Overview of costs and benefits associated with regulation in Scottish agriculture

11. Scottish Statutory Instrument 2006 No. 530 The TSE (Scotland) Regulations 2006

Abstract

In 2002, the Scottish Parliament introduced the TSE (Scotland) Regulations in response to the introduction of the Community TSE Regulations (Regulation ( EC) 999/2001) and to strengthen domestic legislation issued in response to the BSE epidemic in UK. In 2006, the Scottish Regulations were revoked and replace by SSI 530/2006. The total costs of enforcing the TSE regulations in Scotland and GB have been estimated at £30.27 million and £125.22 million per year respectively. Record keeping of the activities is the main cause of high administration costs. Besides that, testing and inspection activities which include over thirty months cattle scheme, laboratory approval, meat hygiene inspection, over 24 month fallen cattle, national Scrapie plan and rams genotype scheme are the main cost generating items. The benefits to industry from disease control include avoided production and market losses, improved food safety and associated improvements in public health and confidence. Available data suggest that keeping the TSEs level at its minimum level (minor outbreaks) in Scotland will continue demanding a high cost until Scotland and eventually UK become definitely free of the diseases. Both the government and private industry will benefit from achieving disease free status. However, little has been done to quantify those benefits. Thus, a detailed cost-effectiveness analysis of the TSE regulations should be undertaken, which takes into account wider impacts, including the benefits to the industry, such as eradication of TSEs in farmed livestock as well as its impact on the public health.

Introduction

What are TSEs?

Transmissible spongiform encephalopathies ( TSEs) also known as prion diseases, are a group of progressive conditions that affect the brain and nervous system of animals. Unlike other kinds of infectious disease which are spread by microbes, the infectious agent in TSEs is a specific protein called prion protein. Creutzfeldt-Jakob disease ( CJD) is the most well-known of the human TSEs. Research suggests that vCJD may have resulted from human consumption of beef from cattle with a TSE disease called bovine spongiform encephalopathy ( BSE). It occurs in adult animals in both sexes, typically in animals aged five years and more. BSE has been recognised as notifiable disease by the International Office of Epizootic Diseases ( OIE). Other TSEs found in animals include scrapie, which affects sheep and goats; chronic wasting disease, which affects elk and deer; and transmissible mink encephalopathy ( NIH, 2008). Transmission occurs when healthy animals consume contaminated feed produced from by-products from other infected animals a practice now banned in many countries.

Background

The first control measure with respect to tissues from cattle without clinical evidence of BSE was introduced in the UK in 1989 when specified bovine offal ( SBO) ban was instituted. This prohibited bovine brain, spinal cord, tonsil, thymus, spleen and intestines from entering the human food chain (Smith and Bradley, 2003). In 1990, the SBO ban was extended to protect all animal species and such bovine tissues were prohibited for use in meat-and-bone meal ( MBM). Further adjustments to the ban have been made in the UK and a similar ban has been introduced throughout the EU since 2000 (Smith and Bradley, 2003). In 1996 the over 30-month ( OTM) scheme was introduced by the UK Government that stopped cattle aged over thirty months from entering the food supply. This was because BSE has mostly been found in cattle over thirty months old.

Regulation ( EC) No. 999/2001 is the directly applicable EU legislation that provides a framework for the prevention, control and eradication of certain TSEs namely BSE and scrapie ( FSA, 2006). This regulation has identified Specified Risk Materials ( SRM) and has provided the guidelines to deal with SRM in member states ( FSA, 2008). It has also set out the guidelines on feed, BSE testing procedure, mechanically separated meat ( MSM) as well as compliance with EU measures.

In 2002, the Scottish Parliament introduced the TSE (Scotland) Regulations in response to the introduction of the Community TSE Regulations (Regulation ( EC) 999/2001) and to strengthen domestic legislation issued in response to the BSE epidemic in UK. Parallel legislation was also introduced in England, Wales and Northern Ireland ( FSA, 2006). Since March 2002 several amendments have been made in response to changes in the Community TSE Regulations ( EC). In 2006, the TSE (Scotland) Regulations was introduced that they revoked the TSE (Scotland) Regulations 2002. The TSE (Scotland) Regulations 2002 consist of nine different parts that lays down the rules and guidelines on the basis of the Community TSE Regulations. This regulation defines SRM as follows (with latest amendments ( SSI, 2008)):

Cattle

All ages: The tonsils, the intestines, from the duodenum to the rectum, and the mesentery.

