Supplementary memorandum submitted by
the Department for Environment, Food and Rural Affairs
Questions 2-9 (Chairman): SPS 2005—review
of errors in claims and payment adjustments arising from this
review
The NAO's report (para 2.7) referred to a review
of some 34,499 cases to determine whether the Single Payment Scheme
(SPS) entitlements originally allocated to claimants were accurate.
This note provides the results, to date, of that review and the
consequential impact that this and other factors have had on payments
under both the 2005 and 2006 SPS.
The latest data extracts show the following
changes in 2005 claim values for the 34,499 cases reviewed[13]:
| | |
|
| Change in claim values | Claimants—No
| Claimants—% | Change—£m
|
| | |
|
| Claim value increased | 12,611
| 36.5 | 28.6 |
| Claim value decreased | 7,281
| 21.1 | -29.2 |
| No change to claim value | 14,607
| 42.4 | |
| Total | 34,499
| 100.0 | -0.6
|
| | |
|
| |
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The reasons for the changed values included human error in
either omitting or manually inserting data (eg national reserve
awards) from the various systems the Agency had to calculate entitlements
and the results of both additional checks, particularly on land
data, and inspection activity carried out in the normal course
of business.
In many cases, changes in claim value did not automatically
give rise to an over or under payment. For example, some corrections
took place after a partial payment had been made, but in time
to ensure that the balancing sum was adjusted to reflect the revised
full claim value.
We have not kept separate data for cases where a top up payment
was required after review of a claimant's entitlements. Nor can
such data now be readily identified given the large number of
partial and manual payments which have been made over the same
time period.
However, some data on overpayments is available. In addition
to the review of entitlements, the overpayments occurred for a
number of reasons, including the run of "duplicate"
payments referred to in para. 2.9 of the NAO's report and the
issuing of partial payment which proved to be greater, following
eg the application of penalties, than the final sum due. In total,
the overpayments are currently estimated to be:
|
Scheme year | No. of
overpayments
|
£m |
|
| SPS 2005 | 10,299 | 20.0
|
| SPS 2006 | 6,925 | 17.6
|
|
| * taking account of overpayments occurring in both years the total number of claimants involved is 14,243
|
| |
|
From the work done so far in approximately 4,700 of these
cases the amount concerned is less than €100 and will be
written off. In some 70% of cases the overpayment amounts to less
than £1,000 while in 0.8% it amounts to over £50,000.
A plan to recover these payments is being implemented.
Questions 10-12 (Chairman): Specific overpayments
Details were requested of the 23 cases referred in paragraph
2.9 and figure 2 of the NAO's report as having been overpaid more
than £50,000 as a result of an erroneous payment run in August
2006 when claimants received nearly double the amount due. Names
and addresses are provided in the Annex to this Memorandum in
respect of 19 of the cases. The remaining four have been reviewed
and the overpayment is now believed to be below £50,000.
It should be noted here that while all nineteen cases were
all written to on 6 September 2006 and some telephoned around
then, the RPA explained in all cases that the claimants should
await an invoice before making repayment. Given the priority attached
to making outstanding payments, invoices only started to be issued
in November 2007.
For the current exercise, wherever possible, invoices are
only being issued once it is confirmed that there are no other
outstanding actions on the claimant's account for any scheme year.
Given many claimants have been affected by more than one issue
that might affect the sums due (changes in entitlement values,
manual payments, partial payments and penalties), this is currently
a very complicated and time consuming process. To date, invoices
have been issued for only two of the 19 cases, one of which has
been queried and will need to be reviewed again.
Questions 28-30 (Mr Curry): Common land issues raised
by David Curry MP
First, in respect of tenants claiming SPS support in relation
to common land registered under the Commons Registration Act 1965,
we understand that the tenants are not registered commoners, but
exercise a right to graze the common under the terms of their
tenancy agreements. In cases where a structural grazing surplus
exists on common land and the common owner has chosen not to claim
for it under SPS, it is possible for the excess to be distributed
between tenants with legitimate agreements wishing to claim subsidy.
However, It is incumbent upon the RPA to ensure that such claims
are legitimate and so it is possible that evidence may be sought
from owners or tenants to establish the basis for their grazing
rights.
Establishing eligibility to claim SPS support can at times
involve a complex process. It is standard practise for the RPA
to verify the eligibility of tenants to claim SPS (on behalf of
commons owners) from the details provided on the tenancy agreement(s)
involved. Copies of agreements can be provided by the tenants
themselves or the agent for the Duke of Devonshire in relation
to Chatsworth Estate. In the case of Chatsworth Estate, the claims
concerned have not been rejected but are currently under review
by the RPA.
The requirement for rights to be exercisable over a piece
of land for a period of at least 10 months flows from the EU rule
governing the SPS that land used to support payment claims must
be at the claimant's disposal for a designated 10 month period
during the year (the 10 month rule.) Where a grazier is legally
restricted in exercising rights of common so that he cannot satisfy
the 10 month rule (eg where a local byelaw restricts grazing to
the summer months, or the registered right is declared to be exercisable
for only eight months each year), he is not eligible to claim
payment under the SPS. However, where a grazier is entitled to
graze all year round but chooses to remove animals from the grazing,
whether because of local custom or to meet the terms of an environmental
agreement his SPS claim will be unaffected. Following pressure
from the UK and others, the 10 month rule will be replaced by
a one day (for instance, 15 May) rule from the 2008 SPS which
should in many cases help to avoid this problem arising in future.
