WHAT FUTURE FOR BEEF? : Let's keep the Government out of it

Let's stand back for a moment from the fate of our 11 million cattle; from the sad fact that there may well be some people - one hopes very, very few - who have contracted Creutzfeldt-Jacob disease from eating beef products; and from the bizarre fact that between 1986 and 1989 people thought it a bright idea to feed our cattle with pellets made from the chopped-up brains of sheep. Let's focus instead on the unpalatable truth that if it does become necessary to slaughter the British herd, most of the loss will be carried by British taxpayers.

That is the way the agricultural industry works. We regard it as normal that our producers should be paid subsidised prices for food. We accept that meat here should cost twice as much as it does in, say, Australia or New Zealand. We think that the management of agriculture should be part of the remit of government, and so it is somehow the Government's fault that the industry should have got itself into this mess. We have dumped the idea that the government should involve itself in organising manufacturing industry, that it should run a telephone service or own an oil company. But we seem to be stuck with involvement in agriculture.

Of course, we are not alone in this. All around the world governments are more closely involved in food than they are in any other industry. At one extreme they own collective farms and plantations, a policy that is now widely discredited. But even in countries where the market economy is established for everything else, they still get drawn into the marketing process and, as a result, into acting as an industry representative. A minister thinks it perfectly appropriate to proclaim that he is feeding his children hamburgers; you would never get him announcing that he was encouraging his family to drink more whisky.

There is, in fact, an illuminating parallel between beef and whisky. The two industries are roughly the same size. The value of farm output of beef last year was roughly pounds 2.4bn; of whisky produced roughly pounds 2.5bn.

We spend as consumers much the same amounts of money on the two products. Add in the costs of the meat-processing industry, mark-ups in restaurants and canteens, and the total amount spent on beef, comes to about pounds 4bn. Take the total sales of whisky, and we spend about pounds 3bn. So the total home spend on beef is a bit larger than on whisky. But whisky is a much more important export product: last year we exported pounds 2.2bn of whisky but only pounds 520m of beef. So you could argue that from the point of view both of national interest and tax revenues, whisky ought to receive much more of the Government's span of attention.

There is one other crucial difference: booze is run under the rules of commercial competition; beef is not. Consider what might happen if the beef industry were.

We would, I suggest, see the same division into a mass-market product and an upmarket one. There would be general brands, with, say, Scottish beef or West Country beef promoted in the same vein as, say, Cutty Sark. They would be basically commodity products, but would be cleverly promoted and the quality would be more carefully monitored. Alongside these, there would more specialised brands for people who were prepared to pay a premium to be assured of higher quality, the bovine equivalent of single malts.

I personally would make a pitch for the Belted Galloway (much prized by discerning German consumers) to be promoted in the same way as the Macallan.

This would have profound consequences for the entire industry. Consumers would be able to demand that animals would be slaughtered in humane and decent conditions Instead of writing letters protesting or calling for the government to change legislation, they would be able to make their preferences known by buying meat from appropriate producers. If people felt strongly about animals being driven around the country for long periods, some supermarket or wholesaler would quickly spot that it could garner a larger share of the market by promising never to treat creatures in this way. You can already see this trend beginning in free-range chickens and so-called "organic" meat.

The key change here would involve a shift in responsibility. In most conventional industries the producer is liable for the quality of the product. Producers operate in the knowledge that a slip in quality will damage the brand image: this is a powerful discipline. Commercial companies inevitably make enormous errors, but they are in general liable for the consequences of their actions, however much they resist. When Perrier found that its water had been contaminated it was forced by market pressure to withdraw its entire supply. When Distillers, the principal whisky producer, strayed so disastrously into pharmaceuticals with Thalidomide, it was eventually forced to pay compensation. In neither case did the taxpayer pick up the tab for a commercial error.

Over the next generation agriculture around the world is going to become much more like any other industry. Food products will no longer be subsidised to anything like the extent they are at the moment. New Zealand has already abolished such subsidies and the efficiency of its farms has soared as a result. It is probably the lowest-cost beef producer in the world.

Import barriers will be reduced, so that the benefits of low costs will be shared among the world community. Quality will rise. If we have a comparative advantage as a beef producer, as we may well do given our climate, then we will be able to exploit it further. But it would be done in a proper commercial way, with the industry appreciating that it was not in its long-term self-interest to be seen to be under the wing of the incumbent minister.

A properly-run commercial industry would now tackle the concerns of consumers head-on. Whether or not that requires an extreme measure like slaughtering the whole herd is not yet clear; what it does mean is looking at every stage of the production process where concern has been expressed - what the animals are fed, what hormones are used, how are they slaughtered - and asking whether present practice is best practice in world terms. Once the product is right, the industry can think about rebuilding demand, which will not be difficult: people like eating beef.

Fail to get the product right, a cloud of suspicion will remain and the long-term commercial costs will be higher. Consumers can be misled, and often have irrational responses to very small risks. But they are not stupid and any industry that fails to listen to them, fails to understand how the world has changed.