Chapter three: The key facts leading to the complaints

Introduction

142. In this chapter,  I set out the key facts needed to understand my general findings of maladministration  and to put the complainants' stories in context. The facts cover what happened  before and after the deadline for SPS claims in May 2005; and how RPA  dealt with farmers' representations and complaints about their claims.
143. I have based  these facts on two main areas of evidence. The first area is the evidence the  investigation has gathered about the individual complaints. This is set out in  chapter four and, in more detail, in Annex E. The second area is the evidence  about the operational and policy decision making about SPS in Defra and RPA and  from earlier investigations of RPA and SPS. The administrative chronology gives  a more detailed account of this in Annex A. The guidance to staff that I refer  to is covered in more detail in the chapter on the specific standard.

SPS money  mattered to farmers – large and small

144. RPA recognised  that SPS payments were central to farmers' planning and to their income. They  knew that non‑payment of the subsidy could threaten the livelihoods and well‑being  of farmers. The EU Regulations call this area of CAP subsidy 'income support'.  RPA had seen, in earlier subsidy schemes, how much farmers could suffer when  hit by problems such as late payment by RPA or farmers' own mistakes in claim  forms.

RPA were  good in parts

145. Farmers had been  able to expect a reasonably good level of service from RPA before SPS started  in 2005. They had had relatively easy access to information and, although there  were exceptions, timely payment. RPA's papers confirm that in 2001‑02 they started  scaling back the level of service they gave farmers through, for example, drop‑in  centres. The evidence we have seen from farmers is that some felt able to  obtain personalised information about their subsidy claim forms from RPA until  2004. The farmers who complained to me have told us that, by 2004, they had a  good understanding of how to claim under the subsidy system that SPS replaced.  Defra's 2002 Clayton Report, about how farmers got information, had said that  farmers' preferred method of communication was word‑of‑mouth, and that access  to a method of asking questions was seen as essential. RPA recognised that  farmers were used to calling at RPA offices to deliver forms or seek  information.

'A hell  of a cultural change'

146. A major overhaul  of RPA, known as the change programme, started in 2001. It aimed to improve the  administration of CAP subsidy and, as part of that, to improve the level of  staff and customer satisfaction. From 2001‑02 RPA had started to close their  network of drop‑in centres, despite worries about the loss of face‑to‑face  contact. The drop‑in centres that survived after 2004 were simply to collect  forms. RPA believed farmers' form‑filling was equally good with or without  access to advice in person. They also felt unable to give farmers such a high  level of personal contact as they had in the past. RPA's new approach was to  direct enquiries through a single call centre. The RPA Chief Executive in place  from 2001 to March 2006³³ said, in evidence he gave in 2007, that he had recognised that the change of  approach was going to be 'a hell of a  cultural change to customers'. Part of the culture change reflected RPA's  move to having a smaller number of offices and a telephone-based customer  service centre, instead of having nine regional offices accepting and  processing claims. This removed the geographical link between claimants and the  processing office. In 2010 RPA increased the level of information about claims  that it could give at drop‑in centres.
147. In commenting on  a draft of this report, the Defra Permanent Secretary said:

     'A very  significant amount of information was provided to farmers through the various  booklets and road shows that preceded publication of the [SPS 2005] Handbook. Our understanding is that this extensive publicity effort did prove  helpful to a significant number of farmers who took up the opportunities  provided to familiarise themselves and prepare for the introduction of the new  scheme. The drop in centres were not removed in 2005 but were very much open  and provided the same basic checking service as they had done in at least the  preceding two years. What is more difficult to evidence, but[is] the collective understanding of those involved in RPA and predecessor  bodies, is that a more informal, individual service did exist at drop in  centres during the 1990's but had been phased out around the turn of the  century. It would be more accurate to say […] that the customer service centre (CSC) (a year round service) replaced  not the drop in centres (only open for around two months a year) but the  facility for farmers to call the individual processing sites who administered  their claims […]. There were initial  problems with calls going unanswered and a number of examples of mis-leading  advice being given. However, overall the CSC answered around 160,000 calls and  the end result whereby 99 per cent of entitlements were activated suggests that  it must have played a positive role in the vast majority of cases.'³⁴

