AHVLA GB wide Charging for Services NFU Informal Stakeholder Engagement 14 th February 2014

1. AHVLA GB wide Charging for ServicesNFUInformal Stakeholder Engagement14th February 2014

2. Programme for the day

3. Why are we here? AHVLA is committed to engaging with key stakeholders to identify the most efficient models for delivery of statutory services whilst still achieving full cost recovery. This includes discussion of the following: the context for charging transparency regarding the AHVLA Full Cost Recovery Model impacts of charging on stakeholders / micro & small businesses approach to travel time potential efficiencies and delivering value for money

4. Background to charging proposals • It is Government policy that businesses benefiting from a service should pay the full cost of delivering the service – the model for how this should be done is set out in HMT guidance, Managing Public Money. • A joint GB wide project led by AHVLA, in partnership with DEFRA, has been set up to consider how cost recovery or new approaches to delivery might improve policy outcomes and service objectives; and allocate costs fairly between tax payers and beneficiaries. • The charging scheme is intended to covers services provided within GB and will therefore require the agreement of Welsh and Scottish Ministers, whose officials are involved in the project.

5. Charging background continued • Stage 1 of the project [Tranche 1] was to update existing fees towards full cost recovery in June 2013 for the following services: • Artificial Breeding Controls • Salmonella National Control Programme (NCP) • Convention on International Trade in Endangered Species (CITES) • Poultry Health Scheme • Border Inspection Posts

6. Charging background continued • Stage 2 [Tranche 2] was to review other statutory services undertaken by AHVLA where there is commercial benefit to the user of that service. • This has led to proposals for new charging in the following areas: • Animal By-Products • Animal Gatherings • Pet Passports • Intra-Trade Animal Health Certification (EU) and Export Health Certification (non-EU / Third Countries) • It is anticipated that charging for these services will commence in Autumn 2014.

7. Review of EU Animal Health Law and Official Food and Feed Controls [OFFC] / Regulation 882/2004

8. OFFC/ Regulation 882/2004 On 6 May 2013, the EU Commission issued a draft proposal for a regulation that will replace EU Regulation 882/2004 on official controls carried out by MSs and their designated enforcement authorities to ensure the verification of compliance with feed & food law, animal health & welfare rules [eg inspections, audits, sampling and analysis]. Food Standards Agency is the UK lead department for the negotiations on the proposal and is considering how the proposed changes will affect UK consumers and industry, in particular food and feed businesses. Commission is proposing mandatory charging for official controls, including health certificates – and mandatory exemption from such charging for micro-businesses. The FSA launched their consultation on the review of the regulation on 17th October 2013. Consultation closed on the 9th January 2014.

9. OFFC/ Regulation 882/2004 continued The FSA consultation focuses on the Commission’s proposals in relation to charging and sets out the UK’s proposed response. It recognises the appropriateness of charging for services and the importance of protecting micro-businesses from the disproportionate impact of such arrangements. But it argues that Member States should retain discretion to decide when to introduce charging, and to which services it should apply – and under which conditions exemptions should apply. This would be in line with current national arrangements in the UK. Link to consultation //www.food.gov.uk/news-updates/consultations/consultations-uk/2013/officialcontrols-consult

10. Services in Scope PETS Passport Document

11. Rationale for intervention and intended effects • Pet passports (for cats, dogs and ferrets) are an integral part of the Pet Travel Regulations which are designed to keep the UK free of rabies and alveolar echinococcosis - diseases that can affect humans and animals. • The intention is to charge for the provision of the pet passport document which enables pet owners to travel internationally with their pets. • Currently government pays the costs of the pet passport (production, administrative and postage) and veterinary practices obtain it free. • The intended effect is to transfer the costs of providing this document from the taxpayer to veterinary practices that issue passports and prepare pets for international travel.

12. Assessment of Business Impact • About 2,700 veterinary practices issue about 60,000 new pet passports each year across the UK. • An indicative cost per batch of 25 passports will be around £50, although EU regulation changes which add features to pet passports may change the batch price of passports . • We expect that veterinary practices will pass on this cost to their customers as part of the cost of preparing pets for international travel.