Finally, in respect of the calculation of livestock units
(Lu), grazing rights are converted into Lus to take into account
the different types of animals with rights to graze and the numerous
variations of how rights have been entered onto the 1965 registers.
The values used for calculating livestock units are 1.0 Lu for
a cow and 0.15 Lu for a sheep. It is accepted that these values
do not always reflect the local customs or practise as recorded
on the common land register. However, these values have become
the accepted standard since the inception of farming subsidies
under the Integrated Administration and Control System (IACS)
introduced in 1993. Since then, they have continued to provide
the most reliable indication of the overall grazing pressure,
experienced on common land, across England.
The values are applied to each entry in each register to
enable the RPA to calculate a maximum value with which the apportionment
of individual claims can be made. It is not possible to consider
changing this methodology due to the need to apply an approach
that is consistent across all English common land.
Questions 93-100 (Mr Bacon): Payments to Accenture
Accenture is one of several IT contractors employed by RPA.
Others include IBM and Xansa. Total spend to all such contractors
between 2004-05 to the end of financial year 2007-08 will be approximately
£210 million.
Total spend with Accenture from January 2003 until the end
of financial year 2007-08 will be approximately £122 million.
Some £90 million of this sum is in respect of IT development,
with the balance relating to business support, delivery of the
live RITA service, model office and management information. The
£79 million mentioned by Tony Cooper at the hearing (Q94)
referred to spend on IT developments up to and including the 2007
SPS, but not preparation for subsequent year schemes.
Additional funding from Defra
The additional funding of £40.1 million from Defra for
the recovery campaign is for the period 2007-08 to 2009-10. In
addition, Tony Cooper mentioned in his evidence (Q.100) that RPA
had already planned investment of around £15 million. The
actual figure was £15.6 million for IT changes around known
policy developments for this period. The breakdown of this investment
is as follows:
| | |
| |
| 2007-08
£m
| 2008-09*
£m | 2009-10*
£m
| Total
£m |
| | |
| |
| Defra bid | 16.8 | 13.5
| 9.8 | 40.1 |
| RPA budget | 6 | 6
| 3.6 | 15.6 |
| TOTAL | 22.8 | 19.5
| 13.4 | 55.7 |
| | |
| |
| *(*Funds for 2008-09 and 2009-10 remain to be confirmed but are likely to be lower than bid).
| | | |
|
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This funding is being managed as a single pot to achieve
the improvements described on page 21 of the NAO report.
Spend on Accenture for IT development from the £55.7
million is expected to be approximately £32.6 million (£12.6
million for 2007-08, £10.5 million for 2008-09 and £9.5
million for 2009-10) The estimate for 2009-10, in particular,
may change as the content of future IT releases is defined. In
addition some elements of the work may be put to competitive tender
and Accenture will be free to bid for this work should they wish.
In addition to these development costs Accenture will, from
the £55.7 million, receive up to £7 million for business
support and project delivery spread across the three years.
IT developments outside the recovery campaign
In this period there will also be other IT work outside the
recovery campaign to which Accenture will contribute. This will
include re-architecture of IT systems, upgrading the Rural Land
Register. Costs around this work are not clear as yet.
As part of the renegotiated contract, from 1 September 2007
Accenture receives a managed service fee of £14 million in
total until 2009-10. This covers the costs of architecture support,
management of delivery, technology and infrastructure management,
release planning and management services etc. As mentioned in
Helen Ghosh's evidence (Q.109) the new contract also includes
risk-reward mechanisms around costing and delivery of IT releases.
Questions 124-127 (Mr Bacon): Reconciliation of disallowance
figures
Paragraph 2.16 of the NAO's report refers to a possible overall
correction of for the Single Payment Scheme of £292 million.
This comprises:
|
| SPS Provisions | £222 million
|
| SPS Accruals | £ 63 million
|
| SPS Contingent liabilities | £ 7 million
|
| |
Both the accrual and contingent liabilities figures relate
to late payment penalties under the 2005 scheme.
In her evidence Mrs Ghosh (Q.63) referred to a total provision
(so not including accruals or contingent liabilities) for EU disallowance
of £348 million. This comprises:
|
| SPS Provisions | £222 million
|
| Other CAP scheme provisions | £ 92 million
|
| Provisions for Devolved | |
| Administrations CAP expenditure | £ 34 million
|
| |
Of the £92 million for other CAP scheme provisions,
£55 million relates to the arable crop payments referred
to in the case study at figure 3 on page 13 of the NAO's report.
The fruit and vegetable scheme referred to at Q.63 and Q.124 is
aid paid to Producer Organisations. Accruals totalling £17
million were made in respect of this aid in the Department's 2005-06
accounts.
13
Additional cases to review will be identified as a result of eg
appeals by claimants and on-farm inspections. Back
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