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Rural Payments Agency

Volume 476: debated on Wednesday 21 May 2008

Motion made, and Question proposed, That this House do now adjourn.—[Alison Seabeck.]

It is a pleasure to be in the House this afternoon, knowing that because the Government business has already been completed, the Under-Secretary, other hon. Members and I have until 7 o’clock this evening to discuss the case of my constituent, who was so unfairly treated about his farm payments.

The Rural Payments Agency’s handling of the single farm payment scheme is well documented. As a Member of Parliament for a rural constituency with a proud farming tradition, I know only too well the strain that that put on families and businesses over the past few years. Many farmers across the country have been forced out of operation, many took on large amounts of debt, and all have come to regret the administrative incompetence of the Ministers who were then in the Department. Rural communities distrust the Labour Government. They are not convinced that the Government understand, or take any interest in, their way of life, and many have lost faith in their ability to improve things.

I hope that that is a source of regret for the Minister, but I suspect that after the foot and mouth outbreak, the cuts in flood defences before last year’s floods, and the failure to distribute awards from the single farm payment scheme on time, he is not especially surprised. I hope, too, that he is embarrassed by the failings of the RPA, which is guilty of staggering incompetence. The conclusions of the National Audit Office report on the delays in administering the single farm payment scheme in 2005 say it all:

“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.”

Whereas Scotland, Wales and most other EU countries opted for payments calculated on the historic basis of claims made by individual farming businesses between 2000 and 2002, England adopted the so-called dynamic hybrid model. I am sure that the Minister who is here tonight would have made different choices, but the Ministers who were there then made that choice. Whereas most Scottish payments were made on time, thousands of English farmers were made to wait. Although the target was to pay 96 per cent. of all money due to farmers by the end of March 2006, by the end of June 2006, 8,586 farmers had not received any money, and 16,168 farmers had received only partial payments amounting to 80 per cent. of their claim.

The result was widespread despair and frustration among members of England’s farming community. Some 20 per cent. of those surveyed by the polling company Ipsos MORI said that the delays had caused distress and anxiety to them and their families. The NAO estimated that the delays cost farmers between £18 million and £22.5 million in interest and arrangement fees on additional bank borrowing. Its report stated that some farmers had

“postponed purchases, sold crops and livestock early or delayed payments to their suppliers.”

Only in this Government could the Minister who presided over such a situation be promoted to the post of Foreign Secretary.

The purpose of today’s debate, however, is not to slam the Government for past misdemeanours but to set out for the Minister the case of Sam Walton, a farmer constituent of mine. Mr. Walton has, in my opinion, been the victim of an injustice at the hands of the Rural Payments Agency. I gave the historical backdrop by setting out the way in which those payments were introduced to provide an idea of the way in which the agency ran its major project, and it is fair to do that before I deal with the way in which rules were rigidly applied to a small farmer in distress.

The injustice that Mr. Walton suffered has led to his losing out by more than £5,000 each year—a huge sum of money for farmers in today’s difficult climate. He has gone through the necessary judicial procedures to retrieve the money, and has got nowhere. As a final resort, he contacted me, and asked me to bring his case before the House. I hope that the Minister will give him a fair hearing this afternoon, and I am confident that he will. Sam Walton is a farmer of long standing in my constituency, and he is highly regarded in the east Yorkshire rural community. He has been farming at his home in the tiny village of Lockington since 1973. During that time, he has built up a plot of land totalling more than 170 acres, and he has become editor of the magazine Pig World. His main source of income for the past few years is cereal and rapeseed, as he no longer handles any livestock.

Mr. Walton’s troubles began in the year 2000-01, when he contracted with a company to grow beans on his land. The company decided to pay him for that work up front. As a result, it alone collected that year’s arable area payment—some £100 per acre. It was a wise decision for Mr. Walton to collect the money before the work was completed. In 2001 he contracted with the same company to grow winter barley. This time no money was collected up front, and when the company went bankrupt later that year, it owed Mr. Walton more than £2,000.

Mr. Walton was diligent before allowing the company to collect that year’s subsidy. He contacted the Rural Payments Agency office in Northallerton, North Yorkshire, to ask specifically whether he would be harmed in future if the transfer to the company went ahead. He was assured that he would not lose out as a result. Given the rules at the time, the civil servants who gave him that advice were entirely right to do so, but when the single farm payment scheme was introduced, he was clobbered to the tune of £5,000 a year.

The reform of the EU common agricultural policy in 2003 was generally welcomed by Members on both sides of the House. The original CAP was based on the ludicrous policy of high support prices: the more the farmer produced the greater the benefit he received, which led to overproduction and the selling of cheap food to the developing world. As a result, local and third-world producers were undercut, local economies were damaged, and millions of people were worse off.

The new CAP has done much to mitigate these problems. Farmers are now freer to produce according to market rules. The environmental damage caused by overproduction and intensification has been reduced, and farmers are encouraged to pay more attention to environmental standards and protocol. It is worth noting in passing that many of us had hoped that there would be further serious steps forward in reducing this. News over the past two days has not been promising, although whether it would be within the ambit of the debate for the Minister to comment on that when he replies, I do not know. I leave it to the Chair.

