Overview of costs and benefits associated with regulation in Scottish agriculture

10. Scottish Statutory Instrument 2007 No. 147 The Tuberculosis (Scotland) Order 2007

Abstract

This legislation is based on EU Directive 1964/432 as amended. Additional controls in terms of pre and post movement testing were introduced in SSI 2005 No.434 the TB (Scotland) Order as part of the strategic framework for the control of b TB the aim being to reduce the risk of spreading disease through the movement of cattle. Only minor changes were introduced in the 2007 Order and the RIA for the 2005 Order therefore remains the point of reference in this case study.

In Scotland the legal requirement is that no one should accept onto a holding any cattle from a high risk area unless the cattle have been tested within the 60 day period prior to movement. Despite several breakdowns, Scotland has so far prevented the development of any high disease incidence areas, unlike the situation elsewhere in GB where the incidence of disease is increasing. While the introduction of this legislation is believed to have helped limit the incidence of the disease other factors such as changes in the pattern of trade between England and Scotland, may be partly or wholly responsible. The introduction of post movement testing has brought additional direct costs for the Scottish Government and Scottish farmers but has also brought benefits. In particular additional cases of b TB have been detected by the post movement test. Industry views on post movement testing have been positive as it is considered essential to protect the health status of Scotland and stakeholder support is strongly in favour. The costs of implementing the legislation are estimated to be low compared to the benefits to the Scottish industry. In view of the continued escalation of TB in England and Wales, the Scottish Government needs to keep the legislation under review to ensure that it continues to provide effective safeguards.

Introduction

Background

Tuberculosis is a notifiable disease that affects cattle and can be spread between cattle and carried by a wide range of mammal species including humans and badgers. Movement of infected cattle is thought to be one of the most important reasons behind the spread of the disease [1]. The disease can be difficult to detect and the symptoms are not always identifiable. In addition there are problems with the main available tuberculin skin test; it is slow, costly and not always accurate.

There is significant variation in disease levels across the UK. Incidence is highest in the South West of England and Wales and in Northern Ireland (and Eire). By contrast the level of the disease is very low in Scotland and there are no high incidence areas within Scotland.

In the calendar year 2007, Scotland accounted for just 1.8% (512 hd) of all cattle slaughtered on account of b TB across GB (29,042 hd), according to DEFRA [2]. This is despite the fact that Scotland had 22% of the Great British cattle population in 2007, according to the June 2007 Agricultural Census. In the same year Scotland was responsible for just 5% (0.291m hd) of b TB tests carried out across GB total as a whole (5.879m hd), according to DEFRA [2].

This variation in the incidence of b TB across Great Britain (and Northern Ireland) influences the control strategy and legislation adopted in each country.

The higher level of disease in England and Wales means that herds there are routinely tested on an annual or bi-annual basis compared to a four yearly basis in all areas of Scotland. Investigation into TB cases has shown that almost all the cases of infection in Scotland can be traced to imports of cattle from infected areas in England, Wales and Northern Ireland.

Cost of b TB control

The Government cost of b TB control in Great Britain is estimated at around £80m per year [2] as detailed in the following table. Government costs are incurred as a result of cattle testing, compensation for the culling of affected cattle and associated surveillance and research costs [3].

Table 1. Breakdown of bovine TB expenditure in Great Britain: 1998/99 - 2007/08 (£m)

Activity	2000/01	2001/02	2002/03	2003/04	2004/05	2005/06	2006/07	2007/081
Cattle Testing	13.3	5.4	24.7	33.2	36.4	36.7	37.8	32.6
Compensation	6.6	9.2	31.9	34.4	35.0	40.4	24.5	29.7
RBCT	6.6	6.0	6.6	7.3	7.2	6.2	1.63	0.03
Surveillance activity by the VLA	3.5	3.7	4.1	5.3	4.9	7.5	6.4	7.9
Other Research2	5.3	6.1	6.5	7.0	5.7	6.5	7.78	8.5
HQ/Overheads	0.9	0.1	0.7	1.0	1.3	1.8	1.7	1.2
Totals	36.2	30.5	74.5	88.2	90.5	99.1	79.71	79.93

