the Agency faced difficulties in recruiting specialist staff because of the decline in the number of university courses offering—and students taking—scientific subjects such as hydrogeology and geotechnics. The ESA said there was a "severe technical skills shortage in the market" and the number of graduates being generated with specialist skills was "far too low".[86] The RSPB likewise acknowledged an "industry-wide problem"—it told us only one hydrogeology degree course remained in the country because universities favoured more general and less technical environmental courses.[87] Consequently, the number of graduate hydrogeologists had "dropped significantly".[88] One reason given for the decline in the demand of such courses was that the financial rewards were "not adequate for those to go through that training to identify a career".[89] The CBI told us that Agency staff in the North East had been leaving the organisation to join the local Regional Development Agency which offered higher pay.[90]

41. However, the ESA believed that the Agency itself was also to blame for the lack of specialist staff it employed, on the grounds that it did not communicate sufficiently with young people about its technical work.[91] The ESA believed that many people did not necessarily perceive the Agency as "an organisation that needs technically-qualified staff" because the "big view" of it remained as "a general protector of the environment".[92] Consequently, "people who have those specialised skills, or are considering acquiring them, do not automatically consider a career in [the Agency] as one where they can use them".[93]

42. The Chairman of the Agency was confident that Agency staff were sufficiently skilled for their purpose.[94] The Agency, he told us, maintained itself as a "a centre of expertise and excellence in a range of functions", as required in ministerial guidance, and the large size of the Agency ensured it possessed the "resources to maintain expertise".[95] He told us there was a "huge over-subscription" for environment officer jobs in the Agency, and the Agency remained an "employer of choice for a lot of young graduates in the relevant disciplines".[96] He acknowledged, however, that the Agency was experiencing staffing problems at the "operational end … where just covering the number of things we have to do makes the job feel most stretched".[97] Baroness Young agreed that the Agency experienced "quite a degree of difficulty in recruiting and retaining staff", particularly with flood risk engineers, and the Agency was "putting measures in place to try and improve them".[98] For example, the Agency had introduced a foundation degree for its trainees in the first stages of engineering.[99] The Agency was also collaborating with the Institute of Civil Engineers to address a "general national shortage of civil engineers across the country" by running a series of recruitment campaigns.[100] These measures include the provision of work experience to sixth form and gap year students, improved career advice and providing case studies and computer models for undergraduate courses.[101]

43. Regarding hydrologists and geomorphologists, the Chief Executive acknowledged there was a "black hole", caused largely by the reduction in the number of university courses available in this area.[102] She told us the Agency was working with universities to try and re-invigorate those courses, as well as putting in place an improved career structure and providing in-house staff development.[103]

44. We are extremely concerned that the Agency is experiencing difficulties recruiting specialist staff, such as flood risk engineers, hydrologists and geomorphologists. By its nature, much of the Agency's work requires a high level of specialist knowledge. It is therefore essential that the Agency employs staff with the necessary skills to undertake its work. We understand that, to some extent, these difficulties are indicative of a more general industry-wide problem relating to a decline in the number of engineers and opportunities to study specific technical environmental courses. We welcome the Agency's attempt to improve this situation by working with the Institute of Civil Engineers and with universities, and encourage the Agency to continue this collaboration in order to encourage more young people to take engineering and technical environmental courses, and to seek employment in the Agency. As part of this work, the Agency should consider a system of bursary payments to encourage young people to study in the disciplines which it needs but where graduates are in short supply. The Agency should also be discussing with the Department for Education and Skills further measures to increase the number of graduates in these areas.

45. It is clear from our evidence that the credibility of the Agency depends largely on the performance of its specialist staff in the front-line, such as its inspectors and flood risk engineers. The importance of such specialist positions should therefore be reflected in the pay structure of the Agency. If the Agency is not able to offer more pay, it should ensure its own generalists acquire appropriate technical skills as part of their training. We therefore recommend the Agency expand the opportunities available for Agency trainees to take a foundation degree in the first stage of engineering.

46. Our evidence showed that witnesses regarded lack of specialist staff as one of the Agency's most significant drawbacks. The Agency should therefore issue a work plan with specific deadlines to set out how it aims to solve its recruitment problems, and publish details about its future graduate requirements.

TRANSPARENCY OF CHARGES

47. Many witnesses criticised the Agency's perceived lack of transparency in relation to regulatory charges. The Prospect trade union said there was "a lack of clarity as to where the income from fees and charges on industry is spent".[104] Yorkshire Water said it paid an annual charge of approximately £5 million yet "a lack of transparency on what these monies are used for by the Agency … means that we are not able to challenge charges adequately".[105] Similarly, EEF argued that business needed to see results from increased charges.[106] EEF claimed that currently, companies "often see charges increasing with little or no justification, and no obvious improvement in service".[107] In relation to water abstraction charges, Water UK said it had been informed by the Agency that charging for supported river systems was calculated using a three times multiplier but "no evidence is given why this should be so".[108]

48. We questioned the Agency about the issue of transparency. The Chief Executive believed the Agency was "pretty transparent" in how it determined its charges, but was continuing to make improvements in this area.[109] The Agency provided us with the following information about the various means by which charge-payers can obtain information about its charges.

