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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1071-vi House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE Environment, Food and Rural Affairs Committee Rural Payments Agency sub-committee
Monday 23 October 2006 LORD BACH and LORD WHITTY Evidence heard in Public Questions 712 - 802
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee (Rural Payments Agency Sub-Committee) on Monday 23 October 2006 Members present Mr Michael Jack, in the Chair Mr David Drew James Duddridge Lynne Jones Mr Dan Rogerson Sir Peter Soulsby David Taylor Mr Roger Williams ________________ Witnesses: Lord Bach, a Member of the House of Lords, former Defra Minister with responsibility for the RPA, and Lord Whitty, a Member of the House of Lords, former Defra Minister with responsibility for CAP reform, gave evidence. Q712 Chairman: Good afternoon, ladies and gentlemen, and welcome to this further evidence session on the EFRA Sub-Committee's inquiry into the Rural Payments Agency. Can I say at the outset there is always the possibility that our proceedings might be disrupted by votes so if you hear any bells, do not worry. You will see us run, and we will get back as quickly as we can. Can I particularly welcome our two witnesses this afternoon, Lord Whitty of Camberwell and Lord Bach of Lutterworth, both former Under-Secretaries in the Department of Environment, Food and Rural Affairs. I am most grateful to you, gentlemen, for agreeing to come before the Committee, although you no longer hold ministerial responsibility. I am pleased that you understood the Committee's wish to learn more about the decision-making processes that led up to some of the problems which the Rural Payments Agency had. I think it would be quite helpful for the Committee if we could start, Lord Whitty, with you, to sketch in so that we can understand with absolute accuracy, in the process of introducing the Single Farm Payment and perhaps the departmental change programme which was an integral part of some of the work which the Rural Payments Agency was doing, what specific responsibilities you had. When you have been kind enough to respond to that question, Lord Bach might make certain that we have also understood what his role in this matter was. Lord Whitty: I was responsible to the Secretary of State for all matters relating to CAP policy, including the EU negotiations and policy decisions and, with the Secretary of State, took the key decisions, although other Ministers were also involved, on the option that we adopted in relation to moving to an area payment. Obviously, the Secretary of State took some such decisions but I was very much involved in those decisions. As far as oversight of the RPA is concerned, however, although I did briefly in 2001 have direct responsibility for the RPA, at no point during this process was I responsible for the overall programme for the RPA or for the IT programme, which was the responsibility of one of my colleagues. Q713 Chairman: Just for the record, who was that? Lord Whitty: At the risk of extending your witness list, Mr Alun Michael. Having said that, I do take responsibility for looking at the implications of any decisions on the CAP policy for the RPA itself. Q714 Chairman: Just before we move on to Lord Bach, you said that you had been involved in CAP, CAP reform policy. Were you directly involved in the negotiations that led up to the adoption of the Council decision to move to a Single Farm Payment? Lord Whitty: I was present at some of those negotiations. There were several such negotiations over the year or 18 months beforehand. I was present at some of them on my own, sometimes with the Secretary of State, but the final negotiations were actually conducted by the Secretary of State herself. Q715 Chairman: Did you, when you were dealing with the evolution of that policy, recognising that the Council regulation opened the potential for more than the then existing group of recipients of CAP reform to make claims, get any indication at that stage about the volume of farmers who might be able to claim under the revised arrangements? Lord Whitty: At that stage, it would be wrong to say, because the discussion which at a relatively late stage of the negotiations opened up the possibility of area payments then led to us considering that option and then consulting on that option. At a fairly early stage in that process, which was after the political agreement in June 2003, we looked at what the effect of going for an area payment would have been and sought advice from the Department as to how much additional land would be brought in as a result of that. Q716 Chairman: Did that advice contain any details, not so much of the hectarage but of the number of holdings that might be involved? Lord Whitty: I am clearer on the recollection of the estimated increase in hectarage, which throughout was put at nine per cent. I will qualify that by saying that was almost entirely based on new applicants and probably did not take full account of people having infill in their existing registered land. On the number of new applicants, the figure of 26,000 was one which was mentioned at the time, which I think related largely to horticulture and potato growers of any size coming into the scheme. So we were thinking there might be 26,000 more than were currently in the pre-existing schemes, though obviously it turned out to be somewhat more than that but not dramatically more. Q717 Chairman: Would I be right in saying that that would take the number of holdings, on that analysis, to just over 100,000? Lord Whitty: Yes. Q718 Chairman: Lord Bach, could you just give us an answer to the same question: what were you responsible for? Lord Bach: I was responsible under the Secretary of State for the Common Agricultural Policy policy and also for the Rural Payments Agency, among numerous other parts of what was a very extensive portfolio. Q719 Chairman: When you took over, when you came into your post, was Alun Michael the Minister who handed you the poison chalice of the RPA? Lord Bach: If Alun Michael was running the RPA before the election of 2005 and I was running the RPA after the election of 2005, the answer is yes. Q720 Chairman: It might be useful in terms of scene-setting if you could tell us, when you took over responsibility for this in 2005, what did you find? What were you told? When you came in and the civil servants handed you that inevitable folder, saying, "Minister, this is what you are responsible for. We would love to give you a more detailed briefing on the Rural Payments Agency," what happened when you first learned about this animal for which you were now responsible? Lord Bach: It was clear, obviously, from the moment I set foot in my office that this was a major part of my responsibilities and that we had said we would ensure payments were started by February 2006, and it was made clear that this would take up a considerable part of my time during the months that were to follow, and indeed, that of course occurred. You will, I think, Chairman, have seen the list of meetings and advices that were sent to you from the Department. I have counted them. I had, if this is absolutely accurate, 24 formal meetings during my 361 days in post. That is one every 15 days. I think that is just an example of how significant this part of my portfolio was and, to be fair to all concerned, that was made clear to me at the start. Q721 Mr Drew: If we can look at this, to me, key issue of the additional people who were now included within the new arrangement, did anyone ever try and define who was likely to now be able to claim? I accept horticulture, because I met the horticulturalists and they were obviously going to be part of the new arrangement, but did anyone think of looking at the issue of those, for example, who kept horses in a paddock, and actually try to think through whether they were the right people to be claiming, whether there was any ability to stop them from claiming, given that, as you know better than me, it is the wedding cake principle: the more people in the scheme, the less money available for what I would define as genuine farming activities, for whom the scheme was principally intended? Was that ever a live discussion? Lord Whitty: Sort of. It was a consequential issue. One of the aims of the scheme was effectively that it did not matter how you were using your grazing land or your growing land in 2000. You would be paid for keeping that in good agricultural and environmental condition. So for equivalent sort of land, there would be a level playing field. So the fact that in 2000 you might have been growing potatoes and your next door neighbour may have been growing a subsidised crop should be irrelevant, because the ultimate objective was a level playing field and a positive environmental outcome. I rather dispute the view "the people for whom this was intended"; it was intended for all agriculture, which includes horticulture, potato growers, and, in my view, horse enterprises. In fact, the decision on horses related to grazing land, not to paddocks, and quite a lot of horse grazing land was already in the IACS system, because it had previously been or was available for subsidised livestock. Q722 Mr Drew: This was an active discussion, so we are effectively redefining farming. Lord Whitty: No, we are not redefining farming. Some of that the previous year had been subsidised, and obviously there is a fruit and veg regime, although there is not a subsidy attached to it any longer. It was all in the agricultural system, both ours and the EU system. Q723 Mr Drew: It was not previously in the agricultural system. Those people did not receive any subsidy. Lord Whitty: No, but they were in the agricultural system. There are EU regimes covering areas which are not subsidised. There used to be EU regimes covering pigs, where that had been withdrawn. There used to be EU situations covering poultry which have been withdrawn. So most of this land had at some point been in the EU system in one form or another and in any case, the same agricultural regulations and environmental regulations applied to that land as to land which was being used for subsidised activities. Q724 James Duddridge: Lord Bach, can I take you back to how the RPA fitted within other parts of your portfolio? I am struggling to understand how big an element it was, whether it was 20 per cent, 30 per cent, and in terms of your priorities, whether it was in the top three, top 20 priorities. Could you perhaps give us an idea of the percentage and prioritisation, if it is that precise? Lord Bach: It is not really that precise. It is hard to do but it was clearly one of the top five priorities, probably top three. It was important. In terms of the time that it took, I think, as I was saying to the Chairman, you have a list of advices and meetings that I had during my period, and those were the official ones. There were clearly unofficial meetings too, when someone would pop in or I would have a question. I had weekly reports for a very long period of time and of course, after March 14 this year I would have daily reports as to what was going on. So it was very major in terms of my priorities. In terms of the time it took up, that is much more difficult to say, because some of the responsibilities that may not have been as high a priority may have taken as long because they involved going abroad or involved visits. I am afraid that is the best I can do. Q725 James Duddridge: I do not quite understand how Ministers work together in teams, but given it was one of the top three priorities, what were the sort of mechanisms for review within the broader team and up to the Secretary of State of each Minister's key priorities? Lord Bach: In those days we had weekly meetings with the Secretary of State. All the Ministers met with her on a Wednesday, and Ministers were of