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22 Jun 2006 : Column 1478

Rural Payments Agency

12.16 pm

The Secretary of State for Environment, Food and Rural Affairs (David Miliband): With permission Mr. Speaker, I shall make a statement on the Rural Payments Agency. In my written statement on 9 May, I promised to keep the House informed of progress made by the RPA on the single payments scheme. At oral questions today, no questions on the SPS were on the Order Paper. I therefore thought it right to give hon. Members the chance to raise the issue.

In summary, there has been some progress, but the situation is far from satisfactory. As of Tuesday 20 June, some £1.38 billion, representing more than 90 per cent. of the total fund, has now been paid to more than 100,000 applicants; 82,571 claims have been settled in full, and 18,785 applicants have received a partial payment and are awaiting their “top-up”.

On 9 May, I said that the priority for the RPA would be claims of more than €1,000 Euro where no payment had been made. The number of claimants in that category is now approximately 2,300. I recognise the hardship involved for them and deeply regret the distress caused. The RPA is taking further steps to pay those complex claims, including discussing issues direct with claimants and, when feasible, bringing parties together in cases of continuing disagreement—for example, when two or more parties have made a claim for the same piece of land. The RPA has written twice to all the individuals concerned.

I also recognise the importance of the unresolved hill farm allowance payments. Of the approximately 10,500 eligible HFA claims, 5,000 have been paid in full and a further 900 authorised for partial payments. Full and partial payments are continuing to be made.

The EU defined payment window for making 2005 SPS payments runs from 1 December 2005 until 30 June this year. Work is continuing to pay as many claims as possible by 30 June. However, farming leaders have made representations to me on behalf of the farmers who do not receive the full sum due to them during the legal payment window. I have therefore authorised the RPA to make interest payments at the London Interbank offered rate plus 1 per cent. calculated from 1 July, in respect of any payments where responsibility for the delay rests with the RPA. That will be subject to a minimum interest payment level of £50. Further details will be given on the timing of those payments once the RPA has assessed how they can be integrated most effectively into the existing payment schedule.

Work on delivery of the 2006 scheme to be paid between 1 December this year and 30 June next year is under way. As I said on 9 May and want to repeat today, the 2006 scheme year will be challenging. The RPA’s interim chief executive, Tony Cooper, has made an initial assessment of the task ahead. He has confirmed that, in respect of customer service and management information, there is no quick fix. Possible options for the 2007 scheme—for example, the use of a minimum payment level—are not available for 2006.

Against this background, farming leaders have understandably called for partial payments to be made in 2006, as they were in 2005. I have discussed the need
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for the necessary EU legislation to make partial payments with the Commissioner, Mrs. Fisher-Boel, and authorised the RPA to start work on the necessary systems. However, until the RPA chief executive has had an opportunity to make a realistic assessment of the prospects for full payments, I do not want to commit to a particular timetable or specify whether or when partial payments might be necessary. Initial validation of the 2006 claims is under way, and detailed validation should start next month. By the time the House returns after the summer recess, therefore, we should have a better understanding of the prospects for the 2006 scheme, and I will make a further statement then.

Given the position on the 2006 scheme, I have decided to simplify to the maximum extent possible the arrangements for the incorporation into the single payment scheme of additional support arising from last November’s landmark EU sugar reform. In practice, that means that the £52 million concerned will be added entirely to the entitlements held by sugar beet producers who meet the defined criteria, rather than some of the funds being used to increase the flat rate value of all entitlements. Further details, including on arrangements for 2007, will be announced in due course.

I can also report that an EU regulation has been adopted which provides for all 2006 claims to be accepted without penalty until 15 June. Under the original timetable, the limit would have been 15 May. This extra time above and beyond the extension to 31 May—to which I referred in my statement on 9 May—will mean that around 4,000 farmers will not now be penalised. I am sure that the whole House will join me in expressing my gratitude to the European Commission for its understanding on this issue.

The fundamental review of the RPA that the then Secretary of State, my right hon. Friend the present Foreign Secretary, set in train earlier this year will be important for the future of the RPA when it reports at the end of this year. In the meantime, I know that this year’s problems have caused real distress and I repeat the apology to farmers that I have made before, both in the House and elsewhere. I can assure the House that the new RPA chief executive, with the support of the Department, will be looking to take interim steps to aid the recovery process and to improve the experience of farmers dealing with the agency to the maximum possible extent. I will keep the House informed as matters progress.