Table 2: Provision of information by the Agency about its charges

Consultation document—this provides details of the impact of cost increases on different types of charges, for groups of chargepayers, and breaks down the various elements of any charge increases.
Leaflets—where there are significant changes to schemes or charges, the Agency sends out leaflets with bills for annual charges which provide an explanation of the reasons for the changes and a breakdown of the elements which make up any increases.
Website—the Agency publishes detailed information on the principles and processes involved in developing its charging schemes and setting charges, as well as providing details of the charges for each of its schemes. The Agency has placed a document on its website entitled "Costs and charges for environmental licences" which describes how it brings charging principles together in order to calculate costs and charges. Charges for Pollution Prevention and Control permits are used as examples.
Stakeholder forums—the Agency engages with its stakeholders through a number of standing groups (for example, the Charges Review Group involving the Government, the trade associations and some of the bigger charging partners and representatives of SMEs which meets three to four times a year) and ad hoc meetings with trade associations where it respond to requests for information, including on the make up of charges.
Specific requests—requests received from individuals are usually concerned with the individual's own charges. These are usually channelled through the Agency's National Customer Contact Centre phoneline, its Finance Departments (Exchequer and Financial Accounting Service (EFAS) or EA Wales Finance) or to the Charges Team, either via stakeholder forums, by e-mail (the Agency advertise a specific e-mail query address in our consultation documents and leaflets) or post. Where a query relates to the basis or calculation of the charge, this is usually dealt with by EFAS or EA Wales Finance, with reference to local (Regional) Environment Officers where the query is of a technical nature. Other charging queries, or where the basis of the charge is disputed by the chargepayer and cannot be resolved locally, are referred to the Charges Team in the Agency's Head Office for a decision and response. This ensures a "consistent approach and response to chargepayers".

Source: Environment Agency[110]

49. The Agency concluded:

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50. The provision of clear and comprehensive information to businesses and companies about their regulatory charges is crucial. In evidence, we heard contradictory opinions about the current degree of transparency provided by the Agency in this area. The Agency believes it provides adequate information about its charges and how they are reached, through its website, leaflets and the establishment of a Charges Review Group including Government, trade associations and partners and representatives of SMEs. We support such initiatives and encourage the Agency to take particular note of the comments made by representatives of charge-payers on the Charges Review Group so that it can truly demonstrate that they are, in the Agency's words, "fully involved in the process".

51. Our evidence showed, however, that a large number of charge-payers are still dissatisfied with the information they receive from the Agency, particularly in relation to where the money received from charges is being spent. The problem here could be a lack of communication with stakeholders about where they can obtain information about charges. We recommend that Defra examine how the Agency calculates its charges to satisfy itself that this process is conducted in the most transparent way possible, so that all stakeholders understand why they are charged as they are.

USE OF INCOME FROM CHARGES FOR ENFORCEMENT

52. CBI and EEF both said that some of the funds obtained from charges were being used by the Agency for inappropriate purposes.[112] For example, the Agency uses £2 million of the money raised by the Business Resource Efficiency and Waste (BREW) Programme for policing of fly-tipping.[113] CBI believed it was "inconsistent to use revenue raised from business for the costs of policing unregulated offenders".[114] The Composting Association believed the costs of regulating and enforcing illegal or poor-performing sites should be "borne by those operators or recovered through the Courts"—not by the legitimate operator through increased fees.[115] It argued the Agency needed "sufficient funding" from Government "to enable it to carry out this function effectively".[116]

53. We asked the Minister whether it was fair that compliant operators bore the costs of policing illegal operators. He told us there was always a "risk" of this occurring, but he believed that developing a risk-based approach would ease the financial burden on compliant operators and free up more resources for the enforcement of poor performing or illegal operators.[117] The Chief Executive of the Agency told us that the origin of enforcement money depended on the particular regime, but the majority of the funding for the Agency's enforcement work on illegal operators came from Grant-in-Aid, not from charges.[118]

54. Business witnesses are concerned that revenue raised from charges on legitimate operators is being used for the policing of illegal operators. We believe that the risk of this occurring should be minimised. Business charges must reflect the costs of regulatory effort. The Agency should make clear how much of the money derived from charges it is currently using for enforcement and produce a plan to show how it intends to end this practice. Enforcement of illegal and poor-performing operators should be funded by Grant-in-Aid or from environmental fines. If the Agency is struggling to fund its enforcement duties, Government should provide additional resources ring-fenced for this purpose.

