Examination of Witnesses (Questions
280-299)
WEDNESDAY 6 MARCH 2002
MR BRIAN
BENDER CB, MR
JOHNSTON MCNEILL
AND MR
HUGH MACKINNON
280. Yes, if you would. That is very different
from what you told Mr Steinberg when he asked the same question,
whichever of you answered it. It is important when we ask questions
that we get accurate answers. I am quite happy for you to write
to me on that and on the other two—
(Mr Bender) We will write in. I apologise if between
us we misled. We will write with crystal clarity. The prosecution
agreed to accept defence pleas to leave the offences on the file,
therefore it did involve an element of plea bargaining, that is
our understanding. We will be crystal clear in what we tell the
Committee in writing afterwards.[18]
281. So a deal was done.
(Mr Bender) It looks as though that is the case.
282. I just want it clarified. It is better
to sort it out now. Secondly, on a completely different point
just raised by Mr Trickett, the question of the police not prosecuting
and leaving it to you to prosecute. I got the impression there
is a certain bemusement on your part rather than amusement that
they had not themselves taken the lead in the prosecution and
had left it to you. I think it was you, Mr MacKinnon, who said
you had come across several cases where they had not taken the
lead in prosecution. In this case he was found guilty or was it—
(Mr MacKinnon) Pleaded guilty, yes.
283. In the other cases, do you remember whether
there were many of those where subsequently, despite the police
refusing to press the case, a guilty verdict was achieved?
(Mr MacKinnon) No, my recollections are not of the
detail and they go back over a number of years. Indeed, I would
probably have some difficulty in locating cases.
284. I see.
(Mr MacKinnon) The police in this case, of course,
although they were not prosecuting, they were aware from our investigators
that we would intend to prosecute. They were not exactly washing
their hands of it, they were aware that the prosecution would
go ahead led by the Intervention Board.
285. Okay. Jumping again to what you, Mr Bender,
said earlier about the loss being to the Exchequer, which obviously
it had to be because it was a system failure and therefore UK
Government's responsibility, what was the total loss to the Exchequer?
(Mr Bender) The department wrote off £111,000
and that covered the unrecovered sums of £80,000 under the
Arable Area Scheme and interest and the then Intervention Board
wrote off £11,000 under the Fibre Flax Subsidy.
286. I see. Nobody in the department has been
held responsible for the fact that situation arose?
(Mr Bender) I would stand by the answer I gave earlier
that this was an issue relating to the systems we were operating
and, therefore, the Accounting Officer is accountable for it.
287. That would have been your predecessor?
(Mr Bender) Yes.
288. Okay. Finally, following on a point raised
by Mr Bacon, why, coming here today, knowing you were going to
face a wide range of questioning, were you apparently unaware
of the recommendations which Mr Bacon referred to from our previous
report and not briefed on whether they had been implemented or
not?
(Mr Bender) Why is a very difficult question to answer,
Mr Williams. I had thought I was briefed on the previous recommendations
of the Committee. The one that I clearly was not adequately prepared
for was the point, I forget whether it was Mr Bacon or another
Member of the Committee, brought up about learning from other
departments, and I apologise for the fact we were not prepared
on that. Clearly it is something we should have already followed
up and certainly will do so in the light of this hearing.
289. As you will appreciate, it is important
to us that the Accounting Officer takes on that responsibility
otherwise we have to, with the NAO, assume responsibility for
swooping constantly across Whitehall.
(Mr Bender) I notice that one Member of the Committee
ticked off the NAO for not doing this but I accept that the NAO
should not be required to do it. They should audit whether we
do it. I accept that it is the department's responsibility and
I apologise for the fact that we did not do that, but I accept
the responsibility.
290. I just wanted to clarify that position.
Can I make an observation and ask for a comment and ask the NAO
something quickly. I have seen the figures which have arisen here
and, again, Mr Steinberg in a way got half way to where I am going
when he referred to the problems that he had outlined with the
counting of the sheep in the field and the problem when the sheep
moved and so on, their non-cooperation in not standing still while
the counting was taking place. In view of the scale of the problems
we have had here with fields, which are relatively static on most
farms, although not in the case of this particular farm, although
you might have got him under the fisheries legislation as well
by the sounds of it, does this presage a rather perhaps stormy
attendance here in relation to the compensation under the foot
and mouth scheme?
(Mr Bender) I think it would be unwise of me to prejudge
the findings of the National Audit Office, who are presently doing
a value for money study. Given the scale of the foot and mouth
disease crisis I do not expect a comfortable hearing later this
year although, as my Secretary of State has said on a number of
occasions and her predecessor said, a lot was done very well.
291. I was going to ask the NAO because I had
forgotten whether they were or were not planning an audit.
(Mr Bender) I think they are.
292. It seemed an obvious candidate.
(Mr Burr) Yes, we are putting a draft report together
and the document that has been circulated to the Committee on
their summer programme includes the foot and mouth report as one
that we have recommended the Committee might wish to take before
the summer recess.
