MEMORANDUM 31
Submitted by the National Office of Animal
Health Ltd (NOAH)
Please find attached two memoranda from NOAH
on the subject of the draft Food Standards Bill, for consideration
by the Committee. One on the draft Bill itself (Annex 1), and
one on the proposed funding mechanism for the Agency (Annex 2).
It should be noted that these papers are potentially
subject to change as consultation with our members is still ongoing
to meet the 24 March deadline for the consultation by the Joint
Food Standards and Safety Group. We will notify you if there are
any significant changes.
March 1999
ANNEX 1
EXECUTIVE SUMMARY
1. NOAH represents the companies which manufacture,
develop and hold licences for animal medicines in the UK.
2. NOAH supports the principle of creating a
Food Standards Agency and welcomes the many refinements which
are included in the latest document.
3. The animal health industry is already highly
regulated, particularly for food animal products, both in UK and
EU law.
4. Consistency and predictability in the approach
of Government are essential if confidence is to be maintained.
5. NOAH's interest in, and analysis of, these
proposals has concentrated on the extent to which the Agency will
contribute to, or detract from, the goals of consistency and predictability.
6. The Agency's remit on food production needs
clear definition both to concentrate its activities and to avoid
overlap with other government bodies.
7. The Agency's remit to communicate with the
public to restore public confidence and explain existing systems
of food safety procedures should be strengthened.
8. "Concordats" on relationships with
other departments should be published and subject to public consultation.
9. The Agency's action on residues surveillance
should be to support and publicise the action of existing agencies.
10. As with all other appointments to the Veterinary
Products Committee, Ministers should either be presented with
a selection of FSA nominees to chose from, or be free to reject
the FSA nomination.
11. The hierarchy of responsibility for food
safety post-devolution needs clarifying to ensure consistent food
policy across the UK.
12. If the Agency considers that it is "unreasonable
or impractical" to weigh the costs and benefits of a measure,
then it should publish a statement giving its argumentation for
such a decision.
13. The Agency's Executive should have a strong
policy creation and co-ordination role, and be made up of persons
with a wide range of relevant experience.
14. Clause 11 should be amended so that neither
the FSA nor VMD is able to publish information submitted in confidence
under the Medicines Act without the prior permission of the owners
of the data, and so that it is consistent with the planned "Freedom
of Information" legislation.
15. The UK's relationship with the proposed
European FSA, and the responsibility for UK representation at
EU meetings, needs greater clarification.
16. Direct government funding would be fairest,
simplest, cheapest and ensure Parliamentary control.
17. We remain concerned at the lack of built-in
controls to prevent the Agency becoming too ambitious in either
its breadth of interest or the creation of new layers of regulation.
18. Due credit should be given to all that is
already being done by existing government bodies, while
due caution is needed to avoid the potential damage of further
legislation.
A. INTRODUCTION
1. An industry integral to the food chain
A1.1 NOAH represents the companies which manufacture,
develop and hold licences for animal medicines in the UK. In 1998,
NOAH's members provided approximately 95 per cent (by value) of
all the animal medicines sold in the UK. Of these, approximately
60 per cent are for use in food producing animals. Thus we are
clearly part of the food chain and the creation of the Food Standards
Agency is of great interest to NOAH member companies.
2. The dangers of further regulation
A2.1 The animal health industry is already highly
regulated, particularly for food animal products, both in the
UK and EU law. The growth of regulation, and the consequent costs,
is forcing companies large and small to question the extent to
which they can afford to continue serving the food animal sector.
It is a worrying indication of the state of senior management
pessimism that a recent survey by our EU federation, FEDESA, found
that today 70 per cent of company investment in animal medicine
research is for companion animals, with only 30 per cent for food
animals.
A2.2 For UK companies the prospect of yet another
regulatory body with powers over food production can only create
more anxiety and uncertainty. Given that healthy food comes from
healthy animals, the prospect of a reduction in the number of
medicines available to treat our farm animals should be a cause
for general concern, both for food safety and farm animal welfare.
