Contents ||

Section 1: Procedural issues and consultation of interested parties || 3

1.1: Background || 3

1.2: Supporting Impact Assessments and Consultations || 3

1.3: Steering Groups || 6

1.4: Impact Assessment Board || 6

Section 2: Problem Definition || 9

2.1: Current policy and financial framework || 9

2.2: Problem Identification || 12

2.3 Who is affected by the current policy? || 15

2.4 How would the problems evolve, all things being equal? || 15

2.5 International dimension || 16

2.6: The Right and Justification for EU Action || 18

Section 3: Objectives || 20

3.1: General Objectives || 20

3.2: Specific Objectives || 21

3.3: Operational Objectives || 21

3.4: Consistency with other EU policies || 21

Section 4: Policy Options || 22

Section 5: Assessment of Impacts || 24

5.1: Option 1 || 24

5.2: Option 2 || 26

5.3: Option 3 (a) || 26

5.4: Option 3 (b) || 29

5.5: Option 4 || 31

Section 6: Comparing the options || 32

Section 7: Monitoring and Evaluation || 33

7.1. Evaluation Report || 33

7.2. Ex-post Evaluation || 33

7.3. Indicators || 33

7.4: Communication || 34

Annex 1: Food Safety Budget 2007-2011 || 35

Annex 2: Added Value from EU co-financing: example case studies || 38

Annex 3: Objectives of individual policy areas || 53

Annex 4: Costs and Responsibility Sharing Scheme || 55

Annex 5: References

56

Glossary ||

AHL || Animal Health Law

AHS || EU Animal Health Strategy 2007-2013

AI || Avian Influenza

BSE || Bovine Spongiform Encephalopathy

BTB || Bovine Tuberculosis

BTSF || Better Training for Safer Food

BTV || Bluetongue Virus

CA || Competent Authority

CAHP || Community Animal Health Policy

CAP || Common Agricultural Policy

CRSS || Cost and Responsibility Sharing Scheme

CSF || Classical Swine Fever

CVO || Chief Veterinary Officer

DG || Directorate General (of the European Commission)

EFSA || European Food Safety Authority

EURLs || EU Reference Laboratories

FAOSTAT || Food and Agricultural Organisation, United Nations, Statistics Division

FCEC || Food Chain Evaluation Consortium

FMD || Foot and Mouth Disease

GNI || Gross National Income

HPAI || High Pathogenic Avian Influenza

IA || Impact Assessment

IASG || Impact Assessment Steering Group

IPPC || International Plant Protection Convention

LPAI || Low Pathogenic Avian Influenza

MFF || Multiannual Financial Framework (2014-2020)

MS || EU Member State

NGO || Non-Governmental Organisation

OECD || Organisation for Economic Co-operation and Development

OIE || World Organisation for Animal Health

PHL || Plant Health Law

PHR || Plant Health Regime

PPP || Public-Private Partnership

PRM || Plant Reproductive Material

SBV || Schmallenberg Virus

SMEs || Small and Medium Sized Enterprises

SPS || Sanitary and Phytosanitary Measures agreement

TFEU || Treaty on the Functioning of the European Union

TSE || Transmissible Spongiform Encephalopathy

vCJD || variant Creutzfeldt-Jakob Disease

WHO || World Health Organisation

WTO || World Trade Organisation

Section 1: Procedural issues and consultation of interested parties

1.1 Background

For some years, the Commission, specifically DG Health and Consumers, has been working on the revision of EU policy for animal health, animal welfare, plant health, plant reproductive material, feed and food safety, and the official controls that underpin the effective implementation of these policies (hereinafter together referred to as "food safety policy"). This overall revision is intended to drive EU policy more strategically, making it more effective, and allowing more flexibility when new changes arise. This assessment evaluates the impacts of options to modernise the financial framework for the food safety policy areas.

The overall budget of €1.891bn from 2014 to 2020 (in current prices) for the food safety financial framework has already been proposed by the Commission within the context of the Multiannual Financial Framework (MFF), published in June 2011 (budget line named 'food safety' under Heading 3 'Security and Citizenship')[1]. Therefore, this impact assessment for the financial measures is intended to consider the likely impacts of the options available for the legislative proposal establishing the financial framework related to food safety, including plant health, animal health and official controls, within this existing context. It brings together relevant work carried out for the impact assessments of the individual policies, along with other recent relevant evidence, such as audit reports and consultation results.

This is intended to be a "proportionate" level of analysis in line with the Commission guidelines on Impact Assessment.

As the budget has already been developed and proposed in the context of the Multiannual Financial Framework, and the policies are at an advanced stage of development with significant analysis of impacts already behind them, and also considering the limited timescale to meet the Secretary General's request, this assessment concentrates on the best ways in which the budget can be spent to support the policies in question. Moreover, no specific tools to demonstrate the cost-effectiveness of the food and feed spending have been implemented within the current monitoring and evaluation system so far. Therefore this assessment will take a light-touch proportionate approach to demonstrate the importance of EU funding in this area and considers some alternative options.

Within the food safety policies under consideration, rules governing expenditure are already in place. In particular, this proposal precedes the 'Healthier Animals and Plants for a Safer Food Chain Package' which includes proposals for:

· the animal health policy, which aims to protect and raise the health status and condition of animals in the EU, in particular food-producing animals, whilst permitting intra-EU trade and imports of animals and animal products in accordance with the appropriate health standards and international obligations;

· the plant health regime (PHR), whose objective is to protect EU agriculture and forestry by preventing the entry and spread of non-native harmful organisms (pests and pathogenic micro-organisms affecting plants);

· the marketing of seed and propagating material of agricultural, vegetable, forest, fruit and ornamental species and vines ("plant reproductive material"), which ensures that EU criteria for health and quality are met;

· a legislative framework for the organisation of official controls concerning food and feed safety, animal health and welfare, plant health and plant reproductive material, established to ensure that the sectorial rules are enforced by Member States (MS) across the EU in a harmonised manner.

1.2 Supporting Impact Assessments and Consultations

Because all four policies have been under revision for some time, they are individually supported by their own impact assessments, and details of these policies have been extensively discussed with stakeholders in various consultation fora. There are four relevant impact assessments and regulations under consideration, in the areas of: animal health; plant health; plant reproductive material; and official controls. This package, aimed at modernising and integrating the EU policies in these sectors, has been developed as a result of a long series of studies, analyses and evaluations. The most relevant ones, as well as their main conclusions and recommendations, are listed below.

Animal Health

In 2004, the Commission launched an independent evaluation to assess the performance of the Community Animal Health Policy (CAHP) over the previous decade and its coherence with other EU policy interventions. The evaluation recommended - among other things - the adoption of a single regulatory framework defining and integrating common principles and requirements of existing legislation for animal health.

The resulting EU Animal Health Strategy 2007-2013 (AHS) "Prevention is better than cure" and its subsequent Action Plan identified the main objective of the Strategy in the development of an EU Animal Health Law (AHL).

The Impact Assessment for the Animal Health Law therefore looked at ways in which the strategy could be best implemented, including making improvements to existing measures, as well as the main objective of consolidating and simplifying the legislation.

The new AHL will replace the current animal health legislative framework, which involves almost 60 basic directives and regulations, some of them adopted as early as 1964, and is expected to affect the veterinary acquis communautaire, which covers now more than 400 acts.

Plant Health

Based on the conclusions of the Council of November 2008, the Commission initiated a comprehensive evaluation of the EU plant health regime (PHR) from the introduction of the internal market (1993) and contracted the necessary study out to an external consultant.

The consultation concerned changes to the EU plant health regime itself as well as elements of the regime to be transferred to or from the PRM regime and the future EU regime on official controls on food and feed, animal health and welfare, plant health and plant reproductive material.

The internal process to develop the IA was further supported by a second contract with the consultant for a study on the quantification of costs and benefits of amendments to the regime, supplementary to the data that had been collected during the evaluation. The IA recommended that an increase in certain aspects of plant health spending would have significant benefits that outweighed the costs.

The impact assessment, approved by the Impact Assessment Board in 2011, explores substantially increasing the Union's financial support for plant health, in particular to expand the scope of Union financial support to surveillance programmes for speedy detection of harmful organisms, and to compensation to operators for the value of plant material destroyed during eradication. It furthermore outlines the extension of the scope of the EU reference laboratories system, financially supported by the EU to plant health and the provision of transitional EU financial support for the accreditation of the corresponding national reference laboratories. The Commission's proposal for the 2014-2020 MFF itself also underlines the need for an increased budget for plant health.

The new Plant Health Law (PHL) will replace the main instrument of the PHR, which is Council Directive 2000/29/EC on protective measures against the introduction into the Community of organisms harmful to plants or plant products and against their spread within the Community. It will also replace six Council Directives for the control of specific harmful organisms, and will affect the phytosanitary acquis communautaire, covering at present more than 60 acts.

Plant Reproductive Material (PRM)

Based on the results of the evaluation of the European Union legislation on the marketing of seed and plant propagating material (PRM) conducted in 2007/2008 by the Food Chain Evaluation Consortium (FCEC), the Commission services developed a PRM Action Plan which was presented in 2009. They were followed by a study on variety registration conducted by the same consortium in 2010 and by a PRM certification study conducted by the Commission's services.

The Impact Assessment on PRM was built on the results of these preparatory works, and focused on the simplification of the basic legal acts, on improving the effectiveness and efficiency of the system, and on horizontal coordination with recent, already adopted EU policies.

