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REGULATORY IMPACT ASSESSMENT

1. Purpose and intended effect of measure

1.1 The Objective
This Order is required to implement the Council Directive 2003/85/EC of September 2003 on Community measures to be taken should foot and mouth disease ( FMD) be suspected or confirmed in EU territory. This Directive amends current measures to control and eradicate FMD to incorporate the following:

• Recent scientific developments in the field of disease control
• Experience gained in eradicating FMD during the 2001 outbreak
• Technical advancements in laboratory diagnosis of FMD viruses.

This legislation will be in place by the end of 2005, however its implementation will only be necessary in the event that FMD is suspected or confirmed.

It is imperative that in the event of a FMD outbreak, disease control and eradication are achieved as quickly as possible, thus safeguarding animal health and welfare and minimising impacts on industries and rural communities. The central purpose of this Order is to create a legislative base from which this can be accomplished.

1.2 The Background
Previous community measures for the control of FMD were laid down in Directive 85/511/EEC, as amended. The current Order, which dates from 1983, does not incorporate the many advances made in disease control, or knowledge and experience gained from the 2001 FMD outbreak, and requires updating to do so. Furthermore, the current Order does not reflect the EU obligation (of all member states) to fully implement the new Directive and is therefore considered incomplete. A new Order is required which fulfils our EU obligation, providing an up to date and comprehensive legislative basis from which any future outbreak can be tackled fast and effectively.

This Order will also support the implementation of the Scottish FMD Contingency Plan (see http://www.scotland.gov.uk/agri/documents/CPjun04.pdf).

The following 3 options are to be considered:

1. do nothing and rely on existing legislation
2. implement Directive exactly: this is the least action required and provides only minimum disease control measures
3. implement Directive with additional stringent disease control powers and measures which reflect the experience gained in the 2001 outbreak.

1.3 Rationale for Government Intervention
FMD presents no appreciable risk to human health, however it is a serious threat to animal health and welfare. FMD is extremely contagious, causing painful lesions, reduced yield, abortions, sudden death in younger animals as well as much suffering and distress. It affects cloven-hoofed animals, in particular cattle, pigs, sheep, goats and deer. These represent sectors of vital importance to the Scottish farming industry and the wider rural economy.

As a result of the severe economic consequences of FMD, it is regarded as a high risk List 'A' disease by the Office International des Epizooties ( OIE), the international animal health body. Any country affected by FMD cannot take part in international trade of animals or animal products.

The potential scale and extent of the financial impacts of FMD can be inferred from the 2001 FMD outbreak. In Scotland the outbreak lasted from 1 ^st March until the final case on 31 May, with disease freedom being confirmed on 11 ^th September, and was confined to Dumfries & Galloway and Borders regions. The following points give an indication of the extent of the outbreak:

• 187 farms were confirmed as being infected with FMD,
• 132,000 animals slaughtered on infected premises (73% sheep, 27% cattle)
• 28 farms had animals slaughtered on suspicion
• 1445 dangerous contact premises slaughtered out
• In total 735,000 animals were culled during the outbreak, 643,900 of which were sheep.
• Total compensation paid for animals slaughtered for control of FMD, 2001 £178.8 m
• estimated losses to farms not slaughtered out, due, for example movement restrictions, was £60M
• Overall total impact of FMD in the initial year was to reduce the Scottish GDP by between £13.6M and £29.8M
• Average farm cleansing and disinfecting projected costs £39000 per farm ( NAO)

The effects of the outbreak were not confined to infected areas but were wide reaching, and impacted on both rural and urban economies; this sharply highlighted the interdependency of businesses. For example tourism was badly affected due to negative and emotive images of the outbreak, discouraging visitors from both home and overseas.

Economic consequences are, however, only one element of the total cost of a FMD outbreak. Although difficult to quantify, farmers and farming families would be affected emotionally and suffer stress, strain and distress; these effects are likely to continue beyond the duration of the epidemic. Feelings of isolation would be felt throughout communities as social opportunities are curtailed. However, as with other costs, these impacts will be greatly reduced by controlling the disease quickly and efficiently.

