Select Committee on Public Accounts Third Report


Sheep farming is a major component of Northern Ireland's rural economy. Between 1995 and 2002, £170 million was paid under the Sheep Annual Premium Scheme in Northern Ireland. The Scheme is a European Union support mechanism for sheep producers who receive a 'headage' payment for eligible sheep. The number of sheep for which farmers can claim is limited by sheep 'quota' and farmers are required to keep eligible animals on notified land for a period of 100 days after the claim application deadline. This 'retention period' normally runs between January and April.

Reimbursement of the Department's costs, by the EU, is conditional upon it managing the Scheme in accordance with EU regulations and having adequate control mechanisms in place. There is a history of defective administration. Due to control deficiencies identified in the administration of the Scheme across the United Kingdom by the European Court of Auditors, a disallowance was imposed on the UK by the European Commission between 1993 and 1997. Some £1.5 million of this was attributed to Northern Ireland.

On the basis of a Report by the Comptroller and Auditor General[1] the Committee took evidence from the Department of Agriculture and Rural Development on five main issues: increasing the effectiveness of farm inspections; raising the standard of flock records and markings; improving payment controls; applying penalties for irregularities; and combating fraud.

Overall, we found a catalogue of errors and control failures, all of which pointed towards a particularly slack regime. It seems to us that the Department has consistently neglected the interests of the taxpayers, over a long period of time, in favour of the interests of farmers. What is needed to successfully administer a scheme of this nature is to get the right balance between the efficient payment of income to farmers and the controls which protect the integrity of public money. The Department has clearly failed to do so in this case.[2]2

We draw the following main conclusions from our examination:

  • It is clear that this scheme has not received the close management and supervision that it deserves. The most damning aspect of the Department's handling is the extent to which key requirements of the scheme were repeatedly ignored, over a long period of time. Non-compliance was not confined to unscrupulous claimants—there is evidence that Departmental staff were at times complicit in turning a blind eye to the rules. As a result, the integrity of the scheme has been undermined. With non-compliance often leading to overpayment of premium, we can only conclude that the Department has been failing in its duty as custodian of the public purse.
  • The Department's failure to properly address the weaknesses in control, highlighted by the European Court of Auditors in 1994, was a serious error in judgement. Given the risk of disallowance for failing to enforce EU controls, the Department's disregard for the auditors' recommendations, especially on flock records and markings, was irresponsible. The Department has to understand that ignoring EU requirements is not an option as it creates a liability which the taxpayer may have to repay.
  • We want to emphasise that a '£' of EU subsidy is as much taxpayers' money as any other form of voted money—this Committee makes no distinction between the rigorous safeguards we expect to see operated for EU subsidies and any other form of grant payment. The Department must be in no doubt that we expect all of its schemes to be administered in line with best practice. We welcome the Accounting Officer's assurance that he has accepted all of the recommendations in the C&AG's Report. However, we have asked the C&AG to re-examine this scheme in due course and to report on the outcome.[3]

Our overall impression is that the Department has in the past been soft on fraud and this has contributed to unacceptably high levels of fraud within Northern Ireland agriculture. Indeed, having carefully examined the evidence, we are convinced that many fraudsters would have regarded an attempt to cheat the scheme as a risk worth taking, given the slackness in control and the Department's poor record of prosecution. We welcome the Accounting Officer's assurances that his Department now operates a policy of zero tolerance to fraud and that attempts to cheat the system are being tackled in a much more vigorous way. We expect to see a much improved performance when the C&AG next examines this or any other scheme in the Department.

1   C&AG's Report, The Sheep Annual Premium Scheme (NIA 75/02, Session 2002-03) Back

2   Qq 3, 88-89, 176 Back

3   Qq 172-173 Back

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