Examination of Witnesses (Questions 60-79)
DEFRA AND RURAL
PAYMENTS AGENCY
23 JANUARY 2008
Q60 Mr Dunne: Mrs Ghosh, that was
because the Department decided that you would have a minimum payment
of zero, and you would not have a cut-off threshold that many
other countries decided to adopt, so you have set that rod for
your own back.
Mrs Ghosh: But even so, at any
realistic cut-off point, it may be that until we significantly
improve our efficiency that it costs you more to make the payment
than the entitlement that the farmer has, but Tony knows more
in detail about the value-for-money issues.
Mr Cooper: The smaller claims
tend to be the easier claims to process, and where a claim has
few changes from the previous year, then the opportunities for
us to automate that processing and therefore reduce those costs
come to the fore. The costs that were identified by David Hunter
for the last year are probably higher, and the costs are higher
because, in effect, we have been processing more than one scheme
year in the one period. We have been correcting 2005, we have
been paying 2006, and we have also been paying 2007. If I give
an example, my staffing in the middle of the year, when it peaked,
was 4,600 people. We were working overtime and we had shift working
in all of my sites. At this point in time we have about 4,200
people, there is very focused and limited overtime in the sites,
and there is only one site now that has any shift working, so
what you will see is the costs coming down.
Q61 Mr Dunne: Do you anticipate that
to come down much more rapidly over the present year as all the
problems of the past are put behind you?
Mr Cooper: I would expect them
to continue. Our target is to reduce to 3,500 staff in the year
2010.
Q62 Mr Dunne: Thank you. A final
question, if I may, is in relation to the EU fine. I have been
trying to work my way through the paragraph on page 12 and 13
to understand what the total fine is going to be. I would ask
you, Mrs Ghosh, if you would just clarify for us where we are
in terms of discussions with the EU, how much you are expecting
you are going to have to be paying and, more significantly, what
impact that is having on your budgets, not only in this Agency
but across the Department for the current year and the next year.
Mrs Ghosh: Certainly and I shall
try not to get deep into the—
Q63 Mr Dunne: Perhaps you could write
a note if you cannot answer now.
Mrs Ghosh: No, I was going to
say there are very complex issues here about near cash and non
cash, which Treasury colleagues would be able to explain in more
detail. The overall picture is this: in our 2005-6 and 2006-07
accounts we have made provision for around £220 million disallowance
in relation to the Single Payment Scheme. The total provision
for EU disallowance is about £348 million but that relates
to a number of other schemes like the Fruit and Vegetable scheme.
We have no indication from the EU yet in relation to disallowance
for the SPS as to what the final figure may be. The figures we
have put in our accounts as provision are our best estimate, based
on recent experience, so for example the kind of response they
have made to issues around pre-SPS on satellite audit.[8]
That is our best estimate of the overall cost, but we, as yet,
have had no indication from the Commission as to what the actual
disallowance will be. Looking forward into CSR07 we have done
two things. First of all, the Treasury has given us a ring-fenced
figure of around £270 million. This is against the overall
disallowance of £348 million, not just the £220 million
that relates to the SPS. We are also making provision, when we
think about our budgets for the three years, for the difference,
which is £78 million. Depending on the outcome—and
clearly we shall argue the case right up to the courts to minimise
the disallowance (but we have to provide for realism in thinking
about our spending in the period)—we are looking at an impact
of around £78 million on the rest of our budgets, because
we have got ring-fenced money from the Treasury which, if it turns
out not to be needed, it will simply go back to the Treasury,
and we have to finance the difference from the rest of our budgets.
Q64 Chairman: Mrs Ghosh, if we could
have slightly shorter answers.
Mrs Ghosh: I am sorry, Chairman,
it is a very complex picture. It is £78 million across the
CSR07 period because we do not know when a final conclusion will
be reached, so that is £78 million spread.
Q65 Angela Browning: I was very tempted
to bring a bundle of case work, and in fact my case worker almost
insisted on it, but I have resisted the temptation. Let us look
at page 5, at the top of the page on the left-hand side and the
bottom of paragraph 2 there is quite an emphatic statement here
at the end of that paragraph. It says: "The Agency made a
commitment ... " and it goes on to say that it would "
... implement its recovery plan by April 2008." Mr Cooper,
can you tell us today, hand on heart, that by April of this year,
in three months' time, you will have implemented that policy?
