Examination of Witnesses (Questions 120-139)
DEFRA AND RURAL
PAYMENTS AGENCY
23 JANUARY 2008
Q120 Mr Bacon: And then you followed
that up with letters. In August 2006?
Mr Cooper: It may not have been
August.
Q121 Mr Bacon: When was it?
Mr Cooper: I do not have the date.
Q122 Mr Bacon: Was it much later?
The reason you might have difficulties now is they have received
the money and spent it, is that right?
Mr Cooper: I do not know the date,
I can let you know the date, but we wrote to them quickly after
the overpayments occurred.[10]
Q123 Mr Bacon: Obviously it would have
been after. I am just thinking about a situation in which it could
have been before that you wrote to tell them you had made an overpayment
before you made any payment at all. Is it the case that some of
these people may be in difficulties because having received the
money they then spent it, it went into their businesses and they
made commitments on the basis of it before you told them that
it had been an overpayment, like happens with HMRC and tax credits?
Mrs Ghosh: Yes. This comes back
to the point that with the very largest people, generally very
sophisticated agribusinesses, they knew what their entitlements
were and they would have seen coming into their accounts two identical
payments[11]
and I think the experience of the Agency is most of them thought,
"Aye, aye, that must be a double payment, there's something
strange here". The concern that ministers have is for those
people who might not be so on the ball for whom, although it is
a relatively small amount of money, it could still have an impact,
they might not have worked it out, and that is why we need to
be very careful, flexible and sensitive in getting overpayments
even of small thousands back from them. That is the policy we
need to agree with them.
Q124 Mr Bacon: I am running out of time
but I would just like to ask one more question following from
what Mr Dunne asked you about the European Commission. In your
answer to Mr Dunne you gave a number of figures, including the
£348 million which was the overall provision and that included
fruit and veg, I think you said.
Mrs Ghosh: Yes.
Q125 Mr Bacon: Perhaps you can send
us a note on that. I did not think fruit came into the CAP, did
it?
Mrs Ghosh: Yes, there is something,
and I am getting out of my depth here, called—
Q126 Mr Bacon: Speaking as a representative
of pig farmers, I thought fruit and pigs were outside the CAP
completely.
Mrs Ghosh: I will send you a note.
They are still leftover.
Mr Bacon: The thing is, the figures you
mentioned did not include the £292 million at the bottom
of page 12, paragraph 2.16. It says there that the potential correction
is now some £292 million whereas you mentioned £220
million, £270 million, the gap of £78 and the total
provision of £348 million. The NAO Report, which you agreed,
says the provision is £292 million.
Q127 Chairman: You are going to send
us a note on that.[12]
Mrs Ghosh: Yes, indeed, and it
may be something to do with the debate going on about the late
payment penalty on which we have reduced the figure.
Mr Mitchell: Obviously a lot of the problems
were caused by the fact that we adapted a system that was over-elaborate
in the first place, the dynamic hybrid model. You said in answer
to the Chairman that was a decision of the ministers and in answer
to Mr Bacon you said it was on the advice of the Department. I
can remember, because I was on the Environment, Food and Rural
Affairs Committee at the time, that the then minister, Margaret
Beckett, appeared before us full of confidence when we said this
system had been complicated and gave us a dose of land of hope
and glory and Britain can make it.
Mr Curry: England, not Britain. Scotland,
Wales and Ireland have got—
Q128 Mr Mitchell: Yes, that is right.
Ministers do not do things like this without the Department advising
them, so the Department got it wrong in going for too complicated
a system and our problems stem from that.
Mrs Ghosh: This Committee's reports
have excellently summarised the problems that arose as a result
of—
Q129 Mr Mitchell: Yes, the Department
got it wrong?
Mrs Ghosh: The advice that ministers
got that a scheme this complex was deliverable on the timescale
they had set, given the choices that the Agency made about business
process, proved to be wrong.
Q130 Mr Mitchell: Let us move on
to the consequences. There has been talk of fines and penalties
from Europe, which makes me a bit upset. I see at 2.13 there are
deductions: €81.7 million plus €19.6 million, a total
of €101 million. Is that the total extent?
Mrs Ghosh: We have only made late
payments in the first year, the 2005 year. This is expressed in
euros and we have had some negotiation with the Commission about
it. The latest figure I have for late payment penalties, ie after
June, is £56 million, but in 2006 we got no penalty for late
payments.
Q131 Mr Mitchell: Are these figures
wrong?
Mrs Ghosh: These are in euros.
I am just trying to do the euro calculation.
Q132 Mr Mitchell: What exchange rate
is it all calculated at? The exchange rate has changed, has it
not, the euro has gone up and the pound has gone down, particularly
over the last year.
Mrs Ghosh: I am sorry, I should
have bought my glasses. There is a footnote which Tony has drawn
my attention to: "The €81.7 million deduction was equivalent
to £55.3 million ... " They then added on £13.3
million, but I believe it is the case that as a result of effective
negotiation by my team we have now gone back down to a figure
of around 56.
Q133 Mr Mitchell: The next question
was what exchange rate was it calculated at. Was it the exchange
rate in the year that the crime was committed or the exchange
rate in the year it was agreed what the penalty was going to be,
or the prevailing exchange rate now, because they are all different?
Mrs Ghosh: I do not know the answer
to that. I will let you know the answer.
Q134 Mr Mitchell: If we pay now at
today's exchange rate we would pay more.
Mrs Ghosh: I do not think the
Treasury would allow me to pay, or rather to reach a settlement—
Mr Mitchell: You have to pay at the exchange
rate, do you not?
Mr Curry: No, it is held in euros. All
the cash is held in euros.
Q135 Mr Bacon: The euro has gone
up and the pound has gone up. Let us move on.
Mrs Ghosh: I am told it is all
paid in euros, so it is whatever euros at the time. The exchange
rate, therefore, does not make any difference.
Q136 Mr Mitchell: Okay. How does
that compare with the other figures which we have, and Mr Bacon
has just referred to them, in 2.16, that there was a provision
and contingent liabilities set aside of £139 million for
2005-06 and in 4.2 we see a potential £153 million in 2006-07?
What is the relationship between those calculations of potential
liabilities and the actual figures?
Mrs Ghosh: If I could just go
back. These figures are in some senses shifting figures because
we are at any one time making our best estimate of what the likely
outcome will be. We get some new example, for example a Commission
response to an issue that has got nothing to do with the SPS,
and we revise our provision. I think the simplest thing is just
to say to the Committee the amount of provision we have made over
the two years in our accounts is the £348 million figure.
Q137 Mr Mitchell: But not actually
paid, of course.
Mrs Ghosh: Not actually paid.
We have to make provision for a repayment later on and then we
argue the case.
Q138 Mr Mitchell: Services expenditure
and value have been cut to either allow that contingency to be
paid or to pay extra penalties.
Mrs Ghosh: As I was saying to
Mr Dunne, we have received from the Treasury additional provision
in our CSR 07 settlement which amounts over the three years to
£270 million and the difference will be met—
Q139 Mr Mitchell: So the cuts are
not labour contingent. The cuts in British Waterways, therefore,
are not due to penalties to Europe?
Mrs Ghosh: No.
10 Note by witness: The claimants concerned were written
to on 6 September 2006 Back
11
Note by witness: In practice, there would not have been two payments,
but a single one for roughly double the amount that was properly
due. Back
12
Ev 18 Back
| 