course at liberty to bring up any of the issues that were of the moment, but of course, at the meetings that I held and called on this subject there would nearly always be present a Special Adviser of the Secretary of State plus a private secretary from the Secretary of State's office. The advices that I signed off would nearly always invariably go to the Secretary of State and, of course, there would be some that I would sign off and then she would sign off after me. So the relationship between my office and her office I think worked perfectly adequately. Q726 Chairman: When you took over responsibility for this particular project, you said very clearly that the target was payment in February 2006, that that was obviously clear, am I right in saying, right from the word go, when you took over after the election in June 2005? Yes? Lord Bach: Can I remind you that it was in January 2005 that the Department announced that we would begin payments in February. Q727 Chairman: But you inherited that. What advice, when you first met the officials involved in this, did you seek from them about the risks that had to be faced in meeting that timetable? Lord Bach: I think every meeting, almost without exception, that I held would be around risk, would be around what the Department had said would happen and whether it would actually happen or not. I cannot recall, I am afraid, the first, second, third meeting as they took place, but this whole issue of whether we would meet that date to start the payments was there really at every meeting. Q728 Chairman: Let me ask it in a different way. As you became more familiar with the unfolding nature of the Rural Payments Agency and its work, what troubled you when you left the office, when you had had time to reflect on the challenges that the RPA were having to face? What are the things that you recall were uppermost in the mind, the worry factors? Every time you met with the officials you were thinking, "Is that going to happen? Is that not going to happen?" Where were your worry beads? Lord Bach: Mr Chairman, like you, I am legally trained... Q729 Chairman: I am not a lawyer. I am just a humble backbench Member of Parliament, but do carry on. Lord Bach: I am also a humble backbench Member of the House of Lords, but I am also a lawyer, and these meetings that took place were not "How nice to see you. Have you had a good journey from Reading? Would you like a cup of tea? What is it you've got to say to me? Goodbye." They were meetings at which I believe I cross-examined, or attempted to, the officials, both RPA and Defra, who would be present at these meetings as to what it was they were putting forward to me, and they would either satisfy me or not satisfy me with what they had to say, and they did make it clear to me, to be fair to them, that this was a risky enterprise, but on all occasions it was likely that we would reach the date of February 2006 for first payments. You will recall, I am sure, that when I appeared before your Committee on January 11 this year, you and your colleagues, quite rightly, pressed me very hard, I think it is fair to say, as to why I could not tell you then whether we would meet those first full payments by the end of February, it being only six weeks or so away, and I held the line, if that is the right expression, by saying no, I could not tell you because we were not sure even then that we would be able to meet those dates. As it happened, we did meet that date but, as, of course, is obvious, we failed as far as the bulk of payments were concerned. Q730 Chairman: I am intrigued about the way that risk was managed. You clearly accept that it was a potentially risky venture but did anybody produce any kind of schematic to say "These are the risks in the project and every time we have a meeting let's have a look against this list of potentially risky ventures how we are actually doing to move us towards the deadline"? Was it ever as rigorously done as that or is it that you knew you were travelling a difficult road but every time you talked to the driver of the bus he said, "Don't worry, we're going to get to the destination"? Lord Bach: I think it was pretty systematic and schematic, to use your word. At the back of our minds - at the forefront of our minds - was that we had this date to attempt to get these important payments started and really, all the discussions that we had around the very technical nature of some of the issues - and the Committee will know very well how technical some of the issues are - what I was intent on and I believe officials, whether from the RPA or Defra, were intent on was in trying to make sure that we could, and it was a question of taking a judgment as to whether we would or not. Sometimes it looked better than it did at other times; at other times it did not look so good, but as we drew towards Christmas of last year it began to look as if we would meet those first payments and make the bulk of payments by the end of March. As you know, one of those came true and the other certainly did not. Q731 Mr Drew: Did you have complete confidence that the Accenture system was going to work as intended? Lord Bach: Yes, I think I did have confidence that it was going to work. The advice I received led me to believe that it would work, yes; that there were risks attached to a number of aspects but that this would work. Q732 Mr Drew: Was that because the RPA management was confident that Accenture knew what they were doing? Was it because your civil servants had really got in and done some proper scrutiny of what Accenture was doing, or was it that Accenture were directly telling you, as they told us, that they still believed that when they pressed the button it all worked, but it did not quite do the things that maybe they thought it would and should have done? Lord Bach: Accenture were not present at all the meetings I had, by a very long way. This was very largely with RPA civil servants and Defra's civil servants, who would come to me with a common view, because, as you know, there was a myriad of committees which were looking at the RPA at this particular time. So they would come to me with a view, and I would discuss that view and debate that view, always, as I said, bearing in mind risk factors involved. But I do think that, at the end of the day, some of the advice that I received from the RPA was over-optimistic. Q733 Chairman: Again, for the record, and for our greater understanding of these matters, you just indicated that there were a myriad of committees. Perhaps you could explain what the management structure was, because it would be nice to know who was actually in charge of the project. The NAO give a hint that there was a shift in responsibility from a body known as CAPRI to something called ERG, which I thought was a Continental form of petrol till I looked and found it was an Executive Review Group. The sense I get from the NAO report was that management responsibility was ceded from those who were very close to the coalface to those who were over-viewing the project. This ERG were masterminding it. Who was actually reporting to you about progress? Lord Bach: I can answer your question by saying the people who were present at the meetings generally would be the chief executive of the RPA and his board really, the main players on his board, or two or three of them, and there would also be some very senior Defra officials, often the Permanent Secretary, and others who were very senior officials in the Department. They would all be at these what I think could be described as fairly high-powered meetings. The people who would speak at the committees would often be those around the chief executive of the RPA, not necessarily him, and of course, the Defra officials as well. But I have to say that, having chaired those meetings, and taken a full part in them, I find it difficult to say where the power lay really at official level. They were coming to me with a collective view and that was a view they wanted ministerial approval or disapproval for. Q734 Chairman: Was there not a conflict of interest? They were seeking your views as a Minister, but the very people who you might have turned to in Defra, namely senior officials with an understanding of what was happening, for advice were involved with the RPA in managing and delivering the project. Are you, again, for the record, telling us that there was no impartial point of advice that you, as the Minister responsible for this programme, could turn to to say "Well, you understand about complex systems. Am I getting a proper message?" It seems to me that Defra and the RPA had joined hands to give you a view but you did not have anybody of your own, uninvolved in either of these two boards, to turn to. Is that right? Lord Bach: I had the private office, of course, and I also had, as I say, a number of unofficial meetings that would happen during the course of a day. I might see an official from the Department and, if I had a particular concern in my mind, talk to him or her about that but basically, when these meetings were held there was a common view, which had been established, I suspect, at a previous meeting between Defra officials and RPA officials. Q735 Chairman: So the Defra officials and the RPA, as you say, came with a common view, so there was no collective tension to argue it out with you as the Minister. They simply came along and said, "This is what we're doing." We are going to look in a little more detail later on at some of the issues that came up as a result of this point of progress. Lord Bach: These meetings certainly had tension in them because, although the Department would come with a point of view, and I do not actually think there was anything wrong in that at all; that is the way the civil service behaves. They come to a Minister with a point of view that they have come to in discussion but of course, as the discussion unravels during the course of some of these meetings, there would obviously be differences of emphasis between perhaps people within the RPA and senior civil servants from Defra. They were pretty open discussions. No-one was hidebound by a piece of advice that might have come to a Minister before that. Q736 Chairman: Am I right in saying that you, in the nicest sense, in your forensic way of probing what was happening, were left to your own devices to work out the questions you were going to ask of this joint group who were presenting you with the view about what was going on? You were on your own to probe, using your obvious powers of investigation, understanding and intelligence, but the questions asked were your questions? Lord Bach: By and large I think the questions were mine, and the Special Advisers' too, but that is not to say that Defra officials would not ask questions for clarification from the RPA and even vice versa. These were not meetings where it was me against the world, Chairman. I was given a lot of advice and assistance from officials from both the RPA and Defra at these meetings, but I have tried to describe them as best I can. Q737 Mr Drew: You said that Accenture were not at many of the meetings, so where was the line responsibility through the RPA to ensure that the system was going to work? Did you actively take part in any prototype work on the system, given that there were a number of changes - as we know, 23 identifiable ones, from memory? Is this something that was crucial to the RPA, working with yourself, with the way in which this was all going to take place? I am confused what level Accenture played in this mechanism of decision-making. Lord Bach: I think the Defra official who had most dealings with Accenture in a formal manner was the Permanent Secretary of the day, and I think the Committee heard that when the two Permanent Secretaries gave evidence. The RPA of course set up as a delivery body for Defra and one of the issues, of course, that I think arises out