Annex A: chronology of events 2006

‘The meeting discussed whether Ministers should hold a press conference to make the announcement. Press Office were against the idea of putting Ministers up to announce what is essentially business as usual. It was considered to be very risky and the press might go into significant detail which we might not wish to expose at this time. LB was minded to agree not to do a press conference but would take the Secretary of State’s views. LB agreed to consider all interview bids on their merits. [Official Two] agreed that a press conference was less important tomorrow if LB could do some positive media on or about 27 February – perhaps visit a farm where the farmer has received a payment. It was agreed that further thought would be given to this.’

Following the meeting, Lord Bach met the then Secretary of State at 5.00pm, who confirmed the recommendations which had been agreed earlier that day. This confirmation – and her agreement of the terms of a written Parliamentary statement to be made the following day – was recorded in an email later that evening from one of the Secretary of State’s Private Secretaries.

The Chairman of the Select Committee on Environment, Food and Rural Affairs, Michael Jack MP, also wrote to Lord Bach that day. His letter said:

‘1. At its meeting on 25 January, the Committee discussed your comments on “Farming Today” and the “Today” programme on 24 January, and your letter to the Financial Times of 25 January, about the Committee’s interim report on the Rural Payments Agency. Committee colleagues asked me to write to you, on their behalf, about your comments.

‘2. You stated in the media that several of our conclusions were “utter nonsense”, citing in particular the report’s comments on timing of payments, financial impact on farmers and the apparent “complacency” of Ministers. On the first point, our report noted that the RPA had indicated in January 2004 that payments would commence in February 2006, and expressed our shock that, so close to this date, no definitive date on which payments would be made had been announced, and that it was still not clear to farmers whether they would receive a full or partial payment (paragraphs 1, 3 and 13). The Committee does not believe this is an unreasonable conclusion.

‘3. On your second point, about the financial impact on farmers, in your “Farming Today” interview you denied that you had referred to an “average farm”. The Committee noted in its report that you referred to the fact that £25 million of extra interest was only about 2% set against “an annual average change in [farmers’] income” (Q 30). The Committee’s point was that, while this sum is a small percentage of the total income, as you noted, for individual businesses on the margins of viability the impact of late payment of SFP could be too much to bear (Paragraph 8).

‘4. Thirdly, you have argued that to accuse you of complacency is “utter nonsense” (“Financial Times”) and “offensive” (“Farming Today”). Our comment was mainly based on your statement to the Committee, in response to a question about whether, with hindsight, there was anything you could have done differently: “I cannot think of anything I could have done although others may well think of things I could have done” (Q 24). Hence our conclusion – which, once again, we do not think unreasonable – that we were “dismayed at the complacency of the Minister, who refused to admit that any mistakes had been made or that anything could have been done differently to avoid the problems” (Paragraph 12).

‘5. You have also said, on “Farming Today”, that the timing of the report “could create unfounded alarm and uncertainty in the farming community”. Given that the impetus for our inquiry, and this interim report, was the huge degree of uncertainty, frustration and indeed anger among farmers, we hardly feel that our report – which has been welcomed by farmer’s representatives – can be said to have “created” alarm and uncertainty.

‘6. Finally, in the course of your interview on the “Today” programme, it was put to you that this was a report from a cross-party committee. You replied that “very strongly chaired, in my view, by the Conservative chairman”, apparently implying that party political considerations had played a part in the report’s findings. While the Committee accepts that Ministers will not always like the conclusions it reaches, we were very disappointed to hear this comment about the way the Committee works. Like other select committees, we seek to work by consensus, reaching conclusions on the basis of evidence presented, as on this occasion. As you know, the inquiry into the RPA was led by two of my colleagues, David Taylor and Roger Williams, and members of all parties took part in the oral evidence session on 13 January. Colleagues have asked me to emphasize that the report, for which they take full responsibility, was agreed for publication without the need for a formal division.

‘7. We would welcome any further comments you might have on the points I have set out above. We look forward to the additional written information which we requested at the oral evidence session and subsequently by letter, and will take this into account in preparing our final report on the RPA. As we consider this further information, the Committee will also wish to determine the need for a further oral evidence session with Defra and the RPA prior to the completion of our final report.’

31 January 2006

Defra Ministers tabled before both Houses of Parliament a written statement about the Single Payment Scheme. The text of the statement tabled by Lord Bach said:

‘On 19 January 2005 the Rural Payments Agency (RPA) announced that payments under the new CAP single payment scheme (SPS) were expected to commence in February 2006, well within the EU regulatory window of 1 December 2005 to 30 June 2006. Over the past year, staff at the RPA have worked exceedingly hard to ensure that this expectation was turned into a reality.

‘At the EFRA Select Committee hearing on 11 January, I made clear that payments would begin, in line with the RPA’s forecast, before the end of February and that an announcement would be made by the end of this month on whether they would be full or partial payments. Having considered the latest progress reports on the processing of farmers’ claims I am pleased to confirm today that the RPA will now proceed to make full payments. The contingency system to make partial payments will not, therefore, be invoked.

‘The RPA will now proceed to definitively establish entitlements on 14 February, details of which will be communicated to individual farmers within two weeks of that date. This will allow for the trading of entitlements to commence in preparation for the 2006 scheme.’

The statement continued:

‘Where 2005 SPS applications have been fully validated, payments will start before the end of February, with the bulk being made in March. In the minority of cases where queries remain unresolved, the validation process will continue beyond March, but farmers may be assured that the RPA will make every effort to complete the task in the shortest possible time frame.

‘I hope that this Statement will provide some reassurance to the farming industry about the progress of the scheme. I want to acknowledge the co-operation and patience of everyone who has made a claim.’

Those statements were accompanied by a Defra press release, entitled Full CAP payments to farmers will begin in February, which was also placed on RPA’s website. This said:

‘English farmers will start receiving full payments in February under the Single Payment Scheme, Farming Minister Lord Bach confirmed today.

‘A total of £1.6 billion will be paid directly into farmers’ and growers’ bank accounts or by payable order, starting at the end of February and with the bulk complete in March. All payments will be well within the window set by EU legislation which runs until 30th June 2006.

'Lord Bach said:

“I am very pleased to confirm what we said more than a year ago – that full payments will begin in February. I hope this announcement will provide some reassurance to the farming industry.

“Staff at the Rural Payments Agency have worked extremely hard to make this possible and I am most grateful to them. I also want to acknowledge the co-operation and patience of everyone who has made a claim.

“The start of these payments signals a milestone in the development of a modern farming industry in this country, one which is no longer driven by subsidies. This new single payment scheme, a key part of the 2003 reforms of the Common Agricultural Policy, rolls 11 old schemes into one.

“It encourages farmers to be more innovative in responding to consumer demand while setting new standards of sustainable agriculture and environmental protection.”

‘The Rural Payments Agency will now press ahead to definitively establish entitlements on February 14th. Farmers will be informed of their individual details within two weeks of that date.

‘Johnston McNeill, Chief Executive of the Rural Payments Agency, said:

“Our staff have shown dedication and a lot of hard work in recent months to deliver these payments and it is a great credit to them.

“Making full payments from February will also deliver major benefits for the future. Claimants will be able to trade their definitively-established entitlements and their SPS forms for 2006 will be pre-printed with their key data so that the next application will be simpler to complete.”’

Note 3 to the press statement dealt with enquiries about the scheme. It said:

‘A service to deal with SPS payment and entitlement enquiries at the RPA’s Customer Service Centre (CSC) will be available from 6 March.

‘Prior to that date, CSC will prioritise queries to help complete outstanding validations, therefore customers are asked to only contact CSC before 6 March if they have been asked to do so by the RPA in order to resolve a query or if they wish to obtain a form to transfer entitlements.’

Reacting to the Ministerial announcement, the Country Land and Business Association, in an item on its website entitled At last! Full Farm Payments Promise by RPA, said:

‘At last, after much pressure from CLA and others, the Government, acting on advice from the RPA, have promised to get full payments out to the bulk of farmers and land managers by the end of March 2006.

‘We welcome this statement as we did not want messy “partial” payments in March. However, statements are merely words, our members will not be happy until they receive the money upon which their businesses and livelihoods depend.

‘Also, we want to see what constitutes “the bulk”. We are very concerned about those who fall foul of the system in some way, particularly as it is not their fault. There will need to be some safety net for them particularly if they are to be able to trade entitlements and submit their claims for 2006 in time.

‘The RPA must pay attention to the needs of the minority as well as the majority.’

On its website, the Tenant Farmers’ Association expressed its ‘relief’ at the announcement. It also said ‘With the information that definitive establishment will take place on 14 February our members will also be able to plan for any transfers of entitlement that may be necessary before 2006 claims are submitted’.

The NFU also described the announcement as a ‘relief’. In a press statement, its President was quoted as saying:

‘The NFU made it quite clear to DEFRA over a year ago that the RPA should have a plan in place to ensure advance payments in December if there was further slippage in its target date for full payment. We have repeatedly sought assurances that the deadline would be respected, but here we are at the start of February and still no money has been paid out.

‘However, I am pleased that Lord Bach and the RPA have fully investigated the position and confirmed that the RPA is able to make full payments to the great majority of farmers by the end of March. We will hold them to that.’

The press statement continued:

‘The NFU still has concerns about Lord Bach’s and the RPA’s claims. There are still hundreds of thousands of tasks still to be completed before the scheme is fully established. Meanwhile, the National Reserve allocation letters currently being received by farmers give very little detail of how awards have been calculated. Many letters are triggering follow-up queries from anxious farmers and are likely to lead to appeals, which again slows the process down.

‘At the same time, it is clear from Lord Bach’s announcement that not all farmers will have their payments by the target date. The government’s original target was for 96% of payments by the end of March.’

The NFU President said:

‘The RPA must make sure that it gets as close to its original 96% target as possible. We will maintain pressure on it to respect that. If a small percentage of farmers cannot be paid because of unresolved queries about some element of their claim, the RPA must make advance payments based on the part of their claim that has been validated.’

1 February 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This stated that:

‘Around 23,500 tasks have been cleared in the past week and 220,000 cleared in the past month.

‘Level 1 validation – The last of the remaining claims have now progressed into the validation system. The total number of claims currently remaining at the primary validation stage is just over 100, which are being progressed to a 1 February deadline. A further 1,200 claims are being reviewed.

‘The main focus remains the clearance of detailed level 2 validation tasks. The total number of tasks has increased by just 1,000 over the past week to 713,000. As of 31 January some 412,000 tasks had either been completed or are in progress, representing 58% of the tasks identified thus far. Over the month of January some 220,000 tasks have been cleared, increasing the proportion of tasks in progress or cleared from 26% to 58%.

‘The first software required to support 2006 scheme processing was successfully deployed on time on 28 January.’

The briefing continued:

‘All bar 144 applications to the National Reserve have completed assessment. The remaining cases are awaiting further advice either from other bodies or the applicant. A further IT fix is required before all results can be loaded into RITA. Around 8,500 accepted cases have thus far been entered into the IT system.

‘Letters have been despatched to most successful Reserve applicants, with a few to follow assessment. Farmers and their agents continue to question the value of awards and further clarification on the method of calculation has been provided.

‘The entitlement programme that will add unallocated reference amount to the National Reserve will run on 1 February to provide figures for the quantification of the scaleback to be applied to entitlements to fund the National Reserve.

