CAA safety levies are dangerous: Some shocking facts about the slush fund

17 March 2019 / by the GAA team / Agricultural, Costs, Governance, Safety

We’ve come a long way… or have we?

On 1 July 2017, the CAA removed hourly charges for routine surveillance (audits and inspections). This was sold to operators on the basis that all future routine audits and inspections would be free. Where operators were found to be non-compliant, follow-up activity would be charged at the existing standard hourly rate.

Hourly rate charges would continue to apply to certification, activities requested by the operator, senior person interviews and manual amendments.

At the time, we noted that LTSA audits of trucking firms and the like had always been free, so it was logical to think that the MoT and CAA were sensibly aligning their policies.

Not so. In place of the hourly cost for routine surveillance, the CAA then introduced operations-based “safety levies”.

The 2017/18 CAA Annual Report discloses that all levy money is tossed into the same bucket. This shouldn’t be occurring, because there are different regulatory levy charges imposed on different categories of operation using different rationale. In essence, the safety levies are just a slush fund from which the CAA spends nothing to specifically improve the safety of operations from which they have been collected.

By calling these charges “safety levies”, the CAA has given them an air of legitimacy which is, of course, all smoke and mirrors and designed to hoodwink the politicians who approved changes to the CAA funding regime.

As an indication of the impact of these levies, a Part 137 Ag operator has provided us with a breakdown of their costs:

Audit costs over three years prior to 1 July 2017 amounted to $14,076.72. Only one of those audits would meet the no hourly charge criteria within the current system.

The safety levies paid for four quarters (1 July 2017 to 30 June 2018) came to $14,309.61. In other words, in the 12 months of 2018, the safety levies were greater than the combined cost of audits over the previous three-year period!

If that wasn’t bad enough, on 1 July 2018, the rate for CAA safety levies doubled for most operators. (The new levies were phased in over two years. For the first year, i.e. from 1 July 2017 – 30 June 2018, levies were calculated on 50% of the rate for each activity. In the next and subsequent year, levies are calculated on the full rate.)

This operator is forecasting that as a result of the cost increase, for the 1 January 2019 to 31 December 2019 period, their safety levies will be in excess of $25,000 – a staggering 42.76% increase.

SMS costs

To become Part 100-certified, the operator was invoiced for $10,557.54. This was considered to be excessive, bearing in mind that there were no findings requiring follow-up work. Added together, the compliance costs of operation safety levies and SMS certification will cost this operator in excess of $35,000 for the period 1 Jan 2019 to 31 Dec 2019.

In the Annual Report 17/18, the Regulator stated that it was recovering more money than budgeted for from SMS. This means that either there are a lot more operators in the system, or the regulator is over-regulating or overcharging more for SMS certification than was considered appropriate at the time SMS was approved by the Government.

This is what economists term “regulatory creep” but it indicates to us that neither the CAA Board nor the MoT are holding the CAA accountable.

The operator makes the point that although they believe that SMS is a positive safety programme, they would have been financially far better off under the old regime of paying for audits and then having money to spend on complying and continually improving their SMS.

These operation levies have been in effect since July 2017 and it is imperative that we get some data on operators’ actual costs post-July 2017.

For instance:

  • Are you better or worse off than you were under the old system of being charged an hourly rate for audits and inspection?
  • Was the cost of obtaining SMS certification greater or less than you anticipated?

If you would be prepared to provide, on a strictly confidential basis, information on how this change to operations-based safety levies has affected your business, we would be very grateful. Please initially use the website contact form, and we’ll be in touch.