Quality and deadlines

148. In 2005 (and in  2006) RPA's public statements talked about customer focus and quality. Their  mission included the goal of being: 'a  customer focused organisation delivering high quality services'. Their  objectives included: providing 'fair,  responsive and high quality services to its customers, minimising  administrative burdens placed on the customers it serves'. In practice it  had proved increasingly difficult in 2004‑05 to meet these goals.
149. Mapping land on  RPA's digital database, the Rural Land Register, was a necessary part of making  a valid SPS claim. In autumn 2004 the database went live, six months later than  planned. In 2004 and 2005 the NFU had raised concerns with RPA about the  backlogs in land registration on the Rural Land Register. Later, in  October 2006, the Permanent Secretary of Defra said:

     '[…] 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.'³⁵

RPA's IT preparation for SPS was 'just  in time'

150. At the same time  as RPA struggled to handle their mapping work, they were setting up their  computer systems for handling SPS claims. These were still evolving when the  claims deadline passed in May 2005. At the end of 2004 Defra and RPA had  decided to continue with a system called RITA for handling SPS. They had found  more flexibility within their schedule for updating RITA and their supplier was  confident about keeping to timetable. The flexibility came from completing  different parts of RITA 'just in time' for each step in processing 2005  SPS claims. For example, that would mean staff could start to key in  information from claim forms from April 2005; start validation  cross-checks and begin to select claims for cross compliance inspections at the  end of April 2005; and start work on entitlements, claim value calculation and  payment from July 2005.
151. In  February 2005 RPA sent farmers the 2005 SPS Handbook, which told them  the detailed scheme rules. Internally, RPA had  recognised that the language used in their draft of the handbook was  inconsistent and that it could confuse the reader. This potentially confusing  language remained in the Handbook they sent farmers. RPA asked the  farming bodies to comment on the draft handbook text (with a three day  deadline). Among other things, the NFU asked:

     'What can the  RPA customer expect from the RPA in terms of help with completing the forms?  Will there be a facility for hand delivery and checking – presumably at the  current RPA processing sites, plus Worcester and Newmarket?'

      

     From the papers we have seen, we do not know how RPA  replied to the NFU's question. Of the nine people who have complained to me,  four have said that they had previously received help with checking claim forms  from officials within two years of SPS starting, and that this was not  available in 2005. 

Signs of trouble to come

152. During the run‑up  to SPS, RPA had lost staff under what they call a 'voluntary exit  scheme', although they were struggling to do all the work needed. The Chief  Executive of RPA during 2001 to 2006 later said that, on reflection, he  wondered why it had not crossed his mind that there would be a problem if RPA  lost staff with experience in dealing with farmers when customer relations were  going to be so important.³⁶
153. RPA's new  customer service centre, set up as a central point to answer farmers'  questions, opened in February 2005. It was initially unable to deal with  the number of calls it received – up to 12,000 a day. RPA have told us that  call numbers rose from 900 a day in February 2006 to more than 7,000 a day  in April and May. It expanded its opening hours and call answering capacity in  response. RPA's 2004‑05 Annual Report said:

     'We accept that  there are lessons to be learnt in dealing with the new customer base, in  particular in responding to the near tenfold increase in volumes of enquiries,  which required a move to contingency plans.'

     NFU council delegates raised a series of problems at  their April 2005 meeting, which senior managers from RPA addressed.  Delegates cited: the difficulty of getting through on the RPA Helpline; the  absence of support for SPS claimants from RPA and Defra; examples of  conflicting or bad advice from RPA on special entitlements, among other things;  concern about fruit, vegetable and potato authorisations; and the risk that two  farmers might claim for the same piece of land.

154. In the weeks  before the May 2005 deadline for SPS claims, RPA countered farmers'  concerns about the scope for mistakes in their claims. RPA's message to the  specialist press was that they would 'of course' use the 'obvious error'  provisions in the Regulations. According to the minutes of the meeting, the RPA  senior managers at the NFU council's April 2005 meeting told the NFU that  cases of genuine farmer error would be recognised. Without making any specific  promises, they said that RPA would try to be flexible with errors. In  commenting on a draft of this report the Defra Permanent Secretary said:

     'At this point  removed from events, it is very difficult to know what was said on those  occasions, but the belief of those involved within RPA and Defra at the time is  that staff were invariably careful to make clear that while the Agency would be  as flexible as possible, this was in the context of the legal provisions,  particularly 'obvious error'. The NFU in particular would have known that there  were limitations on the flexibility. While we cannot vouch for every  conversation, I do not believe, therefore, that messages given at the time were  mis-leading.'

