The Scottish Government

Environment and Rural Affairs Department Agriculture Group To: Stakeholders with an interest in animal disease compensation

Pentland House, 47 Robb's Loan Edinburgh EH14 1TY Telephone: 0131-244 6181, Fax: 0131-244 6616 animal.health@scotland.gsi.gov.uk 27 th October 2003

Dear Sir/Madam

I invite you to consider the enclosed consultation paper and partial Regulatory Impact Assessment outlining our proposals for changes to the compensation arrangements for notifiable animal disease control.

After reviewing existing compensation arrangements and recent experience of compensation regimes in operation during the outbreak of Foot and Mouth disease, it is clear that compensation policy requires an overhaul. Our aim is to increase transparency and fairness while enhancing controls that will protect the taxpayer from excessive payments. We want to remove inconsistencies that have built through the case by case approach to compensation policy by producing a system where compensation is determined by the value of the animal and not the disease it has contracted. Eventually, the rationalised compensation system decided upon will cover all notifiable diseases. In the short-term a pilot scheme will cover 4 cattle diseases: Bovine Tuberculosis, Bovine Spongiform Encephalopathies, Enzootic Bovine Leukosis and Brucellosis.

We have tried to consider the potential problems of dealing with large livestock populations with price broad ranges. We have also given thought to the different diseases for which the Scottish Executive or the Government would pay compensation and the practical pressures they would impose on a compensation system. Our aim is to strike a balance between practical disease control necessity and responsiveness to individual circumstances.

You may be aware that consideration has been given for an animal disease levy to share the costs of disease outbreaks, and that the Outline Animal Health and Welfare Strategy announced that we would be looking at the wider issue of the sharing of animal health costs between Government and industry. These issues are now under review, however, the rationalisation of compensation is a policy objective in its own right. In any future proposals for a disease levy, we would need, in the interests of fairness and equity, to ensure some correspondence between higher compensation rates and levy rates.

As indicated in Section 1 (page 4) of the main consultation paper, responses to this consultation are requested by 7 January 2004 and should be sent to Ronnie Hawkes at the above address. When the consultation period is over, and in line with the Scottish Executive's policy on openness, all responses will be made publicly available in the Scottish Executive Library, K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3DX (tel: 0131 244 4565) unless organisations or individuals clearly indicate that they do not wish their views to be made public.

If you consider that we have omitted any relevant person or organisation from our consultee list, I would be grateful if you could advise me of their details and I will arrange for copies of these papers to be forwarded to them.

Yours faithfully

IAN W STRACHAN

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A CONSULTATION DOCUMENT ISSUED BY THE SCOTTISH EXECUTIVE ENVIRONMENT AND RURAL AFFAIRS DEPARTMENT TO STAKEHOLDERS IN SCOTLAND

Proposals to rationalise compensation for notifiable ANIMaL disease control

CONTENTS

Executive summary

Section 1 Introduction

Section 2 Background

Section 3 Detailed aspects and questions for consultation

Part 1 Background and development of our proposals

Part 2 Aims of the scheme

Part 3 Scope of scheme: diseases

Part 4 Scope of scheme: animal species

Part 5 Scope of scheme: high value animals

Part 6 Operation of scheme: calculation of average market price

Part 7 Operation of scheme: calculating average market prices during a suspension of livestock markets

Part 8 Operation of scheme: pre-valuations

Annex 1 Summary of a sample of existing compensation regimes

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Executive Summary

This consultation document outlines the Scottish Executive's current thinking on compensation for notifiable animal diseases. It is clear from recent experiences in disease control situations that the differences in current regimes offer widely differing levels of compensation depending on the disease. The National Audit Office and the Public Accounts Committee have both produced reports looking at compensation paid during the Foot and Mouth outbreak in 2001. Both reports highlighted weaknesses in the control and monitoring of valuations. We also believe that a lack of certainty in this area has a fundamental effect on livestock owners' business decisions.

The central aim is to attempt to rationalise compensation for notifiable disease and to produce a simple, transparent system that is standardised enough to deliver predictable levels of compensation whilst taking account of significant differences in value between individual animals. We want to offer fair compensation to farmers and avoid over-valuations of livestock. The consequential losses, such as the loss of business and profit, which may arise from the destruction of an animal will remain outside of the scope of these proposals, the compensation discussed in this consultation paper is purely compensation for the value of animals slaughtered.