Unfortunately, the way in which the Government introduced the policy of the single farm payment was an unmitigated disaster, both for Mr. Walton and for the many thousands of farmers across the country who received late payments. The decision how to distribute the payments was left to individual EU states. As we all know, the Government decided to introduce the dynamic hybrid system. Up till 2012, payments would be based upon a combination of historic and regional average payments, with the regional average component increasing each year.

The historic reference amount would be calculated on the basis of the livestock and arable aid claims submitted for the farmer in the years 2000, 2001 and 2002. To allow the industry time to adjust, historic payments would be gradually phased out and flat rates phased in, with the historic payments worth 90 per cent. of the total amount for 2005. This rule and its implementation—the choice made by the Government—have led to Mr. Walton’s downfall. Because he did not claim the £100 per acre payment to which he was entitled in 2000, he has lost out to the tune of £15,000 over the past three years, despite the fact that during 2000 the farm remained in his control, he was eligible for the payment and he did, in fact, farm the land.

In 2005 Mr. Walton submitted an application for a stage 2 SPS appeal to the Rural Payments Agency. He was given the opportunity to make an oral presentation to a hearing on 4 November of that year. Unfortunately, the single payment appeal panel decided to uphold the decision reached by the RPA. That was later confirmed by a Minister.

I am not asking for a miracle this afternoon. I understand that the Minister is constrained in what he can do, but I trawled through the appropriate European Council regulation No.1782/2003 to see whether there was any scope for helping Mr. Walton—and I was heartened when I discovered that in certain extraordinary circumstances, the historic reference years could be moved, by just one year or by all three. The relevant years could therefore be 1997, 1998 and 1999. Paragraph 4 of article 40 states:

“Force majeure or exceptional circumstances shall be recognised by the competent authority in cases such as, for example”—

a number of cases are listed, including severe ones such as the death of the farmer, long-term professional incapacity of the farmer, and a severe natural disaster gravely affecting the holding’s agricultural land. However, it was clear from the wording of the regulation that the list of examples was not meant to be exclusive, and there was some discretion for the authority concerned.

For a small farmer with a relatively small holding, affected as my constituent has been by a technicality, when the failings of the agency to which he had to appeal were many and manifest, affecting thousands of farmers across the country, it seems demonstrably unfair that the rules should be applied in pernickety detail in his case, whereas the agency was able to flout the rules, fail to make payments, and cause inconvenience and suffering throughout the country. The case required a certain amount of leeway to recognise the circumstances, but that leeway was not given.

I have read articles 40 and 44 of the regulations, and it seems to me that those could cover commercial arrangements between a farmer and a company, if the authorities so desired. I ask the Minister to re-examine Mr. Walton’s case, use his best offices and those of his civil servants, contact the RPA and see whether there is some way in which Mr. Walton, a small farmer struggling to make a living, could have an injustice righted.

Sam Walton is of maturing years—although if he is watching this on parliamentary television, he will doubtless be grossly offended by my saying so. He is a remarkably youthful looking man, of course, because of his years of working as a farmer, but it is fair to say that he is older than the average farmer. Mr. Walton has worked hard all his life and contributed enormously to east Yorkshire life. He is an extremely popular figure with those who know him. However, he has been caught out by an administrative difficulty that was no fault of his own. In fact, he had gone to every possible length to ensure that he was being prudent and cautious, by speaking to civil servants before acting.

I hope that the Minister can look into Mr. Walton’s case again and ensure, as much as possible, that agencies such as the Rural Payments Agency consider such cases more humanely. If those agencies were run with exemplary efficiency and fulfilled their every requirement to the letter, it might be more understandable that they should apply the rules to the letter when they penalise small farmers. When agencies are not run in that way, it makes it all the more difficult for people such as Mr. Walton to accept the palpable injustice with which they have been treated.

I welcome this opportunity to respond to the comments that the hon. Member for Beverley and Holderness (Mr. Stuart) has made on behalf of his constituent, Mr. Sam Walton, with the reference to the Rural Payments Agency.

By way of background, the single payment scheme was implemented as part of the 2003 reforms to the common agricultural policy, as the hon. Gentleman pointed out, which were the biggest reforms for 30 years. There is a consensus in the House that we want to move away from payments for production. We do not want to see those hideous mountains of butter being dumped on developing countries’ markets or those countries then seeking financial support from us. That is not the way to carry on.

We introduced a major reform, but there will be further reforms. Later this year, there will be the common agricultural policy health check, on which the Government have been actively involved in discussions with the Commission and other member states. We are pursuing what we set out in our vision for reform of the common agricultural policy, moving away from subsidies and using public money for public goods.

Our reform was the biggest for 30 years. Administering the scheme is a major operation, with annual payments in England of a total value of £1.5 billion being made to about 110,000 farmers. Under the scheme, farmers have greater freedom to farm to the demands of the market, as subsidies are no longer linked to production, and environmentally friendly farming practices are better acknowledged and rewarded. That is of benefit to industry and public alike. Unlike the Scottish and Welsh decisions, to which the hon. Gentleman referred, which will be linked to historic production, our decisions are area based and will provide the flexibility that, in today’s world, is so important in responding to market decisions.

