Economic Analysis Unit (EAU) appraisal values

2006 (Q3) Short version - 28/07/08

The EAU appraisal values can be used to “estimate the benefits of proposed measures which aim to improve occupational health and safety, and to compare such benefits with the cost of government intervention.” ^[1] The prevention of workplace accidents and work-related ill health leads to a reduction in costs to society, and the EAU appraisal values are used to inform estimates of the size of such reductions in cost.

The EAU appraisal values give the unit costs to society for three kinds of workplace accidents and ill health:

• Fatalities;
• Non-fatal injury accidents; and
• An average case of ill health.

In all three categories the overall unit cost to society of an incident is divided into its component costs:

• Human costs;
• Cost of lost output; and
• Resource costs.

It should be noted that the 2006(Q3) values for the resource component of an average case of ill health incorporate changes in methodology based on recent research ^[2]. As a consequence, the ill health values are not comparable to previous estimates.

Wherever possible, specific estimates for human costs, the cost of lost output and resource costs should be made for each new policy appraisal. However, if it is not feasible to produce estimates specific to an individual policy then the human costs, cost of lost output and resource costs estimates presented in Table 1 should be used.

Fatalities

The Department for Transport (DfT) estimate the human costs, lost output, and medical costs saved in preventing a road accident fatality. Human costs represent the cost of “pain, grief and suffering to the casualty, relatives and friends, and, for fatal casualties, the intrinsic loss of enjoyment of life over and above the consumption of goods and services.” ^[3]

These estimates are currently published in the “Highways Economics Note No. 1”, which can be found on the DfT website ^[4]. Future estimates will be published in the “Transport Analysis Guidance (TAG 3.4.1)” ^[5].

Non-fatal injury accidents

Non-fatal injury accidents are classified into three categories:

• Major injuries (absence over three months);
• Other reportable injuries (absence over three days); and
• Minor injuries.

These accident categories do not correspond to the DfT serious and slight injury classifications that are used in “Highways Economics Note No 1”.

Human costs

The estimated human costs associated with each non-fatal accident category are based on the methodology set out in Davies et al (1999). This methodology is based upon the DfT human cost estimates but uses different injury state classifications.

Lost output

The lost output due to an accident is taken as “equal to the labour cost that is normally incurred in employing the absent worker, plus any sick pay” ^[6]. The “lost output” appraisal values are based on estimates from Davies et al (1999).

Resource costs

The resource costs for non-fatal injury accidents include property damage, administration, recruitment, HSE and local authority investigation costs, and medical treatment. The “resource costs” appraisal values are based on estimates from Davies et al (1999).

Ill health

The ill health appraisal value gives the unit cost to society for an average case of work-related ill health. As with the injury values, the ill health estimate is divided into three component costs  -  human costs, lost output, and resource costs.

Human costs

Ill health human costs are based on the methodology set out in Davies et al (1999). The EAU appraisal value is for an average case of ill health. The human costs estimate is calculated as a weighted average of the human costs of different cases of ill health categorised by length of absence.

Lost output

The definition of lost output for a case of ill health is the same as for accidents. The length of absence is taken as the average number of days lost due to ill health.

Resource costs

The resource costs for a case of ill health include administration, recruitment, and medical treatment. The costs of administration and recruitment are based on the methodology set out in Pathak (2008).

Table 1: 2006 (Q3) EAU appraisal values ^[7]

	Human cost	Lost output	Resource costs	Total [7]
Fatality	£991,200	£520,700	£900	£1,500,000
Major injury	£18,400	£16,200	£5,800	£40,500
Other reportable injury (O3D)	£ 2,700	£2,600	£500	£5,800
Minor injury	£200	£100	£50	£350
Average case of ill health	£6,700	£2,700	£800	£10,100

Please note that a revision to the initial estimates for the costs for an average case of ill health (published in August 2008) has been made in November 2008.  The estimates published for the average case of ill health now reflect the most up to date information available.

References

1. Para 189, p 54. Davies et al, (1999), “The costs to Britain of workplace accidents and work-related ill health in 1995/96”, HSE books. [back to 1]
2. Refer to Pathak, M. (2008), “The costs to employers in Britain of workplace injuries and work-related ill health in 2005/06”, HSE Discussion Paper Series 002. 
   Also see 'EAU Appraisal values 2008 - Presentation' [45KB] for an overview of the changes in methodology and further issues to consider. [back to 2 ]
3. Para 5, p 4. Department for Transport, 2007, “High Economics Note No.1 (HEN 1):2005”. [back to 3 ]
   
4. Values from the HEN 1 (2005) have been updated to 2006(Q3) figures using nominal GDP per capita. [back to 4 ]
5. http://www.webtag.org.uk/webdocuments/3_Expert/4_Safety_Objective/3.4.1.htm.
   Note that HEN 1 (2005) should be used until updated values are included in TAG Unit 3.4.1. [back to 5 ]
6. Para 110, p 37, Davies et al, (1999), “The costs to Britain of workplace accidents and work-related ill health in 1995/96”, HSE books. [back to 6 ]
7. Totals may not equal the sum of cost categories due to rounding. [back to 7 ]