of all this is what kind of role the delivery body has under an agency system towards the central Department and then towards Ministers who are on top of the central Department. I have to say that, as far as taking part in prototype testing, as I think you are implying, no, I did not, but I would receive information about what had taken place as part of the advices that I received. Q738 Mr Drew: Presumably, that information was all positive. Lord Bach: Not always positive, to be fair, no. Sometimes things had not gone as well as had been hoped, but the general line over that period of time leading to my appearance before your Committee and the events that we all know so well took place afterwards was that the RPA could fulfil what they had said they could fulfil. Q739 Chairman: We are going to come back and tackle, probably in even greater detail, some of those issues. I just have a couple of quick questions to Lord Whitty. Lord Whitty, were you at all involved in the appointment of Johnson McNeil? Lord Whitty: No. Q740 Chairman: Who was? Which Minister would have made the recommendation that he was the man to head up the RPA? Can you help us on that? Lord Whitty: I cannot from first-hand knowledge. The Secretary of State herself would have approved the appointment, through the normal process of civil service appointments. Q741 David Taylor: We are going to be talking about Accenture later on. I understand that, but one of the performance indicators, if you like, that might have been relatively obvious at the time - and I am talking about a year ago - was the fact that the IT contracted spend with Accenture had more than doubled, it was announced, from £18 million to £37 million by about November of last year. I wonder if I can ask Lord Bach if at that point you got a frisson of concern? Was there any feeling that the system and the contract was spinning out of financial control and beyond the grasp of management? Lord Bach: There was certainly concern. I spoke to Sir Brian Bender. He would come and see me and I would see him and, of course, he had monthly meetings, as you have heard, with Accenture. There was certainly concern generally about whether Accenture were carrying out what they had said they would carry out. I have read very carefully all the evidence that has gone before, but particularly carefully what they had to say to the Committee, and quite clearly, when they first entered into the contract, which of course was well before my time, if they are right, they had not taken into consideration, or no-one had taken into consideration exactly how the CAP reform would be implemented in England, and clearly, there were some concerns about delays, et cetera, with Accenture generally, and of course, you are quite right; it is clear that by that stage it was costing Defra a good deal more than the original contract. I have to say though, no-one ever for a moment suggested that somehow, because of the difficulties that there were or had been with Accenture, that that meant that we would not be able to fulfil what we had said we would, ie payments beginning and the bulk of them, 96 per cent as it was then, and then the bulk of payments being paid by the end of March. Q742 David Taylor: One final observation, Chairman. This Committee were reasonably excoriating about what was seen as the weak IT strategy of the Department in an earlier report, and it is often the case in the public sector that the top managers of client Departments, if I can call it that, have relatively little knowledge of the world of IT and therefore are rather vulnerable to hearing what they want to hear from contractors and would-be software deliverers. We know there is a chapter of accidents that stretches long before 1997 and will no doubt stretch well into the next decade and beyond. Did you sense when you took over after the 2005 general election that the knowledge that was necessary at the very top of the Department to have a good feel for some of the computer systems that were being worked on was adequate or was the Department ultra-vulnerable to receiving seriously flawed and over-optimistic information? Lord Bach: I agree with your premise, what you say about the history of government and IT. You have made the point to a number of witnesses and I agree with that, but on this particular occasion I did not get that feeling that somehow those in the Department were out of their depth when face to face with their Accenture colleagues or rivals. It seemed to me that this was an IT system that had been set up. Costs had obviously increased. Accenture would no doubt say that was because there were new things added to their contract as a result of the CAP reform, but I did not get the feeling that somehow the Department was in fear or somehow did not know how to cope with Accenture. Q743 Chairman: Did you have any body or part of government or external source of independent advice to which you could turn to just touch base if ever there was a moment of hesitation or concern to find out what was going on? Obviously, you had the gateway reviews to call upon - we will come on to those later on - but was there anybody you could phone and say, "Hey, this computer system that we've got - do you think it's really capable of doing this given the following situation?" Was there any source of independent advice, or did you ever feel the need for it? Lord Bach: I did not feel the need, I have to say, so I cannot really answer whether there was anyone. I certainly did not attempt to do so. Q744 Chairman: Lord Whitty, the reasons for choosing the dynamic hybrid model: clearly, there were other potentially more straightforward ways of introducing the reforms. Could you explain for the record why that one was chosen? Lord Whitty: I dislike the term "dynamic hybrid". What it is is a way to get into an area payment system. The choice was between a historic payment and an area payment. The choice of an area payment met a number of objectives in Government policy much more than a historic payment could have done. A historic payment would mean you would be paying the same farmers for doing what they were doing in 2000 in 2012. Government policy was, one, to make farming more commercial, more market-oriented; two, to get a better environmental outcome from farming; three, to ensure the EU was in a better position in relation to the WTO talks, and that we were not engaged in trade-distorting subsidies; four, that the bureaucracy would be simplified. A move to an area payment appeared to meet all those criteria, partly on the grounds that I was mentioning earlier, that there would be a level playing field between similar land, whatever you used it for, therefore farmers could chase the market rather than the subsidies; secondly, because cross-compliance conditions would be attached to all land and the environmental output would be better; in terms of the WTO, the more a degree of recoupling of what was supposed to be a decoupled payment occurred, the less likely it was that our trading partners would regard it as a genuine green box system, and indeed, the historic payment, since it goes differentially between sectors, is still regarded by the Americans and some third world countries as being a production-distorting intervention, subsidy. So, for all those reasons, a land-based payment which effectively supported farmers on the basis of their fixed costs, not on the basis of their variable costs, and was not related to production seemed a much simpler basis on which to have a sustainable system of support for farming. On the simplification dimension, on the face of it, moving from in total 21, but 11 effective systems in England to one, paid once a year, must in the long run - and I had hoped at the time the not very long run - help to move to a more simplified system of support. So on all those criteria, an area payment was better. There will of course be substantial redistribution arising from an area payment, both between sectors and within sectors and different geographical areas. We modified some of that by having the three-tier definition of land, so that all the money did not go uphill, as the expression was at the time. There were other distributional things between sectors which we had to sort out and between land owner and tenant, which caused quite difficult problems of definition and which we partly but not entirely resolved, but because of this substantial distribution need, we had to have a transition period. I would say myself that the transition period was not the optimum one, or the transition arrangements were not the optimum. If you want me to go into that, I will. Q745 Lynne Jones: What would have been optimum? Lord Whitty: I wanted to move to an area payment as rapidly as possible. Clearly, I was persuaded by both pressure from the industry and the advice of the Department that it was not sensible, whatever date we had started it, to move in one year to an area payment. My original proposition, as I said, we took a five-year period, the first year would be 100 per cent historic payment, the last year of which would be 100 per cent area payment; in other words, a three-year transition period between the two. That was not the final outcome. I actually think that would have been better. Whether it is optimum is another matter but I still think that would have been a better transition period. There were two reasons we did not adopt it. One was that legal advice came that, by definition, if you pay 100 per cent historic payment in the first year, then you are only paying these people who had previously been in the scheme, and the legal advice was that you could not then bring other people in at a later stage, except through the national reserve mechanism, which was a relatively limited number. That seemed to destroy the purpose of some of it. I was not totally convinced by that legal advice. I am not a lawyer so I do not necessarily believe what lawyers tell me. I was challenging that or trying to find a way round that but, because the pressure from the industry in a sense was for a longer period, and because eventually one had to present this as a way we were both moving fast and taking a long time over it, we eventually adopted a seven-year period when we would start a partial land payment in the first year. At the time I thought that was a mistake. I was more concerned, frankly, about the seven years than about the ten per cent, although I was worried about the ten per cent. I am now absolutely convinced that was not the most sensible transition period, and that had we been able to have 100 per cent historic payment in the first year, some of the difficulties which subsequently ended up on my desk and Willy's would not have occurred. Q746 Lynne Jones: Since you knew you could not have 100 per cent, or you were advised that you could not have 100 per cent - certainly I have raised that in Committee meetings and we have been told that - would it not have been better to have deferred it for a year? Lord Whitty: With hindsight, I think it might have been, but all the advice, all the pressure, was to get into the system as rapidly as possible. We had committed ourselves, as leaders of the reform, to taking the lead to take it in. There had been Government statements to that effect. The Commission were expecting us to do that. The industry actually were urging us to get on with it. There were no voices to say postpone that. I would say it was on the assumption that detailed decisions would be taken more rapidly in Brussels and in Westminster than they eventually turned out to be taken, particularly in Brussels. Nevertheless, there was no pressure at all for postponing the introduction. Q747 Lynne Jones: Since you say that there were pressures through the WTO to have a scheme which you could be sure would fit in the green box, yet other countries, and indeed other countries in the EU, opted for the historic approach, so