Government response
Introduction
The Government is grateful to the Select Committee
for its report on the Rural Payments Agency (RPA) and the implementation
of the Single Payment Scheme (SPS).
The Government acknowledges with regret the significant
difficulties experienced with the delivery of the new SPS and
the impact that this has had on individual English farmers and
the wider farming community. The RPA paid over 90% of the money
available for the 2005 SPS within the required EU Regulatory timeframe
(by 30 June 2006) but this was after the Government had made a
commitment to pay the bulk of payments by the end of March.
The RPA is an Executive Agency of the Department
for Environment, Food and Rural Affairs (Defra). The Agency's
Chief Executive performs the role of Accounting Officer for the
Agency, responsible for the money spent by the Agency, delivery
of its targets and its day-to-day management. One of the major
roles the Agency plays is acting under EU law as the accredited
Paying Agency for the domestic redistribution of funds from the
Common Agricultural Policy which it does on behalf of the Secretary
of State.
The RPA was responsible for developing and implementing
a system to ensure that correct payments to farmers under the
SPS were made by the internal target date recommended by RPA and
agreed by Defra Ministers. Defra senior officials worked closely
with the RPA Chief Executive and his team in pursuit of that objective
and to provide an appropriate challenge function. However, responsibility
for delivering the scheme and advising Ministers on RPA's ability
to meet the timetable rested solely with the Chief Executive.
Any other arrangement would have compromised the Agency's accountability
and undermined the arrangements under which the Department oversaw
its functions.
Once it became clear that the announced timetable
would not be met, the Department acted swiftly to replace the
Chief Executive and to ensure the flow of payments was expedited.
Details of these actions are set out in the evidence Defra has
provided to the Committee. Since then, the Department and RPA
have focused on ensuring improvements to the way SPS is delivered
with the aim to provide stability for RPA's customers in the SPS
2007 and an improved service for SPS 2008. The RPA's processes
for handling SPS claims have already been streamlined, helping
the Agency to achieve its formal target for SPS 2006 by making
98% of payments by 30 June 2007, and further improvements are
in hand as part of the RPA's Recovery Campaign funded by the Department.
The Defra commissioned Hunter Review which looked
at RPA's current and possible future functions reported in March
2007. It concluded the RPA should remain as a Defra Agency, concentrating
on its core business as a paying agency. Furthermore, the review
recommended against major changes in the structure or responsibilities
of the Agency in the immediate future so it can focus in the short
term on stabilising the SPS.
Many of the lessons learned have been fed into the
Department's wider review of its governance of delivery which
confirmed that governance arrangements should be fit for purpose,
and specifically related to the capacity of a delivery organisation
to manage its challenges and risks. Defra must balance governance
structures and their operation against risk associated with delivery
and the organisational capacity and capability of the delivery
organisation. Actions from this review will be taken forward as
part of the Department's response to its recent Capability Review.
Some of these points are covered in more detail in
response to the Committee's recommendations and conclusions, which
have been grouped by theme. The Committee's recommendations are
reproduced in bold.
1. Defra should establish
why its decision making processes did not require an adequate
examination in 2003 of the implications and changed risk profile
associated with introducing the Single Payment Scheme in parallel
with the RPA's Change Programme and its associated new business
processes.
2. The policy reasons for
the Government choosing the dynamic hybrid are appreciated, but
such decisions should not be made in isolation from practical
realities. The choice of the dynamic hybrid model made the RPA's
task a more complex one than implementation on a historic basis,
especially with the Change Programme being implemented in parallel
with the SPS. The policy suffered from the closed nature of discussions
during its development and a lack of real scrutiny of the implications
of what was proposed, such as the fact that payments would henceforth
be made outside the farming mainstream.
3. We conclude that Defra
ministers selected the 'dynamic hybrid' model in the knowledge
that it was inherently more complex and risky. But they did not
seem to be aware of what they were letting themselves in for.
Defra officials did not quantify these risks for them, and relied
too easily on RPA assurances that the choice was deliverable in
the time available. These assurances were not based on detailed
analysis, and were partly motivated by a desire to escape from
difficulties with the development of IT systems to pay the previous
schemes. No proper appraisal was made of the volume of work that
the chosen policy would entail, both in terms of the number of
claims and, even more significantly, the number of land changes
that the RPA would have to deal with: land not formerly incorporated
would now be within the system and there was a strong incentive
for landowners and farmers to register as much land as possible.