In particular, the current legal framework, which consists of a horizontal Council Directive on the Common Catalogue of varieties of agricultural plant species and 11 vertical Council Directives on the marketing of commodities of seed and propagating material, is to be replaced by one single piece of legislation.

Official Controls for Feed and Food

Regulation (EC) No. 882/2004 on Official Controls provides a harmonised framework of general rules for the official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules.

In September 2011, a report examining the impacts of potential revisions to this Regulation was published. This external study presents results of the research conducted and impact analysis on options proposed by the Directorate-General for Health and Consumers to change the current system in order to improve shortcomings identified in an evaluation of the Regulation conducted in 2008.

In July 2009 the Commission issued a report for the European Parliament and the Council to review the experience gained throughout the first years of application of Regulation (EC) No 882/2004. It indicated that improvements could be made to meet the Commission’s Smart Regulation Agenda objective of simplifying regulation. This would also address the issues of administrative burden reduction and fostering competitiveness.

In addition, DG Health and Consumers has conducted further analysis on the alignment of other EU sectorial legislation on official controls (animal health, plant health, plant reproductive material) with the overarching principles established in the Regulation.

These works led to the development of an Impact Assessment, addressing shortcomings stemming from the incomplete implementation/achievement of certain principles/objectives, and from the fact that the integrated approach to official controls is only partly consolidated.

From the very start of the processes accompanying the package, key stakeholders, Member States' competent authorities, international organisations and trading partners have been closely involved and have played a crucial role in the discussions. In addition, in accordance with the Commission’s standards for consultation, economic and social stakeholders such as European associations with an interest in food and feed and the interested public have been consulted on a number of occasions.

1.2.1 Multiannual Financial Framework

On 29 June 2011, the European Commission presented its proposal for the multi-annual budget for 2014-2020 which will start in 2014. "A Budget for Europe 2020" is aimed to respond to today's concerns and tomorrow's needs, and focuses on priority funding at the EU level that provides true added value. This upcoming EU budget remains focused: the overall amount proposed for the next seven years is €1,025 billion in commitments (1.05% of the EU GNI) and €972.2 billion (1% of EU GNI) in payments. The overall food safety budget €1.891bn from 2014 to 2020 (in current prices) has been proposed by the Commission as part of the overall MFF.

As was made clear in a letter of 26 November 2010 to the President of the European Parliament and the President in office of the Council, the Commission indicated that it considers that:

"European added value is a key test to justify spending at EU level even if the added value of a political project cannot be reduced to a balance sheet".

Therefore the general objectives of the initiative also include those laid out in the Commission working paper discussing the necessity for added value in the new Multiannual Financial Framework. These concentrate on the necessity of added value in EU financial contributions[2]:

· The EU budget should focus on EU added value, meaning the delivery of objectives that can be achieved better through spending at EU level rather than at the level of the individual Member States. The design of both the Multiannual Financial Framework and the sectorial instruments and programmes should be such that the contribution of the expenditure at EU level is made obvious.

· EU added value should be prominent in areas of spending linked to the EU core competences (for example, agriculture, where more than 70% of total spending is at the EU level), or closing missing links (for example, key cross border infrastructures in energy, transport and ICT) or because the issues at stake are of such a magnitude that individual actions by the Member States would not meet the objectives (for example, large-scale research infrastructures or the combatting the consequences of climate change).

· Pooling resources at EU level should also generate economies of scale and better results than the same amounts separately spent at national levels (for example, in the areas of research or education mobility).

1.2.2 Consultations

Due to the limited timescale within which the present impact assessment has been developed, no specific consultation was carried out to involve the stakeholders in the process.

Nevertheless, no radical changes can be envisaged at this stage, in keeping with the formal consultations already conducted in the frame of the proposals of the "Healthier Animals and Plants for a Safer Food Chain Package". These are considered to provide sufficient evidence of the support expected by the interested parties.

Moreover, broad discussions carried out within different fora (such as CVOs' meetings, Advisory Groups and Working Groups involving both representatives of national authorities and experts from the private sector) also demonstrate the overall satisfaction with the current funding policy of both public authorities and the private sector, therefore any major change to the current approach is not considered necessary.

1.3 Steering Groups

This impact assessment was guided by an internal DG Health and Consumers steering group. An Impact Assessment Steering Group (IASG) was also convened, which DG Health and Consumers (SANCO) chaired, and to which the Secretariat-General (SG), Legal Service (SJ), and Directorate-Generals for Budget (BUDG) and Agriculture and Rural Development (AGRI) were invited. The group met twice in September 2012.

The first meeting of the IASG was held on the 6th September 2012 in Brussels. The following DGs participated in the meeting: SG, SJ, BUDG, AGRI, and SANCO. A preliminary discussion on procedural issues, IA objectives and policy options proposed took place; particular emphasis was given to data collection needs. Attendees agreed on the need to focus the further assessment on policy options 3(a) and 3(b), which are illustrated in Section 4.

The second meeting was held on the 20th September in Brussels. DG SANCO chaired the meeting and SG and DG AGRI participated. A draft of the IA was discussed. The approach was broadly endorsed, with some changes requested, particularly the better alignment of objectives with the individual policy objectives.

No third meeting was arranged, in agreement with the participants, as it was not considered necessary in the light of both the limited timescale available and the proportionate approach required to develop the present impact assessment.

1.4 Impact Assessment Board

The meeting with the Impact Assessment Board took place on 7th November 2012. Following this discussion, an opinion on the draft IA was issued. The Board stressed the need to strengthen the report by focusing on five main recommendations for improvement. The main comments and main changes made following the meeting are outlined in the table below:

(1) Identify the existing evaluation gaps.

Describe in detailed how the existing budget is allocated and managed. || · Overview of budget allocations per MSs and their evolution over time · Examples of less successful interventions and lessons learnt · Current eligibility conditions and funding rate mechanism || Sections: - 2.1 - 5.3.1 Annex 1

Clarify which of the available (feasibility) studies, evaluations or audits providing adequate information about the cost-effectiveness of past EU food and feed expenditure. || · Works indicating the added value of EU (co-)funding · No cost-effectiveness analysis conducted so far · Way forward towards a systematic approach to monitoring and evaluation || Sections: - 1.2 - 1.2.1 - 1.2.2 - 1.3 - 2.1 - 2.2.2 - 7

(2) Better explain the problems.

More clearly spell out the need to reprioritise and re-allocate resources between the animal and plant health areas/activities in order to better address the major risks. || · Need for a flexible approach in planning the food safety expenditure · Analysis conducted within other works of the "Healthier Animals and Plants for a Safer Food Chain Package" (e.g. more investments in preventions, increased attention to plant health) · No major risks due to the current framework || Sections: - 2

Demonstrate the need for a separate food and feed emergency fund on top of the envisaged Global Agricultural Risk Management Fund and to finance training activities for third countries. || · Need to access a "crisis reserve" to be recurred when ordinary emergency measures (e.g. "Veterinary emergency fund" for animal diseases) are not sufficient to deal with the emergency · Need to prevent the entrance into or the spread within the EU borders of diseases and pests from neighbours countries. || Sections: - 2.1 - 2.2.1 - 2.5

Provide a detailed analysis of problems and issues related to the EU expenditure management, including high error rates. || · No major problems affecting the current framework · No high error rates identified within this assessment or previous works || Sections: - 2

Better describe all the direct and indirect beneficiaries of the EU support and explain how and to what extent they are affected by the identified problems. || · Outline of indirect beneficiaries of the EU measures · Further details already spelt out in the individual IAs of the package || Sections: - 2.3

(3) Better explain policy options and consider additional ones.

Clearly indicate how priorities will be set and how the budget will be allocated. || · Flexibility of the food safety expenditure: prioritising annually adjusted · Nature of budgetary allocations per macro area · Overview of budgetary allocations since 2005 · Focus on Veterinary programmes || Sections: - 2.1 Annex 1 Annex 2

Better explain the content of the envisaged Cost and Responsibility Sharing Schemes and justify why the current standard co-financing rate should be increased. || · Overview of the assessment conducted only in the field of veterinary emergency measures · More consistency among funding rates across the funding areas · Contribution to economic recovery || Sections: - 4.3 - 5.3.1 Annex 4

Present other, more realistic and diversified, policy options that would duly reflect the identified problems and their drivers and would imply re-prioritisation and spending less on certain activities. || · Reformulation of the options proposed in the previous draft IA and their link to the problems/drivers identified · No need to develop additional policy options in the light of the minor problems identified · Limited timescale available since the request for the present IA || Sections: - 1 - 4

Consider alternative delivery mechanisms related, for example, to the institutional set-up, eligibility criteria such as the minimum size of the co-funded programmes, payment methods, fraud prevention, controls, etc. || · No need to further develop the analysis given the absence of any major problem affecting the present framework ||

(4) Improve the assessment and comparison of options.

Assess and present the benefits of EU intervention with more caution, particularly in view of the lack of evidence on the cost-effectiveness and added value of past food and feed expenditure. || · Clarification of the available information (notably internal and external works, consultations) providing evidence of the added value of the current food safety expenditure, given the absence of a cost-effectiveness analysis || Sections: - 2.1 - 2.2

Indicate the budgetary impact on individual Member States and assess the economic impacts for different sectors and on SMEs in greater detail. || · Quantitative analysis conducted in terms of macro areas of expenditure || Sections: - 5.3.1

Clarify when methodological tools to assess the impacts of EU intervention will become available and to what extent they might have an impact on the foreseen budgetary allocation, or result in different spending per Member State. || · New methodological tool available in the upcoming months: continuous and analytical evaluation of the cost-effectiveness of all actions implemented under the food and feed expenditure || Sections: - 7

Compare a wider set of alternative policy options in terms of effectiveness, efficiency as well as coherence. || · No need to develop and compare a wider set of policy alternatives in the light of the minor problems identified · Limited timescale available since the request for the present IA || Sections: - 1 - 2.2

(5) Strengthen monitoring and evaluation.

