Select Committee on Environment, Food and Rural Affairs Memoranda

Memorandum submitted by the National Farmers' Union (NFU) (RPA 07)

1  Thank you for your emailed letter of 3rd November 2005 to my colleague Barney Holbeche which invited the NFU to submit written evidence to follow up of Committee's earlier report on the Rural Payments Agency (RPA) (sixth report of session 2002-03 Rural Payment Agency: HC382).

2  The NFU welcomes this follow up enquiry into the ongoing progress of the RPA with reference to the payment of the Single Payment Scheme (SPS) and their Change Programme. The state of the RPA continues to be of major interest to farmers in both England and Wales.

3  The NFU welcomed the creation of the RPA as a more open better-focused service provider for farmers and growers. As time has gone on, we have been concerned that the continuing external factors, lead by the 2003 CAP Reform, and continual internal developments through the Change Programme have lead to the RPA loosing sight of its key mission statement of being a 'customer focused organisation'. There is a concern that the organisation is not helping farmers as it should be.

4  The 2003 CAP reform demanded a massive commitment from farmers and huge changes to the way they manage their operations. Farmers were up for the challenge, but this process has not been helped by the problems at the RPA. At the NFU Council meetings in both April and October of this year our members raised their concerns to senior RPA management relating to a wide range of issues which included the following:

a)  Rural Land Register (RLR) Mapping Problems and delays and knock on affect on the Environmental Stewardship Scheme.

b)  Conflicting / Bad Advice from the RPA- Farmers unable to contact the RPA by phone, examples of conflicting advice given on such subjects as set-aside leading to a lack of confidence in the new RPA Callcentre as a result.

c)  Concerns that farmers could not accurately register themselves and their land for SPS in time in the spring.

5  These problems have seriously damaged farmers' confidence in the RPA and its systems. This will take time to rebuild.

6  In response to rapporteurs David Taylor MP and Roger Williams MP terms of reference we have set out our comments below under the headings contained in your aforementioned letter:

7  Why the RPA is unable to make payments under the SPS at the start of the payment window in December

General & Implementation of SPS in England

8  We accept that the RPA functions in a framework set out in European legislation and that a key responsibility of the organisation is to implement and administer the regulations in place. There is a concern that in justifying the implementation model in England, the RPA / DEFRA seem to be more concerned that the Commission accepts it, rather than meeting the industry needs of swift payment.

9  The NFU has been concerned about the implementation of the SPS in England since the announcement on 12th February 2004 that government had chosen to use a 'dynamic hybrid model'. Whilst it may appear to produce a simple compensation system for farmers in the future when payments are decoupled from production and historic compensation, it has so far been far from simple to set up and implement. Added to this was the decision to implement the reform at the first opportunity in 2005. These two fundamental decisions have been instrumental in the problems that have been encountered by farmers since 2004 with SPS.

10  We have been concerned that the implementation of the new compensation system has involved a number of fundamental changes to the rules, for example changes to the definition of who is eligible, what is eligible and what you have to do to be eligible for payment. These issues coupled to the transition from the previous compensation schemes to the new payment structure; adjustments for hardship and national reserve cases (due to the changing nature of farming in recent years) have meant a very complicated scheme has been created. In addition to these issues the RPA has had to address amongst other things the following along the way: a) Moorland line appeals, b) treatment of Common land, c) fruit, vegetable and potato authorisations and d) set-aside.

11  These scheme changes have taken place at a time when the RPA has closed two offices (Crewe and Nottingham), reduced staff numbers, employed more temporary staff and contractors to carry on with work and has restructured the handling of incoming calls and documents.

12  If one looks at the regulatory requirements of SPS it states clearly that a number of tasks have to be met by certain dates to ensure payment is made on time:

13  By 15th April 2005, all farmers should have received their application forms, a significant number seemed have been posted out right up to this date.

14  By 1st August 2005, the RPA / DEFRA should have notified farmers if their set-aside required for 2006 was to change. We are still awaiting the outcome of RPA work on this area.

15  By 31st December 2005, the RPA / DEFRA should have by this date determined the definitive value and number of payment entitlements that farmers will receive. The RPA / DEFRA have now stated that they are not going to fulfil this requirement until January 2006 at the earliest.

16  As a result of these issues the RPA are not in a position to made payment at the start of the SPS payment window (1st December 2005).

Affects of Delayed Payments on Farmers

17  What farmers want from the RPA is a swift payment of SPS monies at the start of the payment window. The long payment window under SPS which runs from 1st December to 30th June will not help the industry this year or in future years. Cashflow as you will be aware is critical. With the industry already weaken by low commodity prices and high input costs, producers are at the mercy of the buyers, traders and financial institutions. Producers are being forced to bear the brunt of the financial costs of extra interest, arrangement fees and then being forced to accept lower commodity prices as traders see an opportunity to 'cash in' on cashflow problems.

