Examination of Witnesses (Questions 260-279)
MS HELEN
GHOSH, SIR
BRIAN BENDER
AND MR
ANDY LEBRECHT
15 MAY 2006
Q260 Mr Williams: Some of the stakeholders
were telling you that they would have preferred an area payment.
Can you just spell out which stakeholders said what to you?
Mr Lebrecht: Just looking at the
big ones, it was clear that the NFU and the TFA were very keen
on an historic basis. A number of the environmental organisations,
including people like the RSPB, English Nature, were arguing in
favour of a flat rate basis and the CLA, after some internal discussions,
were proposing a hybrid, but a hybrid of a rather different form
than the one that was eventually adopted. Ministers were faced
with a range of opinion amongst stakeholders.
Q261 Mr Williams: So who was the
author of the dynamic hybrid that is now being used? How did that
arise? Who was the author of that?
Mr Lebrecht: I am not sure there
was any one author. It was clear that there were arguments against
an historic basis and certainly our ministers had a certain nervousness
about the historic, for reasons which are very much in the public
domain. Equally, when they looked closely at the alternative,
which was an area-based payment, the prospect of moving to an
area-based payment on day one effectively in 2005 was something
that gave grounds for concern, in particular about the very rapid
degree of redistribution of payments amongst recipients that would
be involved. So it was really in a sense in addressing that dilemma
that the idea emerged that we should go for an area payment, because
that was the right thing to do, but instead of going to it on
day one, with all the downsides that that would give rise to,
we should transit to it over a period and that is effectively
the system which we have.
Q262 Chairman: The ministers went
along and at the time they agreed, your Secretary of State agreed,
to the overall political framework of decoupling and then subsequent
to that you started to have a consultation exercise about how
you would implement the Single Farm Payment. I do understand the
question of confidentiality of exchanges between your good selves
and ministers, but let us at least try to get somewhere near what
happened. Did ministers actually say to you, did your Secretary
of State come back from the Council and say "I'm very worried
about this historic scheme. Give me some alternative options that
are now open to us as a result of what we have agreed"? Was
that the question that was asked or did you go to listen to the
consultation and say "Oh, there are many very important bodies
out there getting very exercised about this historic system, we'd
better put up some options to ministers so that they can at least
see both sides of the fence". Which way did it start?
Mr Lebrecht: The first decision
that ministers had to make in July 2003 was whether there were
any elements of discretion that they would decide upon
without going out to consultation and what
other elements they would want to consult on. As I recall, there
were only three major items on which they said that they were
not going to consult. The first was that we would go for full
decoupling; we would not take advantage of the options not to
decouple fully. The second was that we would implement on a regional
basis, in other words Scotland, Northern Ireland, Wales and ourselves
would make our own decisions independently as far as we could.
The third was that we would introduce the scheme in 2005, which
was something that all stakeholders were very keen for us to do.
Q263 Chairman: Let me just stop you
and ask you this question. When the negotiating mandate was agreed,
when you were sitting there in the Council and before political
agreement was reached, ministers would have had a very clear idea
of what it was that they were trying to get. You have made it
very clear that hard negotiating, no doubt led by the United Kingdom,
got us to a position of being able to have fully decoupled payments.
However, in those briefs that always go with these decisions,
there is usually a lot of very good background information so
that ministers can understand what other Member States are saying
and it is clear that some other Member States had a similar idea
to us. Did that briefing not include a bit of background information
about some of these alternatives? Obviously if you are going to
agree something at Council, and you may want to come and consider
how you implement it, you want to make certain all your options
are open at the point of political agreement in the Council. Would
I be right in saying that a bit of thought process like that went
on?
Mr Lebrecht: Certainly the briefing
covered all the different angles in the negotiation, but there
are primary and secondary objectives. The point I was coming to
earlier on was that ministers, having secured the primary objectives
and the overall framework, then wanted to go out to stakeholders
on a whole range of issues. It was not just the question of flat
rate or horizontal, it was things like national envelopes, it
was options for national reserve, a whole range of things. On
those they were saying they wanted to take the views of stakeholders
before they made up their minds. That is something ministers are
encouraged to do of course.
Q264 Mr Williams: In coming to a
decision on the dynamic hybrid, were any risk assessments undertaken
as to the difficulties in actually delivering that particular
system?
Mr Lebrecht: Yes, there certainly
were. There were a lot of issues around that decision, including
questions like redistribution of payments. As far as the deliverability
is concerned, we were working very closely with the RPA and through
them with Accenture to ensure that ministers fully understood
all the implications for delivery of the various options including
the one that they eventually went for. In all the advice that
was given, there was never a suggestion that this particular option
could not be delivered in 2005.