Over 12 months : Skull excluding the mandible but including the brains and eyes, and spinal cord.

Over 30 months: Vertebral column, excluding the vertebrae of the tail the spinous and transverse processes of the cervical, thoracic and lumbar vertebrae, the median sacral crest and the wings of the sacrum, but including the dorsal root ganglia .

Sheep and goats

All ages: The spleen and the ileum.

Over 12 months: Skull including the brains and eyes, tonsils, spinal cord.

In addition: i) If SRM is not removed, the entire carcass of a dead animal, not slaughtered for food, must be treated as SRM. This includes the entire carcass of animals, removed to be rendered or incinerated. ii) Any material still attached to SRM after dissection of the carcase and any animal matter which comes into contact with that material or with SRM after it has been removed from the carcass will itself be regarded as SRM.

Feed controls which are in force in EU countries are: i) a prohibition on the use of mammalian protein in feed to ruminant animals, ii) a prohibition on the incorporation of mammalian meat and bone meal ( MMBM) in any farmed livestock feed, and iii) the ban (except in tightly defined circumstances) on having MMBM material on premises where livestock feed is used, produced or stored.

Testing procedure for BSE in all the member states is required. According to that all cattle over 30 months of age, subject to normal slaughter for human consumption, must be tested for BSE. MSM rule prohibits the use of bones of cattle, sheep and goats for the production of mechanically separated meat.

Main control measures

The main control measures that are directly or indirectly work against TSE, impose costs to various stakeholders and are currently in practice are: OTM, SRM, feed ban, surveillance programs (cattle, sheep and goats and other species), testing cattle for human consumption, testing over 24 months fallen cattle, cohort cull, animal by-products, off-spring cull and cattle identification and tracing (Defra, 2005). Details of the main control measures are presented in Appendix.

Analysis

Costs and benefits of the measures

The main costs and benefits of the measures are outlined in tables 1 and 2 below ²⁸:

Table 1 Main costs

	Action	Scale of cost
Admin	Record keeping	high
Policy	Over 24 month fallen stock	medium
	OTM testing, meat inspection, laboratory approval, national Scrapie plan and rams genotype scheme	low

Table 2 Main benefits

	Action	Scale of benefit
Private	Higher food-safety level	high
	Improved public perception of meat quality.	high
	Reduced risk of food-safety crisis and losses due to product recall or ban	high
	Access to international markets	high
Social	Improving public health with respect to incidence of human vCJD cases	high

Costs of the control measures

Although it is relatively easy to identify the interventions in practice against TSEs (both at GB and Scotland level), data on the annual costs of the implemented interventions based in the TSEs Regulations is more difficult to establish. The recently published SG consultation documents detailing the proposed TSE cost sharing plan, provides reliable information on the cost side of some of the control measures (Scottish Government, 2008). In this study the monetary values mentioned in that document have been used for cost calculation. The advantage of using those figures is they are valid and specific for Scotland. The disadvantage is that they only reflect the cost of TSE regulations borne by the industry and the Government. Moreover, there is still some missing information on the cost aspects of some control measures (e.g. feed ban or surveillance programmes). As a result, the calculated cost in this case study is an under-estimation of the total cost borne by the whole society.

In addition to the above mentioned source, a Defra publication on TSEs (Defra, 2005) has been consulted to determine the administration costs of enforcement of the TSE regulations. Record keeping of the activities is the main cause of high administration costs. The reported administration costs for UK have been modified to represent that costs in Scotland. Table 3 presents the costs of enforcing the TSE regulations in Scotland and GB. Total costs for Scotland and GB are £30.27 million per year and £125.22 million per year respectively.

Table 3 Estimated BSE costs for the industry and Governments in Scotland and GB.

	Costs (£m)
	Scotland	GB
Industry
Over thirty months	0.86	7.00
Laboratory approval	0.06	0.32
Meat hygiene service	1.63	11.00
Over 24 month fallen cattle	6.34	32.00
National Scrapie Plan	2.20	9.20
Rams Genotype Scheme	0.56	2.60
Government
Administration	18.62	63.10 1
SUM	30.27	125.22

¹ adapted from (Defra, 2005).

