Examination of Witnesses (Questions 820-839)
MR TONY
COOPER, MR
SIMON VRY
AND MR
IAN HEWETT
27 NOVEMBER 2006
Q820 Chairman: Help me to understand
the £131m. Whether it be the £131m or whether it be
£1, some real money will have to be found from somewhere;
where does it come from?
Mr Cooper: The provision that
has been made is in the Defra accounts and therefore Defra will
need to decide how that funding, if it is needed, is going to
be gathered together.
Q821 Chairman: Just to be absolutely
clear on that point, Defra has a certain amount of expenditure
which it has got to make; now, in terms of the timescale, when
do you anticipate that the audit process will be concluded? Have
the Commission given you any indication of that?
Mr Cooper: No. The experience
which I believe the Department has had in the past is that it
can take anything up to two years to come to an agreed position.
Q822 Chairman: In which year's accounts
does the £131m sit?
Mr Cooper: The £131m has
been provided for as a contingent liability in the 2005-06 accounts.
Q823 Chairman: If that is the case,
in terms of contingent liabilities, Defra will have a certain
amount of money that it can actually spend in the financial year
in question, because this will be out of the 2006-07 money, is
it, just so we get our financial years right? You said 2005-06,
but that financial year closed at the end of March this year,
so that is where the £131m sits, is it?
Mr Cooper: If I may just consult
Mr Hewett.
Mr Hewett: Very little of the
expenditure would have been made by the end of the 2005-06 financial
year, but the majority would have been made in the European Union
year which ended on 15 October 2006. It is split.
Q824 Chairman: Okay; it is split.
In actual fact, let us say, somewhere along the line, if you have
got a contingent liability in your accounts, you have got to say
to yourself, if that turns into real money, it has got to be found
from somewhere. What I am trying to be clear in mind about is
which year's expenditure it is going to be hurt, because Mr Cooper
said, if it comes, whether it is £1, or £1m, or whatever
it is, somebody has got to find the money from somewhere. Just
so I do not get it wrong, if you are saying it is split between
the two years then in the 2006-07 financial year, the one we are
in at the moment, Defra may have to find that money, because if
it has put the contingent liability and it has got to think "What
happens if we pay it out?" some things may not happen in
the year, because the money has got to be paid out. Is that the
way it works?
Mr Hewett: It depends on what
the European Commission try to disallow us for. Mr Cooper mentioned
it could be for the partial payment solution that we started to
make payments in May. It could be for the fact that not all of
the monies were paid out by the end of the regulatory window,
which ended at the end of June. It could be for the way that we
validated claims, which started some many months ago and would
have fallen within the 2005-06 financial year.
Q825 Chairman: In asking my questions,
I have come to the very simple point that, obviously, the public
seeing £131m sitting there will want to know does this mean
less expenditure in other Defra programmes, if £131m, or
some other number, becomes the number? That is what I am trying
to understand, just for the avoidance of doubt. Equally, you have
also got to put a bit aside for the potential £150m, because
disallowance is nothing new in this territory. I think I am trying
to get a feel as to what sum of money could suddenly be visited
upon Defra as an amount which they cannot spend on United Kingdom
programmes which they are going to have to find from their accounts
to meet any disallowance that comes. If you do not find that the
fine is visited upon you in the 2006-07 financial year, does that
mean that the contingency rolls over into the 2007-08 financial
year, because that is where the real money has got to come from?
Mr Hewett: I suspect that we would
need to talk to our departmental colleagues about the impacts,
but I think the prudent way to do this is that there is a potential
disallowance which could fall in the 2005-06 year, therefore that
is why the contingent liability was placed there.
Chairman: Being a simple man in these
matters, I would be grateful if you would go and talk to your
colleagues. What I would like to know is at what point, when disallowance
is determined, does contingency crystallise out into reality,
and where will the real money come from? The impression given
by the Secretary of State, when he has been probed on this, is
that somehow this is not real money, that it does not have to
be found from anywhere, no programmes are going to be affected
and it has got absolutely nothing whatsoever to do with the current
Defra budget cuts; but it is real money, at some point in the
future, and I would like to know where it is going to come from.
Q826 James Duddridge: Mr Cooper,
I am interested in some of the changes you and Mr Addison made,
first in terms of chronology. Did any of the changes Mr Addison
made to expedite the claims of 2005 have a potentially detrimental
impact for future years?