that really was an artificial pressure you put on yourselves, because you knew that other countries were going down that route. Lord Whitty: I think in order to reach a final deal in the WTO - and of course, that has all been stymied, in part because of lack of faith in what the Europeans are doing on agriculture - that eventually they will have to move away from historic payments. We were at that stage, of course, expecting the WTO talks to have reached a greater degree of success than has now proved to be the case. Q748 Lynne Jones: Because of this self-imposed leadership role though, were you not rather gung-ho in going ahead with this complex model when you already realised, obviously, by advocating the 100 per cent historic in the first year you were aware of the complexities that this might lead to and the problems in delivery? Lord Whitty: We were convinced that it was sensible to move as rapidly as we could, and the issue of it being complex, of course, is a result of the details and of the system. Basically, we were going to move to a payment which consisted in part of consolidating all the historic payments which were already in the system into one payment, which should not have been that difficult, that complex, and of identifying all the land, which was in any case being brought into the system through the already started or in-train programme to establish the Rural Land Register and which, given that I was advised that roughly nine per cent extra land might come in, was already being set up to cater for 90 per cent of the land which would go in the system. So yes, there are complexities about it, but the central part of the system is not that complex. It is certainly not as complex as the pre-existing nine systems under which British agriculture had laboured for many years. Q749 Chairman: Can I just interject for a second? With all of this intense analysis which you have just enunciated, why at the end of the day do you think the estimating of the number of claims and claimants was so wrong? You had obviously looked at it, you had thought about the land holdings, you knew nine per cent more land was coming in, and yet if this was the informant of the size of the job that the system had to cope with, then clearly, it was not set up against a proper estimate of the job it had to do. There was a gross under-estimate. Why do you think the estimates were so wrong? Lord Whitty: The estimates were wrong to the degree that there was a nine per cent estimate of the extra land, and it turned out to be slightly more than double that. Most of that doubling related to bits of land which were owned by people who were already on the system and who theoretically should already have told the RPA in the preparations for the Rural Land Register that they had that land, even though they were not claiming on it. I think there are reasons why that was an inaccurate... Q750 Chairman: Did nobody go out and just take a sample of a dozen farms and say "Here's the policy. Now, what does it mean on the ground? Have we actually got it right in terms of our estimate of what was going to happen"? What you are suggesting is that the whole estimating process of the volume of work which ultimately had to be visited upon the RPA was a desktop exercise. Lord Whitty: It was based on existing maps, so it was not untested; it was not a finger-in-the-air exercise, but it did end up with too low a figure. However, I would contend that the volume argument is not what failed the system. Because we had made an estimate which came to over 100,000 on our figures, our estimate - our inadequate estimate, if you like - we upped the number of claimants which the system was supposed to deal with to 150,000. It never actually got anywhere near 150,000, so the system was designed for up to 150,000. The other point on why the estimates were wrong: I think the effect of the 0.3 hectares was not entirely taken into account and although that was from time immemorial, as I think one of the officials said, had been EU policy, in English terms, the full effect of the number of potential new claimants had not operated and we did not - and I never remember this even being raised - decide, as the Germans did, who were operating more or less the same system, a 100 euro exclusion. If we had operated a 100 euro exclusion, we would have got rid of, I think, 13,000 claimants - I would need to double-check that - which would have brought our estimate much closer to the one that I was originally given. Chairman: So that is a blind spot. Q751 Lynne Jones: Lord Bach, would you like to comment on the situation? Also, were you aware of the discussions and the reservations that Lord Whitty had and his feeling that you should try and go for a 100 per cent historic in the first year? Lord Whitty: It had all been overtaken by then. Lord Bach: The answer is no, I was not aware of it, because when I came in we had 280-odd days until we had to attempt to implement the first payments, so I was not, I have to say, knowledgeable or particularly concerned about the background to the decision that had already, of course, been taken. Q752 Lynne Jones: When was the decision taken? Lord Whitty: The decision was taken in February 2004. The announcement of the basic decision was on 12 February 2004 and the area dimension of it was announced in April, so the seven-year move was announced in February 2004 and the clarification on area definition came two months later. Q753 Lynne Jones: So it was a fait accompli when you actually picked up the reins, so to speak? Lord Bach: Yes. Q754 Lynne Jones: When you embarked on the contract with Accenture - that was in 2003 - and you knew that there was going to be this mid-term review, in a letter you sent, Lord Bach, to the Chairman in March, after you appeared before the Committee, you said that the view was taken that the impact of reform would not be significant on the overall IT solution. Who took that view? It is your letter dated 4 March. You also said that, because of this awareness at the time of the original contract, the details were not known, that you deliberately made the contract flexible. Who took the view that the impact of reform would not be significant on the overall IT solution? Lord Bach: What paragraph of the letter are you looking at? Q755 Lynne Jones: It is right at the end, the penultimate paragraph. Lord Bach: Thank you. I am afraid all I can say about this is that this was a view, no doubt, the Department took quite a long time before I took office. It is probably not a question best directed at me. Q756 Lynne Jones: I ask this because the Secretary of State told the House that the reason for the doubling or the substantial increase in the cost of the IT system was because it was a big change in the system and therefore that justifies it. That does not really quite tune in with this view that there would not be significant changes. Lord Whitty: When Accenture took the contract, I was not involved in the contract negotiations. I was aware of them, obviously. When Accenture first took the contract, they took it in the knowledge that there was going to be fairly substantial reform of the system within a year or two because the negotiations had already started. When the decision was taken as to the form in which we were going to implement the discussion, that is to say, at the beginning of 2004, there were then discussions with Accenture to change the nature of the contract, which would mean that the revised contract ran from May 2004. That already took account of and allowed for a significant increase in the cost. Admittedly, in response to Mr Taylor's question earlier, it was clear there were greater cost escalations than were anticipated there. That revised contract in May 2004 took full account of the nature of the system that we were intending to implement. Q757 Lynne Jones: So what was the increase anticipated in 2004 as compared to what the increase actually was? Lord Whitty: I think it went up to £30 something million. Q758 Lynne Jones: It was £18 million and it went to £30 million on the capital cost, I think. Lord Whitty: Yes, but that was the capital cost. The running costs went up more than that. Q759 Lynne Jones: Was that anticipated in May 2004, that level of increase? Lord Whitty: Not the full level of increase but part of the discussion... Q760 Lynne Jones: Ten per cent, fifty per cent? Give me a ballpark figure of approximately what it was. Lord Whitty: The capital cost was as you say. The running cost was... I am not entirely sure I was ever aware of the additional figure. Q761 Lynne Jones: It was anticipated that the capital cost was going to double? Lord Whitty: Yes. Q762 Lynne Jones: In 2004? Lord Whitty: By the time of the revised contract in 2004 or slightly thereafter there was the estimate that that would cost more. In the discussions on the system that we were going to adopt there was the assumption that there would be roughly a doubling of the total contract, which was actually less than it turned out to be, but nevertheless, that was roughly the assumption. It was one of the arguments against adopting the system that we did but it was not a very big part of the argument. It was a very rough, ballpark figure. Q763 Lynne Jones: Do you have any comments that you would make on that, Lord Bach? Lord Bach: No, I have not because I believe the events that you are asking about were before my time. Q764 Lynne Jones: Obviously, Lord Whitty, you have explained the reason for going for the dynamic hybrid and the need to get to the land-based system. Do you think that you were given sufficient information in reaching that decision about the complexities that would arise, and had you had that information, do you think that you might have done what other devolved authorities did? Lord Whitty: No, I do not think that. I think the policy was absolutely right and remains right. The transition period, as I say, was not optimum. Most of the arguments about going for the system were about redistribution and the effect that this would have on farmers' incomes, not about the management of the system by the RPA. There was a cost element introduced there, but the arguments at that time did not include any argument about it being undeliverable, and indeed, Accenture and the RPA were both confident that it would and could be deliverable. It was in that light that we took the decision. I now think that some of the information was not sufficiently accurate. We talked about the additional land coming in. Nevertheless, had I had the accurate information, I would probably have taken the same decision. I think the problems with the system actually were not problems of the initial policy decision or of the broad move to the area payment but of inadequate resources and some delay in decisions as we went on. In other words, they were not chronically wrong decisions; they were decisions which went wrong and, at the end of the day, if I may stray into Lord Bach's territory, every part of the system was reported to us and to the overseeing group of officials as having worked. All the testing systems worked until right at the end. In other words, there was a serious system fault at the point where validation had worked but authorisation for making payments did not work. It was late, but it had worked, so I do not actually believe the argument that this was never do-able. It clearly was do-able. Apart from anything else, the Germans did it, and as we were going through, every test proved positive. There was a bit of delay but not a huge delay. Q765 Lynne Jones: Did you have any discussions with your counterparts in the devolved authorities in relation to their decision to adopt the historic payment, and, Lord Bach, did you have discussions with your counterparts in Germany and other countries that had adopted a similar system as to how they were going about it? Lord Bach: No, I did not, to your last