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Standing Committee Debates

Cattle Compensation (England) Order 2006

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Fifth Standing Committee
on Delegated Legislation

The Committee consisted of the following Members:


Mrs. Joan Humble

†Bradshaw, Mr. Ben (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)
†Burrowes, Mr. David (Enfield, Southgate) (Con)
†Cunningham, Tony (Workington) (Lab)
Gummer, Mr. John (Suffolk, Coastal) (Con)
Hall, Patrick (Bedford) (Lab)
†Hendrick, Mr. Mark (Preston) (Lab/Co-op)
Horwood, Martin (Cheltenham) (LD)
†Huhne, Chris (Eastleigh) (LD)
†Kaufman, Sir Gerald (Manchester, Gorton) (Lab)
†Khan, Mr. Sadiq (Tooting) (Lab)
†Mitchell, Mr. Austin (Great Grimsby) (Lab)
†Paice, Mr. James (South-East Cambridgeshire) (Con)
Rosindell, Andrew (Romford) (Con)
Salter, Martin (Reading, West) (Lab)
†Turner, Dr. Desmond (Brighton, Kemptown) (Lab)
†Vaz, Keith (Leicester, East) (Lab)
†Wright, Jeremy (Rugby and Kenilworth) (Con)
Geoffrey Farrar, Committee Clerk
† attended the Committee

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Tuesday 21 March 2006

[Mrs. Joan Humble in the Chair]

Cattle Compensation (England) Order 2006

10.30 am

Mr. James Paice (South-East Cambridgeshire) (Con): I beg to move,

    That the Committee has considered the Cattle Compensation (England) Order 2006 (S.I., 2006, No. 168).

It is a pleasure to serve under your chairmanship again, Mrs. Humble. I remind the Committee of my interests in this matter as declared in the Register of Members’ Interests.

The reason that we laid a prayer against the order is that there is a number of issues to be addressed, and we believe that the issue should be debated by hon. Members. The Opposition do not have an issue with the principle of such an order, or even with the principle of a tabulated system of compensation. We recognise the Government’s point that there have been cases of over-compensation and I do not think that anybody would deny that. Whether that has happened to the extent that the Government sometimes make out is perhaps questionable, but it happens. There were also, I suggest, cases of under-compensation under the old system, but I do not have an issue with the principle of a tabular system. I do have an issue, however, with the structure of the order and the schedule, particularly part 2. I shall largely address my remarks to that this morning.

First, however, I want to say that it is a great disappointment, to put it mildly, that, after the order was laid on 1 February and after the Opposition’s prayer against it at about that time, we are considering it only now, on 21 March. That means that it has been in operation for some seven weeks. I think that it is an insult to the House that the prayer was not responded to earlier, and that consideration was not given to allowing an opportunity for earlier debate.

I also want to raise with the Minister an issue that is not directly addressed in the order but which I think should be. The order is all about the genus Bos, but I want to ask the Minister about farm deer, because we know that deer catch bovine TB, and that there may well be outbreaks in herds of farm deer. How would the Minister deal with compensation in relation to such outbreaks, if they were to arise?

On part 2 of the schedule, I draw the Minister’s attention—I am sure that he has already seen it—to the National Farmers Union response to the table valuations when the tables were first produced. In the press release, Meurig Raymond, then vice-president and now deputy president, said:

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    “It is an insult to farmers that the value being offered for productive animals, particularly in the beef sector, is below the value for breeding heifers, and well below the prices quoted to me at market last week.

    This reinforces the point made by the NFU that table valuations take no account of the intrinsic value of the UK herd. Table valuations only give an average value of animals sold at market. Since the best animals never go to market, farmers will never realise the true value of their stock.

    We are also concerned for pedigree producers, some of whom will find the published values substantially below the worth of their stock.”

It think that it is important that hon. Members and Ministers understand some of the things behind the physical appearance of an animal, particularly in the pedigree sector, in which there are some long-established bloodlines. One has only to look back at the foot and mouth tragedy to see how whole families of bloodlines were destroyed because of the culling that took place. The same could happen with TB.

To lose an animal is not just to lose the physical animal. It may mean the severance of a long breeding procedure going back several generations, and a bloodline could be lost quite quickly. That needs to be taken into account, and I hope that Ministers have done so. As I shall say later, I am somewhat dubious of that. If Ministers study sale results, they will see how important bloodlines are when assessing an animal’s value in the pedigree sector. Not just the physical value of the animal, but what it represents in a breeding context is taken into account.

