Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 180-199)



  180. It tells you inside. It is linseed. The interesting thing is that what Mr Bender has talked about really is the failure in the Fibre Flax Subsidy Scheme and the obvious problems with it. Reading this report the main fraud, as I understand it, was actually carried out under the AAPS, the Arable Area Payment Scheme. I remember when I became a special advisor and came with a new minister we got the briefing from the Deputy Secretary, and from Mr Trevelyan, your predecessor, and he said "This new IACS system is so foolproof. We have got satellites watching every farm in the country" and so on. The main fraud was actually carried out under the AAPS system, was it not?
  (Mr Bender) Well, the fraud was a double claim under system A and system B. The court decided that of the two, the one that he was guilty of was under the Arable Area Payment Scheme. The systemic error, the failing, was no cross checking between the two.

  181. As I understand it, the belief of the department was that the crop that was being grown was flax?
  (Mr McNeill) Yes.

  182. So he was claiming for linseed under AAPS and yet the AAPS inspection system was not picking up the fact that he was not growing linseed in fact?
  (Mr McNeill) That is correct.

  183. Is not the failure there with the AAPS scheme? There was a failure of that scheme rather than the flax scheme?
  (Mr McNeill) Yes, in that we did not do an inspection to check that he was growing linseed under the AAPS scheme that is correct. He was not selected for an inspection because we only do five per cent inspections as normal, that is the level required by the Commission.

  184. You do not check the main arable crops of the country?
  (Mr McNeill) Not every one, no.

  185. As a result of what has happened here, are there increased checks on farmers so you know whether they are growing barley, wheat, potatoes?
  (Mr MacKinnon) There are now no crops which lie outside of the IACS control. This fraud was allowed to happen because there were arable crops which fell outside of the arable aid system and outside of IACS control. Now that flax and hemp have been taken into IACS control everything which is grown comes under IACS control and, therefore, you cannot run the scam which Mr Bowden was running.

  186. Could you not have a field of potatoes and fill in an IACS form saying you were growing barley and then take pot luck that you were going to be one of the 95 per cent of farmers who was not checked?
  (Mr MacKinnon) The question would be why you would say that you were growing potatoes.

  187. You could sell the potatoes and get the subsidy on the farming.

  Chairman: It seems a fairly simple question. Try and make a stab at it.
  (Mr McNeill) You are quite right, you could do that if you were a farmer but you run the risk of being caught by inspection, the ten per cent inspection. If you are caught that would be a very clear fraud.

  188. Five per cent?
  (Mr McNeill) Sorry, five per cent, ten per cent for livestock, five per cent for arable. If you are then caught I think we would take the view that is very clear fraud and seek criminal prosecution.

  189. A lot of criminals would happily operate a system where they have only got a five per cent chance of being caught, would they not?
  (Mr McNeill) Possibly.

  190. I think it is too easy. What I am getting at is it is too easy for Mr Bender to in effect say that this flax system was obviously an old system which did not have modern fraud control mechanisms in it, it is being got rid of anyway and it is all going to be part of the new IACS system. We do not have to worry now. It seems to me the real problem was with the Arable Area Payment Scheme because that was where the major fraud was perpetrated. Do you agree, Mr MacKinnon?
  (Mr MacKinnon) I do. It is a minimum level though laid down in the regulations of five per cent that we do. We could do more than that if we were experiencing problems. We have got enhanced capability now using satellite imagery which we had to use last year to a far greater degree because of our inability to get on to the land because of foot and mouth disease. There is a capability which is improving all the time. I think the answer to you is that we would step up that five per cent if there were indications that there were a number of fraud cases found in the five per cent inspection, which there are not.

  191. Turning to another issue. You only sought to recover payments, as I understand it, on the fraudulent claims?
  (Mr MacKinnon) Indeed.
  (Mr Bender) Correct.

  192. In other words, if you capture a fraudster, a farmer who is a fraudster, you cannot claim back all the money you paid them, that is not a condition of claiming money under the Common Agricultural Policy?
  (Mr Bender) For the stuff which was not fraudulent, he had received it legitimately.

  193. Maybe this would require European Union level approval but you could consider a scheme where you said "Look, if you are caught defrauding the system, you lose everything. You cannot keep some bits of it".
  (Mr MacKinnon) That would happen under an IACS claim, for instance, if he was fraudulently claiming one crop. That is why it is such a deterrent in terms of fiddling, if you fiddle one field and one crop you are going to lose your whole claim for all of your crops.

  194. Is that arable and livestock?
  (Mr MacKinnon) And livestock, yes. Arable only, I am told.

  195. You could still claim on the livestock?
  (Mr MacKinnon) You could still claim on your livestock but similarly if there is a fraudulent claim within livestock you lose all of your livestock claim.

  196. If you are a mixed farm and you are caught, if Mr Bowden had had some cows and sheep he could still be claiming for those?
  (Mr MacKinnon) If your forage area is wrong then you would lose all of your claims. I suspect that is an area which will come in the future. The extensification of the livestock penalty application has only come in the last year, so there are moves forward each year on this.

  197. Would you like to see a farmer losing everything if they were caught committing fraud?
  (Mr MacKinnon) Allowing for the difficulty of finding a farmer was doing wrong by intent. A lot of our problems with farmers is they do get things wrong quite unintentionally and some of the penalties can be very severe for somebody who has made just an error.

  198. I understand that. Does the EU want some of its money back as a result of Mr Bowden, the money they paid out to Mr Bowden via you?
  (Mr MacKinnon) The normal arrangement for European Union funding on this is where an irregularity occurs we notify the EU of that irregularity and then the loss would be one to European funds unless we, as a Member State, have contributed to that loss through negligence or improper application of controls.

  199. So you will not be paying any money back to European funds because of this case?
  (Mr MacKinnon) In this case I think the loss was to the Exchequer.

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