Set out concrete arrangements for monitoring, reporting and evaluation, taking due account of the respective responsibilities of all levels of government and actors involved. || · Outline of the ongoing work within DG Health and Consumers to develop and implement, with the cooperation of national public authorities, a systematic approach to monitor and evaluate the performance of all actions implemented in the frame of the food and feed expenditure. || Sections: - 3 - 4 - 5 - 7

Re-define policy objectives in sufficiently concrete terms and define reliable monitoring indicators, including the benchmark against which their performance will be measured. Explain how data will be collected, by whom and at what point of time.

Section 2: Problem definition

EU financial support for food safety, animal health, plant health and official controls has been examined in a number of audits, studies and analyses. In light of the extensive consultation conducted within these tasks, the current system is generally considered to add monetary value over and above the amounts contributed and to work fairly well in its existing format. Nevertheless, it is acknowledged that the current financial framework in the food and feed area is not always supported by a systematic approach to carry out ad hoc evaluations, so a cost-effectiveness analysis allowing the overall performance of the related expenditure to be assessed has not so far been implemented. Therefore, the revision of the overall Multiannual Financial Framework and of the individual policies presents an opportunity to assess the current situation and look at how it could be improved further, as well as tying it more effectively to the objectives of the Commission and the EU, including the Europe 2020 goals.

It is also important to recognise that there are a number of problems, reflected in the various sectorial impact assessments, some of which the financial support for the sectors can help to solve. These are outlined further below and must be borne in mind when developing objectives and solutions.

2.1 Current policy and financial framework

The 2011 food safety budget was just under €314.6m. The overwhelming majority of the EU co-funded activities have their legal basis in one of the three following pieces of legislation:

· Council Decision 2009/470/EC (e.g. Veterinary Eradication Programmes, Veterinary Emergency measures)

· Directive 2000/29/EC (e.g. Plant Health measures)

· Regulation 882/2004 (e.g. EU Reference laboratories, Better Training for Safer Food)

The budget is split between several different budget lines. A short overview of spending in 2011 is presented below in Table 1, and a breakdown of the budget over the period 2007-2011 is presented in Annex 1.

As a snapshot of the EU food and feed expenditure, the amount executed in 2011 are given in Table 1. The distribution presented above reflects the latest prioritisation of the funding, which is decided and adjusted on an annual basis to ensure that it is fully appropriate to the prevailing situation. The Commission, with the Member States, regularly assesses the changing external environment to evaluate the need to adapt the budget to respond better to coming challenges; and priorities are sometimes shifted accordingly.

Table 1: Food safety expenditure 2011

Measures || Amount executed (€) || Legal basis

Veterinary Eradication, Monitoring and Control Programmes || 238.0 m || Dec. 2009/470/EC

Veterinary Emergency Fund to MSs || 10.0 m || Dec. 2009/470/EC

Plant Health Measures || 19.2 m || Dir. 2000/29/EC Reg. 882/2004

EU Reference Laboratories || 14.3 m || Reg. 882/2004

Better Training for Safer Food || 14.4 m || Reg. 882/2004

Other operational measures || 16.0 m || Dec. 2009/470/EC Reg. 882/2004

Administrative measures and miscellaneous || 1.7 m || Various sectorial legal bases

Total || 314.6 m ||

Nevertheless, the distribution of financial allocations to the macro-areas presented in Table 1 have broadly been consistent from year to year, as confirmed by the evolution of the annual budgets executed since 2007 which is shown in Annex 1. A more detailed planning of these items far in advance is not practical. Indeed, the expenditure within these areas is by its nature variable, as it has to be adjusted in keeping with a number of factors (not necessarily consisting in large emergencies); notably the epidemiological evolution, which is not easily predictable. Therefore, some inherent room for flexibility is considered essential when drafting a minute provisional multiannual budget.

A focus on the total budget for Food and Feed executed in the year 2011 reveals that some 75% of the total budget for Food and Feed executed in the year 2011 was allocated to programmes for the eradication, control and surveillance of animal diseases and zoonoses, henceforth referred to as Veterinary Programmes. These programmes aim to progressively eliminate a number of listed animal diseases which are endemic in certain areas of the Union, by means of a wide range of measures including vaccination, testing of animals, and compensation for slaughtering or culling. EU funding to support these measures is allocated according to priority, whereby the greatest weight is given to diseases of public health importance and those that have major economic impacts due to trade implications and income losses for farmers, for the wider livestock industry, as well as adjacent sectors (rural economy etc.). The rationale for intervention is therefore directly linked to the protection of animal health, human health in the case of zoonoses and, also, to the importance of the livestock sector in the EU.

EU co-funding for monitoring, eradication and control activities for some animal diseases has been available and distributed to Member States for some time. This is the case for the monitoring programmes for classical swine fever (CSF), and the eradication measures for bovine brucellosis and bovine tuberculosis, and ovine and caprine brucellosis.

During the 1990s, the co-funding of eradication and monitoring measures of these diseases made up more than 80% of the overall EU funding on the programmes and the financial contribution was distributed among roughly ten Member States, mainly those in the Mediterranean area (Spain, Italy, Portugal, France) where most of these diseases were traditionally endemic.

In recent years, diseases such as avian influenza and bluetongue have emerged, or re-emerged, in EU territory. The EU has, therefore, extended its financial contributions to combat and monitor such diseases and an increased number of Member States have benefited from this co-funding. At the same time, EU policy to combat certain diseases has evolved significantly with increasingly focused and targeted measures following new scientific insights into the epidemiology of each disease and the risks of introduction, spread and transmission to humans (e.g. in the case of enzootic salmonellosis and Transmissible Spongiform Encephalopathy (TSE) programmes). Current ongoing eradication, monitoring and control programmes involve 10 of the 25 diseases covered by EU co-financing[3], notably: Brucellosis (bovine, ovine and caprine), bovine Tuberculosis, Bluetongue, Salmonellosis, African Swine Fever, Classical Swine Fever, Swine Vesicular Disease, Avian Influenza, Transmissible Spongiform Encephalopathies and Rabies. Examples of positive case studies regarding some of these diseases are presented in Annex 2, while the main reasons behind less successful stories are outlined in the next section (Added Value from EU co-financing).

Almost 3.2% of the Food and Feed expenditure was allocated through EU co-financing to Member States under animal health emergency measures in the event of outbreaks of certain listed epidemic livestock diseases. The current EU rules provide for co-financing (or complete funding) of the actual direct costs incurred for eligible expenditure. The eligible expenditure comprises: compensation to owners for the market value of compulsorily slaughtered animals or destroyed eggs; the compulsory slaughter of animals; the destruction of carcasses and/or eggs; the cleaning and disinfection of holdings; the destruction of contaminated feed stuffs and/or milk; the destruction of contaminated equipment; the purchase of vaccines; and vaccination.

The expenditure for Plant Health measures represented the second largest item funded in 2011, amounting to 6.1% of the overall allocation for Food and Feed. It mostly relates to eradication measures, and to the containment of outbreaks of plant pests and diseases. The EU plant health regime (PHR) is mainly aimed at protecting European agriculture and forestry by preventing the entry and spread of non-native harmful organisms (pests and pathogenic micro-organisms), by securing safe trade by the establishment of EU import requirements and intra-EU movement conditions for plants and plant products. Outbreaks of the listed organisms have to be eradicated or, if that is impossible, contained to protect the rest of the EU territory. A second objective of the regime is to ensure the availability and use of healthy plant material at the beginning of the chain of plant production by preventing the spread of harmful organisms with seeds and planting material. This objective is shared with the EU regime for plant reproductive (planting) material, whose health is critical to tackle organisms (e.g. viruses) against which no pesticides are available.

More than 4.5% of the budget considered was spent to finance the Commission training initiative Better Training for Safer Food. It is focused on ensuring harmonised and efficient controls by training national authorities in Member States, and in some cases, candidate countries, keeping them updated on EU law, with a view to ensuring and maintaining a high level of consumer protection and of animal health, animal welfare and plant health. It comprises programmes on different subjects related to the verification of compliance with food and feed law, animal health and welfare rules and plant health rules. In 2011, 151 training activities took place, involving some 6,100 participants. Moreover, 29 thematic programmes were carried out, 8 of which took place in targeted third Countries. The number of training sessions, participants and thematic programmes has progressively increased in the last few years. Between 2006 and 2011, almost 25,000 people took part in the training.

In the frame of official controls, another 4.5% was allocated to the network of EU Reference Laboratories (EURLs). The 47 EURLs have their tasks designated in EU legislation, and contribute to all aspects of food safety by providing information on analysis methods and organising comparative tests with the national reference laboratories, coordinating the application of the methods and research into new analysis methods, organising training and advanced courses for national reference laboratory staff and providing scientific and technical assistance to the Commission.

A breakdown of the last 5 years of the food safety budget, including details about allocation per Member State and their evolution over time, is available in Annex 1. An overview of how much is spent on prevention, surveillance, eradication and containment is also given.

