Rural Payments Agency

My Lords, I am grateful to the noble Baroness for that explanation, if that is what it was. I have congratulated the noble Lord, Lord King, on securing this debate. A number of very important points have been raised on this very topical and important issue. I will address them as best I can. The focus of the debate is the Rural Payments Agency. It was clear from many of the contributions today that a large number of concerns centred on one aspect of the agency’s work; namely, the implementation of the single payment scheme. Perhaps I may take a few minutes to put the introduction of that scheme into context. In June 2003, the EU Council of Agriculture Ministers agreed what amounts, frankly, to the most important reform of agricultural policy in generations. Key to the reform was the introduction in 2005 of the single payment scheme, which gives farmers greater freedom to meet the demands of the market by decoupling subsidies from agricultural production, and helps reduce the negative impact of farming on the environment by removing artificial incentives to maintain production and introducing a new regime of cross-compliance. At last, we have started to get rid of the curse of constant subsidy. I cannot help but point out that none of this happened under the previous administration, who claimed to be so much on the side of the farmers. No reform was even attempted of the ridiculous system which had prevailed for much too long in these islands. It is not hard to guess why they did not seek reform in this area. After the disaster of foot and mouth, such reform of the CAP was a key recommendation of the Curry commission, and it lay at the heart of our strategy for sustainable farming and food. In truth, we are only at the start of this transformation, but we need to see it through if British farming is to have a future. The difficulties which we have encountered with this year’s payments are, sadly, a distraction for many in the farming industry who would otherwise be focusing on modernising their businesses. That is important. The economic benefits to the UK farming industry of introducing the SPS are estimated to amount to some £100 million during the next few years as a result of improved market orientation and removal of many of the rules and distortions associated with production-linked subsidies. Importantly, the new scheme also simplifies the subsidy system by consolidating 11 previously separate CAP payment schemes into one, thereby contributing to a real reduction in paperwork for farmers once the system beds in. Many noble Lords compared the model of the SPS that Ministers have chosen to implement in England with that chosen in Wales and Scotland. They were right to say that we have adopted a different system in England, but I would describe it as being more sustainable and modern rather than more complex, as some others have described it. I agree with the spokesman for the Opposition in another place who said on Monday that the Secretary of State,"““decided, rightly, to introduce a complicated hybrid scheme””.—[Official Report, Commons, 27/3/06; col. 545.]" Is that still the view of the Opposition three days later? If it is, it did not come out in any of the contributions from the Front Bench. I assume from this that the Opposition support our decision to introduce such a scheme, but I could be wrong about that. After all, this modernising move was long overdue after the minimal efforts they made to make the industry more sustainable during their 18 years in office. By contrast, Scotland and Wales have chosen to use a historic system to make payments. Under it, farmers continue, now and for the future, to be paid on the basis of what was received by someone farming the same land between 2000 and 2002. That appeared to us, and no doubt to the party opposite, to be neither beneficial in reconnecting farmers to the market, nor something with which taxpayers or farmers would be content for long. If we accept the principle that subsidies should not be linked to production—I hope that all parts of the House do—it is both unfair to farmers and unjustifiable to the general public to make future payments on the basis of crops and livestock that farmers had five years ago. There are indeed already rumblings in member states that have maintained the historic system about how unsatisfactory it is; and that dissatisfaction is bound to increase as time goes by. Comparisons about the timing of payments in other parts of the UK must also take into account the vastly differing number of claimants that each country has received: 120,000 in England compared with 22,000 in Scotland and 18,000 in Wales. I am surprised that there has been no mention of that point in the debate. Much has been said today about the payment timetable in England. The flat-rate model was chosen by Ministers only after a full consultation was carried out. It also followed advice received by Ministers at that time from the RPA that the introduction in 2005 of the SPS model chosen was achievable. At that time, stakeholder representatives and Ministers were greatly reassured. Indeed, as I understand it, it was the Opposition’s belief that 2005 was the right date to start making the payments. It was always known that there might be a risk of European regulations changing—as indeed they did several times during 2004—to the extent that it might affect the payment timetable. As a result, the RPA announced in January 2005 that the most likely date for the first payments to be made would be February 