Volume 6: Human Health, 1989-96
2. The slaughter and compensation scheme
The operation of the slaughter and compensation scheme
Restriction notices for BSE suspects (Form A)
Slaughter notices (Form C)
Slaughter of cattle
The process of obtaining compensation
'Market value'
'Average price'
Advisory notes to farmers on the slaughter and compensation scheme
Practical difficulties with the scheme
Ex gratia payment scheme

2.25 It is useful to understand exactly what the Bovine Spongiform Encephalopathy (Amendment) Order 1988 and the Bovine Spongiform Encephalopathy Compensation Order 1988 required. ¹ Farmers, or any other person in charge or with knowledge of a BSE suspect, were already required to report suspicion of BSE to the Ministry. ² Dr Danny Matthews (Senior Veterinary Officer (SVO), MAFF ³) told us that this was often done by the farmer's veterinary practitioner in the early stages, 'although over the years more and more farmers reported direct to the Ministry as they became more familiar with the clinical signs of BSE'. ⁴

Restriction notices for BSE suspects (Form A)

2.26 Under the provisions of the Bovine Spongiform Encephalopathy Order 1988, whereby BSE was made notifiable, following the notification of a suspect case of BSE to a DVO, a Veterinary Officer (VO) was to carry out a clinical inspection of the suspect. If the VO inspected an animal and did not suspect BSE, no restrictions would be placed upon it. However, if the VO suspected that an animal was suffering from BSE, a notice (Form A) would be served on the owner or person in charge of the animal. ⁵ The VO had to be satisfied that an animal was affected before serving a Form A. ⁶

2.27 MAFF's internal instructions to VOs provided further advice on serving Form A notices. In particular, if a cattle owner had experienced confirmed cases of BSE in the past, and was convinced that a suspect animal being presented to a VO for inspection was showing signs of BSE, even though the animal presented no symptoms of the disease at the time of the VO's visit, VOs were still instructed to serve a Form A notice. ⁷

2.28 'Form A' is the name traditionally given to a restrictive statutory notice that prohibits the movement of an animal, or animals, on suspicion of the presence of a notifiable disease. In the case of BSE, Form A applied to a single animal and prohibited its movement off the farm. It also introduced requirements to deal with pregnant suspect cattle, and cattle that had died or been destroyed while the Form A was in force. ⁸

2.29 Initially, following the introduction of the first BSE Order in 1988, Form A restrictions could continue indefinitely without review by the Veterinary Inspector. However, the situation changed with the introduction of the slaughter and compensation scheme, which required the Veterinary Inspector to review and renew the Form A notice every 28 days. ⁹

Slaughter notices (Form C)

2.30 Between 21 June 1988 and 7 August 1988, MAFF VOs had no power to slaughter BSE suspects. Slaughter of these animals was not compulsory and owners received no compensation. Farmers did, however, have to notify the local DVO if an animal suffering from BSE died or was destroyed, and the animal's head would be submitted to the nearest Veterinary Investigation Centre (VIC) for diagnosis. ¹⁰

2.31 The procedure changed following the introduction of the slaughter and compensation scheme on 8 August 1988. The Bovine Spongiform Encephalopathy (Amendment) Order 1988 gave power under the Animal Health Act 1981 to Ministers to cause the slaughter of those animals affected, or suspected to be affected, with BSE. ¹¹ Form C is a 'notice of intention to slaughter'. If a suspect was showing signs typical of BSE, then the VO inspecting the animal could serve Form C on its owner, requiring the slaughter of the animal and entitling its owner to compensation.