Mr. Peter Ainsworth (East Surrey) (Con): I am grateful to the Secretary of State for keeping the House informed of the modest progress that is being made to deal with this problem. It is unfortunate, Mr. Speaker, that the BBC’s “Farming Today” programme probably heard about this statement before you did—but that is life these days, under new Labour. As I said, it is good to hear that modest progress is being made to address this appalling fiasco, which has brought added hardship to many in the farming community and related industries at a time of profound change, uncertainty and stress.

Many questions remain to be answered, however. How did the problems arise in the first place? What
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happens next? The Environment, Food and Rural Affairs Committee is conducting an inquiry into what went wrong. Will the Secretary of State give an assurance that the Committee will be given access to all the information that it needs to form a balanced, accurate and comprehensive view of the events that led to the failure to make payments on time? The Committee’s inquiry has already produced some interesting evidence, and we look forward to its findings with great interest. Meanwhile, the BBC’s “File on 4” programme has disclosed that the Office of Government Commerce gateway review was warning two years ago that there were severe problems with delivering the new system. Why were those warnings ignored?

I welcome the announcement that the Government will start paying interest on the money that they owe from 1 July. But what about the people who are entitled to payment but have received nothing for the six months before 30 June? Those people have been put at a huge competitive disadvantage by the Government’s incompetence, denial and mismanagement, and have been forced to take out commercial loans. The Secretary of State said that 90 per cent. of the total fund had now been paid, but he did not say—unless I missed something—how many claimants remained unpaid. I would be grateful if he could give us that information. Will he also tell us whether the hill livestock allowance claimants will benefit from the initiative on interest payments that he has announced today?

How many farmers will receive compensation equal to the salary of the sacked chief executive of the Rural Payments Agency, who, as I understand it, is still on the payroll but doing nothing? What estimate has the Secretary of State made of the total bank interest paid to date by the farming sector in England as a result of his Department’s failure? What estimate has he made of the likely cost to British taxpayers of the Government’s failure to meet the 30 June deadline? Are we to assume that the Government’s humiliating plea to the European Union for an extension beyond that deadline has been refused? What discussions has he had with the EU Commission about the fines that Britain will have to pay for this failure? What discussions has he had with the Chancellor about which budget the fines will be paid out of? If they will be paid out of the Department for Environment, Food and Rural Affairs budget, what will the Secretary of State cut in order to pay them? Or will they come from some other source?

Does the Secretary of State realise that the RPA is still getting its field data wrong and making wildly inaccurate party payments? Will he tell us how many overpayments and underpayments have been recorded, and give us the value in each case? Can he give us the date on which he expects the 2005 payments to have been completed? Is he really unable to give us a date by which farmers can expect to receive their cheques for 2006? Can he guarantee that the UK will not face fines a second time?

Much has been made by Ministers of the hard work of the staff at the Rural Payments Agency, and I am sure that the majority of them have worked very hard to sort out the mess that their political masters have created. Will the Secretary of State take this opportunity to comment, however, on press reports about RPA staff who, even as calls to the rural stress network reached
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record levels, were cavorting naked in the office and hiding cups full of vomit in office cupboards?

We detected a bad smell about the handling of the single farm payment last year, but the Government denied that there was a problem. We called last year for the Government to introduce a partial payment scheme. Their refusal to open up that option at the time cost the farming community millions of pounds. We called on Ministers to return to farmers the interest that they had paid because of the Government’s failure, but again the door was closed. It has taken months for them to accept any financial liability at all. Every time we prise open the door on this wretched affair a little further, the smell gets worse.

David Miliband: The hon. Gentleman has asked some intelligent questions, which I shall address. However, he has also made some allegations that are completely unworthy of him, and should be rejected utterly. There is no question of the Department speaking to “Farming Today” about the interest payments that have been speculated about. We have made a point of being scrupulous in our engagement with stakeholders, and about coming to the House and not making “Farming Today” the first step.

