Inquiry into payouts for farmers

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The Independent Online

Ministers have launched an inquiry into the foot-and-mouth compensation scheme after allegations that farmers and livestock valuers colluded to inflate the value of culled animals.

The Chancellor, Gordon Brown, and the Secretary of State for Rural Affairs, Margaret Beckett, are said to be alarmed by growing evidence that a lack of financial scrutiny has added millions to the Government's bill. In many cases, they believe, too much has been paid in compensation to farmers and commission payments to the livestock valuers.

The inquiry follows the Prime Minister's decision, revealed earlier this week, to suspend the clean-up of affected farms amid concern at the escalating cost of the exercise. Mrs Beckett ordered officials at the Department of Environment, Farming and Rural Affairs (Defra) to review the operation of the scheme after being tipped off about "excessive valuations" during a meeting with officials at the foot-and-mouth centre near Settle, North Yorkshire, on 25 June. They told her they were concerned that the lack of scrutiny of payments meant the taxpayer was being ripped off.

A Whitehall source said: "We are looking at the whole area. We are looking at the fees that valuers get and the rates that are being paid. We have latched on to this as a problem."

The cost of the compensation scheme has already reached £870m and is still rising. Almost £5m of this has been paid to livestock valuers.

The Government is now considering the scrapping of the standard scale for compensation for animals introduced by Nick Brown in March when he was Minister of Agriculture, amid concern that the valuations laid down for culled livestock are too high and have artificially boosted the value of agricultural animals. However, it is the discretion that valuers enjoy which is causing the greatest concern. MPs accused the Government of having failed to learn the lessons of the 1967 foot-and-mouth epidemic after it emerged that a report at the time recommended that senior valuers be appointed by government in each area to prevent abuse of the system.

Valuers are paid 1 per cent commission for every valuation they carry out on the Government's behalf, with a minimum fee for a day's work of £500 and a maximum of £1,500.

The valuation bill so far has reached £4.7m, with "a couple of million" still owing, according to Defra. Agriculture and Treasury ministers are now said to be examining the possibility of appointing their own valuers to prevent abuse.

The Independent has learnt that the official prices set by Government are being used as "minimum" prices by valuers in many parts of the country, with a growing number of farmers nominating valuers who will put a higher price on their livestock.

Some farmers compensated in February received about £700 for a breeding cow. Similar animals will now fetching up to £1,400. There is also evidence that low-grade or elderly animals, which would fetch minimal prices at auction, are fetching top prices of over £1,000 because the government's categorisations – for breeding cows, for example – are not specific enough.

Government officials admit the prices they set in March to compensate farmers for culled cows, pigs and sheep were pitched deliberately high to soften the impact of foot and mouth on individual farmers.

But farmers' representatives accuse the Government of artificially inflating market prices by introducing "standard values" which were far higher than market rates. The National Farmers' Union has demanded a meeting with government officials to discuss the "creeping inflation" in valuations which could have a disastrous effect on farmers who were compensated at an lower rate at the start of the crisis.

"This is a hideous waste of public money," said Tim Yeo, the Tory agriculture spokesman. "It's another failure to control spending and this is going to have an unsettling effect on industry as well."