Working with the Department for Environment and Rural Affairs (Defra) and the Welsh Assembly we have carefully considered the current situation, taking account of conflicting priorities of incentives for reporting, accurate valuations, operational simplicity and value for the taxpayer. These proposals have been designed to comply with the Human Rights Act 1998 and State Aid rules. We propose a scheme with the following elements:

• All animal diseases for which the Scottish Executive and the UK Government currently pays compensation will eventually be covered by the scheme.

• The scheme will be implemented in two stages. In the first instance, only the following diseases will be covered by the scheme: Bovine TB, Enzootic Bovine Leukosis, Brucellosis, and BSE as they do not require primary legislation to make the necessary changes. All other species and diseases that will be covered by the scheme will be addressed through primary legislation.

• Regardless of the disease, the same compensation rate will be paid for categories within individual species.

• Standardised category based systems will be developed for cattle, sheep, pigs and poultry; consideration will also be given to minor species such as goats, camelids and deer.

• Compensation rates for each animal will be equivalent to the current liveweight average market price prevailing prior to the disease outbreak for each category of animal where there is sufficient market data to support such an approach.

• The current market values for cattle and sheep will be calculated and published on a monthly basis. Compensation for all other species will be calculated when required.

• A mechanism for continuing the calculation of current market values if markets are suspended.

• Animals worth significantly more than the current market value for an animal in their category can be pre-valued and registered with the Scottish Executive. In such cases the compensation payable will be equivalent to the current pre-valuation.

This document invites you to comment on the specific elements of our proposals and the broader principles underlying them.

BACK TO CONTENTS PAGE

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Section 1 Introduction

Purpose

1. This consultation document seeks your comments on the rationalisation of the compensation arrangements for the control of notifiable animal diseases. The Scottish Executive has looked at current compensation arrangements and considers that they are in need of a complete overhaul. We are seeking your views on our proposals to simplify the whole approach.
2. In developing our proposals, we have looked at the lessons learned from recent outbreaks of exotic diseases and the strengths and weaknesses of existing compensation policy that were observed. We have also considered the compensation arrangements for endemic diseases, such as Transmissible Spongiform Encephalopathies (TSE) and Bovine Tuberculosis (Bovine TB), current regimes in other countries and compensation schemes for other situations, such as plant health.
3. Your responses to the questions throughout this paper will help inform our understanding and refine our proposals.

4. Consultation process

5. Responses to this consultation document should be sent to the following contact point in the Scottish Executive:

6. Ronnie Hawkes, Animal Health & Welfare Division,

   SEERAD, Room 356, Pentland House, 47 Robb's Loan,

   EDINBURGH, EH14 1TY

   (Telephone 0131 244 6420; Fax 0131 244 6616

   Email:- ronald.hawkes@scotland.gsi.gov.uk .

   The deadline for responses is 7 ^th January 2004.

7. The list of organisations being consulted on these proposals is attached to this document. In addition, this consultation document is available on the Scottish Executive website for comment by other interested organisations and individuals.
8. At the end of the consultation period, as is normal practice, copies of the responses we receive will be made publicly available in the Scottish Executive Library, K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3DX (tel: 0131 244 4565) unless respondents clearly indicate that they do not wish their views to be made public. In this case the confidentially of the response will be strictly respected.
9. This document is being issued by the Scottish Executive to stakeholders in Scotland. Defra and the Welsh Assembly and the Devolved Administration in Northern Ireland will be holding parallel consultations with their stakeholders.