Mr Cooper: I think the changes
that were either introduced or started by Mark Addison are helpful,
and I have, largely, I think, taken them all forward and built
on those. I am trying to think where a change that he introduced
might have a knock-on effect.
Q827 James Duddridge: Just to help,
you said "largely;" which area is perhaps coming in
and looking afresh again at the time point when you said, "No,
that's not right to carry forward"?
Mr Cooper: I do not think I have
come across any yet. So that I do not appear to disregard the
discussion we have just had about disallowance, quite clearly,
the partial payments that were made and the decision to make those
partial payments carry the disallowance risk, and you could argue
that is a detrimental feature going forward. I do not necessarily
want to go back into that discussion on disallowance, but I think
that will be the only area. The sorts of things that were introduced
where we streamlined some of the checking, where we started to
explore how we would introduce a different way of working rather
than the pure task-based working, those are the sorts of things
that are going to make a difference and those were taken forward
into the 2006 year.
Q828 James Duddridge: From when you
took over, what specifically have been the Cooper changes rather
than the Addison changes?
Mr Cooper: I guess, if I can give
an outline in terms of my first four months, first of all, which
were focused largely around continuing to make payments as quickly
as possible and then moving in towards changes in the organisation,
restructuring it, looking at the governance arrangements and changing
those, defining people's roles and responsibilities clearly, so
that they knew what they were doing. The organisation had moved
towards being a fairly matrix-type organisation where people had
multiple responsibilities and it relied upon good co-operation
across different sorts of teams, and whilst my experience is that
works well in a well-functioning organisation, when it is in a
bit of difficulty it needs to have very clear roles and responsibilities.
That is what I defined. I introduced some changes in the senior
management team. I introduced an Agency Board with four directors,
three of whom were new to that Board, and I introduced two non-executives,
to provide a degree of challenge into the organisation. We have
also gone ahead and appointed site managers. What I inherited
was six sites and they had a management team which shared the
responsibility for managing that site, and by introducing one
single person I have clearly got a more direct line of control
over what is happening there and greater accountability in the
organisation. Those were the sorts of changes I made in the first
four months. In the last two months and the next two months what
I am moving towards is what is the business strategy for the Agency,
what are the changes that we are going to introduce and, having
taken stock of the IT and confirming that the IT is fit for purpose,
then what further investment is needed in that to advance in the
way that we need to, to be able to become stable and functioning
in a way that I think our customers would expect and stakeholders
would expect.
Q829 James Duddridge: I have read
that you are going to introduce greater quality control over manual
checks. What have been the problems which have been demonstrated
through the absence of that quality control to date?
Mr Cooper: There is a range of
quality controls which are already in place, which in some areas
are carried out too many times, so we end up checking the checker's
work. The approach that I would take is more of a risk-based approach,
whether that is on the basis of a member of staff being new to
the organisation and therefore going through a learning curve
and that you would expect to check their work, or because it is
a highly complex case which needs a second look at it. There are
quality mechanisms already in place but what I am trying to do
is arrange it so that they are focused, to be more effective,
really.
Q830 Chairman: Can I ask if one of
the two, new non-executive directors that you have appointed has
got IT or systems experience?
Mr Cooper: One has certainly change
experience, and I suspect therefore has looked at IT change from
a business perspective rather than being an IT expert. I know
she is not an IT expert. That is her qualification for this particular
job.
Q831 Chairman: There is nobody with
a specific IT background?
Mr Cooper: Not as a non-executive,
no.
Q832 Chairman: I notice that on page
11 of your Operating Business Plan for 2006-07 you comment on
the state of the RPA for doing all the other things for which
you are responsible. You have given us an outline as to how you
are going to get the Single Farm Payment Scheme right, but sometimes
it is easy to forget that you have got lots of other things for
which you are responsible. I note that on page 11, paragraph eight,
you say: "Unsatisfactory delivery of non-Scheme activities
due to resources for non-Scheme activities falling to unsustainably
low levels. Systemic failures in RPA due to lack of funding for
the resources required, loss of key knowledge, accreditation/control
weaknesses, and poor staff morale leads to reduced productivity."
If that is the state of the rest of the business, it looks like
a pretty big task to fix that as well, together with the focus
you are going to have to put on getting the Single Farm Payment
Scheme right. Are you equipped to do that and, if so, are you
going to get the resources you need to correct that very candid
list of problems?