Added Value from EU co-financing: example case studies

Most of the EU food safety budget is spent on veterinary programmes, which represent about 78% of recent spend. Case studies of seven of the ten diseases which are currently funded are presented in Annex 2. These have been partially or wholly successfully tackled with the help of EU veterinary programmes and co-financing. In the first case study, rabies is examined. This disease has been largely eliminated in Europe through a successful wildlife vaccination programme, virtually wiping out a significant public health risk. Salmonella is the subject of the second case study, demonstrating that the compulsory co-financed control programmes implemented since 2004 have almost halved the number of human cases in the EU. BSE was a new and poorly understood disease in the 1980s, but since then, concerted EU action has almost eradicated it in Europe. Trade in live cattle, beef and bovine products from countries most affected has been restored, and consumer confidence has returned. The fourth case study looks at bovine tuberculosis, a challenging disease to control because of its slow development and, in certain areas, wildlife reservoirs. Nevertheless, success has come in some areas: we concentrate on Spain, where the possibility of obtaining officially free status is close. Classical swine fever used to be endemic in the EU but has been virtually wiped out with the help of EU co-financed programmes. Bovine brucellosis has also been totally eradicated in most EU countries: how Ireland gained officially free status with the help of an EU co-financed programme is examined. Lastly, avian influenza, which has made increasing incursions into the EU in recent years through wild bird spread, has been successfully contained through monitoring and surveillance; reducing the risk of both economic losses to farmers, and also the emergence of a zoonotic strain dangerous to humans.

These are examples of virtuous cases providing evidence of the positive value for money offered by the implementation of EU veterinary programmes.

On the other hand, as already anticipated, one deficiency affecting the current framework is the lack of a systematic approach to the monitoring and evaluation of the performance of the measures implemented in the frame of the food safety expenditure, including the veterinary programmes. Therefore, as will be further explained in Section 2.2, the ability to demonstrate the effectiveness of the financial management is sometimes limited.

Taking into account this lack of cost-effectiveness tools, a continuous evaluation of the programmes co-financed at EU level is nevertheless possible, and has been conducted in the last few years. This evaluation has been based on tangible results of EU action to support the MSs in eradicating, controlling and monitoring certain animal diseases. These studies have shown the overall success of the veterinary programmes but also highlighted some less virtuous stories where particular implementation issues adversely affected the performance of the programme.

Many veterinary programmes, especially eradication activities, are by their nature long-term, therefore results are often achieved a long time after the implementation of specific measures. For example, the eradication of tuberculosis, which cannot be tackled by means of a large-scale vaccination campaign, is likely to require a period exceeding ten years to be completed. Therefore, a proper evaluation can only be carried out in the medium to long term.

Unfortunately, there are also stories of lower performance of programmes co-financed by the EU; these cases are almost always due to problems with implementation at national level.

The Member States affected often face structural difficulties such as budgetary problems or staffing issues (insufficient staff or inappropriate allocation of staff) which, despite all efforts, hamper the proper implementation of the defined actions. From the EU point of view, it is opportune to recognise that these difficulties at national level can be accentuated by the ungainliness of the co-funding system, which sometimes takes some time to reimburse programmes already implemented.

It can also be that these failures are attributable to socio-cultural issues, such as inadequate coordination between national and regional/local players, or lack of dialogue (communication) between public and private sector. An improved commitment by the Member States is essential to resolve these issues.

It is also important to note that, where programmes have failed to perform due to poor or incorrect implementation at Member State level (central, regional or local level), the Commission has taken effective corrective action or imposed penalties in terms of not approving the programme or reducing the funding in subsequent years.

An example of this is the eradication of brucellosis in sheep and goats in Greece: the Commission approved programmes during the period 2005-2007 and in 2009 (in 2008 and 2010 Greece did not submit a brucellosis eradication programme for sheep and goats). Due to the poor implementation of the programme a 100% penalty was applied subsequently and no payments were made.

In the light of this unsuccessful experience, the recent decision of the Commission to reapprove a programme for 2011, 2012 and 2013, was only possible on the condition of a clear commitment from Greece to cooperate in implementing the action agreed, but also thanks to the EU engagement to meet Greece halfway by providing it with additional staff (only for 2013) to make up for the lack of human resources at national level.

2.2 Problem identification

As already mentioned, the present revision mostly addresses the need to adjust the legal current framework to the financial requirements of the new MFF 2014-2020 (Driver 1). In addition, it represents an opportunity to introduce some improvements to cope with a few minor drawbacks affecting the current financial management tools (Driver 2).

The problems of the current financial framework are partly due to the changed sectorial needs identified in the respective policy reviews, which are about to be set out in new Commission proposals. Those needs should be reflected in the future financial legislation and in its implementing tools. The justification for those changes has been extensively provided in the sectorial impact assessments and is simply summarised here (Driver 3).

2.2.1. Driver 1 – Legislative framework: The current legal framework is over-complex and sometimes out of date

Problems:

· Lack of alignment with the newly proposed MFF 2014-2020

· Potential administrative burdens for MSs in keeping up to date and fully complying with administrative and funding requirements.

a) The current revision of the financial framework through the introduction of the new Multiannual Financial Framework will remove the 'food safety' budget lines (which cover all the animal health, plant health and official controls spending in question) from Heading 2 of the overall EU budget 'Preservation and Management of Natural Resources', which includes the Common Agricultural Policy budgets. They will be moved into Heading 3, to be called 'Security and Citizenship'. This means that the current legal base for financial controls and management of funding (Regulation 1205/2005) will no longer cover food and feed spending.

- Therefore a new legal basis would be needed to ensure that the new proposed budget of €1.891bn over seven years is managed and audited in line with legal requirements and good practice.

b) Moreover, the move from Heading 2 to Heading 3 will mean that should severe emergencies arise requiring EU financial support, there will legally be no access to the 'Reserve for crises in the agricultural sector'. This access would be crucial to support MSs in the case of a large-scale crisis - such as that on the scale of the Foot and Mouth Disease crisis in 2001 – in which the Veterinary emergency measures (as concerns animal diseases) would not provide the countries concerned with enough financial support to face the situation. It is important to note that the "crisis reserve" under consideration, whose activation requires a complex procedure involving both the European Parliament and the Council, does not offer as much flexibility as the reimbursements allocated to the MSs under the emergency fund, which can be speedily and straightforwardly approved as soon as the outbreak is reported. Therefore, the reserve is not suitable as a replacement for the emergency measures - which ensure prompt intervention when an outbreak occurs - but should be resorted to in order to supplement the emergency measures when they are not sufficient to deal with a very large crisis.

- Both the Commission and the Member States would suffer from the lack of certainty about access to the crisis reserve in a large crisis, especially in the current economic climate.

c) The current legislative framework is not fully compliant with the Financial Regulation and implementing rules applicable to the general budget of the European Communities.

- Therefore an alignment to the provision of Title VI (grants) by means of the proposed financial regulation covering the food and feed spending is needed.

d) The provisions regarding the various financial provisions supporting food and feed safety, animal health, plant health and official controls are currently found in a number of different legislative instruments, some having a very old legal base, such as Council Decision 2009/470/EC, which is a re-cast of Council Decision 90/424/EEC.

- This in itself can be confusing and unwieldy for MSs seeking to understand the legislation, with associated administrative burden.

e) Aside from the context of the MFF and the current disparate legal framework, there is also the problem of the changing sectorial legislation. The current package being worked on will make certain changes to animal health, plant health, PRM and official controls legislation, some of them very significant.

- Without the according changes to the financial provisions, they will remain unaligned to the new objectives and measures in the policy legislation.

2.2.2. Driver 2 – Operational framework: The existing financial management tools are not optimal

Problems:

· Lack of clarity in eligible measures for funding and their costs

· Complex administrative arrangements

· Inefficient allocation of available resources

a) Current standards expect the Commission to be able to explain clearly and transparently what the EU budget is for and how it will be used, and the current legislation does not fully meet this criteria. Following the revision of the MFF, all budgets should be better aligned with it in order that they can be better managed using programme methods.

- The food and feed financial budgets are not currently time limited and would not sufficiently align with these new requirements.

b) At present, many of the administrative arrangements for gaining programme approval and funding reimbursement are overly complex. For example, there are around 140 Commission decisions required annually to approve reimbursement decisions associated with the veterinary programmes. In addition, several of the programmes are worth very little, many less than €50,000.

- This takes a significant amount of time, effort and bureaucracy. Moreover, it is doubtful whether the time and effort put into administering tiny programmes outweighs the benefits gained from co-financing.

c) The financial provisions at present do not set the most clear and consistent objectives and performance indicators to evaluate the cost-effectiveness of EU measures implemented within the food and feed policy.

- This means that the food and feed spending cannot always be consistently assessed, prioritised and improved.

d) The definition of eligible measures and associated costs are not as clear and simple as they could be. In particular, eligible measures and funding rates are scattered across different regulations. For example, for the Plant Health Emergency measures and the Emergency Veterinary Fund, a 2012 internal audit report recommended that they be clarified and simplified.

- These factors contribute to the over-complexity of the system

e) The current lack of consistency in funding rates presents Member States with a great deal of uncertainty when planning programmes. For example, for the veterinary and emergency programmes, the compensation rate for slaughtered animals was 50% for most diseases, 60% for FMD, whereas other measures had no fixed rate and varied over time. Plant health measures had a basic rate of 50% but with the possibility of derogation which meant that certain procedures could be funded at higher rates. For example, the pinewood nematode programme in Portugal was funded at 75%.