‘Since 3 October Infoterra have digitised around 224,000 land parcels from 38,900 holdings.

‘On 25 January we launched a pre-registration system for farmers wishing to receive a land and entitlement transfer notification form, once they are ready. The system, which has the support of the main industry representative groups, has so far logged 813 requests.’

The briefing concluded by saying that, in the coming week:

‘We will continue to clear down detailed processing tasks based on the current priority order. Additional RPA resources will be trained and deployed on SPS processing, whilst extra employment agency staff are acquired.’

2 February 2006

In the House of Commons, the then Secretary of State, Margaret Beckett, was asked to make a statement on the effectiveness of RPA. She replied:

‘In 2004-05, the RPA met all its key performance targets against a backdrop of considerable organisational change and the introduction of the single payment scheme. [We] announced on 31 January that the RPA would meet its 2005-06 commitment for starting SPS payments.’

When asked to define ‘the bulk’ of payments, which it was noted was the new description of what would be paid by the end of March 2006, the Secretary of State replied ‘… it looks as though we shall not be able to make as much as 96 per cent of the payments in March, which was the original goal, but we hope to make the majority of payments then’.

A written answer by a Defra Minister, Jim Knight, to a question by Lindsay Hoyle MP about whether farmers would receive their payments in line with the original timetable, said:

‘As I announced on 31 January, the Rural Payments Agency will start making full payments under the single payment scheme in February with the bulk of payments being made in March. This is in line with announcements made in January 2005, and well within the regulatory payment window, which runs from 1 December 2005 to 30 June 2006.’

In the House of Lords, Lord Bach said that ‘we cannot be precise at this stage about how many payments will be outstanding at the end of March. It will be a minority and we will have a better idea on numbers once the definitive establishment process is complete’.

9 February 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This stated that:

‘We remain on track for determining entitlement overnight on 14 February and completing first payments by the end of the month. Around 61,000 tasks have been cleared in the past week.

‘Level 1 validation – The last of the remaining claims have now progressed into the validation system. The total number of claims currently remaining at the primary validation stage is just over 100, which are being progressed to a 1 February deadline. Further cases are being reviewed as necessary.

‘The main focus remains the clearance of detailed level 2 validation tasks. The total number of tasks has increased by 18,000 over the past week to 731,000. As of 7 February some 449,000 tasks had either been completed or are in progress, representing 61% of the tasks identified thus far.

‘The focus over the past week, and the remaining few days before the determination of entitlement is to clear tasks representing the largest anomalies on the system, with a view to increasing the accuracy of the entitlement calculation. To that end dedicated teams have been established to clear specific types of work, such as major anomalies on under and over claims and quality checks.’

The briefing continued:

‘All bar 38 applications to the National Reserve have completed assessment. Around 8,850 accepted cases have been entered into the IT system with a further 63 awaiting entry once outstanding issues have been resolved. Farmers and their agents continue to question the value of awards and further clarification on the method of calculation has been provided, including a first case under the Freedom of Information provisions.

‘The computer programme that calculates the number of horticultural authorisations to be awarded to claimants ran for the first time last night.

‘Since 3 October Infoterra have captured or amended c.240,000 land parcels from c.40,900 holdings. Infoterra data delivery 6, comprising c.44K parcels, was successfully uploaded with only 8 parcels failing because of invalid geometry or history file problems. Maps have been mailed to just over 29,000 customers.

‘Some 300 additional staff have temporarily deployed from other operational areas to assist with SPS processing.’

10 February 2006

A status report on the scheme implementation programme was provided to the joint Defra-RPA Executive Review Group. The programme risks were graded as follows:

• business case – red;
• scope of the project – amber;
• schedule – amber;
• resources – red;
• stakeholders – red; and
• risks/issues – red.

14 February 2006

RPA began to definitively determine entitlements and to send to farmers the first statements setting out those entitlements, accompanied by a document entitled Guidance to accompany the entitlements statement: understanding your entitlements statement.

Farmers Weekly, in its 17 February 2006 edition, quoted an RPA spokesperson as having confirmed that those entitlements had been established and that those statements had been issued, saying:

‘The data that we began generating on Tuesday will form the basis of letters advising farmers of their entitlements which will be dispatched from early next week. All of them will be issued by the end of this month.

‘RPA remains on track to commence making full Single Payment Scheme payments to farmers and growers in England before the end of February, with the bulk of all payments made by the end of March.’

The Comptroller and Auditor General’s subsequent October 2006 report on the administration of the scheme, citing the joint Defra-RPA Executive Review Group’s Minutes for 13 February 2006, said that ‘some 60 per cent of the letters sent out, however, acknowledged that the recipient’s definitive entitlement was provisional until all validation checks had been completed’.

According to paragraph 107 of the subsequent report of the House of Commons Select Committee on Environment, Food and Rural Affairs, published on 29 March 2007:

‘Soon after, farmers began receiving letters informing them of entitlements and some payments started on 20 February. Many statements of entitlement were, however, not validated when sent. Some were even sent to the wrong people. Subsequently a number of supposedly “fully validated” statements were found to have been inaccurate.’

15 February 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This stated that:

‘We started the process of determining entitlement overnight on 14 February in accordance with the plan. The process was interrupted at 21.00 on the 14th to allow further checks to be undertaken on the payment hold process, required for claims that are not yet ready for payment.

‘The batch process will resume later this afternoon, with the intention of determining entitlement tomorrow morning. We remain on track for starting payments later this month and commencing the issue of entitlement statements within the next week.

‘A total of 54,000 claims have completed validation, except for fruit and vegetable and commons validations. However, some of these claims will be held back from payment as additional checks and/or information is required. A total of 146,000 tasks have been closed in the last week, including around 100,000 tasks closed automatically.

‘Additional resources continue to be deployed in an effort to contain the processing and payment timetable for the 2005 scheme.

‘Level 1 validation – All claims were progressed though Level 1 before the regional averages were established overnight on 14 February.

‘The main focus remains the clearance of detailed level 2 validation tasks. The total number of tasks has increased over the past week. There are an additional 90,000 of which an estimated 45,000 tasks will require action (the other 45,000 will be subject to automated closure). These have been generated through workflow 1 and 8 being made active. These are being assessed and placed on lists to action.

As of 13 February some 549,000 tasks had either been completed or are in progress, representing 69% of the tasks identified thus far.’

The briefing continued:

‘Following discussion with you and the Executive Review Group on 13 February we invoked the phased implementation of the definitive entitlement calculation.

‘All bar 12 applications to the National Reserve have completed assessment. A further 26 accepted cases are due to be entered into RITA once outstanding issues have been resolved.

‘Since 3 October Infoterra have captured or amended 244,000 land parcels from 41,600 holdings. We have thus far despatched maps to nearly 29,200 customers.

‘A further 50 staff, additional to the 300 acquired over the previous week, have temporarily deployed from other operational areas to assist with SPS processing.’

The briefing concluded by saying that, in the coming week ‘the main focus will be completion of the definitive entitlement calculation and commencement of (i) the claim authorisation and payment; and (ii) the entitlement notification process’.

16 February 2006

A Defra Minister, Jim Knight, gave a written reply to a question from Timothy Farron MP, which had asked what recent assessment Defra had made of the impact on farmers of late scheme payments.

The Minister replied:

‘In my statement on 31 January 2006, Official Report, column 10WS, I confirmed that payments under the Single Payment Scheme would begin before the end of February 2006. This is in line with the forecast made over a year ago and well within the EU regulatory window of 1 December 2005 to 30 June 2006. All evidence to date suggests no otherwise viable businesses will fail because of the timing of these payments, but I know cash-flow is currently an important issue for a number of farmers and that my statement has, consequently, been widely welcomed.’

In a further written reply, the same Minister replied:

‘My right hon. Friend, the Secretary of State, and the rest of the Defra ministerial team meet regularly with farmers and their representatives, when the timing of payments under the single payment scheme (SPS) and the related impact on the agricultural industry are regular topics of discussion.

‘The most recent such meeting was with the President of the National Farmers Union on 14 February, when my right hon. Friend the Secretary of State reconfirmed the Government’s commitment to begin SPS payments before the end of February as was made clear in the statement on 31 January 2006, Official Report, column 10WS.

‘I am sure that representatives of the agricultural supply chain, having previously expressed concerns about consequential effects of cash flow problems within the industry, will have welcomed that statement.’

Defra also issued a press statement, entitled National Reserve scaleback confirmed at 4.2%. After setting out the rate at which entitlements would be reduced in order to fund the National Reserve, the statement quoted Lord Bach as

saying that:

‘Setting the figure today allows us to stick to our timetable for beginning SPS payments in full by the end of February. It is a vital step in the process and one which I am sure the industry will see as a welcome reassurance that we remain firmly on track.’

20 February 2006

RPA made the first scheme payments. This was widely reported in the industry press in the following days.

23 February 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This stated that:

‘The first running of the entitlement programme was completed on Friday 17 February. The run generated 39,000 definitively established claims with a gross entitlement value of around £325 million. Following completion of the entitlement programme claim validation resumed on 17 February.

‘A first batch of 194 payments worth £1.5 million have been made by CHAPS, BACS and payable order, with first payments received on 20 February. A first batch of around 7,000 entitlement statements was issued on 22 February with a further 23,000 issued today.

‘A total of 54,821 claims have completed validation, except for fruit and vegetable and commons validations. A total of 20,000 tasks have been closed in the last week, reflecting the limited processing window created by the initial entitlement programme run from the evening of 14 February to the morning of the 17 February.

‘Additional resources continue to be deployed in an effort to contain the processing and payment timetable for the 2005 scheme.’

The briefing continued:

‘Dealing with the output from the first running of the entitlement programme has been the main activity over the past week. The programme generated around 39,000 definitively established claims, some of which are not immediately ready for payment.

‘The first two batches of 100 authorised claims were processed over the weekend of 18/19 February, with first payments confirmed on Monday 20 February. The claim authorisation process has since been subject to detailed review, prior to the majority of definitively established claims being authorised and paid. The authorisation process is expected to commence in earnest by close today.

‘The other main output from the entitlement programme was the file containing entitlement statements for all eligible claimants. The file has been thoroughly checked, and the first batch of statements issued on 22 February.

‘The main focus for those not involved in authorising claims remains the clearance of detailed level 2 validation tasks. The total number of tasks has increased over the past week by 11,000; with just over 20,000 tasks closed in the 5 calendar days the system was available. As of 21 February some 565,000 tasks had either been completed or are in progress, representing 70% of the tasks identified thus far.’

It was then explained that:

‘Arrangements have been put in place for manually processing land and entitlement transfer notifications, which are expected to arrive from next week. To date some 6,500 claimants have requested a notification form. Since 3 October Infoterra have captured or amended 251,800 land parcels from 43,327 holdings.

‘Staffing has been increased by some 434 FTE over the past two weeks, including 389 staff temporarily deployed from other operational areas to assist with SPS processing and 310 (part-time) twilight shift workers.

‘Along with Andy Lebrecht, I attended the Tenant Farmers Association AGM on 21 February, when I confirmed that first payments had been made.’

The briefing concluded by saying that, in the coming week ‘the three principal areas of activity will be the continuation of (i) the claim authorisation and payment; (ii) the print and distribution of entitlement notifications; and (iii) the validation of claims that have not been fully established’.