Defra should now identify those who were responsible for this
fundamental failure to recognise the consequences of its own actions
on the RPA payment delivery mechanism. Senior officials who presided
over the lack of policy analysis should indicate why those actions
were not undertaken.
4. The amendment of the
original dynamic hybrid decision so soon after it was announced,
by adding a third region, reinforces our conclusion that the wider
implications of the dynamic hybrid model had not been properly
thought through when the decision was made. It also made the RPA's
task yet more complex and lost them more time. Defra should provide
a commentary to explain this failing in its internal decision
making process.
6. We conclude that the
numerous changes to the SPS rules and late policy decisions contributed
to the delay in implementation by reducing the time available
to build and test systems. Defra was not to blame for all of these
delays: the EU was slow to finalise the common rules of the SPS.
However this should have been a foreseeable risk, as Defra should
have realised that other Member States were not in such a hurry
to have the details worked out, either because they were implementing
in 2006 or because they were using a historic system. In addition,
some of the RITA components were not able to cope with the required
volumes when delivered, which reduced the amount of time the RPA
had to process the 2005 SPS claims. RITA itself did not work reliably
enough. Defra failed to anticipate the volume effects on their
systems arising from the implications of the SPS policy for the
numbers of additional landowners who could now benefit from the
new arrangements. Ultimately ministers and Defra senior management
must accept full responsibility for their failings.
In its evidence to the Committee the Government sought
to demonstrate that both Defra and the RPA undertook a substantial
programme of work involving the farming community and their main
representatives to analyse the implications of the June 2003 CAP
reforms and preferred policy options.
The policy development was taken forward in an inclusive
and fluid process. The outcomes of discussions with key industry
stakeholders and the analysis of the real world impact of the
various possible options contributed to the internal discussions
that took place involving Defra and RPA officials, the ministerial
team and special advisers. Substantial analysis underpinned the
decision on the dynamic hybrid model including distributional
impacts and impacts of decoupling.
In parallel, with the developing knowledge of the
shape, if not the detail, of the CAP Reforms, the RPA carried
out an assessment of what impact these reforms would have on its
business. In particular, this assessment looked at the implications
for the Agency's existing Change Programme and at the suitability
and capacity of its IT systems and processes. In September 2003,
the Agency recommended to Defra's Restructuring Board that the
CAP Reform work should be integrated into the existing RPA Change
Programme. This was approved by the Board and recommended to Ministers
for final agreement.
When Ministers subsequently selected the dynamic
hybrid model, it was fully recognised that this approach would
add complexity and increase the risks to the RPA Change Programme.
However, at no point did the Agency or the independent assessors
say that it was not possible. Question marks have been raised
- with the benefit of hindsight - as to whether the Agency had
the capacity or capability to make an informed assessment necessary
of the likely impact of the new scheme on the systems and processes
it was developing. However, as explained in evidence to the Committee,
the Agency's record in meeting its objectives and external assessments
before March 2006 did not suggest that those question marks existed
at the time.
Following the decision to proceed with the dynamic
hybrid model and in line with best practice, close working with
stakeholders continued and amendments were made in light of their
inputs. This included making the further division of the Severely
Disadvantaged Area to identify moorland as a separate region to
which the Committee specifically refers and which it supported
in its 7th Report of Session 2003-2004.
With hindsight it is now clear that the extent of
policy changes and their timing, combined with the problems within
the RPA, overstretched the Agency's ability to deliver.
The Government does recognise the importance of getting
the working relationships right with its delivery bodies. Changes
have been made to the way in which Defra and RPA work together
(some of which are detailed below) forming part of the wider Departmental
review of Defra's governance structures with its delivery bodies.
5. RPA efforts to reduce
risk of EU disallowance in fact increased the risk of failure
in policy delivery. The RPA and Defra ended up with worst of all
worlds: both a failure to deliver and the likelihood of substantial
EU disallowance. Defra should identify which ministers and officials
contrived to agree a scenario that was a precursor to failure.
13. Defra should explain
why its concerns that disallowance prevention was interfering
too much with the preparations for payments were not heeded by
the Agency.