2006. Payments under the single payment scheme indeed began—despite committees elsewhere saying it was unlikely to happen—on 20 February this year, and entitlement statements were sent out to all but 1 per cent of claimants soon afterwards to allow trading to begin. As I made clear to the House on Monday, and I want to reiterate it as clearly and firmly as I can, Ministers fully share farmers’ concerns about the current problems and understand the distress many of them feel. After 20 February, Ministers had expected and been led to believe that more payments would have reached farmers by now than has been the case. It was only late in the afternoon of Tuesday 14 March that Ministers were first told by the RPA that the bulk of SPS payments would not be made by the end of March. We greatly regret that this situation arose. Several Members of the House have asked whether the Government would consider compensating farmers for late payments. As I tried to explain on Monday, payments, while later than any of us would like, remain well within the payment window specified in the relevant European regulations, which give us until the end of June 2006 to make these payments; hence the question of compensation does not arise. We are also acutely aware of the fact that, under the old CAP subsidy schemes, farmers would potentially have received payments at different times of the year, while the single payment scheme is just that—a single payment. Indeed, this is one of the main reasons why we made the announcement over 12 months ago, so that farmers would know that payments would not start until February. We know that the change in the timing of payments has caused difficulty to a number of farmers as they adjust to the new scheme, which is why I have been in regular contact with the leaders of the farming industry, their suppliers and their bankers. I have met all these groups in the past 24 hours, and I talked this morning to the Agricultural Industries Confederation to update its representatives and, more importantly, to hear their views on the current situation and their perspective on how matters are affecting their farmer customers. I have to say that, as far as one can be in this situation, I was encouraged by the message that I took from my meeting with the banks this morning, and indeed from discussions with the NFU, CLA and TFA yesterday morning. There have been no difficulties in securing loans up to the level of the expected payments and none of the unions involved, nor the banks, nor the AIC, knew of cases of bankruptcy that have followed from the fact that we are not going to meet the bulk of payments by the end of March. I do not say that there will not be any, but there are none now, and it is not right to scare on the basis that there have already been some. The issuing of entitlements statements, even where not fully validated, has helped in that respect. In the same vein—and I repeat this, because it is important—I was told unequivocally by the banks that no viable farming businesses are failing as a result of single payment issues. The situation we found ourselves in when the RPA reported its revised assessment of the situation on 14 March was simply unacceptable. That is why we supported the decision of the Permanent Secretary to replace the then chief executive of the RPA with Mark Addison, a senior civil servant with outstanding experience and abilities, and charged him to come forward urgently with a report on the steps needed to get us back on track. The RPA still faces a significant challenge in getting SPS payments out to farmers, and I know RPA staff are doing their best and working all hours that God sends. But speeding up these payments—consistent with our responsibilities in handling public funds—remains the overwhelming priority of Defra Ministers. Noble Lords have asked questions on the detail of the steps being taken to speed up payments. There have also been some questions on the detail of the RPA’s administration of the scheme, particularly mapping and the IT system. On the question of mapping, since September 2004 there have been more than 100,000 requests for new land to be registered or for boundaries of registered land to be amended. In the past five months alone around 45,200 holdings have had fields mapped, and as at the week ending 24 March around 5,000 holdings were awaiting one or more fields to be mapped. The Rural Land Register now comprises some 2.1 million land parcels, and by area is estimated to be approximately 98 per cent complete for SPS purposes. The remaining 2 per cent of incomplete cases are generally where farmers have still to provide maps. Their land will be digitised but their payment may be delayed, because until it is digitised it is not valid for payment. The new acting chief executive realises that mapping is one of the considerable problems, as many noble Lords from all parts of the House have stressed today, and he is taking a close personal look to see what can be done to improve the mapping process. Any advice from noble Lords on that important issue would be very welcome. The development of the Rural Land Register is a significant achievement. It will be used widely within Defra not just for processing single payment scheme applications, but for other schemes such as environmental stewardship. On IT issues, the noble Countess, Lady Mar, asked a question on Monday about computer crashes and lost data. Expanding on the answer that I gave, I emphasise at this point that the RPA is satisfied with the performance of its SPS IT system. To