March 2006

RPA published an updated version of its document Our commitment to good customer service. This set out the service standards in similar form to previous editions of the document.

Under the heading The service you can expect, it was said that:

‘We are committed to providing a consistently high standard of service. We aim to make sure that you are dealt with quickly, politely and professionally at all times.

‘We publish our performance targets in our Business Plan, and details of how we are performing are given in our Annual Report and accounts…’

The service standards set out in the document included the following:

• when dealing with telephone calls, ‘we will make sure that we deal with your call quickly, politely and professionally’;
• ‘we will make sure the information we give you is understandable, up to date, and correct’;
• when dealing with letters, ‘we will provide a full reply to letters within 15 working days of the day we receive them or, if this is not possible, we will tell you the reason for the delay’;
• when dealing with emails, ‘we will confirm that we have received your email within one working day. We will then send you a reply within 15 working days or, if this is not possible, we will tell you the reason for the delay’;
• ‘we will use our website… to publicise our services and provide the latest information as quickly as possible’; and
• ‘we are committed to paying claims within set times each year’.

The document also explained that RPA was ‘dedicated to meeting the needs of our customers. We will offer you choice in the way you can contact us and will make sure that the information we provide is easy to understand’.

Defra also sent out to all farmers on its mailing lists the March copy of its information newsletter, Farming Link, which contained an article about RPA’s progress on making payments under the scheme. This article appeared under the headline Full payments on track for farmers.

1 March 2006

Farmers Weekly reported that it had emerged that fewer than 2,500 farmers in England had received a scheme payment by the end of February. RPA was quoted as having told the magazine that:

‘The pace of payments will ramp up now. And we are still on target to pay the bulk of payments by the end of March.’

In the same article, Lord Bach was also said to have admitted that the number of producers who had been paid so far were ‘small beer’ – but that he was pleased that the Government had kept to its promise that payments would start in February, saying:

‘We do recognise there is a long way to go and I accept there has been a degree of understandable frustration from the farming community. But we now need to just get on and pay this money – that is my priority. We said over a year ago that we would begin payment in February this year and we have begun payments in February this year. We also believe that the bulk of payments will be paid in March this year.’

When asked what he meant by the bulk of payments, Lord Bach was quoted as having said:

‘I mean more than 50% – but I hope much more than 50%. It won’t be the 96%... but a good deal more than half is what I would like to see.’

3 March 2006

A Defra Minister, Jim Knight, in response to a written Parliamentary question from Christopher Fraser MP, which asked on what date Defra expected all farmers in England to have received full scheme payments, said:

‘RPA made the first Single Payment Scheme payments to farmers and growers in England on 20 February. It remains on track to complete the bulk of payments by the end of March 2006. I expect all payments will be made well within the regulatory payment window which runs until 30 June 2006.’

Similar written answers were provided by the same Minister on 6 March and 7 March 2006.

4 March 2006

Lord Bach wrote to the Chairman of the House of Commons Select Committee on Environment, Food and Rural Affairs, following both his appearance before the Committee on 11 January 2006 and subsequent correspondence from the Committee after it published its interim report on 24 January 2006.

The Minister started by saying:

‘First, in respect of the substance of progress in implementing the Single Payments Scheme (SPS), you may recall that I sent you… a copy of my written statement confirming that full payments would begin in February. I am pleased to say that the first payments reached farmers on 20 February and the RPA remains on course to make the bulk of them by the end of March.’

After dealing with a number of points of detail on which the Committee had asked for further information, the Minister concluded his letter by saying:

‘You evidently feel that the timing and content of the Committee’s interim report was justified. I stand by my view that it was, at least in part, misleading and created unnecessary concern and uncertainty for the farming community. I do, of course, stand ready to provide further written or oral evidence should the Committee request it.’

7 March 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This stated that:

‘By close on 6 March 2,882 claims had been authorised for payment, with a combined value of £23.2 million. All such claims have been paid with claims worth £5.5 million released in February. Around 117,000 entitlement statements were issued by 3 March. The remaining statements require the addition of specific information and are due to be issued by the end of this week.

‘The payment authorisation process was temporarily suspended pending investigation of inconsistencies in the use of RLR data in the claim authorisation process. Whilst the investigation is ongoing, we have sufficient controls in place to resume the authorisation process today.’

It was then explained that:

‘In view of the problem with the use of RLR data in the validation process we decided to defer a second run of the programs to identify additional claims for authorisation, as it would have simply perpetuated the problem.

‘Claim validation has continued whilst the authorisation process has been on hold. A total of 63,000 claims have completed validation, except for fruit and vegetable and commons validations.

‘A total of 30,000 tasks were closed in six days leading up to 5 March, reflecting the expansion of the authorisation process, reducing the availability of staff for claim validation.

‘The payment position hasn’t changed since the last report for the reasons explained in the summary. However, considerable progress has been made in completing authorisation checks, with some 66 batches awaiting authorisation.’

The briefing continued:

‘The recent hiatus in the throughput of payments has been caused by some problems in the way that the processing system is interacting with the Rural Land Register data. This could have potentially affected all claims.

‘Immediate action was taken by the Scheme Management Unit and Accenture to analyse the issue and to identify the claims actually affected. During this period, the normal work in going through the final approvals of batches ready for payment continues in parallel. In other words the hiatus has not resulted in any delays in this regard.

‘All bar circa 2,000 of the 120,000 the entitlement statements have now been issued. The remaining statements have address/claim status queries or require additional letters to be issued.

‘These statements are expected to be issued by the end of this week. Those claimants definitively established in the second and subsequent entitlement programmes will receive a second statement confirming definitive status.’

It was then explained that:

‘The main focus for those not involved in authorising claims remains the clearance of detailed level 2 validation tasks. The total number of tasks increased by just over 5,000 over the past week; with just over 28,000 tasks closed in the period.

‘As of 6 March some 613,720 tasks had either been completed or are in progress, representing 76.5% of the tasks identified thus far.

‘Manual processing of land and entitlement transfer notifications, (RLE 1 forms) has commenced. To date some 10,000 forms have been requested and 61 completed forms received, although most so far relate only to land changes rather than entitlement transfers.

‘Since 3 October Infoterra have completed 62,953 mapping tasks for 47,681 holdings. As at week ending 3 March we had despatched maps to just over 33,000 customers.

‘Staffing increased by approaching 500 FTE during February, with approximately 60% temporarily deployed from other operational areas to assist with SPS processing.’

The briefing concluded by saying that, in the coming week, ‘the two principal areas of activity will be the continuation of claim authorisation and payment; and validation of claims that have not been fully established’.

8 March 2006

Lord Bach was interviewed on the BBC Radio 4 programme Farming Today. When it was put to him that, at the rate at which farmers were then receiving payments from RPA, it did not look possible that ‘the majority’ of farmers would receive their scheme payment by the end of March, the Minister replied:

‘We have said for some time that the bulk of the payments will be made by the end of March. That is still the position. That’s what we expect to happen. I hope that’ll be a good deal more than fifty per cent… If farmers haven’t received their payments by now, and there’ll be many who haven’t by today, I ask them to be patient. The bulk will be paid by the end of March.’

The Presidents of the Country Land and Business Association and of the NFU also that day sent the then Chief Executive of RPA a joint and open letter about the administration of the scheme. It opened by saying:

‘We are writing to express in the clearest possible terms the frustration and anger of our respective members concerning the performance of the RPA at this critical time for the SPS. The great volume of errors outstanding, the obscurity of the processes at the RPA and the poor quality of information supplied to your customers and stakeholders are causing unnecessary hardship and worry.

‘In a Defra statement of 31/1 it was announced that the RPA would establish entitlements on 14/2 and all farmers would be notified within two weeks. It was also promised that the bulk of payments would be made by the end of March.

‘The first promise was not fulfilled, and the statistics given by the RPA to the press and to stakeholders last week conflicted…’

The letter continued:

‘We have appreciated the opportunity to meet with RPA officials at the regular stakeholder meetings. This has been helpful both for us to explain the issues as we see them, and for the officials to discuss with us the state of play. What has not been welcome is the belief expressed by one of your senior officials at the last two stakeholder meetings that the only real deadline is the 30th of June…

‘We are prepared to accept that we may not fully understand how the process is working, but certainly the information currently being provided to us is wholly insufficient to assuage our fears that a great number of farmers will be disadvantaged by the slowness of the process, and will suffer real and substantial cash flow problems as a result. Both of our organisations are being placed in an untenable position by the lack of clarity and timeliness on your part.’

According to the subsequent report of the House of Commons Select Committee on Environment, Food and Rural Affairs, published on 29 March 2007, this letter had been sent to demand ‘answers to [the] crisis as it emerge[d] that about two-thirds of entitlements are still unvalidated’.

9 March 2006

A Defra Minister, Jim Knight, gave an oral response to a Parliamentary question from Anne McIntosh MP, which asked:

‘Is the Minister aware that not a penny piece has been paid to any North Yorkshire farmer although the Minister promised that the bulk – 96 per cent – would be paid before the end of March? Indeed, the figure has now been reduced to a mere 50 per cent…’

The Minister replied:

‘I have to remind the hon. Lady that today is 9 March. We will pay the bulk of payments by the end of March.’

(Note: the Minister subsequently apologised to Ms McIntosh for this answer.) When other Members raised the ‘real concern’ felt by farmers about the performance of RPA in administering the scheme, the Minister replied:

‘I have noted the comments made by my hon. Friend and other Members from Yorkshire. We gave farmers a year’s notice and promised that we would begin payments in February.

‘We have delivered on that promise despite all the noise we heard in the House and elsewhere suggesting that we would not. We are pretty pleased with that great effort, by which we have managed to deliver on our promise.’

A status report on the scheme implementation programme was also provided on the same day to the joint Defra-RPA Executive Review Group. The programme risks were graded as follows:

• business case – red;
• scope of the project – amber;
• schedule – green;
• resources – red;
• stakeholders – red; and
• risks/issues – red.

Daniel Rogerson MP tabled Early Day Motion 1786 on Single Farm Payments (No. 2). This motion, which attracted 29 signatures, said:

‘That this House notes that figures from a recent Farming Online members’ poll show that out of 1084 respondents just 31 farmers have received their Single Farm Payments; further notes that these payments are already much later than those under the previous regime which were traditionally delivered in the autumn; further notes with concern that a Rural Payments Agency source recently cast doubt upon the likelihood of the RPA meeting the Government target that 96% of SFP payments be made by the end of March; further notes that of those farmers who have received their SFP entitlement statement 66 per cent have not yet had them validated; and calls upon the Government to provide a guarantee to those farmers who have not yet received their payments that they will have them by the end of March.’

10 March 2006

The then Chief Executive of RPA provided briefing on the scheme to Lord Bach. This said:

‘Current Position

1. By 10 March we would have expected (i) more claims to have been fully validated, definitively established and ready for authorisation; and (ii) more of the definitively established claims would have been authorised and paid.

2. 39,000 of 120,000 claims have been definitively established and are ready for authorisation. Approximately 7,000 of these claims are not ready for payment principally due to inconsistencies in claim data and that held on the RLR.

3. A substantial proportion of the 39,000 fully validated claims are failing authorisation. Based on current procedures we might expect 10-15,000 of the 39,000 claims to be authorised and paid.