2.32 MAFF issued instructions to the Veterinary Field Service (VFS) explaining how to the implement the Order in the field. It was not contemplated that Form C would be served immediately and the instructions stated that repeat visits would be necessary:

until such time as

1. a clinical picture typical of BSE develops; or
2. the animal recovers or dies; or
3. an alternative diagnosis is reached. ¹²

2.33 VOs were instructed to investigate immediately if suspect BSE cases were reported at markets or at slaughterhouses. Animals served with Form A at markets and slaughterhouses were to be returned to the premises of origin if they were fit to travel. Otherwise, they were to be slaughtered at the market or at the slaughterhouse (away from the main slaughter hall). ¹³ MAFF's advice to the VFS noted that some farmers with previous experience of BSE 'may be tempted to submit animals exhibiting early signs of the disease for slaughter rather than risk valuation and compensation at 50% market value'. ¹⁴

The service of Form C: 'not an issue to be treated lightly'

2.34 Dr Danny Matthews explained to us the circumstances in which Form C would be served:

VOs also had to slaughter those suspects that they firmly believed were suffering from BSE. Although the difference between suspicion and belief is subtle, the aim was that the slightest suspicion of disease warranted service of restrictions. Belief that the animal was suffering from BSE, which initiated compulsory slaughter procedures, demanded expression of a greater range of the clinical signs normally associated with BSE. Compulsory slaughter triggered automatic payment of compensation after slaughter, without awaiting confirmation, and was therefore not an issue to be treated lightly. ¹⁵

2.35 Considerable judgement had to be exercised by VOs in deciding whether or not to serve Form C. Confirmation rates suggested that they were generally correct in their diagnosis and most suspects served with Form C were confirmed by subsequent diagnosis. Nevertheless, in late 1988 Mr MacGregor urged close monitoring of confirmation rates. On 11 November, the Minister's Principal Private Secretary, Mrs Stagg, minuted Mr Meldrum, saying:

He [the Minister] fully understands why BSE is not confirmed in all cases; nonetheless, he is concerned that we should keep a very close watch on this so that we are able to refute allegations of abuse. This is something which he will want to be kept informed of. I should be grateful if you would take whatever steps are necessary to ensure that we continue to operate a very tightly controlled system. ¹⁶

2.36 On 12 December 1988, Mr Meldrum replied, noting that before BSE was made notifiable on 21 June the presumptive diagnosis was confirmed in 85 per cent of cases. Between 21 June 1988 and 7 August 1988, when slaughter was not compulsory but farmers could choose to send suspected animals for slaughter, 88.3 per cent of animals slaughtered on suspicion of BSE were subsequently confirmed. ¹⁷ Confirmation rates increased after slaughter became compulsory when VOs were made responsible for determining which BSE suspects should be slaughtered. Figures supplied to the Minister during December 1988 and January 1989 indicated that confirmation rates remained above 90 per cent throughout the period. ¹⁸ On 12 May 1989, in a written answer to a Parliamentary Question, Mr Thompson provided figures that suggested that the confirmation rate for BSE suspects slaughtered during the period between 8 August 1988 and 5 May 1989 was approximately 91 per cent. ¹⁹

2.37 The confirmation rates for animals detected at markets and slaughterhouses were generally lower. For instance, on 30 December 1988, Mr K Taylor minuted Mr Meldrum, setting out the number of BSE cases reported at both markets and slaughterhouses. The confirmation rate of BSE in these suspects was comparatively low: 64 per cent at slaughterhouses and 80 per cent at markets. ²⁰ Although it was acknowledged that these figures were of 'questionable value' because of the small number of animals involved and some outstanding results, this was still noticeably lower than the overall confirmation rate, at that time, of 93 per cent. ²¹ Mr Meldrum told the Inquiry that this level of confirmation did not surprise him unduly for the reasons explained by Mr K Taylor, who suggested that it presumably reflected the difficulty of making a clinical diagnosis in market and slaughterhouse situations when animals were bound to be under stress. ²²

2.38 Nonetheless, some mistakes were inevitable. The misdiagnosis of an animal infected with BSE in North Wales in late 1988 provides an illustration of some of the potential difficulties with diagnosis of BSE. On 10 March 1989, a letter was sent by Mrs R Mary James (Assistant Secretary of the Farmers' Union of Wales (FUW)) to Mr Malcolm Thomas (Principal in the Commodities Division, Welsh Office Agricultural Department (WOAD)). The letter described an incident in North Wales where the failure by a Ministry VO to identify BSE in a cow resulted in the animal entering the pet food chain. A farmer had called his local veterinarian who, suspecting that the animal was a casualty of BSE, notified the Ministry. The Ministry's VO, inspecting the animal the following day, felt unable to confirm BSE as the cause of its condition and the cow was destroyed and removed by a knacker. However, the head was retained and subsequent tests confirmed that the animal was infected with BSE. ²³

