Minutes of evidence: 3 May 2002
Committee for Agriculture and Rural Development
Friday 3 May 2002
Premia Payments
Members present:
Mr Savage (Deputy Chairperson)
Mr Armstrong
Mr Bradley
Mr Dallat
Mr Douglas
Mr Kane
Mr McHugh
Mr Paisley Jnr
Witnesses:
Ms B Rodgers: Minister of Agriculture and Rural Development
Mr R Jordan: Department of Agriculture and Rural Development
The Deputy Chairperson: Minister, you and your officials are welcome. We have only a short time with you, and we wish to address several matters which the Committee has already discussed. We will keep to a tight time schedule to enable us to make use of you while you are here. I mean that in a nice way.
The Minister of Agriculture & Rural Development (Ms Rodgers): I am pleased to hear that.
I am glad for the opportunity to meet the Committee to address several issues, some of which we will deal with briefly and others that we will discuss at greater length. I am grateful to the Committee for rearranging its order of business to accommodate some of my officials who have to go elsewhere once their business here is complete. With that in mind, and given the formidable agenda that faces us this morning, I will turn immediately to the issue of premia payments.
I welcome the opportunity to review the payment of direct farm subsidies with the Committee. Again, I apologise for not being able to meet the Committee on 18 January when subsidy payments were last on the agenda. I am grateful to you, Chairperson, for bearing with me. In my absence in January, my officials provided the Committee with a detailed report, and there have been monthly updates since then, the latest of which showed the position on 11 April. The updates clearly track the good and steady progress that has been made, and continues to be made, in working through this year's very sizeable payment programme.
The April report indicated that advance payments were significantly completed and that balance payments were scheduled to commence in line with the annual payments profile that I published last October. I am pleased to confirm that balance payments are now under way and will continue until the end of June. That is in line with the published targets and fully meets our obligations under EU rules.
The Committee will be aware that the Department encountered problems at the start of this year's payment period when the EU introduced the requirement that subsidy claims be checked against individual animal details held on the Department's animal and public health information system (APHIS) database. In January Tony McCusker briefed the Committee in detail on those checks and explained that, if they were not carried out, the Department would be criticised by European Commission auditors, and the EU would refuse to meet part of the cost of the subsidy budget, which the UK Exchequer would then have to fund. I am pleased to report that we have been able to protect public funds by fulfilling our obligations under the EU audit rules and by making most payments in line with the targets. The new checking systems are now operating effectively. To ensure that there is no continuation, or repeat, of the earlier problems, the Department is reviewing the cross-checking arrangements and will take action as necessary to ensure that they continue to run smoothly.
Although there was an initial delay in issuing some beef advances when payment started at the end of October, the situation improved progressively during November and December. The majority of claims were made within the published target time or, in a small number of cases, soon afterwards. Since October a total of £123 million has been paid out. Because of the particular difficulties and cash-flow problems faced by farmers this year, I decided to take advantage of the flexibility announced by the European Commission at the end of October to increase the beef advance payment rate from 60% to 80% of the full rate of premium. Therefore, about £12 million has been paid five to six months sooner than would normally be the case.
As it stands, over 98% of beef special premium and suckler cow premium advances have now been paid. There is a similar position on less favoured areas allowances, slaughter premium, arable area payments and ewe premium payments. Claims not yet paid have queries which are being pursued with the farmers concerned. Timely payments remain a top priority, and officials will continue to strive to improve performance on this where possible within the EU rules.
Over the last year the Department has been actively working to streamline the systems and procedures which support the payment process. In the past six months several refinements have been introduced to help speed up the processing once claims have passed the verification checks required by the EU. The benefit of these improvements is evidenced by the fact that advance payments of slaughter premium, balances of sheep annual premium and less favoured area compensatory allowances all issued earlier than the published targets and the timetables achieved in previous years.
This year farmers could opt to have payments made directly to their bank accounts. That method of payment is more secure and convenient for farmers, and the cash is available in their bank accounts three days sooner than it would be by payable order. Over 40% of farmers chose that method of payment, and the Department will encourage others to follow suit.
Text and advice notes have been made easier to understand. This summer farmers will receive for the first time an annual statement of all their subsidy payments to help them reconcile their records. Those are only some examples of the work being undertaken across a wide range of areas to improve the payments system. The Department is trying to reduce the bureaucratic burden on farmers by simplifying claim forms, and this year's integrated administration and control system (IACS) form has been greatly streamlined. It is envisaged that application forms for the slaughter premium scheme will be dispensed with next year. The new appeals procedure and the forthcoming code of practice for farm subsidies are also important steps in improving the transparency of the subsidy system.
I believe that, overall, the existing and planned arrangements for the administration and payment of subsidies are effective and are getting better all the time. The close and positive working relationship that the Department maintains with the farming industry has helped to inform its thinking on shaping the future delivery of subsidies.
The current position on premia payments may be summarised as follows: over 98% of advances of suckler cow premium and beef special premium have been completed; 99% of first and second period, and 86% of third period, applications for slaughter premium have been paid; more than 98% of eligible applicants for the 2002 less favoured areas scheme have been paid; ewe premium payments have almost been completed, with around 98% of advances and 95% of balances paid; and 99% of arable area payments have been completed. The priority now is to complete this year's payment programme. By the time balance payments are completed at the end of June, over 400,000 payments will have been processed and more than £180 million paid out. I am pleased to report that the completion of this sizeable exercise is on schedule.