4. By 10 March a total 4,484 claims (3.74% of the total) had been paid with a cumulative value of £31.9 million. It is not possible to give an accurate assessment of the percentage value of payments to date, as the payments made are net of deductions and modulation. Leaving aside the high proportion of batches failing the authorisation check, the authorisation and payment process has been suspended on two occasions to resolve concerns over the accuracy of payments and claims affected by the RLR issue identified in paragraph 2 above.

5. We intended to run the definitive establishment process regularly, once every 1-2 weeks, but have thus far only run the process once (on 14-17 February). A second run is due to take place on the evenings of 10 and 11 March. The frequency of subsequent runs will be determined after the second run.

6. Further batches of definitively established claims will become available for authorisation once we have run the entitlements programmes on a second and subsequent occasions. We expect somewhere in the region of a further 5-10,000 claims to be definitively established in the second entitlement run.’

Farmers Weekly, under a headline ‘farmers’ anger over SFP letters’, reported that ‘of the 117,000 entitlement statements that have been sent out by RPA in the past two weeks, it has emerged that two-thirds (78,000) are unvalidated’.

14 March 2006

Senior Defra and RPA officials informed the then Secretary of State that RPA would not meet the scheme payment targets.

15 March 2006

In Prime Minister’s Questions in the House,

James Paice MP raised the RPA and its administration of the scheme with the then Prime Minister, saying:

‘The Rural Payments Agency had a target to pay 96 per cent of farmers by the end of March, which was already 18 months since their last payment. Last week, Lord Bach said that the figure should be more than 50 per cent. Has the Prime Minister any understanding of the anger and financial distress of tens of thousands of farmers who are fending off their creditors because of the Government’s incompetence?’

The then Prime Minister replied:

‘Yes, I understand the concern. That is why the Rural Payments Agency is working extremely hard to make up the time and to make sure that farmers receive their payments. But I entirely understand their concern; we are working on the matter as hard as we can.’

RPA’s strategic communications manager told the Yorkshire Post, in advance of a story published the following day under the headline ‘farmers are kept waiting for cash “lifeline”’, that ‘our staff have been working overtime voluntarily for several months and while it has been a major challenge, we are confident all targets will be met’.

16 March 2006

The then Secretary of State, Margaret Beckett, tabled a written statement before Parliament on the administration of the Single Payment Scheme. This read as follows:

‘This House, and the farming industry in England, has I know been concerned about problems with the Rural Payments Agency’s delivery of the Single Payment Scheme. The Government fully share this concern and I would like to make a statement about action which I am taking today.

‘The Minister with responsibility for sustainable farming and food, Lord Bach, told the other House on 31 January that the RPA would establish entitlements in mid February and that all farmers would then receive an entitlement statement. This has now happened in all but around 1 per cent of cases and payments did indeed start to be made before the end of February.

‘Ministers have throughout been advised that, following the validation of claims, the RPA expected to make the bulk of payments by the end of the month. Late on Tuesday afternoon the chief executive informed me that their latest reassessment of the position was that this would no longer be possible. This is an unacceptable situation.

‘I have concluded that urgent action is needed to strengthen the leadership of the agency. With my approval, the Permanent Secretary of my Department, Helen Ghosh, has today appointed Mark Addison as acting chief executive in place of Johnston McNeill.

‘Mark Addison has outstanding experience and abilities which I believe fit him for this task, and I have asked him to report to me by Tuesday on the immediate steps needed to get us back on track. A new chief executive will be recruited as soon as possible to take on the task of leading the agency forward at this crucial time.’

The statement continued:

‘Ministers had already concluded, on advice from the permanent secretary, that there were structural issues in the RPA which needed to be addressed over a longer period of time. I am therefore announcing today our decision to set up a fundamental review of the agency, to look at its current and possible future functions, and the effectiveness of its relationship with my Department and its other key stakeholders, and to make recommendations for the future. Details of the review are being published today on my Department’s website.

‘I know that this House and everyone in the farming community will be as disappointed as I am about the announcement I have had to make today, but a successful conclusion to the 2005 round of SPS and a smooth start to the 2006 scheme will remain one of the Department’s highest priorities.’

The statement concluded by saying that:

‘RPA staff have worked with absolute dedication throughout, often in the face of considerable difficulties. I am sure they will continue to do so.’

27 March 2006

There were debates in both Houses of Parliament on the administration of the scheme. In the Commons, answering an Urgent Question which had asked for a statement to be made concerning the RPA’s administration of the scheme, the then Secretary of State, Margaret Beckett, began by saying:

‘In my written statement to the House on 16 March, I told the House that the Rural Payments Agency had advised me for the first time on 14 March that it would no longer be possible to make the bulk of single payment scheme payments by 31 March, and that in the light of this unacceptable situation a new chief executive would be appointed.

‘I fully understand and share the anxieties that these events will cause to the farming community, and deeply regret that this unacceptable situation has arisen.’

She continued:

‘I received an initial report from the acting chief executive, Mark Addison, on the situation at the RPA on 21 March. There are substantial problems facing the RPA in getting SPS payments out to farmers – much greater than had previously been reported to Ministers.

‘As I know the House and the farming community would expect, speeding up those payments remains the overwhelming priority of Department for Environment, Food and Rural Affairs Ministers and of RPA staff. However, it remains essential that actions taken now in response to these problems are carefully considered but also sure-footed, to avoid making the problems still worse in the future. Mr. Addison’s report identified some initial steps to take, which should enable us to speed up payments without losing sight of the need to manage properly the disbursement of a large sum of public money.

‘These are the initial steps that I have sanctioned: focusing resources in the RPA on making the 2005 payments as fast as is legally possible; removing disproportionate checks from the payment authorisations system to speed up the flow of payments once claims have been validated; prioritising work on the validation of claims to release the maximum value of payments as quickly as possible as opposed to the maximum number of claims, which is an action that will mainly benefit historical customers; centralising key mapping work at the most productive office, Reading; reviewing what further steps can be taken to simplify the process to allow decisions to be made later this week; strengthening the RPA’s capacity in key areas; and changing the RPA’s structure to streamline command and control.’

The Secretary of State concluded by saying:

‘The Minister with responsibility for sustainable farming and food – my noble Friend Lord Bach – and the RPA’s acting chief executive have invited senior representatives of the industry to weekly meetings, the first of which took place on 22 March, so that close contact can be maintained. They will also urgently engage with the banks and other key stakeholders.

‘The team at the RPA is central to the success of those steps. I am confident that with Mark Addison at the helm we have the right people in place for the job, and their work and commitment remain key to delivery. The staff of the RPA have worked with absolute dedication throughout, often in the face of considerable difficulties, and I know that the whole House hopes and expects that they will continue to do so.’

In the debate which followed, the Secretary of State:

• said that she was ‘embarrassed and dismayed’ by the issue of the March edition of the Defra newsletter Farming Link, which farmers continued to receive after her statement on 16 March 2006;
• explained her view that ‘although there is no doubt that the organisation is customer-focused in that the staff care about their customers and are working hard and trying to do their best, [RPA’s] systems are not remotely customer-focused’; and
• said that, as regards previous delivery targets, ‘once the decisions had been made about the form and nature of the scheme, Ministers and stakeholder representatives of the industry spent time with the RPA seeking information and assurances on whether it could indeed handle the scheme within the time frame. Those assurances were given, and given categorically – to the extent that stakeholder representatives and Ministers came back immensely reassured and full of confidence that the RPA could handle the issues’.

The Secretary of State, when asked about the position of tenant farmers and the difficulties they would face due to delays in the making of scheme payments, said that ‘I am mindful that they are likely to be the most vulnerable people’.

In the debate in the Lords, Lord Bach repeated the statement made by the then Secretary of State and answered questions. He said:

‘Of course the delays are causing real hardship. We appreciate that very much, which is why we were so disappointed not to receive until 14 March of this year the advice which first told us that these payments would not be met in bulk by the end of March. The advice we have received from the banks so far is that they are not seeing any change in the number of farm business failures and that no otherwise viable business is likely to fail as a result of the timing of payments.’

The Minister described himself as ‘surprised and shaken’ not to have been informed prior to 14 March 2006 that the bulk of payments would not be paid by RPA by the end of that month and set out his view that ‘it is clear that Ministers should have been told earlier that the RPA was not likely to meet its target of making the bulk of payments by the end of March’.

29 March 2006

RPA put on its website an update on the scheme, the first in a series of weekly such updates.

This said:

‘Margaret Beckett, Secretary of State for Environment, Food and Rural Affairs told Parliament on 27 March she had already sanctioned several actions recommended by acting Chief Executive of Rural Payments Agency, Mark Addison to speed up payments to farmers:

• focusing RPA resources on making the 2005 payments as fast as is legally possible;
• removing four (from six to two) disproportionate checks from the payment authorisation system to speed up the flow of payments once claims have been validated;
• prioritising work on validation of claims to release the maximum value of payments as quickly as possible, historic entitlements;
• centralising key mapping work at a single office in Reading;
• strengthening the RPA’s capacity in key areas, and changing the RPA’s structure to streamline command and control.’

The update continued:

‘The Secretary of State last night (28th March) sanctioned a number of additional steps recommended by Mark Addison, as follows:

• reform RPA processes to deliver greater customer focus by dedicating teams of staff to work on individual claims rather than the current task-based approach, subject to successful pilot work;
• as part of that change also allow processing staff to communicate with applicants directly by phone to work through any outstanding issues;
• implement a discrepancy tolerance of 2 hectares or 3% of total area claimed, whichever is the lower, for validation of claims;
• stop redundant quality checking processes so that staff can concentrate on claim processing;
• locate the people doing the mapping work alongside those processing claims on the same site;
• where mapping correspondence is outstanding, be able to make payments on the basis of the information which RPA already have from farmers;
• appoint a senior manager to take charge of the delivery of 2006 claims; and,
• address obstacles in current HR procedures that would prevent the retention of experienced staff.

‘Any further options which can be identified for accelerating validation of claims and authorisation of payments will be put to Ministers for endorsement as soon as their usefulness can be clearly established.

‘So far, £206m has been paid, as of close on 28th March, to 27,862 customers. This represents real progress, but there is still a huge amount to do.’

The update concluded by saying:

‘RPA is not making any forecasts about how much will be paid out by when. RPA’s Acting Chief Executive is: i) keeping all aspects of process under review, and reporting back to Defra Ministers regularly; ii) leaving no stone unturned on simplification of validation and payment systems; iii) continuing to keep other contingency options open, in accordance with proper stewardship for dispensing public monies.

‘Minister for Sustainable Farming Lord Bach is keeping key stakeholders in close touch with developments; having met farming leaders again today, and will meet with banks and agricultural supply industry representatives tomorrow.’

The weekly updates until the beginning of May 2006 provided updates on the amounts paid under the scheme and on the steps being taken by RPA and Defra to resolve the outstanding problems in the administration of the scheme.

30 March 2006

A debate on RPA was held in the House of Lords. Responding to it, Lord Bach reiterated his view that Ministers should have been informed earlier that RPA could not meet its payment targets, saying:

‘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.’

On the timing of the outstanding payments, the Ministers, when invited to provide a revised timetable, said:

‘My Lords, we very much hope that all payments will be made by the end of June, but I am not prepared – because there have been too many easy forecasts in the past – to give a guarantee of any kind. We did not appoint the new acting chief executive to give us the sort of forecasting that Ministers and others might want to hear if that was not based on solid fact.’

