Examination of Witnesses (Questions 20-39)
MR JOHNSTON
MCNEILL,
MR HUGH
MACKINNON
AND MR
ALEX KERR
TUESDAY 28 JANUARY 2003
Chairman
20. What do you mean by "not fully populated"?
Could you just explain that to us?
(Mr MacKinnon) All of the bovines in the national
herd were not on it at that stage. The UK had been building the
database up through recording births and movements, but there
were some animals which were still on the holdings but at that
point had not been captured.
Mrs Shephard
21. Can you give us any idea of the sort of
scales of how many were on and how many were off? In other words,
what was the level of inaccuracy? After all, that is rather important.
(Mr MacKinnon) This was not so much inaccuracy; there
had been no effort to collect the details of the older animals.
That was done during the year 2000 and completed by the end of
2001.
22. When you say "there had been no effort"
that is nicely impersonal. By whom?
(Mr MacKinnon) The Ministry of Agriculture had enacted
legislation—or was responsible for legislation at that time—which
required all new births to go on the database and all movements
to be recorded on the database. During 2000 it enacted legislation
to require the older animals also to be registered. That exercise
was completed by the end of January 2001. During 2002, had we
cross-checked subsidy claims with the database we would have found
animals missing which were the subject of subsidy but were not
on the database. We took the line for that year that we would
operate other controls—farm inspection visits and so forth—and
we took the position with the European Commission that we had
effective controls at least equivalent to that required by cross-checking
and certainly equivalent to what we had done in earlier years
and which was acceptable in those years. However, the Commission
took the line that there was a regulatory requirement to cross-check
through a fully operational database and they are proposing very
substantial disallowance for that year. Currently the figure is
about £14 million. That was for the year 2000. In order to
avoid that in 2001—the claims we were working on last year—we
did cross-check the claims before making the balance payment.
It led to the delays which you will obviously have read about
and heard about from your constituents. The first round of checking
of the 2001 claims led to an enormous number of anomalies between
the claim details which came to us and the animals on the database.
That cross-checking was completed within the time required for
the scheme timetable in the regulation, but because it threw up
so many anomalies payments were late as a result as we had to
check out where those differences arose.
23. You are saying that the incompleteness of
the record—because some records had not been required by
legislation—has led to the disallowance.
(Mr MacKinnon) Yes, indeed.
24. Who is actually accountable for this? Is
it Defra? Is it the Government for failing to legislate and therefore
causing itself—or yourselves or Britain—to be fined?
(Mr MacKinnon) The disallowance is born on the RPA's
vote for which Johnston is the additional accounting officer.
The principal accounting officer is Brian Bender of Defra.
Chairman
25. Was there not a matching up of the Cattle
Tracing System and your payments? Clearly that was going to happen.
You told us earlier on, Mr MacKinnon, that in a sense the Commission
insisted upon it which was a sort of voice from across the water.
Why was that not anticipated?
(Mr MacKinnon) The database was set up in the wake
of the BSE crisis clearly for animal and public health purposes.
It was further along the track that the Commission took the view
that because the database existed, because it was required to
be complete for all bovines, it was common sense that one should
check the subsidy claims against it, to check the validity of
the claims; and also a good spur to producers to make the proper
notification to the database.
Mrs Shephard
26. It seems deeply unfair that the legislative
machinery was not in place to enable you to collect the information
for which you are now being penalised. Have I got that right?
(Mr McNeill) I am not sure whether unfair decisions
were taken at the time.
27. You do know. Either the Government decided
to legislate to enable you to collect this information or it did
not and you just said that they did not. And you are being penalised.
(Mr McNeill) I am not sure we can comment on that.
The decision was taken and the legislation was put in place as
it was. I do not think it is for us to comment. It was before
the time of this Agency. Those decisions were taken; we were not
involved in the discussions. What we are aware of is that it has
resulted in concerns about the disallowance and, has been mentioned,
I am responsible for that disallowance and have to explain how
it has come about and do our best to mitigate and reduce that
disallowance.