BACK TO CONTENTS PAGE

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1. Section 2 Background

2. The recent incidence of animal disease, including the classical swine fever outbreak in 2000, the foot and mouth disease (FMD) outbreak in 2001 and the continuing problem with bovine TB, Bovine Spongiform Encephalopathy (BSE) and Scrapie, has highlighted that current compensation arrangements for disease control are fragmented and, in some cases, contradictory. It is our view that the current measures need to be rationalised, and that the compensation paid should reflect the market value of the animal and not be determined by the disease for which the animal was slaughtered. It is this approach we are setting out in this paper.
3. Currently, compensation for statutory slaughter of animals is calculated by a different method for each disease. Each mechanism has been set out under separate legislation with a case-by-case approach to calculating values, using the prevailing market value of livestock as a reference. In some cases, the compensation rates do not reflect current prices, such as the £20 maximum compensation offered for rinderpest (cattle plague). In other cases, market-tracking measures have diverged from real market trends, as is the case with Brucellosis compensation for dairy animals.
4. At the time that the provisions for compensation for each disease were made, there were sound reasons for the approach taken. As each scheme was designed, account was taken of the characteristics of the disease, circumstances of outbreaks and, overall, tried to balance providing a strong incentive to report the disease with the overall public benefit and burden on the taxpayer. These considerations have formed part of our approach to this exercise. (A summary of some existing compensation regimes can be found at annex A)
5. The current fragmented compensation mechanisms make it very difficult for livestock owners to predict the potential impact of disease on their businesses. Transparent, predictable rates of compensation will improve certainty and allow livestock owners to take additional measures to insulate their businesses from potential risk. Equally, taxpayers need assurance that compensation rates are a fair reflection of true market values.
6. Valuations at point of slaughter can interfere with disease control measures during an outbreak of a fast moving exotic disease. Increasing the efficiency and speed of settling compensation arrangements will increase the efficiency of disease control methods. Improvements in compensation procedures will also support the Bovine TB Strategy, as delays in removing TB reactors from farms can hamper disease control methods.

7. The proposed timetable for implementation

8. A number of the current cattle compensation schemes are set out in secondary legislation. As it is possible to replace existing secondary legislation, we plan to draft a Cattle Compensation Order to apply our proposals to Bovine TB, Enzootic Bovine Leukosis, Brucellosis and BSE. This will give us the opportunity to refine our approach before tackling all other diseases and species through primary legislation.
9. The Order will be drafted and consulted on following our consideration of the responses to this consultation document. We aim for an Order to be laid before the Scottish Parliament by the end of March 2004 and to come into force before end 2004.
10. Legislation for all other diseases and species will be drafted and consulted on by mid 2004. These diseases and species will be dealt with through additional compensation Orders when arrangements are made through Primary legislation which is expected to be introduced during the 2004/2005, if legislative timetable permits.

Section 3 Detailed aspects and questions for consultation

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Part 1 Background and development of our proposals

16. In developing the options that make up our proposals, we have had to take account of many points of view. As we are proposing eventually to cover all notifiable animal diseases under one regime, we had to consider the effect that different levels of compensation would have on the reporting of diseases with widely varying effects and epidemiological profiles. If we are to have a consolidated approach to compensation, the system developed must be operationally suitable for fast moving exotic diseases (such as FMD and avian influenza), transmissible endemic diseases (such as bovine TB) and diseases with relatively low transmissibility (such as BSE).
17. Through experience of the development of other compensation schemes it is clear that any system adopted should, as far as reasonably practicable, recognise the individual circumstances of those affected.
18. Creating a compensation scheme that both reflects market trends and is also responsive to differences in the value of livestock kept by individual owners, requires detailed knowledge of the livestock industries and the animals within it. In addition to the input of the Scottish Executive and Defra officials and discussions with representatives from a broad range of industry sectors, Defra commissioned a study, by ADAS Consulting Limited, to look into the detailed mechanics of the high value livestock markets (the ADAS report is available at:- www2.defra.gov.uk/research/project_data/default.asp. The ADAS report is an investigation into possible methods of producing a system for high value livestock through the use of standardised criteria that are used to establish the value of animals at market.
19. The recently published Auditor General for Wales report into valuations for TB control in Wales is a useful insight into the problems and pressures associated with the use of valuers.
20. We have used these considerations and the information we have gathered to form the basis of our approach. Now we hope to further refine our proposals through the responses to this consultation.

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16. Part 2 Aims of the scheme

17. The rationalisation of compensation was initiated to improve operational simplicity, consistency and transparency. There are no plans to withdraw from or significantly reduce compensation for any disease we currently cover. We will offer fair compensation and it is expected that the new scheme will reduce delays in livestock owners receiving payments. However, we want to use the opportunity of change to increase the level of control and monitoring we have over valuations to reduce the risk of over-valuation. EU state aids rules mean that there are no plans to widen compensation to cover consequential losses, such as the loss of business or profit. The principal aims of the scheme are as follows:

• To provide good incentives for timely reporting of disease.

• To be operationally simple and remove potential obstacles to appropriate disease control measures.

