Examination of Witnesses (Questions 200-219)
DEPARTMENT FOR
ENVIRONMENT, FOOD
& RURAL AFFAIRS
AND RURAL
PAYMENTS AGENCY
MONDAY 9 JULY
2007
Q200 Chairman: Good afternoon, and
welcome to the Public Accounts Committee, where today we reconvene
our earlier hearing on the Comptroller and Auditor General's Report,
The Delays in Administering the 2005 Single Payment Scheme
in England. We welcome you to our Committee, Mr McNeill, and
we are sorry that you have been ill during the past year. We are
grateful to you for appearing before the Committee, so that we
can try to get to the bottom of what went wrong with the scheme.
Paragraph 17 of the Report states, "The
timetable for the implementation of the Single Payment Scheme
became very tight following required changes to the original specification
of the computer system." My first question is whether it
was ever realistic to try to implement the scheme in time for
the 2005 scheme year. I ask that by way of summing up.
Johnston McNeill: That question
was first asked when the proposed Single Payment Scheme (SPS)
for 2005 was going to be on an historical payment basis, which
would have been the most straightforward method of payment. However,
from mid-2003 until early 2004, there were further discussions
between the Secretary of State, Ministers, the National Farmers
Union and others as a result of which the system and the scheme
developed into what became known as the dynamic hybrid. That in
itself was bad enough.
At that time, we took stock of whether Accenture,
our IT supplier, could still meet the requirements, and it felt
that it probably could. After all, it was already contracted to
us to develop 11 schemes, so the possibility of instead producing
one scheme was an attractive idea for them. In addition, they
felt that it had already substantially climbed the learning curve
in working with us. We had our rough times, but we moved along
quite well, and it felt that it would be possible to put the SPS
scheme in place.
The SPS scheme continued to develop. As the
NAO Report notes, there were some 21 major policy changes that
resulted in some 63 change requests to Accenture during the period
up to early 2005. The Office of Government Commerce made the point
at the time that the requests for ongoing changes of SPS policy
must come to an end. It said that it was not possible to continue
writing a system to deal with the SPS scheme unless that stopped.
To answer your question, it was death by a thousand
cuts. We started with something that we felt was relatively straightforward
given the historical data, and moved to something that was more
complex. The system developed over nearly a year, until it became
so complex that we were delivering elements of it on a just-in-time
basis. To be frank, I suspect that that was a major part of our
eventual downfall.
Q201 Chairman: Okay. So in Scotland,
Wales and Northern Ireland there was the static hybrid system,
which was much simpler, while in England we had the dynamic hybrid
system. Presumably that was a ministerial decision.
Johnston McNeill: I was not involved
in discussion with the then Secretary of State—I met her
only twice during my time at the Rural Payments Agency. However,
I have read the evidence from the NFU and other organisations,
and from their personal discussions with the Secretary of State
it was apparent that she was particularly keen on the dynamic
hybrid system.
Q202 Chairman: You were running the
Agency, and the Department, which the Committee has already questioned,
was responsible for policy, so the word came down that the Department
wanted to go for the more complicated system. As you rightly said
from your reading of the NAO Report, the more complicated system
was imposed on your Agency, which was going through a business
change operation and other difficulties. Why did you not notify
the Permanent Secretary in late 2004 that, in your view, as accounting
officer, the scheme was not deliverable?
Johnston McNeill: The Agency repeatedly
reconsidered its position, as further SPS policy direction and
information became available. It discussed where it stood with
Accenture and spent a lot of time with the programme board to
consider whether delivery was still possible. The Agency had to
take decisions about, for example, what could be descoped from
Accenture's work, so that it could continue to focus on delivering
the facilities that the Agency would need in order to make payments.
That meant sacrificing some of its work. For example, the Report
mentions that some of the management information that we should
have had was one of the casualties of our discussions.
