Press Release - Three month extension of Defra contract would make O48 month transition....

Three month extension of Defra contract would make O48 month transition to unsupported business operation much easier.

If Defra extends its current financial support for the NFSCo over 48 month scheme for another three months, the support available could be fully utilised at current rates – and the continued presence of an industry lead O48 month Scheme which creates more price competition, and disposal location choice, for livestock farmers would be secured, says the National Beef Association.

But if the Defra contract with NFSCo is terminated on December 31st, as planned, the consequence will be a big cost jump for farmers, when the current level of support is removed and purely commercial collection charges are met in full by farmers.

This being the case the NBA is hoping that it, and others in the livestock sector, can persuade Defra to introduce a wind down period, by extending the current NFSCo O48 month arrangements to March 31st 2010, so that the smoothest possible transition can be achieved – and the number of collections organised by NFSCo continues at current levels at the same time as the road is left open for an even bigger membership, benefiting from a more competitive pricing system, later.

“The creation of the farmer run NFSCo O48 month Scheme has been a success story because administrative savings were quickly made at the same time as competition was introduced at the business end of the operation. At the same time collection costs faced by members are currently around 35 per cent less than they would be without government support,” explained NBA director, Kim Haywood.

“But if these long term structural benefits are to continue, and a big jump in collection costs is to be avoided from January 1st next year, Defra has to extend its support period for another three months to allow a proper transition.”

“Fortunately this can be achieved with no additional cost to government because the FSS already has sufficient funds in its kitty to underwrite collections at current levels right through to the end of March next year.”

“However if Defra insists in December 31st being the termination date then any government surplus still held by FSS would have to be refunded.

According to the NBA this leaves the FSS, which is currently underwriting its member’s collection costs by 50 per cent with the help of a £2 million government annual grant, with two choices:

“It can either return the unused money to Defra on December 31st, which goes against the grain, or raise its contribution to the collection charge even though it would temporarily reduce farm costs and then pave the way for an unnecessarily big price jump later,” said Ms Haywood.

“or, if Defra agreed to a March 31st extension, its funds could be used to underwrite current FSS charges for a further three months because the on-farm collection costs would be reduced incrementally to 20 per cent and then ten per cent, over the three month extension period, and the risk of a big price jump after government funds are finally withdrawn would be greatly reduced.”

For more information contact:

Kim Haywood, NBA director.    Tel. 0131 336 1754/07967 698936