Plan to change farm payouts Chancellor wants farmers to shoulder burden of future foot-and-mouth compensation:

Plan to change farm payouts
Chancellor wants farmers to shoulder burden of future foot-and-mouth compensation:

August 6, 2001 Financial Times (London) by Cathy Newman and Jim Pickard

The rising cost of the foot-and-mouth epidemic has prompted the government to propose talks with the insurance industry to shift the burden of future crises towards farmers.

With the bill currently standing at Pounds 2.3bn, and with BSE having cost Pounds 3.5bn, Gordon Brown has made it clear that the taxpayer should not bear the sole burden of similar crises in future.

The need to reduce the cost of future animal disease outbreaks has been sharpened by revelations over the weekend that 37 farmers are to receive compensation payouts of more than Pounds 1m. Two spending watchdogs - the National Audit Office and the Public Accounts Committee - are to probe the payments.

One option being considered is for the creation of a central insurance fund, into which farmers and the government would pay.

It could cover the cost of compensating farmers for slaughtered livestock, or it could be limited to payments for cleansing, disinfection and disposal. So far these have been met by government.

Farmers' leaders expressed anger at the idea of the government no longer bearing the full cost of slaughtered animals. Ian Gardiner, deputy director general of the National Farmers' Union, said: "That would be another burden which the industry can ill afford . . . The farming community would feel abandoned by the government."

Exploratory talks took place between farmers, the insurance industry and the government after the classical swine fever outbreak last year. All discussions ceased when foot-and-mouth was discovered in February, but ministers now want to restart them as soon as the epidemic is over.

"It's a question of what the insurance industry covers, how they cover it and what degree of government involvement there would need to be," a minister said.

The talks will also address whether insurance should be compulsory. Any moves towards mandatory insurance for the industry would require primary legislation.

The government is currently required under EU law to "facilitate payment" for animals slaughtered. Ministers believe the law could be re- interpreted to allow payment to be made via an insurance scheme, freeing the taxpayer from the whole burden.

Some farmers already have limited insurance against foot-and-mouth, which enables them to receive supplementary payments for slaughtered animals. However, only 10 per cent of livestock farmers have such insurance, and the state is still required to make a full compensation payment to those covered by the scheme.

Ministers accept that more extensive insurance schemes would probably have to be underwritten by the government, as private companies would be loath to take on the risk after the first major outbreak for 30 years.

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