18  The NFU welcomed the announcement on the 18th May 2005 by the Secretary of State that payment of SPS monies would take place early in the payment window, via the target set for the RPA to achieve of "commence payments under the single payment scheme by February 2006 and to process and pay 96 per cent. of valid SPS claims by value by 31 March 2006". This was reiterated in Lord Bach's statement of 5th October 2005. The government, RPA and DEFRA would appear to understand the importance to farmers of issuing payment promptly, given the adverse cash flow implications of switching from the 'old' commodity payment regimes to the 'new' Single Farm Payment scheme, but payment will critically be late in this first year. As we near this payment target, the NFU and farmers are concerned that this will be missed, given the current progress of work involved in getting to the stage of payment. The period immediately before and after Christmas 2005 will determine whether the RPA payment targets will be met.

19  The farming industry in England at the moment cannot compete on equal terms with other areas of the United Kingdom and Europe because of these payment delays. The industry is suffering real financial hardship and as a result leading to strained relationships between financial institutions and the supply industry. There is a real possibility of failure of viable businesses as a result.

20  The NFU continues to be supportive of the efforts taken by the RPA and its staff and want it to succeed achieving its targets and plans. We understand that this year has been difficult and they are operating in a pressurised situation, but they will be judged by external performance figures, payment of the SPS being number one.

21  We are concerned there is no further slippage in the payment timescale set by the Secretary of State. The majority of applicants would appear to be receiving their payment by the end of March 2006. As has happened in the past, there is a real concern for those who are not paid in the first wave, circa 2-4 % of the 120,000 applicants. Some farmers and growers will not have payment until June 2006.

22  If swift determination of SPS payment entitlement values and payments is critical to the process and if this is not achieved by the RPA, then there will be problems in the rollout of the 2006 SPS scheme (application packs / data) and ability of farmers to comply with the rules and timescales set next year. The fundamental cause of this situation is that the payment window for SPS runs 'into, through and past' the following years application period, we are concerned that farmers will be put at a disadvantage because of this.

23  The affect on 2006 scheme year is particular critical to two groups of farmers.

A  A significant number of farmers as a result of the impact of the introduction of SPS, will have to adjust their arrangements for 2006 which were put in place in 2005. Swift determination of payments entitlements is key to allow farmers to trade these payment entitlements so to allow them and others to unravel the administrative mess created in spring 2005 and be in a position to submit a claim before 15th May 2006.

B  Farmers who farm in England and Wales or England and Scotland for example, have to contend with dealing with only one government administration, but have to supply two sets of SPS applications forms, one for each country. These farmers have to date been extremely concerned with the progress of their applications and the interaction between different administrations who are implementing the SPS using different models.

The Rural Land Register

24  We must question the RPA's planning for the introduction of the Rural Land Register. It is clear that inadequate management and funding has lead to the wholly unacceptable delays in the digitisation of field parcels under the Rural Land Register (RLR) with knock on implications for delivery of the single payment and introduction of the Environmental Stewardship Scheme. That the RPA still has a large backlog of IACS22s is testament to the scale of land registration and change within the industry. We have seen therefore widespread concern, anger and bemusement at the problems reported by the agency through its slowness to appreciate the scale of the task in hand and how this has had severe impact on the Rural Development Service managed Environmental Stewardship schemes (ES) and particularly the Entry Level Scheme option, which is a key element of government policy.

25  The processing of IACS 22 forms (which contain the field areas that need to be digitalised by the RPA for the RLR) has been our biggest concern and threat to payments of SPS. The RLR process has lead to the RPA fire fighting without what it seems a plan to follow. Initially there was denial there was a problem, then realisation that resources were not going to be able to deal with the problem, then various changes in policy from using internal staff to external contractors have occurred.

26  Given that we have an area based SPS system and the new Environmental Stewardship Scheme is fundamental part of Defra's new sustainable land management approach, it is extremely disappointing that the processing of land registration has not been cleared up well before the SPS payment window. The industry pointed out to the government and the RPA some 18 months ago that changing the SPS land eligibility criteria, coupled with ability to include areas of non-traditional IACS land for Environmental Stewardship, would create a huge increase in work if this land had to be entered onto the RLR as a pre-requisite to SPS and ES. The delay in this registration has meant that farmers wanting to enter ES have been delayed from doing so, environmental benefits that may have been gained have been postponed and cashflow problems as the associated conservation payments have not reached farmers.