The former Permanent Secretary made it clear to the
former RPA Chief Executive that the Agency needed to balance appropriately
the risk of disallowance against the risk of failure to deliver.
Possibly as a result of a lack of understanding of how its new
systems and processes would operate in practice, subsequent experience
would suggest that the RPA remained overly focused on compliance
and avoidance of disallowance and did not sufficiently balance
those concerns against the need for efficient processing of payments
to farmers.
Disallowance risks were reviewed during this period
by the RPA Audit Committee, under external chairmanship, and reported
orally to the RPA Ownership Board. However, in July 2006, the
Department established the Disallowance Working Group to strengthen
the assessment of financial, legal, regulatory and reputational
risks associated with the delivery of CAP payments, particularly
concerned with the SPS. The Group's work includes evaluation of
options and assessment of measures to manage and mitigate risks
between principally the Department and the RPA and advises the
Accounting Officers from both the Agency and the Department. Following
some recent additional internal analysis, the Department's capacity
to address disallowance issues is being further strengthened.
7. Accenture witnesses appeared
to have been well schooled in not venturing comment on matters
which they deemed were beyond their contractual observations.
This attitude denied the Committee an important perspective on
the way the SPS project was being run from the standpoint of a
company at the heart of the venture. We regard this as an unacceptable
attitude from a company of international repute and which may
still aspire to work with UK government in other areas.
The Government notes the Committee's observation.
8. What this supervisory
structure confirms is that Defra did not simply let its executive
agency get on its own and try to deliver the SPS on time. The
Department effectively established joint ownership of the project,
'warts and all'. In so doing it reaffirmed its share of the responsibility
for the project.
9. The Committee very much
regrets the former Secretary of State's attempts verbally to distance
herself from the consequences of policies which she herself must
have approved. Expressing annoyance or dismay was no substitute
for her need at the time fully to engage in her Department's efforts
to deliver the SPS on time.
14. The Department should
indicate in detail what steps it has taken, and plans to take,
to ensure that lines of communication between Defra and its Agencies
are clear so that parties can be certain in the future that each
has understood what the other is saying. Defra must also incorporate
in its next Annual Report a section giving a clear and unambiguous
account of how it is correcting its weaknesses and responding
to the lessons learnt.
The Government has set out the key actions it is
taking to enhance the effectiveness of the Department's partnership
with its delivery bodies in its response to the Committee's report
on Defra's 2006 Departmental Report and Defra Budget (published
on 15 May 2007).
Although organisationally at arms length from the
Department, Executive Agencies such as the RPA are responsible
to the Secretary of State and are indistinguishable from the Department
itself. This relationship by its nature is generally closer than
other types of delivery bodies. There is no question therefore
that the Department should at any stage renounce its interest
in an Agency's work.
In the case of implementing the SPS it was important
to ensure that policy development and delivery responsibilities
were closely aligned, without affecting the key accountabilities
of core Defra for the former and RPA for the latter. The roles
of the key mechanisms - notably the CAP reform implementation
programme board (CAPRI) and the Executive Review Group (ERG) -
have been documented in the Government's evidence to the Committee.
The governance structures put in place to oversee progress of
the programme were commented upon favourably in the reviews carried
out by the OGC and NAO at the time. Specific reference was made
in those reviews to the fact that the structures followed best
practice and provided a sound basis through which to manage risks.
The Government accepts that as the delivery deadline
loomed, the degree of overlap between the responsibilities of
these two groups increased. However, there is no evidence that
this undermined the RPA Chief Executive's responsibilities in
respect of delivering the SPS, or that it added to RPA's difficulties.
On the contrary, the attention of senior Defra officials ensured
that providing whatever support was requested was afforded the
necessary high priority and that decisions were made quickly.
The closure of the RPA Change Programme in Spring
2006 and the arrival of a new RPA Chief Executive provided an
opportunity to revisit the governance arrangements for the RPA.
The Defra Management Board's corporate ownership interest has
been placed with the Director General (DG) for Food and Farming,
in line with new practice across Defra of placing this interest
for any given executive agency with an individual member of the
SCS, usually the DG with the greatest policy interest in the performance
of the body concerned. He is supported by a new Strategic Advisory
Board, replacing the old Ownership Board, providing support and
challenge to RPA at the strategic level and focused on the ownership
interest. The new board has a smaller tighter membership and its
members have been chosen as personal experts, rather than representatives,
against a skills mix template for the Board. The resulting higher
proportion of non executives (3 out of 7 members) has enabled
greater non executive challenge.