13. Services in Scope Intra-Trade Animal Health and Export Health Certification

14. Services in Scope • EUIntra-Trade Animal Health Certificates (ITAHCs) which are submitted to AHVLA for manual inputting into TRACES system • 3rd Country (non-EU) Export Health Certificates for all animals and animal products for which a certificate is required to demonstrate compliance with importing country conditions • No exemption is proposed for small or micro businesses

15. EU ITAHCs • All applications for EU Intra-Trade Animal Health Certificates (ITAHCs) for live animals, including pets, and germplasm submitted to AHVLA for manual inputting to TRACES • Estimated number of applications per annum based on current levels – around 4,000 - expected to reduce annually as exporters switch to direct electronic application to TRACES • Charging will not cover direct applications to TRACES, in which there is no AHVLA intervention • No exemption is proposed for small or micro businesses

16. 3rd Country EHCs • All applications for 3rd Country (non-EU) Export Health Certificates (EHCs) for animals, including pets, and animal products needing certification to demonstrate compliance with importing country conditions • Estimated number of applications per annum based on current levels – around 45,000 • 6 charging bands for EHCs • No exemption is proposed for small or micro businesses

17. No exemption for SMBs • Government policy is to protect small and micro businesses (SMBs) from excessive administrative burdens, including official fees and charges, where appropriate • Small business – 11 to 49 employees; micro business – 10 employees or fewer. • It is not proposed however that such provision should apply in the case of ITAHCs or EHCs, as the charges are not considered disproportionate in relation to SMBs and, without them , it would not be possible to achieve a large part of the intended benefits of the measure.

18. Impacts on businesses • Work is still ongoing to calculate the exact level of each of the charges. • The costs can vary considerably and are affected by a number of things. • Over 99% of charges are expected to be in the region of £20 to £35 for a certificate including payment processing and postage costs. However this is likely to be reduced where multiple certificates are paid for together. • Where visits are required charges will be substantially higher. • Full details of how each of the charges are calculated will be included during the formal consultation process.

19. Animal Gatherings

20. Animal Gatherings defined • Animal gatherings Order 2010, England and Wales • Defines an animal gathering as “an occasion at which animals are gathered for one or more of the following purposes— (a) a sale, show or exhibition, (b) collection for onward consignment within Great Britain, (c) inspection to confirm the animals possess specific breed characteristics.” • Must be licensed. Conditions reflect structural, operational and cleansing requirements aimed at preventing spread of disease between successive gatherings and between each gathering and its surroundings. • Around 120 (83) markets, 100 (65) collections and 600 (430) shows

21. What Animal Gatherings Services are in scope of Charging? • Animal Gatherings in Wales & England only • Work in relation to licensing/re-licensing of premises under the Animal Gatherings Order 2010 (AGO) • Industry Groups Affected • Operators of livestock Sales/Markets, collections and Shows • Export assembly centres excluded as not in scope of AGO What’s chargeable to Industry Government Funded • Administration of new and renewed licences • Approvals/re-approvals undertaken by AHVLA Field Staff (Technical and Veterinary) • Travel Time • Non-compliance and Enforcement activities (whether AGO- or welfare-related) • Research and Development • Advice and Guidance • Additional licensing activity relating to other legislation: TB, export.

22. Animal Gatherings – current and proposed • Current process – clear rules for issuing licenses but flexible approach • Proposed process: • Standardised, efficient and consistent service throughout England and Wales • Applications ‘right first time’ • Introduction of ‘provisional licences’ • Fee structure to reflect : • New applications from markets/collections • Renewals markets/collections • New applications from shows • Renewals shows • Additional visits • Categorisation within those, according to risk.