On female cattle in the non-pedigree sector, the Government are implementing a proposal that all calved cows in beef and dairy should be classified as the same. That is the last category of female animal in part 2 of schedule 1. As anybody who knows anything about cattle will understand, that is ludicrous. In the beef sector, a freshly calved heifer with a young beef calf at foot is a highly prized animal. At a livestock market, such an animal, if it is of a good conformation, will fetch a great deal of money as a replacement animal in a beef suckler herd. An older beef cow—one that is perhaps nine years old and has had five or six calves—will be worth a fraction of that on the market, yet we will categorise it as the same and therefore compensate for it at the same rate.

Even more serious will be the case of an animal more than 10 years old. We are coming to the point where a 10-year-old animal might be in the older cattle disposal scheme category. July 1996 is the cut-off date, or 10 years ago. Any animal born before that would have a base value of 50p or 60p per kilo if it had to be sold. An older animal will therefore be worth much less than a younger one, but the Government are lumping them all together in the same category. At the moment, they are all valued at £495, which is patently absurd.

On the issue of non-pedigree dairy cattle, I draw the Minister’s attention to last week’s Farmers Weekly,
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which interviewed auctioneer Terry Hamlin of Stags, a large west Devon-based auctioneering company, as I am sure the Minister knows. The article said:

    “the biggest problem was with pedigree cattle and calved dairy cows. The table lumps all calved cows, regardless of brief and age, together at £632 a head for dairy cows and £495 for beef cows. ‘That is ludicrous. This table makes a 15-year-old barren Jersey cow worth the same as a prime black-and-white second calver.’”

That is the considered opinion of an auctioneer with as much experience of auctioning livestock as any auctioneer in this country.

We should not get bogged down in the precise figures, because no doubt the Minister will wish to emphasise that they change as the formula is used. I am challenging the categorisation, which does not change and which lumps all calved cows together in one group. Mr. Hamlin has made it absolutely clear what he thinks of it.

Mr. Austin Mitchell (Great Grimsby) (Lab): What the hon. Gentleman is saying is intriguing, but would not any system of classification or grading be inordinately complicated compared with what we have here? Is he suggesting that we should establish, as for the House of Lords, a kind of Debrett’s for cattle?

Mr. Paice: I am not proposing that we lend anybody any money, for a start. That is the distinction between us and the House of Lords.

Of course the hon. Gentleman is right that any categorisation will inevitably have some issues around the edges. I am making the case that the Government’s categorisations bear no relevance to the realities of the cattle market. On the points to which I am referring, there should be greater differentiation.

If we look at pedigree cattle in part 2, we will see that no value is allocated to a beef calf less than six months old. I tabled a question for the Government a couple of months ago, to which the response was that, at that age, the calf would normally still be suckling its mother, which is perfectly true. I hope that the Minister will confirm that the valuation attached to the cow assumes that she will have a suckling calf with her—in other words, that the calf is covered. It is all very well to say that a calf under six months will still be suckling its mother, but it is correct only if the valuation for the mother takes that into account. Otherwise, the calf and, again, the bloodline attached to it are lost.

Another pedigree beef category of 12 to 24 months old—only six to 18 months older than the category with no value—is valued under the present table at £1,164. That is a huge and sudden jump. Many beef breeders would be happy to take £1,164 for an animal of that age.

On a similar point to the one about the non-pedigree sector, calved cows of 36 months and over—over three years—are valued at £1,248 in the present table. The principle that I am trying to establish is that that is assuming that the animals are the same. I am certain that the Minister will talk to us about averages, because that is what part 1 of the schedule is about.

To talk about specific breeds, however, the schedule says that a Charolais cow, weighing a tonne, is valued the same as a pedigree Dexter, the small black animal
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that is popular among—dare I use the phrase—hobby farmers. However, no one would classify them in the same context as a pedigree Charolais, Limousin or even Hereford. The best Charolais animals are worth £10,000 and more. There have been examples of some bulls making £20,000 or £30,000. The pedigrees are lumped together in those categories.

What is even more daft is that, under the present table, a calved animal under 36 months in the pedigree beef sector is worth more than a calved animal of more than 36 months. I can see little logic in that.

