Cost-sharing has been a controversial subject in the British industry, with strong opposition mounted to Government plans to impose a horse levy, which the industry branded inequitable and unworkable.
The government has since agreed to look at other options.
The advisory group was asked to come up with recommendations to ministers on how the responsibilities and costs of improving animal health and welfare can be shared. Ministers will respond to the recommendations in Spring 2011.
A key recommendation is to create a new Partnership Board, bringing together Defra officials and external members from various sectors, including the farming industry.
The Horse Trust said it welcomed the report, but was concerned that the equine industry may not get a place on the Partnership Board, despite its contribution to the British economy.
"The report thankfully reinforces the inseparability of health and welfare and endorses the path that the horse industry and Government embarked on a few years ago with collaboration as the cornerstone," said Paul Jepson, specialist policy consultant with the trust.
"The proposed Partnership Board of industry experts and Defra to drive policy and strategy for the whole animal sector is of concern.
"It seems unlikely that the horse industry will merit a seat at the top table of this board, despite contributing an estimated £7 billion to the UK economy," Jepson said.
Equine welfare charities such as the Horse Trust had worked hard to develop a strategy to improve equine health and welfare.
"The burden of formulating and implementing strategy to improve health and welfare already falls heavily on the equine industry, primarily the welfare charity sector and British Eequine Veterinary Association," Jepson said.
This was laid out in the Equine Health and Welfare Strategy, launched with the support of Defra and its devolved government partners in 2007.
Jepson noted that the advisory group rejected the idea of a general animal disease levy, "which is great news for horse owners".
"Horse owners will be delighted at the report's rejection of the proposed levy on animal owners to fund national health and welfare programmes.
"The equestrian world was not at all clear what this revenue would be used for and the report recognises the difficulties and cost of collection.
"Interestingly, horse owners in Holland have welcomed a similar proposal to pay a levy towards a fund to combat disease outbreaks," said Jepson.
The government's investigation in the area recognises that animal disease outbreaks can be costly to industries and the government as well as a threat to public health in some cases.
Defra currently spends £330 million annually on animal health and has to meet the additional costs of any disease outbreaks in England, Scotland and Wales.
The main arguments for sharing responsibility for dealing with animal disease with animal owners include the need to reduce annual public spending while managing the risk of disease, and to meet the costs of outbreaks when they occur.
The main strategic aim of the Partnership Board is to reduce the risk and cost of animal disease and improve the welfare of kept animals; and also to rebuild and maintain trust between animal keepers and Defra, and to improve the effectiveness and value for money of policy and delivery.
Agriculture Minister Jim Paice welcomed the report, describing it as a valuable base to help explore the options for responsibility and cost-sharing in the future. Ministers will announce their response to the report early in 2011.