Discussion

Details of the effectiveness assessment analysis and the cost to disease case ratio analysis are presented in the Appendix. Based on the estimated cost and effectiveness, it can be concluded that keeping the BSE level at its minimum level (minor outbreaks) in Scotland will continue demanding a high cost until Scotland and eventually UK become definitely free of the disease (which is the milestone of the whole campaign against TSEs (Defra, 2005)). Both the government and private industry will benefit from achieving disease free status. Disease free status would mean fewer trade barriers for industry. Countries that are not recognised as BSE free must condemn certain tissues from all manufacturing, and they become waste instead of useful products. Moreover, the industry will benefit from more quality assurance, better product differentiation and branding, and eventually more consumer confidence and demand. In addition to the discussed effectiveness of the implemented measures there are some positive judgments from the international organisations as well. At EU level, following the authorities' positive opinion in 2004 on the BSE situation in the UK, the European Food Safety Authority ( EFSA) confirmed on 15 March 2005, that the UK herd is considered a moderate risk for BSE. In the latest development, on 17 June 2008, The World Organisation for Animal Health ( OIE) officially declared that the UK is 'controlled risk' for BSE at its recent General Session (Defra, 2008). The OIE sets out risk-based criteria for the export of live bovines and bovine products. It agreed a new system of categorising exporting countries on the basis of BSE risk as 'negligible', 'controlled' or 'undetermined'. The UK applied for categorisation under the new system in March 2007. Confirmation of the UK's 'controlled risk' status will support the opening of more international markets for the export of UK cattle and beef.

Review of RIA

Scottish Statutory Instrument 2006 No. 530 The TSE (Scotland) Regulations 2006

Does the regulation originate from an EU Directive?

Yes. European Commission Regulation Number (999/2001 EC).

Has a RIA been done?

Yes.

Does the RIA quantify costs?

Yes, partially.

Does the RIA quantify benefits?

No.

Does the RIA demonstrate that benefits exceed costs?

Not applicable.

Data required to improve assessment of costs and benefits

Not applicable.

Recommendations for improvement

A detailed cost-effectiveness analysis of the TSE regulations could be undertaken, which takes into account wider effects such as reducing the incidence of human vCJD cases and the possible positive impact on the environment and access to international meat markets, however this case study has concluded that benefits are likely to be high compared to the costs of this regulation.

References

Defra 2005. Transmissible Spongiform Encephalopathies ( TSE) in Great Britain

http://www.defra.gov.uk/animalh/bse/pdf/tse-gb_progressreport12-05.pdf

Defra 2006. BSE: Over Thirty Month cattle - Q&A, http://www.defra.gov.uk/animalh/Bse/otm/quanda.html#rule

Defra 2008. World Organisation for Animal Health ( OIE) grants UK 'controlled' BSE risk status, Ref: 189/08. http://www.defra.gov.uk/news/2008/080617b.htm

FSA 2006. Food Standard Agency: Partial Regulatory Impact Assessment, TSE (Scotland) Regulations 2006. http://www.food.gov.uk/multimedia/pdfs/tseregsscot06ria.pdf.pdf

FSA 2008. Food Standard Agency, BSE controls explained: Main controls on beef production. http://www.food.gov.uk/bse/what/beef/controls

NIH 2008. National Institutes of Health ( NIH). What are Transmissible Spongiform Encephalopathies? http://www.ninds.nih.gov/disorders/tse/tse.htm

SAC 2008. Scottish Agricultural College: Consultancy News. Winding Down Of Older Cattle Disposal Scheme, http://www.sac.ac.uk/consultancy/newsandevents/news/oldercattledisposalscheme/

Scottish Government 2008. Consultation detailing the proposed Transmissible Spongiform Encephalopathies ( TSE) costs that may be shared with industry, 2008. http://www.scotland.gov.uk/Publications/2008/03/TSEcostsharingconsult/Q/Page/5

Peter G Smith and Ray Bradley, 2003. Bovine spongiform encephalopathy ( BSE) and its epidemiology. British Medical Bulletin 2003; 66: 185-198.

