A second progress update on the administration of the Single Payment Scheme by the Rural Payments Agency

“This is the third time we have looked at the Single Payment Scheme and there are still significant issues to be resolved. There has been a serious lack of attention to the protection of taxpayers’ interests over the administration of the scheme. There has been a lack of senior management ownership of the scheme in the Agency and DEFRA, even though the risks were previously highlighted by the Committee of Public Accounts.

“Previous assurances on overall progress in recovering overpayments from farmers proved optimistic and reflect a lack of reliable information on actual progress. DEFRA should urgently address the risks to ongoing IT system support and the inaccuracy of the scheme’s data, explore alternative payment systems and resolve the ongoing management issues.”

"This is the third time we have looked at the Single Payment Scheme and there are still significant issues to be resolved. There has been a serious lack of attention to the protection of taxpayers’ interests over the administration of the scheme. There has been a lack of senior management ownership of the scheme in the Agency and DEFRA, even though the risks were previously highlighted by the Committee of Public Accounts. "Previous assurances on overall progress in recovering overpayments from farmers proved optimistic and reflect a lack of reliable information on actual progress. DEFRA should urgently address the risks to ongoing IT system support and the inaccuracy of the scheme’s data, explore alternative payment systems and resolve the ongoing management issues."

The Rural Payments Agency and DEFRA have shown scant regard to protecting public money in their administration and management of the EU’s Single Payment Scheme in England, according to the National Audit Office. The IT system does not meet the scheme’s needs, the cost of processing claims, already very high, has continued to increase and the administration of the scheme is not value for money.

The Department and Agency have brought forward the payments to farmers, but they have not adequately addressed the concerns over value for money previously raised by the National Audit Office and the Committee of Public Accounts. Farmers were paid earlier under the 2008 scheme, with over 96 per cent paid by mid May 2009, compared to 80 per cent by the same month for the 2006 scheme. However, the cost of the scheme is high and increasing: we calculate that the average cost per claim is £1,743 and this is an increase of 22 per cent on the 2005 scheme. It compares to a cost of £285 per claim under the simpler Scottish system.

Since April 2005 the Agency has incurred additional administration costs of £304 million as a result of needing more staff than anticipated in the 2005 business case for the scheme, the Department has had to set aside £280 million for disallowance and penalties, and the Agency anticipates that a further £43 million of overpayments will be irrecoverable. The IT upgrades and maintenance since 2007, costing £130 million, have resulted in heavy customisation of an IT system that has now cost £350 million in total, with complex software that is expensive and reliant on contractors to maintain. With many of the Agency’s contracts for ongoing support due to end in 2009, there is an increased risk of obsolescence.

The NAO has calculated that the cost of correcting earlier mistakes in processing claims has amounted to £119 million. Progress in recovering overpayments has been slow and the Agency does not have a clear picture of the extent of overpayments, which the NAO estimates is likely to be between £55 million and £90 million.

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