Press Release - Department for Environment, Food and
Rural Affairs, and Rural Payments Agency: the delays in
administering the 2005 Single Payment Scheme in
England
18 October 2006
Difficulties encountered by a government agency in making
payments under the EU’s Single Payment Scheme have caused distress
to a significant minority of farmers, cost farmers money in
additional interest and bank charges, and undermined the farming
industry’s confidence in the agency, according to a report
published today. The study by the National Audit Office found that
the risks and complexities involved in delivery had not been fully
appreciated. As a consequence the Rural Payments Agency
underestimated the amount of work involved.
The Single Payment Scheme is worth £1,515 million to 116,000
farmers in England. Defra and the Agency notified farmers that they
aimed to start payments in February and make 96 per cent of
payments by the end of March. The Agency encountered difficulties
and by 31 March had paid £225 million (15 per cent) to 31,000
farmers (27 per cent). The Agency had processed 95 per cent of
payments by the end of June, but in the interim the Chief Executive
had been removed from his post.
The cost of implementing the scheme was budgeted at £76 million
but, by March 2006, had reached £122 million, with further cost
increases likely. Defra and the Agency had expected to reduce the
Agency’s staff by 1,800 and make efficiency savings of £164 million
by 2008-09, but difficulties in processing claims led to the
recruitment of additional agency staff and there appears to be
little prospect that much of the savings will now be realised in
this timeframe.
The NAO identified 34 overpayments and 79 underpayments out of
363 claims tested. There is a risk that the errors and other
procedural mistakes will result in the European Commission
disallowing a substantial amount of the expenditure, for which
Defra has had to make provisions and allow for contingent
liabilities totalling some £131 million. The Agency is unlikely to
be able to remedy all the problems identified in time for the 2006
scheme, the payment window for which starts in December 2006.
A survey carried out by the NAO found that 20 per cent of
farmers said the delays had caused them distress and anxiety, with
the problem particularly acute among those who rely on the scheme
for a significant proportion of their income, such as hill farmers.
The NAO estimates the delays cost farmers between £18 million and
£22.5 million in additional interest and arrangement fees on
loans.
The timetable to introduce the scheme was tight, and became
tighter following changes to the original specification of the IT
system to incorporate changes to EU Regulations, legal
clarification of the Regulations, Ministerial decisions and
operational changes such as the design of the application form.
Nonetheless, difficulties within the Agency’s control contributed
to delays in making payments. Each element of the IT system was
tested, but the system was never tested as a whole before the
scheme was introduced, and problems arose once it went live.
The Agency did not adequately pilot land registration and
underestimated the amount of work involved in mapping the land.
Instead of the expected 1.7 million parcels of land, it had to deal
with 2.1 million, and instead of 200 maps a week it received 1,200.
By September 2005 there was a backlog of 31,000 forms and 59 per
cent of farmers reported difficulties in finalising maps. The
Agency also underestimated the amount of work involved in
processing each claim and had to rely on often inexperienced
temporary and agency staff to clear the backlog.
Problems with the Single Payment Scheme were not picked up early
enough, both by the Agency and Defra, for corrective action to be
taken. Contingency plans were mothballed because continued work on
them would have spread more thinly the limited staff with the
necessary understanding of the scheme and technical skills, and
because the Agency believed there was a better chance of making
payments on time with the main system. Progress reports from the
former Chief Executive of the Agency were unduly optimistic but, in
the absence of adequate management information systems, robust and
objective data showing the progress that had been made and the work
that still had to be done were not readily available. This meant
that clearer output measures (such as the cumulative number of maps
registered or the progress of claims through the validation
process) which might have triggered corrective actions earlier,
could not be set.
Sir John Bourn, head of the NAO, said
today:
“In paring back the work required to get the single
payment scheme ready on time, the Agency underestimated the effort
involved in processing claims, but also left itself without the
management information it needed to take control of the situation.
As a result, many farmers faced unacceptable delays before getting
their money and the Agency made mistakes in paying out the correct
amount. Unpicking what has gone wrong will take some
time.
“Foremost among the Agency’s priorities now must be to
determine if the administrative and computer systems for mapping
land and processing claims are really up to the job. Until that
happens, there is little prospect the problems will be remedied in
time to deal with the 2006 claims.”
Notes for Editors
- The EU Single Payment Scheme replaced 11 previous subsidies to
farmers based on agricultural production with one payment for land
management. The European Commission’s deadline was for 96.14 per
cent of payments (by value), across the whole of the United
Kingdom, to have been made by the end of June 2006. The European
Commission gave some discretion to Member States over how to
implement the scheme. England and Germany opted for the “dynamic
hybrid” model, where payments are partly based on previous
entitlement and partly on a flat rate per hectare, with the
weighting transferring to the flat rate by ten per cent a
year.
- The Rural Payments Agency is responsible for administering
single payment scheme payments in England. Payments in Scotland,
Wales and Northern Ireland are handled by the devolved
administrations.
- Press notices and reports are available from the date of
publication on the NAO website, which is at
www.nao.org.uk. Hard copies can be obtained from
The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 850 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 55/06
All enquiries to Nick Morrison,
NAO Press Office:
Tel: 020 7798 7934 Mobile: 07796 940 746