Over the past few years, there has been an explosion of private companies issuing fines on behalf of local authorities, and being paid per fine issued. The more fines they issue, the more money they make, which means that they have an overt financial incentive to issue as many as possible. The result is the inevitable corruption of punishment, with people being fined for minor or non-offences, such as dropping an item by accident or even placing an item temporarily on the floor.
In September 2019, Defra produced guidance seeking to rein in the practice of issuing fines for profit. This guidance said that enforcement should not be used as a means of raising revenue:
in no circumstances should enforcement be considered a means to raise revenue. Any perception that enforcement activity is being used intentionally to generate income is likely to undermine the legitimacy of the enforcement regime in the eyes of the local community, which in turn may diminish the deterrent effect.
The guidance stated that there should be no financial incentive to issue penalties:
private firms should not be able to receive greater revenue or profits just from increasing the volume of penalties, since this runs contrary to the overall aim of reducing the number of offences committed.
Yet an investigation of any of the dozens of councils still employing private companies to issue fines show that this guidance is being roundly ignored. Council documents show that enforcement is seen primarily as a means of raising revenue, and that private contractors are favoured because of their ability to deliver a revenue stream at no cost to the council.
Moreover, private contractors are still being paid per fine issued, and therefore must issue a certain number of fines in order to make a profit, and can increase this profit by increasing the number of fines.
Hull Council
Hull Council’s report to the Cabinet and Scrutiny Commission last July outlined six options for enforcing letter penalties, from in-house enforcement to various arrangements with a private contractor. These arrangements included a 20% revenue share with the private contractor on all paid FPNs, revenue share after costs of the private contractor were covered, and payment to the contractor for every FPN issued (whether paid or not).
The 20:80 split with the private contractor was favoured, on the basis that it would deliver a reliable financial income to the council at no financial risk:
With option 1 the Council has no financial risk and during the pilot project delivered an income of £43,038 to the Council (up to June 2021) so this option is proven to have worked with the incumbent contractor.
The report noted that perhaps other options could deliver more revenue, but they would come with more financial risk. Therefore, the decision about the ‘model’ of enforcement is being made solely as an investment decision, and not as a matter of public benefit or justice.
It is also clear that councils are using, and depending upon fines income for the delivery of public projects. The report stated that:
in terms of the positives from the pilot, what we can say is that an enforcement service has been successfully introduced in Hull at zero cost. In addition, the revenue share arrangement (income from 20% of all FPNs paid comes to the Council) generated £43,038 in income over the period for the Council which has been ring fenced to fund the Love Your Street project moving forward. If litter enforcement didn’t continue at a similar scale this would represent a revenue pressure for the Love Your Street project.
Therefore, the council is under pressure to continue the fining arrangement in order to fund public programmes.
The report notes the problem that payment of fines has been lower than expected, probably because lockdown and other covid pressures have left many people with less money: ‘The financial impact of Covid-19 is thought to have impacted on some litterer’s ability to pay’. Yet the existence of public hardship does not appear to be of concern to the council, except inasmuch as it has reduced expected penalty income.
It is additionally unclear whether enforcement has led to any public benefit such as cleaner streets. The report said it was ‘very difficult to assess’ whether the pilot had led to a reduction in littering or an increased cleanliness of the streets. It noted that the majority of fines were issued for cigarette butts rather than more substantial litter. The report suggested that fining had the positive effect as a ‘demonstration of the Council’s stance on littering, and commitment to protecting the environment’ – which suggests that punishment becomes a form of PR, rather than a proportionate recompense for harmful acts.
Thurrock Council
A report for the Thurrock Council scrutiny committee in February 2021 considered the different options for enforcement primarily in terms of their financial results. Since 2017, the council has contracted a private company to issue penalties for litter and dog offences, and more recently for violations of Public Spaces Protection Orders. The council paid the contractor £42.50 per fixed penalty notice issued; it had recently raised the penalty to £150 with no early payment option, leading to the very high profit of £107.50 per FPN for the council.
The report concluded:
The contract has been delivered on a ‘No cost – No risk’ financial model and has demonstrated that, providing that it is closely managed, it can deliver excellent results and generate significant income for the council at minimal financial risk to the authority.
The council therefore favoured the continuation of a payment-per-fine model. However, it recognised that it had a better than average deal, and that any new contract would yield a lower proportion of each fine issued. This presents a pressure on the departments that have come to rely upon penalty income as part of their budget:
Whilst a new contract would continue to provide an income stream to the authority, any change to the percentage in favour of the contractor would make it more challenging for Enforcement to meet the budgeted income target, which forms part of their budget.