The corporate customer interest in the RPA has similarly
been placed with the SRO for the 'Farming for the Future' Programme.
Again in line with new practice to introduce greater clarity in
the management of ownership, customer and stakeholder interests
for all our executive agencies. The RPA Oversight Group has been
established as a temporary body to give Defra oversight of the
Agency's performance on SPS delivery (and its broader portfolio)
as it recovers from the crisis of SPS 2005. A new joint policy-delivery
Division has also been established, reporting jointly to a Director
in Defra and the Chief Operating Mrs Madeleine Moon
Officer in RPA, bringing together key officials responsible
for the complete policy to delivery chain.
A more substantial update on the SPS was included
in the Department's 2007 Annual Report published in May 2007
and further analysis will be incorporated into the RPA's Annual
Report and Accounts for 2006-07.
10. The RPA did not adequately
take into account the effects of losing a large number of experienced
people. Lord Whitty should have acted at the time to prevent the
departure of so many such staff.
Staffing levels in the RPA were primarily an issue
for the Agency and its Chief Executive. The former Defra Permanent
Secretary did however make clear to the RPA that delivery success
was of paramount importance and that if the Agency was failing
to meet the SPS delivery as a result of its efficiency targets
then the issue should be elevated to him. At no point was this
done.
Once the negative impacts of the staff efficiencies
did become clear, the second wave of exits was cancelled. In addition,
a number of staff yet to leave under the first wave were asked
to delay their departures.
The RPA currently has a headcount of 4,500 of which
approximately 50% work directly on SPS with the remainder dealing
with the Agency's other work. As part of the RPA's Recovery Campaign,
the Agency is introducing a systematic manpower planning system
which will provide a sound basis for future planning and the stabilising
of permanent recruitment and promotion needs. In the meantime
the Agency has made changes to convert long-serving Agency staff
to fixed term appointment and plans to regularise the position
of managers on temporary promotion.
11. The Office of Government
Commerce should review its procedures and warning assessment systems
which allowed a project to reach a rating of probability of success
of only 40% seemingly without effective preventative action being
taken.
Varying assessments of the probability of success
were made at different stages of the programme. The key point
was that action was taken at each stage to improve that probability.
Mindful of the NAO report on 'The Delays in Administering
the 2005 Single Payment Scheme in England', the recent OGC Gateway
Refresh exercise has updated the Gateway workbooks to improve
the focus on assessing the softer skills present in projects.
For example, areas to be probed by review teams include determining
stakeholder support for the delivery approach and mechanisms,
and the adequacy of skills and experience of the Project Team
including risk management. Evidence expected includes: documentation
that the project decision-making process is inclusive of all the
relevant stakeholders and that their views are recorded; and that
the results of stakeholder consultations are documented and acted
upon. Reviewers should also ensure that the project resource plan
properly identifies all the project skills and experience required
to deliver each stage, and that measures are in place to determine
whether these skills are available internally, or whether external
skills should be acquired.
OGC has also sought to address the situation where
an SRO uses the Gateway process as the primary source of assurance.
The updated Gateway workbooks remind users that its purpose is
to provide a quick snapshot view of progress at a particular point
in time. It positions Gateway clearly as a source of external
assurance which is complementary to, but not a replacement for,
a public sector body's internal review, health checks and audits
of its activities, including projects and programmes. In particular,
departments are reminded that an OGC Gateway review does not replace
the need for a full audit opinion on the effectiveness of risk
management control and governance in the audited area.
12. Given the high importance
of successful implementation of the SPS scheme, to the reputation
of the Department and the RPA let alone to the claimants, we find
it extraordinary that Defra seemed prepared merely to aim to keep
the probability of success above 50% just eight months before
payments were due to begin.
15. We welcome the RPA's
live test of 2006 scheme year payments in January 2007. Defra
should have demanded that such a test take place in the 2005 scheme
year before it went ahead with the attempt to pay all claims.