28. What is your total budget then? What effect
will this £14 million reduction have?
(Mr McNeill) My understanding is that the final disallowance
figure has not been agreed. We are still debating with the Commission
what that figure will be. I mentioned our disallowance risk register
earlier and we have identified that. There were earlier views
taken by the Commission which were much more significant than
that, but we have managed to persuade them in negotiations that
those were not appropriate. That process is not finalised as yet.
29. Do you directly negotiate with the Commission?
(Mr McNeill) Yes, it is part of the RPA's role to
liaise with the Commission, to argue our case as to how things
have been managed and try to reduce their proposals regarding
disallowances.
30. Is it your impression that your counterparts
elsewhere in Europe perhaps have similar problems that involved
them being disallowed for different reasons?
(Mr MacKinnon) Yes. Their databases are in different
states of completeness, but it is our understanding from the Commission—although
we have not seen anything published—that some other member
states have significant amounts of disallowance for the same broad
area of lack of control (as the Commission sees it).
(Mr McNeill) To keep the level of disallowance to
the minimum is a performance target for the Rural Payments Agency.
I think it is very much in our interests to achieve that target,
not just to save the public purse, and to argue and negotiate
as robustly as we can with the Commission.
31. Yes, but I do think there is a difference
in principle between being disallowed because, say, you have been
inefficient or hopeless or on strike for a year, and not having
the machinery in place to allow you to do so.
(Mr McNeill) Certainly we are aware of that but we
are part of the Defra family and it is for us to work with our
colleagues to do our best to reduce the impact. I am sure you
will touch on the concerns about difficulties we have had this
year in terms of bovine payments and we have been working very
closely with the British Cattle Movement Service and Defra to
try to resolve those difficulties. In this case it is really not
going to take us very far in terms of our customers as to who
is responsible for this in terms of the delays in payment and,
as a consequence, disallowance. We take the view that we are part
of the Defra organisation and have to work with them to get this
ironed out.
Mrs Shephard: It is very much the business of
this Committee as to whether or not Defra performs efficiently
and provides its agencies with the relevant tools of the trade.
That is why we are pressing you on this. It is of extreme relevance
to the work we are doing.
Chairman
32. Can we just check one point, Mr MacKinnon.
You negotiate disallowance with the Commission. I am not entirely
sure whether it is you who is doing that or Mr Bender or a mixture
of both.
(Mr MacKinnon) I will talk you through the process.
The Commission comes on an audit in the UK; it is a fairly thorough
audit in which they look at our accounts within the RPA. They
then go out on field visits so they look at farms, the quality
of farming, records and so forth. They look at our inspection.
At the end of that they reach conclusions about the standard of
our controls, how effective they are, how widespread they are,
whether we have covered the right ground. They propose some correction
to our accounts. At that stage we normally write back to them
and make our defence about this issue which, I can assure you,
always happens. We are usually then invited to a bi-lateral meeting
with the Commission which, typically, I would lead the RPA delegation
in that. We would take and present further evidence that we had
to show that we had done more than they were saying or that the
effect of what we had done and they had noted was greater than
they were saying. Usually, as a result of that, the Commission
will then come up with a different figure. We hope it would be
a lower figure. If, at that point, we are still unhappy with it,
we can go to a further body, a conciliation body, and present
our case separately. The Commission would also present their case.
They would come up with a report at the end. I have to say that
in that process we very often got a sympathetic report from the
conciliation body but the Commission is not bound to act on the
conciliation body's report. The only other port of call at that
stage is the European Court of Justice. So at the point the Commission
reach their decision they will simply take the money out of our
account by docking it from the next payment which they make to
us.
Mr Breed
33. Let us go back to these inaccurate records,
as such. How many of the inaccurate records were due to the failure
to put the correct data onto your database? Failure of your inputs
rather than a failure of farmers to provide you with the information.
(Mr MacKinnon) Are you talking about the Cattle Tracing
System?