The Agency was tasked to deliver. It was clear
from the discussions that the delivery of SPS 2005 was a major
objective for the Department and that it had to happen. Funds
were made available, and we had to put in place a number of manual
work-arounds. We had to say to the Department, "This can
no longer be developed by Accenture, because it's too risky in
terms of IT development. We're going to have to put in a manual
work-around to deal with it."
The Department was aware throughout the process
of the need for additional funding for manual work-arounds, of
the discussions at the CAP reform implementation board and the
Executive Review Group and of the tough decisions regarding what
would have to be stripped out to deliver the core functionality
and to make SPS payments. The Agency never arrived at a position
in which the people and organisations involved—Accenture
and the raft of top consultants, the RPA team, DEFRA's Permanent
Secretary and the Director-General—said that the SPS scheme
was no longer deliverable.
Q203 Chairman: So it was a slow-moving
train crash? Was there was no point, either in late 2004 or early
2005, at which you felt that your advice to the Permanent Secretary
had to be that the Agency could not deliver? We know that the
Agency could not deliver in the long run, so there is not much
point in going over that now; we want only to draw some lessons
on how we can avoid such a situation in the future. You said that
you met the Secretary of State twice. When did it become apparent
that you could not deliver? Was it late 2004 or early 2005? You
finally left the Agency in March 2006.
Johnston McNeill: It became apparent
that the SPS scheme was not going to be delivered in the timescales
set by ministers. The OGC undertook a review in February 2006,
following which the Agency had an amber light, one of the few
that it received. The OGC was reasonably confident that the Agency
could deliver the scheme. We defined SPS entitlements on 14 February
2006, and moved from that point to begin SPS '05 payments on 20
February 2006. It became apparent between then and the 10 March
2006, when I wrote to Lord Bach—a period of some 20 days—that
the Agency was running into a problem with the speed of clearance
of level 2 validations. In other words, the team could not get
the payments through the system. The IT was working, so the just-in-time
approach had worked, but the Agency could not get the payments
through the system fast enough to enable us to meet the target
of making the bulk of SPS '05 payments by the end of March 2006.
Q204 Chairman: To what extent were
you consulted? That is important, because you were running the
Agency. To what extent were you consulted about the policy decisions?
Are you telling us that you were not consulted and that you were
told to get on and do it?
Johnston McNeill: I had no discussion
with the Secretary of State—
Q205 Chairman: Or with the Permanent
Secretary about whether the scheme was deliverable.
Johnston McNeill: The discussion
took place at director general level, with Andy Lebrecht. The
Agency fielded Bill Duncan, who was involved with the McSharry
reforms and who had worked on CAP for 30 years, and its director
of operations, Hugh MacKinnon, who also had 30 years experience
of managing CAP schemes. Those were the two most experienced people
that the Agency had to interface with the policy people and to
consider the operational impact.
Those discussions started in June 2003, but
the policy continued to develop for a further year after the announcement
of the dynamic hybrid scheme in early 2004, which involved one
set of difficulties and challenges that led to consideration of
the implementation issues. The policy continued to develop for
practically a year after that.
Q206 Chairman: It must have been
obvious that the Scheme was going wrong. I think that you had
about 4,000 staff. There were only 116,000 potential claimants—farmers—in
the country, so there was a very high ratio of staff to farmers.
Leaving aside the fact that there are always problems with computer
systems and the scheme is complicated, why did you not put in
place contingency plans and back-up manual systems, which could
have taken up some of the slack?
Johnston McNeill: A number of
SPS `05 manual work-arounds were put in place. Many CAP schemes
are done by automated processes. We cannot take things off-line
and start to work on paper systems. I am afraid that that is just
not allowed. The disallowance that would flow from that would
be substantial—potentially anything up to 25% of the fund
value. I am afraid, therefore, that that was not an option.
We developed a contingency scheme to replace
RITA (RPA Information Technology Application) for the Single Payment
Scheme, if that did not work. Once RITA had developed to a stage
at which we felt that the contingency was no longer required,
we dropped that scheme with the agreement of the Executive Review
Group and the Department. Then we developed a contingency so that
we could make partial payments. That system was used to make payments
to farmers after I departed in March.[1]
Q207 Chairman: Paragraph 5.13 on
page 24 of the Report is about the relationship between the Department
and Accenture. It seems that this was down to the Permanent Secretary.
