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Foot-and-mouth costs mount but not for farmers

Anyone looking at Britain from the outside, seeing the fields of slaughtered livestock and pyres of burning carcasses, could be forgiven for thinking all farmers are about to go out of business.

Doom-laden predictions that the foot-and-mouth crisis will cost the country billions of pounds must surely be a burden too big for the agricultural sector, already suffering from falling incomes, to bear?

But the truth is that while many farmers face the pain of seeing their animals, many of which are healthy, destroyed, they are not bearing the real financial pain of the disease.

Farmers are paid on average £1000 ($1443) per slaughtered cow and one recently made the headlines when the payout for his herd topped a million pounds.

Even before the outbreak, farming, which has been in decline for decades and now accounts for only one percent of the British economy, was receiving more than £3bn a year in subsidies, far more than any other industry and equivalent to over £10 per family per week.

Since the foot-and-mouth outbreak began two months ago, compensation to farmers has amounted to over half a billion pounds, according to government figures. That is already as much as the value of a year's meat exports, which is what the slaughter policy is designed to protect.

Although the disease very rarely kills animals, and presents no health threat to humans, many countries will not import animals or meat from a country with the disease for fear of infecting its own herds. That is the root of farmers' concerns.

The latest row about whether to vaccinate some animals to try to contain the disease also centres on money. Farmers want to know if they are to be compensated for the cost of vaccine and for any loss of domestic or export sales. A slaughtered animal is worth more to them than a vaccinated one.

So the billions of pounds of cost that have been estimated by research bodies, quite apart from the extra money taxpayers are having to fork out to farmers, is really being borne by the thousands of small businesses who depend on rural tourism and for whom meaningful compensation is out of the question.

Tourism dwarfs farm sector

The tourism sector is roughly seven times larger than agriculture and has created a quarter of all the new jobs in the economy over the past decade, while employment in farming has declined. But with large swathes of the countryside closed to hikers, many country hotels and businesses are suffering.

Resentment is growing, and the question being asked increasingly is why the problems facing one industry are being financed largely by another.

"Everyone has cancelled rooms they booked and we've lost a lot of money. But no one thinks of compensating us like they do the farmers," said the owner of a small hotel in the picturesque Peak District in central England, an area popular with ramblers.

Prime Minister Tony Blair, who has already postponed the general election originally pencilled in for May 3, is acutely aware of this irony and so insists repeatedly that Britain is "open for business".

He is acutely aware that the slaughter policy is really about supporting Britain's last subsidised industry long after the practice of doling out billions of pounds of public money to dying industries such as shipbuilding and coalmining was given up as good money thrown after bad.

This month he got involved in a publicity blitz by the tourist industry to try to persuade foreign tourists not to boycott Britain in the crucial summer season.

And well he might. Visitors bring in more than £12bn pounds a year into the UK - that is 25 times the amount Britain earns from exporting meat.

A fifth of that money is accounted for by the United States. Small wonder, then that Blair has been on US television to appeal to Americans to still come here. Small wonder, also, that he has promised a "long, cool look" at farming when the crisis is over.

Cost running into billions

The industry group the Institute of Directors published a survey this month showing a third of Britain's businesses outside the agricultural sector had already felt the impact of foot-and-mouth, to the tune of an average of £50 000 pounds.

It gave a rough estimate that the cost to the economy so far could be £4-5bn, a figure in the middle of the range of estimates coming from a number of research groups. That figure is about 10 times higher than the value of meat exports under threat and is likely to rise further.

Having a fully vaccinated national herd, for example, and paying farmers for the loss of meat export earnings, would be a much cheaper option. Meat from vaccinated animals is safe for human consumption, the experts say.

"The foot-and-mouth outbreak is clearly having a major impact on many businesses, not just farming," said Ruth Lea, head of the Institute of Directors' policy unit.

One has to be careful with big figures about the cost to the economy or the tourist industry, however. Evidence emerging over the Easter weekend, for example, suggested that Britons shunned the countryside but visited theme parks, provincial towns and shopping centres instead.

And many foreign visitors stay in cities like London and Oxford do not go into the countryside. But tourism is such a big industry that even a drop in business levels of five percent amounts to several billion pounds.

Increasingly, those in the tourist industry and the wider economy are beginning to wonder why they should not get compensation as well.

"Our members have made it clear that they expect support for businesses, and not just farming, that have been badly affected by the foot-and-mouth outbreak," said Lea, pointing to things like tax rebates or direct compensation for lost earnings.

Broader compensation not likely

The government has set aside some money to help non-farming businesses but the chances of them getting compensation on anything like the scale of farmers are negligible.

In which case the question can be turned on its head: If no other industry suffering a crisis gets bailed out by government, why should agriculture?

This is not to suggest that farmers are rich. Farm incomes have fallen sharply in recent years as a result of falling demand, the BSE crisis and, most of all, a sharp rise in the value of the pound.

But many farmers own the land they farm and are sitting on holdings averaging half a million pounds in value, according to figures from the agriculture ministry.

So while many Britons still feel agriculture has an intrinsic value and ought to be protected, they are also starting to wonder why it should be a special case supported by subsidy and artificially high food prices.

Britain, however, cannot really act on its own over the issue, as most subsidies are set through the European Union's controversial Common Agricultural Policy, which still swallows the lion's share of the total EU budget.

But the writing must be on the wall. The CAP has already been reformed, with the famous wine lakes and butter mountains consigned to history, and further reforms likely as the EU brings in new members from eastern Europe.

While change will be slow in coming, farmers are unlikely to be able to count on the generosity of taxpayers or the patience of other businesses next time the disease breaks out.

($1=.6928 Pound)

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