Health and Safety
Executive / Commission
Regulatory Impact Assessments: Chemicals
This regulatory impact assessment covers the new regime being introduced by the Biocidal Products Regulations 2000 and by a European Commission Regulation concerning the review of biocides on the market on 14 May 2000.
1. The Biocidal Products Regulations (BPR) are being introduced to implement the Biocidal Products Directive (BPD) in Great Britain. This article 100A Directive, which must be implemented by May 2000, was introduced following an assessment by the European Commission of regulatory schemes in Member States. The assessment showed that biocidal products have widely different regulatory status in Member States, ranging from little or no controls to comprehensive schemes. Such disparities can lead to barriers to trade between Member States.
2. The BPD will set up a European Union (EU) wide authorisation scheme for placing biocidal products on the market. Biocidal products contain one or more active substances which give them the ability to control a target organism. They include pesticides, such as wood preservatives, public hygiene pest control products, marine anti fouling products, disinfectants, water biocides and certain industrial preservatives (e.g. textile treatments). Member States must recognise products authorised in other member States.
3. Under transitional arrangements, products containing existing active substances could remain subject to existing national controls for up to 10 years subject to an EU review programme for such substances. This RIA is based on the EU reviewing all active substances in a ten year period.
4. There are several thousand biocidal product formulations and several hundred active substances which are used in them currently on the EU market. The total EU market for active substances is estimated to be worth up to £330m and the market for biocidal products is about three times larger. The UK share is about one sixth of the total European market.
5. It is very likely that even without the BPD, biocides would be facing increased controls. The Government’s recently published Chemicals Strategy, which exempts biocides because of the BPD, allows for hazard assessment (based on the intrinsic properties of a substance) as well as risk assessment (which takes account of the probability of the hazard being expressed). In addition, Member States could have been expected increasingly to take action under the Marketing and Use Directive (76/769/EEC) to prohibit the marketing and use of biocides in certain usage areas - for example wood preservation and anti fouling paints, and these controls would not have been based on such a comprehensive risk assessment as will be possible under the BPD.
6. The EC assessment showed that biocidal products are extremely varied. They have widely diverse hazards and exposure scenarios and can present potential risks for the environment, at the workplace and for the consumer.
7. Options are severely limited. As European Directives must be implemented by either regulations or an Act of Parliament, implementing this Directive by any other means (guidance or an ACoP) is not an option. We consider the introduction of new regulations which are consistent with the Directive to be the preferred option.
8. The costs of the BPR have been estimated in consultation with the Chemical Industries Association (CIA). They measure the compliance costs of the BPR over and above existing regulations - e.g. The Control of Pesticides Regulations (CoPR), Notification of New Substances (NONS) etc. It is thought that non - compliance with existing regulations is not significant.
9. Unless stated otherwise, all cost data are in 1998/99 prices. Under transitional arrangements, products containing existing active substances could remain subject to existing national controls for up to ten years subject to an EU review programme for such substances established by the BPD. Since the large majority of costs are staff time, costs over ten years are uprated by 1.8 per cent per year to allow for real increases in earnings. These projected costs are then discounted using the Treasury recommended discount rate of 6 per cent. This year (2000/01) when the regulations come into force, is taken as the base year for discounting, so costs are projected over the ten year period 2000/01 to 2009/10.
10. There are likely to be health and safety benefits from the extension of regulatory control over biocidal products, though these cannot be quantified. Under BPR, the information necessary to carry out rigorous risk assessment of both active substances and products will be made available. The BPR aims to provide a high level of protection for people, both at work and consumers, with risk management in place where appropriate.
Environment
11. There are likely to be environmental benefits. Biocidal products may have the potential to cause adverse effects in the environment as a result of exposure through use. The BPR aims to ensure a high level of protection for the environment, with risk management in place where appropriate. Environmental benefits are difficult to quantify without extensive and protracted research.
12. Industry expressed concern during consultation that the financial burden of complying with the BPD will drain resources from research and development and delay the introduction of more environmentally friendly products. HSE acknowledges that this may be the case. However, we note that only a small number of new active substances are introduced to the market each year. The majority of new products are reformulations using active substances already available and there are opportunities to read across to data already available on the existing products.
