Animal by-products: Government Response to the independent review of the National Fallen Stock Scheme & Company
The Government welcomes the report on the operations of the National Fallen Stock Scheme & Company (NFSCo), produced by Bob Bansback.
This report was prepared in response to a request from Defra in late 2005, and delivered in April 2006 following extensive consultation with Defra and devolved administration officials, NFSCo, and key players in the livestock and fallen stock collection industry.
The National Fallen Stock Scheme was jointly set up by Government and the farming industry to help farmers meet their legal responsibilities for disposing of animals which die on-farm, and has been running since November 2004. The Scheme is currently part Government funded - a Government grant has provided £20 million over a four (originally three) year period to reduce the cost to farmers of compliance. The NFSCo is a non-profit making Company limited by guarantee, whose members are Defra and the devolved administrations. The board of the Company comprises one Government member and five members nominated by UK farming unions and livestock organisations.
The report provides a comprehensive overview of the status of the National Fallen Stock Scheme & Company at present, and provides a number of recommendations for developing the Scheme & Company in the future in order to maintain NFSCo’s position as a provider of a vital service for the farming community. It also provides a "road map" of necessary transitional steps to ensure that the Scheme and Company remain viable after the Government funding period ends and a new ownership and governance structure is in place.
Executive summary of Government response
The Government is particularly pleased that the report has acknowledged that the scheme is an excellent example of Government and industry working in partnership.
The Government accepts most of the recommendations in the report. In order to take forward these recommendations, the Government will:
- work with NFSCo and the farming industry to ensure that the scheme remains attractive and affordable after current government funding ceases (recommendation 1)
- work with NFSCo, on the basis of its business plan, to provide services in the future which continue to give value for money to tax payers and farmers (recommendation 6)
- develop a communications strategy which better articulates the need for the Animal By-Products Regulation (ABPR) and communicate this to the farming industry (recommendation 4)
- continue to work with the EU Commission to propose changes to the ABPR in certain areas, such as novel methods of disposal and risk based controls on the processing industry (recommendation 5)
- co-operate with NFSCo in developing an appropriate ownership and governance structure to meet the future challenges (recommendations 2, 3, 7, 9 and 10)
- extend the period of the existing grant to the end of 2008 (recommendation 8 – already implemented)
Detailed response to specific recommendations
Recommendation 1: closely monitoring future uptake (i.e. membership of Scheme), particularly for sheep
The Government has taken careful note of the report’s recommendation that it should monitor the future uptake of the Scheme by the various farming sectors. The uptake of the Scheme is already closely monitored by the Company and this information is fed back to Government on a regular basis, so that any impact on membership (with any potential resulting enforcement implications) can be assessed and action taken if required. In addition, following the report the Government commissioned an economic analysis of the extent of the impact of the eventual withdrawal of Government support for the Fallen Stock Scheme, also taking into account other future regulatory burdens and the impact of cost and responsibility sharing on the livestock industry.
This analysis shows that fallen stock disposal is a relatively minor cost as a percentage of total farm costs in all sectors, although it is clear that those farms with a higher proportion of sheep will bear higher (though still proportionately low) costs. It also disguises regional variation in costs; fallen stock collection costs are higher, for example, in areas of the country where the collection infrastructure is relatively underdeveloped. It is also clear that as the report states, particularly for sheep farmers, such costs can form a relatively high proportion of their net profits. This has the potential to impact on the viability of such farms and create an enforcement problem.
The Government will work with NFSCo and the farming industry to develop proposals which will address these issues.
Recommendation 2: remain active in participation with the Company, particularly through the seat on the Board
Recommendation 3: give added weight in NFSCo’s discussions with other Government Departments and official bodies
Recommendation 9 (For NFSCo & Government): agree to NFSCo becoming a farmer-owned company with a Board Structure as proposed
The Government is keen to discuss ways of increasing the industry stake and involvement in the running of the NFSCo and Scheme and is committed to maintaining a stake in the Company and representation on its board. The extent of the future government role will be determined in the light of discussions about the Company’s business plan.
Recommendation 4: articulate more strongly the need for the Regulation
The Government recognises the importance of this recommendation. It believes it is vital for the farming industry to have confidence in the Animal By-Products Regulation and to understand the reasoning behind the burial ban if it is to comply with the law. To this end Government is developing a communications strategy which will better articulate the reasoning behind the ban on on-farm burial of fallen stock, aimed in particular at sectors where there are concerns about the levels of compliance, such as the sheep sector. The Government will consult with the Company and industry stakeholders on its proposed message and on the most appropriate channels and effective methods to get the key policy messages out to the industry.
Recommendation 5: review and seeking changes in the Animal By-Products Regulation (EC) No 1774/2002
The EU ABP regulation came in to force in 2003, banning on-farm burial of fallen stock. Although there is no scope for reversing the burial ban, the Government recognises the need for, and is willing to encourage the EU Commission to propose, legislative changes in the following areas:
- Following consultation with the European Food Safety Authority as necessary, to encourage development of low cost novel methods to be used for disposal of fallen stock. For example, to be willing to consider methods which, although they may not effectively deal with TSEs in ruminants, might be suitable for other fallen stock
- To put in place more risk-based controls on the fallen stock processing industry, i.e. knackeries, renderers and incinerator operators, so as to control the regulatory burden and costs they incur as these will be reflected in the prices farmers pay to the industry for disposal of fallen stock
Recommendation 6: support, where possible, requests for Government funding (when linked to a rigorously prepared business plan) in the following areas:
- Transitional funding to ease the transfer to private ownership and to support sectors in particular difficulty
- Research and (particularly) development funding towards establishing lower-cost solutions for by-product collection and disposal
- Infrastructure improvements geared to providing local or regional solutions
- Business improvement measures
- Payment for public goods provided by the company, e.g. better disease surveillance or improved biosecurity
- Extra activities which are consistent with Defra’s wider objectives, e.g. disposal of all farm waste
The Government recognises that these are all legitimate areas for consideration and is in discussion with the NFSCo how best to address them in the light of its business plan.
Recommendation 7 (For NFSCo & Government): agree that there should continue to be an overall UK Scheme so long as the structure provides for devolved issues to be resolved within it
The Government accepts this recommendation. The Scheme has played a vital role in ensuring compliance with the Regulation in the UK, and the board structure (which comprises directors from each part of the UK) has proved to be an effective tool for ensuring the varying needs of the different parts of the UK have been addressed. In this Defra continues to work closely with the devolved administrations to ensure that any future structure continues to represent the whole of the UK.
Recommendation 8 (For NFSCo & Government): immediate attention should be given to seeking an extension to the period of the existing grant to the end of 2008
This recommendation has already been accepted by Government. The existing Government funding of £20m towards collection costs over a three year period has now been extended by a fourth year to November 2008. This will allow Government and industry to use the existing funding over a longer period, to ensure there is a smooth transition to a post-subsidy scheme.
Recommendation 10 (For NFSCo & Government): agree to having more financial and commercial expertise to take the Company forward in its new role
This recommendation has been accepted in principle. The Company business plan outlines how it proposes to tackle this recommendation. Its implementation will be decided in the light of discussion between Government and the NFSCo on its business plan.
Future work
The Government is in the process of considering the NFSCo business plan and wishes to discuss it further with the Company with the aim of agreeing a joint way forward which it can put to the livestock industry. The Government will publish a follow up to this response once the outcome of these discussions has been concluded.
Page last modified:
9 June, 2008
Page published: 21 February, 2007