You were having to rely on the Permanent Secretary to improve
relationships with Accenture. Should you not have rolled up your
sleeves with Accenture to try to improve relationships there?
Johnston McNeill: That is simply
not the case. The best practice guidance of the Office of Government
Commerce is that relationships with the IT contractor take place
at an operational and at a Chief Executive-managing director level,
which was where I was. The Permanent Secretary or the accounting
officer of the Department are encouraged to meet their counterparts
in the organisation with a view to ensuring that the IT organisation
puts in place the correct and right quality of resources and the
right people, and that that piece of work is seen as important.
There were regular meetings at all levels between
the RPA and Accenture. The Permanent Secretary met monthly with
Joan Dominic, who was the Accenture director with responsibility
for Europe operations. I also attended regular meetings.
Q208 Chairman: So, when it says here
that the Department confirmed the introduction of monthly progress
meetings, which you just confirmed, that was on top of what you
were doing.
Johnston McNeill: That was outlined
in best practice. We put that in place as soon as the contract
with Accenture was signed.
Q209 Chairman: You talked briefly
about what was going on in March 2006. Did you have any notification
from your policy makers or superiors before March 2006 that they
appeared to have lost confidence in you and your Agency? Was there
a process going back some time, or was it like a bolt out of the
blue for you?
Johnston McNeill: It was a bolt
out of the blue. I have had box one markings in all my time as
a Chief Executive in Government. That is `outstanding'. I have
had my bonus awards in full. There was never any discussion or
correspondence about my performance mentioned in either the informal
bilaterals with permanent secretaries or otherwise.
Q210 Chairman: To sum it up, who
is to blame for this? Clearly, a lot of grief has been caused.
Payments that were due to farmers were not made. Whom should we
hold responsible? Is it the people in your Agency who were charged
with administering this or was it the fault of the policy makers
who were trying to introduce something too complex at too short
notice?
Johnston McNeill: Since the decision
in 2000, before I even joined the organisation, to implement the
PricewaterhouseCoopers recommendations to move to a new way of
managing CAP schemes, this has been defined as one of the top
10 high-risk programmes in the Government. To then take it and
use it to bring about one of the biggest changes in CAP in living
memory was a major challenge. It made the risk much greater, as
was identified by the OGC and NAO Reports.
I do not believe that anyone has tried to do
anything but their best to deliver this, using the best expertise
that they could acquire—be it consultants or contractors.
Therefore, I do not think that anyone was negligent. It was always
high risk, and it was made more high risk. I have been held to
account in my responsibility as Chief Executive of the Agency,
and I have read the Report of the Environment, Food and Rural
Affairs Select Committee, which is much more comprehensive than
my performance perspective. The Report suggests that others should
also be held to account.
Chairman: All right, thank you very much.
Mr David Curry.
Q211 Mr Curry: Am I right in making
the following statement? The Government chose to introduce the
most complex scheme on offer—the United Kingdom was alone
in that—in the shortest time made available by the European
Union, against the background of a departmental reorganisation
which involved members of the Department being dismissed, with
the possibility of tens of thousands of claimants who had not
previously claimed agricultural support, in the absence of complete
digital mapping and with a computer model using a task-based approach
that had not previously been tried. Is that fair as a background
statement?
Johnston McNeill: Just a couple
of points. It was not the Department that was undergoing the reorganisation,
it was the Agency.
Mr Curry: That is what I mean.
Johnston McNeill: I am just being
clear. And the digitised system, the rural land register, was
actually developed and in place. Apart from that, yes, the theme
of that statement is certainly correct.
Q212 Mr Curry: Right. We had the
DEFRA Permanent Secretary here, although she was not in place
at the time, and we discovered a wonderful consensus that you
were to blame for it all.