question. By the way, I agree absolutely that this was the right policy choice and I think it will be proved to have been so in spite of the agonies that farmers have gone through. I think we did the right thing in England in policy terms and I think that will show in due course. I did not talk about it to other countries that were adopting our system or the other system. My job was to attempt to make sure that the RPA implemented the scheme that, whether it was the right or the wrong one, was actually there. That was the decision that had been taken well before I came. Lord Whitty: In my time we had, obviously, very lengthy discussions with the devolved administrations as to whether we could have a common approach, although we had agreed that we had had the opportunity not to have a common approach, and indeed I would say that there was some inclination by the political leadership to try and go closer to the system we adopted in England, but in fact in Scotland and Wales we adopted a purely historic system and in Northern Ireland a static mixed system. We also had some contact with Germany. Q766 Lynne Jones: What reasons did they give though? Did that not cause any concerns? Did they give any reasons why they thought it was too complex? Lord Whitty: They thought there would be too much redistribution amongst the farming community and that the political importance of farming was greater in Wales and Scotland than we were taking into account in England. My view would be that we were looking to the long term for the farming industry in England and they were looking rather at the short term. However, I do not want to be too disparaging to my Scottish and Welsh colleagues because clearly there was in a sense other more substantial political pressure. We also talked to the Germans but at the time the German system seemed more complicated than ours because of the differentiation between länder and the rather difficult dividing line that they drew between grassland and arable. Q767 Chairman: Lord Whitty, you used a phrase a few moments ago, "inadequate resources". What did you mean by that? Lord Whitty: I think the essential failure of this scheme has been the mapping. One or two decisions were a bit late and one or two systems took a bit longer to get into place but basically, until we got into the mapping, there were not serious problems of either resource or expertise from RPA or from Accenture. When we got into the mapping it was clear that the existing Rural Land Register system was not as advanced as we had thought it to be. The staff at RPA were not able to cope with the number of queries that the farmers had with the maps they were originally sent. Sometimes that got to quite antagonistic relationships because of a lack of adequately trained and experienced staff. I think that was the point where more staff and more experienced staff would have been helpful. I do not think that was the case beforehand and I do not think it should be the case when the system is fully running, but at that point the RPA were short of staff. Perhaps I ought also to say that this was the point at which I felt the advice I was getting was most misleading, and I have used the term "misleading" publicly but I would perhaps prefer to rephrase that in the NAO terms ------ Q768 Chairman: Develop that thought process for our benefit. Lord Whitty: "Over-optimistic upward reporting", I think the NAO referred to it as. Q769 Chairman: Could you just give us a moment in time when ----- Lord Whitty: We had had the situation where, somewhat unexpectedly, from an 80 per cent confidence that we could deliver in December, we had slipped and we had to put it back to February. That was the turn of the year, so I am talking after that. I am talking February/March/April 2005 when the maps were going out. Forms had gone out, and although the forms had some difficulties the preparation had been done for the forms, the preparation had been done for the maps. The reports which were coming to me were that this was going reasonably well, there were a few little difficulties but it was going reasonably well. There would be some difficult cases but no, it was running reasonably well. The feedback I was getting from farmers and from others, including both formal and informal representations from the farming organisation, was quite contrary, mainly that maps were hugely inaccurate, that people they talked to were not fully understanding the ways of solving the problems that they were suggesting, and that therefore the process was taking inordinately longer than it was supposed to on the timetable. I think it was those weeks of the mapping exercise which really put even the February date in jeopardy. I have to say that at the same time and throughout my period, right up until two days before the election, the assessment of the likely meeting of the February date was reckoned at 70 per cent consistently, so a 70 per cent probability that we would meet the revised target date of making payments in February was what, if you like, I left it at, but I also knew that some of the information which was informing that was not what was going on on the ground, and some of the experience of farmers trying to deal with this system was not the same as the experience being relayed to me in my fairly regular meetings with RPA and Defra officials. Q770 Sir Peter Soulsby: And I guess that if this was becoming evident to you it was also becoming evident to the Permanent Secretary and others at the top of the department, so at about the time that Lord Bach inherited this portfolio, not from you but from your colleague, it ought to have been evident at the top of the department that there was this fundamental problem. I suppose my question is to Lord Bach. Did anybody tell you this? Lord Bach: I never received advice that suggested that, because of the mapping difficulties - and there clearly were; I knew there were mapping difficulties, of course, - there was likely to be at the end of all this a full stop, an inability to pay the bulk of the payments by the end of March. My approach to this is very like Mr Addison's. He mentioned to you that he thought there were two main reasons why this went wrong. One he called volume and the other he called timing, and by "volume" he did not mean the number of bits of land. He meant the fact that there was the Single Payment Scheme being implemented, there was the Change Programme that had started before that, and he meant the Rural Land Register changes that were taking place, and I think that is consistent with what Lord Whitty has said. The answer to your question, Sir Peter, is no, no-one told me that because there were mapping difficulties somehow that put at risk the eventual paying out of the single payment. Q771 Sir Peter Soulsby: It strikes me that at the time you took over you were inheriting what Lord Whitty has told us ought to have been something that was very evident to the Permanent Secretary and those around him, of course, Sir Brian at the time. You were inheriting a timetable, you were inheriting a contract with Accenture, you were inheriting a management structure and you were being told that it could deliver on time despite what had been evidenced to Lord Whitty of this very fundamental issue about the mapping. Lord Bach: Yes. Lord Whitty: I should say that what was said to me, and I am sure to my successor, was that despite the mapping difficulties, and I think I have made clear that I think the Department underestimated the mapping difficulties, every bit of the system that was being tested was working. I have not got the notes but there was a meeting at the end of March which said 70 per cent likely and by the end of June it should rise to 90 per cent if everything went well, and that was repeated to me two days before the election, so the confidence in the system was very high despite the fact that a particular part of the system, or a particular part of the information going into the system, to be more accurate, was causing difficulties, so what would have been told to my successor was, "The system is on course more or less. There are some risks and the OGC and others have pointed out the risks, but there are some problems at this particular phase because the mapping has proved somewhat more difficult". I do think that was underestimated at the time. I think I was more concerned about that than any advice coming to me was concerned about it because I was being lobbied by farmers directly on the issue, people for whom I have some considerable respect, not necessarily the average bloke who catches you at the county show. I am talking about serious people who wanted the scheme to work telling me that it was not working and that was contrary to the kind of advice that was coming. There was a difficult situation at that point and up until then there had not been. Q772 Lynne Jones: So what you are saying is that you were putting rubbish in and you did not realise that you would get rubbish out at the end of this process? Lord Whitty: No. It is still the case that most of the land should have gone through the Rural Land Register and come out the other end, so it was not rubbish going in. There were bits of land which were not going into the system properly and the mapping system itself was not working properly, so it was not so much rubbish in. Ninety per cent of the land information was accurate going in. Farmers would tell you that this was the map we gave but it came back to us in the wrong form. It was not just that the farmers had not got all the land into the system, so I do not think it is rubbish in. Q773 Lynne Jones: So it was 90 per cent accurate information going in and then that came out as rubbish by a system that was not working? Lord Whitty: Yes, the system was not dealing with it very well, and, as I say, queries about that system were not being dealt with very well. That was the one point, and it is a very important point, where the RPA and the Department were not operating to maximum efficiency and the information coming to ministers in my view was inadequate. I would say that the rest of it, even though some of the news was not particularly what we wanted to hear, was working. The mapping system proved to be a serious problem. Having said that, Chairman, may I just repeat, at the end of the day it was not that which failed the system. That was all sorted later but was substantial. What the system "gummed up" on was nothing to do with that because all the validation had taken place, all the land information had taken place, but the authorisation failed, so although it delayed it was not the central system's failure. Q774 Lynne Jones: Have mistakes not been made though in the payments that have been made? Lord Bach: Some. I am going from the NAO report; that is all I can go from. Some mistakes have been made but I think it is almost inevitable that some mistakes have been made both on overpayment and on underpayment for something as complex as this. I think Lord Whitty is right: it was not the mapping that in the end led to the breakdown that we saw in early March 2006. He is also right in saying that the mapping caused immense problems and that is why the Department outsourced the mapping part of this, and I cannot remember the month, quite a long way into 2005. Q775 Sir Peter Soulsby: I am aware that we have in front of us one Minister that had partial responsibility at an early stage and another Minister who had responsibility for a limited period of time. I wonder if I can just explore what was being said to Lord Bach in particular because, as I understand it from the evidence that the Permanent Secretaries gave to us and what Lord Bach has said today, the Permanent Secretaries were personally meeting with Accenture on a monthly basis, the Permanent Secretaries were involved on the executive board and the management board, I think I recall them describing to us, of the Rural