The council also announced an intention to increase prosecutions, and resulting fines, in order to prevent any reduction in payment rates or overall income:
The current payment rate at 64% is resulting in a positive financial position. If the payment rate dropped below 40%, this would mean the contract was making a loss. To prevent a drop in payments this Council is committed to prosecuting non payers and publicising those cases that result in a successful prosecution against offenders. The Council have an effective prosecution process in place and have passed over 1200 cases of non-payment for prosecution, resulting in an increase in the estimated 60% payment rate and a successful prosecution rate.
Here, prosecution is presented not as a matter of justice – and there is no proportionality test, given that many of these prosecutions will be for cigarette butts. Instead, prosecution becomes as a means of mitigating financial risk and protecting income streams.
Swale Council
A report by Swale Council in February 2021 recommended that the council enter into another three-year enforcement contract with the company LA Support.
The reasons for this were again primarily financial, generating an income that could be used for public environmental projects.
Based upon an estimate of 2 Officers each issuing 1000FPN’s a year, it is estimated that the annual contractor costs will be £103,500pa. Based upon an estimated payment rate of 65%,the FPN income will be £195,000. Once all costs have been deducted then this project could contribute around £70k per annum for environmental improvements (plus the added value from the contractor’s other initiatives).
The council said that one of the attractions of the contractor was that they would receive and process FPN payments:
One of the added benefits of this contractor will be that they accept and monitor the FPN payments. This will save the council time and money.
This indicates a desire to off-load responsibility for running enforcement to outside contractors, reducing ‘risk’ and investment by the local authority, while generating a steady income stream.
Dartford
A Dartford Council report outlined its reasons for extending a contract with a private company, from January 2020 to January 2022.
The council summarised the account balance of the contract so far:
£42 of each litter FPN was retained by LA Support Limited to fund the Enforcement Officers and £33 retained by the Council. So far the Council had paid LA Support Limited £466,450 and collected £602,680 realising an income of £136,230. The Council also took legal action against offenders who did not pay the FPN and had been awarded court costs of £50,980 against expenditure of £25,100.
The report also showed that private contractors are expanding the range of offences, moving into the punishment offences including A-boards, fly-posting, and the violation of PSPOs.
The terms of the existing contract with LA Support Limited contained a provision for the contract to be extended by a further two years and for the addition of the additional offences and the contractor was keen to broaden the pool of offences. Officers had examined the experience of other authorities where a wider range of offences were enforced and concluded that the enforcement delivered positive results. The proposed financial split of 70:30 on all Fixed Penalty Charges (FPN’s) that had been paid by offenders would deliver a projected annual income to the Council of £133,995 which could be reinvested to support the Council’s corporate priorities and keep the borough clean and tidy.
The contractor provided a ‘projected income’ spreadsheet, detailing how many of these different FPNs it would expect to issue. This included 1000 penalties for violating PSPOs, 3500 for littering, 100 for A-boards, and 100 for the offence of ‘selling and repairing vehicles on the highway’.
This shows that local authorities are outsourcing a wider range of offences, which means that private security officers will be able to issue a greater number of penalties per day, increasing profit for the private company and for the council.
Conclusion
These council documents show that some councils are employing private companies on a commission basis, with a direct incentive for the company to issue as many penalties as possible.
Councils are relying upon penalties to finance core budgets and special public projects. This means that they cannot allow these penalties to drop, and are reliant upon them as an income stream.
These documents show that councils are not primarily considering public benefit such as cleaner streets, or the public interest of enforcement, when they are negotiating these contracts. The primary, and often sole consideration is financial, in terms of the amount of income that can be generated for the council, at the smallest possible risk and investment of time or resources.
Therefore, some councils are approaching enforcement not as a public service, but as a source of ‘free money’ – and it is this that makes them attracted to ‘no risk’ commission deals with private companies.
These reports show that Defra guidance has not yet had an impact upon council enforcement practices, and that further legal measures are necessary in order to prevent this mercantile approach to punishment and the resulting injustice.
The government has gained powers in the Environment Act to create guidance governing litter enforcement. This would allow the existing Defra guidance to be put on a statutory footing, subject to a public consultation. We would urge Defra to proceed towards placing its existing guidance on a firm legal basis, to prevent the continued corruption of punishment.
There is a further question with the move of fining-for-profit into the enforcement of PSPOs and other anti-social behaviour offences. These offences are governed by Home Office guidance, and the current statutory guidance makes no mention of the question of subcontracting private companies for the issuing of fines. We therefore suggest that the Home Office should consider guidance similar to that of Defra, to ensure that penalties are issued fairly and not according to the profit motive.
- Funding for this report was received from the Joseph Rowntree Reform Trust. The Joseph Rowntree Reform Trust has supported this work in recognition of the importance of the issue. The facts presented and the views expressed in this report are, however, those of the authors and not necessarily those of the Trust. www.jrrt.org.uk