     She also said: 'Our  view is that the Agency demonstrated in practice the flexibility that was  suggested by messages given at the time'. The NFU have told us that among  their recollections of the period is the sentiment from the RPA customer  service centre in 2005 – for claimants just to get the claim form in to RPA.  The 2005 SPS Handbook summarised the  'obvious error' provisions, and what they might mean. But the Handbook's  summary did not explain that 'obvious error' was a legal concept that might be  open to interpretation by the courts.

RPA's systems problems start

155. RPA's systems  failed to behave as RPA had expected. First, RPA were unable to start keying in  the SPS claims for three weeks. That was because of early problems with the system  used for 'high volume data capture'. (RPA scanned in the claims from 2006  onwards.) Later problems arose from the task‑based approach used in handling  the 2005 SPS claims. RPA staff worked on a list of tasks from many different  claims, instead of working on complete claims. RPA found the number of system‑generated  'tasks' for the 2005 SPS claims grew unpredictably. The more tasks RPA cleared,  the more tasks they needed to clear. In November 2005 about 440,000 tasks  were neither cleared nor underway, out of 500,000 tasks in total. By early  March 2006 the total number of tasks was just over 800,000, of these,  188,000 tasks were outstanding. RPA had to complete these tasks before they  could say all claims were fully 'validated' and therefore fit for a final  decision – and payment. RPA moved to working case‑by‑case for SPS 2006.
156.  In 2005 (and in  2006) RPA processors were without a case management system that would give them  an overview of all the relevant information for each claim. RPA's intention had  been to have one source of customer information, open to any authorised person  in RPA, by the time they finished their change programme at the end of 2004.

RPA's work on  incomplete forms

157. Establishing  entitlements under SPS ensured the farmer could claim subsidy on the land, even  if he or she did not want to claim it in 2005. But it was also essential to  activate the entitlements in the 2005 claim form if he or she wanted to receive  any money.
158. RPA's initial  checks on claim forms, the ones intended to make sure that claims met a minimum  standard for the claim to be lodged, were basic. The minimum requirement in the  section of the checklist that covered the different elements of SPS and other  relevant schemes was for the farmer to have ticked yes to the question: 'Please confirm that you are applying to  establish entitlements for the areas that you have entered in column I of your  field data sheet', or to have  completed column I on the field data sheet (SP5b); or to have ticked yes to the question about confirming that he or  she was applying to establish special entitlements; or to have ticked yes for any box in the column on the common land  field data sheet that asked whether the farmer was establishing entitlements  for those rights; or to have ticked  yes to the question about the area payment for nuts, or about aid for energy crops or about protein crop premium or about  hill farm allowance.
159. RPA have told us  that by April 2005 their work on these initial checks had alerted them to  the 'common error' of omitting to activate entitlements. RPA named the failure  to activate entitlements in a list of common errors included in the  supplementary guidance they sent farmers in April 2005. Also in  April 2005, an RPA lawyer advised colleagues that RPA had no legal  obligation to return forms at all, or to query incomplete data. But he also  pointed out that, from a policy perspective, 'there could be a customer service driver that encourages RPA to do its  best to ensure that as many eligible applicants as possible apply to the scheme'.  In commenting on a draft of this report, the Defra Permanent Secretary said  that this was the opinion of one lawyer, not a collective view. She said:  

     'The collective  view in the Agency was that there was no anomaly as, in seeking to establish entitlements,  the claimants had submitted a valid claim and the option not to activate those  entitlements was a legitimate one.'

     Later, in 2007, RPA started sending farmers 'nonpay  letters' if RPA checks found the farmer had omitted to activate any entitlements.  Those letters told farmers they would not receive a payment without activating  the entitlements. RPA have told us that farmers who received a nonpay letter could  change their claims up to 31 May without penalty.