Mr Cooper: Can I clarify first
though that this is a set of risks that we have identified to
the successful delivery of these schemes and for the Agency. Having
identified the risks, quite clearly, we wish to take mitigation
action to ensure that we do not realise that risk, and the areas
that we have identified are those to which we need to pay careful
attention. There is a risk that we take too many resources out
of those areas that are non-SPS, as we have made SPS the priority
for the Agency, and I need to guard against that. I do that by,
for example, tracking on a regular basis the performance of those
areas against the targets which they have. At the moment I am
managing that risk.
Q833 Chairman: Can we come to some
specifics, because what the Committee has learned over time is
that the present set-up is costing far more than was originally
budgeted for, and you are still left, roughly speaking, with the
present set-up, because you said that you cannot implement the
kind of dramatic change that you might want to, possibly for the
next two years. If you are going to have to operate the current
system with more resources than was originally planned, have you
been given those resources and, if so, what does it amount to
in millions of extra pounds?
Mr Cooper: We have been allocated
in this current financial year an additional £23m, which
has provided additional funding for the additional people that
we have recruited into the organisation.
Q834 Chairman: That extra £23m,
let us be absolutely clear, does that come on top of the additional
resources which had to be put in to get the Single Farm Payment
actually up and running, or is it £23m above some base-line
figure; just so that we know? I do not want to be accused of inaccuracy.
Which is it? Is it £23m above what it cost in 2005-06, so
in other words the 2006-07 expenditure is £23m above the
2005-06 for the delivery of the Single Farm Payment?
Mr Cooper: I think the annual
expenditure, running costs, for the Agency is more or less the
same as last year, but I think I should offer to confirm that
to you.[1]
Q835 Chairman: It would be helpful to
have some clarity as to where that £23m comes in. Were you
going to say something else before I sought clarity?
Mr Cooper: Just to say, that provided
sufficient funds to make some additional IT changes which have
been necessary and also to fund 300 staff that we recruited to
start the process of validating the Single Payment Scheme.
Q836 Chairman: Again, just so we
are clear, we were told that, to make the Single Farm Payment
work, you had to take on 900 staff during 2005-06, these were
supposedly temporary people, to make up for the failure of the
optical character reader system. Therefore, do I understand that
in addition to those 900 you have now had to have another 300
to make it work in the next financial year?
Mr Cooper: It is not quite as
straightforward as that.
Q837 Chairman: This is your chance
to tell us what the numbers are?
Mr Cooper: The number of staff
that we have in the Agency at the moment is about 4,500, but that
number fluctuates depending on the demands and therefore it constantly
goes up and down and it can vary. I suspect, when I say there
are 300, there are 300 people that were recruited specifically
on a temporary basis to do the initial processing of the Single
Payment Scheme for 2006. They were recruited in one location and,
as you would expect with temporary staff, there has been quite
a turnover. The 300 people that were recruited, 200 of them went
back to college at the end of the summer and obviously we have
been continuing to recruit to replace those people. In terms of
recruitment numbers, the recruitment numbers are quite different
from those that we have actually sitting at desks.
Q838 David Taylor: Are you reviewing
training of the members from the first batch that you recruited?
Mr Cooper: We are putting a lot
of effort into reviewing and improving the training facilities
that we provide. The induction training and the SPS training is
being reviewed and it is being revamped; indeed, I think there
is work this week going on to draw upon the experiences of the
staff who have been on the receiving end of the training and having
to process it as a result of that. We are learning from that and
developing different models and different approaches.
Q839 Mr Drew: It is very interesting,
because obviously I was working on exactly the same script as
the Chairman, so either we have pre-prepared this or we are thinking
along the same lines, and David Taylor's point is absolutely crucial.
You identify and are managing risk, as the Chairman has said,
quite rightly, loss of key knowledge. We know that one of the
real problems was that the nature of the people who were being
employed, without being rude to them, was externalised temporary
staff who clearly had no long-term commitment, because of the
nature of the employment under which they were taken on, and who
were not doing the work, not through any fault of their own, they
were not really capable of doing that work. Are you saying that
those people no longer exist in the organisation, or are you still
taking on students who clearly cannot have any long-term commitment
to the Agency?
Mr Cooper: We have a range of
people employed in the Rural Payments Agency and it would be very
wrong to assume that a category of those people employed are not
doing a good job. There are many temporary staff that are fulfilling
a very, very competent job.
1 Ev 240 (RPA Sub 17). Back
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