Volume 1: Findings and Conclusions
6. Protecting human health
Slaughter and compensation
Was compensation too low?
Ante-mortem inspection
Compensation changed again
Unanticipated burdens

511 The slaughter and compensation scheme was designed to ensure that animals sick with BSE were destroyed so that there was no way in which they could transmit the disease to humans or to animals. It was a vitally important measure. We have been concerned to investigate allegations that some farmers sent animals showing early signs of BSE to the slaughterhouse in deliberate breach of the Regulations, and that the reason that they did so was because the level of compensation set by MAFF was inadequate.

512 We have seen above the circumstances in which the Government decided to introduce compulsory slaughter of animals showing signs of BSE and the destruction of their carcasses. It received advice that it should do this from the Southwood Working Party on 21 June 1988. Under the Animal Health Act 1981 compensation would have to be paid for compulsory slaughter on grounds of human or animal health. Ministers determined the level of compensation payable but had to have the agreement of the Treasury. Exploratory discussions with the farming industry indicated that payment of 50 per cent of market value might be considered acceptable, provided that 100 per cent was paid in respect of any animal which, after slaughter, was found not to have been suffering from the disease.

513 On 29 June Mr MacGregor wrote to Mr Major, the Chief Secretary to the Treasury, seeking approval for the payment of compensation at 50 per cent of market value. He estimated that on the basis of 60 cases a month this would cost about £200,000 to £250,000 a year. Mr Major agreed to this on 6 July, emphasising that he only did so because of the need to protect human health. Two Orders ¹ were drafted by 22 July, and were made on 28 July and brought into force on 8 August, abridging the three weeks that normally elapse before Orders subject to negative resolution procedure come into force. It can be seen that no time was lost in implementing the recommendation of the Southwood Working Party.

514 The formula for determining compensation was complicated. Broadly, but not precisely:

• When the slaughtered animal proved to have BSE, the lesser of:
  
  
  1. 50 per cent of the value of that animal (in good health); or
  2. 62½ per cent of the value of an average animal was payable.
• When the slaughtered animal proved not to have BSE the lesser of:
  
  
  1. 100 per cent of the value of that animal; or
  2. 125 per cent of the value of an average animal was payable.

515 When an owner declared to MAFF that an animal was suspected of having BSE, but the animal died or was put down before a MAFF veterinarian confirmed that it appeared to have the disease, no compensation fell to be paid under the Order. On the recommendation of Mr Kevin Taylor and Mr Meldrum, it was agreed that normal compensation be paid on an ex gratia basis in those circumstances, provided that the animal was shown to have been suffering from BSE. When the animal did not have BSE, £50 was paid. This arrangement seems to us fair and we commend it.

516 Although industry soundings made by MAFF officials had suggested that the level of compensation would be acceptable, it in fact provoked a sustained barrage of attack:

• 8 July 1988: the National Farmers' Union (NFU) in a press release expressed the view that 100 per cent compensation should be paid for all slaughtered cattle.
• 2 September 1988: Mr Gordon Gresty, the County Trading Standards Officer of North Yorkshire County Council, expressed concern that compensation was only 50 per cent of market value. This might deter farmers from notifying suspect cases.
• 27 September 1988: the Milk and Dairy Produce Committee of the NFU stressed that compensation should be 100 per cent of market value.
• 23 January 1989: the Farmers' Union of Wales expressed 'complete dissatisfaction' with the compensation arrangements, suggesting that the low level of compensation might encourage less scrupulous farmers to dispose of animals showing signs of BSE on the open market.
• 17 February 1989: the first of a series of Parliamentary Questions from the Opposition suggesting that compensation should be raised to 100 per cent.
• 5 May 1989: Mr Peter Walker, Secretary of State for Wales, wrote to Mr MacGregor passing on concerns of his Agriculture Advisory Panel that the level of compensation was leading to evasion of reporting. He suggested reviewing the position.
• 14 June 1989: the National Consumer Council wrote to Mr MacGregor suggesting that, with compensation at 50 per cent, there was 'every incentive for farmers to send a cow for slaughter at the earliest sign of disease . . . the compensation arrangements must be reviewed'.
• 14 June 1989: the NFU wrote asking for a review of the level of compensation which, in their view, should be 100 per cent.