SSI 2002. Scottish Statutory Instrument: Explanatory notes, Scottish Statutory Instrument 2002 No. 255: The TSE (Scotland) Regulations 2002. http://www.oqps.gov.uk/legislation/ssi/ssi2002/ssi_20020255_en_19#Legislation-ExNote

SSI 2008. Scottish Statutory Instrument: The Transmissible Spongiform Encephalopathies (No. 2) (Amendment) Regulations 2008. http://www.opsi.gov.uk/si/si2008/em/uksiem_20081180_en.pdf

Appendix to case study 11

Control measures

i) OTM and OCDS rules

The over thirty month ( OTM) rule banned the sale for human consumption of meat from cattle aged over thirty months at the time of slaughter. The ban took effect on 29 March 1996. On 7 November 2005 the rule was replaced with a system of BSE testing for OTM cattle born after July 1996 (Defra, 2006). The older cattle disposal scheme ( OCDS) was introduced to compensate for older cows when post 31 July 1996 born cows, aged over thirty months came back into the food chain to maintain consumer confidence. Current Pre August 1996 numbers on farm are approximately 50,000 for Scotland ( SAC, 2008).

ii) Specified risk material ( SRM)

The controls on SRM are designed to prevent the tissues of slaughtered animals most likely to contain the BSE agent from entering the food and animal feed chain. Those in place for sheep are a potential risk reduction rather than risk elimination measure as BSE has not been found to have occurred naturally in sheep.

iii) The feed ban

The aim of this ban is to keep potentially infectious material out of feed for farmed livestock. It began as a ban on feeding ruminant protein to ruminants but has been extended to prohibit the feeding of any mammalian MBM to any farmed livestock. It has been largely effective in arresting the spread of the BSE epidemic and hastening its decline.

iv) Surveillance programme

Cattle surveillance programme has two implementation patterns: passive and active. Passive surveillance for BSE is designed to ensure detection of animals showing clinical signs of BSE. As the TSEs are considered as Notifiable Diseases, veterinarians or other professionals who are in charge of the health status of the animals need to report any suspicious case to the state veterinary service. Active or targeted surveillance programme specifically targets the risky animal groups or healthy animals are being tested for TSE (For detail information see Defra, 2005).

v) Testing of fallen cattle aged over 24 months

Under The Animal By-Products (Scotland) Regulations 2003, burring or burning an adult bovine or goat on-farm without official approval is forbidden. Under the TSE (Scotland) Regulations 2002 all livestock keepers, including those within the "remote area", have a legal responsibility to report the death or slaughter on-farm of all bovine animals aged over 24 months and all goats aged over 18 months to the TSE Surveillance Helpline number. After registration, the Helpline will arrange for the carcass to be collected , tested for BSE and destroyed free of charge. vi) Cohort cull

Regulation ( EC) No.999/2001 required that all Member States identify, trace, restrict and cull the cohorts of confirmed BSE cases. Cohorts are cattle which were either: born in the same herd as a BSE case, up to a year before or after its birth; or reared with a BSE case when both were up to a year old (Defra, 2005).

vii) Offspring cull

All surviving offspring born on or after 1 August 1996 to confirmed BSE cases and the offspring of new BSE cases arising after 25 November 1998 should be slaughtered without delay. In 2001, the offspring cull was introduced throughout the EU but, other than in the UK, it only applied to cattle born two years before, or any time after, the onset of clinical signs of disease in the dam (Defra, 2005).

viii) Animal by-products

The Animal By-Products (Scotland) Regulations 2003 introduced stringent conditions throughout the food and feed chains requiring safe collection, transport, storage, handling, processing, use and disposal of animal by-products. It required premises that handle, treat or dispose of animal by-products, to meet specific standards and to be approved.

Supplementary analysis

Effectiveness in reducing BSE cases

There were 8,267 confirmed cases of BSE in Scotland from the start of the epidemic in 1987 until 2 June 2008. Figure A1a illustrates the epidemic from 1987, when the disease first became notifiable, to June 2008. The decline in the epidemic since the peak in 1993 reflects the considerable impact of the controls introduced by enforcement of the Regulation ( EC) No. 999/2001 and the TSE (Scotland) Regulations 2002 and the regulatory controls that preceded this instrument.

