The government was warned two years before the foot-and-mouth crisis that its vets could be overwhelmed by rapid spread of the disease, says a powerful watchdog.

Progress was made on many of those problems, says the National Audit Office (NAO), but action on other key concerns was delayed because other "high priority work" had to be done.

There are lessons to be learned for the whole government from the foot-and-mouth crisis

Sir John Bourn National Audit Office

The watchdog argues not enough was done to prepare for the unprecedented scale of last year's foot-and-mouth outbreak - the total cost of which it puts at over �8bn.

The report comes as initial results of an investigation into a suspected new case of foot-and-mouth in the Midlands are due to be released.

Total costs

The Department of Environment, Food and Rural Affairs says the findings show the government did much right in its handling of the crisis but that there are lessons to be learned.

Worries about fraud and overcharging by contractors and farmers are also revealed in the report, published on Friday.

One farmer allegedly claimed compensation for more hens than were put down, while another made false claims about the pedigree status of animals.

Beckett says government did well on controls

Six million animals were slaughtered in the crisis, which the NAO says cost the government �3bn and tourism and the rural economy more than �5bn.

The government admitted on Thursday that the source of the infected meat that sparked the epidemic is unlikely ever to be discovered.

The NAO says a shortage of vets in the early weeks of the crisis delayed control of the disease and it points to the warnings of the 1998-9 Drummond report about the state veterinary service.

The government had contingency plans, in line with European Union, which were based on the assumption that there would not be more than 10 infected premises at any time.

Urgent action needed

In reality, 57 farms sites were infected before the first case was diagnosed.

NAO chairman Sir John Bourn said: "We must acknowledge that this outbreak was of an unprecedented nature and magnitude.

"In the light of what happened, urgent action is needed to produce contingency plans which would be more sensitive to outbreaks of different scales."

More research was needed too on the best measures for tackling the disease, said Sir John.

Edward Leigh, Conservative chairman of the Commons public accounts select committee, said the contingency plans showed "a complete failure of imagination".

'Out of control'

He criticised the lack of consultation with other departments over the plans.

Neither the outbreak nor its costs were well-handled, argued Mr Leigh.

"The costs of dealing with the outbreak spiralled out of control, with the government having to spend money hand over fist to get things done quickly," he added.

Six million animals were slaughtered during the crisis

The NAO says ways of ensuring proper cost controls in crisis conditions must now be set up.

Its report shows fraud allegations involving farmers and contractors are still being investigated.

There are 11 claims that cleaning and disinfection companies exaggerated how much time they had worked or were elsewhere or on holiday.

More than �1.1bn of taxpayers' money was spent on the goods and services, such as transport, vets, slaughtermen and valuers, needed to stamp out the disease.

Compensation concerns

The report discloses that four officials tasked with tackling the disease now face prosecution, including three over hotel expenses claims.

Compensation for farmers whose animals were slaughtered to prevent the virus spreading or for welfare reasons topped �1.34bn.

Officials at a government department meeting last April also noted that high prices were giving farmers incentives to let their livestock become welfare problems and be slaughtered.

The Conservatives are citing the report as evidence of government "bungling" of the crisis.

But Environment, Food and Rural Affairs Secretary Margaret Beckett said: "The report describes accurately the unprecedented nature of the outbreak and the very wide spread of the disease before its presence was detected."

It showed too the government's success in limiting its spread to more areas once the controls were in place, said Mrs Beckett.