27  The biggest problem and frustration to farmers has been the profound instability of the IT software used by the RPA to digitalise and capture field parcels on the RLR. It would appear to be unstable when 1) interacting with printer software, 2) retrieval of data and 3) transfer of data to the RDS for ES (who use a different IT application, which has inevitably created further delays). This is leading to instances of farmers submitting having a full set of RLR maps with all there fields on and then wanting to make a number of new changes, when farmers eventually receive back their RLR maps, the changes may have been added on, but previously highlighted fields attached to the farmers holding are now missing. Also when the farmer goes to the RDS and asks for the relevant paperwork and associated illustrated maps for ES showing the farm these fields are again also missing, leading to the application being delayed or not being possible to proceed with an application.

Problems in Applying for SPS and RPA Follow Up Action

28  We have already highlighted at the beginning of this letter that there were problems even before the RPA received SPS application forms back from farmers and growers. This did not set the processing of application forms off to a good start and the RPA have never really recovered. When there is change to application forms, there needs to be help at hand to guide applicants through the paperwork, as with any change applicants are anxious to get things right and understand the changes and not make errors. Unfortunately the guidance booklets supplied to applicants with the application form in certain key areas did not assist, but hindered them, this was particular concern given that the RPA (and MAFF beforehand) had produced a range of pre SPS guidance to a high standard. The result of ommissions and vague instructions lead the RPA to hastily issue further supplementary guidance to all farmers from at the beginning of April, some applicants by then had already submitted their application forms. Communication of changes and clarification of rules were posted on the RPA and DEFRA websites during the spring also, but many farmers and growers simply failed to be aware of them or more importantly did not have access to the internet.

29  The combination of a new scheme, new rules, poor guidance, increased numbers of applicants lead the RPA's helpline to be simply overrun with calls, leading to further concerns from applicants. This had a number of affects, the RPA had to take on more staff or shift resource internally to cope, thereby taking staff away from other SPS work and with poor / rushed training lead to poor, wrong or bad advice being given when callers got through. Because of these delays, application forms were no doubt have been submitted incorrectly and for the vast majority gone in late, thereby preventing the RPA from starting their work to validate the claims early. A further consequence of poor initial instructions to applicants was the slowing of processing caused by applications received and then enquires having to be made to applicants.

The issues involved in making an interim payment to farmers, in advance of the now February target

30  Recently further help has been forthcoming from the EU Commission allowing for an interim SPS payment to be made, this option has been taken up by other territories within the Untied Kingdom. Unfortunately due to the complexity of the implementation model introduced in England the impact of this development will be minimal at best. The reason for this is the RPA appear to simply did not have a plan B, i.e. to pay some compensation at the start of the payment window. The RPA / DEFRA have stated to the NFU and others that software had not be developed to cater for such a payment and now belately it would appear they are developing software to deal with a two part payment. The problem is that we are told that even this interim payment will not start before February 2006, with the balance following before June, so no different to the current envisaged payment of all moines due to the farmer. This interim payment will not be affective in England for this reason and therefore leading to the financial hardship already mentioned.

What impact the RPA's own change programme has had in the introduction of the new CAP payments and the agri-environment schemes

31  The RPA set out on the road to complete modernisation through its ambitious change programme but whilst cost savings will no doubt come, improved customer service has not been felt by farmers to date. The RPA change programme has yet to pass back benefits to farmers that have been promised such as easier access to quality information, online submission and interaction.

32  In retrospect there appears to have been a tension between internal modernisation goals for the RPA and that of retaining local contact and its knowledge base.

33  The delivery of reduced bureaucracy under SPS has not yet been felt by our members. A key element of the change programme apart from the RLR already mentioned has been the new database of customer information held by the RPA. However the initial way the Customer Registration Form (Creg01) and accompanying guide was introduced is an illustration of poor customer focus. The form and guidance are just too long and confusing for the vast majority of recipients and as result caused numerous problems to applicants. First the form had to be completed by new SPS claimants in the spring of this year before they could obtain an SPS application form and guidance, this requirement was soon dropped due to delay in getting application forms out. The form then had to be completed by those who had what it would appear minor business changes to their details causing further paperwork. The number of new applicants coupled with applications being received from existing farmers and growers has lead to a delay to SPS application processing, this has been a resource hungry activity undertaken by the RPA.

The extent to which the RPA's IT systems have failed to evolve to deliver what is required of them

34  We are told by the RPA that their software is up to the job, we are concerned that new IT could be the final nail in the payment target coffin. We have heard reports to date that the software already installed and being used, whilst it works in principle when used in anger by a large number of operators has broken down with faults occurring and delays to progress of work, our concern is that it simply has to perform, as there appears to be no plan B.

35  The key element that has yet to be used in anger is the payment calculation function of the operating system. Because of complicated method of determination of payments we will not know how it will work until early next year.

36  We hope that the new software being use will not disrupt payments as was the case in Wales when they introduced similar changes in 2002. The proof will come from payment performance.

National Farmers' Union

December 2005

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