3. A consistent and predictable approach across
Government
A3.1 All industry requires confidence in the
legislation and regulation that governs it, and in the day to
day implementation of the rules, if it is to invest in new products
and new production processes. This is supremely true of highly
technical industries such as animal medicines, where the development
of a new product can consume many years and many millions of pounds.
Consistency and predictability are thus essential if confidence
is to be maintained.
A3.2 For a predominantly international industry
such as animal medicines, the extent to which UK law is predictable
and consistent with EU and international law will have significant
implications on whether, for example, products are developed for
the UK market and manufacturing investment is located here. Inconsistent
and unpredictable activity by local regulators could result in
international investment focusing elsewhere and UK becoming a
technological backwater.
A3.3 With this in mind, the relationship between
FSA and
(a) other UK departments and agencies;
(b) the devolved assemblies;
(c) EU and international bodies.
are all of significance and we are concerned that
insufficient consideration seems to have been given to preventing
dispute and ensuring a consistent and predictable approach.
A3.4 Two particular aspects seem to have been
overlooked:
(i) that, particularly in the early years,
the Agency may be tempted to justify its existence by excessive
new regulation and interference in the work of other agencies
and departments;
(ii) that, in time, inevitably, different
political parties will be in control in Westminster and the devolved
assemblies, leading to different policies.
A3.5 As representatives of a UK industry whose
products are aimed at animal health and welfare, but which are
scrutinised for their effect on operator safety, the environment
and farm economics as well as food safety, NOAH's interest
in, and analysis of, these proposals has concentrated on the extent
to which the Agency will contribute to, or detract from, the goals
of consistency and predictability
B. THE DRAFT
LEGISLATION
1. Aims of the Agency
B1.1 The Aims of the Agency are "to protect
public health from risks which may arise in connection with the
consumption of food (including risks caused by the way in which
it is produced or supplied) and otherwise to protect the
interests of consumers in relation to food" (clause 1(2)).
B1.2 It is unclear how far the Agency's brief
on food production will go. Will they be able to move "upstream"—not
just on to farms, but to farm inputs? (We note that animal feed
responsibilities will transfer from MAFF to the Agency.) Unless
their remit on food production is closely defined there will be
a continual prospect of inter-departmental dispute.
B1.3 We have argued in previous submissions
that part of the problem with the crisis of public confidence
in food safety is that not enough is being done to explain to
the public what is already being done to protect them. Although
the need to communicate with the public is recognised in clause
10, and the welcome recognition of the need to avoid causing undue
alarm is in clause 19, since the "main objective" in
clause 1(2) could be used forevermore to argue about what is the
job of the Agency (and what is not), some mention of communication
with the public in this clause would be extremely helpful.
B1.4 The Agency's remit on food production
needs clear definition both to concentrate its activities and
to avoid overlap with other government bodies.
B1.5 The Agency's remit to communicate with
the public to restore public confidence and explain existing systems
of food safety procedures should be strengthened.
2. Veterinary Medicines Directorate
B2.1 We welcome the proposals for the VMD to
remain completely within MAFF, which is something we argued for
following the publication of the James Report.
B2.2 We note that while the FSA will be consulted
on general policy issues relating to animal medicines which are
relevant to food safety, the VMD will retain responsibility for
all aspects of the authorisation process. However, it is not clear
what form this consultation by VMD with the FSA will take: could
it be open to abuse by FSA to prevent VMD from making decisions?
B2.3 The Government envisages that the relationship
between the Agency and other departments should be underpinned
by administrative concordats, which would be published documents
setting out the duties and responsibilities each will have in
relation to the other: there is clearly need for consultation
with affected external interests when drafting these "concordats".
B2.4 "Concordats" on relationships
with other departments should be published and subject to public
consultation.
3. Residues surveillance
B3.1 The residues surveillance programme will
remain with VMD, but with the introduction of structured and transparent
processes for determining the scope and priorities of the programme.
We welcome both these proposals.
B3.2 The Bill also provides new surveillance
powers which could be exercised by the Agency in relation to residues
of animal medicines. The very extensive surveillance programme
already undertaken by VMD does, we believe, render further surveillance
by the Agency unnecessary, but we welcome any steps which can
be taken to further reassure the pubic that there is no health
risk from residues of animal medicines in food.