The Deputy Chairperson: Thank you, Minister. I congratulate your Department on the fact that anyone can see when the payments are being made through the farming papers. That is good; it brings us into line and keeps farmers up to date with regard to their claims.
Mr Kane: Minister, I thank you for your response to my question the other day. Do you accept that the balance of payments now due to producers is a balance on claims submitted in 2001? Do you also accept that there is room for the timescale to be reduced, and payments thereby speeded up? Many producers are concerned about the interdependence of the balance of premia payments and the release of EU funds. Will you comment on that?
Ms Rodgers: The answer to the first part of your question is "Yes, 2001." The timing of the balance payments is designed to enable advance payments to be cleared before balances become due. The EU rules allow until the end of June for 96% of payments to be fully completed, and that timing is taken into account in the Department's payments profile. As I have already said, we have been able to increase the amount we pay in advance from 60% to 80%, and we have taken advantage of that.
Mr Bradley:
I welcome the statement that will be issued to farmers in the summer. That will be beneficial because it is terribly difficult to identify some of the cheques that come in. I cannot point the finger at you on this, but there are cheques for 35p and 40p that drift in at the end. Is there anything we can possibly do to eliminate that? It is hardly worth taking the Land Rover out to go to the bank with some of those.
Ms Rodgers: Not to mention the postage.
Mr Bradley: You touched briefly on the IACS form; its simplicity has improved greatly. I have tabled a written question to you; I do not expect an answer today, but I would like you to take note of it. I have had reports of farmers who have not received their application forms. That could certainly raise issues, because they have been warned that the deadline for their return is 15 May. Some are asking about the Department's deadline for issuing the forms.
Ms Rodgers: I accept that it can look ridiculous to get a small cheque, and we are considering how we can deal with that. We are looking to see if we can do something about that. I hope and presume that those farmers who have not received their application forms have contacted the Department. If there are any cases, you can let us know, and we will have them followed up urgently.
Mr Douglas: I want to acknowledge that there has been an improvement in the payments system. You mentioned advance payments. People submitted applications for arable area payments on 15 May last year; is there any way that part of those payments could be made in advance, if there are questions to be answered? As you know, those in the arable section who have not received the payment have had little other income.
Ms Rodgers: Thank you for your initial remarks. I will ask Mr Jordan to deal with your question.
Mr Jordan: We are bound by the EU provisions concerning the advance payments for the livestock schemes.
Mr Douglas: So you are not allowed to pay anything out until it is completely cleared?
Mr Jordan: Yes, they must be cleared first.
Mr Douglas: So, if there is a problem over one particular area, there is no funding until that is completely cleared; is that right?
Mr Jordan: Yes.
Mr Douglas: That is fine.
Mr Armstrong: I was pleased to hear that you are now able to pay up to 80% of the beef special premium; that is welcome. When would it be possible to have one payment instead of two? Is it possible that in time there could be some ruling that you could -
Ms Rodgers: Make the whole thing in advance?
Mr Armstrong: Provided everything is in order.
Ms Rodgers: The key point is that everything needs to be in order. Mr Jordan will explain the technicalities.
Mr Jordan: The advantage in being able to make advance payments is that every aspect of the claim need not be clear initially, whereas if a single payment is being made, everything must be in order.
The first opportunity for the advance payment approach will come with this autumn's sheep annual premia. The 2002 scheme will involve a single payment being made after 16 October instead of a three-stage payment. The advance payment provision is well advanced. The retention period was during January to April, and any difficulties should be resolved by October. As the beef schemes have different timings, payments can be delayed because of the time needed to deal with claim-related queries.
The provision to make advance payments will help farmers when there are difficulties with their claims. They will receive an advance payment, and problems will be solved by the time the balance becomes due.
Mr Armstrong: APHIS, the new computerised forms, and the new rural network system should provide greater scope for speeding up the process.
Mr Jordan: Yes. An example would be in the slaughter premium scheme, which the Minister mentioned. From next year the Department intends to use the APHIS system to pay farmers directly, without their having to make claims for specific animals. Farmers will have to sign a declaration that they are willing to take part in the scheme, and on that basis the Department will access APHIS, identify animals that have been slaughtered, pay on that basis and issue an appropriate advice notice, which will tell farmers to contact the Department if they have any queries. Farmers will not have to go through the process of identifying animals that they have slaughtered and submitting separate claims.
Ms Rodgers: Farmers will be paid without having to submit applications.
Mr Armstrong: During the pilot scheme for APHIS, I noticed that much more information was available than normal.
Mr Jordan: That is one positive side of APHIS, given the problems there have been over the past few months.
Mr Dallat: The high percentage of claims achieved within the timescales is good news. I am sure that it was achieved with a great deal of time and effort by the Department. The Committee, on behalf of the farming community, would like to express its thanks.
Ms Rodgers: Thank you. Last year, the Department said that it would examine ways of improving the system urgently. My officials have been working very hard, and the results are evidence of that work.
The Deputy Chairperson: The topic of arable aid is causing concern, Minister. Many farmers did not claim for that aid during the time period allowed. However, as farming patterns have changed, can farmers who did not qualify before claim again?
Mr Jordan: I am not familiar with the rules sufficiently to answer that question. I will write to the Committee.