23. Animal Gatherings – issues and consultation • Affordability and how costs will be absorbed/passed on • How to improve, and reward, compliance • Advice and guidance • Travel time

24. Animal By Products

25. What Animal By Product Services are in scope of Charging? • Animal By Products Services • Approvals of plants, establishments and operators handling, using or disposing of ABPs • Risk-based inspections of approved or registered premises • Industry Groups/Stakeholders affected include: • Rendering (processing) plants, Composting and biogas plants, On-farm incinerators, Pet crematoriums, Pet food plants, Organic fertiliser (OF/SI) production plants, Wool processors, Tanneries, Hunt kennels, Zoos, Collection centres for fallen stock What’s chargeable to Industry Government Funded • Administration • Approvals and risk based Inspections undertaken by AHVLA • Travel Time • Non-compliance and Enforcement • Research and Development • Advice and Guidance

26. ABP – The Fees: Overview Approval and registration • New premises or operators using, handling or disposing of ABPs are either ‘approved’ or ‘registered’ depending on the requirements of the EU ABP regulations. • Plants carrying out higher risk operations require approval (e.g. rendering plants, pet food plants and incinerators) by AHVLA. • Activities associated with approval are chargeable under the proposal • Lower risk activities (e.g. manufacturers of technical products) may simply require the operator to registration with AHVLA. • Activities associated with registration are not chargeable under the proposal (although the operator may still be subject to chargeable risk based inspection).

27. ABP – The Fees: Approvals • Plants are approved on a one-off basis (re-approvals only take place if there is a substantive change in the material received, equipment used or treatment process). • The complexity, risks, and therefore the nature and cost of plant approvals varies widely.

28. ABP – The Fees: Inspections • Following approval or registration, premises (apart from some very low risk, registered operators) are visited on an annually, quarterly or monthly basis depending on their position in the AHVLA risk matrix (reflecting complexity of operation, quantity and category of material handled, hazard control and compliance record). • Premises are currently re-risk assessed following each inspection visit. This will change to an annual risk assessment to permit ‘up-front’ payment. • Activities associated with risk based inspection visits are chargeable under the proposal and will represent the on-going cost that most businesses would pay each year.

29. ABP – The Fees: Inspections • The complexity and cost of an inspection, and the number of inspections per year will vary significantly between types of ABP operations. The charge to businesses will be made up of the total cost per visit multiplied by the frequency of inspection. Most compliant on-farm incinerators could expect an annual visit.

30. Engagement/Efficiencies: Industry • Before charging commences, businesses are being encouraged to engage with AHVLA to consider ways to reduce the frequency and time required for inspections. • Such measures might include: • Ensuring management controls are in place & effectively implemented to minimise risks; • Improving compliance levels; • possibly developing sectoral codes of practice. • Measures such as these would demonstrate that certain standards are met, which would then permit AHVLA to apply ‘earned recognition’ criteria.

31. Engagement/Efficiencies: Defra & AHVLA • Defra and AHVLA have already written to a number of stakeholders in the ABP sector. Initial meetings have taken place to discuss potential impact of charges.  • AHVLA are currently reviewing their delivery processes with the aim of identifying potential areas where greater standardisation/ efficiency improvements can be made without compromising the quality of the inspection. AHVLA will continue to review processes following the introduction of charging. • Defra is committed to supporting industry led “earned recognition” approaches. Independently accredited quality schemes could be considered as a way of reducing inspection frequencies for some sectors.

32. AHVLA’s Full Cost Recovery Method[FCR]

33. AHVLA’s FCR method • What are the basic HM Treasury principles? • AHVLA/Defra are required to follow HMT principles: • Guidance: Managing Public Money [MPM]: https://www.gov.uk/government/publications/managing-public-money • The standard approach is to set charges to recover full costs. • This approach is intended to make sure that the government neither profits at the expense of consumers nor makes a loss for taxpayers to subsidise. • The AHVLA charging model has been set in line with this principle to recover the full costs of services provided by AHVLA .