I am not getting tied down with precise figures, but discussing their relationship. In the pedigree dairy sector, a calved animal under 36 months is worth £1,067, and calved at 36 months and over, £944—more than £100 less. I am using average prices, because I do not want to get bogged down in individual amounts. In last week’s Farmers Weekly, the end of a report on the sale of Marlain Holsteins, the commonest dairy breed in this country, said that the average price for 59 cows and heifers in milk, of which some will be less than 36 months, but the vast majority well in excess of 36 months, was £1,228. Eight in-calf heifers, all of which would be under 36 months and, according to the Minister’s figures, worth more, averaged £1,009. They averaged £219 less than the older cows, which is a complete reversal of the format used by the Government.

I am concerned about the way in which the Government have gone about that categorisation. It does not stand up to examination. I believe that it has been designed with complete ignorance of the realities of the cattle market and without real consultation with the industry, as witnessed by the remarks of the NFU and of a prominent livestock auctioneer.

More important, the categorisation has been signed off by Ministers. Just as we had with the continuing Rural Payments Agency debacle, and last week’s events in particular, it seems that Ministers do not really know the reality of the industry for which they have responsibility.

I have made it clear that the order has serious shortcomings, but it is in place and in operation, and therefore to oppose it or to say that it should be withdrawn would clearly be illogical—it is probably being operated out in the country today. Nevertheless, the Minister should move quickly to discuss the system of categorisation with the industry—both farmers and livestock auctioneers—and design a better system that reflects fairly all the values of cattle, the relevance of breeds and bloodlines, the true relativity between the different age groups, and logical ways to translate categories into actual valuations.

Time has moved on since we laid our prayer, and I do not suggest that we should reject the motion, nor that the Minister should abandon the order today. He should move quickly, however, to find a better and fairer categorisation. Such a system will not necessarily be any more expensive, so I hope that he will not use that as an excuse for inaction. I am not pleading for more money, I am simply saying that I do not believe the order fairly represents the relativity of
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different values within the cattle industry. He should design a better categorisation involving all industry sectors.

10.47 am

Chris Huhne (Eastleigh) (LD): For our part, we certainly associate ourselves with some of the concerns expressed by the hon. Member for South-East Cambridgeshire (Mr. Paice). Clearly, there have been cases of over-compensation with the existing scheme, some of which has been substantial. The potential savings from public expenditure could be as much as 30 per cent. on some estimates.

However, it is also the case that the new proposal with its table of valuations is clearly not sensitive to the array of different values that appear before auctioneers. I do not want to go into the detail of that, except to say that the Government have already expanded the number of categories from 29 to 47. Perhaps the Minister will consider a further expansion to take account of at least some other categories. For example, the tables make no allowance for organic beef, and there are no payments for closing a herd because of bovine TB.

I gather that the National Farmers Union is urging farmers who believe that they have suffered a significant shortfall to sue the Government. I do not think that one would like to see that, either from the farmers’ or the Government’s point of view. Perhaps an extra element of sensitivity could be introduced.

The point is particularly important to tenant farmers, because livestock form a particularly high proportion of the value of their capital. Therefore, it is crucial to get it right. One option may be some sort of appeal scheme. Perhaps the Minister can indicate whether that will be a possibility if a farmer feels aggrieved that the table valuation results in a substantial discrepancy in a particular case. Finally, so as not to detain the Committee, it would be reassuring if the Minister gave us an update on the efforts to ensure that cattle compensation is not required at all by dealing with the underlying causes, notably, through a further push on vaccine and the eradication of bovine TB.

10.50 am

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Ben Bradshaw): This has been a helpful debate, and I am sure that my officials will have heard the comments of the hon. Members for South-East Cambridgeshire and for Eastleigh (Chris Huhne) on how categorisation and the tables could be improved. However, it is important to remind the Committee of how and why we are in the present situation.

We did not take the decision lightly to introduce a tabular system, and the hon. Member for South-East Cambridgeshire acknowledged that he supports the idea in principle. The hon. Member for Eastleigh spoke of some cases of over-compensation, but it is much more serious than that. He will be aware, as will
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other members of the Committee, that three years ago the National Audit Office published a critical report of over-compensation in Wales. Since then, independent reports from Reading and Exeter universities have mirrored that finding, and reports from our staff show that it remains a serious problem. It may help if I give hon. Members an idea of what has happened over the last few years.

In 1999-2000, just over £5.3 million was paid in compensation for TB, and just over 7,000 animals were culled. By 2004-05, compensation rose to more than £40 million, which was almost an eightfold increase, whereas the number of cattle increased to 23,000, which was only a threefold increase. It is clearly a serious problem, and I am sure that all hon. Members will agree that we have a duty to the taxpayer to ensure that farmers are not being over-compensated. However, we must not create a disincentive to farmers to have good biosecurity.

