Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Desai: My Lords, I have no agricultural interest to declare. I am about the only speaker this afternoon with such a problem. My first job was in agricultural economics in America, when I was involved in looking at payments for dairy farmers. That convinced me that every payment system was a nightmare.

We are all grateful to the noble Lord, Lord King, for introducing the debate. As he rightly reminded us, we have had some serious disasters on the agricultural front in the past 10 or so years. While I have been here—15 years—we have had BSE, which was a major disaster, and then we had foot and mouth disease. The feeling I get, having read the debates and having talked to people, is that, as serious as this situation is, it is not on the same scale as either foot and mouth or the BSE crisis. I am not trying to be complacent, but I am putting down a marker.

In the debate in another place yesterday the honourable Member for Vale of York said that normally farmers carry a debt of around £50 million per month. In the foot and mouth case, it went up to £80 million. She gave an estimate that due to this delayed payment £8 million had been added to the debt burden of farmers. Those are her numbers; I did not make them up. We are talking about, although I do not want to minimise the problem, a 16 per cent extra debt burden on the farmers. This may be unrealistic. As I said, I am not a farmer. I am quoting opposition numbers, rather than government numbers. I will quote government numbers in a minute.

Again without trying to underestimate or underplay the crisis, the Minister said yesterday in another place that 23 per cent of payments had been made by close of play yesterday. That is not anywhere near 96 per cent, which was the target, but 23 per cent of payments had been made by 29 March. My guess, although I am not a Minister, is that it should not be beyond human ingenuity to pay all the money by the end of June, which was the close of the window.

The noble Countess, Lady Mar, asked what lessons can be learnt. Clearly, if you set up an arm's-length agency—regardless of who set it up—Ministers cannot interfere on a day-to-day basis. If somebody comes to them 15 days before the deadline saying that the whole thing has gone belly up, you sack the person concerned and you start all over again. It is bad, but I do not know to what extent you can simultaneously have a devolved agency to do the work and hold the Minister responsible on a day-to-day basis for what that agency
30 Mar 2006 : Column 899
does. People who have been Ministers can probably tell me more about honourable resignations in the past, mentioned by the noble Lord, Lord King. He gave the example of the noble Lord, Lord Carrington, whom we all admired when he resigned his position as Foreign Secretary, but I genuinely do not recall how many people resigned in the BSE crisis. I do not think that resignations would help a single farmer get even one extra pound tomorrow. Resignations are, however, a political thing.

Our first lesson is that the whole relationship between devolved agencies and ministries has to be rethought. Secondly, again and again we have computer systems that do not work. This morning the Financial Times carries the news that Accenture is going to pay £294 million to the Department of Health for a computer software glitch it was responsible for—that is about half a billion dollars. Mistakes like that happen with companies like Accenture. Fujitsu also has noted that it is going to lose money on the software system that it was providing; it has sold its software subsidiary. Clearly the computer system has gone wrong. Again, we have to learn how to do this properly. If there is a reform of CAP going on and the payment basis is changed, it behoves the Government and the agency to start changing the system ever so gently from being based 100 per cent on the new method to a mixed system.

I gather that, with the new system being based on land area, maps are imperfect. Maps were not needed before, because the payment system was not based on maps. If you suddenly want accurate mapping of all of England, it should have been done on time, but it turns out that only the Reading office of the agency can do accurate mapping. Again, the honourable Member for Vale of York asked yesterday what an office in Reading would know about north Yorkshire. I presume that it can read the maps. It does not have to know the problems of north Yorkshire; it only has to know something about the mapping.

The chief executive has been sacked and the new executive put in operation. I have to compliment the new person. He is not giving a hopeful and totally unrealistic estimate of how soon payments can be made, unlike his predecessor. It is a bad situation and people are suffering—I do not deny that. It is difficult, if not impossible, for the Government to pay interest on delayed payments. We have had the discussion about the Government meeting their payment obligations on time over many years, but we have to remember that the resignation tomorrow of every Minister in Defra would not solve any farmer's problems. Rather than calling for resignations, we have to learn the lessons, and next time this happens, we will be much better prepared.

I will make one remark more as an economist than as a farmer. It is very surprising that with an industry historically based on uncertainty in payment receipts and uncertainty of weather and so on, banks are still not able to cope. Banks should have already invented instruments of credit that would take on board such uncertainties. That is a market failure. I am very surprised. After all, people have been doing this for
30 Mar 2006 : Column 900
ages. Why have the banks not up till now invented an efficient credit instrument that will cushion farmers? Why are there no good insurance schemes? If there are, I would like to know. This is a classic case for insurance—again, I speak as an economist. One can see clearly the uncertainties of the profession. There should be in place an insurance scheme. This is again an example of market failure.