Environmental costs ( i.e. cost of slaughter, disposal issues/logistics, environmental and health risks associated with burning and burial, environmental monitoring etc.) must also be considered. Disposal issues present major logistical problems, as well as environmental and health concerns. For example the sourcing of appropriate disposal sites, the biosecure transportation of carcases, and the subsequent programme of environmental monitoring that must be carried out to ensure public health is not affected.

The internationally recognised status of 'disease free without vaccination' is vitally important to international trade in animals and animal products. The primary aim of this Order is to maintain this status, or in the event of an outbreak, to regain it promptly, thus minimising costs to industries and unnecessary suffering to animals.

Under the Scotland Act (1998) we are required to fully implement EU legislation; not fulfilling this obligation could lead to infraction proceedings and ultimately European Court of Justice action. The existing legislation will not allow us to achieve this. More importantly not implementing the proposed Order and ignoring the many important lessons learned as well as the scientific advances in disease control would be a matter of gross negligence. To do so would leave us open to an FMD epidemic on the scale if not worse than 2001. Impacts would be felt on all rural industry sectors, in particular the agri-food industry, tourism and rural communities.

2. Consultation

2.1 Consultation Within Government

2.2 Public Consultation
This draft Regulatory Impact Assessment will form part of the consultation package. Its content builds on regular stakeholder consultation, for example on the draft Directive and ongoing revisions to the Contingency Plan.

3. Options

Enhanced contingency planning together with policies designed to minimise the risk of disease spread, for example a 13 day movement standstill on susceptible animals, will help to relieve the impact of any future outbreak. However it is vital that as many disease control measures as possible are in place to provide an effective response to any specific disease outbreak.

3.1 Option 1: Do nothing
This approach requires no action, and relies upon existing legislation to enforce any disease control approach.

3.2 Option 2: To transpose the Directive exactly, using the minimum measures.
Under the Scotland Act (1998) the EU Directive must be fully implemented. The existing Order is inadequate to fulfil this requirement and must be updated. This option is a 'least action' approach. It fulfils the requirements of the Directive however provides only the minimum complement of powers/measures to do so.

Under the Directive vaccination is given a higher profile in disease control and will be considered from the early stages of a ( FMD) disease outbreak. Vaccination does not present an alternative to culling out infected premises; this remains the main disease control policy along with slaughter of dangerous contacts. A decision on whether to vaccinate will be dependant on the disease epidemiology and the advantages conferred in the specific circumstances of the outbreak.

Exact implementation of the EU Directive would entail the following measures:

• Slaughter of infected animals and dangerous contacts as the main disease control policy
• Prohibition of movements of (susceptible) animals in protection and surveillance zones. Movements in surveillance zones may be permitted under licence in certain specified conditions where the risk of disease spread is considered negligible.
• Specified treatments of fresh meat and meat products from (susceptible) animals in protection and surveillance zones
• Vaccination (either 'to kill' or 'to live') as a key tool in disease combat and control. Guidance on vaccination is set out in Scotland's FMD contingency plan. Full and careful consideration will be given to the costs and benefits of vaccination before any decision is taken on its use.
• Maturation and deboning treatment of meat from vaccinated animals
• Prohibition on testing milk samples from protection zone, for milk hygiene purposes in laboratories not authorised to test for FMD virus. Samples from surveillance zone can go to 'non authorised' laboratories for testing subject to official authorisation to avoid risk of spreading FMD virus.
• Discretionary powers to kill non-susceptible animals, such as pets, on infected premises. (Veterinary advice is that they do not envisage circumstance in which they would wish to use this power but we must transpose it if we are not to be in breach of the Directive.)
• measures to maintain zoo and rare breed animals include heightened biosecurity which may include restricting public access.