- This situation is unsettling and difficult to deal with, and is likely to create an additional administrative burden for MSs; therefore it could be rationalised by means of a harmonised approach.

f) A recent survey of MSs representatives found that the multiannual and annual programme planning framework is regarded as burdensome. The annual cycle of plan preparation, appraisal, approval, adoption and reporting is resource-intensive and involves a high degree of year-on-year repetition. In addition, there is a general lack of visibility and clarity in Member States’ medium term programme objectives, and some perceived imprecision in the criteria used to evaluate plans at EU level.

2.2.3. Driver 3 – Policy framework: Current tools are not sufficiently focused to guarantee the achievement of food safety objectives

Problems:

· Sub-optimal implementation of individual policies and risk of not fully achieving overall policy objectives

DG Health and Consumers internal audits and reports, as well as the impact assessments carried out for the individual policy areas, have identified a few issues relating to the existing framework that could be improved to better support policy objectives.

The plant health law impact assessment identified that an increased EU financial support for plant health would pay back several times over in wider economic benefits. This included direct support for surveillance and associated measures; and the expansion of the scope of the EU Reference Laboratories to include plant health work. In addition, the official controls impact assessment concluded that there was a similar case to be made for expanding the scope of the Better Training for Safer Food initiative.

While at an aggregate level, the EU programmes have offered good value for money, the Commission could better formalise the process of evaluating and approving MS programme plans (which has already started to happen but could be improved further). Member States themselves when consulted stated that funding criteria, data management and payment processing were the three areas where they most wanted to see changes to the current model of veterinary programmes. By their very nature, veterinary programmes are long term investments.

All of these factors link to problems listed under the financial driver (2.2.2), and ought to be consistently reflected in the legislation. For instance, the lack of a clear and consistent set of objectives and indicators means that the programmes which benefit from EU co-financing are at risk of under-achieving compared to the objectives which are set out for the policy areas, and resources being spent in a sub-optimal way.

2.3 Who is affected by the current policy?

The current financial framework primarily affects Member States and their competent authorities, as they are the direct beneficiaries of the financial support. As thoroughly presented within each IA of the "Healthier Animals and Plants for a Safer Food Chain Package", there is also a wide range of indirect impacts linked to the EU measures implemented under the food safety policy, affecting the following categories of stakeholders:

· stakeholders involved in keeping live animals and in the production of, trade in, and import or export of live animals, animal products and products of animal origin, non-commercial animal keepers and holdings such as pet owners, zoos, backyard farmers, and hobby farmers;

· farmers, growers, traders in agriculture, horticulture, forestry, the wood industries, wood packaging material industries, logistics industries and industry and trade at large;

· breeders of plant varieties, PRM suppliers and users;

· business operators within the food chain;

· landscape managers, citizens, environmental NGOs and other parties interested in the conservation of the natural environment, landscape and public and private green;

· trading partners and competent authorities in third countries as they have to comply with the EU's import conditions for live animals, animal products and products of animal origin, the EU provisions and pay for export controls and issuance of phytosanitary certificates, and have to perform controls prior to export to the EU;

· veterinarians, both official (state) or private, other veterinary professionals, technicians and the wider veterinary industries;

· consumers both in the EU and outside the EU, as they are the ultimate beneficiaries of measures to ensure the safety and quality of the food chain.

2.4 How would the problems evolve, all things being equal?

The current financial framework would become problematic to manage by the start of 2014 because of the following factors.

Linked to the first set of problems, the primary difficulty would be the absence of a legal base covering the food and feed expenditure after its move from Heading 2 to Heading 3, and allowing it to be controlled and managed. In addition, there would be no legal base for access to the 'reserve for crisis in the agricultural sector' in the case of large crises. In addition, the financial framework will not be fully compliant with the Financial Regulation, notably with Title VI (grants).

As concerns the second set of problems, the lack of clarity regarding eligible measures and the objectives and indicators for the framework would continue to jeopardise the correct monitoring and evaluation of the measures implemented and hamper the effective prioritisation and planning of future expenditure.

Linked to the third set, other minor problems identified through various evaluations, including those in the impact assessments, will continue.

2.5 International dimension

International governance

EU membership of international bodies and its commitment to international agreements, such as the OIE Health Code, the International Plant Protection Convention, the WTO Sanitary and Phytosanitary Agreement and the OECD seed scheme, also ensures that the EU is responsible for maintaining an adequate legal framework consistent with international standards, guidelines and recommendations.

Third Countries

Another international dimension is the possibility of spending limited and targeted EU feed and food budgets in programmes in third countries. This has been done in the past, where a clear case can be made that the programmes would not be otherwise developed, and there is a clear benefit for the EU. This should continue to be the case in the new MFF. For example, rabies control in bordering countries to the EU is usually managed by the neighbouring EU MS in order to ensure compliance with the overall rabies measures, and ensure a buffer zone between the remaining infected areas and EU territory, and so reduce the risk of incursions.

The Importance of Trade

However, the most important international dimension is undoubtedly the value of the EU's production and the importance of trade. The production value at basic price for crop output in the Union in 2011 was €205 billion and for animal output €156 billion.

The EU is the world's largest exporter and importer of food and drink products. In 2010, EU27 food and beverages imports were worth €78 billion, and exports €73 billion.

The EU27 imported 79.3 million tonnes of food and live animals and 3.4 million tonnes of beverages in 2010, with a trade deficit of 14 million tonnes for food and live animals, but a surplus of 6 million tonnes for beverages. These figures explain how important it is for the EU economy to encourage certain importing countries to meet the EU safety standards for food and feed, notably by means of the BTSF programme.

The EU is the world's largest exporter of PRM with an estimated export value of €4.4 billion representing roughly 60% of the total worldwide PRM export value of €7.7 billion.

Included in these overall figures, in 2010 the EU exported €1.5 billion of live animals, €6.6 billion of meat, €8 billion of dairy products and birds' eggs, €2.9 billion of fish, €9.5 billion of cereals, €8.8 billion of vegetables and fruit and €2.9 of feeding stuff for animals.

The EU's ability to export to third countries relies on its continued reputation of high production standards and added value in EU goods compared to those produced outside Europe. As regards imports, it is essential that all products on the EU market covered by Union food safety legislation are safe. This can only be achieved by a reliable and trusted official controls system which ensures that the relevant EU safety and quality standards are consistently enforced and corresponding expectations from trade partners met (for EU exports) and that goods arriving from third countries offer adequate guarantees of meeting equivalent safety levels (for EU imports).

The various EU initiatives under the auspices of the food safety budget contribute to ensuring that MSs can continue to trade animals and animal products effectively and with as few restrictions as possible. This is an important contribution to the EU's economic recovery.

The impact on trade in the case of disease outbreaks is demonstrated by a couple of very recent case studies:

Schmallenberg virus The Schmallenberg virus (SBV) is an example of how the appearance of an "unknown" virus and diseased animals have the potential to greatly impact on trade and how a quick reaction from the EU was needed to minimise this impact. In November 2011 Germany isolated (for the first time in the EU) a new virus that was identified as belonging to the family Orthobunyavirus, serogroup Simbu. It was given the name "Schmallenberg", after the first place where it was found. Later, the virus was also confirmed in the Netherlands, Belgium, Germany, United Kingdom, France, Luxembourg, Italy, Spain, Denmark, Poland and Austria. From early February, several trading partners (e.g. US and Russian Federation) started taking temporary protective measures including trade restrictions and requested additional guarantees for certain commodities (i.e. live animals, semen and embryos,) awaiting further scientific knowledge before resuming trade. The Commission together with the MS identified the priorities and areas for which additional information was urgently needed to establish disease control measures. Some of the affected MS started to carry out scientific studies to improve knowledge about this virus and requested EU financial support. The Commission was able to very quickly allocate almost €3m to support 7 Member States to carry out 14 scientific studies to gather further information on the virus. (Commission Decision 2012/349/EU). As a result of this, it has been confirmed that SBV has a very minor impact on livestock production, the risk of infection to humans from direct contact or products is negligible. Since then, some countries have already lifted trade restrictions, and the EU is in the process of agreeing with others to do the same.

E-Coli The 2011 outbreak of e-coli, primarily in Germany, demonstrates the impact of a loss of consumer confidence and trade restrictions when an outbreak occurs. Although not a direct animal disease or plant disease or pest, the direct parallels with a possible outbreak in one of those areas are evident, especially those with serious effects on humans. From May to July 2011, a major outbreak due to the contamination of sprouted seeds by Shiga toxin-producing Escherichia coli (STEC) O104:H4 occurred in clusters in the north of Germany and in the Bordeaux region in France. The outbreak started in Germany at the beginning of May and reached a peak on 22 May 2011. It ultimately led to 4010 cases, including 55 deaths. As soon as the first cases were notified by Germany, the Commission launched appropriate emergency procedures. The European Commission coordinated the response to the outbreak at EU level and was assisted by the ECDC, and the European Food Safety Authority (EFSA). The EU reference laboratory (EURL) for Escherichia coli (E. coli) played a crucial role in the identification and management of the outbreak; providing risk assessment, advice in preventative measures, exchange of best practice in treatment, the development of a much quicker method for detection, and other epidemiological assistance. The losses for farmers in the fruit & vegetable sector were estimated to be at least €812m in the first 2 weeks alone (source: Copa-Cogeca). In addition a temporary export ban of vegetables to Russia occurred, constituting an annual value of €600m. The Commission supported the sector with exceptional measures on market intervention with a total value of €227m. This was a previously unforeseen burden on the EU budget. Such measures concerned the products most directly affected by the crisis, i.e. tomatoes, cucumbers, lettuces and certain endives, courgettes and sweet peppers. Sales dropped significantly as consumers stopped buying these vegetables because of uncertainty as to the source of the outbreak, and recommendations not to consume these products raw. Following the confirmation of the source of the outbreak and its control, trade restrictions were subsequently lifted and consumer confidence has largely been restored.

