In September 2007, the Committee reported on the implementation of the Single Payment Scheme by the Department for Environment, Food and Rural Affairs (the Department) and the Rural Payments Agency (the Agency).[1] The Single Payment Scheme replaced previous European Union production-based agricultural subsidy schemes from 2005. The Department had chosen to implement the most complex option for reform in the shortest possible timescale, and the Agency had badly underestimated the scale of the task. This led to delays in making payments to farmers, erroneous payments and additional project and administrative costs.

Following the difficulties with the 2005 Scheme, the Agency identified 34,499 claims (some 32% of the number of claims for the 2006 Scheme year), where further errors might arise unless farmers' entitlements were properly checked. The Agency's review process has taken too long to complete, and a breakdown of the outcome was not available at our hearing. Subsequently, the Agency has estimated that there were £20 million of overpayments for the 2005 Scheme, and £17.4 million for the 2006 Scheme. In August 2006, the Agency had also identified £4.4 million of overpayments in one batch of claims. Where overpayments have been identified, the Agency has taken little action to recover the sums, with the risk that farmers may have unknowingly spent the money in the interim. Of 19 overpayments in excess of £50,000 paid in August 2006, the Agency had started the recovery process with only two of the farmers affected.

Major changes made to the Agency's IT systems have enabled most farmers to receive payments earlier under the 2006 Scheme than for the 2005 Scheme. There has been a substantial impact on the costs of the business change programme to improve the Agency's efficiency, and the total project cost is now likely to exceed £300 million. In mid 2007, staff numbers in the Agency peaked at 4,600 and are not expected to reduce to 3,500 until 2010. The Agency is still not able to offer adequate advice to farmers on the progress of their claim. It was reluctant to specify targets by when such information would be available and when payments would be made under the 2008 Scheme.

On the basis of a further Report by the Comptroller and Auditor General,[2] we took evidence from the Department and the Acting Chief Executive of the Agency on actions taken to rectify errors in payments under the Single Payment Scheme and to develop a more cost-effective service to farmers.