Throughout this programme, the Government's aim was
to make payments in line with ministerial commitments. Formal
risk management processes used by the RPA were based on a standard
best practice approach and were supplemented by additional internal
risk identification and reporting mechanisms. Quality assurance
was sought from a wide range of external experts, including through
appointment of a non-executive director to the CAPRI Board, and
participation in a full OGC Gateway Review process.
These formal processes were used to define the programme's
structure and to track its implementation, with frequent consideration
and balancing of system and policy development priorities.
The Government does, however, recognise that risk
identification and management was largely focused on adherence
to the delivery timetable; once operational problems began to
occur risk mitigation was therefore largely taken in order to
reduce threats to this timetable as they occurred, rather than
to identify and avoid potential higher level delivery issues including
the descoping of end-to-end testing. The Government welcomes the
Committee's support for the live end-to-end testing carried out
for the 2006 Scheme.
A key focus for the RPA now is to improve the information
available to manage its business. This includes risk identification
and management of risk. The Agency is developing a new Management
Information Strategy which will develop existing processes and
will also seek to establish a robust performance management culture
with the aim that business will, in short time, have a more informed
understanding of progress against performance targets.
16. We seriously question
the decision to spend more than half a million pounds in fees
to private consultants as part of the Hunter Review of the single
payment scheme. The Department must publish an explanation about
why use of such a sum was thought necessary and where the resources
to fund the review have been found at a time when Defra has been
cutting the budget of a number of its agencies.
Whilst this work was formally commissioned as part
of the Hunter review, and was reported to the Committee in those
terms, in practice the consultancy's work also fed into RPA's
short term action plan. The Government was conscious of the importance
in taking action quickly so that a basis for making early progress
was achieved. Corven Consulting was therefore commissioned to
undertake a rapid organisational Capability Review of RPA. The
main focus of Corven Consulting was to:
- review Mark Addison's 2005
scheme payments plan to ensure maximum traction and release money
into the industry quickly, to identify scope for improvements
and quick wins;
- review plans and issues in respect of SPS 2006
and make recommendations;
- review RPA budgets and cost base to establish
resourcing requirements etc.
- deliver an organisational capability assessment
to set the baseline and ability to deliver
- facilitate early definition of scenarios for
RPA's future role and produce a gap analysis of current capability
against these scenarios (to feed into later work by the Hunter
Review)
- make recommendations in respect of operational
business improvements, tactical delivery plans and evaluated strategic
options for RPA's organisational development.
The output of this review started to rebuild Defra's
relationship with RPA. The new arrangements put in place for Defra
governance and oversight of RPA are also based on the work of
Corven Consulting. The cost of the work came from within existing
budgets.
17. The Committee requests
that the Secretary of State continues to keep the House fully
informed of progress with payments and important operational developments.
The Government will keep the House informed on progress
with the SPS. Since the significant problems with the SPS came
to light in March 2006, the Government has made nine statements
to the House as well as providing regular updates in answers to
Parliamentary Questions and via the Defra and RPA websites. The
Government's last statement on the SPS was on 2 July 2007.
18. Although the move away
from the task-based system is welcome, we remain concerned that
the RPA is still using an IT system that was designed for a task-based
system and has been difficult and unreliable in service. We require
the Department and the RPA now to cost and publish details of
the further IT changes which will now have to be made to overcome
current problems and speed up the SPS payments process.
The Department accepts that the RPA's RITA system
was built to support a task-based approach and that elements of
the system were removed in favour of delivering to time and meeting
the core needs of SPS. The RPA has a planned programme of enhancements
which will improve the processing of claims and the underlying
architecture of the RITA system. The first changes to RITA to
support whole case working will be made in 2007 with full benefits
in 2008 and subsequent years. Other changes include a management
information system, test environments, improvements to the Rural
Land Register, support within RITA for a simpler SPS claim and
the automation of a number of activities. The activities to be
automated include calculation of the extra subsidies farmers receive
as a result of reform of the EU Sugar regime and the transfers
of entitlements.