Mr Cooper: Can I tell you what
I said at the time which was it would take 18 to 24 months to
get the Agency into a stable position; that has now been turned
into "by April 2008". Will we have recovered sufficiently
to be able to provide a stable service? I believe, yes. Will there
still be room for improvement? Yes, indeed. My view is that we
will get to the point in April where we can start to make sure
that we are paying on time but also then start to address some
of the other shortcomings of the organisation. We spoke earlier
about overpayments and our ability to get the information—
Q66 Angela Browning: If I was asking
you to reply in a yes or no answer, would it be yes or would it
be no?
Mr Cooper: It would be yes to
the extent it would get us to a certain point.
Q67 Angela Browning: Do not qualify
it; just tell me yes or no.
Mr Cooper: There is further improvement
to be made.
Q68 Angela Browning: Normally a commitment
is a commitment, is it not; it is usually a yes or no.
Mr Cooper: It is. We will have
achieved what we set out to achieve in the recovery plan by April.
Q69 Angela Browning: Can I move on
to the final sentence there where the Department agreed to provide
this extra £40 million to help the Agency recover and make
changes to its IT and processes. In layman's language, can you
tell me what are the major changes you have made to your IT systems
that will enable you to do this?
Mr Cooper: I suppose there are
some big chunks. I have mentioned case working arrangements, and
that has been a complex re-engineering of some of the way in which
the systems have operated, so that is one aspect that has absorbed
quite a lot of funds. An example is at the moment if a farmer
phones up and says, "How much was I paid?" the processor
is unable to tell them because they do not have the information
in front of them.
Q70 Angela Browning: So have you
had a lot of rewriting of software?
Mr Cooper: We have.
Q71 Angela Browning: And are you
confident that that software now works and the system that the
Government has devised?
Mr Cooper: We are. As I say, we
have changed the system to make it do what we now require of it.
The final piece of that in terms of the case working will be delivered
in April of this year. The benefits will take time to roll through.
In addition, we have put in place and addressed some of the recommendations
that were made in the last Report around testing arrangements,
about management information, and about putting in place what
we call a "model office", where we can bring together
the people who are going to use the system, write procedures for
the staff as well as the IT technicians, so when the system is
introduced into the live environment to the users they are trained
in it, they have got instructions on how to use it, as opposed
to what was happening when I arrived, which was none of that.
Q72 Angela Browning: I will not take
up the Committee's time on this. From what you have told me it
sounds very encouraging, but it does sound to me that within the
Department there should be some major investigation as to how
the initial software was commissioned, because it sounds to me
as though whoever was responsible for that clearly did not do
a good service either to the farmers we have heard about or in
terms of value for money.
Mrs Ghosh: Indeed and, as we have
discussed previously in the Committee, the issue was that Accenture
as IT provider provided what the Agency asked for it, and it asked
for a very rigid, task-based system which does not, as Tony has
implied, fit with a customer-based system nor indeed have the
flexibility to respond to policy changes. That is essentially
the work that Tony has been leading to improve the IT.
Q73 Angela Browning: Right, thank
you. Could we now turn to page 7 where the National Audit Office
has been incredibly helpful to you in giving you at paragraph
17 a list of things that they feel would help you as specific
recommendations. I hope you will understand that I have something
else I want to ask you before my ten minutes is up, so could we
canter through this, and I would be grateful—and I do not
mind which one of you replies—to have a yes, no or maybe
answer to this. Let us start: 17a?
Mr Cooper: We would agree.
Q74 Angela Browning: 17b?
Mr Cooper: We would agree.
Q75 Angela Browning: 17c?
Mrs Ghosh: Yes we agree, and there
is the work that the policy link team into the Agency is doing,
an excellent example in the sugar scheme, and obviously we are
working very closely together on the CAP health check.
Q76 Angela Browning: Okay. 17d?
Mr Cooper: Agreed.
Q77 Angela Browning: 17e, and there
are several sections in (e), let us take the first one, the off-the-shelf
bespoke software?
Mr Cooper: We will do that wherever
we can. There are very few off-the-shelf packages that will deliver
the Single Payment Scheme.
Q78 Angela Browning: Okay. Off-line
systems?
Mr Cooper: Agreed.
Q79 Angela Browning: Aligning the
systems to business needs?
Mr Cooper: Agreed.
Mrs Ghosh: Yes.
8 C&AG's Report, Department for Environment,
Food and Rural Affairs, and the Rural Payments Agency: A progress
update in resolving the difficulties in administering the Single
Payment Scheme in England, HC 10, p 13. Back
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