The Intervention Board
21. The Intervention Board's annual report for 19992000
is not due for publication until the end of July this year[76]
so in our evidence session we relied on the summary of its activities
and performance contained in the Departmental Report. The Intervention
Board (IB), like MAFF, has a number of departmental objectives,
targets and output measures. In general, it is meeting its targets.
However, we noted two areas of concern which we raised with its
Chief Executive, Mr Trevelyan. First, the IB is required "To
achieve 4.0% improvement in the productivity index."[77]
By contrast, at 30 September 1999 its productivity index had fallen
by 2.3 per cent.[78]
The productivity index is measured in terms of outputs: "lines
of subsidy paid" in the case of the IB.[79]
Mr Trevelyan explained that the number of these outputs was falling.[80]
This made it increasingly difficult for the IB to achieve its
targets since it was "actually difficult when you are running
a fairly large organisation to reduce your central costs quickly
enough so that your productivity index remains favourable".[81]
There is an urgent need to say how this will be addressed,
either in the annual report or subsequent to its publication.
22. Second, the IB reported that it "will not
meet its disallowance target" in 1999-2000, mainly as a result
of European Commission financial corrections of £22.8 million
due to "perceived control deficiencies during the initial
implementation of the OTMS [Over Thirty Months Scheme] in 199697".[82]
Further penalties are likely in this financial year. On this point,
Mr Trevelyan reminded the Committee that the IB "had a long
running dispute with the Commission on this subject".[83]
Disallowance - that is the EU not reimbursing a member state for
expenditure it incurred under an EU scheme - occurs as a result
of control weaknesses identified by EU auditors but "the
rules of the game are that disallowance should also be linked
to risk presented to the [European Agricultural Guidance and Guarantee
Fund]".[84]
Mr Trevelyan acknowledged that there had been control weaknesses
when the OTMS was first introduced in May 1996, mostly because
of the speed of implementation. However, the IB disputed that
"there was any risk to the fund" because meat and bone
meal had no market outlet in the UK.[85]
We accept Mr Trevelyan's explanation that the disallowance is
the result of differing EU and UK interpretation of the rules,
rather than unresolved control weaknesses. We hope that the IB
is more successful in putting the arguments against further disallowance
in this financial year.
23. One problem which did occur during the year and
caused some concern to farmers was the reduction of the number
of abattoirs contracted by the IB to slaughter cattle under the
Over Thirty Months Scheme from 30 to 20.[86]
Mr Trevelyan told us that the objective of the process had not
been to have just 20 abattoirs but simply to review contractual
arrangements as the existing contracts had run for three years.[87]
As a result of the tender process, the IB had saved "between
£5 and £6 million" on operating costs.[88]
Following accusations that the reduction in the number of abattoirs
increased costs to farmers, the IB had "extensive discussions
with the NFU" who were asked for evidence to back up the
claims.[89]
Mr Trevelyan assured us that "there is no dossier in our
office from the NFU which gives any evidence of significantly
increased costs to the industry".[90]
He admitted that some cattle are taken longer distances but argued
that "some journeys are shorter"[91]
and that "we kept the concentrations in the areas in the
West of the country" where greater numbers of cattle are
maintained.[92]
It is important that schemes such as the OTMS are regularly
reviewed and if savings can be made, they should be made. However,
as we have seen before, when the cost to the industry overall
is neutral there are bound to be gainers and losers. In such cases
careful assessment of the cost and competitiveness implications
must be made.
24. We note that Mr Trevelyan identified falling
outputs as "one of the reasons why the Intervention Board
is engaged in discussions with MAFF about the potential for a
merger".[93]
The development of a single paying agency, as suggested to MAFF
by PricewaterhouseCoopers (PwC), would facilitate this merger
and the theory of being able to move staff from market oriented
work to direct support work appears sensible. However, the evolution
of the CAP will continue and activities in a new single paying
agency are likely to be subject to equally sudden developments
as those the IB has seen.[94]
Some sensitivity will therefore be required in the target-setting
for any new Agency. We discuss in a separate Report the results
of our inquiry into the Regional Service Centres and the PwC proposals.
Conclusions
25. MAFF has undergone change for a number of years
and that process continued throughout 1999-2000 as it prepared
for the establishment of the Food Standards Agency and developed
the initiatives designed to outline the New Direction for Agriculture.
Because change is always unsettling, the Prime Minister's commitment
to bring an end to speculation on the future of MAFF is welcome.[95]
However, there will still be a substantial programme of internal
reform at MAFF as a new Permanent Secretary implements the wide-ranging
Modernising Government agenda as well as new Public Service
Agreements and output performance measures. On a policy level,
the separation of the role of policing food standards and sponsoring
the food industry as a result of the establishment of the Food
Standards Agency offers MAFF the opportunity to develop its role
as sponsor of the entire food chain, and we look forward to seeing
how it will take this role forward.
26. It is against the background of these developments
that Mr Bender takes up his post as MAFF's Permanent Secretary.
He was keen to stress to us that the Department was "not
a completely blank sheet of paper" to him.[96]
He also underlined his recognition that MAFF was undergoing a
"reorientation of its priorities and role," which would
lead to "important changes both for the internal aspects
of the Ministry and for the relations with customers, with farmers,
with taxpayers, with consumers and its role in the rural environment"
and that his role was "working with Ministers to lead the
Department through that period of quite exciting change".[97]
We wish Mr Bender well in this challenging task. We look forward
to seeing him, and assessing the progress he and MAFF are making,
in twelve months time.
52 Ev. pp. 19-20, pp. 20-22. Back
53 Cm
4612, Annex 1. Back
54 Ev.
p. 19. Back
55 Q
8. Back
56 Ev.
pp. 19-20, pp. 20-22. Back
57 Q
8. Back
58 Ibid. Back
59 Qq
116-121. Back
60 Q
122. Back
61 HC852,
Session 1998-99, para 17. Back
62 Cm
4612, page 22. Back
63 Q
94. Back
64 Q
100. Back
65 Q
101. Back
66 Q
97. Back
67 Ibid. Back
68 Ibid. Back
69 Q
98. Back
70 Cm
4612, para 7.1. Back
71 Cm
4612, p. 55, Table 7.1. Back
72 Cm
4612, para 7.5. Back
73 Q
57. Back
74 Cm
4612, p. 55, Table 7.1. Back
75 Q
61. Back
76 Q
33. Back
77 Cm
4612, p. 120, Table 19.2. Back
78 Ibid. Back
79 Q
36. Back
80 Ibid. Back
81 Ibid. Back
82 Cm
4612, para 19.6, iii. Back
83 Q
40. Back
84 Ibid. Back
85 Ibid. Back
86 Q
41. Back
87 Q
42. Back
88 Ibid Back
89 Q
43. Back
90 Ibid. Back
91 Q
44. Back
92 Q
45. Back
93 Q
36. Back
94 Q
37. Back
95 Action
Plan for Farming, 30 March 2000. Back
96 Q
2. Back
97 Ibid. Back