Q265 Mr Williams: But that advice
came from the RPA?
Mr Lebrecht: It came from the
RPA. Essentially we were in dialogue with them. Our responsibility
clearly was to specify the options, the scheme requirements that
that would involve and then RPA, using their expertise and the
expertise of Accenture, would assess the implications of that
for the delivery process.
Sir Brian Bender: From this point
on, I was very keen that any policy submission which went up to
ministers was fully joined up between the policy side of the Department
and the RPA, so that ministers had advice on the policy and its
implementability.
Q266 Mr Williams: Nevertheless, in
January 2004, Commissioner Franz Fischler, wrote to all the EU
farm ministers to warn them of the potential dangers of departing
from the Commission's default position of using the historic approach
to Single Farm Payments. So it was obvious at that time that the
Commission at least had some idea that using area payment or a
static hybrid or a dynamic hybrid did have inherent dangers in
it. Would you agree with that?
Mr Lebrecht: Commissioner Fischler
was obviously very anxious to ensure that the Member States did
not do anything that was outwith the terms of reference of the
Council legislation. He was certainly anxious, I suspect more
by what he was hearing in Berlin than what he was hearing in London,
that some Member States might be going too far away from the broad
philosophy of the basic regulation. He reminded us in that letter
that all Member States had an obligation, whatever model we adopted,
to justify objectively any departure from the default position
by reference to objective facts and we did that. We had to write
to them by 31 August 2004 and we did that, to their satisfaction
as far as I know.
Q267 Mr Williams: When you signed
your new contract with Accenture, how many changes in the scheme
were implemented in that time? I understand, for instance, that
in November you agreed that land that was grazed by horses should
be included in the scheme. That was a fairly major alteration
and it does seem to me that there were many, many changes like
that along the line.
Mr Lebrecht: The decision on the
horses more or less followed from the decision to adopt a flat
rate scheme. One of the key objectives of going for a flat rate
scheme was to bring as much land as we possibly could into the
scheme, so it could benefit from the cross-compliance provisions
in the scheme. Any land that was in agricultural use would thereby
come into the scheme. Land in agricultural use includes land which
is kept in good environmental and agricultural condition and that
would include any land grazed by horses. So that was not a change
in scope. There were changes in the scope towards the end of 2004.
Those were primarily driven by developments in the EU legislation,
because all through 2004 the Commission were finding, through
dialogue with the Member States, not just us but others, that
there were flaws in their legislation and they had to amend it
in October 2004 and that required material changes in the scope
of the RPA contract.
Q268 Chairman: You just said something
very interesting and very significant. You said that part of the
reason that you went down the route that was chosen was to bring
as much land as possible within the scope to gain the environmental
payments. You have been in this game an awfully long time and
you would have realised very quickly the range of different types
of land holding which could have been encompassed by the objective
you have just outlined. Why then was it given as a point of excuse
for what has happened in terms of the RPA's ability to cope with
the volume of applications, that you were surprised by the number
of applications you received? You have just told us that you would
like to bring in as much land as possible to benefit from these
payments. You would have gone into that with your eyes wide open.
Why were you then surprised when you knew what you were trying
to do?
Mr Lebrecht: I do not think that
when ministers took the decision they were surprised.
Q269 Chairman: But that has been
said publicly, "We were surprised by the volume of applications".
You were overwhelmed by the large numbers. Ministers stood up,
I remember hearing the Secretary of State in the Commons when
she stood up and said "We did not anticipate the demand that
was going to be made". That is what your ministers said in
public.
Ms Ghosh: My much less well-informed
response than Andy's would be that we were not surprised by the
number of applications we got. When you look back at the assumptions
that the RPA made about how many applicants we would get under
the dynamic hybrid model, they were practically bang slap on right
at about 120,000. The IT system was built for 150,000 so there
was no surprise about the number of actual single applications.
The issue, again on which Andy is a much greater expert than I,
which did cause us concern was the scale of the mapping changes
and the issues involved in getting the rural land register sorted
out. We had a mixture of people catching up with notifications
and amendments to their land holding that they should probably
have made under the old scheme and the incentive element of the
new scheme, for example to the people with land that had not previously
been covered, but also to existing claimants to maximise the area
of land and then there was customer behaviour.
Q270 Chairman: Let me just remind
you what Johnston McNeill said and he was talking about the volume.