2.39 The correspondence generated by the incident addressed the potential for erroneous diagnosis. On 3 April 1989, Mr Roger Bollington, Head of Division Two of WOAD, sent a minute about the case through Mr John Davies (WOAD Under-Secretary) to Mr Peter Walker, the Secretary of State for Wales, saying:

To put the case in perspective, it is not practicable to guarantee that animals going for slaughter do not have BSE - the only sure way would be to remove all cattle from the food chain. It is only when the symptoms appear that the possibility of isolating particular animals arises.

Nevertheless the question arises whether more can be done to reduce or remove the risk of mistaken diagnosis which has occurred in this case. The only possibility would seem to be to require that any animal suspected by a local veterinary practitioner should be put under restriction until either it recovers or dies. This would however deny the SVS the right to make their own clinical judgment and they have more expertise in BSE than local practitioners. It is probably also neither practicable nor financially justifiable to tie up SVS resources in keeping watch over cases where on the basis of the symptoms and the disease history of the animal and the farm they can reasonably conclude that BSE is not the cause. In GB as a whole some 5% of cases are not put under restriction since it is considered the cattle are suffering from some other condition . . .

Statistics suggest that the SVS are already erring on the side of caution. An analysis undertaken in December 1988 showed that just over 6% of heads referred for laboratory examination on suspicion of BSE were either negative or inconclusive. Nevertheless, in view of this case (and of another suspected mistake which is still to be confirmed as BSE) the Veterinary Adviser took the opportunity of a meeting with his DVOs at the end of last week to raise the issue and remind them how important it was presentationally to keep affected animals out of the food chain.

If the Secretary of State is content, officials will reply to the FUW as in the draft letter at document 3. ²⁴

2.40 Accordingly, on 11 April 1989, Mr Davies replied to Mrs James saying that an investigation of the matter had confirmed that the Veterinary Officer was firmly of the opinion at the time of the examination that the animal did not have BSE:

Unfortunately it would seem that the diagnosis was incorrect. Obviously there is always a risk of this happening given the practical problems of making the diagnosis on clinical grounds . . .

I can assure you that the Veterinary Service are making every effort to prevent affected animals entering the food chain. We believe that considerable cooperation between the SVS and the farming community has to a very great extent achieved that objective, and will continue to do so. ²⁵

2.41 Nonetheless, concerns about the reluctance of VOs to serve Form C continued. For instance, on 15 January 1990, Mr Gueterbock met a group of farmers from Dorset who highlighted this reluctance as an ongoing difficulty. He sent a note of the points raised at the meeting to MAFF Ministers, Mr Meldrum and others:

It was also suggested that responsible farmers had problems in getting affected stock identified by vets. One farmer told me of an incident where his stockman, having had two cases, identified a third cow which he felt was also showing signs of BSE. It took over two months and several visits before the vet would agree the diagnosis. In this time many farmers would have dispatched the suspect cow to market. ²⁶

2.42 However, a manuscript note by Mr Meldrum on the front of Mr Gueterbock's minute, said that the farmer could not have sent the cow to be slaughtered as it would have already been placed under a movement restriction order as a BSE suspect cow. ²⁷ For a discussion of the situation where a cow died before Form C was served see paragraphs 2.61-2.77.