• To provide transparent, predictable and fair rates of compensation.

• To be flexible and responsive to changes in circumstances.

22. The rationalised scheme will categorise different types of animals within each species. Our aim is that the majority of animals to which compensation could apply would be covered by these categories. Paragraphs 25 to 29 discuss the development of these categories in relation to cattle, sheep and pigs and other species. We recognise that these categories will not be appropriate for certain high value animals, and paragraphs 30 to 33 set out our proposals in this regard. There are particular difficulties in developing categories for poultry; these are addressed in paragraphs 27 and 40.

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Part 3 Scope of scheme: diseases

23. All diseases for which the Scottish Executive and the UK Government would, under current legislation, pay compensation for the slaughter of animals will be included. We have some reservations over compensation in relation to diseases of horses; these are explained more fully in paragraph 29. The following table summarises the diseases in question:

NOTIFIABLE DISEASE	SPECIES AFFECTED
African horse sickness	Horses
African Swine Fever	Pigs
Aujeszky's Disease	Pigs and other mammals
Bluetongue (for ruminating animals)	Ruminants
Bovine Spongiform Encephalopathy	Cattle
Brucellosis (Brucella abortus)	Cattle
Classical Swine Fever	Pigs
Contagious agalactia	Sheep and goats
Contagious Bovine Pleuro-pneumonia	Cattle
Contagious epidydimitis	Sheep and goats
Diseases of poultry (including salmonella, Newcastle disease and Avian influenza)	Poultry
Enzootic Bovine Leukosis	Cattle
Epizootic haemorrhagic virus disease	Deer
Foot and Mouth Disease	Cattle, sheep, pigs and other cloven hoofed animals
Goat pox	Goats
Lumpy skin disease	Cattle
Peste des petits ruminants	Sheep and goats
Rabies	Dogs and other mammals (compensation for companion and other non-farmed animals is outside of the scope of these proposals. Please see paragraph 24)
Rift valley fever	Cattle, sheep and goats
Rinderpest (cattle plague)	Cattle
Scrapie	Sheep and goats
Sheep pox	Sheep
Swine Vesicular Disease	Pigs
Teschen disease	Pigs
Tuberculosis (Bovine TB)	Cattle and deer
Vesicular stomatitis	Cattle, pigs and horses

24. Although rabies is a notifiable disease for which powers exist to slaughter animals with compensation in certain circumstances in an outbreak, the animals most likely to be affected are dogs and cats. Clearly the approach outlined in this document could not apply to companion animals. Compensation for cats and dogs and other non-farmed animals under the Rabies (Compensation) Order 1976 is therefore outside the scope of these proposals.

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Part 4 Scope of scheme: animal species

25. The rationalised compensation regime will use a system of categories for cattle, sheep and pigs.
26. The following proposed categories are designed to make definition of individual animals as straightforward as possible based on objective criteria. This is aimed at both reducing delays in a disease control situation and avoiding disputes over the type of animal and its intended use. The categories have to be suitable both for compensation for individual animals (e.g. BSE offspring cull) and for larger numbers, such as an outbreak of a fast moving exotic disease. The categories also reflect factors that give animals an intrinsic value relative to other categories within the same species.

27. Cattle

    Category & Definition

    Any female animal over 24 months old that has had at least one calf

    Any male animal over 24 months old being used for breeding purposes

    Any male animal up to 6 months old

    Any entire male animal between 6 and 12 months old

    Any castrated male animal between 6 and 12 months old

    Any male animal between 12 and 24 months old

    Any male animal over 24 months old not used for breeding

    Any female animal up to 12 months old

    Any female animal between 12 and 24 months old

    Any female animal over 24 months old not in-calf or calved

    Sheep

    Category & Definition

    Any female sheep with at least 1 pair of permanent incisors

    Any entire male sheep with at least 1 pair of permanent incisors

    Any other sheep

    Pigs

    Category & definition

    Pigs - Breeding sows and replacements (any female animal which has given birth and any female animal 85 kg and over intended for breeding, but not yet farrowed).

    Pigs - Breeding boars (any boar used, or intended to be used for breeding, 100 kg and over)

    Pigs - Non breeding stock between 0 and 11 weeks

    Pigs - Non breeding stock between 11 and 26 weeks

    Question 1 Do you feel that the categories we have developed adequately describe the variety of stock in the market place, bearing in mind the need for operational simplicity?