On the same day, a Defra Minister, Jim Knight, provided a written response to a Parliamentary question, which had asked, among other matters, how many farmers had received letters confirming the amounts that they would be paid under the scheme. He said that ‘all those farmers receiving payment have received a payment statement setting out details of its value, including any deductions’.

Lord Bach also met the British Bankers’ Association and other representatives of the major lending banks to discuss the situation of farmers awaiting payment under the scheme. After the meeting, a joint statement was issued, which read:

‘We have agreed that we will continue to work closely together in ensuring that farmers awaiting payment are offered support and help wherever possible. We recognise that these are difficult times for many farmers and that a flexible approach on all sides is required.

‘Lord Bach confirmed the new steps being taken by the RPA to speed up the validation and authorisation of payments, which the banks welcomed.

‘The banks re-emphasised that no viable business is being refused additional financial support and, as a result, no viable businesses are failing because of uncertainty about the payments timetable.’

19 April 2006

Defra and RPA invoked partial payment contingency arrangements. The then Secretary of State, Margaret Beckett, tabled a written statement before the House of Commons, which was also tabled in the House of Lords. This said:

‘I announced in my written statement of 16 March 2006, Official Report, col. 104WS, that in light of the unacceptable progress in implementing the Single Payment Scheme, steps were being taken to strengthen the leadership of the Rural Payments Agency.

‘The House has subsequently been kept informed, – 27 March 2006, Official Report, col. 543, and 29 March 2006, Official Report, col. 305WH, – of the measures introduced by the new acting chief executive to speed up payments without losing sight of the need to manage properly the disbursement of a large sum of public money.

‘The measures already in place have begun to bear fruit with 47,033 claims representing 39 per cent of the customer population having being [sic] paid a total of £362.23 million as at 18 April.

‘Given, in particular, the unavailability of the SPS system over the Easter period for a planned essential upgrade for the 2006 scheme, this represents useful progress. The upgraded system is now fully operational and further payment runs are planned over the rest of the week.’

The statement continued:

‘The acting chief executive has, however, now told me he does not feel confident that he can say with complete assurance that the RPA will be able to make all of the full payments by the end of June.

‘Given that advice, I have authorised that work on a system to make substantial partial payments to the remaining claimants should now be given priority and I further decided that the system should be deployed as soon as it is operationally possible to do so.

‘The RPA will in the meantime continue to make full payments when claims have been fully validated, with historic claimants having priority.’

9 May 2006

The new Secretary of State following a Cabinet reshuffle, David Miliband, tabled a further written statement before the House of Commons. This said:

‘On 19 April, … my right hon. Friend the Member for Derby, South (Margaret Beckett) reported on progress in making full payments under the 2005 Single Payment Scheme (SPS) in England and announced that partial payments under the scheme would start as soon as operationally possible.

‘By close on 4 May, over 58,000 claimants, representing 48.5 per cent of the customer population, had been paid a total of £552 million in full payments. A test run of partial payments to 1,000 claimants was undertaken, successfully, at the end of last week. The Rural Payments Agency (RPA) then moved immediately to process the remaining partial payments. As a result, RPA has now made transfers to the BACS system, and drawn up payable orders, for £730 million in partial payments. This means the money should reach farmers over the coming week. In total, 85 per cent of the £1,500 million worth of expected payments for the 2005 SPS scheme year will have been distributed.

‘The task now is to ensure that the residual element of payments are made as soon as possible to those who have received a partial payment, and that a plan is in place to deal with those who to date have not yet received either a full or a partial payment under the 2005 scheme. 31,000 claimants were not included in the partial payments system, 26,000 because their claim amounted to less than €1,000 and 5,000 because of a diverse range of other factors which made their cases particularly complex.

‘Making full payments to this group of 5,000 will now be given the highest priority by the Rural Payments Agency. Increased priority will also be given to making outstanding payments under the Hill Farm Allowance (HFA) scheme in recognition of the importance of HFA payments to those concerned.

‘I will make a further statement in due course on the 26,000 small claimants and those with HFA claims.’

The Secretary of State continued:

‘I am acutely conscious of the difficulties endured so far, and the magnitude of the challenge that still lies ahead to complete delivery of the 2005 SPS scheme year.

‘The fact that previous estimates of payment timetables were missed, and the problems this has caused for farmers up and down the country, are a matter of deep regret.

‘I am determined that the right lessons are learned from our experience this year, first to prepare for the undoubted challenges that will exist in the delivery of the 2006 scheme, and second to move to a more stable position for the 2007 scheme year. This will require a concentrated and sustained effort from both RPA and DEFRA, and I hope that industry stakeholders will also continue to work closely with us to that end.

‘At a practical level, it is important for farmers to aim to submit their applications by the 15 May deadline wherever possible for the 2006 year. However, in recognition of the real problems this year with the distribution of application forms, my noble friend Lord Bach announced last week that late claim penalties will not be applied to claims received between 16 and 31 May.

‘In order to progress matters in this crucial next phase of SPS delivery I am pleased to announce that Tony Cooper will join the RPA on 15 May as interim chief executive in succession to Mark Addison. Mr Addison accepted the post at short notice in March in order to address the immediate challenges facing the RPA and has, I know, made a real impression over the last couple of months. However, his was always intended to be a short term appointment and he will leave the RPA at the end of the month.’

10 May 2006

RPA began to make partial payments to farmers of 80% of their estimated entitlement and placed on its website a document which gave answers to possible questions which might arise about those payments.

15 May 2006

The House of Commons Select Committee on Environment, Food and Rural Affairs took evidence from the Permanent Secretary of Defra, her predecessor Sir Brian Bender, and another senior Defra official.

The Permanent Secretary began by reiterating the apology ‘for the distress that the delay in payments has caused to the farming community’ that had been made by Ministers.

Noting that the Permanent Secretary had taken up post in November 2005, the Committee Chairman asked her: ‘When you came into post in November, did you ask for or were you given an indication as to when payments could actually be made?’ She replied:

‘When I came into post in November, we were still working on the basis that full payments would begin in February and the kinds of discussions that were going on then, and obviously accelerated over the next couple of months, were the extent to which we needed to continue to develop, and indeed ultimately implement, a partial payments option.

‘To cut straight to the chase, if I have a regret, but you will see when you see the analysis we did, that it was extremely thorough, if I have a regret now, it is to say we should have made the decision in January to go for a partial payments option, to trigger that contingency.

‘Having said that, many stakeholders very early on in my time in the Department were saying that actually they would rather receive a full payment under a valid entitlement which they could trade a little bit later, rather than a partial payment earlier. Those were some of the message we were being sent, but in November it still looked as though we should be going for a full payment starting in February.’

In response to another Committee member, the Permanent Secretary explained what had happened when the RPA’s Chief Executive had been replaced. She said:

‘As you know, when the Secretary of State made her announcement on 16 March about both the timetable and new management arrangements at the RPA, she also announced the move from post of Johnston McNeill, who was the chief executive of the RPA, and his replacement on an acting basis by Mark.

‘That signalled two things: one was an irreparable loss of confidence between ministers and the chief executive. In the light of the fact that only five days before she had been assured and indeed her colleagues had stood up in Parliament and said that it would be possible to make the bulk of payments by the end of March 2006 and, secondly, and this comes to the heart of the question you are asking, which is the analysis of what it was that went wrong, the other thing that had become clear at that point, if I may just take you back a moment to February, was that in February, and we must not forget this, the RPA had hit its target and it had started to make payments.’

The Permanent Secretary continued:

‘We were all aware of the effort that had gone into that, the management effort and the ministerial supervision effort, but they had started to make payments. For some reason, having started to make the payments, the whole system gummed up...

‘The challenge for us was trying to work out what had happened and again, it was pretty clear that there was a lack of understanding at the very top of the RPA in how the different elements, the IT system that had been commissioned and built, the business processes, customer responses, would actually ultimately all fit together.

‘What was happening in that period between 20 February and 16 March was that it became clear that an IT system had been built based on a business system which was essentially highly risk averse, contained an enormous number of checks, there was the complicated relationship, which I am sure we shall come back to, with the rural land register and the whole mapping issue and the system simply ground to a halt.

‘Now the fact that that was not predicted by the most senior levels of the RPA was very significant and was the second key part.’

The Committee Chairman then intervened, saying:

‘… when you came into post on 7 November it looked as though the thing was going to work, yet we go through November and December into January, probably about two and a half working months, bearing in mind Christmas and the New Year, and now you have just described a system which suddenly gums up, to use your own phrase.

‘What I find absolutely amazing is that, given all the professional advice, information, checking, all the lead time you had to introduce all of this, and we shall go into it in more detail, suddenly, something in which you had confidence fails to deliver two and a half months after you took responsibility for it.’

The Permanent Secretary replied:

‘That comes back to this crucial point about the nature of the relationships. It was neither the role of ministers, and in one sense the various governance bodies, nor did they have the capacity to look down at the very, very detailed coding of the system which had been built successively over six months, a year, 18 months or whatever it was previously. It was that kind of predictive ability of how it will all inter-relate when we press the button and it starts to happen.

‘You could not expect the governance groups that we had to be able to go down to that level of detail. What you do expect to have is an overview from the Agency, who should, as a delivery body, have that understanding of the very, very, very detailed workings of the IT system. If they say “We have this level of confidence that it will happen”, ultimately you have to believe them.’

The Committee also asked the officials about the volume of work handled by RPA. Ms Ghosh said that there had been no surprise about the number of Single Payment Scheme applications that RPA had received. The issue that did cause Defra concern was, she said, the scale of the mapping changes and the issues involved in sorting out the Rural Land Register. She said:

‘We had a mixture of people catching up with notifications and amendments to their land holding that they should probably have made under the old scheme and the incentive element of the new scheme, for example to the people with land that had not previously been covered, but also to existing claimants to maximise the areas of land and then there was customer behaviour… The surprise was the scale of the work, as it were catching up with the historic backlog and the incentivisation effect, which was involved in sorting out the land.’

The Chairman of the Committee expressed surprise that the volumes of work had been unexpected. He said:

‘Anybody who knows anything about a mixed farm, for example, would understand that you are going to have more land which could be claimed for and that is bound to bring complexities because you have introduced a brand-new digitally-based mapping system at a time when you expanded the number of people applying and some of them clearly have no previous experience of applying for anything.’

Ms Ghosh replied: ‘That indeed unarguably was the volume issue which was the greatest challenge to the RPA’. She then spoke about Defra’s decision to outsource the mapping process to a specialist company called Infoterra in September 2005. In the same evidence session, Sir Brian Bender, the Defra Permanent Secretary before Ms Ghosh, told the Committee: ‘The outsourcing to Infoterra was the last action we took to deal with the problems. There were several previous actions to try to deal with the increasing backlog of maps’.

Towards the end of the evidence session, the Chairman asked both the current and former Permanent Secretaries the following:

‘Can I be very clear then? At no stage during Mr McNeill’s tenure of responsibility for this project did he communicate to you two as permanent secretaries or to ministers that he would be unable, that is his Agency, to deliver in line with ministerial assurances on the timing of payments.’

The former Permanent Secretary replied that, as regards the period during which he was in post, ‘the answer to your question is that it is correct that there were probabilities and there were risks in delivery which he shared with us’.