Source: DEFRA [2]

In addition to Government admin. costs, the industry suffers significant policy costs in a number of areas including;

- testing

- compulsory culling

- movement restrictions

While the government pays for the costs of the tuberculin test itself, the farmer must pay for the samples to be collected. Estimates for this vary. DEFRA estimates the cost at £9.60 per animal tested [4]. Industry estimates place the cost higher. According to a survey undertaken by Reading University on behalf of RABDF these costs averaged around £15.36 per head [5]. These farm costs comprised farm labour, veterinary charges, extra resources, management time, farm business disruption and missed marketing opportunities. Considering the 5.879m hd of cattle tested in 2007/08 this could represent an estimated cost to the industry in Great Britain of between £56.43m ( DEFRA) and £90.30m ( RABDF).

The cost of culling animals is offset in many cases by government compensation although this depends on the individual situation of each farmer and the value of the cattle being culled.

Further costs to the farmer arise from movement restrictions due to loss of revenue, cash flow difficulties and higher interest costs due to the inability to sell animals at the optimum time as well as suffering potentially increased feed, housing and labour costs.

Combining the costs to both government and farmer DEFRA estimated the average cost of one confirmed incident of cattle TB at £27,000 [6]. This was divided roughly 70:30 between taxpayers and farmers respectively. The total cost comprised the value of cattle slaughtered, the time and cost of herd testing, and the cost to the farmer of isolating animals and the effect of movement restrictions on the farm business.

The 2005 order

The Tuberculosis (Scotland) Order 2005 [7] extends the reach of the Animal Health Act 1981. The Order is based on Community legislation EC Directive 1964/432. This Directive and its various amendments set conditions regarding animal health issues and international trade, specifies disease testing intervals, routine testing, definition of a TB herd, tuberculin testing and how animals can be traded between TB free herds.

The purpose of the 2005 Order is to provide veterinary inspectors with the necessary powers to require owners to present their animals for testing and meet the requirements of the EU Directive.

The 2005 Order also introduces further measures over and above the minimum requirements of the EU Directive. The main additions were the inclusion of pre and post movement testing for animals moving from high to low TB disease incidence areas.

These safeguard measures were brought in part due to pressure from stakeholder groups in Scotland who felt that existing legislation was not offering enough protection to Scotland's low disease incidence status. In fact Scotland had already been applying a system of pre and post movement testing for cattle from the island of Ireland (Eire and NI) which had proved effective in limiting the spread of infection to Scotland.

A parallel Order was also introduced into England and Wales at the same time (The Tuberculosis (England and Wales) Order 2005). Like the Scottish Order this requires pre-movement testing of cattle moving from a high incidence area but differs in that no post movement testing is required.

The operation of the testing procedure is detailed as follows. Farmers in high incidence areas (i.e. in England as there are no high incidence areas in Scotland currently) sending cattle to low incidence areas (i.e. in Scotland) are required to carry out pre-movement testing no more than 60 days prior to the date of movement.

Farmers in Scotland receiving animals from high incidence areas in England, Wales, Northern Ireland (or elsewhere) are required to ensure that the animals they are bringing in have been pre-movement tested no more than 60 days prior to the date of movement. Where these animals have not been pre-movement tested the receiving farmer in Scotland is required to have them tested as soon as practicable.

The Scottish farmer receiving animals from a high incidence area is in all cases then required to carry out a further post-movement test no fewer than 60 days and no more than 120 days after the arrival of the animal in Scotland.

Effectiveness of the Order

The benefits of the TB Order are represented by reduced incidence of disease or reduced risk of incidence of disease. The introduction of the 2005 Order must be considered alongside a range of other factors that have influenced the number of disease incidents recorded. Scotland traditionally had a very low level of disease before 2002 with an average of 4 herd incidents recorded each year between 1998 and 2001 [2]. By contrast the average over the period 2002 to 2007 was just under 20 herd incidents. The main cause of this rise was likely to have been the result of the restocking of herds in Scotland with cattle brought in from infected areas in England, Wales and Northern Ireland following the 2001 foot and mouth outbreak.