2.6 The right and justification for EU action

The EU has the right to act in all of these areas, but not exclusive competence. MSs are also free to take their own measures regarding the financial support of animal health, plant health, official controls or feed and food objectives, provided that they do not interfere with other EU regulations, such as those governing the internal market and State Aid.

2.6.1. Treaty basis

There are a number of relevant treaty articles:

· Article 43 provides the basis for the EU legislative measures on the Common Agricultural Policy. The objectives of that policy are to increase agricultural productivity, to ensure a fair standard of living for the agricultural community, to stabilise markets, to assure the availability of supplies and to ensure that supplies reach consumers at reasonable prices. The Lisbon Treaty qualifies agriculture as shared competence between the EU and its Member States. It is obvious, however, that to a very large extent all fields of agricultural activity as well as ancillary activities upstream and downstream, have been regulated at the EU level. This means that legislation is predominantly a role for the institutions of the European Union.

· Article 114 provides the legal basis for the establishment and functioning of the internal market and the approximation of provisions laid down by the law, regulation or administrative actions in this respect.

· Article 168 on health protection refers to the protection of human health from all causes that may damage it, including those related to animal health. The legal basis for veterinary and plant health measures directly aimed at protecting public health were adopted under the co-decision procedure as a result of this article.

· Article 191 states as the objectives of EU environment policy the preservation of the environment, the prudent and rational use of natural resources as well as promoting measures at international level to deal with environmental problems.

2.6.2. Subsidiarity Test

2.6.2.1. Necessity test - Why can the objectives not be achieved by MSs?

In very general terms, good animal health, plant health, food safety and feed safety generates not only private benefits for the stakeholders concerned, but is a public good with wider societal benefits.

This is particularly true for the spread of diseases and pests. Co-operation in management and control measures is virtually always essential to limiting and defeating the problem. Diseases and pests do not respect national borders, and can easily spread across them. Where there is a risk of this happening, or a case of it having happened, MSs must act together, using similar or identical control and management measures, in order to have an impact on the disease. Reflecting this approach, EU legislation has introduced harmonised rules which apply to all MSs.

In addition, coordination at EU level allows for cheaper action on EU priorities, making it more effective and less expensive than actions by individual MSs. Both animal diseases and plant pests are independently mobile and cross-border effects can occur not only through intra-EU movement of commodities but also via natural spread; therefore they need to be addressed comprehensively. Inaction in one MS may result in spread to others. Third country trade partners might also implement restrictions on imports from the EU as a whole if an outbreak or safety problem in one of the MSs is not properly eradicated or resolved.

2.6.2.2. Added value test - Can objectives be better achieved by the EU?

The specific added value of EU financing or co-financing is that it provides incentives to MSs to put in place and support eradication and surveillance actions which are in the long-term interest of the Union as a whole. Large-scale eradication actions by MSs, including emergency measures could be difficult without EU support in view of the large costs incurred by the individual MS to the benefit of the EU, even if the overall cost/benefit for the Union as a whole would be clearly positive. This requires solidarity between MSs in sharing the costs and burden. If there were no measures at all at EU level, 27 systems instead of one would be in place. This would pose significant obstacles to movement on the internal market and would likely increase the financial burden associated with controls on health and quality.

But why support eradication and emergency actions in the first place? There are a number of reasons why the EU intervenes to support better and safer food and feed, including reducing animal and plant disease. For example, this flow diagram (Figure 1) shows the various reasons why intervention is considered relevant and important for animal diseases, and gives some idea of the possible impacts if they are left alone. Different diseases have different impacts and profiles, and there are different reasons why we might intervene. For example, although salmonella will cause some direct economic losses for operators, the primary reasons for controlling it are because of its direct threat to public health, and the indirect impact on trade if serious or prolonged outbreaks occur. On the other hand, a disease like Foot and Mouth is epidemic by nature, spreading extremely quickly and requiring immediate control measures. The primary reasons for controlling it are that it causes direct and potentially enormous economic loss to the farmer through natural losses and culling for control; and lower production output should the disease be uncontrolled and animals recover. Its occurrence will provoke serious and immediate trade embargos.

The specific added value of the EU co-financing of the plant health regime is that it provides incentives to MS who put in place eradication and surveillance actions which are in the long-term interest of the Union as a whole. Large-scale eradication actions by MS for outbreaks could be difficult without EU support in view of the large costs incurred by the individual MS to the benefit of the EU, even if the overall cost/benefit for the Union as a whole would be clearly positive. This requires solidarity between MS in sharing the costs and burden. The current example of the pine wood nematode outbreaks in Portugal and Spain demonstrates that EU plant health co-financing budget is crucial to implementing the eradication and containment measures which cause damage to Portuguese and Spanish forestry, however are essential to protect forestry in the other 25 MSs. The impact assessment for the plant health review specifically addressed the Union added value of expenditures in this area and concluded that increased investment in this area would result in significant overall long-term savings for the Union.

Figure 1

The benefits of EU rules for the prevention, notification, control and eradication of plant pests and animal diseases have been demonstrated, respectively, by the appearance of plant pests and occurrence of animal disease outbreaks in recent times. The response to these crises, examples of which are provided in the Animal Health Law and Plant Health Law impact assessments, showed the EU's capability to react quickly, limiting the spread of pests and diseases and minimising their impacts. This was largely due to the harmonised approach to controls, including providing financial compensation for losses due to eradication measures. The current system also enables the development of sustainable surveillance and monitoring programmes by providing co-financing at EU level.

For example, a 2011 report[4] undertaken by the Food Chain Evaluation Consortium (FCEC) in conjunction with three independent consultants, which looked at the outcome of the EU co-financed animal disease eradication and monitoring programmes, concluded that, "the programmes continue to play a crucial role in the effective management of the targeted animal diseases […] this […] offers clear net economic benefits to the relevant sectors and stakeholders, as well as the protection of consumers and public health."

The EURLs are also a key part of co-ordinated EU action. The shared resource enables MSs to rely on shared and consistent best practice being developed across MSs. This ensures that a consistent approach is taken to all aspects of the scientific support of food safety objectives. For example, during the e-coli outbreak in 2011 mentioned above, the EURL was crucial to developing a faster detection method, providing risk assessments, advice on preventative measures, and exchange of best practice in treatment; as well as other epidemiological assistance. Given the cross-border nature of this outbreak, a co-ordinated approach was essential to both detecting and eliminating the outbreak, and to limiting the number of cases and loss of life.

Overall, the approach followed at EU level to financially support activities under the food and feed policy meets the expectations of all interested parties in the MSs. The satisfaction of the public authorities and the private sector stakeholders with the current funding system in this area has been confirmed through the dialogue constantly carried out at EU level, both formally and informally, with these parties.

Section 3: Objectives

3.1 General Objectives

Financial instruments should be part of EU budget interventions in internal policies pursuing the following objectives, as set out in the Commission working paper accompanying the new Multiannual Financial Framework[5], and with the EU 2020 priorities:

Figure 2: EU2020 priorities for Health and Consumers (SANCO compilation)

The general objective of the regulation itself will be:

· Expenditure covered by this Regulation shall aim to ensure a high level of health for humans, animals and plants along the food chain and in related areas and a high level of protection for consumers and the environment while enabling the EU food industry to operate in an environment favouring competitiveness and the creation of jobs.

3.2 Specific objectives

1. To establish a single, clear and modern legal framework fit for purpose to manage the food and feed expenditure budget lines, including animal health, plant health and official controls.

2. To optimise the implementation and the functioning of financial management instruments.

3. To support the policy objectives laid out in feed and food legislation through the effective and efficient distribution of the budget.

3.3 Operational Objectives

1. The modernisation and simplification of the present legal framework has to be achieved through:

a. defining a common legal basis, replacing the current multiple legal bases;

b. establishing a harmonised legal basis, to cope with the move of food and feed expenditure from Heading 2 (Agriculture) to Heading 3 (Security and Citizenship) of the EU budget;

c. ensuring continued access to the "Reserve for crisis in the agriculture sector", to resort to in case of large scale emergencies;

d. aligning EU financial instruments in the field of food and feed to the Financial Regulation.

2. The optimisation of the financial management tools will be pursued by:

a. simplifying financial management structures and processes, also ensuring that the framework is time limited;

b. setting clear objectives and performance indicators;

c. clarifying actions eligible for funding or co-financing;

d. simplifying and standardising the funding rates, removing ad hoc rates;

3. The support for the policy objectives will be achieved through support in each of the policy areas:

a. contributing to a high level of safety of food and other products and of food production systems which may affect safety of food while improving the sustainability of food production;

b. contributing to a higher animal health status in the Union and to support the improvement of the welfare of animals;

c. contributing to timely detection of plant pests and their eradication where these have entered into the Union;

d. contributing to improve the effectiveness, efficiency and reliability of official controls and other activities carried out in view of the effective implementation of and compliance with the Union rules.

