Select Committee on European Legislation Third Report


IDENTIFICATION OF CATTLE AND LABELLING OF BEEF AND BEEF PRODUCTS

8.   We have given further consideration to the following on the basis of further information from the Government. We maintain our opinion that it raises questions of political importance, but make no recommendation for its additional further consideration:--

Ministry of Agriculture, Fisheries and Food

(17535) 10495/96 COM(96)460	(1)   A proposal for a Council Regulation (EC) establishing a system for the identification and registration of bovine animals; and (2)   A proposal for a Council Regulation (EC) regarding the labelling of beef and beef products.
Legal base:	Article 43; qualified majority voting.

Background
8.1  We considered the Commission's proposal on 30 October[16] and recommended it for debate in European Standing Committee A. The debate took place this morning. At the time of our consideration a Compliance Cost Assessment was not available. This has now been supplied to us by the Government, and also made available to the Members of European Standing Committee A and in the Vote Office.

  Compliance Cost Assessment

8.2  The Government points out that much of the proposal has already been anticipated through measures to improve cattle traceability. In particular, compulsory cattle passports have been introduced in Great Britain (but not Northern Ireland) for animals born or imported after 1 July 1996. The Compliance Cost Assessment for this measure was provided with the Cattle Passports Order 1996[17] and estimated at £7.9 million for the first year, rising to £8.5 million and £9.2 million in the second and third year. In her letter of 7 November, the Parliamentary Secretary (Commons) at the Ministry of Agriculture, Fisheries and Food (Mrs Browning) points out that "Requirements for passports in Northern Ireland have been included in the proposal to give a complete picture but given the historical information held on the existing computer database, the Government questions the necessity for passports in the Province".

  Double tagging of cattle

8.3  At present all cattle require one ear tag. The proposal would require not only an additional ear tag but also the renumbering of current tags on a fully numeric basis (the present system is alphanumeric). The cost of double tagging is estimated at a recurring annual cost of £2.4 million in Great Britain and £0.3 million in Northern Ireland.

  GB central database on cattle movements

8.4  The estimate given in the Explanatory Memorandum for the proposal was an initial cost of £10 million with an annual running cost of £20 million. This includes an estimate for "back recording"[18]. The costs of setting up a traceability database without "back recording" are estimated at around £5 million.
8.5  In addition to the three elements in the proposal on cattle identification (cattle passports, double tagging, and a computerised database) the Government points out that the requirements for on-farm movement records to be kept in a prescribed format would mean that potential savings of £7.5 million for livestock holdings in England and Wales, identified in a study on simplifying farmers' paperwork, would have to be forgone[19]. There would also be compliance cost for Government in amendments to existing databases, issuing passports for animals born before 1 July 1996 in Great Britain, issuing replacement passports in Great Britain if the ear tag numbering system changes and issuing passports for all animals currently in the Northern Irish herd. These costs are estimated to be at least £12 million, with recurring costs of £0.75 million for issuing passports in Northern Ireland.

  Labelling of beef and beef products

8.6  The proposal will affect all retailers including supermarkets, high street butchers and the Meat and Livestock Commission in relation to national labelling and insurance schemes. Consultation with the industry has shown unanimous opposition to the proposal, even from consumer groups, who believe it would be discriminatory, as only those retail organisations with the financial ability to undertake participation in such a scheme could provide labelling information. The total recurring costs are estimated at £3,168,000 and total non-recurring costs at £4,672,800.
8.7  An extract from the Parliamentary Secretary's letter showing the methodology used in the compliance cost assessment[20], and a summary of the total cost to the industry in Great Britain and Northern Ireland is set out below.

  Conclusion

8.8  As we said in our earlier Report, we recognise that the proposal is intended to assist consumer confidence. Our doubts as to its effectiveness remain. It is important for any Regulation, particularly in this area, to be easily understood, put into operation, and enforced. The system should also be developed in a way which reduces human error to the minimum. Any system which does not meet these criteria is likely to be counter- productive in restoring consumers' confidence. However, the proposal has now been debated by European Standing Committee A, and we do not therefore recommend further consideration.
IDENTIFICATION OF CATTLE

[21]TOTAL COMPLIANCE COSTS FOR GB BUSINESS

Total Costs to the Industry

---

Recurring costs:
Passports:			£Nil
Eartags:			£Nil
		Total Recurring costs	£Nil
Non Recurring costs:
Passports:	(£76.43 x 117,000)		£8,942,310
Eartags:	(£91.95 x 117,000)		£10,758,150
		Total Non Recurring costs	£19,700,460

---




IDENTIFICATION OF CATTLE

TOTAL COMPLIANCE COSTS FOR NI BUSINESS (Assumptions and Calculations)

Passports

There are approximately 36,000 registered cattle keepers in Northern Ireland and an estimated 1.5 million cattle. The average herd size is taken to be 41. The proposal is ambiguous. Article 6 would suggest that passports would only be introduced for animals born from a future date. However, the proposal could be interpreted as meaning that passports would have to be issued for all animals. This CCA therefore assumes that farmers would need to apply for a passport for all cattle in the national herd at a given date, and thereafter for an estimated number of .5 million births a year. (Passports would also be required for cattle imported from non Member State countries. These costs are not included since the totals are negligible: some 80 animals p.a.) The compliance cost for NI farmers is assumed to be:

Cost of reading notes and completing forms:

--assuming producers submit applications for cattle passports at an average rate of 4 per year, plus postage
--that it takes approximately one hour to read notes and this is likely to be a one off exercise each year
--that it takes 10 minutes to complete an application form and the average number of animals per application is 4
--that there are 0.5 million movements per year. It is estimated that each movement record would take about 2 minutes to complete
--that there would be a one off exercise to issue passports for the existing national herd at an average of 41 head per business, and it taking 10 minutes to establish the relevant data for each animal and complete an application form, plus postage.