3.3 Option 3: transpose directive with additional measures
This involves the minimum requirement of transposition of the EU Directive ( i.e. option 2) however, in addition, takes full advantage of the Directive's flexibility allowing Member States to adopt further measures with which to fight a disease outbreak.

Veterinary advice is that in certain areas the Directive should be strengthened by the addition of further controls. These measures, already contained within the existing FMD Order, are considered vital elements of a disease control strategy as demonstrated in 2001.

The result is a more inclusive set of measures, better equipping us to combat disease and reduce the size and duration of any future outbreak. Consequently the impact on and costs to those affected will be limited. No cost will be incurred due to these measures unless in a disease out break.

The following additional measures will be implemented under Option 3. They are considered a vital component of any disease control strategy and played an essential part in quelling the 2001 outbreak.

• Pest control. On a premise where disease is suspected or dangerous contact there will be a requirement to control rats and vermin.
• Requirement to control dogs and poultry within the protection and surveillance zones around infected premises.
• Licensing of activities such as shearing, dipping and scanning of sheep in protection, surveillance and restricted zones.
• A provision to close footpaths within the protection and surveillance zones
• All shooting/stalking/drag hunting activities prohibited within protection and surveillance zones. In all other circumstances these activities may continue under license .
• Markets/fairs/shows/gatherings of animals (including collection and dispersion of susceptible species) are prohibited in the protection zone and surveillance zone. Out with these areas such activities may continue under strict license and the risk of disease spread is considered negligible.

4. Costs and Benefits

4.1 Sectors and Groups Affected
As demonstrated in 2001, the impacts of an FMD outbreak are severe and widely felt due to the interdependency of rural industries. Agricultural sectors, in particular livestock producers, will be severely affected as will the meat trade, abattoirs, auction markets, milk companies, food processors, hauliers. The wider food industry may be affected due to reactions of some export markets. Tourism sectors are also likely to be affected with people less likely to travel, particularly to infected rural areas.

Implications of the disease are wide reaching, however this Order (whatever option is chosen) will only be implemented should disease be suspected or confirmed. These legislative powers will predominantly affect livestock keepers and the agri-food industries, and within these categories the provisions will be even handed, proportionate to risks and will depend on the location of disease.

4.2 Economic, Social and Environmental Benefits

4.2.1 Option 1
This option requires no regulatory changes to be made, and existing legislation would be relied upon in the event of an FMD outbreak. As with the following options, this necessitates no action and has no associated costs to stakeholders unless disease is suspected or confirmed.

4.2.2 Option 2
This option of transposing the Directive is the very least action that is required and it provides only a minimum complement of disease control powers and measures. These are designed to control and eradicate disease quickly and effectively, thus lessening the impacts and costs on stakeholders and suffering to animals.

The advantages of this option are listed below:

• Vaccination: If deployed quickly, vaccination could offer benefits in reducing the severity of an outbreak by stemming disease spread. The Directive now sets out explicitly the controls required following vaccination, allowing the potential benefits to be judged fully in any given scenario. The Scottish Contingency Plan ( http://www.scotland.gov.uk/agri/documents/CPjun04.pdf) sets out the many factors which must be taken into account before an informed decision is made on whether and in what mode a programme of vaccination should be implemented
  
  The rules for recovery of disease free status are set down by the OIE. International trade implications for use of emergency vaccination has been reduced from 12 to 6 months after the last case or the last vaccination (whichever is latest) in the case of vaccination to live (protective vaccination), provided that serological surveillance demonstrates the absence of infection in the remaining vaccinated population.

• Prohibitions on animal movements from within the protection and surveillance zones are essential to prevent disease spread. Only in specified circumstances, where the risk of disease spread is considered negligible, will these be permitted.
• Treatment of meat and meat products from within the surveillance and protection zones (as well as treatment of vaccinated meat/products) will minimise the risk of further disease transmission.

