Opinion

Paying the price: who bears the cost of health and safety failure?

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​The political dialogue is dominated by discussions about money. But with the cost to the economy of health and safety failure at eye-watering levels, there may be a better way to save money.


It is perhaps one of the most tragic features of health and safety failure that it is the injured and ill individuals and their families who must also face the financial burdens of that failure. But it is also a grim irony that all the money British business pays out because of injury and disease could be put to better use – perhaps keeping workers and the public safer and healthier.

The reduction of so-called ‘red tape’ (which includes a host of regulations, not just health and safety) ushered in by the coalition government has saved British business in the region of £2.2bn since the start of 2011, according to the Better Regulation Executive. That’s £550m a year. The less money a business spends on administrative issues means there is more money to spend on products or staff, which means more output, which means more money in people’s pockets – which in turn means better living standards for people and a bigger and growing economy. Or so the argument goes.

Quickly glossing over how much this equates to per business, there may be a better way of saving businesses, and the UK taxpayer, money.

HSE’s statisticians have produced detailed breakdowns of the cost of work-related injury and ill health to the UK, which bear the national statistics quality mark. The latest batch was released in October. Some of the prices have confidence intervals – where they do we will use the central estimate.

Counting the cost
Figures from HSE show that an eye-watering £14.2bn was wasted on health and safety failure in 2012/13.

The figures, importantly, largely exclude costs of illness caused by previous working conditions, including cancer and other long-latency diseases. With roughly 13,500 cancers diagnosed each year that are associated with work, this figure is likely to add a substantial amount to the total.

But let’s focus on the information we have: £14.2bn. That’s equivalent to 92 times the expenditure of HSE in 2013/14, or very nearly the GDP of Cyprus. And it’s 25 times the amount saved through four years of red tape reduction. But whose pockets does it come out of? What is this £14.2bn made up of? And how has it changed over time?

In short, this money is made up of all costs associated with injury or ill health: compensation, lost earnings, insurance, social security payments, healthcare and so on. The lion’s share of it isn’t money at all, but non-financial human costs in monetised form; pain and misery. HSE statisticians say this is equivalent to £8.2bn – £8.2bn of wasted potential – and is, without doubt, the very gravest and most burdensome price.

In 2006/07, the total cost of health and safety failure was around £16.5bn. Unsurprisingly, with the reduction in injuries and fatalities that has occurred in the intervening years, that figure has decreased since. But it has started to plateau. Perhaps even rise.

 

Unfortunately we do not have any figures for the total cost of health and safety failure for 2011/12, which muddies the water. Figures are available that demonstrate the cost of fatal and non-fatal injuries, but not ill health, as HSE did not carry out a survey that year assessing the extent of occupational ill health in Britain.

By 2010/11 the total cost had fallen to its lowest on record – £14bn – though pace of reduction had slowed. Come 2012/13, however, the latest year for which statistics are available, it rose to £14.2bn. 59% was money associated with ill health that led to seven or more days’ absence from work; 35% due to injury that caused more than six days’ absence (see below).

But, again, whose pockets does this money come out of?

HSE’s figures break the numbers down into three categories: employers, government (and therefore the general taxpayer) and individuals and their families. For the most recent year individuals bore the greatest financial weight, by quite some distance.

Families and individuals bore £8.1bn of the total cost in 2012/13 – an increase of £361m on 2010/11. As with any instance of injury or illness, there will be associated money coming in and going out.

In 2013, the largest cost out was the non-financial one – human suffering, the value of human life. This came to £8.2bn, as previously mentioned. The next is lost potential family income, which came in at £4.4bn. There are other smaller costs: £77m for funeral expenses, travel costs associated with the condition, or home adaptations.

Money comes in too: benefit receipts, sick pay, compensation. Compensation receipts come to £826m. Benefits related to occupational ill-health and injury costs the UK taxpayer £1.8bn. But once you’ve totted it all up, families and individuals end up £8.1bn out of pocket.

There is a question over compensation: it is meant to provide recompense for money lost out on – earnings, home adaptations etc – but so too pain and suffering. If £8.1bn is the cost of pain and suffering, then families’ money in and money out should roughly balance. It clearly does not.

As you’d imagine, employers’ share of the costs do not balance, and nor are they meant to. Employers lost £2.9bn to health and safety failings in 2012/13. £1.1bn was spent on sick pay; £1.4bn on insurance premiums; £15m on fines. This figure has remained largely static since HSE last carried out an assessment of costs to this level of detail, which was in 2006/07.

As for the government and taxpayer, as already mentioned, HSE’s statisticians say £1.8bn was paid in 2012/13 on social security related to occupational ill health and injury. A further £719m was lost through reduced income tax and national insurance contributions. NHS treatment also cost £719m. The total the state spent came to £3.2bn.

Shouldering the cost
Since 2006/07, the proportion of the total cost borne by families and individuals has decreased. Back then, it was 60%, but by 2010/11 it had reduced to 55%. So not only had the total cost decreased, but so too had the proportion families and individuals were paying.

Come 2012/13 however, this had begun to grow again – to 57%. It should be pointed out that this is a small increase and may not be sustained. It may not be statistically significant. But it is a rise.

The proportion employers pay on the other hand had remained almost completely flat since 2006/07. Eight years ago it was 20%. In 2012/13 it was 20%. In cash terms it has decreased slightly.

As family and individuals’ proportion dipped to 55%, government’s rose to 24%. But this was not because it was shouldering more of the burden. Rather, the absolute cost to employers and the taxpayer has stayed stable over the years. What has changed, however, is the burden individuals and their families bear.

The regions

HSE’s figures also provide a breakdown of the cost to each of Britain’s regions. Both work-related injury and ill health, at £1.96bn, cost the South East the most in 2012/13. Following not far behind in second place (or second to last, depending on how you look at it) was London, where work-related ill health and injury cost £1.62bn. At the other end of the scale is the North East, with £593m and Wales, with £648m.

But when you divide these figures by the regions’ populations, something very different happens. Per head, work-related ill health and injury cost the East Midlands the most, at equivalent to £243 for every man, woman and child. Next is the North East, at £228. At the other end of the scale is East of England, with £176 per head, and the West Midlands, at £192.

In this election year, the cost of health and safety failure may not be high on politicians’ agendas. But with political debate centring on money and the desperate search to find sources to save it, parties of all stripes should grasp this particularly potent nettle.

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