Pembrokeshire's livestock farmers will be among the hardest hit if proposals to cut compensation payments for stock affected by bovine TB are implemented. According to a report published by the National Audit Office, compensation payments in Wales are currently averaging £8 million a year. But changes to the valuation process, currently carried out by independent professional valuers, could cut this bill by £2.6 million. Figures show TB breakdowns in 779 Welsh cattle herds - with the highest concentration of these cases in Pembrokeshire, Carmar-thenshire and Ceredigion. Nearly 5,000 animals were slaughtered in Wales in 2002, with incidents of the disease increasing by an annual average of 29% between 1996 and 2002.

Suggested changes to the valuation process were premature, insist farmers, because the Government and the National Assembly were failing to address the core problem. Evan R. Thomas, who represents the Farmers' Union of Wales on the national TB Forum, believed any immediate savings would be wiped out by the escalating number of herd breakdowns.

"The union believes steps must be taken to eradicate the disease both in the cattle and wildlife populations of this country, otherwise bovine TB will continue to spread and cause misery to farmers throughout the country,'' he said.

The National Audit Office report acknowledged the consequential losses that farmers suffer as a result of a TB breakdown in the herd.

"Although the report pinpoints the level of compensation paid to farmers in Wales, it must also be remembered that the restrictions placed on the herd have a huge financial impact on farm businesses,'' said Evan Thomas.

Restrictions on the movement of livestock until the test cycle is completed mean that other costs, including feed, veterinary fees and labour all increase. There are also losses from reduced milk or beef sales to be taken into account.

Bovine TB is having a major impact on livestock markets in west Wales. Bob Jones-Prytherch and Co, which operates the markets at Haverfordwest and Carmarthen, estimates it is losing up to 100 calves a week.

Farmers restricted from moving cattle are culling dairy bull calves with the knock-on impact on markets.