Delay  in paying farmers for SPS 2005

160. In late 2005 RPA  did some more work on cases where farmers had omitted to activate their  entitlements. They looked at claims where the farmers  had said in one part of their claim that they wanted to activate all  entitlements entered in column J, but had then left column J blank. RPA  contacted the claimants to check their intentions and later paid a number of  them under the 'obvious error' provisions. From the evidence we have seen, RPA  do not know exactly how many claims they paid  in this way. Guidance to staff, issued in September 2005, asked them to  use an 'obvious error spreadsheet' (already sent to staff) to record possible  cases of 'obvious error'. Further guidance went to staff in September and  October 2005.
161. Earlier  reports have described how RPA's problems with SPS meant that they were unable  to make the bulk of SPS payments to farmers by the end of March 2006 as  they had said they would. Defra and RPA revealed the scale of the problems in  March 2006, when the Secretary of State replaced the RPA Chief Executive. A National Audit  Office report on RPA, published in October 2006,³⁷ reviewed RPA's  implementation of SPS. It said:  

     '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, relations with the Agency's customer base have been  damaged and there is a risk of  substantial disallowance of expenditure by the European Union.'

     Also in October 2006, the then  Permanent Secretary of Defra gave evidence to the House of Commons Public  Accounts Committee. A member of the Committee asked her: 'Was the Rural Payments Agency unfit for purpose between May 2004  and March 2006?' She replied: 'Subsequent  events suggest that it was'.³⁸

RPA's  workload kept growing

162. The evidence we  have gathered shows RPA were struggling to manage the volume of work connected  with SPS claims in 2005 and 2006. That was work from the claims themselves and  from correspondence about SPS claims. In 2006 RPA had a standard letter for  2005 SPS claimants who queried the progress of their payments. It asked them  not to contact RPA for further information as RPA were 'striving to make payments on all claims, including yours, as quickly as  possible'. RPA's processing problems meant they had only just made partial  payments for SPS 2005 claims by mid‑May 2006 – the usual timing of the SPS  claim deadline. They extended the deadline for SPS 2006 claims to  June 2006. In August 2006 RPA's operational management team noted  that RPA had a backlog of over 40,000 pieces of correspondence and over 10,000  appeals and representations.
163. As I have  described, RPA were giving staff frequent updates on how to deal with problems  in claims. However, in practice, RPA were inconsistent in their  approach to farmers who had made mistakes on their SPS claim forms. We asked  RPA about this. They told us that they had 'stretched' the 'obvious error' provisions. They also said that individual  business units and managers were encouraged to use their initiative to pay  people. RPA said that that might well have led to an inconsistent approach.  This is played out in what some of our complainants have told us. For example,  Mrs A, Mr G and Mr B's agent, Mr J, all mentioned other claimants they knew  who had made the same or similar mistakes when completing their SPS claim  forms. RPA had paid these other claims.

The 11,000  non-activation claims

164. By  August 2006 RPA were on their third chief executive of the year. Cases  where claimants had omitted to activate their entitlements continued to dog RPA  throughout the difficulties of 2005 and 2006. In early August 2006 they  issued fresh guidance to staff about the latest area of possible 'obvious  error'. Later that month, the RPA policy director briefed RPA's operational  management team on the problem. He told them that in 11,331 SPS 2005 claims  applicants had not activated all or some or their entitlements. (RPA had  received 116,000 SPS claims.) He said RPA had dismissed the argument for  'obvious error' in these cases because the forms were internally consistent. 'Misunderstanding scheme rules is not the  basis for obvious error' said RPA's note of his briefing. In  October 2006 RPA's operational management team discussed a paper from the  policy director about how RPA might deal with these claims for SPS 2005. It  became known as the paper on misunderstandings. The paper aimed to answer two  questions. Could RPA consider the cases on a blanket basis? And could they pay  the claims 'outside the 'obvious error' guidance/principles and the  amendment rules'?
165. The  misunderstandings paper gave three options in response to these questions, as  summarised by RPA's records of the meeting. They were:
     • continue to deal  with representations and appeals and take no further action;
     • have a blanket  acceptance of all the non‑activation cases – this would carry a high risk that  the European Commission would take disallowance action (see my explanation of  disallowance in the glossary); or
     • use RPA's  'obvious error' guidance to 'take a judgement on individual cases where we  believe the customer deserves a payment due to an error/misunderstanding,' –  this would limit any disallowance to those cases, but would need many staff and  could lead RPA's stakeholders to press RPA to allow more cases.
166. The  recommendation in the misunderstandings paper, again as summarised by RPA's  notes, was that RPA should use the 'obvious error' guidance and in each case  decide whether the customer deserved a payment because of an error or  misunderstanding.³⁹ The paper did not consider whether maladministration had contributed to the  misunderstandings and did not mention an ex gratia payment solution.
167. In October 2006  the operational management team estimated that it would take at least three  weeks to review the non‑activation cases. They said that they could not afford  to take this time away from processing current claims. (RPA had only just  switched their processing priority from clearing old 2005 claims to handling  the 2006 SPS claims.)
168. After the  meeting, RPA's operations director noted that the operational management team  had agreed with his proposal that RPA should first, hold a firm line and not  review individual cases, and secondly, check the number of representations and  appeals that resulted from this decision. He also named managers who would look  into the position on partial activation for SPS 2006 and SPS 2007.
169. Senior RPA  officers continued to have concerns about the approach decided in  October 2006. In December 2006 the acting head of RPA's legal team  emailed the policy director. She said:  

