House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Fifth Report

2 INTERIM FINDINGS

5. In February 2004, the Secretary of State for Environment, Food and Rural Affairs, Margaret Beckett, announced that the new Single Farm Payment (SFP) would be implemented in England under a "dynamic hybrid" system that combined a declining proportion of payments based on farmers' historic receipts, with an increasing proportion of area-based payments.[4] Defra also chose to implement the payments at the earliest possible opportunity, which was during the 2005 CAP payment year.[5] Lord Bach told us that Ministers recognised that this was a more challenging system than one based solely on historic criteria, but he believed the benefits of this approach were worth the resulting delay in payments in the first year of the scheme. He also rejected the idea that Defra should have delayed introduction of the new scheme for a year, in order to allow more time for preparation.[6] In making its decision to adopt the 'dynamic hybrid' approach for implementing the Single Farm Payment in England, we believe Defra gave insufficient consideration to the administrative complexity of the chosen model. Defra should also have considered postponing the implementation of the SFP until 2006, as allowed for in the CAP reform regulation, to allow more time for preparation, thus avoiding the problems that are now evident.

6. The RPA noted that the chosen CAP implementation model had stimulated a higher than anticipated volume of claims for payment and changes to the pre-existing customer base. RPA witnesses told us that, under the previous Integrated Administration and Control System (IACS), they would have expected about 10,000 notifications of additional land or changes to land. Under the new SPS, they in fact received more than 100,000 notifications, including 40,000 new customers informing the RPA about land on which they wished to claim, as well as existing customers informing the RPA about land of which the RPA had not previously been aware. RPA witnesses admitted the existence of this unregistered land had come as a "major shock".[7] However, RPA witnesses told us that no sampling assessment had been done to try to establish what impact the implementation model might have on farmers' claims.[8]

7. We believe that the lack of foresight shown by the RPA, and the apparent lack of analysis about the possible impacts of the implementation model, are not acceptable. Further, we believe that both Defra and the RPA should have anticipated the extra work involved in this project, had they taken into account the policy effects of the SFP which, by definition, increased the volume of eligible land over and above the amount covered by IACS.

Cost to industry of delayed payments

8. The Minister told us that while any costs to the industry resulting from the delayed payments were regrettable, his discussions with the banks had suggested that no "viable" businesses would fail as a direct consequence. Referring to "average" changes in farm income, Lord Bach noted that the predicted £25 million increase in interest paid by farmers that would result from delayed payment was only a small fraction of the total amount owed by farmers.[9] For individual businesses, on the margins of viability, the added costs of interest and arrangement fees could be too much to bear. It would be unacceptable if farms were put out of business due to delays by the RPA in making payments, and the Government should make clear what steps it intends to take to ensure that this does not happen. The Minister appears to have based his assessment of farm viability on an analysis of "average" farms; in doing so he has, in our opinion, shown an unacceptable degree of complacency about the financial impact on the industry of a delay in making the SFP.

Budgetary overruns

9. The RPA entered into a contract with Accenture, a major IT supplier, in January 2003, to develop an IT system to enable it to make payments under the new scheme. We were told that the revenue cost of the RPA's IT contract with Accenture had more than doubled, from £18.1 million to £37.4 million. RPA witnesses told us that the main reasons for the increase were: the growing complexity of the SFP scheme; the high volume of applications for funds; and the fact that Accenture had been engaged in developing systems for existing CAP schemes which were abolished as part of the 2003 reform, resulting in nugatory work. These factors were in addition to the cost of designing, building and testing the system for paying the SFP.[10] We were alarmed to learn about the scale of the cost overrun on the revenue side of the RPA's IT contract with Accenture, given that it amounted to a doubling of the original budget. We are concerned that the nature of the contract agreed between the RPA and Accenture apparently allowed for the costs to increase so dramatically, and thus seemingly ignored the practical workload implications of the SFP policy agreed by Ministers.

IT systems

10. When the Committee last scrutinised the work of the RPA, in 2003, we stressed the importance of the new IT system and highlighted the fact that it would "facilitate all of the activities of the Agency". We also drew attention to the problems encountered by some other large-scale Government IT projects and called on Defra to monitor the progress of the new IT system "to ensure that the timetable for its implementation is adhered to and that it represents good value for money".[11] When questioned on the recent IT problems, the RPA said that it had been a "salutary experience" to be so reliant on technology to bring about the huge changes that were required.[12] The Committee is particularly concerned about the IT problems encountered by the RPA. We believe that, while such difficulties are not uncommon in projects of this nature, with better planning and monitoring many of the problems could have been avoided. The importance of the IT systems was stressed in the Committee's previous scrutiny of the RPA. We regret that the Government appears to have taken little notice of our previous warnings.

Staffing issues

11. In the course of the oral evidence session, we raised a number of staffing issues, involving working hours, staff morale, redundancies, the closure of regional offices and the use of agency staff. The RPA acknowledged that its staff were working very long hours in attempting to meet the timetable for processing payment claims, with some even volunteering to work on Christmas Day. RPA witnesses emphasised that all overtime was voluntary.[13] The RPA stated that 300 of its staff had already left the organisation, as part of the Change Programme, and a further 100 redundancies were planned. A significant number of those who had left were not part of the IT development being used to deliver the SFP.[14] The RPA was keen to note the high level of commitment shown by the staff that had left, right up until the day they departed.[15] While we recognise that a peak in workload is likely when introducing a new system, we believe that the extremely long hours currently demanded of the RPA's staff should not have been necessary, had the project been better managed. We acknowledge the effort and commitment of RPA staff, in the face of large-scale redundancies and the requirement to work long hours. We recommend that the Agency's staff, including those on temporary contracts, should receive assurance from RPA management regarding their future employment once the current intensive period of work activity is over and payments have been made for the 2005 scheme year.

General conclusions

12. We are deeply unimpressed by the failure of Defra and the RPA to plan properly for the process of administering payments under the Single Payment Scheme. This has led to English farmers being disadvantaged in comparison with those in other parts of the UK, who have already received a partial interim payment. We were also dismayed at the complacency of the Minister, who refused to admit that any mistakes had been made or that anything could have been done differently to avoid the problems.[16]

13. Most significantly, we were staggered that, so close to the proposed date for making payments, and nearly a year after that date was announced by the RPA, the Minister could still not give us a definitive statement about when payments would be made, or whether they would be full or partial payments.

14. We recommend that Ministers now make a definitive announcement on the timing and nature of Single Farm Payments in England. We further recommend that, if this announcement includes the making of interim partial payments, or further delays, then it should be made in the form of an oral statement by a Minister to the House.

4 HC Deb, 12 February 2004, col 1586 Back

5 The 2003 CAP reform agreement gave Member States the option of postponing the implementation of the Single Farm Payment until either 2006 or 2007 Back

6 Qq 48-49 Back

7 Q 26 Back

8 Q 110 Back

9 Q 30 Back

10 Qq 85-87 Back

11 Environment, Food and Rural Affairs Committee, Sixth Report of Session 2002-03, Rural Payments Agency, HC 382, para 7 Back

12 Q 62 Back

13 Qq 70, 95 Back

14 Q 103-04 Back

15 Q 94 Back