Since 1998, we have had individual valuations. Under the previous Conservative Government, we had a table system, which covered 75 per cent. of market value. The present Government increased that to the full market value.

The hon. Member for Eastleigh spoke about the potential for legal action. Anyone is free to contemplate legal action, but our legal obligation is to compensate only for the value of the animal, and the value of diseased animals is considerably less than what we pay under the new system. Not only is it more than the animals’ real value, given that they are diseased, but it is considerably more than was paid under the previous Government.

As has been acknowledged, we have listened to the concerns of farmers and the industry. That discussion and consultation have been continuing for the three years since the NAO report. I personally would have liked to move more quickly, but it is a complicated matter. However one formulates a table system, some will feel that they are not being given the true value of their cattle. That is why we significantly expanded the number of categories in the table. We have not ruled out expanding it further, and I shall take on board the comments made by both hon. Gentlemen. The independent stakeholder group was set up to monitor the situation. As the hon. Member for South-East Cambridgeshire said, the market is changing all the time, and it is important that the system is flexible enough to take account of farmers’ concerns. However, it must also be capable of protecting the taxpayers’ interest.

The hon. Member for Eastleigh raised the issue of appeals. Again, we thought long and hard about the subject. The table system has one big advantage. Not only is it fairer to the taxpayer, but it should speed up the process. One thing that has delayed the removal of reactors in TB cases is that farmers often have to wait for an individual valuation. An appeal system would negate the whole point of having a table system. It is much more sensible to have a table system that is fair, although I acknowledge that we can probably improve it further. Again, I would welcome feedback from the Opposition parties as to how that might be done.

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Chris Huhne: To avoid that problem—the wish is clearly to reintroduce appeals by the back door—if a farmer feels particularly aggrieved, we could build in various limits. For example, an appeal could be entertained only if there were a certain percentage between the claimed value and what was paid. If that were not found to be the case, there would be a loss to the farmer of some percentage of the original payment. There are ways of protecting against over-compensation that would, nevertheless, give the farmer who felt particularly aggrieved the means to take proceedings against the decision.

Mr. Bradshaw: I hear what the hon. Gentleman says. As I said, we have thought about the system carefully. We have also considered carefully the counter-proposals made by the NFU, which, basically, were to retain individual valuations and have a team of monitors. We came to the conclusion that that would introduce a huge extra bureaucracy without tackling the over-compensation problem. We did not think that a team of monitors would be able successfully to challenge overvaluation, particularly as the animal would no longer be alive in most cases, and the large number of animals taken each month would pose a real problem.

As I said earlier, the table valuation system introduces greater transparency. We have not had many problems so far, although, as the hon. Member for South-East Cambridgeshire said, the NFU is urging people to sue and complain. We have had few complaints in the first six weeks of the system’s operation, yet some 1,300 animals have been slaughtered. That tends to indicate that there is acceptance in the industry that something had to be done. However, as I said, we keep the whole system under review.

I shall address some of the issues that were raised by the hon. Member for South-East Cambridgeshire. Some of them were of such detail that I am not competent to respond to them. Given his background, he has a great deal more expertise than I do in this area.

There is scope in the system for individual valuations for certain rare species for which we do not have enough data. I believe that the hon. Gentleman mentioned the case of pedigree Dexter cattle. There is a well known recent case of a calf in my own part of the world that was retested and found positive. That animal will have an individual valuation because there are not enough data. We should not look only at the tables in the statutory instrument. If the data do not exist, there is scope for individual valuations to take place.

Mr. Paice: I am interested in what the Minister just said in respect of Dexters; obviously, there are other possibilities. Can he point to where in the whole order there is a category for individual market valuations? Part 1 of the schedule clearly refers to pedigree and non-pedigree bovine categories. A Dexter, which is classified as a beef animal, or any other species must fall within one of those categories.

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My reading of the order is that the only species that are outside the categories are bison and buffalo, which understandably are dealt with in article 3(2) of the order, but every other conventional member of the cattle family falls within the categories in part 2. Can the Minister explain where the opportunity is for individual valuation?

Mr. Bradshaw: I refer the hon. Gentleman to article 3(7), which states:

    “In any case where, in accordance with paragraph 1(3) or paragraph 2(3) of Schedule 1, the Secretary of State considers that sales price data for any particular bovine category in any given month are inadequate, or such data are unavailable, she may opt to pay compensation at the level of the market value of the animal in question, as ascertained under the Individual Ascertainment of Value (England) Order 2005.”