In the longer run we ought to worry more about those issues, so that the recurrence of such a problem will have a lesser impact on people who are clearly suffering, than about who is in office or resigning Ministers.

2.09 pm

The Earl of Erroll: Is it me now, my Lords?

Baroness Byford: My Lords, the noble Baroness, Lady Farrington, announced earlier that there had been a mistake. The noble Baroness, Lady Shephard, was due to speak in the previous debate—as she did—but is not here to speak in this one, so it is now the noble Earl, Lord Erroll.

The Earl of Erroll: My Lords, I am sorry. I arrived just after the debate had started so I missed that announcement.

I thank the noble Lord, Lord King, for providing the opportunity to debate this subject. I declare an interest up-front in that I am married to a farmer. This situation, plus all the changes associated with it, has been causing us a lot of grief over the past couple of years and has wrecked a year of our life. We have had to absorb an amount of paperwork on top of all the other legislation that has come out relating to health and safety, cross-compliance issues and so on, so it is not just a simple matter of trying to get one little thing right.

I feel slightly sorry for the Minister because I think that he has been badly misled by the agency. I have always been very concerned about the concept of agencies being hived off—almost as part of the Civil Service but not quite—so that we could never get to grips with them in Parliament. They could always hide behind their remit and were not directly responsible. That allowed a loss of control and a loss of information to occur. I am concerned that we are setting up Natural England in the same way. I can see that we are not learning from our mistakes, and I think that hiving off responsibility to large agencies is very dangerous.

My background is in IT and software development. I wrote a lot of farming software years ago. I then married a farmer, and I have also learnt how to do digital mapping as a result of the move to the mapping system. My wife will not sign off maps unless she knows that they are 100 per cent accurate. The justification for relating what has happened to us is simply that the same thing has happened to 65,000 others. Those people cannot get their money either, and I hope that some lessons can be learnt.
30 Mar 2006 : Column 901

I say to the noble Lord, Lord Desai, that the situation is very serious. Anecdotally, we have heard of three suicides locally. The trouble is that the problem is exacerbated by the paperwork and everything surrounding it. People did not go into farming to farm paperwork. If farmers are already at their financial limits, they cannot extend their overdrafts. Therefore, although the debt burden overall may not seem terribly serious, individual farmers are at their limit. Speaking personally, we are able to weather the problem at the moment but I shall give noble Lords an idea of the situation, given that the farming subsidy structure has been relied on for many years and cannot be cut off overnight.

The last payment to my wife, who is an arable farmer, was in November 2004. Normally she would have been paid in November 2005 and that would have paid for seeds, fertilisers and sprays so that she could continue farming over the next year and pay off some of the debt while the harvest was being sold from the previous year. Currently, she has not received a payment for 16 months, as opposed to a year, and that has to be covered somehow. She has to buy the materials to continue farming for the next year and that is very difficult—her money has to come from somewhere. Without a happy bank manager, basically you have to fold. For arable farmers, the crunch point is now. If they cannot get further loans, they will have to go out of farming—there is no other option. That is why the situation is so serious.

I shall try to describe the root of the problem. The digitisation exercise was started several years ago but, at that point, we had an arable area payment system which depended on certain definitions of land and so on. As the digitisation process went forward, it was not properly explained that there would be new rules on what qualified for future payments. The single payment system and the entry-level scheme suddenly came in but there was no real information on them until much later. In September 2004, we arrived at the point where the maps were based on an old idea of what should be submitted to Defra but a whole lot of new stuff then qualified and had to be included, so suddenly all the maps needed to be revised. I do not think that anyone had realised that until it was far too late.

We submitted the necessary corrections and registered for "fast track" because we realised that the entry-level scheme money would also be vital to the profitability of the farm. To do that, we also needed to get on with our woodland areas and so on. However, the maps did not appear and we could not apply for the entry-level scheme in August. We started to panic and telephoned the agency. Then, around October, we were told, "We're terribly sorry. It's all going to slow down again as there has been a change of policy". I think that that is probably when university students stopped being directly employed to do the work and the department switched to an outsource process. Perhaps that had been planned earlier—I do not know—but there was a huge slowing-down in the process.
30 Mar 2006 : Column 902

Months and months after submitting our application, just before Christmas on 23 December, we received maps covering about 80 per cent of the farm estate with a requirement, set out in an abrupt letter, to return them within seven days—not working days but seven days over Christmas—if we wanted to make any changes.

