Volume 10: Economic Impact and International Trade
2. Impact on the public sector
Part 3: Running costs and other expenditure
Ministry of Agriculture, Fisheries and Food (MAFF)
Department of Health
National Health Service
Scottish Office
Welsh Office
Northern Ireland Departments
Local authorities

2.44 Running costs are the everyday fixed operational overheads of a Government Department and include such things as rent, utilities, wages and equipment costs. In assessing the impact of an event on a Department, it is not uncommon to attribute to its costs a percentage of the Department's total running costs based upon what portion of that Department's time was devoted to responding to the event. The charge simply reflects the fact that the Department has marshalled a portion of its resources to respond to it. The funds would have been spent by the Department, albeit on different matters, even if the event had never occurred.

2.45 Running costs are also charged to an event if a Department actually increases its outlays to respond to it. These additional outlays might be incurred as a result of hiring additional staff or leasing additional space. The expenditure would not have been incurred if the event had not happened.

2.46 In considering the economic impact of BSE on various Government Departments, we have included both running costs which are attributable to the reallocation of existing departmental resources to respond to the crisis, and 'new money' that was specifically allocated as a result of the emergence of BSE. During a period of shrinking departmental budgets, most Departments responded by shifting resources to address the crisis rather than by obtaining additional funding.

2.47 The problem which arises in trying to reconstruct running costs after the event is that any such figure is invariably the product of a great deal of guesswork, particularly when the running costs are not 'new money'. The figures in the following paragraphs were provided by the various Departments themselves. Although there is no reason to believe that they are inaccurate, it should be borne in mind that they are estimates and not precise calculations.

Ministry of Agriculture, Fisheries and Food (MAFF)

Running costs

2.48 MAFF has estimated its running costs incurred in responding to the emergence of BSE from 1988 to 1996 to be £35.2 million. This figure includes BSE-related work undertaken by headquarters staff, the State Veterinary Service and the Chief Scientists Group. ¹ It does not include running costs incurred by the CVL, which are dealt with in the next paragraph. MAFF's work included administering BSE compensation schemes. It also included the monitoring of BSE-related legislation and the servicing of expert committees, such as the Spongiform Encephalopathy Advisory Committee (SEAC).

Diagnosis and surveillance

2.49 MAFF provided the Central Veterinary Laboratory (CVL) ² and the Veterinary Investigation Centres (VICs) around Great Britain with funding for the diagnostic and surveillance work it was required to perform under the BSE Order 1988 and subsequent legislation. ³ The Orders required veterinary inspectors who suspected BSE to perform tests upon or take samples from any animal or carcass on the premises for identification purposes. ⁴ The payments MAFF made to cover CVL costs are shown in Figure 2.7 below. As can be seen, they grew significantly from 1988, and particularly between 1991 and 1993. Expenditure on diagnosis and surveillance totalled approximately £7.7 million over the period. ⁵

Carriage, valuation and disposal of carcasses

2.50 MAFF was also responsible in Great Britain for funding the carriage, valuation and disposal of BSE suspected carcasses, as required by the Bovine Spongiform Encephalopathy Order 1988, the Bovine Spongiform Encephalopathy Compensation Order 1988, ⁶ and their successors. MAFF's State Veterinary Service was responsible for arranging the removal of suspected cattle or carcasses from a property, valuing them, and the subsequent incineration of carcasses. Figure 2.7 below shows the expenditure pattern, which reflects the number of reported suspect cases. Total expenditure over the whole period was approximately £44 million.

Figure 2.7: Selected MAFF expenditure on BSE-related costs, 1986-96, at cash prices

Department of Health

Running costs

2.51 The cost of DH staff time spent on BSE/CJD-related activities during 1988-96 was approximately £820,000. ⁷ This amount included staff salaries, accommodation and common services, and covered the servicing of SEAC. The estimate was based on the civil service graded pay structure and the percentage of staff time devoted to BSE/TSE-related activities. Estimates of the time dedicated to such activities were derived from witness statements, enquiries to individuals within Departments at the time and by comparison with other individuals who occupied the same post at a later or earlier date. ⁸

