Memorandum from the Department for Environment,
Food and Rural Affairs
INTRODUCTION
This memorandum responds to the Committee's
request for written evidence on why Defra did not accept fully
the recommendations for redress in the Ombudsman's report Cold
Comfort: the Administration of the 2005 Single Payment Scheme
by the Rural Payments Agency published on 16 December.
BACKGROUND
The Rural Payments Agency (RPA) is an executive
agency of Defra and was established in 2001 with a primary focus
on making payments under 60 or so EU Common Agricultural Policy
(CAP) schemes to over 100,000 farm businesses and processing/trading
companies. After major CAP reform negotiations, the Single Payment
Scheme (SPS) was introduced in 2005 and with it a requirement
to make approximately £1.5 billion worth of payment to English
farmers on an annual basis.
The EU rules governing the SPS set a regulatory
payment window which, for the 2005 Scheme, ran from 1 December
2005 to 30 June 2006. Unless Member States made 96.14% of payments
before the end of that window, the European Commission applied
a sliding scale of "late payment" penalties. As is normal
with executive agencies, Ministers additionally set RPA what were
believed to be stretching but deliverable targets for its key
activities, including one to begin making SPS payments in February
2006 and make 96.14% of those payments by the end of March 2006.
As outlined in reports from the Efra Select
Committee and Public Accounts Committee, a number of difficulties
were experienced in the implementation of the scheme. RPA did
indeed start to make payments in February but the flow did not
then increase as expected and the March target was not met. Nor
was it possible to make the bulk of payments by the end of that
month as the then Farming Minister (Lord Bach) had indicated in
a statement to the House at the end of January 2006. Successive
Ministers have apologised for that failure and the distress caused
to a number of farmers as a result.
THE OMBUDSMAN'S
REPORT
In summary, the Ombudsman's recommendations
were to:
(i) Send written apologies to both Mr W and Mr
Y.
(ii) Pay Mr W £3,500 and Mr Y £5,500
in recognition of both the stress and financial impact which flowed
from maladministration.
(iii) Review 22 additional cases and make similar
redress where unremedied injustice is identified.
The Department informed the Ombudsman in the
context of the drafting of the individual reports on Mr W and
Mr Y's cases that it would:
— respond positively on no 1. This
has now been done;
— on no 2, make a consolatory payment
of £500 to both individuals. This has also been done; and
— on no 3, review the 22 other cases
once the Ombudsman had supplied RPA with details of the complaints,
and make redress as necessary in line with the approach it had
set out for Mr W and Mr Y's cases. Work has started on the 19
cases where details have been supplied to RPA to date and the
Agency remains hopeful of completing action within the recommended
three months as long as the outstanding details are received in
the near future.
For completeness, the Department accepted maladministration
had occurred in terms of the Ombudsman's test "to get it
right", but did not accept that the Ombudsman's conclusion
that the same applies to the test "to be open and accountable".
Ministers and Defra officials learned for the first time on 14
March 2006 that the RPA would not, as had been indicated in the
House some six weeks earlier, make the bulk of payments by the
end of that month. Farmers were informed two days later after
revised management arrangements for the Agency were put in place
by the Department. All statements made up to that date and subsequently
were based on an honest reflection of the collective expectations
of those involved.
WHY THE
OMBUDSMAN'S
RECOMMENDATIONS ON
REDRESS WERE
NOT ACCEPTED
IN FULL
It is accepted fully that non-financial and
financial remedies should be considered where maladministration
occurs. In the case of the implementation of the SPS, the Chief
Executive of RPA and successive Ministers have offered apologies
for both general and individual failings. It is also standard
practice to make interest payments in lieu of compensation (with
a £50 de minimis) where payments are made after the end of
the payment window set out in EU Regulations. Additionally payments
have been made in individual cases of maladministration in respect
of both inconvenience or distress and financial losses eg when
incorrect advice had lead to an incorrect application under the
SPS or other scheme.
After it became clear in March 2006 that the
payments were not flowing as expected and subsequent investigations
revealed there was no short term fix, substantial advance payments
were made in May 2006, including to Mr W (£37,000) and Mr
Y (£72,000). Both also received interest payments in respect
of the balance of the payments which they received after the end
of the payment window on 30 June 2006.
It is acknowledged that the individual service
received by Mr W and Mr Y was not of an acceptable standard and
at an early stage in the Ombudsman's investigations the Department
signalled that it was prepared to make consolatory payments of
£250 and £350 respectively. It was subsequently agreed
to raise these figures to £500 in both cases. This was not
a signal of a "one size fits all" attitude to redress,
but rather the difficulty in making fine distinctions in treatment
after what was an increasing passage of time.
In reaching a figure for recommended redress,
the Ombudsman takes account not only of her finding of the stress
suffered by Mr W and Mr Y, but also other factors such as lost
investment opportunities and additional costs incurred. The Department
understands that those factors have been calculated on the basis
the target date for 96.14% (and later "bulk") of payments
to be paid from March 2006. This is regarded as inappropriate
in that no farmer could reasonably have concluded they had a guarantee
of payment in March and could have planned his affairs accordingly.
As a matter of principle, the Department cannot accept that shortcomings
in meeting what are deliberately intended to be challenging targets
for Agencies should lead to compensation in this way.
However, it is accepted that SPS claimants could
reasonably expect that their payments would be received by the
end of the regulatory payment window. It was for this reason that
interest payments, in lieu of compensation, have been made to
those affected.
January 2010
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