Trade
13. The BPD helps to further open up the EU market in biocidal products by breaking down barriers to trade for products that are currently controlled. Of the 23 product types, 9 currently require approval in the UK. In the EU, products that gain authorisation/registration in one Member State will gain access to other Member States. Harmonisation will also stimulate competition between companies based both within and outside the EU. Increased competition should widen consumer choice and lower prices. However these benefits cannot be quantified.
Cost savings
14. For the product groups where there are existing controls, the simplified procedures contained within the BPR for basic substances, low risk products and frame formulations are expected to result in time savings and consequently cost savings, as lower fees are anticipated. There will be some benefits to companies using biocides as intermediate products in their own business, notably by making it easier to complete assessments required under the Control of Substances Hazardous to Health Regulations.
15. The scope of the Directive is very wide and covers any product designed to control unwanted organisms not defined or within the scope of other EC legislation. Business sectors affected include producers of:
Some of these product types have been subject to an approval scheme in the UK for some time under other legislation, but most will become subject to such a scheme for the first time under the BPR.
16. The costs of the Regulations have been estimated in consultation with the Chemical Industries Association (CIA). The costs estimated here are those incurred by UK industry (the costs to HSE will be recouped from firms) in seeking authorisation or registration to place biocidal products on the UK market. The costs to UK industry of applying for first or mutual recognition, authorisation or registration in other Member States are not included. It is thought that such applications for first authorisations and registrations will be rare - nearly all biocidal products supplied by UK industry are also supplied to the home market and it would be normal in these cases to apply for first authorisation or registration in the home country.
17. The number of mutual recognitions sought by UK industry in other Member States will be more significant, although the cost of each application will be smaller than a first authorisation/registration. It would, in any case, be very difficult to assess the cost to UK industry in this respect. This would depend not only upon what other Member States will charge under their implementing regulations, but also upon their current requirements.
18. Industry also believes a significant number of actives and products currently on the market will no longer be supported, as the biocides regime will make production uneconomic. Industry claim that loss of multiple actives and products from those used to maintain public hygiene could lead to public health concerns. However they have not been able to provide sufficient information to enable HSE or Department of Health to make any assessment at this stage of the impact of their claims. HSE has contacted the United States Environmental Protection Agency, which has fewer approved anti microbial active substances than appear on the current EU list. Their advice is that public health concerns regarding a reduction in the number of active substances in the UK are premature, particularly if the concerns are related to microbial resistance.
19. If a product can only be produced using one particular active substance, then the manufacturer could maintain production by passing the extra costs of complying with the BPD onto the consumer in the form of higher prices. This should be possible for the majority of products although the view of one company is that some companies operating in certain niche markets may not be able to charge more for their products. HSE does not have any information to gauge the extent to which this might occur.
20. Industry have also stated that increased competition resulting from the harmonisation of Member States authorisation and registration requirements will place an additional burden on them. With more competitors, companies may be forced to cut their prices and therefore may experience lower profits. However, the consumer will benefit as they will have more money available to spend on other goods.
21. Under the BPD, existing active substances will need to be reviewed prior to inclusion on Annex I. The CIA estimate that the cost of producing data for this could be between £2.1m and £3.1m per active substance, plus £0.16m to £0.31m per active substance in compiling dossiers, agreeing task forces etc. It is estimated that about 400 existing active substances across the EU will be supported during this review process.
22. As a minimum cost we assume that sufficient data are already available on 150 of these 400 active substances, as they are currently subject to approval regimes broadly equivalent to BPR. For the remaining 250 we assume costs at the low end of the CIA ranges (i.e. £2.1m and £0.16m) and that for each of these active substances £0.78m of data are already available (based upon the cost of gaining approval in the USA). This gives a total cost per active substance of £1.48m and a cost of £370m across the EU. We assume that one-sixth of this is incurred by UK industry, giving a cost in the UK of about £62m.
23. For the maximum cost we assume that sufficient data are available for only 100 of these 400 active substances (in line with about 100 active substances currently listed under CoPR). For the remaining 300 we assume that costs are at the high end of the CIA ranges (i.e. £3.1m and £0.31m) and that only £0.1m worth of data are already available (roughly equivalent to the cost of a basic NONS data set). This gives a total cost per active substance of £3.41m and a cost of £1,023m across the EU. We assume that one-sixth of this is incurred by UK industry, giving a cost to the UK of about £171m.