Johnston McNeill: I have noticed
that myself.
Q213 Mr Curry: All my instincts tell
me that I should be suspicious that you are the fall guy. When
you ran the Department, you presumably had departmental heads
Reporting to you.
Johnston McNeill: There is an
Agency and a Department. I am not trying to be pedantic—
Q214 Mr Curry: I am now talking about
the Agency. You had people in the Agency responsible for different
aspects of its work, Reporting to you.
Johnston McNeill: Absolutely.
I had six senior civil servants Reporting to me.
Q215 Mr Curry: Who have all somewhat
disappeared from sight since, I understand—
Johnston McNeill: I am sorry,
that is simply not the case, despite what you might have gathered
from discussions with the Department. The Director of Operations
is still in post, the Programme Director is in post, only now
he is the Chief Operating Officer, and the Legal Director is still
in post. The IT Director had planned to move on while I was there,
and the replacement was already pretty much signed up. The team
is pretty much the same.
Q216 Mr Curry: Do you regard the
information that came up to you, as the Chief Executive, as incomplete
and unsatisfactory to enable you to Report back to the Department
that things were not going as hoped?
Johnston McNeill: No, I do not
believe that. The RPA senior management team worked incredibly
hard to try to get this piece of work achieved. I do not believe
that there was ever anything but full and frank Reporting to myself
and the Department.
Q217 Mr Curry: What was the coupling
between you and the Department? What was the management structure
that you Reported to? I understand that it did not always have
the same chairman.
Johnston McNeill: No. The governance
arrangement was that a board called CAPRI, the CAP Reform Implementation
board, was set up by Sir Brian Bender when he was Permanent Secretary.
It was chaired jointly by Andy Lebrecht, a Director-General in
the core Department, and me as Chief Executive of the RPA. It
reported to a board chaired by the Permanent Secretary, Sir Brian
Bender, called the Executive Review Group. The Reports would go
up jointly to Ministers and the Permanent Secretary from Andy
Lebrecht and me. That was the piece of work relating to the delivery
of the SPS. Those were the normal governance arrangements for
the Agency—the Agency had responsibilities other than the
CAP payment.
Mr Curry: Yes, I appreciate that.
Johnston McNeill: That was the
normal governance arrangement of a Minister's advisory board or,
as DEFRA called it, an ownership board.
Q218 Mr Curry: Do you feel that that
management system had built into it the antennae to sense when
there was a problem and respond to it?
Johnston McNeill: With the non-executive
directors, particularly Karen Jordan, and the expertise at those
meetings—at the Executive Review Group we had Andrew Burchill,
the DEFRA Director of Finance; Mark Addison, the Director-General
responsible for operations in DEFRA; the Permanent Secretary,
and Angus Ward from BearingPoint, one of the top consultancies—there
was a robust challenge of the papers that went to them and all
the reports. I was never left in any doubt that they had a close
and good understanding of what was going on.
Q219 Mr Curry: So we have the slightly
curious situation that you say that the people Reporting to you
did their jobs perfectly well and you have no complaint about
them; that you yourself did your job well and have a track record
of getting high marks in your work, and that the management structure
was sufficiently flexible and effective to detect what was happening,
yet we had a train crash. Train crashes do not happen by spiritual
intervention; they happen because something goes wrong. The signals
were working, the engine driver, fireman and guard were there,
the lamps were working and even the ticket inspector was on the
train, but it crashed. What went wrong?
Johnston McNeill: And you had
a full raft of overview from the Office of Government Commerce
and other auditors. The National Audit Office Report makes the
point—I think it is fair comment—that our inexperience
of dealing with a task-based approach to processing CAP claims
caused us significant difficulties all the way through, not least
with the customers' reaction when we started to reduce that way
of working.
1 Note by witness: Not all 4,000 RPA staff
work on SPS processing, The RPA has many other schemes and responsibilities,
including, BCMS (British Cattle Movement Service) (400+ staff),
Inspectorate et cetera. Back
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