Economics research programme (D03)

The economics research programme was established in April 2003 and is being run through the Agency's Economics and Analytical Division (EAD), which acts as an internal consultancy service to the Agency, providing economic and statistical advice.

The aim of this programme is to assist the Agency in acting proportionately in response to identified risks. Specifically, the programme will address:

• Development of the economic principles that can be used to analyse food safety and food standards with specific reference to the UK, including methodologies that allow estimation of costs and benefits.
• Evaluation and appraisal of alternative policy options in terms of effectiveness and value for money, including research to gain a better understanding of the impact of policy in the UK.
• Development of interdisciplinary research approaches with other FSA policy divisions, where there is significant potential for economics to add value.

The programme will therefore enhance the Agency's ability to measure and evaluate the costs and benefits of its policy choices.

The Agency is heavily committed to acting proportionately and basing its decisions on the best available evidence, as set out in the Food Standards Act. Economics has a key role to play in this by helping to develop the Agency's policy and regulatory responses, for example, by quantifying the costs and benefits associated with identified risks. However, an initial internal review revealed only a small body of applied economic research in food safety and food standards exists in general and particularly in the UK.

The economics research programme will therefore aim to contribute to the evidence base of FSA policy making, by filling this identified gap in economics research. In completing this work, this programme will enhance the economic evidence base of the Agency and will ensure that policy decisions are proportionate to the risks and problems involved.

The research will provide a more robust basis for proportionate action and for the large number of Regulatory Impact Assessments (RIA) that the Agency must conduct, by improving its understanding of the costs and benefits associated with its activities.

Only a small literature on the economics of food safety and standards currently exists in the UK. The programme will therefore begin by carrying out a comprehensive literature review in this area, to establish the current knowledge base and to identify gaps that need to be addressed. Empirical economic research will be reviewed as well as work on economic principles and theories. The latter is needed to gain a thorough understanding of the issues that are raised by food safety and standards and the empirical review will provide an indication of the estimates for costs and benefits that are currently available. The results of the literature review and of further consultations will help to identify priorities for the programme, which will be used to decide on future projects.

Economics has the potential to contribute to a wide range of areas, for example:

• Measurement of the benefits of improving public health and information and comparison of these to the costs associated with policy options. Measuring the effect of health risks and misinformation on the wellbeing of consumers is a difficult challenge and FSA economists already have close contact with economists in other government departments and with academics.
• Analysis of the relative effectiveness of different policy tools (e.g. traditional regulation, codes of practice) at achieving a desired policy outcome. There are typically a number of ways in which a policy need can be addressed and finding the method, which achieves the best balance between costs and benefits is very important.
• Economists have developed theories and methods to analyse compliance costs and compliance behaviour by industry. This is an important area for assessing the relative costs and benefits of alternative policy options.
• Analysis of the effects of economic variables, such as prices and incomes, on consumer behaviour and choice using econometric techniques.

One major aim is that, at the conclusion of the programme, the Agency can assess the economic impacts (costs and benefits) of its policies more accurately and base its decisions on a sound economic evidence base.

Name: Jennifer Heigham
Tel: 020 7276 8203
Email: jennifer.heigham@foodstandards.gsi.gov.uk