I am happy to confirm to the hon. Gentleman that there will be full co-operation with the Environment, Food and Rural Affairs Committee. I am not sure, however, whether he fully understands the purpose of the gateway reviews. Their role is to identify issues that need to be addressed, and at every stage the purpose of the different traffic lights is to show which those issues are. Officials and Ministers have tried to address those issues; they certainly have not ignored them.

I think that I made it clear in my statement that 2,300 claimants of more than €1,000 had not been—

Bill Wiggin (Leominster) (Con): How many in total?

David Miliband: If the hon. Gentleman will just contain himself, I can assure him that he will get the full picture. As I was saying, 2,300 claimants of more than €1,000 have not been paid, and about 12,000—it might be 12,200—claims of less than €1,000 have not been paid.

As for the taxpayers, the hon. Member for East Surrey (Mr. Ainsworth) will know that the European Commission requirement is not to pay 100 per cent. of the payments by the deadline. Obviously, some people die, and there are other reasons involved. The target is a 96.1 per cent. payment for the UK as a whole—this will be of interest to Members from outside England—and our commitment is to make as many payments as possible by 30 June. It would be wrong of me to make predictions, especially given the history of some previous predictions, but we have now reached over 90 per cent. for England, and we are trying to make as many payments as we can as soon as possible.

As for the completion of the 2005 scheme, which relates to the 30 June question, I have said that I want to meet as many claims as possible as fast as possible. The RPA is dealing with that, but I see no value in making predictions about when the process will be completed.

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Finally, in respect of 2006, I think it right for me to say that our first commitment should be to seek every opportunity to make full payments, but if full payments are not possible, we have the backstop of partial payments. We shall ensure that the decision on partial payments is made at an early rather than a late stage.

David Taylor (North-West Leicestershire) (Lab/Co-op): As one of the co-rapporteurs on the EFRA Select Committee, whose members were selected as long ago as December last year to investigate the process, I welcome some of the progress that the Secretary of State has announced. However, 2,300 farmers have still received absolutely nothing.

The Secretary of State said that the Rural Payments Agency would be the subject of a root-and-branch review at some point during the next few months. Will he incorporate in that review an assessment of the success or otherwise of the specification, design, development, implementation and operation of the information and communications technology system? Will the review also consider the role of Accenture—a company whose performance has been patchy, to put it kindly—and that of the Office of Government Commerce, whose purpose is supposed to be to advise Government on these matters?

David Miliband: My hon. Friend raised an important point about the Hunter review, which was established by my right hon. Friend the Member for Derby, South (Margaret Beckett). Those conducting it will seek to learn all possible lessons from this year’s difficulties.

Chris Huhne (Eastleigh) (LD): I cannot comment on “Farming Today”, but I note that the right hon. Gentleman’s statement was available on the Department’s website long before it was made available to the House. As a former journalist, I am delighted that at least one part of the Department is operating beyond its productivity quotas, namely the press and communications office. I hope that that does not reflect the Secretary of State’s priorities, because this continues to be a grave issue for a number of farmers. I was informed today that, in the last three days alone, five farmers who have received no payment have approached my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith). We now know from the Secretary of State’s own figures that a substantial number of claimants—nearly 15,000—have received no payment. That is obviously devastating for some of the farmers involved.

We are pleased that further progress is being made on payments. We are also pleased that the Secretary of State has seen fit to authorise interest payments, which we have requested for some time, and party payments for the 2006 single payment scheme, which we have also requested. However, it is worth noting that it is reported that the parliamentary ombudsman has received several complaints about the maladministration of single farm payments. If that is indeed the case, is it not clear that the interest payments have been granted at a time when the Government have a gun to their head?

Moreover, the Department’s proposed interest rate of 1 percentage point above the London interbank offered rate strikes me as surprisingly niggardly. There may be a farmer or two in the country who can borrow at 1 per
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cent. above LIBOR, possibly including the Duke of Westminster, but a more typical rate for small farmers would be between 3 and 4 per cent. above LIBOR. Although DEFRA has made that commitment, I should be grateful if it took account of what farmers have had to pay to relieve the liquidity crisis caused by its incompetence and reflected that more adequately in the proposed interest payments.