In the mean time, in trying to enter the entry-level scheme we also established from the Rural Development Service that a lot of the land had been lost and was no longer connected, so nothing tallied. The maps that we received in December were not too bad. When I looked at the overall hectarage of the 80 per cent of the land covered by the maps, it came within 0.04 hectares of what I thought it should be according to our digital maps. Therefore, we concurred because at that stage we were both working from Ordnance Survey landline-based data. We only needed to get the remaining 20 per cent registered and we could then go ahead with the entry-level scheme.

We had a few problems. We got a note from the Countryside Stewardship Scheme, which was clearly working on out-of-date maps with different areas and so on. We also received material from the customer services centre in Newcastle, which showed that the staff there were working from maps with changes on them which went through from 23 December, and from the old 2004 pre-change maps. There was obviously a muddle.

In March, we were worried as we started to receive maps with completely new areas on them. I realised that I was probably looking at a new mapping system based on the Ordnance Survey master-map series, and that maps had been changed in the middle of the operation. We had problems because people had made arbitrary decisions about where the field boundary lay and that did not concur with the old information. That was particularly the case with the old Countryside Stewardship Scheme agreements, where a boundary might date back to well before certain other things had changed in the fields. Therefore, if you did not go back to the old boundaries, you would have to rewrite legal agreements as well. We were left in confusion and with problems.

Yesterday, we received some maps and we are now down to only two-thirds of the farm estate being mapped. We seem to have lost an awful lot, so I suppose that I have to go through the whole lot and send them back again. The problem with the mapping, and the reason that it is so important, is that it triggers everything else. The maps are the key to everything: nothing can happen until the maps are agreed. Out of them come the tables from the customer services centre and therefore the entitlement statements. The Countryside Stewardship Scheme, the entry-level scheme, the farm woodland grant scheme and the Forestry Commission woodland grant schemes are triggered by the maps. The sad thing is that, according to the unverified statements sent out not very long ago from Newcastle, we were within four-tenths of a per cent of agreeing the total area for the single payment system claim, but we will not receive anything.
30 Mar 2006 : Column 903

Money is the key to this. I think that the Minister is responsible for sustainable farming, but you cannot sustain farming without money. An online poll in January showed that 62 per cent of farmers were already in financial trouble. I do not know whose money it is. Who is accruing interest on the billions of pounds that are sitting there? I do not know whether the amount is £1.6 billion or £3 billion—I read different articles. Presumably the Government are getting the interest on that money, so why can they not pay it out to keep farmers, and perhaps the bank managers, a little happier?

I have a question. My wife told me that after 30 June this year, the EU will cease to have to pay this money and the Government will have to pay it from UK funds instead. Is that true? There are further problems. What happens if two payments arrive next year? What about the tax issues? Will we be allowed to refer one tax liability back to this year? We have an enormous tax hit. As you have to pay your tax up-front for the following year, that will bankrupt a few people too.

By 16 May we have to fill in the next SPS forms, but which areas do we put on them? If we show the same areas that we put on the previous form, will we receive penalties if penalties had to be paid on that one? Will we get penalties over two years just because we are sticking to our guns and, inadvertently, did not realise that there was a mistake? We hear that there are heavy penalties with regard to cross-compliance. An eastern region farmer has been penalised 15 per cent for going over the top with some fertiliser on an FP209 recommendation. People are heavily active on the penalty side. It is sad that there is no Smithfield this year. I am sorry—I am jumping all over the place.

In conclusion, what is the way forward? I am not sure that promoting the second in command, who was probably responsible for instituting these procedures, into a position of control is the answer. For those who have digitised their farms accurately, the digital maps could be accepted. We need to speak one-on-one with the people doing the mapping to sort out the boundaries. We need to know why they are moving the boundaries, so that we can agree them.

We could make historic payments. Ninety per cent of the single farm payment is supposed to be based on historic payments. We know what those are, from last year. It could, therefore, be 90 per cent, as long as we know the base years being used for those of us who have rebased. We do not even know whether that has been accepted, or if the data have been lost. There are a lot of complications. I am happy to talk to whomever about how they can be sorted out, as I have quite a bit of experience.

2.20 pm

Next Section Back to Table of Contents Lords Hansard Home Page