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Common Agricultural Policy: Single Farm Payment

Volume 685: debated on Monday 23 October 2006

asked Her Majesty’s Government:

How many farmers are still due their full or partial single farm payment for 2005.

My Lords, I take this further opportunity to apologise on behalf of the Government for the delay in payments to farmers earlier this year. The situation as at 17 October is that 114,037 claimants, which amounted to 97.91 per cent, had received a total of £1.51 billion, which is 99.7 per cent of the total money. That was the money paid in full or partial payments.

Approximately 2,400 claimants have yet to receive a payment. Most of those have claims valued below €1,000—around £680. That figure includes 58 outstanding Priority 1 claimants who are due a payment of over €1,000, including complex cases such as probate, liquidation and business partnership disputes.

My Lords, I thank the Minister for that reply. Does he accept the finding of the National Audit Office report that the delayed English single farm payment system has cost farmers between £18 million and £22 million in interest and arrangement fees on additional bank lending, to say nothing of the human misery and the suicides that have followed? What do the Government intend to do to avoid a 2006 fiasco, when the chief executive’s estimate is that it will take 18 months to two years to get the system up and running properly?

My Lords, the chief executive has said nothing different from what I have said in the House on more than one occasion. We are speaking from the same evidence. That is why we draw the same conclusion, which is to warn people that the 2006 scheme started before May this year when the forms were sent out. The 2007 forms will be signed off within a month or a few weeks’ time. It will be 2008 before substantial changes can be made to the system. In any event, making substantial changes to the system year on year is a recipe for disaster.

I warn farmers and everybody else that the payments year we are entering—the window starts 1 December this year—will be as difficult as the previous year, not least because the first year has an effect on the second year. This year’s difficulties relating to mapping and other issues relating to the 2 million-odd fields in this country on which payments will be made will have a legacy for next year. That is why we are not making any promises about when we will be able to start. We hope to deliver a better system, but hope is not the basis on which I intend to respond to the House.

My Lords, has the position of the former chief executive, Mr Johnston McNeill, who was sacked seven months ago, been resolved? It sticks in the craw of hill farmers, to whom £2,000 is a fortune, when they hear of him still getting £114,000 a year, after being sacked last March.

My Lords, the position of Mr McNeill, who is a civil servant and still on the department’s books, is to be settled by the permanent secretary and the management of the Civil Service. As regards the inquiry, I believe that the Public Accounts Committee will take evidence next Monday from the permanent secretary of the department and the current chief executive on the report that was published last week. Therefore, there is nothing more that I can say about the named individual. Other individuals, including former Ministers and officials, are giving evidence about what has happened.

My Lords, what is the estimate of the number of farmers who may go bankrupt because of this disastrous situation?

My Lords, I cannot give an estimate because I do not have any evidence or figures on that matter. In any event, it would be difficult to tie down farmers’ cash flow to precise cause and effect. We are paying modest interest on delayed payments after 30 June subject to a de minimis. I have no evidence of bankruptcy. Likewise, I have no evidence of suicides, as mentioned by the noble Baroness, Lady Byford, in her first supplementary.

My Lords, did the Minister, like me, hear the noble Baroness, Lady Byford, ascribe suicides to the non-payment of the single farm payment? Does my noble friend have any evidence of that?

My Lords, as I said in answering the previous question, I do not. If there had been such evidence, I am sure that I would have heard about it. I am not saying that people have not 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.

My Lords, the Minister has inherited a difficult situation that is not of his making. None the less, the noble Baroness mentioned the additional interest paid by farmers. Some 11 per cent of farmers have had to extend existing loans, 8 per cent of those through not being paid or operating at a loss. The NAO report says that it was a “high risk project”. Matters were underestimated, and the progress reporting was wholly inadequate. Would it not be better temporarily to adopt the payments system operating in Scotland and Wales, which is based on static historic payments, if farmers are not going to be secure in their payments for the next two years?

My Lords, we cannot do that. The 2006 scheme is already under way. The forms have been sent out. The European Commission has approved the system that we are using. It will also be used in 2007. The noble Lord’s question and the theme that lies behind it—whether we should tear it up and go back to the old historic payments system— is one that I can assure him has been asked in the department.

Nevertheless, we are looking to make the best of this system, which has the potential to be much better than the systems used in the devolved Administrations. However, for various reasons, as highlighted in the National Audit Office report last week, every factor on the risk issues is read, as everyone can see on page 43, with policy changes made late. Eleven schemes into one is good, but under the 11 schemes the money was paid earlier than under the one scheme. However, the potential is a lot greater. I cannot give an assurance on interest payments at the moment, simply because we owe 5,319 farmers top-up payments, and until they are paid we cannot work out the delay in the payments to pay the interest to them.

My Lords, I am sure that the Minister has done everything possible to bring some order out of chaos, but does he realise that the 10 schemes listed in the National Audit Office report could be multiplied by more than 1,000 for people who have suffered stress and loss of revenue? Loss of revenue is one thing, but the loss of trust and confidence, both in the Government and in the department, is considerable. Why cannot the English scheme be delivered in the declared time scale when the Germans, who applied exactly the same scheme, paid on the nail within a matter of weeks from the beginning of their scheme? Is the answer therefore to consider an early partial payment for this year to try to restore some confidence in the Government?

My Lords, I do not have the details for Germany with me, but as I understand it Germany did have problems. A team from the Rural Payments Agency went to Germany in the summer to discuss some of the common difficulties that we had had. Notwithstanding that, I understand that France and the Republic of Ireland are making advance payments.

The point that the noble Lord, Lord Plumb, asked about is under consideration. No decisions have been made. We asked the Rural Payments Agency in July to assess the position on the scenarios for the payment prospects for 2006 and whether there could be partial payments. Partial payments could be illegal under Common Market rules, or they could be legal, depending on the dates when they are paid and the knowledge that they are paid. These matters are being actively considered, and it will not be too long before Ministers can give directions to the RPA on which route to go down. 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.