B3.3 The Agency's action on residues surveillance
should be to support and publicise the action of existing agencies.
4. Veterinary Products Committee
B4.1 Under the present wording of Schedule 2,
paragraph 8(2), one member of the VPC "shall be appointed
by the Ministers on the nomination of the FSA": this appears
to mean that the Ministers will have a choice. At present a wide
range of organisations nominate people, and Ministers choose from
among them: the FSA appears to be being given a unique authority,
and removing that choice from the Ministers (the people's representatives):
is this just or democratic?
B4.2 Such a system undermines the necessary
independence of VPC members who are appointed for their
individual expertise, not as representatives. There
is a clear danger that the FSA nominee's independence would be
suspect.
B4.3 We also note that this places the Agency
in a superior position to other agencies (EA, HSE, etc.) who can
only send staff to observe/advise
B4.4 As with all other VPC appointments,
Ministers should either be presented with a selection of FSA nominees
to choose from, or be free to reject the FSA nomination. The wording
of Schedule 2 clause 8(2) must be changed.
5. Devolution
B5.1 Under the Scotland Act 1998, the Government
of Wales Act 1998 and the Northern Ireland Act 1998, the new authorities
in these parts of the UK have devolved responsibility for food
safety and standards. It is therefore possible that they could
take their own action (provided it is within UK and EU law) in
these areas, and thus a UK-wide Agency could be helpful in providing
a consistent approach, and we welcome it.
B5.2 However, attention needs to be given to
longer term, when different parties may be in control in Westminster,
Wales, etc.,—this has the potential to lead to damaging
and confusing dispute, undermining both producer and consumer
confidence.
B5.3 The hierarchy of responsibility post-devolution
needs clarifying to ensure consistent food policy across the UK.
6. Costs and benefits—over-regulation
B6.1 Clause 19 puts a duty on the Agency to
assess costs and benefits, and the nature and magnitude of risks
and any uncertainties. This is welcome, though past experience
shows that assessments predicting very large costs have had very
little impact on the decision made in some cases. Historically,
such government cost/benefit analyses have applied only to direct
costs, and not indirect costs from, for example, cost of compliance—this
should be addressed.
B6.2 The wording of clause 19(3)(a) is confusing,
and should be amended so that, should the Agency consider that
it is "unreasonable or impracticable" to weigh the costs
and benefits of a measure, then it should publish a statement
giving its argument for such a decision.
7. Members of the Agency Executive
B7.1 In contrast to the James Report, the Bill
does not set any quotas for membership of the executive, merely
stating that it should be between 10 and 14 members, with a reasonable
balance of relevant skills and experience. This is welcome as
it removes the suggestion that a majority of members be "consumers"
(which we always found strange since all of us are consumers),
but also means that there is no mention of experience in any particular
field, such as veterinary medicine or farming—we trust that
in the appointment of members such important knowledge and experience
is not overlooked. Furthermore, as the work of the Agency develops
over time, the make-up of the Agency's governing body would be
reviewed to ensure expertise relevant t the work being done.
B7.2 We are also mindful of the experience from
other major agencies (HSE, EA etc.) where policy seems to be driven
entirely by the staff, and the Executive's role seems entirely
limited to business management and "rubber stamping"
of officials' decisions.
B7.3 The Agency's Executive should have a
strong policy creation and co-ordination role, and be made up
of persons with a wide range of relevant experience
8. Freedom of information
B8.1 Clause 11 allows the Agency to publish
advice or information, including advice to Ministers. However,
it does not require it to do so. The Agency "must take account
of any considerations of confidentiality attaching to that information
but may publish that information (or any of it) if it appears
to the Agency to be in the public interest do so." We are
concerned that there is no statutory appeals procedure for preventing
the release of commercial confidential information.
B8.2 This is particularly relevant since the
Act would lift Section 118 of the Medicines Act to allow VMD to
provide any information submitted in confidence to the Agency.
B8.3 Clause 11 should be amended so that
neither Agency is able to publish this information without the
prior permission of the owners of the data, and so that it is
consistent with the planned "Freedom of Information"
legislation.