    Question 2 What alternative approach can you suggest? What advantages might it have over the categories presented here?

28. We are currently conducting a scoping study to attempt to identify suitable categories for domestic and other species of poultry. We intend to continue using the current salmonella compensation scheme as means of calculating poultry compensation values. The system, at present, only has categories of broiler and layer breeding birds for domestic fowl.

29. Question 3 How might we expand the categories used in the salmonella compensation scheme to cover other types and species of poultry?

30. Due to the comparatively small size of the markets for deer, goats and camelids and the lack of market data, the range of categories for these species will be limited. We would want to apply the same principles that cover the major commercial species to the smaller livestock sectors but require more information from the individual sectors to be able to do so.

31. Question 4 Can you suggest possible categories for deer, goats and camelids?

32. The risk of an outbreak of the diseases that affect horses, listed above, is very low. However, as we would like to be as comprehensive as possible in this consultation, it is important to explore all compensation issues. We currently have no policy for the compensation of horses. It would be very difficult to set standard rates of compensation given the extremely wide distribution of prices within the horse market. We do not believe that it would be right or proportionate for the taxpayer to underwrite the value of very high value racehorses and bloodstock against notifiable disease. Government involvement in compensation in this area could also distort existing insurance arrangements.

33. Question 5 How do you think we should approach compensation for horses, if at all?

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    Part 5 Scope of scheme: high value animals

34. While we aim to encompass the majority of animals in a standard compensation scheme, we are aware that we will have to make arrangements for a significant minority of higher value animals. Through research, we have established that the complexities in the way the high value animal market operates makes any standardised approach very difficult. The distribution of prices is extremely wide and there are no characteristics or criteria with which to establish acceptable standard categorisation at the top end of individual livestock markets.
35. The comparatively small size of the high value livestock market also discourages an attempt at standardisation. Our studies have shown that 1-2% of most livestock species could be described as elite breeding stock and attract extremely high prices. A further 5-12% of most livestock species could be described as significantly above average in quality and value. This is more pronounced in the dairy industry, with about a third of animals being considerably above the average commercial values.

36. Question 6 In your experience, what proportion of animals within individual livestock sectors are significantly above average market prices and what distribution of prices could we expect to see?

37. A standardised system for high value animals would also undermine our proposals for commercial animals. Further standard categories will increase the grey areas between individual categories and will reduce transparency and operational simplicity.
38. It is unlikely that a standard system, no matter how complex, would be able to forecast the true value of every individual animal. For these reasons the new arrangements would provide a mechanism for establishing the worth of high value animals.

39. Question 7 Do you feel it is appropriate to have a separate scheme for high value animals?

    Operation of the scheme

40. The remainder of this document outlines how the elements of the scheme will operate. How we will set compensation rates for the standard category based system is described in paragraphs 35 to 42. The proposed procedures for continuing to produce compensation rates in the absence of live market data are set out in paragraphs 43 to 44. The proposed system for pre-valuing and registering high value animals is outlined in paragraphs 45 to 50.

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25. Part 6 Operation of scheme: calculation of average market price

26. Standard compensation rates for all cattle and sheep categories will be calculated and published on a monthly basis. Compensation rates for other species, where compensation cannot be based on live market data, will be calculated as required.
27. The main aim of the standard scheme is for compensation levels to reflect actual trends in the livestock markets to produce more representative values. We therefore need to find a way of calculating an appropriate market price. This requires a large and relevant statistical base. After assessing an array of available data sources, we have concluded that live statistical data is not available for all the categories required for the scheme. Some of the categories within species rarely, or never, appear at market.
28. To address these weaknesses for cattle and sheep, market price data will be collected for the category from each species that has the largest representation at market in that period. From this, a monthly average market price for that category will be calculated. Using this market price as a base, compensation rates for all other categories within the species will be derived through relative value ratios.
29. It is important that the ratios are set in an objective and transparent way, using the best available expertise. It is important for the credibility of the compensation regime that ratios are set in partnership with industry. Representatives of the national species associations will be invited to be members of an expert working group, one group for each species, dedicated to the maintenance of credible ratios. The working groups will need to be supported with a variety of statistics on market trends and information on associated costs in order to inform their decisions.