The RPA's programme of IT releases is planned for
January, March and October in 2007, 2008 and 2009. This projected
expenditure is set out in the following table (figures are in
£000s):-
| | 2007/2008
| 2008/09 |
2009/10 |
|
| Release date | Jan-08
| Mar-08 | Oct-08
| Jan-09 | Mar-09
| Oct-09 | Total
|
| | | |
| | | |
|
| Business process Re-engineering |
986 | 6732
| 3300 | 2700
| 300 | 0
| 14018 |
| Technology | 582
| 6136 | 3290
| 60 | 1200
| 2400 | 13668
|
| Services including release management and live support
| 2701 | 2748
| 4880 | 3382
| 1394 | 5300
| 20406 |
| RLR mastermap update |
| - | -
| 1900 | -
| - | 1900
|
| Contingency | -
| - | -
| - | -
| - | 5722
|
| Total programme costs | 4270
| 15616 | 11471
| 8042 | 2894
| 7700 | 55714
|
19. Johnston McNeill was
Chief Executive and Accounting Officer of the independently accountable
delivery body that failed so clearly to deliver, and which failed
to foresee in time the fact that it would not deliver. As such
he is accountable for, and must bear responsibility for, the failings
of the RPA. If he felt that he was being asked to carry out a
task that he would not be able to defend on value for money grounds
to the PAC, he should have sought a formal written instruction
in accordance with the Treasury's rules on Government Accounting.
20. But Mr McNeill was not
personally and solely responsible for the failure to pay farmers.
The Agency failed largely because Defra asked it to do too much
in too short a time and did not pay enough heed to the Agency's
warnings about the risks of what was being proposed. The governance
arrangements stipulated that Johnston McNeill should share senior
responsible ownership with Andy Lebrecht, and all the crucial
decisions and recommendations to ministers on implementation were
made jointly with Defra by committee through CAPRI or the ERG.
We conclude that it is unfair for McNeill to be the only person
to be held accountable when he was not given the sole responsibility
for delivery.
21. If a failure to deliver
on such a scale had occurred in a major plc, the chairman and
the senior operating executives would have faced dismissal from
post. With this in mind the Committee continues to be astonished
that Sir Brian Bender continues to hold the rank of Permanent
Secretary. If he does not tender his resignation the Head of the
Home Civil Service should explain why a failure such as this results
in no penalty.
22. His long standing knowledge
of the importance of timely payments to farmers and his full involvement
in the SPS project from its inception mean that he should now
consider his position. If he chooses to stay, the Department in
its response to this report should explain to us in straightforward
language why being so closely associated with the waste of large
sums of Government and farmers' money and the widespread disruption
of England's rural economy should result in no personal penalty
being paid.
23. It will seem strange to many in
the rural economy that right at the top of Defra no price for
failure has been paid by the now Foreign Secretary. Leaving others
to get on with the day to day delivery of services should not
remove the obligation from the holders of high office to do more
than just apologise and mouth the words "I am taking responsibility".
It should be the case that when a Department fails to deliver
a key programme right at the heart of its fundamental responsibilities
the holder of the office of Secretary of State should not be rewarded
with promotion but its reverse. New ministerial guidelines should
now be drawn up to make it even clearer that if individuals are
prepared to accept the glories that come with high office they
also know precisely what to do if fundamental Departmental failure
occurs.)
The Government has already acknowledged with regret
the significant difficulties experienced with the delivery of
the new SPS and the impact that this has had on individual English
farmers and the wider farming community. Defra considered questions
of responsibility and took strong action in the light of the failings
as recorded in the introduction to this response. Officials past
and present also gave a full account of the Department's actions
to the Select Committee. When the report was published, the Prime
Minister and Sir Gus O'Donnell made it clear that Sir Brian Bender
continues to enjoy their full confidence.
Successive Governments have taken the clear view
that discipline and employment matters are matters of confidence
and trust, and Select Committees have agreed that it is not their
task to act as disciplinary tribunals[1].
The Government therefore strongly regrets that the Select Committee
have chosen to make criticisms of named civil servants in the
way that they have done in these conclusions.
The accountability and responsibility of Ministers
is set out clearly in the Ministerial Code. The Government does
not believe there is a need for any further guidance.
Department for Environment, Food and Rural Affairs
July 2007
1 Departmental Evidence and Response to Select Committees
[also known as the Osmotherly Rules], Cabinet Office,
July 2005. http://www.cabinetoffice.gov.uk/propriety_and_ethics/documents/osmotherly_rules.pdf Back
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