Examination of Witnesses (Questions 80-99)
MR JOHNSTON
MCNEILL,
MR HUGH
MACKINNON
AND MR
ALEX KERR
TUESDAY 28 JANUARY 2003
Mr Wiggin
80. I want to ask about the 842 claims that
were submitted electronically. They were paid first, were they
not?
(Mr MacKinnon) They were not, no.
81. Why was that?
(Mr MacKinnon) I cannot tell you the technical reasons.
They were not paid last either. It was no part of the promise
that was made at the time. I have to say this was before my time
in charge of that, but my understanding of it—going round
the offices where they were actually being processed—was
that they were coming through during what you might call the processing
season. My understanding of that was that the new receiving system
within Defra—or MAFF as it was when this was introduced—and
there was a lot of validation being done within the confines of
the MAFF system. But I could not tell you exactly what the problem
was.
82. Ten thousand people expressed an interest
in doing their claims electronically. There was no incentive to
encourage them to do so and as a result only 842 people submitted
an electronic claim. And yet there is a target of 95% by the end
of March 2004-05. Why was there not an incentive to do this?
(Mr McNeill) The intention is that in 2004-05 we will
have the proper systems and the incentive will be that if you
put in the accurate data your claim will be processed and you
will receive your payment probably much quicker than others using
paper-based applications or whatever. That is our intention. With
the legacy systems we had and the technology difficulties, I am
afraid this system just cannot deliver that type of process. The
10,000 number to us was very pleasing; that is about 10% of our
customer base who were interested. That was a good start. One
of the difficulties we had at that time was that they were required
to get a digital certificate. In other words, to engage in a financial
transaction over the Internet you must have the digital certificate.
We arranged with the chambers of commerce to issue digital certificates
at no cost to the farmers so that they could actually make that
application. Of course, we had foot and mouth disease and numerous
other problems and it meant going and queuing in the chamber of
commerce et cetera. All of those difficulties made it almost as
difficult as making the application on a paper-based system. I
think that put a lot of our customers off. Can I just touch on
the issue of 20% take-up? BCMS have developed an e-business application
where farmers can notify them for passports and movements. They
have at this time about 20% of their customer base making applications.
That, we think, is a good example of take-up with the farming
community.
Chairman
83. Let us just go back to a simple matter.
The forms that Mr Breed was pressing you about. We have all seen
different examples from different countries. I think, as Mr MacKinnon
was saying, the form has to be simplified. What kind of time frame
are you working in?
(Mr MacKinnon) We should have our new system supplier
on board with us hopefully from as soon as next week. We will
be sitting down with the supplier who is going to develop the
new system. The new forms ought to arise as a result of the system
development. There is certain work which we have done on specifying
what our requirement is and clearly that carries a significant
element of simplification in it, but we need to sit down with
the supplier, discuss how the thing is going to look on-line;
how the thing is going to look on paper. It should be next year.
84. Are you in a position yet to tell us who
the new supplier is?
(Mr McNeill) That decision will be taken by the permanent
secretary within the next day or two and we would hope to sign
the contract on Friday. I can certainly tell you who the three
bidders were if that helps. Xansa, CSC and Accenture were the
three short-listed bidders. There has been evaluation and proposals
written which have gone forward to the permanent secretary.
85. This is a big change process. You are changing
from an antiquated system to an all singing all dancing system
and the Government is not good at developing new systems. I have
seen figures that suggest yours is one of the most risky. What
kind of confidence have you got that you will be able to handle
this?