Payments Agency and were also advising you, Lord Bach, that there were difficulties, there were risks, but that they had every reason to believe that it would actually deliver on the date. Can I just check that that is a correct understanding of the relationships and of what was being said to you? Lord Bach: The collective view of the RPA and the Department was that while there were risks, and some were worse than others, we would meet the first payments by February 2006 and the bulk of payments by the end of March 2006. That was the advice, yes. Q776 Sir Peter Soulsby: Pursuing the point that the Chairman was making earlier on in his questioning to you, you were getting this advice from the Permanent Secretary, in effect, or with the Permanent Secretary's apparent approval that what you were getting was reliable and appropriate. Did you not feel the need to turn elsewhere for advice beyond this reassurance because others were saying that, despite what apparently you were being told, it was not going to deliver? Lord Bach: It was not just the Permanent Secretary. As I say, it was the collective view put to the Minister all the way through that we would meet this date, and I would have expected to be advised if we were not going to meet this date, but of course the Permanent Secretary would have played a role, and a leading role no doubt, in making sure that that was the advice that I got. I have to say that the advice that I got was both from the RPA and from the Department, and I did not feel the need to go elsewhere. I am not quite sure where else I would have gone. After all, if you will excuse me, Chairman, I am quoting something that you said on 3 April, talking about me, "I am sure he tried to do his best in answering the questions of the Committee but at the end of the day I know from my experience of Government that ministers sometimes are only as good as the advice they have been receiving". Q777 Chairman: That is perfectly true, but when I was responsible for the introduction of self-assessment in the Treasury, which was a massive change in the way the tax system operated. I had the benefit of George Cox, the head of Unisys, as a piece of independent advice to come and tell me whether we were travelling in the right direction on such a complex issue. I had masses of technicians, members of the Inland Revenue, all telling me what was going on, but I did have the benefit of somebody who could hold my hand in an area where I was not familiar. That is why I asked you those earlier questions. I was intrigued, actually, because we do have an insight into some of the advice you did get. Jeff Rooker has very kindly sent us copies of some of the briefings which you received and I notice that, for example, in the briefing on 29 September 2005 you are told that there is going to be "a brainstorming session", where I presume Johnston McNeill, who wrote this stuff, said his staff and policy colleagues in Accenture were going to meet on 6 October to ensure "that we have identified all possible actions that could ensure for February payment". I must admit that if I were brainstorming in September a sense of concern would have come over me. And then I notice in the briefing you got on 6 October that they start to talk about "work has started on digitising the land parcels", but we do not get any reference thereafter to mapping issues until 30 November when they said a total of 35,730 mapping tasks had been processed since 3 October. Given the volume of work that, by definition, you must have understood was being done, did that not ring any bells that there was an increasing and mounting tide of problems? Again, on 30 November you were told that there was an increase in the total population of genuine tasks to be sorted out at 522,000, and then, by the time we get to 9 February when doom is building up at the doorstep, we find that the number of tasks to be done had mounted to 731,000. With that kind of picture I think a few bells might have been ringing in my head that something in the state of Denmark was not right. Lord Bach: As I say, all the way through the assurance was that we were likely to meet the targets that we had set over a year before. You will recall asking, I am sure, at the Committee hearing on 11 January, about the tasks that remained to be done. The point that I think was made in reply, probably from Mr McNeill, and I cannot find the place just like that, was that because this was a task-based system that was being used, and you have heard all about that during your inquiry, once you had solved, as it were, one task you might have solved 5,000, 10,000, even 100,000. I was aware, of course, from what Mr McNeill was telling me that there were risks attached, but I was hearing all the way through that we were likely to meet the date of starting this scheme, and indeed we did meet the date that we had said we would get to, which was February 2005. I will quote if I may what Mr Macdonald from the NFU said to you. He said, "When you are given assurance after assurance, at some stage you either have to believe it, find another tack or give up". That is what he said at question 54, a question from Mr Taylor, as it happened. Q778 James Duddridge: Can I turn to Lord Whitty? Earlier you went back to your statement that I think you made to Radio 4 on 20 June and said you were moving away from the term about ministers being misled and more to a term around being over-optimistic. Why do you think the RPA was overly optimistic in its analysis, its operational analysis in particular, and was there a culture both within Defra and the RPA that made it difficult to bring bad news to ministers? Lord Whitty: I moved away on the grounds that "misleading" can to some hearers suggest intent. I do not necessarily think it was intent to mislead. It had the effect of misleading. I think in all life people tend to tell their boss what they think their boss wants to hear, and indeed tend to talk to their colleagues as if the most optimistic outcome is likely to be the most probable. I do not think it was particularly a culture of the RPA that that was the case. I found RPA officials quite open to discussion of matters and I found Defra officials, who were questioning them and then agreeing with them or reporting to me, pretty open, so I do not think they were scared of reporting it. I think they just took the most optimistic of the outcomes, put them together and felt that that was the message they needed to give to those who were overseeing them. That is not to say it was not challenged; it was certainly challenged by me and it was challenged by Defra officials and, to revert to the point about independent advice, there were independents built into the overseeing system, which used not to be the case in terms of - and I am not sure about the Inland Revenue - civil servants' projects, and they were clearly questioning them as well. Nevertheless, the net effect of that was that they were over-optimistic on two grounds: first, the fact that all the parts worked might not have meant that the total system worked but nevertheless it was reasonably solid ground for saying that things were going well if all the different parts were not; and, secondly, I think they were not sufficiently taking on board the problems in relation to mapping at that stage and I think that did delay one or two later things over and above any delays which had related to late decisions at an earlier stage, which in comparative terms, although they are not unimportant, are relatively minor. I do not think that those who were managing the system, whether Accenture or RPA, were fully aware of or gave sufficient importance to the fact that the system was not working with the actual customers. Q779 James Duddridge: Looking forward, what lessons have been learned, in particular about how ministers access official advice they receive, because clearly many things went wrong in terms of this over-optimistic presentation? How can we avoid a similar situation happening again? Lord Whitty: I think there are two key issues to be answered on this. One is that all the decisions of Government, particularly in relation to Defra of late, have said "Separate out policy from delivery", following the Haskins Report, on which in my time as a Minister I reported to this Committee, and the tendency is in that direction. I think this example shows you that actually you cannot just do that. You have got to follow the policy through and have some system of following it through to the point of delivery. I think if anything we have to reconsider when there are major policy changes - I am not saying ongoing efficiency improvements and so forth - that you need to follow through right to the point of delivery. Ministers and senior advisers need to do that and it needs to be tested. I am not sure that that system would have thrown up quite the difficulties that we had but we should have done it more effectively and I think that same lesson, if I might say so without straying into ex-colleagues' territory, probably applies to a lot of other IT projects where the Government have not delivered what has been quite a positive and good policy but has been undermined by inadequate delivery. Q780 James Duddridge: I am struggling to analyse the information because there are two sets of information: one set I have heard that says ministers and senior officials were so involved in the detail that there was not a sufficient check mechanism, and another set that says they needed to be more detached to give oversight. Lord Bach: I think that is a dilemma for ministers, to be honest, with the Agency system as it is. How involved should ministers become? Should they spend all their time acting as a kind of check on the details that they are being given by those who are technically expert or should they on the other hand stand back and say, "You sort it out among yourselves, boys, and then at the end I will look to see whether you have done it right or not"? I think getting that balance correct is extremely hard. Speaking personally, I have learned quite a lot of lessons from this rather bitter experience. Q781 Lynne Jones: What are they? Lord Bach: As Lord Whitty says, the simple proposition that you should have on the one hand policy and on the other hand delivery may be too simple; it may be over-simple. That is not to say it is completely wrong and that it is not solving some of the things that went wrong before, but there are consequences for ministers, I think, when you have, as it were, two levels: you have your department that is advising you and you have beyond it a powerful agency and you rely on the agency extremely heavily in these circumstances. Q782 Chairman: I think Mr Duddridge has teased out some very helpful observations here, and I come back to my point: the Department had integrated itself into the Agency and you said you relied very heavily on the Department but the very people in the Department who could have given you another perspective of advice (looking for example, at Mr Lebrecht, who was the number two or three person in Defra) were involved in the ERG and they became very heavily involved in the CAPRI board. Did that intermingling not take away some of your channel of advice, if you like, from the Department that you have just said you were very heavily dependent on? Lord Bach: Arguably it did. I have already said, I think, this afternoon that there were unofficial meetings when I would ask very senior officials from the Department their view or they would give me some advice - and this is not the formal list of meetings that you have - so it was not quite as total as you suggest, but on the other hand the Department is bound, I think, on something like this to want to have a week-by-week, if not day-by-day, interest in how the implementation about which ministers have said things is getting along. I imagine that all the Department was trying to do, they