REPORT BY THE COMPTROLLER AND AUDITOR GENERAL. PROTECTING
ENVIRONMENTALLY SENSITIVE AREAS (HC120).
THE ADMINISTRATIVE COST
OF ESAs (PAC 97-98/137)
Memorandum submitted by
Professor Martin Whitby and Katherine Falconer[2]
The National Audit Office [1997] Report has
presented a thorough and searching examination of the administration
of ESAs. It has raised some important questions concerning this
policy and there are one or two points we would add to their comments
in this short note. We have summarised them briefly here but could
supply references to allow follow-up in detail.
Administrative performance is at the nub of
this issue. It is particularly important in the case of ESAs because
these involve contracts between farmers and the Government where
activities are detailed for subsequent execution. The majority
of MAFF expenditure is through the commodity regimes of the CAP
and on these the administrative costs incurred by MAFF are of
the order of 1.5 per cent of total expenditure. This varies from
some five per cent for certain livestock regimes to less than
one per cent for some crops. In contrast with that the twenty
or more per cent spent on administering agri-environment schemes
may seem high. Nevertheless there are several other policy areas
where administrative costs are higher-indeed some where all costs
are administrative. The question driving the NAO report is whether
administrative costs in the case of ESAs are too high and the
report devotes some space to considering ways in which these costs
might be reduced. This question could usefully be focused at the
level of individual ESAs and RSCs where variation is notable.
Our comments and questions are as follows:-
1. The report notes the substantial variation
in administrative performance, for example in terms of processing
time for agreements, across RSCs.
Question: Have these variations been investigated
yet, with what results?
2. A central theme in the report is the
funding of schemes. This requires some form of forecasting, it
could be linked to expected new entries into a scheme and/or cumulative
numbers of agreements? This was a problem in 1995 when expenditure
forecasts had to be drastically revised [Hansard, 6th February,
1996].
Question: How are expenditure plans for administration
and components of this such as monitoring set?
3. Related to [2], a recurring theme in
agri-environment policy has been the problem of staffing levels.
These are particularly important in this rapidly expanding policy
area.
Question: Are RSC/ADAS staffing levels thought
to have been satisfactory to cope with changes in workload since
the implementation of each ESA?
4. The NAO reports a remarkable range of
variation in monitoring levels across RSCs. [see figure 17].
Question: Why does this variability arise? Is
it administratively awkward to cope with such a range.
5. The report discusses the question of
compliance monitoring, its substantial cost and possible ways
of reducing it. EU Regulation 746/96 requires member states to
monitor at least five per cent of contracts each year. If farm
monitoring targets are reduced to five per cent, this will mean
that some farms may not be visited within the lifetime of the
agreement (the former MAFF monitoring target was set at 20 per
cent to ensure that each agreement-holder would be visited at
least once during their agreement). Surely this increases the
incentives for non-compliance. To balance these incentives, should
a financial penalty system be introduced as a deterrent effect?
The report advocates a lower monitoring level
be achieved by selecting farms for visits on the basis of risk
of non-compliance. But in practice, if risky farms were less than
5 per cent of agreement holders, would the balance be selected
randomly? If risky farms were thought to cover more than 5 per
cent of agreement holders, would they all be visited, or would
only the most risky be visited in order to stay within the 5 per
cent limit.
Question: What is the Ministry's current policy
on monitoring rates?
6. The level of compliance could be drastically
reduced, with a possible gain in compliance if substantial penalties
were introduced for non-compliance. This is both intuitively persuasive
and can be demonstrated to be the case as well. Yet present practice
is to merely seek return of some part of the payments made.
Question: Why does not MAFF introduce a rigorous
system of penalties, at least for the more blatant non-compliance
of contracts?
Professor Martin Whitby and Katherine Falconer
Dept. for Agriculture, Economics and Food Marketing,
University of Newcastle
20 January 1998
2 Respectively, Professor [Emeritus] of Countryside
Management and Research Associate, Centre for Rural Economy, University
of Newcastle upon Tyne. Back
| 