2.52 It was estimated that the running costs of the Medicines Control Agency (MCA) ⁹ attributable to BSE/TSE during 1989-96 totalled approximately £1.7 million. The amount reflects the fact that the MCA dealt with the issue on a product-by-product basis, as well as servicing a number of relevant expert committees throughout the period. ¹⁰

National Health Service

2.53 The costs of caring for vCJD patients can vary considerably. Moreover, no overall data are available. In answer to a question in the House of Lords in January 1998 about the overall costs to the NHS arising from CJD each year, Baroness Jay (Leader of the House of Lords) replied: 'There is no reliable information available.' ¹¹ Furthermore, during the relevant period the families tended to take on most of the care of the patients in their homes. ¹²

2.54 Recently DH's Economics and Operational Research Division based an estimate of the cost of caring for vCJD patients on information given in witness statements to the Inquiry. It concluded that the care costs may have ranged from under £6,500 to over £40,000, depending on the type of care received by a specific patient. The average cost per patient was about £20,000. However, the number of patients considered was quite small and some aspects of care were not included in the estimate. ¹³

2.55 Thus, while we recognise that there were costs incurred by the National Health Service towards the end of the period under consideration in caring for those with vCJD, these costs are too uncertain to be quantified.

Scottish Office

2.56 The estimated running costs outlined below are those of the Scottish Office Agriculture and Health Departments and the Solicitor's Office. They include the cost of Scottish Office officials who supported MAFF's State Veterinary Service professional and technical staff based in Scotland. Both staff and accommodation costs have been taken into account. These estimates are based on job descriptions at the time, recollections by people within the Department, advice from finance and accommodation divisions, and papers on file. ¹⁴

2.57 Over the period 1989-96 Scottish Office estimated running costs associated with BSE activities totalled £461,000. Annual expenditure was highest in 1992/93 and 1993/94 at £104,000 and £106,000 respectively. ¹⁵

Welsh Office

2.58 The Welsh Office had some running costs associated with BSE activities during 1986-96. These costs were difficult to estimate as no new posts were created for BSE work in the animal and public health fields. However, based on the grades of staff dealing with BSE, estimates of the average percentage of time spent on it, and the average staff costs for each grade over the ten-year period, a 'very rough estimate' was developed. ¹⁶ Over the period 1986-96 the Welsh Office estimated running costs associated with BSE activities to be between £350,000 and £400,000. ¹⁷

Northern Ireland Departments

2.59 The Northern Ireland Departments funded BSE-related activities in the following areas: diagnosis and surveillance; carriage, valuation and disposal; and the associated running costs of these activities. ¹⁸

2.60 Veterinary staff in Northern Ireland were required to perform a number of tasks associated with diagnosis and surveillance of BSE. These tasks were regarded as a part of their daily duties and as a result it has not been possible to estimate the costs associated with such activities.

2.61 Over the period 1986-96 carriage costs for BSE-affected cattle were approximately £23,000. This was for the transportation of 989 cattle. There were additional costs for the carriage of 1,160 carcasses. However, no estimate of these is available. Valuation costs are also not available, since the work was undertaken as a part of daily duties by existing staff. Disposal costs were estimated to be £172,000, reflecting a charge of £80 for each animal.

2.62 An estimate of running costs associated with BSE-related activities is not available, because the additional work was subsumed in daily duties, in most cases without extra resources being employed. Consequently the Department of Agriculture for Northern Ireland (DANI) has not been able to estimate the proportion of running costs devoted specifically to BSE-related activities. ¹⁹

Local authorities

2.63 Local authorities had various roles under BSE legislation, including the inspection of animals and meat in slaughterhouses, and the enforcement of animal health and welfare provisions on farms, in markets and in transit. ²⁰

2.64 No additional funding provided through the Revenue Support Grant system was identified at the time as relating to BSE. ²¹ We have been unable to quantify the costs incurred by local authorities in the period in question.

2.65 The Meat Hygiene Service (MHS) was launched on 1 April 1995 as an Executive Agency of MAFF and took over the meat inspection duties of some 300 local authorities. It was not established specifically to deal with BSE problems but did incur costs enforcing Specified Bovine Offal (SBO) controls. The MHS Annual Report for 1995/96 estimates that SBO controls cost the Service £434,000 in that year. ²²