The policy objectives of the individual parts of the food and feed legislation, as identified in their individual impact assessments, are laid out in Annex 3.

3.4 Consistency with other EU policies

It is crucial that the proposal currently under consideration also remains consistent with other EU policies. At a high level, this means supporting the objectives of EU 2020 and the Multiannual Financial Framework. Perhaps most importantly, it is crucial that the financial framework supports the economic recovery through promotion of trade and other important economic activity. In other areas, it will be important to ensure that feed and food safety policy supports and complements, and does not overlap or undermine, other EU policies. This is particularly true in the areas of Agriculture and Trade. The new proposals for the Common Agricultural Policy support the same sorts of general objectives as the current financial regulations in question, but different specific objectives and via different means. It is also crucial that the financial regulation continues to support European trade and is consistent with existing and future trade rules. There is some consideration needed of marine policy, when the financial framework supports the prevention or eradication of diseases affecting aquaculture animals, for example. And it is important to be mindful of the objectives of environmental policies. Lastly, there are strong links between other policies such as public health, animal welfare, and others, which must be co-ordinated with.

Section 4: Policy options

4.1. Option 1: Baseline scenario: No change

No change would involve continuing with the existing set of legislative instruments governing the financial framework. This would mean initially that programmes could continue as now, but from 2014, there would be no legal base for the management and control of the expenditure. If the existing scenario is kept as it is, the 'Reserve for crises in the agricultural sector', needed to cope with large-scale crises for which the ordinary emergency measures are not sufficient, could no longer be resorted to after 2014. Moreover, none of the minor drawbacks identified within the present impact assessment are addressed.

4.2. Option 2: Bring existing legislation into one legislative instrument

Option 2 examines whether it would be possible to keep all existing measures from existing legislation, and bring them together into one regulation, as requested by DG Budget within the discussions on the MFF 2014-2020. This would make the legal provisions consistent with and workable within the new MFF, including making them consistent with the change from Heading 2 (preservation and management of natural resources) to Heading 3 (security and citizenship), and providing the legal basis for its control and management.

However, the existing provisions for financially supporting and co-financing programmes would not materially change.

4.3. Option 3: Single coherent financial programme

Sub-option 3(a): Establish a single coherent financial programme, largely using existing financial provisions, but with some improvements, particularly simplification.

This option envisages, as for option 2, bringing all financial provisions for food and feed together into one regulation. However, rather than keeping all the existing provisions exactly as they are, this option takes the opportunity to ensure that the revision fully meets objectives 1 and 2 by amending the framework to ensure that it is time limited, that it sets clear objectives and indicators, that it identifies eligible actions as well as evaluation criteria, and establishes detailed financial rules. In addition, there are a number of improvements to the current system which would be introduced in this option, including the simplification and harmonisation of co-financing rates, the expansion of certain financing measures to plant health, and better targeting of the scope of the Better Training for Safer Food Programme to also include PRM. In particular, the introduction of a systematic approach to monitoring and evaluation by defining clear objectives accompanied by performance indicators, as mentioned above, would provide evidence on the drivers of cost-effectiveness and critical success factors for food and feed programmes and measures offering better value for money.

Sub-option 3(b): As for sub-option (a) but including the introduction of aspects of Cost and Responsibility Sharing Schemes (CRSS)

Option 3(b) would further develop Option 3(a) by introducing an element of cost and responsibility sharing into the financial regulation. Both the upcoming AHL and PHL put emphasis on the need to explore possibilities of distributing costs and responsibilities more fairly between the EU, the MSs and the private sector. In particular, work has been ongoing for some time in the animal health area to identify whether there are ways in which farmers, animal keepers and MSs could be incentivised to adequately take the responsibility for prevention and best practice management methods, and to share the costs of outbreaks and epidemics when they do occur. However, in the light of this investigation, there is not enough evidence to suggest that the benefits from introducing this system will outweigh the costs, especially in the short term. The introduction of a CRSS, as assessed with respect to the emergency veterinary fund, was considered not viable in the current climate and not likely to be accepted by MSs and stakeholders for the following reasons:

· it would introduce some administrative complexity, conflicting with the objective of simplification and harmonisation;

· it would require an additional administrative burden to set up the elements of the scheme especially in the start-up phase:

· the contribution required from the private sector risks being unsustainable, particularly in the challenging financial climate.

More details about the investigations conducted in the animal health area are presented in ANNEX 4.

4.4: Option 4: Stop all EU action

It would in theory be possible to stop all EU financial provisions that contribute towards animal health, plant health and food and feed safety, and require MSs to fund their own programmes and activities.

Veterinary programmes

This would leave Member States uncompensated for any veterinary programmes, if they decided to initiate them at all. It is entirely possible that without the incentive to initiate programmes, Member States may stop many of them. It would also provide them with little incentive to comply with EU standards or keep the EU informed.

Emergency measures

In addition, emergency measures would go uncompensated. This would mean that should a serious animal disease outbreak occur, Member States would have to bear management and control burdens themselves.

Plant Health

Plant health measures would also go uncompensated, leaving Member States with no financial contribution for surveillance programmes. There would be no support during periods of emergency.

EU Reference Laboratories

The financing for the EU Reference Laboratories would be removed. Alternative measures such as entirely relying on the private sector to fund and supervise official testing and research, should be taken.

Better Training for Safer Food

Removing the financing for Better Training for Safer Food would mean that there would be no integrated Union-level training available for those working on the front line of official controls.

Option progression logic

The graph in Figure 3 presents the logic of the development of the options presented above, from least action (Option 4) to most action (Option 3.b):

The present Impact Assessment is primarily aimed at exploring possible alternatives in response to the formal requirement from the Secretary General to establish a new common legal basis to control the EU expenditure in the food safety area within the next financial framework. Therefore, neither a scenario where this change to the existing legislation is not made (Option 1), nor a scenario where the entire food safety spend is stopped (Option 4), can be considered as realistic policy alternatives, since they do not address the main purpose of the proposal the present impact assessment examines, i.e. creating a new legal basis complying with the structure of the Budget 2014-2020.

This means that Option 1 and Option 4 can be dismissed without further investigation.

Options 2, 3.a and 3.b, all satisfy this formal requirement missing in Options 1 and 4, and also meet the request from DG Budget to move the existing legislation into a common financial framework covering all food and feed issues.

Moreover, Options 3.a and 3.b introduce a few changes to solve a number of minor problems identified within the present assessment (section 2.2), aimed at modernising the current framework by making it more straightforward, effective and sound.

In addition, Option 3.b envisages an advanced system where the EU, the MSs and the private sector share both the costs and the responsibilities to tackle problems due to animal diseases and plant pests.

Figure 3: Option progression logic

Section 5: Assessment of impacts

As this is strictly a financial regulation, each option will be analysed according to its impact related to the main problems and specific objectives identified earlier in the assessment, which are largely financial or socio-economic impacts, rather than the policy-focused objectives of economic, social and environmental impacts which are traditionally used for policy legislation. The criteria for assessing impacts is broadly related to the achievement of the three specific objectives, and so divided into:

· Administrative and legal impacts

· Financial and management impacts

· Impacts on food safety objectives

5.1: Option 1: Baseline scenario: No change

No change initially means that the current programmes would continue for the next year or so, or new ones be approved on the same basis. Funding for other aspects such as EURLs would continue as now. There is unlikely to be any significant impact on the ground during that time. However, as noted in section 2, the current financial framework risks becoming unmanageable by the start of 2014, as it will no longer be legally consistent with the new MFF which is due to be introduced then, and will have no legal basis for financial management or controls.

5.1.1: Administrative and legal impacts

The financial framework for food safety will no longer be legally supported, because of the move from heading 2 of the MFF to heading 3. The lack of management and audit controls means that the framework risks being legally non-compliant. This has a potentially huge impact on the Commission and Member States who rely on the co-financing to help fund programmes and activities.

Administrative burden

At present, the complexity of the current system (e.g. lack of harmonisation, fragmentation of the legal basis) creates administrative burden for stakeholders to understand the legislation, and by the start of 2014, will prove very burdensome due to the lack of legal base for controls and management. It is extremely difficult to quantify this burden as some of the consequences of this legal issue are as yet unclear, but it has the potential to be large.

Access to crisis reserve

The impact of the move of the food safety budget lines from Heading 2 to Heading 3 of the MFF leaves a number of legal questions. But the main potential problem is access to the crisis reserve. Although there has not been a serious epidemic outbreak for several years, there is always the potential for MSs to be hit with a debilitating disease or pest, especially with climate change potentially bringing changing conditions for the nurture of vectors or diseases that have not been found in Europe before. The possibility of access to the crisis reserve is an absolutely essential part of last-resort disease control. Without it, MSs would be left to fend for themselves in the face of serious economic losses, as well as the possible associated problems of food safety, public health and food security. In the current economic climate, MSs are likely to find this even harder than usual to bear.

5.1.2: Financial and management impacts

Management control

Setting aside the problems that are inevitably going to arise when there is no legal basis for the control and management of the finances, the use of available resources will continue to be sub-optimal in the short term. The need for better management and evaluation of programmes, particularly the veterinary programmes (by far the largest amount of spend), has already been identified. This will enable MSs to better identify which measures work most effectively against which diseases. Continuing with the current system would mean not reforming the requirements for better evaluation and according ability to modify programmes to make them more effective, therefore inevitably continuing with sub-optimal and perhaps ineffective programmes.