Slaughter of cattle

2.43 Where required, euthanasia of the animals was usually carried out by barbiturate overdose. Dr Matthews suggested in his evidence that in the first few months of the slaughter and compensation policy many suspects were destroyed by captive bolt stunning followed by barbiturate injection. However, by April 1989 most were slaughtered by primary injection of intravenous barbiturate, which proved less stressful for owners and 'minimised damage to brain tissue in order to secure a diagnosis'. ²⁸

2.44 Disposal of the carcasses of slaughtered BSE suspects did present difficulties. According to Dr Matthews, in the absence of sufficient incineration capacity in the early stages of the scheme, 'it would have been normal to decapitate the suspect on farm, with the head transported by the veterinary officer direct to the nearest VIC for brain removal'. ²⁹ Waste disposal is considered in a separate chapter of this volume (see Chapter 10), but Dr Matthews has described for the Inquiry the general destination of the carcasses of BSE suspects:

As incineration capacity became available, it became the norm for carcasses to be transported intact from farm to either an incinerator or collection centre. Decapitation would take place at this point, for onward transportation of the head to the nearest VIC. The carcasses would either remain at the incinerator for disposal or would be chilled or frozen prior to further transportation to an incinerator. ³⁰

The process of obtaining compensation

2.45 Section 32(3) of the Animal Health Act 1981 states that:

The Minister shall pay for animals slaughtered under this section compensation of such amount as may be determined in accordance with scales prescribed by order of the Minister made with the Treasury's approval. ³¹

2.46 Therefore, owners of animals slaughtered for disease control purposes were entitled to such compensation as was determined by the Minister and agreed by the Treasury. Accordingly, the requirement that BSE-infected animals be slaughtered gave the owners of slaughtered animals an entitlement to some level of compensation.

2.47 The Bovine Spongiform Encephalopathy Compensation Order 1988 prescribed the amount of compensation payable. Owners of slaughtered animals were entitled to an amount equal to 50 per cent of the lesser amount of either:

1. the market value of the animal; or
2. 125 per cent of the average price (as determined for the month two months prior to the month in which the animal was valued). ³²

2.48 However, where subsequent tests on the slaughtered animal did not confirm that it was affected with BSE, 100 per cent compensation was payable either at the animal's market value or 125 per cent of the average price, whichever was less. ³³ The Schedule of the Order set out the method of calculating the average price:

2.- (1) Subject to sub-paragraph (2) below, the average price in respect of a month shall be the amount obtained by dividing the total of the sale prices shown in the returns by the total number of animals shown in those returns to have been sold.

(2) Where in respect of any month, returns in respect of all markets specified in paragraph 1 above have not been furnished to the Minister by the fifteenth day of the following month -

1. where returns have been so furnished in respect of five or more of the specified markets the average price in respect of that month shall be the amount obtained by dividing the total of the sale prices shown in the returns by the total number of animals shown in those returns to have been sold;
2. in any other case the average price in respect of that month shall be the most recent average price calculated in accordance with this paragraph. ³⁴

2.49 Valuation was generally performed by the VO who had served the owner with Form A. Instructions to the VFS included the following:

Valuation should, however, be carried out at the time that the Form A is first served, and every effort should be made to value the animal by agreement at that first visit, or as soon as possible thereafter if agreement cannot be reached. This is primarily to allay the owner's concern that the animal will be decreasing in value while remaining on the farm. ³⁵

2.50 As Dr Matthews has noted, the introduction of the scheme 'presented veterinary officers with additional responsibilities in that they had to value suspects that were placed under restriction'.

Valuation by VOs of single animals or small groups of animals is normally permitted for BSE and other diseases as the cost of using professional valuers in such instances usually outweighs any potential saving that might be achieved by their greater precision in estimating value. VOs do have knowledge of market prices through their local market contacts and reading of farming journals. ³⁶

'Market value'

2.51 The concept of the market value of the animal appears to have been a source of some confusion. 'Market value' was defined in the Order as 'the price that might reasonably have been obtainable for it at the time of valuation from a purchaser in the open market if the animal were not an affected or suspected animal'. ³⁷ The definition of market value remained the same in the 1990 and 1994 Orders.

2.52 However, in some instances the condition of an animal would have deteriorated by virtue of BSE. Some found the Order unclear as to whether or not account could be taken of this loss of condition.