517 To all of these submissions MAFF made the same reply. Compensation at 50 per cent of the market value was fair. That compensation was payable for animals suffering from a terminal illness. The cattle were valued for the purposes of compensation, not as terminally ill, but as if they were unaffected with disease. Furthermore there was no evidence of any farmers attempting to evade the law.

518 This response reflected the advice being given to Mr MacGregor by his officials.

519 In July 1989 ministerial changes brought about a change in attitude in respect of compensation levels. On 6 September 1989 Mr David Curry, one of the new Parliamentary Secretaries, put an aide-mémoire to Mr Gummer, the new Minister, expressing the view that 50 per cent compensation was inadequate, and observing that the possibility of a farmer slipping a diseased animal into the food chain could not be absolutely denied. Officials responded recommending against increasing the level of compensation. Mr Lowson pointed out that only 52 suspect cases had been detected at abattoirs in the first six months of the year, of which by no means all would have resulted from deliberate deception. Mr Curry was not persuaded, but accepted that there was little chance of changing the position in the light of financial constraints.

520 Pressure for an increase in compensation then intensified:

• 4 December 1989: Mr R Cooper, a Director of Sainsburys, wrote saying that his company felt that 'full compensation' should be given for any BSE-infected cattle rather than 50 per cent in order to give the farming community every incentive to isolate diseased cattle.
• 4 January 1990: The Times reported that 'farmers are attempting to pass off diseased cattle as healthy because the Ministry of Agriculture will only compensate them for 50 per cent of the value of an infected beast once it is destroyed'.
• The Consumers' Committee of the Meat and Livestock Commission (MLC) expressed the view that compensation should be increased.
• 15 January 1990: a meeting of Dorset farmers expressed concern that failure to pay full compensation was giving the wrong message to consumers and could damage meat consumption.
• 25 January 1990: the President of the NFU wrote to Mr Gummer suggesting that 'raising the compensation to a more realistic level would be the most effective way of reassuring the public that there is no temptation for any farmer deliberately to send to market an animal with incipient BSE'.

521 Up to this point Ministers had continued to advance the same reasons as before for rejecting calls for higher compensation. Mr Gummer now decided that it would be politic to increase compensation. In a meeting with Mrs Thatcher on 30 January 1990, he suggested that compensation for the slaughter of diseased animals should be increased to 100 per cent for two reasons. First, losses were increasing, and some farmers were having a hard time. Second, full compensation would demonstrate that the Government was doing everything possible to keep BSE-infected cattle out of the food chain. The Prime Minister felt that the second was the better case and agreed that Mr Gummer should work up a proposal for increasing the rate of compensation, in consultation with the Treasury, which could then be put to ministerial colleagues.

522 On 7 February 1990, after discussing the matter with his colleagues, Mr Gummer wrote to Mr Norman Lamont, Chief Secretary to the Treasury, proposing an increase in compensation. He stated that he did not believe that farmers were sending BSE suspects to slaughter to any great extent, but that the possibility that they might do so must be growing. The principal case that he made for the increase was that this would allay public concern.

523 A submission to Mr Lamont from a Treasury official in respect of Mr Gummer's proposal observed:

This is essentially a political matter, and on this basis you may wish to agree. The Prime Minister is thought to be sympathetic to Mr Gummer.

524 On 9 February 1990 Mr Lamont wrote to Mr Gummer reluctantly agreeing to his proposal.

525 On 13 February 1990 Mr Gummer announced the change in policy on compensation to the Annual General Meeting of the NFU. The change that he announced was brought into force the following day. ² The new level of compensation for confirmed BSE cases was the lesser of 100 per cent of the animal's sound market value, or 100 per cent of the average cattle value.