would argue, was to assist the RPA in reaching the deadlines. Q783 Chairman: To those of us who have not only the benefit of hindsight but also of being observers, looking at all the evidence that we have had from the NAO, from the minutes and the plethora of data that has been sent to us, there is a mounting series of problems and if the buck so far has stopped at the door of Mr Johnston McNeill because he was removed from his post, and he is the main source of this optimistic flow of advice which was accepted by the Department, you do have to ask yourself the question what was informing Mr McNeill and his management team that it would be all right on the night when just about every other observer of what was going on was sending out, and in fact what Lord Whitty adverted to with his contact in the real world, that the wheels were well and truly falling off both ends of the axle simultaneously? It is one of those things where you say, "This is blindingly self-obvious it is not going to happen", but on went the army, as I said on the radio on Saturday morning, into the valley of non-payment with the slings and arrows of people attacking you from the heights, but on you went, and then, after defending the status quo with great vigour in front of the Committee, within a month of that you collapse. Lord Bach: I wonder if I can make an attempt first of all at disagreeing with some of other things you say. You say the buck stopped with Mr Johnston McNeill. Well, perhaps in a sense it did. I think the buck also stopped with someone else and it was me, if I may say so, and I think my present status perhaps is some evidence of that. Although there would be many who would deny it I think that is the general perception. Q784 James Duddridge: I must admit I started off being in agreement that the buck should end with yourself but, reflecting back to the beginning of the discussions that as one of your top three priorities everything was going through the Secretary of State, to what extent was the Secretary of State responsible? Lord Bach: I do not think either the Secretary of State or I would claim our responsibilities were the same. I actually do not think either of us is to blame for this having gone wrong, if you press me. I am sure there is more I could have done, but I was accused by this Committee in their interim report of complacency and that is an accusation that has stung, I have to say. I think it is a very easy one to make and a hard one to refute but I think it is a very serious accusation. Much more serious than saying a minister is stupid is to say that he is complacent. Q785 Chairman: That is very helpful. So you can get away with stupidity but not with complacency? Lord Bach: Part of my agreeing to come before your Committee today, Chairman, if I may say so, is to try and gently persuade you into thinking that whatever else I may have been I was not complacent. Q786 Chairman: You have had your chance to put that on the record. I think we were stung a little bit by your observations about our activities on the Farming Today programme and on the Today programme. Lord Bach: I think I owe you something of an apology for that, not a total apology; I must be very careful not to eat too much humble pie, but I do owe you and the Committee, I think, something of an apology for perhaps a slight over-reaction. I think it has cost me though. Q787 Chairman: And it is accepted in full measure. What I would say is that the Committee always considers very carefully what it says, and I have to say for the record that part of the reason we did put out an interim report, which is fairly unusual for us to do, is that we were aware of the growing difficulties that farmers were facing and we wanted to apply a little gentle pressure to try and encourage the process, bearing in mind we were not as well armed with knowledge about what was going on behind the scenes as we are now, and I did a moment ago preface my remarks by saying that we have the benefit of this discussion and conversation and the benefit of hindsight, so I think we are all learning something about this. You mentioned the question of accountability and where the buck stops. I think Mark Addison, when he came before the Committee, gave us the first hint that perhaps what we were seeing was the sum total of the parts which we managed by retrospective analysis to show where things went wrong, and you were generous enough to say a second ago that you felt some of the responsibility lay with you and some lay with Johnston McNeill. Lord Bach: I did not say Johnston McNeill. I actually do not think Johnston McNeill as a personality is someone who should be crucified. That is not my view. My view is that the top management of the RPA was not up to task on this occasion. Q788 Chairman: The whole -----? Lord Bach: Yes, that is how I would put it, actually, and were giving advice. You have had this example. On Thursday, 9 March, we were given advice that the bulk of payments would be made by the first few days of April, not the end of March but the first few days of April. On the 14th, five days later, Tuesday, 14 March, and that is a date which I think will stick in my memory for a while, we were told that there was no chance at all of such a thing happening, that the bulk of payments would not be made anywhere near by the end of March and, of course, as you know, they were not. I frankly have to say that I do not think that that was satisfactory from senior civil servants whose job is to tell ministers the truth. Q789 David Taylor: They were being complacent on the 9th and stupid on the 14th? Lord Bach: I do not think they were deliberately trying to mislead, I really do not think that at all; there would be no point in doing that, but I think there was a slight conspiracy of optimism, I have to say, as I think Lord Whitty has been suggesting existed perhaps before my time, and it may be that I should have been slightly more aware that over-optimistic noises were being made. What stopped the bulk of payments being made, as has been referred to before, was that at the authorisation stage, the very last stage, all these validations and entitlements have been gone through and at this very last stage, to use Helen Ghosh's phrase, something got "gummed up". That is what happened and I dare say it is not what the RPA expected to happen but that is what happened, and I have to say that ministers, of course, were caused a huge degree of embarrassment, which is not necessarily unusual, by the way in which the timing worked out. Q790 Mr Drew: I am confused and I just cannot get to the bottom of this. I can understand the thing getting gummed up. What I cannot understand is that from all the evidence there did not seem to be a full, desktop run-through of how the thing could function, not would function but could function, from, let us say, 15 farmers, which we will call X, through to their mapping exercise, which we will call Y, to their outcome in terms of payment, Z. Take 15, take 30, take two. Nowhere in the evidence from all that I have seen did anyone do this desktop exercise to say, "Blimey! This all works", or, "Actually, it did not quite work because of problems with Y". That is where I am flummoxed by the fact that when they pressed the button and it did not work there was not something to fall back on to say, "Ah! We had an idea that there might have been some problem with this when we went live". Is that something you were surprised about? Lord Bach: I think, and it may tell against myself to some extent, you have a real point there and I have been trying to think since I read some of the evidence that has been heard before as to why that should be so. Forgive me quoting, because I do not like to do that; it is almost too court-like, but Mr Addison, when he gave evidence before you, dealt with this point and I think he dealt with it as best it could be dealt with. Sir Peter asked him the question at Q661. He was asked about testing and he said that testing could mean a very wide range of things, and you had had evidence from others who had experienced that a good deal of testing was done, that was definitely true. The individual system releases were extensively tested. If you look at the OGC programme reviews, all of those reviews looked at the bits of the RITA system that were being designed, and one of the questions they asked was whether this had been successfully tested and so on, so there was a great deal of testing, he said. As it turned out, when the testing did not happen in the way that it would have been useful if it had, was the testing of the whole system which would have been a very major undertaking, he said, would have taken a good deal of time and would probably have compromised the original target in any event. There was also lacking, he went on, as he had said before, a depth of understanding of the way in which the whole system would fit together and that those were the issues. I think I agree with what Mr Addison told the Committee on that subject. That is why I think he said the two causes of what went wrong were, one, volume, and, two, timetable. It is for that second reason, the timetable issue, that the testing falls under. I do not know technically whether it would have been possible to have tested live to a satisfactory extent, but obviously the decision was taken not to test live, one, because there would not have been time, and, two, maybe there were other factors too. Q791 Chairman: I think the frightening thing when you look at Appendix 6 of the NAO report, which has got a detailed analysis of the date when we knew, is that the number of red marks increases with frequency as time goes on, and under the column headed "Risk/Issues" it is just a solid series of red traffic lights. Under "Resources" we have got red traffic lights from October 2005 through to the end; "Business Case", red traffic lights all the way through to the end. There seemed to be a lot of lights shining that perhaps might have caused somebody to question whether this was deliverable and for the advice that you were getting to flag that up. Lord Bach: Yes, and I think that is fair comment if I may say so. I notice though, and you will forgive me mentioning it, that in February 2006, which is Appendix 6, page 44, the last page of the NAO report, that by February 2006 there was a status amber. It goes on to say that since the last Gateway review, when the probability of making February payments was assessed at around 50 per cent, a huge effort had gone into achieving this target, the relationship with Accenture had improved and they were now performing to a stronger standard. That was encouraging in the very month that we were going to and did start making payments. Q792 Chairman: Tell us about fallback positions because the NAO report talks about the fact that the technology for a fallback position existed. That was dismissed on the basis of the optimistic noises but then eventually, when Mark Addison takes over running the project, within about a couple of weeks we are into a position of interim payments. Why did fallback get pushed out of the way so forcibly? Lord Whitty: If I could answer for my period and Lord Bach can fill in the rest of the story, throughout that period there was a fallback of relying on the existing systems for working out and making a stab at the Land Register. There was what was called the old systems contingency. There was a point when the resources devoted to continuing that contingency would be too much and the probability of achieving the main aim would have increased to sufficient a level to put that about, but throughout the early part and a large part of the subsequent period there was a full-scale contingency arrangement for paying. The interim issue is a different issue and I do not know whether you want to deal with that at the same time. The interim payment issue arose when we slipped the timescale from