Payments are determined by the entitlements held by a customer which were based on the land area established and claimed in 2005. Therefore any increase in the size of a field would not change the expenditure unless the customer had sufficient entitlements to activate any claim on the increased area. During 2005 and 2006 the Rural Land Register was subject to a process of validation which in some cases resulted in field sizes changing. Where this impacted on individual claims, a process of reworking is under way, designed, where appropriate, to correct the land area and the number of entitlements established. Increase in land area may result in individual farmers being able to activate more entitlements. Effects on the level of expenditure of single payment scheme payments in 2006-07 cannot be determined until the evaluation of reworked cases, currently under way, is completed.
My right hon. Friend the Secretary of State and my noble and right hon. Friend Lord Rooker have regular meetings the Rural Payments Agency (RPA) chief executive, during which they confirmed then their support for the significant efforts being made by the Agency, in relation to the 2007 Single Payment Scheme, to make more full payments, to more farmers, earlier than under the 2006 scheme. The announcement by RPA on 10 December, that live testing of the payments system was under way, is an encouraging sign that the Agency is on track to meet its formal targets of making 75 per cent. of full 2007 scheme payments, by value, by the end of March and 90 per cent. by end of May 2008.
The annual payments made to English farmers under the Single Payment Scheme (SPS) are based on the total value of the entitlements on which a valid claim is made, with adjustments then made to reflect the application of reductions such as modulation and penalties for breaches of eligibility or cross-compliance rules.
The number of entitlements allocated to English farmers is in turn based on the number of eligible hectares that they declared on their application form under the 2005 SPS. The value of those entitlements under the 2005 scheme was calculated in two parts. First a flat rate per entitlement was established by dividing the total number of entitlements created in each English area into a sum representing 10 per cent. of the available funds. The remaining 90 per cent. of the available funds was then used to fund an individual reference amount for each farmer based on historic subsidy receipts. The value of each entitlement will be adjusted each year until 2012 to allocate a higher percentage of available funds to calculate the flat rate value. By 2012, the entire value of each entitlement will be based on a common flat rate amount in each area. Farmers may use the '2007 Entitlements Calculator' on the RPA website (www.rpa.gov.uk) to assist in the calculation of an approximate value of their entitlements for the 2007 scheme.
DEFRA has included accruals totalling £63 million in its 2006-07 resource accounts in respect of late payment penalties imposed for SPS 2005, which has now been paid. A further £7 million was noted as a contingent liability in those resource accounts but no further amounts have been paid.
There will be no late payment penalties for SPS2006 as the Rural Payments Agency met the EC target of making 96.154 per cent. of payments by 30 June 2007.
I refer the hon. Member to the statement made by my right hon. Friend the Secretary of State on 18 December 2007, Official Report, column 107WS.