293. About a week or two before your report
appears we can expect a pre-emptive statement from the department
anticipating everything that is in your as then unpublished report.
(Mr Burr) We shall see.
294. I hope we will not and I say that to the
department.
(Mr Bender) I am puzzled by that, I am not conscious
that my department has made such statements in the past.
Mr Williams: It is not an unknown practice in
Whitehall. I would be delighted if your department had not done
anything like that and does not make its first venture into that
field on this occasion. Thank you very much.
Chairman
295. Thank you very much for what has been a
very interesting session. I have just a few points to put to you
if you can come back with a note. The first is to underline the
fact that we would like to see a breakdown of each payment scheme.
I think Mr MacKinnon said that there are 50 or 60 such schemes.
That is the first point. The amount paid, point two. Point three,
the number of claimants/farmers claiming. Point four, the administration
costs of each scheme. On all of those four headings the irregularities
and frauds connected with them, say over the last ten years, so
we can get a feel for the trends of what is going on. 20 I think
we would also be interested in the number of days on average per
prosecution when it actually comes to trial.
(Mr Bender) I am sorry to interrupt, Chairman. Do
you mean the number of working days required or the number of
days past?
Mr Bacon: From start to finish.
(Mr Bender) It is the length of time.
Mr Bacon: Yes.
(Mr Bender) Forgive me for interrupting.
296. The total number of prosecutions per investigator
I suspect will be very low indeed. Thirdly, the number of successful
prosecutions per investigator. 21 Another question from a colleague:
under the new regulations the verification is that the processing
of the fibre is complete and deliveries of the crop are checked
from contractor to processor. Is it possible for a farmer to outsource
the fibre flax store or perhaps any flax even from outside the
EU, deliver it and have it processed without ever growing it,
claim subsidy and grow another crop?
(Mr Bender) Can we take delivery of that question?
22
297. Another question from a Member, was Mr
Bowden told in advance that the inspector would be visiting his
farm to inspect the harvested crop in 1995?
(Mr MacKinnon) No.
298. If so was he warned before the barn was
set on fire?
(Mr MacKinnon) Our practice is not to announce the
visits beforehand. I cannot actually categorically say there was
no warning given in that case. There should not have been and
I do not expect there to have been.
299. Without going into a long lecture about
it, you were saying that it was not possible to commit this sort
of fraud before the area payment support in 1993. It would be
interesting to get a feel of what the cereal support system was
before then. It seems to me there is an obvious fraud to claim
for two crops on the same field. There seem to be remarkably few
successful prosecutions. I want to get a feel of what has been
going on historically. Do you want to answer now or give us a
note?
(Mr MacKinnon) The market support arrangement was
an institutional target price, a target price within the European
Union supported by levies on imports, export refunds on exports
and some support buying within the Community so we would buy cereals
into intervention. The aid was not delivered at the farm level
it was delivered to cereal traders, cereal exporters, those sort
of things. It was a very expensive regime because we ended up
at various times with very large quantities of cereals in our
intervention stores at very high cost. When the target price was
cut farmers were compensated for their loss of income through
an area aid which began in 1993 and was associated at that time
with the new system of control, the IACS system, so that each
farm was registered with all the details of its fields and its
enterprises.
Chairman: I think we will leave it there. Can
I just outline this point which has already been raised. I think
it is a very important point. It is the point about the Twenty-Fifth
Report of 1998-1999. It is put there very emphatically. "In
1996-1997 alone the Ministry detected 2,700 irregularities in
scheme claims and applied administrative penalties in 820 of these,
but between 1993 and 1997 only 25 cases of suspected fraud or
serious negligence had been submitted for investigation. Only
seven of these led to prosecution, of which six were successful.
We recommend that the Ministry review its criteria for prosecution,
such as the potential size of judicial penalties, the value of
the irregularity and the claimant's past behaviour. This review
should take into account the approach of other Government departments
such as the Benefits Agency, and the deterrent effect of prosecution
on others tempted to abuse the system." There is absolutely
no point in us sitting in this room and putting these sort of
questions and taking up a lot of your time if we make these recommendations
and they just go into some black hole in Whitehall and are forgotten
about. I think this is a very serious point indeed. I know you
have already apologised for it but I hope others who follow our
affairs in other Government departments will take note of this.
Thank you very much for coming this afternoon, gentlemen. Thank
you for answering our questions. I know that this is a narrow
case but I think it has been a very useful exercise and a good
exercise to repeat perhaps in the future because we can draw wider
conclusions from just one fraudulent case and I think it has brought
it home. There have been some interesting points made. Thank you
very much.
20 Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex
C.
21 Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex
A.
22 Note by witness: The situations described
are clearly fraudulent and anyone trying this type of subsidy
scam would risk being caught and punished. Fibre flax is now an
eligible crop under IACS. All land used for growing the crop has
to be recorded on the IACS database. It is not possible for a
claimant
to grow and claim for two crops on the one area of land. Transport
costs of importing flax would reduce any financial incentive to
carry out the type of fraud suggested.
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