progress payments, the RPA is utilizing the system for 15 hours per day during weekdays, and up to eight hours per day during weekends. However, it is sometimes necessary to temporarily stop the processing of individual claims so that the system can carry out certain automated system-wide tasks such as identifying which claims are now ready for payment or have completed certain validation procedures. As I said on Monday, all the main IT systems are in place and have produced the entitlement statements and first payments as planned. However, we also know that it has not been possible to ramp up the validation and distribution of payments as planned. The key objective for the acting chief executive is to identify the problems and develop and drive forward the plans to overcome them. He has identified several actions, some of which I outlined to the House on Monday, which would enable us to speed up payments without losing sight of the need to properly manage the disbursement of a large sum of public money. There is no question of the UK Government receiving interest on this money. It belongs to the EU, and is then transferred to us to hand on to farmers. There is no question of it being in UK Government bank accounts where interest can be gained. I hope that once and for all that canard can be put to rest. The acting chief executive has removed disproportionate checks from the payment authorisation system to speed up the payments; prioritised work on validation of claims to release the maximum value of payments as quickly as possible; centralised key mapping work; and strengthened the RPA’s capacity in key areas. Those were initial steps. He is now, with the strong support of the Secretary of State, taking the following steps. He is reforming RPA processes to deliver customer focus by dedicating teams of staff to work on individual claims in the entirety, rather than the current task-based approach. Also as part of that change—and this is significant, as noble Lords with experience of this may appreciate—processing staff will be allowed to phone applicants directly to work through any outstanding issues. A discrepancy tolerance of two hectares or 3 per cent, whichever is the lower, will be implemented for validation of claims. That is also important. There has been too tight a process with regard to small pieces of land. Redundant quality checking processes will be stopped to allow staff to work on claims processing. People doing the mapping work will be joined up with those actually processing claims in the same office. Where mapping correspondence is outstanding—and we all know examples of that; we have heard about them today—payments will be made on the basis of the information the agency has. A senior manager will be appointed to take delivery of the 2006 claims processing, which we cannot forget. In his initial assessment of the reasons for delays, the acting chief executive has not identified lack of overall staff resources as a concern for the completion of the 2005 SPS statements. In addition to these steps I can also announce today, after receiving representations about the need to provide more time for farmers to notify transfers of entitlements in order for the transferee to claim on them under the 2006 scheme, that we are arranging for the necessary changes to be made to both EU and domestic legislation. In practice that means the deadline will be moved back from 2 April to 23 April, an extra three weeks. While that may not be the most major thing the House wanted to hear today, I hope it will be considered an important step. I shall quickly try and answer some questions. The position of the ex-chief executive is that he is on paid leave of absence until the department is in a position to determine and agree the terms of his departure. There is all-party support to introduce the new scheme in 2005 to help modernise the industry. We only went ahead with it after the RPA advised that the task was achievable. The noble Lord, Lord Plumb—whose contribution to these proceedings I always listen to with great care—will know, although this is not what he asked for, that there is to be a thorough examination of the RPA to see whether the agency is generally functioning in the way it should. That review is starting now. Like the noble Lord, Lord King of Bridgwater, when he was a distinguished Minister, I too am a hands-on Minister. I have, for good or bad, spent a long time over a number of months talking to the RPA and listening to what it has to tell me about what progress was—or was not—being made. I have to tell the House that it was not until Tuesday 14 March that we learned that the bulk of payments would not be made in time. This is from a standalone agency of the sort that was the model for the Conservative government from 1979 to 1997. What are Ministers supposed to do when they get advice of that kind? We checked, checked, and checked again. There has never been any complacency; there was continual challenge. Our priority was to see payments made. Until 14 March, the advice given in the face of continuing ministerial challenge was that the bulk of payments could—and would—be made on schedule. The RPA is an arm’s-length delivery agency, and Ministers are reliant on the advice received from it. We understand our responsibilities. The government of which the noble Lord was a distinguished member was not noted for its resignations, the noble Lord, Lord Carrington, being a very honourable exception. Perhaps the noble Lord would name a Minister who resigned over the BSE farce?