Figure A1a Number of confirmed BSE cases in cattle in Scotland from 1987 to 2008

Cost to disease case ratios

A cost to disease case ratio analysis has been done to compare the costs and health effects of an intervention to assess whether it is worth doing from an economic perspective. This approach is a useful approach to rank various interventions in situations where quantifying benefits and the effectiveness of regulations in monetary term is difficult. In this case study the cost to disease cases ratios have been calculated to compare the cost per year to the number of actual cases of BSE. For illustrative purposes two scenarios for the costs were assumed. The first assumption was that the estimated total costs for year 2008 have been a fixed value from the start of the BSE epidemic in 1987 in Scotland. The second scenario uses a discount factor (0.05) to estimate the distribution of the BSE costs since 1987 till 2008. The yearly change in the number of confirmed infected cattle cases was considered as the effectiveness of the Regulations (although one cannot assign all the effectiveness to the Regulation) and was used to generate cost to disease case ratios. As the ratios were very small values, to ease the evaluation process they've been multiplied by 10^9. Table A1 summarises the number of cases, reduction in terms of percentages for every year, discount factors used, discounted BSE control costs per year (from the starting year 1987), the assumed fixed costs and the ratios for the two cost scenarios. Figure A1b illustrates the cost to disease case ratios (the last two columns of the right hand side of the Table A1) across the epidemic years based on two cost assumptions.

Table A1 Cost to disease case ratio ¹ for the BSE Regulations in Scotland from 1994 to 2008.

Year	BSE confirmed cases in cattle	Reduction (%) in cases (?P)	Discount factor	BSE discounted cost (dC), (£m)	BSE fixed cost 2 (fC), (£m)	Cost to disease case ratio (?P/(dC* 10^9)	Cost to disease case ratio (?P/fC* 10^9)
1994	1325	40	0.71	£55.48	£28.02	7	14
1995	672	49	0.68	£52.84	£28.02	9	18
1996	301	55	0.64	£50.33	£28.02	11	20
1997	141	53	0.61	£47.93	£28.02	11	19
1998	84	40	0.58	£45.65	£28.02	9	14
1999	37	56	0.56	£43.48	£28.02	13	20
2000	36	03	0.53	£41.41	£28.02	1	1
2001	25	31	0.51	£39.43	£28.02	8	11
2002	16	36	0.48	£37.56	£28.02	10	13
2003	5	69	0.46	£35.77	£28.02	19	25
2004	3	40	0.44	£34.10	£28.02	12	14
2005	1	67	0.42	£32.44	£28.02	21	24
2006	2	-100	0.40	£30.90	£28.02	-1	-1
2007	0	100	0.38	£29.43	£28.02	34	36
2008	0	100	0.36	£28.02	£28.02	36	36

¹ Reduction in number of confirmed cases divided by discounted and (assumed) fixed costs: ?P/dC and ?P/fC.

Figure A1b Cost to disease case ratios for TSE (Scotland) Regulations from 1994 to 2007 based on: i) the reduction of confirmed BSE cases in Cattle, and ii) two assumptions for cost calculations, fixed and discounted from year 1987 to 2008.

Table A1 and Figure A1b show that the highest cost to disease case ratios (36) have been achieved in the last two years (2007 and 2008). There are two years, which are 2000 and 2006, with the lowest ratios (1 and -1) where the reductions of the confirmed cases were in its minimum level. In other worlds in those years, the implementation and enforcement of the regulations (and the whole efforts against TSEs) were not as successful as the other years. It should be noted that the incidence of TSEs are influenced by various annually fluctuating epidemiological parameters. Our main assumption in this case study was that the TSE Regulations have had positive effects on controlling those epidemiological parameters and as a result, the incidence of the diseases has been reduced. The other important outcome of this analysis is that by reducing the number of confirmed cases, as a result of control measures, the costs of minimising (or eradicating) the number of BSE positive cases increases. As an example, the cost of BSE control measures in 1994 was £63,000 (883 cases reduction from the previous year). This figure grows up to £135,000 in 1996 (for 371 cases) and to £925,000 for 47 confirmed cases in 1997). The costs of eliminating the only positive confirmed BSE case in 2005 was £25 million.

In the presented analysis the focus was on BSE and the effects of the control measures on other TSEs such as sheep scrapie were not taken into analysis. Moreover, the other potential benefits of these Regulations, such as reducing the incidence of human vCJD cases and their possible positive impact on the environment and having access to international meat markets were not included in the study. In addition, lack of data on the imposed costs to the farmers, as well as costs of implementing some interventions (e.g. feed ban) are considered as shortcomings of the presented case study. However, it is considered as a pilot model and a good practice to shed light on economic and epidemiological effectiveness of the TSEs Regulations in Scotland. Thus, for a full cost to disease case ratio analysis of the TSE regulations further data would be built on this basis once the data in the mentioned fields are available.