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The Rural Payments Agency has made good progress, but still has more to do to resolve all the problems it experienced in administering the 2005 EU single payment scheme to farmers in England, according to a report by the National Audit Office. It succeeded in meeting the June 2007 deadline for paying claims under the 2006 scheme. However, the Agency has not yet made up the difference to all those claimants who were paid too little in the first year, nor recovered the sums from those farmers who were paid too much.

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In the first year of the scheme (the 2005 scheme), the Agency had experienced considerable difficulties in capturing and processing the information about farmers’ land areas and failed to meet its own target dates and EU June deadline for making payments to farmers. Financial hardship was the result for a significant minority of farmers and the Chief Executive of the Agency at the time was removed from post.

The Agency made a commitment to pay farmers who had received partial payments or who were yet to receive any payment under the 2005 scheme by the end of 2006 and to implement its recovery plan by April 2008. In the event, the backlog of outstanding payments for the 2005 scheme was almost wholly cleared by December 2006.

Today’s progress report by the NAO recognises the clearer sense of direction and drive that the management team has brought to the organisation. The Agency has also undertaken a substantial exercise to identify overpayment and underpayment errors in calculating entitlements for the 2005 scheme.

The Agency found errors in the original calculations of farmers’ entitlements to money for the 2005 scheme in a substantial number of some 34,500 cases it identified as at risk. The overpayments made in the 2005 scheme, which the NAO estimated at up to £6.8 million, have largely been repeated in the 2006 scheme payments. Together with the estimated underpayments of £19.3 million, the risk of the EU imposing a disallowance penalty remains; and the Department for Environment, Food and Rural Affairs has consequently increased its provision for such an event from £139 million in 2005-06 to £292 million in 2006-07.

The Agency managed to process 98 per cent by value of payments for the 2006 scheme by the end of June 2007. But farmers in Wales, Scotland and Northern Ireland, like those in Finland and Germany, continue to receive their payments earlier than farmers in England. Our survey of farmers found that 61 per cent of respondents were satisfied with the Agency’s handling of the scheme this year, compared to 39 per cent last year. Eighty per cent of farmers believe their entitlement statements were correct though some continue to question the accuracy of the data used to calculate their entitlements.

The NAO notes that the Agency has developed a detailed recovery plan to deliver improvements – but warns that implementing the necessary changes to business processes and the enhancements to computer systems needed to support them remains challenging. The Agency’s current plans include the flexibility to accommodate known amendments to the scheme required by the European Commission. However,there is little room for manoeuvre in case of any significant unforeseen events such as additional policy changes to the scheme by the EU.

"Since my report over a year ago on the implementation of the Single Payment Scheme, the Rural Payments Agency has made encouraging progress in remedying the problems I highlighted, as demonstrated by an increase in farmers’ satisfaction with the handling of their claims.

"But, until the Agency is in the position consistently to meet the June deadline each year and can process payments within an acceptable tolerance of error, the risk is that farmers’ confidence in the scheme will wane and the European Commission will levy financial penalties."

Head of the National Audit Office Sir John Bourn

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