In the longer term, the lack of any legal controls and management after the adoption of the MFF means a complete lack of requirements to assess and monitor programmes, and so no value for money can be guaranteed (if indeed any programmes were able to be continued or approved).

Impacts on/Sustainability of Public budgets

Assuming that around the same rough scale of programmes continue to be co-financed as currently, initially there would be no change to public budgets. However, the legal and administrative uncertainty if the legislation is not reformed to align with the new MFF means that far fewer programmes would be able to be funded. While this might initially save money from public budgets, the expected impacts from removing any prevention and management programmes are high. And if more pests and diseases begin to develop due to the lack of preventative programmes, there would be no guaranteed finances available to help Member States cope with emergency measures. The increase in both animal and plant disease, and the corresponding impacts on food safety, public health, and food security, is likely to ultimately cost much more to public budgets. However, this is extremely difficult to quantify in any meaningful way, as there is no available data assessing the impact of partially or totally removing prevention and control programmes.

Nevertheless, the impact of a serious outbreak can be devastating. To give an idea of the possible scale, the Animal Health Law impact assessment quoted the costs of some recent major crises:

· BSE (1996-1997): for UK only, GBP£3.5 billion (0.5% of GDP). The disease also caused a serious fall in consumer confidence across the whole EU and long-term large-scale trade embargos.

· FMD (2001-2002): for UK only, GBP£10-12 billion (1.2% of GDP) – i.e. between about €16bn and €19bn - mainly in agriculture / food chain (30%) and tourism (50%). For this outbreak, the EU co-financed €386.7m under the emergency measures to cover part of the direct costs incurred, that is about 3.5% of the total estimated (direct and indirect) losses.

· Avian flu in the Netherlands (2003): 30 million birds and direct economic costs of more than €150 million.

In the Plant Health Law Impact Assessment, examples were given of major pest incursions which have already threatened agricultural and forestry production, as well as the natural environment.

· Xanthomonas axonopodis pv. citri (citrus canker): following its introduction into Florida, the US authorities have spent €800 million in their fight against the bacterium. The production value of citrus in the EU, where the pest could cause huge damage, is about €3.9 billion.

· Mortality of western Canada's pine forests due to the mountain pine beetle (Dendroctonus ponderosae) outbreaks currently approaches 80% and reversed these vast forests from carbon sink to carbon source. Scandinavian pine forests are still free from the pest but are equally susceptible (FCEC, 2011).

5.1.3: Impacts on food safety objectives

Plant and Animal Health

For plant health, the impact assessment shows that the increasing influx of new harmful organisms cannot be adequately stopped without expanding the scope of Union financial support to measures that are not receiving such support at present (surveys for new organisms and priority organisms; compensation to operators for losses from eradication measures). This option was considered unacceptable by the majority of the stakeholders as well as by the Member States.

In addition, should the animal disease veterinary programmes have funding reduced or removed due to the legal problem of lack of controls and management, the frequency and seriousness of animal disease outbreaks may increase. This is particularly the case as the lack of co-financing programmes gives little incentives for MSs to finance them themselves. The potential problems with then reimbursing MSs for emergency spend may also be extremely serious. Member States (and potentially farmers or other individuals and businesses affected) may well have to bear significant and unanticipated financial burdens.

In the long term, the EU will have no legal control over the finances granted to Member States, seriously risking major falls in prevention activity, and therefore putting the whole EU at risk of more animal and plant disease outbreaks. In addition, in the case of an outbreak, there would be no legal recourse to the crisis reserve. This would mean that any serious outbreaks above the budget already reserved would not be reimbursed from EU funds. Therefore, incidents such as those quoted above would be dealt with by Member States alone, with no reimbursement, at a time when many are struggling with recession and budgetary deficit.

5.2: Option 2: Bring existing legislation into one legislative instrument

This option would only partially achieve objective 1 as identified in section 3, and would not meet either of the other two objectives identified. From a formal point of view, the establishment of a new legal basis would ensure continuity of the food and feed expenditure after 2014, when the budget line named "food safety" will be implemented under Heading 3 of the EU budget. The coverage of all food and feed expenditure through one single piece of legislation would address, to some extent, objective 1, by promoting simplicity and encouraging better understanding of the legislation. However, without further change to the existing measures, no harmonisation will be achieved and the specific changes envisaged within the sectorial legislation will not be implemented in the financial instrument. Moreover, it would not allow the financial programme to be planned and managed together comprehensively and consistently or set clear objectives and indicators, and it would not set clear and consistent criteria for evaluating eligible actions, or establish detailed financing rules.

5.3: Option 3 (a): establish a single coherent financial programme, largely using existing financial provisions, but with some improvements

5.3.1: Administrative and legal impacts

The simplification of the system and the harmonization or rates is expected to reduce the administrative burden on the Commission and MSs.

Reducing administrative burden: simplification of funding rates

Funding rates would be simplified to provide only three different standard rates, improving transparency and consistency.

· 50%

Where Union financial aid takes the form of a grant, the amount of the Union financial contribution would be up to 50% of the eligible costs. Until 2010, this used to be the standard rate for funding veterinary programmes (representing about 75% of the total food and feed expenditure), and it is also commonly used to co-finance most of the other measures in this area.

· 75%

The standard rate above would be increased to 75% for cross-border activities coordinated by two or more Member States in order to eradicate diseases or harmful organisms (as co-operation to overcome the technical problems of working together in harmony is essential to the success of the programme), or for Member States whose 2011 gross national income per inhabitant based on EUROSTAT data is less than 90% of the Union average (to encourage the development of programmes by requiring less state funding from those MSs less able to contribute).

· 100%

Where the control of serious health risks for the Union is involved, where the activities benefitting from Union contribution are specific tasks of particular importance for the Union or when the activities funded are implemented in third countries (for the good of the EU as well as those countries, and where they are unlikely to be otherwise funded), the grant may cover up to 100% of eligible costs (see below).

The simplification of the rates would provide more simplicity, transparency and consistency across EU measures. This would enable simpler programme development and approvals processes and reduce administrative burden for both the Commission and Member States.

Reducing administrative burden: removing low-value programmes

Another proposition for reducing administrative burden is to remove the possibility of funding programmes with a value of less than €50,000. At present, a number of very small payments are made to Member States for tiny contributions to veterinary programmes. These do not add up to a significant proportion of the budget, and do not carry great importance for eradicating animal disease. Yet the processes of development by MSs and approval and payment by the Commission take a similar amount of time to a very large and significant programme worth millions of Euros. So, removing them introduces the possibility of eliminating a disproportionate administrative burden for both the Commission and the MSs.

Quantitative analysis

The budgetary impact expected from this introduction of standardised rates and removal of low value programmes has been estimated by projecting the new rates onto recent spending.

As above, three standard co-financing rates are envisaged:

· 50%

- basic co-financing rate

· 75%

- cross-border activities coordinated by two or more MSs to eradicate diseases or harmful organisms

- measures for MSs whose 2011 gross national income (GNI) per inhabitant based on EUROSTAT data is below 90% of the Union average

· 100%

- measures involving the control of serious health risks for the Union.

The introduction of the standard co-financing rate of 50% would have a positive impact on the EU budget.

· The largest proportion of spend is on veterinary programmes, whose basic co-funding rate has been recently increased to 60%, at the request of Member States (on the basis of article 28.2 of Council Decision 2009/470): therefore an appreciable reduction of the amounts funded can be envisaged.

· The implementation of the new scheme would generate an expected decrease also for compensations under the emergency veterinary measures, which are mostly co-financed at 50% exception made for measures for Foot and Mouth disease, currently co-financed at 60%.

· The spending on plant health measures would be limited affected as their current rate is between 40% and 50%.

Further savings are expected thanks to the fact that any measure not exceeding would no longer be eligible for EU co-financing.

On the other hand, an extra expenditure is expected for measures addressing MSs whose 2011 gross national income (GNI) per inhabitant (in current prices) is below 90% of the Union average: this is likely to partly counterbalance the reduction in the food safety budget due to the introduction of a standard rate of 50% and to the non-eligibility for co-financing for measures below €50,000, as presented above.

Lastly, measures which are currently totally financed or co-financed at higher rates, such as the purchase of vaccines under emergency measures (100%) and the programmes for rabies (75%) and TSE (100%) would not be affected by the changes described above.

Taking all this into account, the application of the new standardised rates to the profile of the expenditure committed in 2011 would have meant:

· for the veterinary programmes, a decrease in expenditures amounting to 13million euro

· for the emergency veterinary measures, an extra-expenditure of about 350,000 euro

· for the plant health measures, an extra-expenditure of less than 7million euro

Overall, the proposed rate system - applied to the items above - would have generated annual budgetary savings on the food safety budget of more than 6million euro.

Streamlining administration across different policies

The financial support for plant health is proposed to be more strongly aligned with animal health as regards procedures and processes. This introduces the possibility of streamlining administration in both the Commission and MSs. This impact is extremely difficult to quantify due to the different arrangements in each MS and the very varied potential for any improvement, and the impact for the Commission is likely to be greater than for MSs.

Reduction in Commission decisions

One major expected change is that the legal requirements for the processes to approve and reimburse programmes in the eradication, monitoring and control programmes and the emergency measures would be simplified. Commission decisions will not have to be taken for every single reimbursement in the administrative process, as now; but a