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Splitting costs one way

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A KEY component of the Government’s Animal Health and Welfare Strategy (AHWS) is the concept of partnership – the idea that everyone with an interest in animal health and welfare should accept their responsibilities and work together as one. An important part of that concept is the question of how costs should be shared; this question has still to be resolved, although the Government has long made clear that it believes that more of the burden should fall on the livestock industry. A strategy document published by DEFRA earlier this week gives the clearest indication yet of what the Government might be prepared to pay for in the future and, more to the point, what it will not.

The document, ‘Partners for success: a farm regulation and charging strategy’* , has been promoted by DEFRA largely in terms of its proposals for streamlining regulation, simplifying rules and ‘cutting red tape for farmers’. The strategy document indeed contains proposals along these lines, and these are likely to be welcomed by farmers. Its other main strand – that, in return for less bureaucracy, they should share more of the risks and bear more of the costs – received less emphasis at the launch and is less likely to be welcomed. Among other things, it proposes the introduction of a levy by means of which producers would share the cost of dealing with future disease outbreaks. It is only a few weeks since the House of Commons Public Accounts Committee criticised DEFRA for not having completed discussions on proposals for a levy with the industry and suggested that it ‘should not delay in taking forward proposals to transfer part or all of the cost of future disease outbreaks to the industry’ (VR, November 5, 2005, vol 157, p 565). From ‘Partners for success’ it seems that DEFRA has taken the committee’s comments to heart.

The strategy document applies a simple principle to all forms of government intervention: ‘Where market forces deliver goods or benefits for the public, the Government should not step in. Where these forces either fail to deliver, or cause damage, the Government will design an appropriate mix of policy tools to influence outcomes.’ It also makes much of the idea that farmers will take more interest in disease prevention if they have more say in the measures adopted and a financial stake in the outcome.

Applying these principles to managing the risk of animal disease outbreaks, the document points out that ‘Animal disease outbreaks can be very damaging, with severe impacts on farming and many other businesses, especially in rural areas. They also cause high costs for all taxpayers and concerns about animal welfare. The priority in addressing animal disease must be to reduce the risk rather than just putting in place mechanisms to deal with an outbreak.’ It says the Government is committed to playing its role in providing effective biosecurity controls at borders and working for the prevention and control of preventable disease. However, it notes that risk reduction can be further developed by shared ownership of responsibility for disease prevention, through greater understanding of the costs of disease and the financial benefits of prevention. It draws attention to the benefits of farm health planning as a tool to prevent disease spread, but suggests that further financial mechanisms could be used to encourage farmers to change the way they manage their animal disease risks and to control common disease problems in a practical and cost-effective way.

The strategy document draws attention to arrangements in Denmark, the Netherlands, France, Germany and Australia, all of which use some form of production levy. It says, ‘The main lesson from these countries is that, where industries share the costs of managing disease risks with government, there is greater participation by their members in reducing risk on farms. Industry also has a bigger say in how a particular disease risk is managed . . . We want to work in partnership with the livestock sector to develop new management structures appropriate for English farming practices to deal with livestock diseases.’

The Government is setting up a joint industry working group to explore risk-sharing mechanisms, and to help design ways of collecting and spending funds. The role of insurance, as well as a levy, will be among the options considered. An action plan that accompanies the document says that all interested parties will be formally consulted on the proposals by spring 2006. The aim is to have new arrangements in place by 2009.

The Government will be applying the same financial principle to meeting the costs of regulatory requirements, and says it will work with the industry in moving towards charging for appropriate regulatory services ‘in farming, as in any other business’. In doing so, it will take into account the impact on the sustainability of the farming sector, including its economic viability. It recognises that there may be circumstances where, in consultation with the industry, it might be decided to reduce, delay or defer a proposed charge. However, it says that such a decision will be recognised as explicit support for the industry, with the expectation of review in due course.

Whether transferring the costs of animal disease control to the industry will benefit animal health and welfare in the long term is at best debatable. In the short term it can only be damaging and is the last thing farmers need.

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