Does the Secretary of State agree that, by giving firm assurances that 96 per cent. of payments would be made by March 2006—assurances given as late as 2005—his Department raised farmers’ expectations about the timing of their payments above the legal minimum, and that that has seriously disadvantaged many farmers? How will he compensate them? Will he also undertake to assess the impact of mapping disputes causing farmers to miss the deadline for entry to agri-environment scheme?

In response to a question from a Liberal Democrat, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Brent, North (Barry Gardiner), said:

What plans has the Department to assess that impact accurately, and how will the Secretary of State ensure that feed merchants and other businesses that depend on farm revenues do not suffer?

As the Secretary of State knows—because he was asked about it by the hon. Member for East Surrey (Mr. Ainsworth)—the late payments will have an impact not just on the finances of rural communities, but on Government finances. However, I did not hear him specify a figure that he has told the Treasury to expect for the overrun that will be caused by the fact that the European Union will not meet any payments made by DEFRA after 30 June. What is that figure, and will it be met from the departmental budget? If so, what other budget lines will be cut to defray the extra cost? If not, will the Secretary of State assure us that the amount will be met from the contingency reserve? That would obviously be preferable for all concerned.

The Secretary of State said that a minimum payment level was not available for 2006. Given that the RPA has made a payment of just 1p, and that the costs of the £54 million IT system, if divided equally among claimants, would be about £450 per head, will he give urgent consideration to imposing a minimum threshold on payments for 2007 to prevent a repetition of this costly bureaucratic nonsense? I should be grateful if he also gave us an update on the trading of entitlements.

David Miliband: At least two of the hon. Gentleman’s questions were answered in my statement. I explained about the minimum threshold, which we are exploring seriously. I cannot believe that he disagrees that complicating the 2006 payments further at this stage would be dangerous, but we are considering the 2007 payments carefully. I referred to the mapping disputes that occur between different farmers. The RPA has told me that it will examine that issue with due speed.

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The hon. Gentleman’s allegation about the website was a serious point. I am assured that, under departmental procedure, no copy of my statement would appear on the website until its conclusion in the House, but I will check as soon as this is over and write to the hon. Member for East Surrey (Mr. Ainsworth) if a breach has occurred.

As for the European Union and possible implications for the United Kingdom’s finances, issues of disallowance or fines are serious, but they are subject to negotiation and dependent on final figures for payments. The hon. Gentleman asked about the 96 per cent.; it would be unwise to start bandying figures until we know whether we have reached that amount.

I have discussed the particular circumstances surrounding the single payment scheme this year with Mrs. Fisher-Boel. My officials will work with her officials, and I will keep the House informed. I hope that there will be a reasonable outcome.

Paddy Tipping (Sherwood) (Lab): The Secretary of State again rightly acknowledged the difficulties that farmers have faced because of late payments. I hope he will accept that what is essential now is for no false promises to be made about 2006 payments. What farm businesses want is certainty. Will he make that his policy aim, and, more particularly, will he acknowledge that the difficulties have arisen partly because of changes in the common agricultural policy? Despite the difficulties at the RPA, further reform of the CAP is inevitable and necessary. Will the Secretary of State make that a major objective?

David Miliband: Continuing reform of the CAP is essential. The decoupling of payments from production achieved by my predecessor was a landmark change and the increasing emphasis on the second, rural development, pillar of the CAP is critical. On my hon. Friend’s first point, I hope that he recognises that, far from seeking to hide the difficulties ahead, in my statements of 9 May and today I have tried to be as clear as possible about them. I have said repeatedly that my assessment is that 2006 will be a very challenging year, but I am determined that we will keep farmers’ representatives and the House informed as the RPA grapples with these difficult issues. As to whether partial or full payments will be made for the 2006 scheme, I shall come back to the House in the autumn with the recommendation from the chief executive of the RPA.

Sir Patrick Cormack (South Staffordshire) (Con): In thanking the Secretary of State for his personal candour and contrition, may I ask whether he is truly aware of the depth of depression and concern in rural areas? Will he spend a goodly portion of the forthcoming recess touring the rural areas, talking to farmers and those who depend on them for their living? Will he seek to give them a sense of hope and tell them how he is going to deliver on it?

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