2.53 Mr Kevin Taylor said in his evidence that the valuation of animals proceeded on the basis that 'the suspect had a breeding and production potential, and any loss of condition which might have been caused by BSE was disregarded'. ³⁸ This was confirmed by the Minister, Mr MacGregor, who explained during a Parliamentary debate that the scheme provided compensation at 50 per cent of the 'original market value'. ³⁹ Nonetheless, it appears that not all farmers were aware that market value was determined on this basis. John Hoskin, a farmer from Dorset, told us in oral evidence:

Some [farmers] were not aware that it was 50 per cent of market - of replacement value. A lot thought it was 50 per cent of the value as the animal stood at that time, which was its cull value. ⁴⁰

2.54 Concern was raised about this issue in a letter dated 23 January 1989 from Mrs James of the Farmers' Union of Wales to Mr Bollington of WOAD. Mrs James sought clarification of when an animal's market value was to be determined. She suggested that 'the debilitating nature of the disease is such that market value will decline rapidly if there is any delay in assessment'. ⁴¹ However, the February 1989 Inset instructions for the VFS on the slaughter and compensation scheme clarified how VOs were to undertake the valuation:

The 'market value' is the price which might reasonably have been obtained for the animal at the time of valuation from a purchase in the open market if the animal were not an affected or suspected animal. In other words, any deterioration in condition attributed to BSE should be ignored. Deterioration attributed to other causes must be taken into account. Where reported at an abattoir or a slaughter market, market value should be interpreted as slaughter or carcasses value. ⁴²

2.55 Nevertheless disputes sometimes arose over the valuation of individual animals. ⁴³ Article 3(3) of the 1988 Compensation Order provided for the appointment of a valuer if there was a dispute as to the cow's market value. ⁴⁴ For instance, in August 1988, Mr Jim Harrison, a farmer from West Sussex, wrote to Mr MacGregor pointing out that he had recently had three BSE suspects valued and was 'quite satisfied with the outcome, being I felt on the generous side of fair, for good dairy like animals'. ⁴⁵ However, by July 1989, Mr Harrison was writing to MAFF airing his grievances arising out of a dispute over what he considered an unfair valuation of BSE-infected animals. ⁴⁶

'Average price'

2.56 The other basis upon which compensation was determined was by taking 125 per cent of the average price in respect of the month which occurred two months prior to the calculation of the market price.

2.57 Calculation of the average price gave rise to some difficulties as it was both two months out of date, and based on all cows, not only cows of the breed concerned. Further, the amount of compensation paid was based on the lesser of the average price or the market price. ⁴⁷ For instance, there was a sharp increase in values in the summer of 1989, but the figures used for calculating the level of compensation were from two months previously as this was the lesser value. This resulted in some farmers changing their opinion on the fairness of the compensation scheme, as 'unrealistic' ceilings were placed on cattle valuations. ⁴⁸ However, it appears that in less volatile market conditions the ceiling was not a major factor, and that most disagreements over valuing occurred because farmers were motivated to get as much compensation as possible. ⁴⁹ For a discussion of changes to the compensation scheme in 1990, see paragraphs 2.117-2.207. For a discussion of the further changes made in the compensation scheme in 1994 and the change to an indicative market price calculation, see paragraphs 2.208-2.225.

Advisory notes to farmers on the slaughter and compensation scheme

2.58 MAFF issued advisory notes to keep farmers informed about BSE. They included information on the slaughter and compensation scheme among other things. Initially, information for farmers with suspected BSE cases was included in the inset instructions to the VFS. The February 1989 update of Inset 25 stated that once Form A had been served, the advisory notes at Appendix 19 were to be given to farmers. This appendix explained the symptoms of BSE and outlined how the slaughter and compensation scheme worked in practice. ⁵⁰

2.59 The appendix was then issued as a leaflet to Animal Health Offices to be distributed to farmers once BSE had been reported. However, DVOs indicated a need for a more general leaflet to all cattle owners and Dr Matthews redrafted this leaflet in October 1989. ⁵¹ This advisory leaflet was eventually issued to all cattle owners in June 1990. ⁵² It was entitled 'Bovine Spongiform Encephalopathy (BSE): Advisory notes for farmers'. As well as outlining the background to the disease, the note described the procedure for reporting suspected cases of BSE in accordance with the legislation.