30. Question 8 What types of information and statistics do you think the working groups would need to enable them to set credible ratios?

    Question 9 How do you see the ratios being set?

31. Setting these ratios will be complex. We are aware that the relationship between values in the different categories is dynamic and not easily captured by fixed ratios. The frequency and timing of ratio adjustments will have an impact on the ability of the system to successfully reflect seasonal variations and other market trends. We therefore propose to adjust the ratios at appropriate periods.

32. Question 10 At what times of year do you feel that significant changes occur in the prices of individual categories, so as to require an adjustment of the ratios?

    Question 11 What market forces, if any, could require the ratios to change?

33. There are some species where it would be difficult to develop compensation categories based on open market prices. As there is no open market for most categories of poultry, we propose to continue using the compensation categories currently used for salmonella, where they apply to domestic fowl. The system produces values for three categories of domestic fowl, based on the costs of a variety of inputs and the value of poultry products. We are conducting a scoping study to see if the system can be adapted, based on industry agreed formulae, to apply to the broad number of husbandry situations and the variety of possible species that might be involved.

34. Question 12 Do you agree that the valuation scheme for salmonella can be adapted and extended to cover other diseases of poultry and other species and categories of poultry?

    Question 13 For what categories of poultry (including game birds) do markets exist to allow values to be set on market values?

35. The closed breeding pyramid structure in the pig industry produces a similar problem to that of the poultry industry. With a lack of live market data, it is difficult to follow the same approach as for cattle and sheep. We propose that our agreed categories, for commercial animals, will have to rely on dead weight prices as a basis. We understand that commercial pig producers already list their assets under categories that reflect the production cycle.

36. Question 14 What approach should we take to setting base level compensation for pigs?

37. As the markets for deer, goats and camelids operate on a much smaller scale than the main commercial animals there is less data on which to base a credible market price for different categories. We would like, as far as possible, to apply the same principles we are suggesting for the major commercial species but understand that the limited market for some species might require a different approach.

38. Question 15 How might we overcome the shortage of market price information for deer, goats and camelids in order to develop acceptable compensation values?

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    Part 7 Operation of scheme: calculating average market prices during a suspension of livestock markets

39. If, as during the 2001 Foot and Mouth outbreak, market closure removes the live data required to run the standard system, a contingency arrangement has to be in place to continue the operation of the scheme.
40. In order to avoid seasonal variations adversely affecting the rate set during market closure, the level should be maintained at an average of an appropriate period of complete data, until such time as market data becomes available again. To avoid the short-term distortions to markets at the end of an outbreak, live data compensation calculation should only recommence after an appropriate period of uninterrupted data is available.

41. Question 16 How do you think we should deal with the problem of widespread market closures.

    Question 17 If we were to use averages of previous compensation rates, what periods should be used to reduce seasonal distortions?

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    Part 8 Operation of scheme: pre-valuations

42. In order to address the issue of high value animals that cannot be included in the standardised system we suggest a pre-valuation approach. Owners, who consider the value of their livestock to be above the standard rates we publish, will have the opportunity for a pre-valuation of their animals to be conducted by a valuer drawn from a panel of independent valuers maintained by the Scottish Executive. This valuation would be conducted at the livestock owners' expense.
43. There will be a list of approved valuers available to carry out this work. When valuers have been used in previous disease control situations, we have been criticised for our lack of control over the valuations carried out. By approving valuers ourselves we can ensure that valuations are fair and reflect the real market situation. Certain standard criteria would have to be met in order to apply for entry to the list, such as experience of auctioneering.

44. Question 18 What criteria should qualify a valuer for this work?

45. Pre-valuations will have to follow a specific format, using documentary evidence to support the valuer, including sales receipts, pedigree certificates, any breed society recording statistics that indicate relative value and market data.

46. Question 19 What sort of information do you feel is important to record on a pre-valuation form? What sort of documentary evidence is available to support valuations and ensure a consistent approach across Great Britain?

47. We are aware of the pressures that can lead to inflated valuations. In order to monitor and control valuations a sample of pre-valuation work would be audited each year to establish the accuracy and effectiveness of the system. If evidence is uncovered that a valuer is providing inaccurate or fraudulent valuations, they will be removed from the approved list.