He said "That was the result of 40,000 new customers telling
us about the land that they wished to claim on and that was a
major shock to us to be perfectly frank".
Ms Ghosh: It is the "telling
us about the land". I am seeking to help the Committee in
terms of the forensic examination we have been doing. I can assure
you that it is absolutely the case that the number of applications
was not a surprise. The surprise was the scale of the work, as
it were catching up with the historic backlog and the incentivisation
effect, which was involved in sorting out the land.
Q271 Chairman: You do not have to
be a rocket scientist to work out that you are going to have a
major mapping problem even within established farms which have
been part of IACS when there were different categories of land
on their holding which they previously had not been able to claim
for, which they could now claim for. It was bound to be. I am
surprised people were expressing surprise. Anybody who knows anything
about a mixed farm, for example, would understand that you are
going to have more land which could be claimed for and that is
bound to bring complexities because you have introduced a brand-new
digitally-based mapping system at a time when you expanded the
number of people applying and some of them clearly have no previous
experience of applying for anything.
Ms Ghosh: That indeed unarguably
was the volume issue which was the greatest challenge to the RPA.
Q272 Chairman: You did not see that
one coming.
Ms Ghosh: Once we did see it,
we took very careful risk management steps to deal with it. For
example, the decision Sir Brian took to outsource the mapping
process to Infoterra in September last year was absolutely vital
to that process. The mapping was the key delivery challenge.
Q273 Chairman: But you did not pick
up on this until September.
Sir Brian Bender: May I just correct
a point? We did pick up on the mapping problems much earlier than
September. The outsourcing to Infoterra was the last action we
took to deal with the problems. There were several previous actions
to try to deal with the increasing backlog of maps.
Chairman: We shall come onto the mapping
in a bit more detail.
Q274 Lynne Jones: Could you just
clarify whether, when ministers were in negotiation on the CAP
reforms up to June 2003, you had considered that you were going
to adopt anything other than an historic model? Mr Lebrecht suggested
that originally you intended to adopt the historic model and it
was only after consultation that other proposals were being looked
at. What is the timescale for these? The NFU and the Tenant Farmers'
Association told us that in their stakeholder meetings they were
told by civil servants that it would be a nightmare to adopt the
hybrid approach.
Mr Lebrecht: I know that one or
two officials said that some of the examples which were being
looked at at the time could be a nightmare. None of those examples
was the one we eventually adopted. When ministers came to take
their decision, I do not think any of them would dissent from
the view that we had had from RPA that this was deliverable in
2005.
Q275 Lynne Jones: I should be interested
to know which models would be a nightmare. Could we have that
information?
Ms Ghosh: That will come through
in the material we send you.
Mr Lebrecht: There is a piece
of paper which we can give you. Some very, very complicated hybrid
models were being floated around at the time and what we have
adopted is considerably more straightforward than those. To answer
your question about timing, the consultation started in July and
finished in October, so it was largely during the period around
October in 2003 that these issues were being considered.
Q276 Lynne Jones: You did not consider
those alternatives when you were in negotiation on CAP at all.
Mr Lebrecht: No.
Q277 Lynne Jones: Was that a mistake?
Mr Lebrecht: No, I do not think
so. What we were focusing on in particular at the time was the
big prize of all, which was securing full decoupling. I have read
the evidence which was given to you by the NFU and one of the
points which was made was, if we had been thinking about an area
approach at that time, we might have sought changes to the Council
regulation, for example on whether the 0.3 hectare minimum for
a claim size could be raised. Our own judgment is that even if
we had raised it then, we would not have had any success in securing
the change. That minimum is something which has been in the CAP
since time immemorial and I do not think the Commission would
have been persuaded to change it. I am not sure that in reality
there has been any great consequence of the fact that—
Q278 Lynne Jones: What about having
a zero area based approach in the first year? Was that considered?
Mr Lebrecht: It was not considered,
but I am not sure that would have made a great deal of difference.
Q279 Lynne Jones: You could have
gone into the first year on the historic basis and then you would
have had more time to work through all these problems.
Mr Lebrecht: I am not sure, if
I may say so, that would have made a great deal of difference.
The complexity of delivery arises from establishing the definitive
entitlement in the first year of application. Whenever the first
year of application was, that issue would still have been there
to be addressed. If we had put off that decision and had a different
system on an interim basis, we would just have had to ask the
RPA first of all to implement the interim system and then to implement
the new system. I am not sure it would have been helpful.
Lynne Jones: You would have had more
time.
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