(Mr McNeill) I am very pleased to be able to tell
this Sub-Committee that the Office of Government Commerce undertook
reviews of our various programmes and we have had green lights
for all of our Gateways and the final Gateway Three which is required
to have their approval took place last week. On Friday we received
a green light; not an amber, not a red, a green. I have to say
that the report is very, very positive. We have spent a lot of
time looking and reading the NAO reports, what went right, what
went wrong; we have undertaken a large number of best practice
visits (as I was recommended to do so by this Committee). We have
followed best practice. We have been to the passport office. We
have been to all the organisations that have had major problems
and have sat with the management and had very frank discussions
as to what went wrong and how can we avoid it. We have given a
commitment as a senior management team to spend a very substantial
amount of our time getting this programme right. I think as a
result of that and the enthusiasm and effort that we bring to
this we have received very positive reports from OGC. But we are
not complacent. I have to say we are very pleased with the supplier
that we have on board. If you had asked me two years ago if we
would have been content to have the three suppliers I mentioned
earlier even bidding for this work I think we would have been
very pleased. We think we have a very good supplier. We think
we have everything in place that OGC consider correct. We have
followed all of OGC's best guidance. Green lights all the way
through to date. We think we are well placed to make this work.
86. The change process is going to drastically
reduce the number of staff. You are in difficulty with your staff
because of pay and conditions. You are closing offices down. You
are going to reduce substantially the number of staff. Morale,
I guess, is not entirely high. How are you going to handle this
transition? You have to keep your staff on board, have you not?
(Mr McNeill) Although we had industrial action over
pay I would say we had probably the best industrial relations
of any organisation I have ever worked with. We have the formal
Whitley Council arrangements fully recognised and in place, but
we have an excellent informal industrial relations framework as
well. I have an open door policy with our trade unions. They sit
on our management group. They are fully engaged in all management
board papers. They are fully engaged on the change programme.
They are quite aware—we have made no secret of the fact—that
it is our intention to lay off a thousand-plus staff. We do point
out that we have a substantial amount of funding available to
make sure that we part with those staff in an appropriate manner,
to their satisfaction. We have, I think, excellent industrial
relations. The industrial action was not of our making. They accept
that; we accept that. We met with them at the time they proposed
to take industrial action and cause us damage and cause our customers
difficulties. We considered with them what course of action that
we, as management, might take and had a very frank discussion
on that. I think our relationship has strengthened following that,
as opposed to weakened. In terms of the Trade Unions we think
it is a good story. In terms of the programme itself, this is
not a big bang approach. Hugh has already mentioned the significant
investment we have made in the land register. About 50% of the
1.7 million parcels of land have now been digitally mapped. That
piece of work is going on remarkably well. We have invested in
a new finance system which is an Oracle development. We brought
down the finances previously managed by MAFF in York and combined
them with the Intervention Board finances. We now have in place
an Oracle upgrade. That has gone well ahead of time and in budget;
that piece of work is now complete. We have invested in a serious
piece of change management with our Inspectorate and that has
gone well and is in place. The final piece—the most important
piece probably—is this investment we are making. We think
we have a very good, top-class company which is very enthusiastic
about the work. In particular they are very attracted to potential
market opportunities in Europe and can see that, with the expansion
of the EU, this has got certain attractions and have made great
play of that. They have come in within our pre-tender estimates
over a 17 month procurement and we think they have a good deal,
we have a good deal and that is going to assist us in making this
work.
Mr Breed
87. You mentioned digital mapping which was
going on last year and is going on now. There was an August 2002
deadline for farmers to return the maps you sent out. What proportion
of those maps were returned on time and what proportion came back
without any changes on them?
(Mr McNeill) We have 841,000—that is about 50
per cent—of parcels that have been digitalised. We have
only recently started sending out maps to farmers. We have sent
out 19,000 IACS applicants of a total of 67,900. So we have sent
out about 20,000 out of about 70,000. On average each applicant
received three maps. Just under 15,500 applicants have already
returned their maps to the RPA. So we have sent out 19,000; 15,500
have sent them back, which is about 81%.
88. Those that came back, were they perfectly
all right?
(Mr MacKinnon) The time limit was of our own setting
and clearly when we set it we misread the market in the sense
that farmers were fairly upset that they were being given a short
period of time, as they saw it. I do not think we have any difficulty
with that. There is no penalty for being late coming back. We
sent out that signal and clearly if we were doing it all again
we would be talking to farmers before we put the time limit on.
