Volume 10: Economic Impact and International Trade
2. Impact on the public sector
Part 2: Compensation schemes
Ministry of Agriculture, Fisheries and Food (MAFF)
Department of Agriculture for Northern Ireland

2.37 Compensation schemes were designed to reimburse farmers for the losses they incurred when animals were slaughtered as suspected BSE cases. These payments were determined by reference to the 'sound market value' of the animal - that is, its value if it had not been sick. Payments in England, Scotland and Wales were funded by MAFF as described below. Separate arrangements were put in place in Northern Ireland and are described later in this chapter.

Ministry of Agriculture, Fisheries and Food (MAFF)

2.38 Between 1988 and 1996 three successive schemes were developed to compensate farmers in England, Scotland and Wales. These schemes were funded by MAFF. We summarise them below. Further details are given in Chapter 2 of vol. 6: Human Health, 1989-96

2.39 Under the first scheme, which was in effect from August 1988 to February 1990, compensation was paid to a farmer for an animal affected with, or suspected of having, BSE at an amount equal to 50 per cent of the market value of the animal or of an adjusted average market price for all cattle sold in the month two months before the animal in question was slaughtered, whichever was less. For an animal that turned out, on post-mortem examination, not to be infected with BSE, compensation was 100 per cent of the above. ¹

2.40 Under the second scheme, which took effect from 14 February 1990, compensation for an animal affected with BSE was paid at an amount equal to 100 per cent of either the market value of the animal or of the average market price for all cattle sold in the month two months before the animal in question was slaughtered, whichever was less. For an animal subsequently confirmed as not affected with BSE, compensation was an amount equal to either the market value of the animal or 125 per cent of the average market price for all cattle sold in the month two months before the animal in question was slaughtered, whichever was less. ²

2.41 The third scheme was introduced from 1 April 1994. The main change was replacement of the average price with an 'indicative' market price. This was essentially a weighted average that distinguished between cattle less than seven years old when valued for slaughter as BSE suspects, and those aged seven years or more when valued. It was calculated using data in Great Britain relating to the month occurring two months before the date on which the market value was determined. ³

2.42 Total expenditure on compensation payments for 1986-96 is shown in Figure 2.7 below. As can be seen, payments tracked the curve of the epidemic, growing significantly from 1988 and reaching peak levels in 1993/94 (a year after the peak of the epidemic in England and Wales). Between 1994 and 1996 payments fell substantially. Total expenditure on compensation and ex gratia payments ⁴ over the entire period from 1988 to 1996 was £135 million. ⁵

Department of Agriculture for Northern Ireland

2.43 Compensation was first paid to farmers in November 1988, when the first recorded and confirmed case of BSE occurred. From that time until 20 March 1996 the total amount of compensation paid to farmers was £1.4 million. The compensation schemes applicable in Northern Ireland are set out in an annex to Chapter 2 of vol. 6: Human Health, 1989-96.