The cost of putting beef back on the menu

CITY COMMENT
Solving the beef crisis need not cost an arm and a leg. Before the weekend, many commentators had concluded that the BSE episode could represent the last nail in the political coffin of this Government. This always seemed a vast exaggeration, fanned by absurdly inflated estimates of the likely economic costs of a slaughter policy by City analysts. It was never very plausible that the Government would allow its pre-election tax cuts to go up in smoke with a few million unfortunate cattle. But now it is becoming apparent that a solution can be found to this crisis which will not cost an arm and a leg, and which will put beef back on the menu for next Sunday's lunch.

If the BSE problem does have a long-term political fall-out, it will not be because of its modest economic consequences, but because of the way it has been handled by ministers. Admittedly, it is always easy to be critical of Government in hindsight. I do not usually share the cynical view that the Major government has been uncommonly weak or vacillating. Most of its problems have been born of Tory longevity - there is simply no one else to blame for today's accidents. But even its greatest fans would concede that this has not been the finest hour of John Major's administration.

OK, the situation was never going to be easy. Roughly paraphrased, the Government was faced with a scientific report which said the following: "We have been claiming for 10 years that there was no evidence of any link between BSE in cattle and CJD in humans. Now we have news of a handful of cases of CJD which seem different from anything we have seen before. We haven't got the foggiest idea whether this is the start of a major human epidemic or, to be honest, whether these new cases have anything to do with eating beef. But they might. We don't have a clue how BSE is spread from one cow to another, and we are not very good at testing for its existence in any given animal. We are not sure what is the best way to eradicate the disease in cattle, but we think you are probably doing most of the right things. We don't have any new ideas about what to do next. Yours ever - some very eminent scientists."

With scientists like that, who needs enemies? But even allowing for the trickiness of the situation, the Government's first response looked indecisive. For example, it was not very helpful of Stephen Dorrell to keep telling people to make up their minds whether to eat beef "on the advice of the scientists". Unfortunately, there was no advice from the scientists, or at least nothing that any ordinary citizen could fathom. Instead, an effective political response was needed, and quickly.

This took well over a week to emerge. The Government started by claiming there was no need for any important new measures, since all the necessary action had been taken years before. Then Douglas Hogg talked (admittedly behind the cover of off-the- record briefings) about culling 4.5 million cattle, and speculated about slaughtering the whole herd. Next day, the Cabinet decided that no further slaughtering was necessary, and hinted that anyone who recommended such a course was showing the symptoms of eating too much infected offal. Two days later, the Prime Minister announced that further slaughtering would occur, not for scientific reasons but as a response to "market hysteria".

The implication was that the Government would now take action that it considered entirely unnecessary, just to get mad cows off the front pages. But it was hard to see how this could restore confidence to the beef consumer, since unnecessary action can, by definition, have no effect on the safety of eating beef. What was really needed was new action which would recognise the new situation and genuinely decrease the chances of BSE infecting humans. Eventually, in the latter stages of last week, a sensible package seemed to be emerging in talks between the UK and the European Commission.

While it was making up its mind what to do, the Government risked annoying almost everybody at one time or another. From the outset, there were only three candidates for incurring the costs of the BSE accident - the farmers, the UK taxpayer (usually known as "the Government"), and the EU. None of these groups was likely to be a happy volunteer.

In strict logic, it might have been thought that the farmers should incur the costs, since they were the ones that were feeding potentially unsafe food to the consumer. (As far as I am aware, no one has so far suggested that we should compensate kebab shops for giving their customers salmonella.) But, in reality, no government seems able to incur the political wrath of the farmers, so this was a non starter.

Nevertheless, the "no culling" policy adopted early last week necessarily involved off-loading the costs on to the farmer. The market collapsed, but the beef could not be sold into the EU's intervention stock, since it had been deemed unsafe for human consumption. Farmers concluded that they had been left holding the baby. Consumers, meanwhile, felt that the Government was taking risks with their health in order to save money for pre- election tax cuts. The EU complained that Britain was trying to make other countries pay the costs of its unsafe farm practices over the previous decade. The cattle, contemplating an extension to their life expectancy, were the only interest group obviously delighted by a "no culling" policy.

So what should have been done? Faced with the new information from the scientists, but in the absence of clear scientific advice on how to proceed, the Government should have announced that this was a new situation which required a "belt and braces" approach to policy. While previous measures had represented a sensible response to earlier information, new steps were now needed to ensure that no BSE infected meat could possibly get into the human or animal food chain.

In particular, this would involve two specific new measures. First, dairy cows reaching the end of their working lives - about 800,000 per year - should be incinerated instead of being sold for animal feed. And all beef cattle over 30 months old - about 700,000 in total - should be culled. Since there is virtually no evidence of cows younger than that getting BSE, this would effectively have solved the problem. The total cost of this policy would have been pounds 1.6bn in the first year, up to a half of which would probably have been wrung out of the EU, and much of the rest could have been found in the Treasury's contingency reserve. Any excess would have been a rounding error in the PSBR calculations, so it would have had no effect on the prospects for tax cuts. And there would have been no excuse whatever for the EU - plagued by its own BSE problems on the Continent - to have banned British beef.

Something very like this package will probably now emerge. A lot of political angst could have been avoided by announcing it one week earlier.

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