Poultry Flocks (Salmonella) (Hansard, 2 March 1993)

§ Mr. Gummer

The PCA has today reported to the House on a complaint referred to him by my hon. Friend the Member for Holland with Boston (Sir. R. Body) about the scheme of compensation payments introduced in 1989 for poultry flocks slaughtered on account of salmonella. I am grateful to the Parliamentary Commissioner for this report, which I have studied carefully.

The PCA criticises the Ministry of Agriculture, Fisheries and Food for failing in 1989 to discharge the obligation to devise and implement a compensation scheme which complied with the requirements of the legislation. The Government accept that the original decision to discount the estimated value of the flock by 40 per cent. to reflect the taint of salmonella infection was shown, following an arbitration case the following year, to be incorrect, but I should emphasise, as the permanent secretary has done in his comments quoted in the report, that the legal advice available to Ministers was taken fully into account at every stage, and that the Government considered that they were acting properly at the time.

In late 1988 and 1989, the Government were faced with a sudden drop of 60 to 80 per cent. of the market for fresh eggs, leaving individual producers facing a very serious commercial crisis. The Government would have been open to severe criticism had they not moved quickly to restore the position. In fact, a whole series of measures were taken to combat salmonella in a very short time on the basis of the medical, veterinary and scientific advice to protect public health and restore consumer confidence. I must stress that these measures were welcomed by the Select Committee for Agriculture in its report of February 1989, and were again welcomed in a debate in the House on 21 February.

The Government are always under a duty to be careful with the use of taxpayers' money. There were those in the House and outside who argued that no compensation was appropriate in the case of egg producers. While this view was rejected by the Government, it was thought justifiable for compensation to be discounted to reflect the fact that the flocks concerned were tainted with salmonella and therefore had a reduced market value.

This principle, which was of course designed to protect public funds, was never rejected, although it was found that the Ministry should not have applied a standard reduction to take it into account, but rather should have calculated a specific figure for each case on the basis of the facts. When, following the arbitrator's finding in September 1990 and the further legal advice obtained, it became clear that the basis of compensation applied hitherto needed to be changed, this was promptly done.

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The PCA criticises the Ministry's unwillingness to reveal the basis on which compensation was proposed. This exacerbated the pressure under which flock owners were put. The Government accepts this finding.

The PCA also questions the decision in November 1990 to regard as closed the cases of those flock owners who had accepted compensation on the basis of the 40 per cent. abatement without exercising their right to arbitration. In deciding not to adjust retrospectively the compensation payments settled before the change of policy took effect, the Government were acting on a clear legal principle. We were not unmindful of the interest of individual producers or the merits of particular cases, but we had to balance these against the need to be careful with the use of public funds.

While the position remains that the Government are under no legal liability, we have reflected on the PCA's findings and now accept his view that it would be all right in the circumstances to adjust the compensation paid to all the producers affected to reflect the arrangements subsequently put in place. We shall accordingly be making ex gratia payments on a basis which has been agreed with the PCA to all those owners who were compensated on the basis of the 40 per cent. discount between March 1989 and September 1990. The total cost will be some £600,000.