9. Relationships with Europe
B9.1 As so much of UK legislation is derived
from Europe, we were surprised to see so little reference to the
relationship between the UK authorities and Europe. There need
to be adequate procedures to ensure that the UK view is fully
represented in Europe, with a united front, without disagreement
between FSA, DH and MAFF.
B9.2 We also note, elsewhere, that there are
plans in Brussels to create a European FSA. However, the consultation
document makes no mention of this or what the relationship between
the two bodies will be.
B9.3 The UK's relationship with the proposed
European FSA, and the responsibility for UK representation of
EU meetings, needs greater clarification.
10. Funding
B10.1 The funding of the Agency is enfranchised
by clause 23, and has been the subject of a separate consultation
to which we have produced a separate paper (below).
C. CONCLUSION
C1 As in our response to previous consultations,
NOAH supports the principle of creating a Food Standards Agency
and welcomes the many refinements which are included in the latest
document.
C2 We do, however, remain concerned at the lack
of built-in controls to prevent the Agency becoming too ambitious
in either its breadth of interest or the creation of new layers
of regulation. Given the current level of public debate about
food safety, it would be all too easy for the Agency to justify
any expansion of its activities as being "in the pubic
interest". Due credit should be given to all that is already
being done by existing government bodies, while due caution is
needed to avoid the potential damage of further legislation.
ANNEX 2
NOAH'S COMMENTS
ON THE PROPOSAL FOR A LEVY SCHEME
EXECUTIVE SUMMARY
1. We are concerned at the vagueness of the
figures for the costs to be raised by the levy, which equate to
a "blank cheque".
2. A new regulatory impact assessment should
be made, to include full compliance costs to industry of any new
Agency activities.
3. Clause 23 effectively gives the Agency free
rein to do whatever it chooses and then send the bill to industry.
4. Clause 23 provides opportunity for a troubled
Chancellor to raise money without increasing direct taxation.
5. A flat fee is manifestly unfair, while defining
exemptions is a nightmare.
6. Linking fees to the commercial business rate
would be fairer, and reduce collection costs.
7. Direct government funding would be fairest,
simplest, cheapest and strengthen Parliamentary control.
1. The Cost of the Agency
1.1 Nowhere does the document state the actual
cost of running the Agency; however, calculations based on the
1998 White Paper have put this at £250 million per annum.
1.2 The Government proposes to raise part of
the cost (the "new" activities and setting up costs)
by a flat fee of £90 on all 490,000 eligible food outlets.
It is said this will raise £41 million, but a fee of £90
on 490,000 outlets would raise £44 million (a 7 per cent
variance)—to raise £41 million the fee need only be
£84.
1.3 The consultation document emphasises "all
costs are provisional" but that "at the outset"
the sum to be recovered "will not exceed £50 million"
(which equates to a fee of £102). What are the costs
to be—£41 million, £44.1 million, or £50
million? What will the fee be—£84, £90, or £102?
How long is "the outset"? What happens after that?
1.4 The setting up costs are put at £12
million per annum for three years. What happens then? Will there
be a cut of 29 per cent in the levy?
1.5 We are concerned at the vagueness of
these figures, which equate to a "blank cheque".
2. The True Cost of the Agency
2.1 The consultation document focuses on the
level of fee to be paid by business. However, the real
cost of any regulation to a business is the cost of compliance—what
extra measures the business must take to comply with the legislation.
As argued in our response to the main consultation paper, we are
concerned that the new Agency will want to introduce further,
new, regulations—not least to justify its creation.
2.2 The Regulatory Impact Assessment makes little
reference to this aspect of creating the Agency, which will inevitably
be much higher than the "£40 million" proposed
as the initial levy on the food industry.
2.3 A new regulatory impact assessment should
be made, to include full compliance costs to industry, of any
new Agency activities.
3. The Future Size of the Levy
3.1 Although the consultation document makes
clear the present Government's intent to keep the levy and individual
fee "small", legislation outlasts governments and government
policies change.