34. AHVLA’s FCR method continued • What does FCR include? • All direct costs and indirect costs which can be directly attributed to or are essential for the delivery of the services for which a charge is to be made – i.e. processing of applications and issuing of certificates: • Salary Costs • Non-Pay Running Costs (NPRC) • Indirect Costs • Specific Fees

35. AHVLA’s FCR method continued • 1. Salary Costs: • These are the salary costs of direct staff, which includes • basic salary, • permanent allowances, • ERNIC • superannuation.

36. AHVLA’s FCR method continued • 2. Non-Pay Running Costs (NPRC): • NPRC are apportioned to the direct salary on a weighted average cost per grade basis. This includes: • Staff Support • Veterinary Consumables • Accommodation • General Overheads • ICT Costs • Training

37. FCR method continued 3. Indirect Costs: Indirect costs include the costs of the essential back office support functions apportioned to the direct activities on an FTE basis. This equates to an equal recovery rate per grade per hour. This includes: Health & Safety Communications Corporate Office Human Resources Finance & Procurement Relationship Management Estates Information Management

38. FCR method continued 4. Specific Fees Specific fees are those fees incurred directly in relation to the activity carried out. These include: • Payment processing costs • IT software costs • Variable postage costs dependant upon the option chosen, such as special delivery.

39. Travel time

40. Charging for Travel Time Treasury have agreed to AHVLA’s approach on charging for travel time up to a capped ceiling. To ensure Industry isn’t being unfairly penalised,AHVLA will cap the total travel time charge at 1 ½ hours which we believe brings the charge more in line with visit fees charged by private veterinary surgeons. AHVLAs approach of capping travel will mitigate the impacts of charging on micro/small businesses and will not disadvantage businesses located at a distance from AHVLA Field Offices or in remote rural areas. Total travel time will be charged from the AHVLA field office to the premises and return.

41. Efficiencies

42. How have AHVLA ensured efficient services? • AHVLA is taking steps to drive down its costs which includes streamlining procedures, improving its computer systems, reducing estate and staff costs. • In recent years AHVLA’s programme of business improvements has delivered significant cost reductions (£29m over the last 3 years), allowing it to reduce costs associated with delivery of statutory services. • The Agency has restructured several times, rationalising the number of operational regions in each country and the administrative teams to support that structure. • Laboratory services have already been partly rationalised with the first phase completed in March 2013. • Review process activities to seek efficiencies and cost estimates.

43. Payment and Fees

44. Method of payment • On-line up front payment • Payment on account • 3. Assisted payment

45. 1. Up front payment – standard process • Service request • E-mail application received by AHVLA • Calculate fee • Service wide fee calculator • Unique reference number for transaction • Present payment to customer • Payment request sent to customer • Customer makes payment • Authorisation of payment • Provide service • e.g. Certificate. • VAT receipt

46. Up front payment – alternative process • Service request • E-mail application received by AHVLA • AND • Calculate fee • Service wide fee calculator • Unique reference number • for transaction • Present payment to customer Provide service • Payment request sent e.g. certificate • to customer VAT receipt • Customer makes payment • Authorisation of payment

47. 2. Payment on account • Service request • E-mail application received by AHVLA • Provide service • e.g. Certificate. • Calculate fee • Service wide fee calculator • Unique reference number for transaction • Invoice customer • Generate invoice / VAT receipt

48. 3. Assisted Payment • Service request • Hard copy application received by AHVLA • Telephone call from customer • Assist customer with processing payment • Calculate fee • Service wide fee calculator • Unique reference number for transaction • Process Payment • Provide service • e.g. Certificate • VAT Receipt

49. What happens next? • January 2014 to March 2014: • Continued informal engagement with stakeholders • Pre-consultation work to prepare for consultation • Seek Ministerial clearance to go to Consultation • March 2014 to June 2014: • Undertake formal consultation • June 2014 - Autumn 2014: • Consider responses from stakeholders to the consultation • Publish consultation responses • If appropriate, we would: • Prepare statutory instrument and conducting legislative processes • Envisage introducing the new charges from Autumn 2014

50. Questions? If you have any further questions following this meeting please contact us at: Chargingenquiries@ahvla.gsi.gov.uk