Practical difficulties with the scheme

2.60 Following the commencement of the slaughter and compensation scheme, a number of practical difficulties with its operation became apparent. In this section we look at a number of measures that were introduced in response to various problems identified with the scheme: ex gratia payments, ante-mortem inspection in domestic slaughterhouses and the NFU's insurance scheme for BSE. In addition to these practical difficulties, many queried the adequacy of the level of compensation available to owners of BSE suspects slaughtered under the scheme. Concerns that the compensation was insufficient ultimately led to its increase in February 1990, and the events leading to this change are described later in this chapter.

Ex gratia payment scheme

2.61 As we have explained earlier in this chapter, in order to receive compensation for the slaughter of BSE-affected animals farmers had to be served with Form C. However, as not all BSE cases notified to MAFF survived until Form C could be served, farmers in these case were unable to claim compensation. Instructions issued to the VFS on 8 August 1988 contemplated the possibility of a cow dying before Form C was served, and stated that 'the question of compensation in such circumstances is still being considered.' ⁵³

2.62 During a meeting of Regional Veterinary Officers (RVOs) on 6 October 1988, the idea of a dual compensation scheme was floated, whereby it was proposed that:

. . . 'downer' cows could be valued as healthy and as found. If histopathology confirmed disease, a proportion of the 'healthy' valuation would be paid; if not confirmed, 'as found' valuation would be paid. This would discourage farmers from inventing spurious BSE histories for downer cows to obtain compensation. ⁵⁴

2.63 This was discussed on the following day at a meeting of senior MAFF officials chaired by Mr Meldrum. The note of the meeting records:

5% of incidents involved 'downer cows'. VOs were being pressurised to make a clinical diagnosis at the first visit so that farmers could get a 100% compensation. At the RVO meetings on the two preceding days the case had been argued for moving to a dual valuation system. Mr Taylor said that the existing system could deal with the problem provided that notice of intention to slaughter was not served. This allows MAFF to refuse to pay compensation if BSE is not confirmed. To change to a dual valuation system would mean revisiting the 600 odd animals still alive and provisionally valued. After some discussion over the advantages and disadvantages of the dual valuation system the CVO said the present system would be retained with ex gratia payments if BSE were subsequently confirmed. The situation should be kept under review. ⁵⁵

2.64 On 12 October 1988, Mr Kevin Taylor circulated a letter to all DVOs in England, Scotland and Wales. He asked for it to be distributed by the DVOs to all Regional Veterinary Officers (RVOs), and he copied it to senior officials within MAFF. In the letter, Mr Taylor said:

Form C 'Notice of intention to slaughter' should not be served unless you believe, on the basis of all the information available to you, that an animal is affected with BSE . . .

Welfare considerations may require the slaughter of a downer cow, but notice of intended slaughter in accordance with the Bovine Spongiform Encephalopathy Order 1988 (as amended) (Form C) must be served only if you genuinely believe the animal to be affected by BSE . . .

Compensation is not payable unless Form C has been served. However, an ex gratia payment may be considered where appropriate when the results of histopathological investigations are available. When BSE has been confirmed in these circumstances the DVO should prepare a manuscript report describing the case and giving details of the valuation which had been agreed. This should be submitted to the RVO who, if he agrees should endorse the recommendation for payment and submit the report to Tolworth for consideration. Although recommendations for ex gratia payment can be submitted in other circumstances they are unlikely to be approved if BSE has not been confirmed histopathologically. ⁵⁶

2.65 A further issue arose for those cows that died before Form A could be served. Mr Taylor wrote to Mr Meldrum on 13 December 1988:

I recommend that when the following circumstances apply:-

The owner had reported suspected BSE in accordance with the requirements of the Order, and

A veterinary officer had examined the suspect animal, decided it was not affected with BSE and had not served Form A, and

The animal had subsequently died or been slaughtered, the brain examined and BSE confirmed by one of the diagnostic Veterinary Investigation Centres

then payment should be recommended and authorised. I believe that to do otherwise would cause strong criticism of the field service which it would be impossible to refute.