24. For some active substances some additional data will in any case need to be provided under NONS or the Existing Substances Regulation (ESR) in the long term. The effect of the BPR will be to bring forward these costs. We assume that this applies to one-tenth of the 400 active substances and that £0.68m (£0.78m used in the minimum cost estimate, less £0.1m already deducted for the basic NONS data set) worth of data would need to be provided. Thus £27.2m (40 x £0.68m) of the £171m maximum cost is simply brought forward as a result of the BPR and is a cost which would have had to be incurred in any case. We assume that under the BPR these data would need to be provided in five years time, whereas without the BPR it would need to be provided in fifteen years time. This is estimated to involve a cost of about £7.4m in present value terms.[2]
25. Therefore, using these assumptions, the data cost of reviewing active substances under the BPR is estimated to be between £62m and £151.2m in present value terms (the upper end of the range being £171m minus £27.2m, plus £7.4m).
26. To meet the requirements of the BPR :
27. We estimate that 800 products per year across the EU will require authorisation/registration once their active substance(s) have been reviewed and added to Annex I. However, we estimate that, for 200 of these, sufficient data will be available already as the products would have required approval under national approval schemes. Of the remaining 600, we estimate that for one-sixth (i.e. 100) British industry will need to provide the data and gain authorisation/registration.
28. The cost of providing data will vary substantially for different biocidal products. Some products will be very similar in formulation and much of the information needed for one product can be used for another - a slight variation in a set of basic ingredients is classically used to create a new brand, stimulating competition between many essentially similar products. For others, a substantial amount of data will need to be provided.
30. The CIA also stated that there would be additional costs where products needed to be reformulated. This was unquantifiable.
31. Under BPR appropriate costs incurred by HSE in regulating biocides will be charged to the biocides industry by means of fees and a general industry charge (GIC). The GIC is likely to cover the costs of monitoring the effects of biocides, research directly related to the authorisation of biocides, UK input into the European level work of other member States, establishing and maintaining the competence of the competent authority and providing information to industry. The current regulatory costs incurred by the biocides industry under CoPR, both fees and a levy, will decline over the period 2000/01 - 2009/10 as products move from one regime to another. Conversely the regulatory costs under BPR will increase. Whilst many more active substances and biocidal products will fall within scope of the biocides regime, the costs of regulating them will be spread across the European Union. Therefore we assume there will be no increase in GB regulatory costs compared with the costs which would have been incurred under CoPR if the BPR were not being introduced. There will be a distribution impact on industry as biocides will cover a larger range of product types and industry sectors than the current national pesticides regime.
32. HSE will face some additional costs in implementing the Directive, in particular for policy work and the provision of information to enforcement agencies and members of the public. This would mean first year costs of £343,000 and ten-year present value costs of £1.7 million.
33.There should be no immediate additional costs to Local Authorities: because of the 10 year transitional period their enforcement duties will initially remain the same as at present. Although BPR will eventually regulate more product types than is the case under CoPR, the additional products are currently enforced by Local Authorities under other existing chemicals legislation such as CHIP.
34. The following table gives a breakdown of the total costs to society of implementing the Directive. The ten year present value cost to society is between £133 million and £222 million.
35. The Directive is expected to have a neutral effect on consumers. Any increase in prices resulting from manufacturers passing on additional compliance costs to consumers should be balanced by the downward pressure on prices that will result from increased competition within the industry.
| One-off costs (£m), 1998/99 prices | Recurring costs (over 10 years), 1998/99 prices | |
|---|---|---|
| Active substances (including fees) | 62 to 151.2 | - |
| Biocidal products (including fees) | - | 69 |
| Costs to HSE | - | 1.7 |
| Total 10-year present value costs | 132.7 to 221.9 | |
NB To some extent the distinction between one-off and recurring costs is an oversimplification. For some active substances the review will be spread over a number of years and for some products industry may choose to supply data “up-front” at the time of the review of the active substance. Recurring costs decrease each year throughout the ten year appraisal period.
