The Maritime and Coastguard Agency (MCA) is required to comply with the guidance set out in HM Treasury’s publication Managing Public Money when recovering the full cost of the fee-funded services it provides in its role as a regulator which covers direct and indirect costs associated with delivering services to the public. The full cost recovery norm to fees ensures Government neither profits at the expense of consumers nor makes a loss for taxpayers to subsidise.
Since September 2006, the MCA has not changed its fee level and has consequently absorbed increases in ship registrations, ship surveys and merchant navy training costs. As a result, the industry has paid below-cost fees so the services which the industry has received have been publicly subsidised. There has been a shortfall between income and costs for the services provided in each year since 2010-11 (and likely since 2006). The shortfall for 2010-11 (the base year) is estimated at £3.7m (in 2010 prices). MCA efficiency improvements have helped maintain standards while keeping costs down.
The recently published Maritime Growth Study identified full cost recovery as critical to improving the service provided by the MCA. Lord Mountevans recommended that government take: “timely action to fully recover the cost of the services being provided and facilitate continuous improvement in service delivery, while remaining competitive with other international shipping registries.”
Achieving full cost recovery will allow the MCA to establish a strong foundation for future service improvements and enable the transformational change to services which will improve productivity and responsiveness.
Public sector organisations normally pass on the full cost of providing a service to each user of the service. The law allows the MCA to set fees to cover the full cost which we incur in the course of statutory service provision provided except in the case of Inspections where the power under the Merchant Shipping Act 1995 is excluded and no mandatory fee is raised.
The MCA recently performed a time and cost study to apportion costs against each fee generating activity for the Agency to get an up-to-date picture of the processes involved, as the fees were last updated in 2006. This exercise has improved the direct cost and overhead allocation mechanism which ensures that the user pays principle is applied.
It should be noted that the Premium service fee is unchanged and remains payable in addition to the revised fee for certain services if a customer wishes for their request to be prioritised above the standard delivery timeframe.
The Agency intends to review fees on a more frequent basis in future to minimise the impact of fee changes on its industry stakeholders. The Agency also intends to update its modelling capability to ensure future costs for statutory work are fully recovered, and to enable it to respond more quickly to changes to the cost base as services to customers improve.
The full consultation documentation can be accessed by following this link.
Please note the consultation will close on 26 October 2016.