Was compensation too low?

526 We have carefully considered the level of compensation originally paid to farmers for the slaughter of BSE suspects. It seems to us that the compensation bore a reasonable relationship to the loss caused by the slaughter, and on that basis was fair. We would emphasise that the loss in question was not the loss consequent upon having a cow affected, or suspected of being affected, with BSE. The loss was that experienced as a result of the deprivation of such a cow. To offer 50 per cent of the value of a healthy cow does not seem unreasonable for an animal showing signs of a terminal disease.

527 Nor would we have expected the level of compensation to have resulted in widespread evasion of the duty to notify. We would hope that most farmers would have been sufficiently principled not to seek to put into the food chain an animal that might endanger human life. Furthermore, to send a sick animal off to the market would be a chancy business, for the stress would be likely to make the symptoms more apparent.

528 The evidence that we received suggests that there was not significant evasion of the duty to notify during the period that compensation for infected animals remained at 50 per cent. During December and January MAFF veterinary staff made nearly 300 random visits to over 180 slaughterhouses. Of 1,663 animals sent for slaughter that were inspected, only one suspect case was identified.

529 Leaders within the farming industry, who gave evidence to us, expressed a firm belief that there was no, or negligible, failure to report suspect cases. Farmers gave evidence to the same effect, as did veterinarians.

530 The 1990 Agriculture Committee in its Report commented:

The introduction of full compensation produced no very dramatic increase in the number of BSE cases being reported but, in view of the general perception that there may be under-reporting of such diseases where farmers are not fully compensated, it might have been prudent, for reasons of public reassurance, to have introduced it earlier.

531 We agree with the Agriculture Committee that the justification for raising compensation was the desirability of providing reassurance to the public that cattle affected by BSE were not being slaughtered for food, rather than a need to provide a better financial inducement to farmers to obey the law. Mr Gummer's decision was, essentially, a political decision. We have no criticism to make either of that decision or of its timing.

Ante-mortem inspection

532 We have referred to random slaughterhouse inspections in December 1989 and January 1990. These were carried out at the suggestion of Mr Meldrum, who believed it was desirable to check that farmers were not sending off for slaughter cattle that showed signs of BSE. Mr Gummer agreed with Mr Meldrum's proposal. Initially these inspections were carried out by State Veterinary Service (SVS) staff, but from 5 February 1990 this function was transferred to Local Veterinary Inspectors (LVIs). In 1990 LVIs inspected over 31,000 animals at slaughterhouses, among which they identified just 29 suspects, of which only 14 were confirmed. This certainly indicates that after compensation for BSE casualties was raised to 100 per cent, there were at most only a few deliberate attempts to send suspect animals for human consumption. We consider that ante-mortem inspections at domestic slaughterhouses were desirable as a check that the Regulations were being complied with, and we commend Mr Meldrum for promoting them.

Compensation changed again

533 On 1 April 1994 a new formula for calculating compensation was introduced. ³ The change related to the method of calculating the market price element of the formula. This was adjusted downwards to reflect the fact that a large proportion of the cows developing BSE were older animals at the end of their working life. The motive for this change was to save money - it was calculated that it would reduce compensation payable by approximately £5 million in 1994/95. We have no criticism to make of this change or of the reason for it.

Unanticipated burdens

534 When the slaughter and compensation scheme was introduced, it was anticipated that it would apply to about 60 cattle a month. At the height of the BSE epidemic 8,000 suspects were notified in a single month. The task of diagnosing whether or not the suspects were infected with BSE was enormous. It was achieved by performing histopathology on a single section of the bovine brain (the obex section) and sharing the task of analysis between a number of Veterinary Investigation Centres. We commend the Veterinary Investigation Service for the efficiency with which this task was performed.

535 The other unforeseen consequence of the slaughter and compensation policy was the horrific problem of disposing of the carcasses of thousands of slaughtered cattle. This was a major element in the waste disposal problem to which BSE gave rise. We shall revert to the problem of waste disposal later in this volume.