Select Committee on Economic Affairs Fifth Report


CHAPTER 5: Risk Management—Two Cases

74.  The risk assessment guidelines adopted by the Government emphasise the importance of openness and transparency in the formulation and implementation of policy, and the requirement that policy decisions should be evidence-based. Openness and transparency imply that the objectives of policy should be clearly stated and that policy should be designed with clear objectives in mind. Good practice in the use of evidence also suggests that policy should be formulated and applied in response to clearly defined problems, with appropriate evidence to support the judgement that a problem exists and that a policy response is required.

75.  In this chapter we draw together some of the themes and issues discussed earlier, by examining two cases which illustrate how risk guidelines have been interpreted and applied in specific circumstances.

Passive Smoking

76.  The recently introduced bill to ban smoking in public places illustrates a number of worrying features connected with the formulation and promotion of legislation[49]. The stated objective of the bill was to ban smoking at work and in enclosed public places, because passive smoking imposes a significant health risk on workers and others exposed to environmental tobacco smoke (ETS).

77.  In order to evaluate the operation of risk policy in this area, we considered a range of evidence, much of which cast doubt on the stated rationale of the legislation. In her evidence to us, Caroline Flint, Parliamentary Under Secretary of State for Public Health, commented that:

"it is clearly the case that, in relation to deaths from smoking and second-hand smoke, the most serious aspect of that is smoking in the home. Ninety-five percent of deaths are related to smoking in the home"[50].

Other evidence we received suggested that the health risks associated with passive smoking are relatively minor and the main harm, if there is one, concerns children who are exposed to passive smoking in the home, which is something the bill is not designed to address[51]. Sir Richard Peto did suggest that ex-smokers might be more at risk from ETS than those who had never smoked at all, but the general tenor of his evidence indicated that the risks are uncertain and unlikely to be large[52].

78.  Given the evidence about the impact of passive smoking, we are concerned that the decision to ban smoking in public places may represent a disproportionate response to a relatively minor health concern. It may be that the unstated objective of policy is to encourage a reduction in active smoking by indirect means. This may well be a desirable policy objective, but if it is the objective, it should have been clearly stated.

79.  If, however, it is accepted that policy on passive smoking has been genuinely concerned only with a reduction in smoking in public places, other issues about the formulation of policy in this area are raised, in addition to any concern that the ban on smoking may represent a disproportionate policy response. One of these issues is whether decision-making in this area has given sufficient attention to alternative policy responses, as required by the Treasury guidelines. For example, the Confederation of British Industry (CBI), in their written evidence to us argued strongly that voluntary smoking bans are already in place in many areas and that business saw the legislation as further evidence of unnecessary intervention by government[53].

80.  In the context of the passive smoking debate, we also took evidence from the Health and Safety Executive. When questioned about the impact of the smoking ban on consumers and workers in relevant establishments, and the possibility that people have the option of choosing not to visit or work in smoking environments if they are concerned about the possible health risks, the HSE dismissed the idea of relying on labour market forces to deal with the problem:

"we find rather repugnant the idea that people should have a choice between having that level of safety or alternatively being paid more and not have it, not least because it is a very difficult choice for people to make. Inherently it will appeal to those who are most vulnerable because they are most in need of money, but they then become exposed to this risk from which the rest of us are shielded…we certainly do not like the idea of trading off basic safety against money"[54].

81.  In the case of the actual health risks associated with passive smoking, the HSE offered the view:

"…the evidence is pretty clear. The Chief Medical Officer regards this as an important health issue"[55].

82.  In the light of these comments, we believe that the HSE, responsible for implementing risk guidelines on the ground, should give due consideration to both the evidence related to the health risks of passive smoking and to the possibility that personal choices and market forces might be used to deal with the problem. Our concern in particular is that the HSE response does not properly reflect either the spirit or the letter of existing government guidelines.

83.  Another aspect of this issue that concerned us was the Government's attitude to the possible trade-offs between personal liberty and risk reduction inherent in many areas of legislation. In the case of the legislation to ban smoking in public places, we were concerned that the preliminary stages of policy formulation appear to have given little or no weight to this important factor. We note that government risk guidelines do not emphasise any requirement to assess the impact of legislation on personal freedoms or civil liberties. This is something that needs to be considered further.

84.  The evidence we took on passive smoking leads us to doubt whether government guidelines on risk management have been properly implemented. In particular, the purpose of legislation should have been defined more clearly and greater attention should have been given to available scientific evidence, the relative merits of alternative policy options and the impact of legislation on personal freedom and choice. Failure to consider these matters properly has resulted in the introduction of a policy that appears to demonstrate a disproportionate response to the problem. Lessons learned from the progress of this legislation should be used to ensure that future policy responses are transparent, evidence-based, and proportionate.

Road and Rail Safety

85.  The evidence we received suggests that the practical application of cost-benefit analysis and the use of willingness-to-pay-based values of safety by decision-making and regulatory agencies in the UK in their assessment of proposed public and private sector safety improvements have not always been consistent.

