Basic Payment Scheme

Nick Smith Excerpts

Thursday 28th January 2016 Westminster Hall

[Nick Smith (Blaenau Gwent) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Betts. I thank the hon. Member for Wells (James Heappey) for securing the debate, and I also thank colleagues who have intervened and made contributions.

We have just heard a farmer’s deep lament, and the Minister has been pursued across these green fields today by his Back Benchers. The basic payment scheme is a bedrock of our agricultural industry. About 87,000 farmers and businesses depend on the payment to balance the books, to ensure workers are paid and to keep the bills from piling up. It is an important income when farm gate prices are low.

The Government wheeled out a new IT system to handle the payments for 2015—a system they were so confident in, it was hailed as a “digital exemplar”. Instead, it is a failed system that has cost the taxpayer millions, threatened us with hundreds of millions in penalty payments for years to come and put the livelihoods of many hard-working families at risk.

I have been talking to farmers since the Rural Payments Agency started making payments last autumn. They are worried and face mounting bills while they wait for money that the RPA refuses to give them a meaningful deadline for. How have the Government responded? They have been telling farmers to take out bank loans for which they will put in a good word—clearly a case of double standards, from a Government who were previously very keen to talk about paying off the credit card. One family farmer, who admitted to me that their bank overdraft was teetering at the edge of its current limit because of the lack of payment, put it like this:

“I believe that through no fault of their own, farmers deserve better.”

That is a powerful and sobering message.

Farmers do not deserve an IT system, designed to give them peace of mind, that stalls in such a spectacular fashion. The latest National Audit Office report was damning about a project that spiralled £60 million over budget; saw four leaders of the flagship system in just 12 months, with too many changes in direction; and saw top management embroiled in deep rifts that put stress on staff and led to childish squabbles and confrontations. The system failed so badly that pen and paper applications had to be introduced at the last minute. When I challenged the Minister at the Dispatch Box on why his Department had not got a grip, he talked up its intervention after the IT failure.

Staff have been working tirelessly since March to get applications finalised. Their Stakhanovite, round-the-clock efforts should be commended, but my question is simple: why did key Ministers not intervene sooner still to make sure that this IT project worked, so that the whole sorry debacle was avoided?

Farmers are paying for these mistakes, but all of us may soon be doing the same if the situation results in penalty payments to the EU. The Financial Times reported this week that Britain is facing £180 million worth of fines a year over failure by the RPA. The Secretary of State told the Select Committee on Environment, Food and Rural Affairs this week that one of DEFRA’s major savings could be to reduce those penalties in future. It intends, as the Secretary of State said, to

“stop paying out money in fines that we could be putting into farms, environmental stewardship and flood defences.”

To test that point, with DEFRA budgets being slashed, does the Minister have an estimate of the amount of disallowance that will be paid as a result of this year’s failings?

In the short term, however, the Department must concentrate on ensuring that farmers get the money that they need as soon as possible. The farmers I have spoken to echo the NFU’s concern that there is a “fog of confusion” about when farmers will now receive their money. When I and colleagues warned the Government that thousands might be left without their basic payment for months, we were confidently told—I have heard this phrase already this afternoon—that the “vast majority” of payments would be made by the end of January. I am sorry to say that unless the Minister has much better news for us this afternoon, the “vast majority” target set by his boss has been missed by some margin.

In recent weeks, I wrote to the RPA chief executive because I was concerned that the target could be a problem. Unfortunately, that concern has proved to be the case. In a letter from the RPA chief executive today, I found out that 61,300 of 87,000 farmers have received this vital payment; £850 million of the allocated total fund of £1.43 billion has been handed out. That means that just under a third of farmers will not have received their payment and that 40% of the money remains unpaid.

Farmers will feel rightly let down by DEFRA Ministers’ hyperbole. This will be a kick in the guts for many. To put it in context, 95% of farmers in last year’s scheme were paid on the first day possible. Will the Minister now put farmers’ minds at rest and say when the target of the “vast majority” of payments will be reached? Can he put a firm figure on what a “vast majority” even is?

The new basic payment scheme IT system has been useless. Consequently, increased payments to Brussels look inevitable. Many farmers have been let down, so who is going to take responsibility for this sorry tale?

--- Later in debate ---

[George Eustice]

Sorry, yes, I meant by the end of the month—I am sorry if I said by the end of March. We will have a final batch, which will take the figure probably above 75%, but it is not certain; that is still being worked on now.

We should highlight the fact that we worked quickly to get the dairy support fund out. It went out earlier than expected in the middle of November to help hard- pressed dairy farmers.

[Nick Smith]

I was just listening to the Minister’s comments. Will he confirm whether he thinks that the “vast majority” is 75% of farmers? Is that the definition he is using?

[George Eustice]

We could agonise over the definition of “vast majority”, but as far as I am concerned, “over 60,000” is a vast number of applications and a vast amount of work has gone into processing them.

We should recognise what has been done on the entry level and higher level stewardship schemes. Again, we had a difficult start because of the paper application process, but 97% of applicants have now had their first instalment and 60% have received their second instalment a month earlier than normal. We have made progress, but there is further to go.

Some people will ask why we cannot just pay and why things are so complicated. As the hon. Member for Ross, Skye and Lochaber said, there is a good reason for that. Under regulations and law, the EU requires certain inspections and verification to be carried out. The truth is that we tried to get the Commission to relax those requirements to enable us to expedite payments this year, but it refused. We cannot make those payments from the EU until those various checks and the validation of claims have been completed.

A number of hon. Members referred to communications. In November, we wrote to around 15,000 farmers whom we anticipated would not be paid by the end of January. The two primary groups are some 4,700 farmers with common land—I will come back to them—and around 9,000 farms that had inspections of one sort or another.

A number of hon. Members mentioned part-payments. We considered this, but we ruled it out and I will explain a couple of reasons why I think that we were right. Scotland has decided to make part-payments. It has 3,500 farmers and, according the latest figures I have seen, around 18% of them had received a part-payment of 70%. Compare that with this country where 70% of farmers have received everything. That is a better position to be in. Had we taken a decision in November at the end of last year to start chopping and changing plans again and messing around to try to get part-payments out, even fewer farmers might have received them, never mind receiving full payment.