4.2.3 Option 3
This complies with the minimum requirements of the directive (option 2 above) with the addition of extra measures which are designed to reduce the extent and duration of any future outbreak. This option gives the flexibility to incorporate these extra measures to ensure any future outbreak is dealt with fast and effectively hence minimising the impact on rural communities. The following highlights benefits gained from the above measures:

• Pest control: This will reduce the threat of disease spread (via rats/vermin acting as fomites - mechanical carriers of infected material on feet, bodies etc). Pest control should already be established as part of good premises management and animal husbandry as a matter of course. Costs will not be significant.
• Control of dogs and poultry which might act as mechanical vectors of disease. Again costs are unlikely to be significant.
• Licensing of activities: Itinerant workers undertaking activities such as shearing, scanning, dipping etc. present a high risk of spreading disease. However loss of these activities for any length of time would risk serious welfare issues. Licensing of itinerant workers who provide such services will allow these workers to carry on their trade, avoid any potential welfare issues and ensure strict biosecurity guidelines are adhered to. No extra costs will be incurred to stakeholders.
• Restricted access on footpaths: Powers to close footpaths/access within the infected area ( i.e. protection and surveillance zones) will be provided. This will have major benefits for tourism and related industries as access to areas outwith these areas will be left open and the public will be urged to adhere to biosecurity measures i.e. disinfect footwear, where the facilities exist. This is consistent with Veterinary Risk Assessment.
• Shooting/stalking/drag hunting activities will be prohibited within protection and surveillance zones; this reflects the risk of disease spread associated with these activities. However their continuation under license outwith these areas will ensure strict biosecurity measures are adhered to, and be beneficial both in generating income and a sense of normality within affected communities.
• Powers to ban all markets/gatherings etc. in the restricted and surveillance zones are considered essential to halt and eradicate disease. Out with these areas such activities may take place under license. This again is important as it represents a social norm as well as allowing a more usual pattern of business and income generation.

4.3 Economic, Social and Environmental costs
The costs given below are an estimate of the potential impact of each option on stakeholders. Many variables govern the extent of an outbreak, for example location and timing; in some cases this makes realistic figures difficult to achieve. Comments, responses or revised estimates on the following costs are therefore sought to help inform the decision process.

4.3.1 Option 1
As stated above, the Scotland Act (1998) requires full implementation of EU legislation; not fulfilling this obligation could lead to infraction proceedings and ultimately European Court of Justice action. The existing legislation will not allow us to meet our obligation.

Scientific and policy developments, and experience have produced advances in disease control; these are not reflected in current legislation. Not taking advantage of these developments would be negligent and short sighted. No costs are associated with this option when disease free, however in the event of a future FMD outbreak the impact on all related industries could only be compared to those of 2001.

4.3.2 Option 2
This option fails to fully exploit the flexibility built in to the Directive allowing additional more stringent measures to be implemented, as considered necessary. All measures are designed to mitigate any future outbreak and hence reduce impacts on stakeholders.

The use of these powers will incur certain costs to stakeholders, however this must be juxtaposed with the cost of disease.

• An economic impact study of the 2001 FMD outbreak in Scotland found that of the £33.5m loss to GDP as a result of changes in the agriculture sector because of FMD, £23.7m (71%) was as a result of the export ban. Export/trade can not recommence until 'disease free' status is regained. Under OIE (international animal health) rules, industry stakeholders would be faced with loss of market and associated withholding costs for a six month period after a protective vaccination program has been completed. Suppressive vaccination requires a three month period at least before disease free status can be regained and trade to recommence
• Animal movements are one of the major disease transmission mechanisms. Prohibitions and restrictions on (susceptible) animal movements are therefore essential. Due to these restrictions there is the possibility that individual welfare issues may occur. Withholding costs may also arise from keeping animals beyond their optimum sale date.
  