Since the introduction of the 2005 Order the number of new herd incidents in Scotland appears to have stabilised at around 20 incidents per year. The 2005 Order therefore may have contributed to a stabilisation in the number of new incidents to at or below the levels seen in 2002. However other factors may well be at work here particularly the level of cross border trade in live cattle from high incidence areas. By contrast in England and Wales the number of new incidents is continuing to rise and is now around 15% higher than that seen in 2002.

Table 2.Confirmed new herd incidents

	E&W	Scotland
2007	2194	21
2006	2027	18
2005	2076	9
2004	1747	23
2003	1639	19
2002	1891	27
2001	515	1
2000	1045	4
1999	870	7
1998	717	4

Source: DEFRA [2]

Financial Implications

A Regulatory Impact Assessment has been completed for this instrument [8]. This RIA has estimated the cost of the different options. It has not estimated the value of the benefit, though it has quantified estimates of the number of b TB outbreaks likely under each option.

Table 3 Summary Costs and Benefits Table for Scotland

Option	Outcomes	Costs
1) Do nothing	26 cases of b TB	£912,240 33% of cost incurred by farmers
2) Pre-movement testing True positives False negatives	20 5	£687,842 43% of cost incurred by farmers
3) Pre-movement testing of cattle over 15 months True positives False negatives	13 3	£395,159 39% of cost incurred by farmers
4) Post-movement testing True positives False negatives	20 5	£1,096,233 39% of cost incurred by farmers
5 Pre-movement testing and post-movement testing True positives False negatives	24 1	£1,204,767 47% of cost incurred by farmers

Source: Regulatory impact assessment for Scotland on the implementation of The Tuberculosis (Scotland) Order 2005 [8].

Option 5 was chosen for implementation in the 2005 Order and incorporated both pre and post movement testing. This option was the highest cost but brought with it the expectation of the lowest number of false negatives, representing a precautionary approach to avoiding disease incidence. Scotland's low level of infection at present reduces the chances of the disease spreading.

If increased b TB incidence were to occur in Scotland this would be likely to bring a substantial increase in cost of disease incidence or outbreak. DEFRA estimate the cost of each confirmed case of b TB at £27,000 [6]. The RIA [2] estimated potential costs and levels of b TB outcomes for Scotland, however there have not yet been any follow up estimates made of the costs and benefits that have been achieved in practice following the implementation of the 2005 Order.

EU directive and flexibility for designing legislation in Scotland

The Scotland 2005 Order exceeds the requirements of EU directive 1964/423 particularly in the level of testing. The addition of post-movement testing in Scotland represents an additional safeguard to that seen in England and is more appropriate to the need to maintain Scotland's low incidence status. While it is recognised that there are benefits of having a common policy across the UK, the low level of b TB incidence in Scotland gives support to the need to implement the most appropriate legislation for Scotland.

The Scottish Government therefore has significant room to influence the nature and detail of this Order to best meet the needs of Scotland.

Conclusions

Does the Order originate from an EU Directive?

Yes

Has a Scottish RIA been completed?

Yes

Are the benefits adequately quantified?

The RIA does not quantify financial benefits only costs although it does estimate the likely reduction in disease incidents that the Order could ensure. The option adopted in the Order had the highest cost but also the lowest level of false negatives. False negatives are the most important means of spreading the disease undetected. There is no value placed on the value of outbreaks avoided.

Are the administrative costs adequately quantified?

Yes

Are the policy costs adequately quantified?

Yes

What are the problems with the regulation?