PROSECUTION OF ENVIRONMENTAL OFFENCES

55. In 2004, the Agency successfully prosecuted 233 limited and public companies.[119] However, the Agency believed a number of "key barriers" needed to be addressed if performance in relation to prosecution were to be improved.[120] One barrier was the current low level of environmental fines. For example, in 2004 the average fine for business was £8,500—£500 less than in 2003.[121] In total, the Agency estimated that approximately £3 million per year was generated from environmental fines, but the bulk of this revenue went into the Consolidated Fund.[122] The Agency told us it had explored with the Treasury whether it could retain income from fines but, until fines increased considerably, it was "not worth making too much heat and steam about".[123] According to the Minister, the Treasury would defend the current arrangement by arguing that the fine income which went into the Consolidated Fund was recycled back to the Agency through Grant-in-Aid.[124]

56. The Agency identified other barriers restricting effective prosecution, including:

Inconsistency in sentencing—the Agency believed inconsistency was "considerable" due in part to the "lack of familiarity that courts have with environmental cases".[125] It proposed that all environmental cases should be heard by a specialist group of magistrates, who had received dedicated training.[126]
Lack of deterrence—fines are often less than the profit gained. The Agency wanted a "general principle that no one should profit from environmental crime", and powers for the criminal courts to order companies or individuals to clean up the pollution they have caused.[127]
More flexible penalties—the Agency wanted the courts to be able to use higher fines coupled with new penalties such as adverse publicity orders, corporate probation or community benefit orders and remediation orders, in order to gain the attention of the boardroom, shareholders and customers of larger companies.[128]
Regulator-applied penalty powers—to enable the Agency to propose the payment of a penalty by the offender as an alternative to court action. Penalties imposed by the court would be equivalent to or higher than the administrative penalties, and the offender would be free to accept or reject the proposed penalty. The Agency believed this would provide "a faster and more effective process for cases where there is no dispute about responsibility for environmental damage".[129]

57. Some of these issues were raised in the Environmental Audit Committee's (EAC) Second Report of Session 2004-05 on Corporate Environmental Crime and its Sixth Report of Session 2003-04 on Environmental Crime and the Courts.[130] The EAC concluded that the general level at which fines were imposed "neither reflects the gravity of environmental crimes, nor deters or punishes adequately those who commit them".[131] It also supported the creation of "a robust civil penalty regime as an alternative means with which to deal with environmental crime", as well as compulsory remediation work.[132]

58. We asked the Minister whether he thought there was a case for tougher penalties for poor-performing and illegal operators. He agreed that the fines often did "not reflect the severity of the offence".[133] He told us:

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He told us that Government was considering a review that would examine "a wider concept of environmental justice", and whether there was a case for special training for magistrates, dedicated courts and different forms of fines, such as remediation penalties.[135]

59. Business witnesses also supported reform in this area. The CBI believed a "new approach" was necessary to deal with illegitimate operators, whether in terms of higher fines or the use of administrative penalties.[136] However, it warned that some issues would need to be resolved—such as the establishment of an appropriate means of appeal against administrative penalties—because it believed the Agency might be tempted to use such an approach "rather more rigorously than might otherwise be desirable, in the interests of raising sufficient revenue".[137]

60. We believe a strong case exists for placing more of the burden of enforcement costs onto fines, rather than charges. Fines for environmental offences are still relatively small and often do not reflect the severity of the offence. We also believe that consistency in sentencing of environmental crimes should be improved, and therefore support the Agency's proposal that a team of magistrates be trained specifically to deal with environmental cases. Consideration should be also given to the Agency having the ability to propose payment of a fixed penalty by the offender as an alternative to court action. We welcome the fact that discussions are taking place within Government about the prosecution of environmental cases. The Environment Agency and business representatives should be closely involved in such discussions. Defra should, without delay, publish a Green Paper detailing its proposals on the roles to be played by other branches of Government in devising ways to fundamentally improve the system by which courts administer environmental prosecutions.

61. At present, money received from environmental fines goes directly into the Consolidated Fund, and is recycled to the Agency through Grant-in-Aid. If the amount of fines increases significantly, the Agency should receive the full value of any additional revenue either through retaining fine income or through the present arrangement. Our preference, however, is for the Agency to be able to retain income directly from fines. We recommend that the Treasury examine the case for allowing the Agency to keep the fines which result from successful prosecutions and report to Parliament about its conclusions on this matter.

12 Environment Agency, Making it happen: Corporate Strategy 2002-07, 2002. Back

13 Ev 132 Back

14 For example, EEF [Q 102 and 104] Back

15 Ev 50 Back

16 Ev 49 Back

17 Ev 49 Back

18 Ev 257 Back

19 Q 203 Back

20 Q 215 Back

21 Ev 291 Back

22 Q 338 Back

23 Q 338 Back