  Drawing on knowledge of the 2001 outbreak, and the fact that movement restrictions on susceptible animals have been in place ( i.e. 13 day standstill) since then, direct costs of livestock movement controls in Scotland in a future outbreak could be up to £3.2m. These costs include additional feed associated with keeping animals longer than intended, price penalty from keeping animals beyond their optimum sale date and production inefficiencies as a result of longer retention. Specialist beef, specialist cattle and mixed farms are the farm types most affected by the movement controls .
• Meat from vaccinated animals will require to be de-boned and matured, imposing costs on abattoirs and meat processing plants. Estimates as at April 2001 suggests that the requirement of maturation and de boning of meat from vaccinated cattle would increase costs of slaughtering by 5 - 15 %. These costs are anticipated to mostly affect sheep/lamb. Reactions from industry on these costs and their acceptability (and hence a vaccinate to live policy) are sought.
• Meat and meat products originating from protection and surveillance zones are prohibited unless treated by heat and other methods. Costs for these treatments have not been established and responses from industry (particularly the pig industry) concerning this are welcomed.
• Prohibition on testing milk samples (from the protection zone) for milk hygiene purposes in laboratories not authorised to test for FMD virus. This will potentially cause practical problems for dairy companies monitoring the quality of milk collected in these zones prior to pasteurisation. The milk is normally tested at a laboratory for antibiotic residues, water and butter fat content, as farmers are paid for the quality of the milk .
• Compensation will be provided by the Government for infected animals culled-out

4.3.3 Option 3
All measures are designed to reduce the severity, duration and extent of an outbreak and therefore lessen costs and distress of those affected, and animal suffering.

All costs associated with option 2 above apply here. The additional measures contained in option 3 are considered vital to control and eradicate disease; costs to individual stakeholders are not anticipated to be significant. In any case these measures will only be implemented in the event of disease suspicion/confirmation.

5. Consultation with Small Businesses: the Small Firms Impact Test

In the event of an FMD outbreak the measures in this Order are likely to affect small businesses in particular, predominantly farmers, but also other small businesses in rural areas. During consultation on the draft Directive which this Order implements, we received no specific feedback from small businesses. From the responses which were received the main issues centre round vaccination. Its prominence as a disease control tool is welcomed however concern is raised by the meat industry mainly regarding consumer acceptance. The capacity for the heat treatment of meat is questioned. Further comments from all stakeholders are still welcomed.

Our normal stakeholder consultation arrangements involve SMEs from all parts of the meat supply chain across Scotland, and they have been kept informed of the requirements of the Directive and have been able to make representations on the measures and their effect on the businesses. They are fully aware that the impact of an FMD outbreak will depend on its location, scale and timing.

6. Competition Assessment

The SSI is likely to have only a minor impact on competition in the markets directly affected by it. The major markets affected include the European markets for beef, sheep meat and pig meat, as well as markets for the trade in live animals. Other farm types, such as poultry holdings, may incur indirect impacts form the regulations. Furthermore, whole other sectors of the rural economy such as the tourism industry may be indirectly affected by the SSI.

Of the markets directly affected by the SSI, all are characterised by low levels of concentration; no firm has 20% market share and no three have 50%. The SSI will affect some firms substantially more than others. The shocks to supply that the SSI may bring about if implemented would not be due to competitive distortions.

The SSI will have a temporary impact on the market structure if an FMD outbreak occurred, reducing the number of meat and animal suppliers. However, consumers are not expected to suffer as a result of this, since substitution to imports or other non-affected meat, such as poultry, will be possible.

7. Enforcement, Sanctions and Monitoring

In the event of an outbreak, enforcement of the proposed measures in GB will be implemented by the State Veterinary Service Agency, as under existing EU and national law, and in Northern Ireland by the Department of Agriculture's Veterinary Service. Local Authorities will assist in enforcement.

The EU commission has responsibility for monitoring enforcement by Member States in order to ensure uniform application of EU legislation.

The effectiveness of UK enforcement procedures in kept under ongoing review. Any evidence of failure to enforce on other Member States is drawn to the attention of the Commission.

Monitoring of the effectiveness of the Regulations will arise from regular National Contingency Plan Exercises.

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