48. Question 20 What methods could be used for establishing the accuracy of valuations?

49. We envisage that pre-valuations would have to be submitted for registration each year. We are aware that because market valuations fluctuate over the year and that animals are born, bought and sold, it is difficult to reflect all animals' values in a single annual "snapshot". It would be for the livestock owner to decide how often they wish to re-value animals. However, we consider that it would be an important principle for the values to be updated on an annual basis at the very least, after a given period the registered value would lapse and the standard price would apply. A regular registration exercise would be needed to protect the Government against increased levels of speculative valuation during periods of high disease risk.

Question 21 What would be the most efficient way of running a registration exercise?

Question 22 How long should a pre-valuation be valid for before lapsing?

Question 23 Taking into account fluctuations during the year, how could valuations be adjusted with the minimum cost and bureaucracy?

Question 24 How should we operate the system to be as open and cost free as possible to genuine applicants at the same time as being resistant to speculative valuations?

50. There will be circumstances where registered pre-valuations, when used to calculate compensation, no longer accurately describe the value of the animals. Time, movements on and off the farm and changes in the condition of the animals and other circumstances will all have an effect on the accuracy of any pre-valuation. Where there are large changes in numbers of animals or their value, livestock owner might consider registering an updated valuation. In situations where this is not possible, there would be recourse to an appeals process. Documentary evidence would be put before an independent appeals panel to substantiate claims that there had been a significant change of value since the registration of the pre-valuation. This process would also be available to the Scottish Executive where it feels that the pre-valuation is higher than the actual value at time of slaughter.

Question 25 Under what circumstances do you consider that an appeals mechanism would be required?

Question 26 Independence is important if both livestock owners and the Scottish Executive will have the right to appeal. How should an appeals panel be set up and who should sit on it?

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Annex 1

Summary of a sample of existing compensation regimes

Disease	Compensation Paid
African Swine Fever and Classical Swine Fever	Affected animals: half the value of the animal immediately before it became affected: in every other case, the value of the animal immediately before it was slaughtered.
Aujeszky's Disease	Market value of the animal: maximum £300
Brucellosis	Affected animals or reactors: an amount equal to 75% of either: - (i) its market value, or (ii) 125% of the average price two months previously (calculated from the average price at specified markets) rounded down to the nearest multiple of £4. - whichever is the less. ("market value" here means in the case of a bovine animal over 30 months old, either; (a) the price which might reasonably have been obtained at the time of valuation from a purchaser in the open market: or (b) the purchase price had the animal been slaughtered - whichever is the higher: For a bovine animal under 30 months, same as (a) above Maximum currently payable is £567 for each animal (cattle) slaughtered.
BSE	If BSE confirmed (via lab examination): 100% of market value or the indicative market price that is a weighted average of prices in 36 markets (IMP), whichever is less. If not confirmed as having BSE, rate is the market value of the animal or 125% of the IMP, whichever is less. Valuation carried out by DEFRA Vet and farmer. Cohorts, exposed animals and offspring of BSE cows are compensated at other rates.
Enzootic Bovine Leukosis (EBL)	The lesser of £567 or 100% of the market value of the animal. Note: Compensation provisions not currently applied, as disease has not been identified in UK recently.
Foot & Mouth	100% of valuation (of individual animal) carried out by independent valuer (though at one stage in the 2001 outbreak farmers were able to opt for standard values)
Salmonella	Compensation is paid at 100% of the market value immediately before slaughter in the case of breeding flocks and at 100% of the market value at the time of seizure in the case of hatching eggs. Valuation scales for compensation are set monthly for breeding flocks by an independent consultant (ADAS) to reflect the changes in commercial values of poultry and the rate used is that for the month in which the birds are slaughtered. A valuation for compensation for the seizure of hatching eggs is also set by ADAS as required.
Scrapie	Compensation paid for reported cases that are slaughtered (compulsory) for diagnosis. For confirmed cases the rate is £30 for cull ewes and £90 for any other animal. For suspect cases not diagnosed with Scrapie, the same rates apply, unless documentary evidence is produced to show that the value was greater, in which compensation is that value up to a ceiling of £400
Tuberculosis (TB) in cattle	100% of market value
Tuberculosis (TB) in deer	The lesser of £600 or 50% of the market value of the animal [This should be changed so it has the same format throughout. See how you say the same thing for this and for EBL. Valuation by specialist valuer, agreement between owner and DEFRA or average market price.