My legal officials advise me that that covers the point that I was making.

Mr. Paice: I am grateful to the Minister, but I challenge him—perhaps he will want to think about this—if he is saying that any bovine category in article 3(7) is different from the bovine categories in part 2. At the very least, the order is extremely confusing. There may well be plenty of sale price data for general beef cattle, but I cannot see how one could extract a beef animal such as the Dexter from the category and say that it does not fit. I cannot see a statutory power to do that. He refers to a particular bovine category with reference to paragraph 2(3) of schedule 1, yet we have the categories. Where is the power to extract it?

Mr. Bradshaw: I will write to the hon. Gentleman with the clarification that he seeks, because the advice from my legal officials is that that covers the point that I was making on the scope for individual valuation when the data are not available.

I want to address a couple of other specific points that the hon. Gentleman raised. First, he asked how it could be right to include barren and cull cattle in determining compensation for certain categories. That is because of the return of OTM finished cattle on to the open market. We took the view that before introducing new compensation arrangements the OTMS had the potential adversely to affect compensation payments, so we have tried to be helpful to the industry. Under the new table valuation-based compensation system, cow cull data—that is, ex-OTMS—would have significantly reduced the compensation figures for the beef and dairy non-pedigree calf categories. Generally, relevant reactors taken off farms would be kept either for breeding or milking purposes. That is why we decided that it would not be appropriate to use cull cow sales data in determining compensation for disease-affected animals. We took steps to ensure that all such data is removed for the compensation calculations. On balance, that will help in terms of the pricing that the hon. Gentleman was talking about.

Secondly, the hon. Gentleman asked about the zero to six months pedigree beef category. He was right. There is no table valuation for that category because we have been advised that beef calves would be suckling until the age of six months and would not usually be sold without the dam. Beef calves are
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therefore covered by the appropriate commercial table valuation category and the dam by the appropriate pedigree category.

I will write to the hon. Gentleman on the other specific issues that he raised and to which I do not have immediate answers.

Another reason for believing that it was right to do this is that there was a discrepancy in the compensation that we were paying for other cattle diseases. In some ways, one could argue that we were under-compensating farmers for brucellosis, for example, and we felt it was fair to compensate them equally for diseases that have a similar impact on their businesses.

We believe that the Government have a responsibility to give farmers a fair price for slaughtered animals, but equally, we have a responsibility to taxpayers to avoid the serious overpayments that we have seen in recent years.

Mr. Paice: I hoped to intervene on the Minister before he sat down, because I do not think I am allowed another go.

The Chairman: Order. If the hon. Gentleman wants to make a second contribution to the debate, he is allowed to do so.

11.3 am

Mr. Paice: Perhaps the Minister has sat down. I was under the impression that I could not make another contribution. I do not want to detain the Committee except to thank the Minister for his courteous response. I look forward to his written reply to the issues that he has not addressed.

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I want to conclude with one point. Obviously, any responsible Opposition will endorse what the Minister said about ensuring that the valuation is fair to both the farmer and the taxpayer. No one would quibble with that. My point of concern is that the categories laid out in part 2 of the schedule create huge scope for a wide range of approximation. The point on which the hon. Member for Great Grimsby (Mr. Mitchell) challenged me earlier is relevant. Surely it is in the interests of both farmers and taxpayers that the marginality should be at a minimum. The Government should address the matter by choosing categories—whatever figure they choose and bearing in mind the wide range of cattle that could fall into that category—whereby the figure will be within, for example, 10 per cent. of what it should be. That would minimise the gain or loss to the farmer and be fair to both in maintaining the simplicity of a tabulated system. My contention, which I will not repeat, is that because of the way in which the Government have designed the scheme, the figure could be not 10 per cent., but 50 per cent. or more. That would mean massive over-compensation in some cases and massive under-compensation in others. I do not believe that that is fair to either party.

The Minister said that he keeps the matter under review, and I hope that he is genuinely doing that. He should look at how we can produce a table that keeps the approximation to within, for example, 10 per cent.—we can argue about the precise figure—of what it should be so that the margin of loss or gain is kept at a reasonably acceptable level. I do not believe that that is the case, which is why I am grateful for the opportunity that we have had to debate the matter this morning.

Question put and agreed to.


    That the Committee has considered the Cattle Compensation (England) Order 2006 (S.I., 2006, No. 168).

Committee rose at six minutes past Eleven o’clock.


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