The assumed average hourly rate for farmers is £5

---

Recurring:
i)	Cost of reading guidance notes	=	£5.00
ii)	Cost of completing applications for newly born animals = (4 x 10 minutes @ £5, plus 80p postage)	=	£4.13
iii)	Cost of completing movement data on passports = (0.46 hours p.a. per business @ £5 per hour)	=	£2.31
Non-recurring:
iv)	Cost of completing applications for current national herd = (10 minutes x 41 @ £5 per hour plus 40p postage)	=	£34.56

---




IDENTIFICATION OF CATTLE

TOTAL COMPLIANCE COSTS FOR NI BUSINESS

---

Recurring costs:
Passports:	(£11.44 x 36,000)		£411,840
		Total Recurring Costs	£411,840
Non Recurring costs:
Passports:	(£34.56 x 36,000)		£1,244,160
		Total Non Recurring Costs	£1,244,160

---




LABELLING OF BEEF AND BEEF PRODUCTS

SMALL BUSINESS LITMUS TEST

Three independent butchers were consulted in assessing the estimated cost of compliance. One in a town, one in a rural area and one in a semi rural area.

Assumptions used

There are estimated to be around 9,000 local butchers. On average each local butcher handles around 30 beef and beef products giving a total of 270,000 labels/information at point of sale. However each butcher could have any one scheme approved to cover all products/labels.

Up to one third of the schemes would need to be re-approved each year.

---

Non Recurring Costs		£ Per Scheme	£ Overall
Initial staff training (£10/hr x 9,000)		10	45,000
Work carried out by representative organisations			21,000
Cost of labels			405,000
Postage etc. for initial applications		.2	1,800
-  Collecting information for labels	)
-  Checking authentication	) £300 x 9,000	300	2,700,000
-  Preparing labels	)
Total (Non recurring)			3,172,800
Recurring Costs - Per annum			918,000

---




LABELLING OF BEEF AND BEEF PRODUCTS

TOTAL COMPLIANCE COSTS (Assumptions and Calculations)

There are roughly 10 supermarkets that already have their own assurance labels (at the most 3) and staff that already deal with the administration of these schemes. A further 10 that would require approval for new schemes (one each) once the legislation came into effect.

Although supermarkets sell up to 30 beef products the vast majority would fall within the (3) assurance schemes that receive approval.

Although supermarkets sell up to 300 manufactured beef products these are unlikely to require detailed labelling.

On top of these there are an estimated 10 wholesalers and cash and carry outlets that would require approved schemes (one per operator).

There are about 5 specialist schemes (e.g. Aberdeen Angus) that would need to seek approval. In the first year of operation the non recurring costs and the recurring costs would apply to each scheme.

---

Recurring costs (per annum)
10 Supermarkets x 3 schemes each x £35,000 per scheme		=	£1,050,000
10 Supermarkets x 1 scheme each x £45,000 per scheme		=	£450,000
10 Wholesalers etc. x 1 scheme each x £45,000 per scheme		=	£450,000
5 Specialist schemes x 60,000 each		=	£300,000
Small Business recurring (see Annex A)		=	£918,000
Total Recurring		=	£3,168,000
Non Recurring costs
10 Supermarkets x 3 schemes each x £20,000 per scheme		=	£600,000
10 Supermarkets x 1 scheme each x £35,000 per scheme		=	£350,000
10 Wholesalers etc. x 1 scheme each x £35,000 per scheme		=	£350,000
5 Specialist schemes x 40,000 each		=	£200,000
Small Business non recurring (see Annex A)		=	£3,172,800
Total Non Recurring		=	£4,672,800

---

---

16.  (17535) 10495/96; see HC 36-i (1996-97), paragraph 5 (30 October 1996).

 Back

17.  Cattle Passports Order 1996 (S.I., 1996, No. 1686).

 Back

18.  That is, putting on to the database movement details for the cattle to which passports had been issued before the traceability database was set up.

 Back

19.  The total saving estimated was £15 million.

 Back

20.  A copy has been placed in the Library.

 Back

21.  Source: Annex A2 and Annex B and B₁ of MAFF Compliance Cost Assessment. Paragraph 6(2) of the document explains that the figures above do not include the recurring compliance costs for the GB Cattle Passport System estimated at £7.9 million for the first year, rising to £8.5 million and £9.2 million in the second and third year, as these are covered by the Compliance Cost Assessment deposited in the Library of the House with the Cattle Passport Order 1996 (S.I., 1996,No. 1686).

The cost of the database for Great Britain is estimated at a set-up cost of £10 million, with running costs of £20 million annually (assuming back dating of cattle already on holdings before passports are issued).

The cost of double tagging is estimated at £2.4 million in GB and £0.3 million in Northern Ireland. It has not been included as the Ministry is consulting the industry on a UK government proposal anticipating the Community proposal and it therefore considers the costs would arise, in any case, from UK legislation.

Finally the summary of costs does not cover the savings foregone of £7.5 million through simplification of farm records.

 Back

---

Prepared 2nd December 1996