Rural Payments Agency

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 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, who 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. Second, 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 that 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 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.