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The Department for Environment, Food and Rural Affairs (the Department) and its Agency (the Rural Payments Agency) spent £122 million implementing in England the European Union land area based single payment scheme which replaced production based Common Agricultural Policy subsidies. The aim was that farmers would comply with European Regulations on land management during 2005 and 96% of the £1,515 million due to claimants would be paid out by the end of March 2006. The single payment scheme was not a large grant scheme but the Department's deliberate choice to implement the most complex option for reform (the dynamic hybrid) in the shortest possible timescale (in year one of the new scheme), its decision not to implement a de minimis claim and the need to accommodate 46,000 newly eligible claimants, led to a series of risks which individually would have been severe but collectively were unmanageable. The risks were compounded by the requirement for digitised mapping of land in England, which Scotland and Wales already had in place. The Agency underestimated the scale of work needed, and its oversight boards lacked objective management information to enable them to assess progress effectively. As a result, only 15% of payments had been made by 31 March 2006, and some 3,000 farmers were still unpaid at the end of October 2006, the payment delays causing stress, anxiety and financial hardship in the farming sector.
The Department and the Agency sought to implement the scheme as part of a wider business change programme to rationalise systems and reduce the staff headcount by 1,800 posts. But the change programme had cost £258 million by the end of March 2006 and is expected to achieve efficiency savings of only £7.5 million by March 2009. Additionally, the Department set aside a provision of £131 million for potential disallowance of claims expenditure by the European Commission for non-compliance with European Regulations in administering the 2005 scheme in England. In February 2007 the Department obtained Parliamentary approval for a supplementary estimate of £305 million to meet the potential cost of additional disallowance on the 2005 and 2006 single payment schemes and residual liabilities on earlier grant schemes administered by the Rural Payments Agency. In their haste to have the scheme ready on time the Department and the Agency failed to adhere to basic principles of project implementation including putting in place adequate pilot testing and the development of systems to extract management information necessary to monitor progress. Given the history of implementing government information technology programmes, and in view of the wider changes being attempted, it would have been more sensible to trial the scheme in the first year and implement fully in year two.
The problems experienced for the 2005 scheme were likely to recur in subsequent years and the Agency did not expect to remedy matters fully until April 2008. In March 2006 the Agency's then Chief Executive was removed from his post but was retained on full pay while the Department determined his terms of departure.
On the basis of a Report by the Comptroller and Auditor General,[1] the Committee took evidence from the Department, the Acting Chief Executive of the Rural Payments Agency and, after a delay of some months attributable to his ill health, from the former Chief Executive, Mr Johnston McNeill, who was in charge of the Agency during the relevant period. The Committee reviewed the impact of the payment delays, why implementation failed, the Department's role, and the changes being put in place to rectify the mistakes made.
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