     'The main point  that is haunting us (particularly [the Interim Chief Executive]) is the recurrent question of "Why would a  farmer have signed [an SPS claim form] if he did not intend to establish/activate entitlements?".'

     She suggested a fundamental reappraisal of RPA's  approach on these claims. The policy director replied: 'The reappraisal you suggest would cause us huge difficulties'. He  agreed to raise the matter, but we have seen no evidence of what happened after  that email exchange. We do know that RPA continued to refuse to pay the claims  for the farmers in this investigation who failed to activate their  entitlements.

170. RPA have said  that the EU Regulations covering SPS leave little room for RPA to vary the  rules to pay claims where farmers have made mistakes in their claims. Their  position was, and is, that they may pay claims only if the particular  circumstances meet conditions which, in the light of rulings by the courts,  must be strictly applied. The courts have confirmed RPA's interpretation of the  Regulations in this area.⁴⁰
171. The evidence from  RPA's operational management team discussions in August to October 2006  suggests that RPA believed in 2006 that they did have scope to make payments of  SPS on some problem claims, albeit with a risk of disallowance, and that this  would not require ex gratia payments. Their main tests in deciding whether or  not to pay such problem claims within the normal course of SPS claims handling  were: how much RPA could manage the risk of disallowance; and whether they had  the resources to do the work needed.

Complaints versus appeals

172.  RPA had a complaints process, which their  customer relations team oversaw. They also have (and had) guidance on ex gratia  payments that give them the scope to provide a remedy where it is impossible to  remedy an injustice within the terms of the SPS regulations. RPA sometimes call  this a remedy 'outside the rules'.
173. In 2006 RPA  decided to use the appeal route, not the complaints process, for cases where  people told them they had not activated their entitlements by mistake. The  customer relations team managed the appeal route as well as the complaints  process. Using the appeal route meant that RPA would consider each case on its  merits. But the criteria for the appeal decision would be the Regulations.
174. By and large,  representations from farmers that raised questions of possible  maladministration, such as misdirection about the likelihood of payment or the  quality of scheme guidance, did not fit RPA's appeal remit. In the cases under  investigation here, such complaints went largely unaddressed. This was also  true of cases where the farmer's complaint arose from something other than a  failure to activate entitlements.

RPA and anticipating the needs of disabled  people

175. As I set out in  the specific standard, government departments have legal duties to people with  disabilities. In June 2004 RPA's guidance on assistance to claimants with  disabilities was based on the view that all claimants were business people and  should be expected to take responsibility for looking after their claims.
176. The guidance we  have seen said:  

     'Our customers  are in business and therefore it is for them to seek assistance for themselves.  There may be costs for the applicant. In no circumstances can RPA be held  liable for completing forms but in instances where someone had no other option  than to assist it would be necessary to have in place a disclaimer against the  action and [for it to be] fully  recorded why this was done.'

     The guidance said it was primarily up to operations  managers to decide what 'realistically  can be achieved within time and costs  constraints' and added:

     '…there are no  existing budgets available to undertake the additional assistance the claimant  with disabilities may request unless there are sufficient printing type budgets  on each site.'

     It gave the equal opportunities team and the chief  executive's office as sources of advice for staff.

177. Also in June 2004  RPA officials exchanged emails about what adjustments they should make for the  needs of people with disabilities or with particular communication needs. The  papers we have seen show that they decided to include a general statement:

     'Customers with  special needs – we are committed to providing consistently high quality  services that are valued by our customers. If you have any difficulties in  accessing information from us, please contact your relevant RPA office.'

     They also decided to provide a Minicom number for  people who were hard of hearing.

Conclusion

178. In chapter three,  I have set out the key facts drawn from my review of the evidence we have  gathered. In chapter four I tell the stories of the nine complainants.