When asked what the confidence limits of those probabilities and risks had been, he replied that ‘at the worst it was around 50 to 60% probability it would be delivered and at those points we then had discussions about what we could do to de-risk it so that probability could be pushed up’. He also said:

‘… the RPA did not at any point say this was not deliverable. They were confidence levels which at no point fell below 50% and when they got uncomfortably close to 50% – indeed one of the questions was how to get it up to 90% – we took the various decisions to try to help and the last one was the one which has been referred to several times which was to outsource all the mapping processing…’

17 May 2006

A further weekly update on the scheme was placed on RPA’s website. This said:

‘This week saw the beginning of top up payments being made to some of the 31,000 customers who the previous week had received partial payments – 80% of the SPS element of their claims.

‘Latest figures available for close of play on 16 May showed that 91,376 customers have received a full or partial payment. This represents 76% of the customer base now having received a total of £1.3 billion. This equates to 87% of the £1.5 billion fund.

‘Priority work for RPA remains focused on completing validations and paying the customers who have not yet received a full or partial payment. Of these, the vast majority are small claims, due to receive less than €1,000 (or £682).’

21 May 2006

The new Minister responsible for RPA and the scheme, Lord Rooker, appeared on the BBC television programme Countryfile, along with industry representatives, to discuss the scheme. When asked about the problems RPA had encountered in making payments in line with its targets, the Minister said that the Government and Defra Ministers:

‘… deeply regret and apologise to farmers and the farming community for the distress that’s been caused… it’s only if you’re on the inside really would you have any idea of the distress where you keep hearing Ministers and… others promising “the cheque’s in the post” as it were, and it doesn’t happen and you’re up against it whether it’s the bank… [or] your suppliers… So we deeply regret and apologise sincerely for that.’

The Minister also said:

‘We will move heaven and earth to make sure it doesn’t happen next year, it’s in our interest to do that. It’s a way of making up for what’s happened this year because we understand the distress that has been caused to the farming community and their suppliers.’

12 June 2006

RPA announced on its website that:

‘Following a successful test of the system for partial payments this weekend, we are today making a second run of 80% partial payments. These partial payments are being made to 841 customers in the top priority category (some of whom will have received a definitive statement of entitlement from RPA earlier in the year) and totals over £12.8 million.

‘A payment statement giving further information on how individual payments were calculated will be sent with the balance payment in due course.

‘RPA is devoting full resources to making the residual payments as soon as possible to recipients of partial payments, and to paying remaining customers who have yet to receive a payment.’

During this period, weekly updates continued to be provided on RPA’s website and the partial payment information leaflet was updated.

22 June 2006

The then Secretary of State, David Miliband, made an oral statement in the House of Commons about RPA and the scheme. In it, he said:

‘I know that this year’s problems have caused real distress and I repeat the apology to farmers that I have made before, both in the House and elsewhere.

‘I can assure the House that the new RPA chief executive, with the support of the Department, will be looking to take interim steps to aid the recovery process and to improve the experience of farmers dealing with the agency to the maximum possible extent. I will keep the House informed as matters progress.’

Responding to questions after his statement, the Secretary of State said that ‘it is part of the deal for farmers that they should expect efficient service from a public service organisation that is working for them’. He also told the House that ‘it is the duty of the RPA to make payments accurately, efficiently, and on time’.

23 June 2006

Speaking on the BBC Radio 4 programme Farming Today, the Defra Minister Lord Rooker told listeners that, as regards RPA’s handling of the scheme:

‘The fact is the first year has not been, well, let’s put it this way, it’s been less than satisfactory. We fell down on our duty, we certainly didn’t keep our promises; we’ve got to improve in 06.’

27 June 2006

RPA announced on its website that more partial payments had been made, saying:

‘RPA made a third batch of 80% partial payments to 2,587 customers yesterday (Monday 26 June), worth a total of £22.4 million.

‘A total of 822 of these recipients are priority one customers who had previously received no SPS money and had claims worth in excess of €1,000 (£682). The priority one claimants figure has now been reduced to around 1,500 customers with this latest round of partial payments.

‘RPA is focusing its full resources on ensuring these remaining priority one customers receive a full or 80% partial payment as soon as possible, as well as making top up payments to those who have already received a partial payment.

‘For those in receipt of partial payments, a payment statement giving information on how individual payments were calculated will be sent with the balance payment in due course.’

28 June 2006

The Select Committee on Environment, Food and Rural Affairs took evidence from the former acting Chief Executive of RPA (who had replaced the then Chief Executive in March 2006 and had been a member of Defra’s management board prior to this appointment).

One Committee member asked the former acting Chief Executive:

‘What I still find very hard to understand is how it was possible for all of those involved, the Rural Payments Agency and the Department and the ministers, to be so apparently confident right up to mid March and to be telling us how confident they were, that this could be delivered and then so suddenly for matters to emerge and for the position to change so dramatically; suddenly it was not going to happen. Was it that the chief executive and the others in the Rural Payments Agency did not realise that this was not going to deliver or was it that they realised but were not telling you and us?’

The former acting Chief Executive replied that:

‘There were these two factors. The issue which took everybody by surprise, including everybody in the Rural Payments Agency, was the failure of the 44,000 claims to go through into payment smoothly. The authorisation checks’ element of the process had not been tested as part of the whole system test, a point raised earlier. That simply did take the RPA by surprise.’

When asked whether it would be fair to say that ‘what really went wrong was the failure, at an appropriate stage, to test the system, to make sure it really would deliver and really would work’, he also replied:

‘As I said earlier, the amount of testing that was done, the amount of whole system testing that was done and the amount of whole system knowledge there was, was, as it turned out, not great enough. One of the reasons for that was the overall timetable. A lot of this can be traced back to my earlier two points about the number of things being done and the timetable.’

29 and 30 June 2006

RPA made two announcements on its website that further partial payments had been made to, respectively, 249 and 74 farmers.

30 June 2006

The regulatory scheme payment window closed.

5 July 2006

The then Secretary of State, David Miliband, tabled a written statement before Parliament. This said:

‘In my oral statement of 22 June, I promised to keep the House informed of the Rural Payment Agency’s (RPA) progress in making payments under the 2005 Single Payment Scheme (SPS). I can report now on the position at the end of the EU regulatory payment window on 30 June.

‘As was the case in previous years with the old CAP schemes, the total amount to be paid by the RPA under the 2005 SPS will not be known for certain until the last claim is completely validated. However, the latest estimate puts the figure at £1.515 billion of which over £1.438 billion (94.9 per cent) was paid by 30 June. 91,720 claimants had received a full payment and a further 16,168 had received a partial payment and are awaiting their “top up”.

‘The combined total of 107,888 represents over 92 per cent of the revised estimated total claimant population entitled to a payment of 116,474, which now takes account of merged multiple claims from the same business and discounts duplicate claims, voluntary withdrawals and those where the claim was only to establish entitlements and not claim payment against them.

‘Of the estimated 8,500 claimants who have yet to receive a payment, approximately 460 currently have a claim value of more than €1,000. Some of these are in a category that it is not possible to pay at present, for example because RPA is awaiting information from claimants. However, the majority require further action from the RPA and those cases will remain the agency’s number one priority to resolve as quickly as possible.’

The statement continued:

‘Discussions are now underway with the devolved Administrations to determine whether, for the UK as a whole, sufficient payments have been made to avoid triggering the normal EU rules on withholding EU funding of payments after the end of the 30 June payment window.

‘Those rules allow for 4 per cent of value payments made before the end of the window to be made after it with full EU funding. After that, a sliding scale of reductions applies, depending on timing, to payments after the 4 per cent threshold has been exhausted.

‘The indications are that the UK is likely to have paid between 95 per cent and 96 per cent of payments by 30 June. If this is confirmed, we will, as previously indicated, have further discussions with the European Commission about the application of the payment reduction rules.

‘In the meantime, the RPA will continue to pay the remaining claims and progress work under the 2006 scheme in line with my 22 June statement.’

This information was placed on the RPA’s website in a further weekly update on the scheme.

2 August 2006

According to a subsequent written Parliamentary answer, given on 15 December 2008, on this date RPA met the EU target of paying 96.14% of payments by value under the scheme.

18 October 2006

The Comptroller and Auditor General published a report, entitled Department for Environment, Food and Rural Affairs and Rural Payments Agency: the delays in administering the 2005 Single Payment Scheme in England.

The report began by explaining that ‘The Agency encountered difficulties in processing payments due under the scheme, totalling around £1,515 million, and failed to meet its own target to pay 96 per cent of that sum by the end of March 2006’. It said:

‘From its inception in 2001 the Agency [RPA] had embarked on a business change programme to improve efficiency but had to revise its approach in November 2003 to include the development of the single payment scheme which then became the key element of business change. The way the scheme was implemented was designed to achieve efficiency savings by enabling staff in different offices to work on any tasks relating to any claim, rather than for the same individual or small team to process a whole claim from end to end. The Agency [RPA] anticipated that this “task based” approach would enable faster processing and improve staffing flexibility.’

The report continued:

‘The factors contributing to the difficulties experienced included:

a. the Department and the Agency had not fully appreciated the risks and complexities involved in implementing the English model of the single payment scheme. This was, in part, due to a lack of common understanding of the scheme requirements and likely customer behaviours across all key teams within the Department and the Agency;

b. an absence of clear metrics against which to assess progress on implementation led to over optimistic upward reporting, and hence a failure to show the true state of progress. As a consequence, the related risks of failure became apparent at too late a stage to enable effective alternative payment regimes to be put in place; and

c. in implementing the scheme at the same time as a wider business change programme aimed at delivering efficiencies, the Agency lost too many of its experienced staff and, as a consequence, the knowledge which went with them.’

The report then explained that:

‘Implementation has not provided value for money because the project has cost more than anticipated and is not fully implemented as scoped, planned efficiency savings will not be achieved, relationships with the Agency’s customer base have been damaged and there is a risk of substantial disallowance of expenditure by the European Union.

‘The previous Chief Executive was therefore removed from post on 16 March 2006 and at the end of September 2006 remained on leave of absence on full pay of almost £114,000 a year.

‘The new Chief Executive and senior managers at the Agency have demonstrated a business-like approach to learning lessons from what happened with the 2005 single payment scheme and are acting on the recommendations we have made.

‘The Agency is unlikely to be able to remedy all the problems in time for the 2006 single payment, but the management team is developing a recovery plan which they expect to be fully implemented by April 2008.’

The report then set out what RPA had achieved, saying:

‘As at 31 March 2006 the Agency had paid £225 million (representing 15 per cent of the £1,515 million single payment scheme funds) to 31,040 farmers (27 per cent of the 116,474 claimants).

‘The Agency made payments of £515 million by the end of April 2006 by streamlining processes for authorising payment once claims had been validated.

‘Taking into account the risk that the remaining payments could otherwise have been deferred beyond the end of June 2006, the Agency made partial payments of £730 million in May 2006 with the agreement of the Department and Ministers.

‘The Agency paid out £1,438 million (95 per cent) against an EU deadline of 96.14 per cent by the end of June 2006, and 96 per cent of sums due by the end of July. By the end of June most farmers had been paid, except for 8,586 farmers (7 per cent) who had not received any money, and 16,168 (14 per cent) who had received partial payments amounting to 80 per cent of their claim.’

