Environment Agency charge proposal: cost of service
Introduction
To continue to operate and regulate businesses effectively, it is essential that we can fully recover the costs of these services.
Along with most employers, the overall costs of employing staff have increased, there are also inflationary pressures too. We are proposing to increase regulatory charges in certain areas to reflect these additional costs to our service. We are also supporting the government’s focus on introducing digitally enabled services to ensure effective regulation and robust enforcement.
Increase to cost of service
The overall costs of employing our staff have increased due to:
- the government approved pay award
- employer National Insurance contributions
In addition, we also need to cover increased costs relating to:
- corporate service costs, which have also been subject to pay and other inflationary pressures
- IT systems development costs for the regulatory services programme and the environmental monitoring and planning programme
We must invest in digital transformation to deliver better and more effective regulation. The regulatory services programme (RSP) provides better digital capability for customers and modernised regulation through improved data quality and intelligence-led interventions. The environmental monitoring and planning (EMP) programme is developing an integrated system to collect, analyse and share environmental data on the water environment. Investment in digital services will help deliver efficiencies over the long-term. Digital transformation in RSP and EMP will reduce the administrative costs for business, helping us meet the government’s challenge to reduce these costs by 25% by the end of the current parliament. We must recover the full cost of our services through charges in line with managing public money guidance.
We have provided guidance in how the Environment Agency calculates its charges, to help you understand what we include when we develop or review a charge.
The principles we follow
Our aim is to make the environment a better place for people and wildlife while facilitating sustainable development and supporting economic growth.
The proposals we have outlined in this consultation make sure that:
- people only pay for the regulatory service they receive
- we recover our costs of regulation
- we will not need to use additional taxpayer funds to support our regulatory work
When reviewing charges, and for all our regulatory work, we need to make sure:
- our costs are reflected in our charges and must align with HM Treasury rules in the guidance managing public money
- our regulatory activities are transparent, accountable, proportionate, consistent, and targeted only at cases where action is needed (in line with the Legislative and Regulatory Reform Act 2006)
- we follow the Regulators’ Code (as required under section 22 of the Legislative and Regulatory Reform Act 2006)
- we have regard to the desirability of promoting economic growth (under section 108 of the Deregulation Act 2015) when we carry out our regulatory activities
Inflationary increase to charges
From 2026 onwards, we propose to update these charges annually in line with inflation, unless future charge increases have already been specified within the relevant charging scheme. This means we can maintain full cost recovery.
All Environment Agency charges and fees will be updated on 1 April each year. The Office for National Statistics measure of Consumer Price Index (CPI) inflation as of 30 September in the immediately preceding year will be applied. Any increase to charges and fees will be equal to or less than this measure. Increases will be less if we believe our increased costs do not equate to the CPI measure. For our regulatory charges, we would round the charge to the nearest pound, for some registration charges and licences, this may be to the nearest 10 pence.
We have chosen the CPI measure as this is widely recognised, understood, and accepted as a measure of cost inflation. It is used by:
- economic regulators to set regulated charges
- government to set taxes and benefits
- employers in wage bargaining
- private sector companies to set payment amounts in business contracts
Powers to charge
Charging powers under section 41 and section 42 of the Environment Act 1995 allow us to introduce new charges for The Environment Agency (Environmental Permitting and Abstraction Licensing) (England) Charging Scheme 2022 ) (EPR charging scheme) and The Waste (Miscellaneous)(England) Charging Scheme 2018 (waste miscellaneous charging scheme).