2.66 Mr Meldrum told the Inquiry that his recollection was that, once he had agreed Mr K Taylor's recommendation in December 1988, Mr Taylor sought and obtained departmental agreement for the ex gratia compensation policy to be implemented. ⁵⁷

2.67 By February 1989, the latest version of Inset 25 contained a basic policy for those animals that were slaughtered or died before Form C could be served. It stated:

This category, which may include animals which die while under restriction, as well as those which have to be slaughtered on welfare grounds before a veterinary officer is certain that BSE exists, does not automatically qualify for the payment of compensation. Ex-gratia payments will, however, be considered in suitable circumstances. ⁵⁸

MAFF reviews arrangements for ex gratia payments

2.68 As the scheme continued, it became apparent that some 'opportunistic' farmers were reporting animals that were actually in advanced stages of suffering from some other condition in the hope of obtaining compensation for their slaughter on the basis that they were infected with BSE. Permitting ex gratia payments allowed VOs some security in declining to diagnose such animals with BSE. On 4 August 1989, Mr K Taylor minuted Mr Meldrum, Mr Lowson and others in MAFF presenting several recommendations about the arrangements for paying ex gratia compensation. By way of introduction he said:

The ex-gratia compensation system was introduced to avoid abuse of the formal compensation procedures by farmers reporting the late clinical cases, frequently downers, in the hope of obtaining 100% payment for histopathologically negative animals. Such procedures are usually implemented in situations where animals:-

a) are presented late in development of disease

b) are not presenting a full range of pathognomonic symptoms

c) have to be slaughtered urgently on welfare grounds, thus preventing long term observation while in isolation.

In other words, the veterinary officer is given little opportunity to examine the animal for clinical signs that are characteristic of BSE.

While on the whole the system appears to have worked fairly well, and to have dissuaded too many opportunists from submitting welfare cases for disposal, there is now a need to rationalise procedures and to deal with one or two specific problems that have arisen. ⁵⁹

2.69 In relation to the procedures at that time for dealing with ex gratia payments on farm, Mr Taylor commented:

Despite general concern amongst farmers about compensation levels, this system does appear to have been grudgingly accepted. Some, however, have complained that, by serving form A and slaughtering without form C, they have been deprived of potential income via casualty slaughter. ⁶⁰

2.70 Mr Taylor went on to recommend:

Where the animal is slaughtered on farm without form C having been served, given that the farmer is deprived of any income for the carcasses of an unconfirmed case, a nominal 'knacker value' payment, say £40-50, should be made for those cases which cannot subsequently be confirmed by histopathology. ⁶¹

2.71 Mr Taylor told us that this recommendation was implemented:

One practical problem was not foreseen and was addressed administratively. Some owners were determined to have suspect cases slaughtered before the veterinary officer was convinced that the animal was affected with BSE: some animals died unexpectedly whilst under Form A restrictions, and some - particularly those notified when already recumbent - had to be destroyed to protect their welfare without Form C being served. All these animals were handled by MAFF as if compulsorily slaughtered - carcasses were destroyed and brains examined - but because Form C had not been served there was no statutory obligation to pay compensation. A system of ex-gratia payments was therefore developed: where BSE was confirmed the payment was the same as if the animal had been compulsorily slaughtered, but when it was not the sum of £50 was paid - rather more than might have been received at the time from a knacker. Payment at this level has continued, even though knackers now charge to collect carcasses. These arrangements ensure that compensation is paid for all confirmed cases of BSE which are still alive when notified. ⁶²