Other than that there had been these delays in paying farmers, the report’s key conclusions were:

• that the difficulties in the implementation of the scheme could result in the European Commission imposing sizeable penalties;
• that the difficulties in making payments had caused distress to a significant minority of farmers and had undermined the farming industry’s confidence in RPA;
• that the scheme had cost more to implement than had been expected and that many of the savings that had been forecast were unlikely now to materialise; and
• that better management of the risks involved could have reduced the disruption that had been experienced.

In discussing ‘lessons to be learned’, the report noted that:

‘The Department allowed the Agency too much discretion and independence in implementing the single payment scheme given the potential liability it faced and the consequent risks to its reputation. Senior departmental officials confirmed that they had concerns in late 2005 about whether the Agency’s management team could deliver the single payment scheme on time, but felt that making changes at that time would have been more disruptive and raised the risk profile of the project even higher.’

It also noted that:

‘As the pressure built, day to day communications with farmers proved difficult and a lack of information on the progress of their claims led to stress and frustration amongst the Agency’s primary customers. The Agency relies on farmers’ cooperation to administer the payments scheme effectively. The absence of key information on the progress of each claim hampered the ability of staff in the customer contact centre to resolve farmers’ queries.’

As part of the work that had been undertaken by the National Audit Office as preparation for the publication of the report, a survey of affected farmers had been carried out. The report, in setting out the results of that survey, said:

‘Twenty per cent of the farmers surveyed… said that delayed payments had been a cause of increased stress and anxiety for them and their family. Five per cent of farmers confirmed that they had considered leaving farming. The problem has been particularly acute amongst those farmers, such as hill farmers, for whom the money from the single payment scheme represents a large proportion of their family income.

‘Of the 14 per cent of farmers in our survey who stated that the single payment scheme money amounted to at least 40 per cent of the total net annual income for their family for the year, 38 per cent felt the delay had led to stress and anxiety.

‘The farming help charities, Farm Crisis Network and the Rural Stress Information Network, confirmed to us that they had experienced a substantial increase in calls to their telephone helplines between March and May 2006.

‘In recognition of the impact of delayed payments the Department has granted an additional £115,000 to rural support organisations to help farmers deal with stress. The Secretary of State for Environment, Food and Rural Affairs announced on 22 June that, calculated from 1 July 2006, the Agency would pay interest to farmers in respect of delayed payments at one per cent above the London Interbank Offered Rate.’

The report continued:

‘The majority of farmers responding to our survey said that delay in receiving payment had not caused them to take action to save or raise money. Nonetheless, a significant proportion said they had done so “entirely” or “mostly” as a consequence of delays in receiving payment. Farmers who had expected to receive payment in February or March and who would otherwise have experienced a cash flow difficulty… took out, or extended, financial loans, sold crops or livestock earlier than anticipated or, in some cases delayed payments to their suppliers.

‘For many farmers the direct effect of late payment was to force them to postpone purchases or investments. Whilst the range of actions taken make it difficult to calculate the cost accurately, drawing on the advice we received from the British Bankers’ Association, we estimate that the delays could have cost farmers between £18 million and £22.5 million in interest and arrangement fees on additional bank loans and increased short term borrowing on overdrafts. This figure does not include any estimate for interest foregone by farmers whose bank accounts are, or would have been, in credit, or any knock-on effect on the wider agricultural industry.

‘A number of suppliers’ representatives and other associations in the farming industry considered that their businesses had been affected by delays in settling their accounts and a decline in other business activities, such as the trade in farm machinery.’

The report then said:

‘The delays in making payments have undermined confidence amongst farmers that the Agency will deal with their 2006 claim effectively. A common theme of the focus groups and other interviews we held with farmers was that the relationship between farmers and the government had deteriorated. A number of farming industry associations and representative bodies noted that this breakdown in trust had deterred farmers from participating in other government initiatives, such as the Entry Level Stewardship Scheme and the Higher Level Stewardship Scheme.’

The report continued by setting out the conclusion that ‘more effective liaison with farmers and landowners would have reduced the adverse impact on the industry’. In doing so, the report noted that:

‘Our survey of farmers and landowners confirmed that 64 per cent of respondents had sought to contact the Agency in order to seek an update on the progress of their claim. According to the Agency’s records, in 236 out of the 363 claims we examined, the farmer or their agents had written to the Agency to amend their claim, query something or to make a complaint. One hundred and twenty of the claimants had written on three or more occasions.

‘The management information also shows that the Agency received over 271,000 telephone calls between January and June 2006, and all the calls were answered quickly with an automated response and menu of options. Some of the automated responses were not particularly helpful, however, and discouraged farmers and landowners from pursuing their query.

‘When we tested the telephone call centre response in June 2006, automated messages told callers that “…there is nothing that the call centre staff can tell you about your payment”. Farmers were discouraged from pursuing queries with the message “If you contact us, this will divert resources away from the urgent tasks of completing validations and making full payments”.’

Dealing with liaison by Defra and RPA with the industry, the report said:

‘As the implementation of the single payment scheme progressed, senior staff at the Agency and the Department continued to liaise regularly with the relevant unions and trade associations. Given the lack of management information, more general communications tended to centre around reassuring farmers that payments would be made, rather than giving specific information on when issues would be resolved and individuals’ payments would be processed. The Rural Stress Information Network found that a lack of information was by far the greatest cause of frustration and complaint within the farming community.’

23 October 2006

Lord Whitty and Lord Bach, both former Defra Ministers, appeared before the House of Commons Select Committee on Environment, Food and Rural Affairs.

In his evidence, Lord Whitty said:

‘I think the essential failure of this scheme has been the mapping. One or two decisions were a bit late and one or two systems took a bit longer to get into place but basically, until we got into the mapping, there were not serious problems of either resource or expertise from RPA or from Accenture.

‘When we got into the mapping it was clear that the existing Rural Land Register system was not as advanced as we had thought it to be. The staff at RPA were not able to cope with the number of queries that the farmers had with the maps they were originally sent.

‘Sometimes that got to quite antagonistic relationships because of a lack of adequately trained and experienced staff. I think that was the point where more staff and more experienced staff would have been helpful. I do not think that was the case beforehand and I do not think it should be the case when the system is fully running, but at that point the RPA were short of staff.

‘Perhaps I ought also to say that this was the point at which I felt the advice I was getting was most misleading, and I have used the term “misleading” publicly but I would perhaps prefer to rephrase that [as] “over-optimistic upward reporting”…’

Dealing with the advice he had received, Lord Bach said:

‘… the collective view put to the Minister all the way through that we would meet this date, and I would have expected to be advised if we were not going to meet this date… I have to say that the advice that I got was both from the RPA and from the Department, and I did not feel the need to go elsewhere.

‘… On Thursday 9 March, we were given advice that the bulk of payments would be made by the first few days of April, not the end of March but the first few days of April. On the 14th, five days later, Tuesday, 14 March, and that is a date which I think will stick in my memory for a while, we were told that there was no chance at all of such a thing happening, that the bulk of payments would not be made anywhere near by the end of March and, of course, as you know, they were not. I frankly have to say that I do not think that that was satisfactory…’

The Chairman asked Lord Bach about the risk ratings that had been provided to the joint Defra-RPA Executive Review Group, saying:

‘I think the frightening thing when you look at Appendix 6 of the NAO report, which has got a detailed analysis of the date when we knew, is that the number of red marks increases with frequency as time goes on, and under the column headed “Risk/Issues” it is just a solid series of red traffic lights. Under “Resources” we have got red traffic lights from October 2005 through to the end; “Business Case”, red traffic lights all the way through to the end. There seemed to be a lot of lights shining that perhaps might have caused somebody to question whether this was deliverable and for the advice that you were getting to flag that up.’

Lord Bach replied:

‘Yes, and I think that is fair comment if I may say so. I notice though, and you will forgive me mentioning it, that in February 2006… there was a status amber. It goes on to say that since the last Gateway review, when the probability of making February payments was assessed at around 50%, a huge effort had gone into achieving this target… That was encouraging in the very month that we were going to and did start making payments.’

The Defra Minister, Lord Rooker, responded in the House to an oral question, which had asked how many farmers were still due their full or partial single farm payment for 2005. The Minister further apologised to the House for the delay in payments to farmers. He also said that he accepted that farmers had:

‘… suffered illness or distress as a result of this situation. People who were specifically promised that they would receive money on certain dates but have not received that money have suffered terrible turmoil. There is no question that people took on debt. Their suppliers had to be paid, or not as the case may be. There has been massive turmoil.'

‘We have allocated more money to tackle rural stress as farmers asked for help. I am not knocking that in any way. It has been a terrible year. As I say, we apologise for that, and we hope that it will not happen again. Rural Payments Agency staff are working their socks off to ensure that it does not. However, in my present position, I cannot make any promises.’

Dealing with the 2006 scheme year, the Minister said:

‘Obviously, we want to get money to farmers faster and to give them certainty, but we cannot afford to have anything remotely like what happened this year, when dates were given and not delivered. Given the lack of trust, what farmers want is certainty. They may have to wait to get certainty, so that we do not take the risk of again having the catastrophic lack of trust that we had this year, which would be compounded if there was a problem two years running.’

30 October 2006

The Permanent Secretary of Defra, the then interim Chief Executive of RPA, and officials gave evidence about the administration of the scheme to the House of Commons Committee of Public Accounts.

When asked by the Committee Chairman why the administration of the scheme had been ‘a complete failure’, Defra’s Permanent Secretary replied:

‘I think that there were a number of reasons for the scheme’s problems… There is no single issue or explanation, but I would like to highlight three or four that were particularly problematic…

‘I believe that the agency’s adoption of a business process that allocated tasks across the organisation, rather than dealing end to end with individual customers who were able to assemble the data associated with the claim, was a key feature of the problems, particularly those that I observed in the latter period.

‘As the National Audit Office Report highlights, problems with the mapping were probably one of the key challenges. There was a vast increase in the number of mapping changes, which had either not been previously reported or were produced – incentivised – by the new scheme.’

She continued:

‘There were problems about testing the IT against a real business process… Clearly, there was not a proper – what I would call model office approach – to testing. Management information was one of the very early victims of time and resource pressure. That meant, as I think the Report says, that there was a conspiracy of optimism in the Agency in terms of the achievability, in the end, of full payments starting in February 2006.’

Other Committee members took up the baton. One member said:

‘Mrs Ghosh, the crisis did not burst upon you unexpectedly. Every single warning light was flashing red years before we actually reached the present debacle. Yet it was as if the team… was on a rope bridge across a ravine. They could see that in front of them the rope was giving way and the bits were not holding together, yet the decision at each stage when there was a decision to take was to press ahead.’

He then asked ‘who took the decision to press on regardless each time attention was drawn to a red light?’ The Permanent Secretary replied:

‘Clearly, the most obvious red lights were flashed through the Office of Government Commerce gateway process. As you well know, that process is intended to highlight risks and suggest that a team take action to mitigate them.

‘The two or three gateways in 2005, shortly before my arrival, are striking. In both January and September that year, there were reasonably positive things being said about the programme, although there were still lots of risks. The June 2005 gateway was very gloomy, and a great deal of thought and action followed on from it.

‘The point about red lights and gateways is not to stop, but to see a risk and do something to mitigate it. One can see the responses that the RPA project team, DEFRA officials and Ministers took at each stage.’