34. Yes.
(Mr MacKinnon) It is not strictly our database now;
it is the British Cattle Movement Service, a Defra database. I
think it is very difficult to say to what extent each has contributed.
It is something that, in the process of reviewing all the penalties
which applied to 2001 claims, is something that we are finding
out a lot more about now. I would not like to draw a general conclusion.
Certainly I can tell you that both things are happening. There
are very poor notifications from farmers and also there are errors
on the database. I can certainly say that both of those things
are true. Where we have discovered in the review of penalties
that the error is in the database or in the handling of the notification
from the farmers, we have undertaken to put that right, to restore
penalties and where the payment was late as a result we have paid
compensation to producers. All of the industry has that firm undertaking
from us. We work very closely with the National Farmers' Union
in agreeing the procedures that we would use for the review. But
we need to go on from there. We need to find ways of making the
database more accurate, more responsive, so that it is up-to-date
and one can call on it at any moment in time and know that one
is getting an accurate picture.
35. You are not saying that your particular
data inputs were any less efficient than a normal organisation?
In other words, the failures of input—there are always going
to be failures in input—that you experienced on your side
were no higher than would normally be expected in many organisations
inputting data?
(Mr McNeill) The British Cattle Movement Service is
not part of the Rural Payments Agency. I am sure you are aware
of that. We do work very, very closely with them. They have been
under a lot of pressure for some time, as you are possibly aware,
in terms of setting up what is one of the largest databases in
Europe, dealing with millions of movements every year. They have
had a number of difficulties, not least of all a large number
of their staff being deflected to deal with foot and mouth disease
duties and running a call centre with some two or three hundred
staff to assist farmers during that difficult time. They have
had many pressures upon them and I think they would accept—were
they here—that their database is not as accurate as they
would wish it to be. There are a number of difficulties with it.
Substantial investments are being made to improve the database,
not least of all its operational platform; the current platform
is not robust enough to deal with the demands upon it. There is
a substantial plan of investments to be made to improve the database,
its operation and the accuracy of the data. We spent a lot of
time and effort with the British Cattle Movement Service this
summer. We had large numbers of our staff working with them to
clean up the database to enable us to engage in these cross-checks
and to get as many claims through as possible. The department
is now considering the best place for the future governance of
the British Cattle Movement Service and a decision will be made
in the very near future as to whether it might be more appropriate
if it were to be a part of the Rural Payments Agency; after all
we are very heavily reliant upon it, it is extremely important.
Our customers are pretty unconcerned whether it is a problem with
the database which is one part of Defra, or a problem with us.
We feel, certainly from the RPA side, that working with our colleagues
in BCMS we could improve things and improve the service to our
customers. We would like to be more involved in the day to day
management of BCMS and to improve standards.
Chairman
36. When you say you are working closely with
them, what does that entail? How often do you meet the head of
the British Cattle Movement Service?
(Mr McNeill) The British Cattle Movement Service is
part of Defra. Hugh sits on a steering committee which has actually
been working with the management of the BCMS—the director
of BCMS and others—to improve the operation. That is a very
useful step forward, but we feel that there is more that could
be done and that is something which is under consideration by
the department at this time.
37. In a sense some of the hostility you are
getting is because you are reliant upon poor data from an organisation
for which you are not responsible.
(Mr McNeill) You could say that.
38. I have said it.
(Mr McNeill) It is irrelevant to the customers. At
the end of the day Defra, as an organisation, we as an Agency
have not got our act together as perhaps we should and we have
been considering ways to improve that for next year. As Hugh has
said, this year we have had a substantial number of our staff
working with BCMS and doing cross-checks and trying to clean up
the database. We have spent an inordinate amount of management
time in trying to find the best way ahead and to improve this.
From our customers' perspective I think they are pretty unconcerned
as to who it is.
39. The reality is that you are not satisfied
with the present situation and you know it can be improved. It
will require, you think, some organisation.
(Mr McNeill) We think it is a good fit with our operation.
We are heavily reliant for all our bovine payments on that database
and we feel that is important.
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