2.72 Dr Matthews also explained to the Inquiry the circumstances in which payment of ex gratia compensation might arise:

. . . the welfare of the suspect was paramount, and if necessary slaughter could be arranged without requiring compulsory slaughter. In other words Form C was not served, and slaughter was on the understanding that the owner would still receive full compensation if BSE was confirmed, and a maximum of £50 if it wasn't. The payment was not automatic at the time of slaughter in such circumstances, being triggered only when the result was received. The purpose of the ex-gratia procedures was to encourage farmers to report cases sooner rather than later, rather than to leave them until they were effectively downer cows. At that point a full clinical inspection to identify the typical clinical signs of BSE was not possible and it was essential that the presentation of casualty animals as BSE suspects did not become an easy option for disposal of cattle while also cashing in on the epidemic. The diagnostic rate for such animals, slaughtered without the service of Form C (notice of compulsory slaughter) has always been lower than for animals that could be subjected to full clinical inspection. ⁶³

2.73 Mr Taylor's minute of 4 August to Mr Meldrum and others in MAFF also discussed the situation where BSE suspects were slaughtered at slaughterhouses. In that situation compensation had not generally been paid. However, he recommended that ex gratia compensation should be considered in such cases. Often the owner of the slaughterhouse had bought the animal in good faith only to have it deteriorate rapidly on transfer to the slaughterhouse. If the animal was slaughtered as a BSE suspect but without the service of Form C, the slaughterhouse would receive no income from it. By not providing compensation, there was the possibility that slaughterhouse owners would be less likely to report BSE suspects in the future. Mr K Taylor recommended that in these circumstances 100 per cent of the carcass value of the animal should be paid. ⁶⁴

2.74 Mr Taylor said in his statement to the Inquiry that this recommendation was implemented:

Different compensation arrangements applied to suspects identified in slaughter markets or in slaughterhouses. In these cases compensation was paid for the meat value of the carcass, ensuring that slaughterhouse operators suffered no financial loss by reporting suspected cases. ⁶⁵

2.75 The system of ex gratia payments operated relatively informally and outside the terms of the Orders that introduced the slaughter and compensation scheme. This was a feature that caused Mr Lowson concern. On 24 August, he responded to Mr Taylor's minute of 4 August agreeing with the recommendations, but remarking:

I am slightly nervous about continuing on an ex-gratia basis. It is clearly desirable for expenditure to be made on the basis of clear rules, ideally laid down by the Order, wherever possible. On the other hand I can see that an ex-gratia system provides the flexibility to deal with borderline cases. Could Mr Maslin please consider in the light of past discussion with the lawyers and Finance Dept whether we have adequate clearance to operate in this way. If not, we ought to seek their clearance now. ⁶⁶

Advice to farmers and instructions to the VFS on ex gratia payments

2.76 In the advisory note issued to farmers in June 1990, ⁶⁷ MAFF stated in relation to ex gratia payments:

When an animal is slaughtered without Form C being served, there is no automatic right to compensation and the matter should be discussed with the DVO. No compensation will be paid until laboratory results are known. Full compensation (ie the animal's value up to the AMP) may be paid if infection is confirmed. But if it is not, compensation will be limited to £50, so it is in the farmer's interest to report suspicion of the disease early. Different arrangements apply to suspects identified at slaughterhouses. Details are available from the DVO. ⁶⁸

2.77 The instructions issued to the VFS on 11 June 1992 contained a comprehensive statement of policy in relation to ex gratia payments. This was as follows:

The amount of compensation payable where Form C is not served (ex-gratia) will be subject to the following guidelines. With the exception of paragraph b) the payments may be subject to revision following an assessment of the circumstances surrounding each case.

for animals slaughtered on farm in which BSE is confirmed - 100% of its market value, subject to the upper limit for confirmed cases (AMP) published by telex each month. ⁶⁹

for animals slaughtered on farm in which BSE is NOT CONFIRMED - £50 in lieu of 'knacker value'.

for animals slaughtered at markets or abattoirs in which BSE is confirmed - 100% of its market value, subject to the upper limit for confirmed cases (AMP) published by telex each month.

for animals slaughtered at slaughter markets or abattoirs in which BSE is NOT CONFIRMED - 100% of its market value subject to the upper limit for unconfirmed cases published by telex each month. ⁷⁰