Another Committee member asked:

‘Why did no one know until very late that things were going wrong? Was the former chief executive… being unduly optimistic? Were his reports misleading the Department and Ministers?’

The Permanent Secretary replied:

‘I would not say that there was any intent wilfully to mislead the Department; I think that they were over-optimistic. There is a more important underlying point, which we have discussed with the DEFRA Committee. I suspect that there was no one in the agency who really understood the end-to-end impact of the business process…

‘What happened right at the end was that we pressed the button in February and payments started to go out. As you know, they went out very slowly.

‘When that became clear, Johnston McNeill departed and Mark Addison went in. He looked at what was happening, and it was clear that in the business process was built a very, very high level of checking and validation that meant it was extremely difficult, essentially, to get payments out – what Lord Bach referred to as “gumming up”. That bit of the process was not understood and had not been tested.’

When asked ‘when did the alarm bells begin to ring at ministerial level?’, the Permanent Secretary replied:

‘As I said earlier, clearly a lot of warning bells were rung by the gateway reviews in 2005 – in particular, the June 2005 review…

‘… it was a significant warning, and the agency and the Department took action to respond to the criticisms made. Again… it seemed, right up to March, as the payments were going out… that we would still succeed in getting payments out by the end of March, as Ministers had committed to, although that was on the basis, one now realises, of over-optimistic interpretations of perhaps inadequate management information.

‘The button having been pressed in February, and the wheels having begun to grind more and more slowly, it became clear only in the middle of March that we were very unlikely to hit the end-of-March target, let alone the end-of-June target. Johnston McNeill came and explained that to Margaret Beckett, and she made a statement on 16 March. It was only at that stage that it became absolutely clear that we would not be able to make the payments by the end of March.’

Another member returned to the question of when Defra and RPA knew that the delivery targets would not be met. He said ‘I am interested in the statement in January 2006, which I assume the Minister gave absolutely in good faith’. When asked ‘When [the Minister] stated that payments would be made in February, was he advised to say that by officials?’, the Permanent Secretary replied:

‘He made that statement following the discussions that I described about whether, on the basis of the management information that we had, we should press the button for an interim payment or whether we had sufficient confidence that we could go for full payments starting in February. The advice that was given to Lord Bach, which he challenged and we debated, was that, on balance, the business case went in favour of holding on, pressing the button in February and going for full payments.’

Another member asked the Permanent Secretary what she had meant by the term ‘a conspiracy of optimism’. She replied:

‘What it means is that because the agency had the can-do attitude that your Report describes and management information was not as full as it should have been, it was possible for all members of the project and indeed officials to look on the bright side of the information they were getting. That is what I mean by a conspiracy of optimism.’

(Note: the Committee Chairman had earlier referred to RPA as ‘a can-do organisation that could not do’.)

Another member asked whether RPA was ‘unfit for purpose between May 2004 and March 2006’. The Permanent Secretary replied that subsequent events suggested that it had indeed been unfit for purpose.

1 November 2006

23 November 2006

‘The Single Payment Scheme (SPS) has been introduced to replace a range of payments previously made to farmers and is a major element of the Common Agricultural Policy (CAP) Reform Programme. The Scheme is key to Defra’s Sustainable Farming and Food Strategy, and to one of our PSA targets.

‘Implementation of SPS is being managed by Defra and RPA. RPA administer the payments made under the SPS. The challenge of implementing the new scheme within the planned timescales, while major changes were also being made to the structure and staffing of the RPA, has confronted Defra with considerable reputational, financial and other risks.’

The Permanent Secretary continued:

‘Early in 2006, I and the managers involved in the governance of the SPS considered that the relevant risks were being managed effectively and that our target to start full payments by the end of February 2006 and make the bulk of payments by the end of March 2006 was still achievable.

‘Full payments were started by the end of February as planned but in spite of the extensive controls and governance processes in place it became clear by 14 March that the rate at which the RPA was progressing claims for payments was insufficient to meet the target and I formally informed Ministers.

‘In response to this situation and with the approval of the Secretary of State, I immediately took steps to strengthen the RPA’s leadership and appointed Mark Addison as Acting Chief Executive of RPA in place of Johnston McNeill. Subsequently, Tony Cooper took over as interim Chief Executive from 15 May.

‘In the weeks following 14 March a number of changes were introduced to the SPS claim process to make the outstanding payments as fast as legally possible. They involved removing a number of checks which were already covered elsewhere in the process, introducing a tolerance to help expedite the claims, changes to the work process, direct contact with customers for processing work and centralising mapping.

‘These changes were discussed and agreed with legal and Internal Audit colleagues and approved by Ministers. Ministers also decided that RPA should make partial payments of claims in May and June 2006. By 30 June, £1.4 billion had been paid under the 2005 scheme which was about 95% of the total estimated to be due for payment, against the European Commission requirement of 96.14%.’

The Permanent Secretary then said:

‘I very much regret the impact the delay in SPS payments has had on the farming community, and the additional costs that have arisen due to the problems associated with the introduction of the scheme. Completing the 2005 payments, the 2006 scheme and beyond remains very challenging, with further major reputational and financial risks.

‘Due to the large number of changes required, including those stemming from the NAO review… the RPA considers that it will take between 18 and 24 months for it to deliver a satisfactory level of service and it is working on contingency plans to provide part payments for 2006.

‘The errors and other procedural mistakes in administering the SPS in England are likely to result in the EC imposing a financial penalty, for which the Department has had to recognise provisions and contingent liabilities of some £131m in the 2005-06 accounts. This amount is included within figures reported in these accounts for provisions of £150.2m and contingent liabilities of £63.5m.’

Section 35 of the Accounts dealt with post-balance sheet events. In relation to the administration of the scheme, this section said:

‘The delays faced by RPA in processing payments due under the SPS experienced during the financial year continued thereafter. One of the steps taken as part of the subsequent processing of payments, sanctioned by Ministers, was the making of partial payments, £770m in total.

‘The European Commission was consulted before these payments were made and Commission officials advised that making these payments could give rise to disallowance up to 10% of the payments made. In addition RPA took steps to streamline the controls over processing claims for payment. These steps resulted in 94.9% of payments being made by the regulatory deadline of 30 June 2006. However, this level of payment may still give rise to late payment penalties.

‘The risks arising from the partial payments, streamlining in controls and late payments have given rise to a material exposure to disallowance which will result in a failure to recover sufficient monies from the EU to fully fund the payments made under the SPS. These are provided for in note 21.1 under EAGGF financial corrections and a contingent liability in note 31.1.

‘Johnston McNeill left RPA on 15 March 2006. The terms of his departure are still under discussion.’

November 2006

The aims of RPA for the year covered by the Plan included those to ‘aim to give customers a better service than in 2005-06’ and to ‘endeavour to make all payments accurately and in a timely manner’.

In section 3.1, the Plan dealt with the administration of the 2005 scheme, saying:

‘RPA regrets the delays to making 2005 Scheme payments and apologises for the resultant difficulties experienced by farmers. RPA will endeavour to restore a more acceptable level of service as soon as practicable.’

The Plan also set out the new performance targets for RPA, which had been ‘set taking account of the difficulties experienced with the Scheme’.

As regards payments under the scheme, the relevant target was now ‘to have paid 96.14% by value of valid 2006 Scheme claims by 30 June 2007’ (that is, by the end of the statutory payment window).

The Plan also recognised that:

‘… arrangements for customer contact during processing of the 2005 Scheme led to great frustration among claimants because our staff were unable to explain how their case was progressing. The move to whole case working for the 2006 Scheme is intended to improve this.’

27 November 2006

‘… when we encountered the changes that we needed to make to the system, as a result of policy changes, in December 2004, we went through a fundamental review of the risks of delivering that programme. We took a view that it was still deliverable at that point in time, but it had increased the risks of delivery.

‘In discussion with Defra, we announced that the earliest we could start making payments would be February 2006, and we worked throughout 2005 and early 2006 to ensure that we did hit that milestone, and indeed we did commence making payments in February, as we had promised some 12 months before.

‘The issue was that where we had not understood the complexity was that it would take far longer to get the payments out; once we started making payments they did not flow through with the speed or at the level that we had anticipated, and that is where then the major problems arose.’

Referring to briefing provided by RPA to Defra Ministers concerning the likelihood that RPA would complete all the tasks outstanding within the timetable necessary to deliver against the payment targets, RPA’s Operations Director explained:

‘The information that I think went forward explained that we would not complete all of those tasks by the middle of February but that we were satisfied with the degree of accuracy on the overall level of entitlements and payments, meaning that we could start in February, as we had announced some 13 months earlier, and we did make a start to payments. Unfortunately, the payments did not flood out as we were hoping, they trickled, and it was at that point we became alarmed.’

The Committee Chairman then asked:

‘What I am trying to get at is that you never wavered from your belief that you could actually deliver 100% of what was required by the end of February, in spite of the fact that every observer from outside was seeing mounting problems.

‘Huge problems with the mapping, lots of unanswered letters, poor communications, all the things that you know about, but which never made you sway one moment from saying, “Excuse me, do you think we ought to think about interim payments?” before you came to the conclusion in 2006 that you needed to do interim payments?’

RPA’s Operations Director, after explaining that the making of interim payments had been considered earlier but discounted due to the additional work (and risk to the delivery timetable) that would have entailed, also said in reply:

‘It became apparent only during the months of March and April, when we did not achieve the level of full payments that we were anticipating, that we needed to move into a partial payment scenario.

‘It was at that point that Mr Addison, on advice from colleagues within RPA and discussion with policy colleagues, sought agreement to make a partial payment, and that is what we did.’

6 December 2006

Part of the evidence session dealt with the confidence levels about meeting the payment delivery targets which had existed within RPA and Defra during 2005. The Committee Chairman said:

‘I looked at some of the material which supposedly was the report back from Johnston McNeill to ministers. I speak now without having the benefit of the papers in front of me, but I remember that midway through 2005 there was a report which said there were 441,000 tasks to do and two or three minutes later it had gone to 720,000 tasks to do, yet onward sailed this project seemingly unaffected by the mounting tide of undone work.

‘Nobody seems to say, “Excuse me, are we ever going to get there?” The whole flavour of the reports he was producing supposedly to brief ministers contained unbelievable optimism that somehow it would all be all right on the night and yet it was getting closer and closer to the then public timescale when payments would be reached. How on earth did this kind of overoptimistic reporting seemingly go unchallenged and unnoticed?’

The former Permanent Secretary replied:

‘… In the summer of 2005 the probability of payment by 1 February was reduced to 40%. At that point the programme board or Executive Review Group discussed some propositions for reducing risk and they were put to ministers.

‘There is a question about why there was a belief that it would work and why it was 60% and certain de-risking to keep it on the right side of 50%. But there was a lot of challenge and questioning and by that stage ministers were having regular meetings and were able to do that challenge and questioning themselves.

‘It comes back to the question: did the RPA know sufficiently what was going on in their own organisation about their own productivity in using of the system?

‘… I think that it was in the summer of 2005 that the probability assessment of the probability of commencing payments on 1 February was 40%, which increased to 75% if the date was slipped to 1 March. There was discussion at official level in the various groups. There were recommendations to ministers for actions that would increase that confidence level.’

12 December 2006