You need a bit of discipline in this thing because you are building
a major database with suppliers on board. You want to keep the
flow of work to them. We did want a date, but we could have spent
a bit of time just agreeing with the farmers what would be reasonable
at that time of year. Hands up to that. No penalties arose from
any that were late; most people rang and we just gave them extra
time.
89. Presumably there will be some people who
are going to refuse to send it back. What are going to do about
those?
(Mr MacKinnon) The level of irritation is falling
away. I have to say that when I first saw the quality of the maps
that we were producing and sending out I actually thought that
they would be very well received and farmers would be quite glad
of a very high quality product, a map of their holding. But there
was a bit of reaction, a lot of it born out of concern that the
area of the farm was going to be found to be different from the
area that they had been claiming and that somehow penalties would
arise from that. We are using the most modern OS mapping so it
is more accurate and there may be differences. The figures are
that 88% of the maps that we have sent out or have been returned
are within plus or minus 5% of the area before. There are no penalties
being applied.
Chairman
90. If I were one of your farmers and I wanted
to be paid in euros, is that possible? If it is not possible when
will it be possible?
(Mr Kerr) The intention is that the new systems we
are developing will have a euro payment capability as and when
the Government decides that this is a direction it wants to go
in. We can actually make payments in euros now, but we are, through
this process, building the capability should that decision be
taken then we will be able to pay in euros once the new change
programme systems are in place.
91. So I could be paid in euros now?
(Mr Kerr) That is right. There have been one or two
instances where there has been a specific request for payment
in euros and we have accommodated it. There is not a difficulty
with that. Clearly, if 100,000 customers say they would like to
be paid in euros there would be major implications and it would
be impossible, but where there is a specific need we can make
that happen.
Mr Wiggin
92. What rate do you use?
(Mr Kerr) The prevailing rate for the payment when
it is made.
Chairman
93. Mr McNeill I think it is about 18 months
since you came to the old Agriculture Committee. Would that be
about right?
(Mr McNeill) It is of that order, yes.
94. If you were to come in 18 months' time what
progress would you have wanted to make?
(Mr McNeill) In 18 months' time our plans are to be
rolling out the new systems, IACS applications will be made on
the new systems. We would hope to point to a significant take-up
and certainly application over the Internet. We would hope to
still have a customer base that was content with our day to day
operation and the way in which we continue through this difficult
change programme—this challenging change programme—to
make payments as best we could. As Hugh has mentioned, despite
all of our difficulties this year we have made the IACS payments
in record time. We hope to keep the existing business going. We
would hope to have implemented the change programme and have a
successful application in place so that we could start doing business
in the way we plan to in the future.
95. What challenges are there in that 18 months?
(Mr McNeill) We are certainly not complacent. The
fact that a top team from OGC (and I do mean a top team) have
spent time with us—we are one of the top 31 programmes in
terms of risk in government and challenge—we are not complacent.
Despite having a series of green lights at the various stages
so far we accept that much can still go wrong. I can only say
that we think we have a very enthusiastic and dedicated management
team and we are very focussed on making this work.
96. In terms of customer satisfaction, you told
us you had had a survey which was 75%?
(Mr McNeill) That is correct, yes.
97. Where will it be in 18 months' time?
(Mr McNeill) Our plan is that we increase that by
5% each year. Can I just go on to add that the independent company
identified that we have a customer base that is very demanding.
It is going to be a challenge to improve our performance to a
standard where the customer satisfaction will increase. They think
to increase it by even 5% is quite a challenge for us. We are
happy to make that report available to the Committee if you would
like to read it.
98. That is very helpful. Is there anything
you want to tell us?
(Mr McNeill) I think we have had a very comprehensive
discussion. I do not think there is anything else at this time.
99. You are going to send us some information
about disallowance. You are going to let us have the customer
satisfaction survey.
(Mr McNeill) Certainly. And the disallowance risk
register which we think is a major step forward.
Chairman: Thank you. That is very helpful. I
guess we will be meeting again at some time in the future. Best
of luck with all you are trying to do.
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