36. The bulk of the development of new active substances used - where costs will be high - is undertaken by large firms, rather than SMEs, and so the latter will not be as adversely affected. However, there are “niche” markets (for example preservatives) where SMEs have a large share. In some cases the additional requirements for testing and supplying data may create a barrier to market entry. The chemical industry have informed us that costs will inhibit innovation and lead to loss of business, and that the costs incurred by a small enterprise manufacturing an active substance or a range of products would significantly outweigh any benefits. While in general costs to SMEs are likely to be less than those to large firms, benefits are also likely to be less. The benefits of free trade and the opportunity to take advantage of economies of scale is likely to benefit larger firms the most.
37. HSE consulted nine small firms that are expected to be affected by the BPR. Four replies were received. Two were unable to provide data on costs and did not see any benefits from the BPR. However, two other small firms did provide more detailed information.
38. The first operates in a niche market supplying a specialised product to a large organisation. The firm stated that the cost of complying with the BPR was too great and they would be forced out of the biocides industry. They were not aware of alternative products, although HSE has since discovered that there are alternatives available. It is therefore likely that the small firm will be adversely affected by the BPR.
39. The second small firm was more positive. While it was concerned about potentially high costs, it believes that the BPR will make small firms achieve the same high standards as their larger competitors and will create new opportunities through improved access to the European Single Market.
See paragraphs 11 and 12.
40. The ten year present value costs are estimated to be between £133 million and £222 million. Implementation of the Directive is expected to result in benefits to health and safety, trade and the environment and some cost savings should occur. However, we are unable to quantify these benefits so a quantitative comparison of the costs and benefits is not possible. During the European negotiation of the Directive the UK emphasised the importance of the cost-benefit balance but insufficient other Member States shared this concern: whilst the UK did achieve some reduction of costs through inclusion of special procedures for authorisation of some products, the final cost-benefit balance was the best the UK could secure from the negotiations.
41. To produce the cost estimates it has been necessary to make a number of assumptions, in particular on the number of active substances and products affected and the cost per active substance/product. There is considerable uncertainty attached to these assumptions. However, they have been made in consultation with the CIA and represent HSE’s best estimates using the available information. The cost in relation to biocidal products might have been presented as a range and the cost estimate here should be seen as indicative of the scale of costs rather than a precise estimate.
42. The Biocides Review Regulation is currently being developed in Europe. Until this is agreed by member States, there is uncertainty about how the review programme will operate. As the timing and priority order of the review of active substances are not yet known, the range of costs presented for the review of active substances captures some of this uncertainty.
43. This RIA was sent as part of the regulatory consultation document to more than 1200 organisations and there were more than 1600 hits on the Internet. Fifty - one sets of comments were received in total. Most respondents had views on the RIA. Comments received have been summarised into four main categories - costs, effects on small businesses, lack of quantified benefits and public health concerns. All comments have been discussed and where possible incorporated into the text of the RIA - the text in bold shows the changes that have been made. A summary of comments received is available from the contact point.
44. Monitoring of biocidal products which have been placed on the market is a requirement of this Directive. Information has to be forwarded to the European Commission every three years after the regulations come into effect.
45. Information obtained from monitoring biocidal products will also be fed back into the authorisation process.
46. The main guidance document explaining the new regulations will contain a feedback form for comments on the new regime to be fed back to HSE.
47. A formal evaluation of the Regulations will be carried out within three years of them coming into force.
I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs.
Signed by the responsible Minister
Date
[1] Costs in this section have been calculated by uprating the costs in the 1998 Cost Benefit Assessment by 1.8% a year in real terms (in line with the historical growth in average earnings).
[2] This involves subtracting the cost of providing the data in 15 years time from the cost of providing in 5 years. There are two steps in each calculation. Firstly we assume costs rise by 1.8% per year in real terms (in line with the historical growth in average earnings). Secondly, costs are discounted using the Treasury recommended real discount rate of 6%. The cost of providing data in 15 years time is : £35.5m (given by £27.2m x 1.01815) x 1/1.0615 = £14.8m. The cost of providing the data in 5 years time is : £29.7m (given by £27.2m x 1.0185 ) x 1/1.06 5 = £22.2m. Subtracting £14.8m from £22.2m gives £7.4m.