Summary
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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