Under the regional model of the scheme that has been adopted in England, all payment entitlements within each of the three English regions will have the same value by 2012. However, Ministers have recognised that it takes time for farmers to adapt their businesses to the new subsidy regime, so the scheme was designed with a period of transition. During the transitional period to 2012, a declining element of a farmer’s payment entitlement will be based on his average subsidy receipts during the single payment system reference period from 2000 to 2002.

Inevitably, there will be some farmers whose production was lower than usual during one of these reference years. The EU rules make certain provisions in that regard. Farmers whose production was adversely affected during the reference period by force majeure or exceptional circumstances could elect to omit the affected years from the calculation of their reference amount. However, the EU rules do not allow affected years to be omitted where the reduced production is the result of a business decision by the farmer.

Unfortunately, Mr. Walton’s circumstances arise from a business decision that he made, for understandable reasons, in 2000 when he elected to allow a third party to grow crops and claim the associated subsidy payment on his land. That had the consequence of reducing the value of his entitlements under the single payment scheme. I understand and sympathise with the difficulties that Mr. Walton now faces as a result of earlier decisions, but the Rural Payments Agency applies EU provisions as flexibly as it can and is unable to operate outside those rules.

Farmers who disagree with an RPA decision on the SPS have the opportunity to challenge it via the appeals process, which includes the referral of cases to an independent appeals panel whose members come from the industry rather than Government. A claimant has the opportunity to present his case directly to the panel, which then examines all the facts of the case to see whether the RPA has correctly applied the legislation and its published scheme rules in the circumstances. I am sure that the hon. Gentleman will understand that the panel cannot make recommendations outside the regulations.

The hon. Gentleman has made a reasonable request on his constituent’s behalf. He referred to the regulations and asked whether there is scope to consider flexibility within them. It is not often that an hon. Member brings such a case to the Floor of the House. The hon. Gentleman clearly feels that there is a case to answer and he has made his case very reasonably. I agree to his request and undertake to ask officials in my Department and in the RPA to look through the case bearing in mind what he has said, the regulations and their scope. Officials will be able to see from the record what he has said and which issues he has raised, and I shall ask them to cross-check those matters with his constituent’s claim.

The hon. Gentleman discussed the RPA; let me discuss the wider issues. My first speech in this House after being appointed by the Prime Minister last June was a response to the inquiry of the Select Committee on Environment, Food and Rural Affairs into the SPS and the RPA. You can imagine, Madam Deputy Speaker, how I spent the weekend before that Monday debate. I repeat what I said then: we did not, by any stretch of the imagination, get the system up and running correctly. The Government have been severely criticised about that, and we have accepted that criticism. It is now our job to ensure that the RPA provides a better service, and it is recovering. Farmers have the right to expect an agency that is committed to delivering.

Before the Minister moves on, I want to put on the record my thanks to him for agreeing to my request. I hope that something positive might result from that.

I do not want to build up false hopes. The hon. Gentleman said that his constituent is a popular man; if we can get some responses for his constituent, the hon. Gentleman will be an even more popular Member of Parliament than I am sure he already is. My colleagues in the Labour party will, no doubt, send me letters from his constituency after reading those comments.

We want to ensure that the agency recovers, and we believe that it is recovering. A number of steps have already been taken to improve the level of service that the RPA can provide. The RPA has taken measures to reduce the proportion of its staff who are on short-term contracts—a situation that has been criticised by the Select Committee and the Audit Commission. That is an important and necessary step to stabilising the work force. Together with a comprehensive programme of staff training, it is part of the long-term strategy to deliver improvements in the quality of service provided by the RPA.

IT systems have been enhanced to make it easier for one member of staff to deal with a farmer’s entire claim. It became clear, over a weekend, that too many staff were dealing with one particular farmer. We have changed that system and there are significant improvements under the leadership of Mr. Cooper. There have been some encouraging signs of progress.

The Rural Payments Agency met the first of its targets for SPS 2007 payments, to make 75 per cent. of full payments by value by the end of March, some five weeks ahead of schedule, and figures published today show that 90.5 per cent. of the fund—£1.312 billion— has been paid to more than 99,000 customers. That means that the RPA has met its second target of making 90 per cent. of full payments by value by the end of May. The agency is working hard on completing the processing of the outstanding claims as soon as possible.

Although improvements have been made, we all recognise that we cannot and must not stop there. Ministers are committed to working with the agency to ensure that the scheme delivers and continues to improve for the future and, most importantly, for the customers that it serves—England’s farmers. I am grateful to the hon. Gentleman for bringing this case to the Floor of the House, and I undertake to accede to his request to have another look to ensure that everything that could possibly have been considered was considered at the time. I will then write to him.

Question put and agreed to.

Adjourned accordingly at nine minutes to Four o’clock.