86.  Prominent amongst the apparent inconsistencies was the treatment, until recently, of road and rail safety. Thus, while in assessing the prevention of single-fatality accidents in which the victim has a degree of control, the rail industry uses the same willingness-to-pay-based Value of Preventing a Statistical Fatality (VPF) as is applied to road safety by the Department for Transport (DfT), until 2003 a figure equal to about three times the roads VPF was used in the assessment of projects aimed at preventing multiple-fatality rail accidents. This was in spite of the fact that empirical studies have indicated that members of the public do not regard the loss of several lives in a single accident as being markedly worse than the loss of the same number of lives in separate accidents. In addition, according to evidence presented to the Inquiry by Professor Andrew Evans, the sort of level at which the VPF would need to be set in order to justify the installation of the Train Protection and Warning System (TPWS) is even higher (though this has already been undertaken by Network Rail following the recommendations of the Cullen-Uff Inquiry)[56].

87.  The application of a differential valuation of safety on the two main modes of surface transport in the UK would imply a potentially serious misallocation of resources. Fortunately, as noted above, following widespread criticism of the differential valuation, since 2003 the rail industry and the Rail Safety and Standards Board (RSSB) in particular have now abandoned the use of the two distinct VPFs and have instead elected to apply a common baseline VPF equal to the Department for Transport roads figure. For example, in its recent document, Valuing Safety, the RSSB notes that:

"The term 'gross disproportion' was used by some people in the past to describe the concept of using a higher VPF for multi-fatality accidents. We can see no justification, either in the Edwards judgement or in the balancing approach of risk against sacrifice, for this interpretation"[57].

88.  We welcome this move towards uniformity of treatment of road and rail safety and we would encourage agencies working in other relevant areas, such as the Department of Health, the NHS and NICE, to follow in the same direction.

89.  A second source of inconsistency—again pointed out by Professor Evans—relates to the values of safety that are implied by the actual levels of expenditure on road safety undertaken in particular by local authorities and subject ultimately to their budget constraints. Thus, Professor Evans noted that in 1997 the Department for Environment, Transport and the Regions (DETR) stated that:

"The Department has monitored the introduction of recent local safety schemes and this is one of the few areas where expenditure is underpinned by a considerable amount of knowledge about costs and benefits. Clear benefits can be shown, with the first-year rate of return of these schemes typically in excess of 150%".

Professor Evans commented that:

"Such returns imply that, even if the average project produced benefits over a period of only six or seven years, the value of the accident savings would be 10 times the cost"[58].

90.  This suggests that, based on the DfT willingness-to-pay VPF, local authority road expenditure budget constraints are binding well before the level of expenditure justified by cost-benefit analysis can be reached.

91.  Turning to centrally-funded expenditure on road safety, while the DfT has set targets for road safety improvement which involve, inter alia, a reduction in the number of road fatalities by 40% by 2010[59], there are indications that expenditure on trunk road safety may, like local authority expenditure, fall short of the level that would be justified on pure cost-benefit grounds. In practice, it is difficult to extract information concerning the rate of return on centrally-funded trunk road safety expenditure per se (since safety expenditure and benefits constitute only a relatively small fraction of the overall cost and benefit figures concerned, and are also to some degree inextricable from the overall figures). However, according to the Highways Agency[60], overall trunk road investment benefit-cost ratios are in the region of 3:1. If a similar benefit-cost ratio applies in the case of safety expenditure, it would indicate a potential shortfall in road safety expenditure.

92.  Overall, there are encouraging signs that the decision-making procedures employed in road and rail safety expenditure planning are now generally well-founded, from both a conceptual and practical point of view, and that the decision-making agencies concerned are moving in the direction of consistency of application between the two modes of transport. However, the evidence also indicates that the actual levels of expenditure undertaken on road and rail safety differ substantially in the extent to which they actually reach the "ideal" levels implied by the planning procedures concerned. Thus, while even on the least demanding interpretation of the HSE's "gross disproportion" prescription, the rail industry is required to undertake all safety improvements for which benefits, appropriately defined, exceed costs, there is clear evidence that local and central government budget constraints impose a cut-off on road safety expenditure well before all safety projects for which benefits exceed costs have been undertaken.

93.  It appears that project appraisal procedures used in rail safety decision-making are now broadly consistent with those applied to road safety. However, the evidence suggests that government, in particular local government, expenditure on road safety still falls short of the level that would be justified by current safety project appraisal procedures. There is, therefore, still a need for government to ensure that road safety expenditure is set at an appropriate level, consistent with expenditures on rail safety.


49   Health Bill, introduced in the House of Commons, 27 October, 2005. The text of the bill is available at http://www.publications.parliament.uk/pa/cm200506/cmbills/069/2006069.pdf Back

50   Evidence from Caroline Flint, MP (Vol II, p 105) Back

51   Sir Richard Peto suggested that "these risks are small and difficult to measure directly" (Vol II, p 143). See also evidence from Imperial Tobacco Group PLC (Vol II, pp 196-200) and the Tobacco Manufacturers Association (Vol II, pp 249-250) Back

52   Evidence from Sir Richard Peto (Vol II, pp 143-151) Back

53   Evidence from the Confederation of British Industry (Vol II, pp 160-161) Back

54   Evidence from the HSE (Vol II, p 80) Back

55   Evidence from the HSE (Vol II, p 80) Back

56   Evidence from A. Evans (Vol II, pp 130-143) Back

57   Valuing Safety, RSSB, 2006 Back

58   Evidence from A. Evans (Vol II, pp 130-143) Back

59   Tomorrow's Roads-Safer for Everyone, Department for Transport, 2000 Back

60   New Deal for Trunk Roads in England: Understanding the new approach to appraisals, Highways Agency, 1998 Back


 
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