One potential concern is that the Order leaves most farms in Scotland subject to testing only once every 4 years. Although the chance of a breakdown on these farms is low, because of the long period between testing if a breakdown does occur there is the potential for an outbreak to spread widely before it is detected. While four yearly testing brings substantially lower ongoing costs it also brings slightly higher risk and potential additional cost if it enables an outbreak to spread further before detection. The frequency of routine testing to be applied in Member States is however determined in EU Directive 64/432 according to the percentage incidence of TB in the national herd of a particular Member State or part of a Member State. The pre and post movement testing regimes implemented and enforced by the Tuberculosis (Scotland) Order 2007 are separate domestic controls.

What is the overall balance - cost or benefit?

The overall benefits of the 2005 Order in Scotland have not been quantified in monetary terms and it is therefore not possible to compare this directly to the monetary costs. Based on industry comment however, the level of cost to benefit is generally seen as favourable since the Order has helped prevent the spread of TB in Scotland. A subjective assessment of the Order is given in tables 4 and 5. Scotland has been alone in the UK in introducing post movement testing. This has brought additional costs (see Table 3). However the high value of maintaining Scotland's low disease status is widely expected to justify extra safeguards such as post-movement testing, even where further evidence of efficacy is sought. The changes made in the 2005 Order resulted in a tightening up of the testing procedures in Scotland. Further improving cost effectiveness has been accompanied by improvements in communication and checks within the government departments responsible.

Table 4. Subjective assessment of the costs of the Order (to the farmer) ²⁷

	Action	Scale of cost
Admin	Testing and inspection	low
Policy	Movement and trade restrictions on farmers importing from a high disease incidence area	medium

Table 5. Subjective assessment of the benefits of the Order

	Action	Scale of benefit
Private	Avoidance of b TB infection and subsequent reduction in costs		high
	Maintain Scotland's low incidence b TB status eases cattle movement and trade		high
Social	Minimise risk of b TB outbreak and associated taxpayers cost		high

Does it meet the Better Regulation guidelines?

Transparency: High. The requirements of the new Orders are clear.

Accountability: High. The Scottish government is responsible for designing and implementing the Order in accordance with the EC Directive. At the practical level, cattle owners are responsible for complying with the Order and are assisted in this by the Scottish Government Rural Directorate Animal Health and Welfare department. The UK wide Animal Health service is responsible for the enforcement of the Order on farm and the Meat Hygiene Service in abattoirs.

Proportionality: High. The benefits of the Order to Scottish agriculture are high and do not impose excessive costs on the industry with relatively low enforcement costs.

Consistency: Medium. The Order is consistent with similar Orders across GB with additional measures justified in order to help maintain Scotland's low b TB incidence status.

Targeted: Medium. This Order is correctly targeted at the highest risk farms and the highest risk animals i.e. those imported from high incidence areas of GB. It does not place undue cost on low risk farms i.e. since it permits four yearly testing.

References

[1] Cattle movements and bovine tuberculosis in Great Britain, M. Gilbert, A. Mitchell, D. Bourn, J. Mawdsley, R. Clifton-Hadley & W. Wint, Nature 435, 491-496 (26 May 2005.

[2] DEFRATB Statistics - http://www.defra.gov.uk/animalh/tb/stats/

[3] Badgers and cattle TB: the final report of the Independent Scientific Group on Cattle TB Fourth Report of Session 2007-08 Volume I, House of Commons, Environment, Food and Rural Affairs Committee

[4] Daily Hansard, 22 Jan 2008 : Column 1980W

http://www.parliament.the-stationery-office.co.uk/pa/cm200708/cmhansrd/cm080122/text/80122w0048.htm

[5] Bovine TB Pre-Movement Tests Cost £15 per Animal, headlines for a study by Reading University for RABDFhttp://rs3.pindigital.com/RABDF.1762/news/movement-tests-cost-animal

[6] Defra, Cost benefit analysis of badger management as a component of bovine TB control in England, 2005, p 1

[7] Scottish Statutory Instrument 2005 No. 434 The Tuberculosis (Scotland) Order 2005

[8] Regulatory Impact Assessment on Scottish Statutory Instrument 2005 No. 434 The Tuberculosis (Scotland) Order 2005.