December to February, and if you recall December was the earliest possible time we would legally pay; it was the beginning of the window. When we slipped to February the issue of an interim payment was very much pressed on us by the farming industry and was very much my concern, that if we were not certain of February we ought to have an interim payment. The pressure from outside, from within the management system, was the opposite. The OGC report in January 2005 said if you maintain the interim payment option this is going to divert resources. The Commission said if you are going to pay an interim payment you have got to get the farmers to securitize it which really destroys the possibility of it. The view from the senior management in Defra and the RPA was that we were endangering not only this year's programme but next year's if we went for an interim payment. Nevertheless, we kept the possibility of the interim payment open because by that time it was clear that a significant number of farmers were going to be in very serious difficulty if we did not make an interim payment, so we kept that option open as a contingency. Lord Bach: It was a live issue, of course, when I appeared before the Committee last and I said at the end of that that there will definitely be payment by the end of February, "whether or not it is a full payment or the first part of a partial payment" was my direct quote. The reasons why we did not go for a partial payment then, and I know the present Permanent Secretary regrets that decision, and I think she may well be right, was because we managed to start a full payment, which on the face of it was a better course of action, but the arguments against a partial payment were reconciliation with final payments, full payments would not have commenced until April, risk of false expectations, the whole issue around trading which could be excluded by partial payments, the greater risk to 2006, the risk of disallowance still looming in future years and the threat to the payment window of 2006. They were all powerful arguments, Chairman, against partial payments where we believed we could start full payments. After the fiasco that occurred in March then of course we considered again very quickly whether partial payments were the best method of trying to at least give farmers something where they had been expecting something more, and the Commission agreed and that was what happened. There are consequences of partial payments that I think will be felt over the next period of time but the balance had certainly shifted by that stage. I am sure we were right to agree partial payments in April. Q793 Lynne Jones: Could we talk a little bit about the Change Programme. Although the RPA was not your direct responsibility, as the Minister responsible for the CAP reform did you have involvement in the decisions about the RPA Change Programme? Lord Whitty: Not in a direct sense. Clearly I was aware of the programme and the profile that it suggested but I was not involved in discussing with the RPA in any detail the implications of the Change Programme. Q794 Lynne Jones: So when you were making decisions about the Single Payment scheme did any consideration come into play that at the same time as you were bringing about ---- Lord Whitty: Yes, to be honest I was concerned that we would not go too fast on the reduction of staff which, after all, was a consequence of decisions which had been taken years beforehand, basically MAFF decisions, that the rundown in staff was too steep. However, I did think that the end point was do-able because we were moving from a system which involved the RPA in processing 11-plus different schemes to one where they would be processing one, therefore the beginning and the end points seemed sensible to me in terms of the staffing levels. I think there were some shifts in the profile of that which meant that the point where the RPA had just lost such a significant body of staff was followed by the point where they should be dealing with the mapping. I was not entirely sure that the same staff would be the most appropriate to do the mapping but, nevertheless, that was the point where the staff squeeze began to be apparent. I do not think that it had affected the programme at all up until then because relatively senior staff were developing the programme, it was not a hands-on face to customer approach, but when the mapping came in, and to some extent the forms, then clearly we needed more experienced staff, and I think the impact of the Change Programme on that was probably not sufficiently taken into account. The overall trajectory of the Change Programme I never queried. I queried the speed but not the overall direction. Q795 Lynne Jones: Lord Bach, would you like to comment? Lord Bach: I really have not got very much to say. The Change Programme was in place, it was obviously quite a dramatic Change Programme over a number of years. The combination of that with Single Payments plus the Rural Payment Register difficulties did add up to a little bit too much volume, I have to say, but by the time I arrived the Change Programme had been implemented to a considerable extent. I really do not have any strong views on that. Q796 Lynne Jones: I know that there were concerns about the lack of consistency amongst different offices, as I understand it, but who took the decision to move to the task-based approach. Lord Bach: That was before me, I think. Lord Whitty: That was before me as well actually. It is pretty prehistoric. When we wound up the Intervention Board and other organisations and merged them into the RPA, the regional offices that had been dealing with everything were going to be task related. The consequence of that decision was followed through to the formal Change Programme. It was quite a 1999/2000 kind of decision which meant that was the future structure of the RPA. The Change Programme as a term of art was used slightly later on when it was part of the Defra Change Programme which meant with the creation of a new department and its agencies there would be a reduction in staff in total of which the RPA was but one part. The key decisions of the kind you are talking about had happened before that. Q797 Lynne Jones: Yet when the acting Chief Executive came in, was that Mark Addison, he immediately did away with the task-based approach. Lord Whitty: In part, yes. Q798 David Taylor: The reasons that government department outsource so often are complex but they include things of the kind such as "we have not got the resources, we have not got the skills, we have not got the time to do it with the people we have directly employed within our department". We have certainly addressed a lot of the Accenture issues, Chairman, but I want to make the point I am making now. Sir Brian was moved to say at one point that it was inconceivable that Defra could have delivered a programme of this scale without an external partner such as Accenture. In the cold light of day, months after the events that we have analysing both this evening and in the weeks and months that have gone before with the NAO, do you think that Sir Brian was right? Was he being a tad over-bullish about the benefits of outsourcing? Lord Whitty: I think at the point when this came in there was no alternative but to have outsourcing because we had earlier outsourced a significant proportion of MAFF and Defra IT staff. Whether they would have had the level of expertise to do it more in-house - you still need some outside advice - I do not know but the point at which the decisions as to how to deliver the Single Farm Payment were made there was no way in which we could have managed without an outside partner. Lord Bach: I agree with that. I read what Sir Brian said and thought about it and I agree with that. Q799 Mr Drew: Did you ever discuss staffing in the RPA? We all know about the terrible goings-on in Newcastle which seemed to be very much a problem with that office but certainly MPs I have talked to who have RPA offices in their constituencies, and we got this from PCS, regular briefings that things were not right within the agency itself, that people felt very under-valued, they felt completely overwhelmed, and deliverability was always going to be a problem even if the wonderful system worked, was that ever reported through to you? Lord Whitty: I was aware that following the rationalisation of the RPA from its predecessor that there was ongoing and understandable resentment. There were office closures, there were quite substantial redundancies and re-tasking and that was still running through. I think the RPA also suffered from the devolution of pay negotiations relative to the department system, of which I do not approve. I can say that now I am not a member of the government. It did lead to severe differentiation between RPA staff's pay and sometimes the staff who were in the office next door or even the same office. I think there was a morale problem. My personal judgment is that was not the reason we did not deliver the system. Lord Bach: I read the PCS's evidence very carefully and one of my regrets here is that I did not see them when I paid my visits. When I was at the Defence Ministry when I paid visits I would always see the unions involved. I did not when I had my two visits to Reading and one to Carlisle and I now wish I had. I have to say that I did hear that there were some staff difficulties, indeed RPA senior officials did not shy away from the fact that there were some concerns and, indeed, I believe there was some prospect of industrial action of some kind towards the latter part of last year in which I took a very special interest. Q800 Lynne Jones: Johnston McNeill told this Committee there were excellent relations with the trade unions. Lord Bach: I do not necessarily disagree with him, I just wish that I had met with them myself and formed my own view on that, I have to say. It is not just the trade unions in this case, I am quite sure there are other people within the RPA who are not necessarily members of trade unions. I did meet a cross-section, particularly in Carlisle interestingly enough. Q801 Mr Drew: It seemed that the agency relied an awful lot on temporary and contracted staff. Lord Bach: Yes, they did. Q802 Mr Drew: To undertake, with the best will in the world, very complicated tasks. Lord Bach: Yes, and by the end in order to try and meet the implementation dates they were doing that I think, looking back on it, to too great an extent. Indeed, I had Members of Parliament come to me. One in particular came to me and said, "Look, not only are these full-time RPA people paid less than Defra people but the people who come in as agency workers get an even worse deal". There clearly were staff issues but at the end of the day I am not sure whether in this instance that made the difference between success and failure, although I think there are lessons to be learned from that. Chairman: Gentlemen, thank you very much indeed first for giving of your time to come back. There is no obligation on former ministers to come before select committees but there is great value in the fact that you both volunteered to come and talk to us about the background to this whole matter. Can I also thank you for the candour of what you have said. If there is any value of inquiries like this it is genuinely to try to unearth what went wrong if for no other reason than to prevent things like it happening in the future. You have greatly assisted us in giving us a real flavour of the decision-making processes both in terms of the policy and the reality of the way in which the Single Farm Payment and the RPA came about and for that we are very grateful. If there is anything that you want to qualify in writing in terms of what you have said, please do not hesitate to write to us. The only thing that we cannot undo is that which you have already said. Thank you very much indeed. |