Programme for the day

1. AHVLA GB wide Charging for ServicesIntra-Trade and Export Health CertificationInformal Stakeholder Engagement8th January 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. Responses are due by the 9th Jan 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 Intra-Trade Animal Health and Export Health Certification

11. 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

12. 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

13. 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

14. 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.

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

16. 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 .

17. 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

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

19. 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

20. 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

21. 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.

22. Travel time

23. 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.

24. Efficiencies

25. 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. • Implementing an agency-wide LEAN programme.

26. Impacts

27. 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.

28. Overview of Intra-Trade and EHC Workflow

29. Payment and Fees

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

31. 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

32. 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

33. 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

34. 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

35. Lunch

36. Question & Answer Panel

37. Questions & Answers Intra-Trade Animal Health and Export Health Certification

38. Questions & Answers AHVLA’s Full Cost Recovery Method[FCR]

39. Questions & Answers Payment and Fees

40. What happens next? • January 2014 to May 2014: • Continued informal engagement with stakeholders • Pre-consultation work to prepare for consultation • Seek Ministerial clearance to go to Consultation • May 2014 to July 2014: • Undertake formal consultation • July 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

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

42. Summary & Close

43. Thank you