3.2 The wording of clause 23 of the draft Bill
is very wide-ranging, allowing recovery of "some or all"
of a wide range of central and local government costs. The White
Paper made it possible to calculate current costs of around
£250 million. Given an ambitious Agency, these costs could
eventually be much higher.
3.3 Clause 23 effectively gives the Agency
free rein to do whatever it chooses and then send the bill to
industry.
4. Increased Taxation
4.1 It should be noted that the principle costs
of the Agency are for staff and activities currently paid for
by local and national taxpayers. The consultation document gives
no indication that any transfer of cost from the taxpayer to industry
will be balanced by an equivalent reduction in general taxation.
4.2 Clause 23 provides opportunity for a
troubled Chancellor to raise money without increasing direct taxation.
3. The Levy System
5.1 The current proposals indicate that
a levy of £40 million will be raised by a levy on the retail
food sector. However, the draft Bill does not contain any
such constraint. There is nothing to stop an ambitious Agency,
having chosen to extend its activities "downstream"
to agriculture and the suppliers of agricultural inputs, from
similarly extending its fee "catchment" to these areas.
5.2 We welcome the Government's declared
desire to equally impinge upon home produced and imported food
and agree that a levy on retail outlets is a fair and simple
way to achieve this (but see below).
5.3 We welcome the Government's aim to minimise
the cost of collection, and acknowledge that a single flat rate
levy on all relevant businesses would be one way of achieving
this.
5.4 However, the flat rate system would be manifestly
unfair to the smallest businesses, and far too generous to the
largest retailers:
— a major retail outlet fulfils the
role of many traditional "High Street" shops (butcher,
baker, delicatessen, fishmonger, greengrocer, grocer, etc.) each
of which will have to pay a levy, while the supermarket pays only
one;
— a major retail outlet will have a
turnover of many millions, unlike the small independent outlets
with which it competes;
— while accepting that some "economies
of scale" will apply when inspecting one supermarket compared
to several small shops, it is also true that as the supermarket
will serve many more consumers, the consequences of safety failure
could be much greater;
— while welcoming the exemption for
shops selling simple packaged sweets, etc., it should be noted
that today such outlets frequently sell a wide range of other
foods—canned drinks, ice cream, prepacked sandwiches, simple
groceries, etc.: this is all for the convenience of the public.
Unless the exemption is widely drawn, the net "regulatory
impact" could be to reduce consumer convenience and deter
entrepreneurial activity.
— no mention is made of theatres and
other places of entertainment or sport, many of which rely on
the sales of sweets and snacks for financial survival. Will they
too be exempt, or will this become another "tax on the Arts"?
5.5 A flat fee is manifestly unfair, while
defining exemptions is a nightmare.
6. Alternative Fundraising
6.1 As outline above, we welcome the intent
to contain collection costs, but believe a flat rate unfair. One
simple alternative would be to link the fee to the Commercial
Business Rate for registered food outlets. This would provide
a broad relationship between size of business and fee paid, which
would be fairer, while the existing collection system would
reduce collection costs to one of simple internal financial transfer
within the Treasury.
6.2 Linking fees to the commercial business
rate would be fairer, and reduce collection costs.
7. The Case for Government Funding
7.1 The principle arguments for the Agency being
fully funded by government have been well rehearsed by others—not
least the point that consumer confidence will be strengthened
if it is felt that the food sector will have no financial influence
on the Agency.
7.2 However, developing the points already made,
the following are worthy of consideration:
— if no "fee" is to be paid
then the problem of "fairness", collection cost, and
defining exemption are also avoided;
— assuming the Agency is successful
in its task of reducing food related disease, the cost of the
Agency should be balanced by savings to the National Health Service;
— we have already expressed our concern
at the lack of mechanisms to constrain the ambitions of the Agency,
not least because it would be politically difficult to block any
expansion of their activities "to protect the public".
7.3 Funding the Agency from central government
taxation would not only force the Agency to argue its case in
the rigours of the annual Public Spending Review, but it would
provide a further, and quite proper, opportunity for full Parliamentary
scrutiny of their activities.
7.4 Direct Government funding would be fairest,
simplest, cheapest and strengthen Parliamentary control.
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