Basic Payment Scheme

Geoffrey Clifton-Brown Excerpts

Thursday 28th January 2016 Westminster Hall

[James Heappey]

I absolutely agree with my hon. Friend. The issue has caused significant distress. When I reflect on some of the correspondence I have had from farmers in Somerset, I find that their anger subsides very quickly to real worry and concern for their livelihood and those of their families and the people they support through their business. The issue is hugely important.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

My hon. Friend is being very generous with his time. I draw attention to my declaration in the Register of Members’ Financial Interests.

The Rural Payments Agency said that it would make the vast majority of payments by the end of January. Does he agree that we need much better communication to farmers who will not be paid by the end of January, so that they know and can plan for when they might receive payments? Furthermore, does he agree that we need much greater certainty going forward that the RPA will deal with this year’s applications in a much more expeditious way than it did last year’s?

[James Heappey]

I very much agree with my hon. Friend. The term “vast majority” is rather loose, and we will come to that in a second.

There are three key issues in the debate. First, what is the current state of play? How many payments have been made as of today? How many will be made tomorrow—the last banking day of the month? How many payments will therefore be made by the end of January—the line the RPA previously drew in the sand? Secondly, what is the understanding of the Government and the RPA of what has gone wrong this year? How deep has their analysis been? How willing are they to apply the lessons learned to next year’s process? Thirdly, I invite the Minister to assure us, and all the farmers in this country, that these things will not happen again next year or, indeed, at any point in the future.

The difficulty is that there has been a shocking failure of expectation management by the RPA, and that comes down to the agency’s use of the term “vast majority”. When the RPA’s chief executive appeared before the NFU council on 13 October, he implied that about 90% of payments would be made by the end of January—that appeared to be the definition of “vast majority” at the time. However, shortly afterwards, about 17% of farmers were written to and told they would not be paid by the end of January, which indicates that, by default, the vast majority was to be defined as 80% to 85%. As of yesterday, however, only 70% of payments had been made. With one banking day left this month, therefore, we might conclude that 70% is the vast majority. The real problem is that “vast majority” is an awfully hard term to define, although I can say with absolute certainty that the vast majority of farmers agree with what I am saying today.

I hope the Minister will take this opportunity to confirm exactly how many payments have been completed. I hope he can also say with absolute certainty when we will reach the 95% threshold. In the previous year, 95% of payments were completed on the very first day that payments were made—1 December—and 98.5% were completed by 6 February. The year before, 92.3% of payments were completed by 4 December, and 97% were completed by 28 January. The year before that, 91% of payments were completed on 3 December, and 93.5% were completed by 31 December.

Technology is supposed to speed up advances, but in this case it seems to have slipped us into reverse. We need to say as quickly as possible when the remainder of farmers will be paid, and we need to be precise—we can no longer say, “You have an eight or nine-week window in which you will be paid.” People need to know now, with certainty, whether they will be paid in February, March, April, May or June. I hope the Minister agrees that the RPA should have that responsibility for everybody who is left unpaid after tomorrow.

For complex payments—involving, say, common land—we need to make split payments. We need to say that we will make the payment for the home farm now and that everything else can come later. People with complex claims are in real difficulties. Although they might ordinarily expect to be towards the back of the queue, they would still expect to receive their payment around now, and certainly within the next few weeks. This year, however, because of the backlog of more simple payments, they could have to wait much longer, and we must avoid that.

The impact of the delay is very serious. Tomorrow, we across the parliamentary estate will be paid, as will many other people across the country. Next week, standing orders and direct debits will almost certainly come out of our bank accounts to pay our mortgages and whatever other bills we have, and we will be confident that we can meet those bills, because we know what we will be paid tomorrow. Farmers, however, do not have that luxury, and they have not had since they received a letter towards the end of November telling them that the vast majority would be paid at some point in December or January. They expected that to mean that at least 80% to 85% of them, and perhaps even 90%, would be paid, but it appears that only about 70% have been paid in that window.

However, the issue goes further than that. A farmer has told me that he has £12,000 of unpaid invoices on his desk in his farm office. Those invoices are not to big feed suppliers or other big companies, but to small, local companies servicing the agricultural sector. Those companies have been made to wait for their money, because the farmer has not had his basic payment scheme payment. I understand from farmers down at the market in Bridgwater that the value of store lambs this year is depressed because farmers simply do not have the cash in their pockets to go to the market to buy livestock. That is having an impact, too.

There is also the cost of extra credit, as farmers have to go cap in hand—again—to their bank managers to secure an extension to their overdrafts or credit facilities. That comes at a cost, and it is a cost that farmers will bear, not the Government. We must take the impact of the delay seriously. We need to be able to say with absolute certainty when the payments will be made.

If Members will indulge me, I would like to suggest what lessons might be learned. I do not expect the list to be exhaustive—it is based on my reflections on what I have heard and on the wish list of the NFU, the Country Land and Business Association and others who have been in touch. However, I hope the Minister will take note of it. Indeed, I would hope that DEFRA and the RPA have already spotted all these things and more, and that work is already well under way to make sure that the lessons are applied to next year’s scheme.

First, what is being done to increase the capacity of the IT system? It crashed because it became overloaded. We need a guarantee that the system will be able to cope with the pressure placed on it next year when all farmers seek to apply for their payments.

Secondly, what is being done to preserve half-completed applications when connectivity is lost? We in rural areas are well used to trying to make a purchase online and going through that awful experience of seeing the broadband fall over at the crucial moment when we have clicked “Pay”, with the result that we do not know whether we have completed our purchase. Buying something on Amazon takes 10 minutes, but someone could have spent a couple of hours filling in their basic payment scheme application this year. If their broadband then fell over, as it so often does in rural areas, they would have had to go all the way back to square one and start again. It cannot be beyond the wit of man to develop an application system where, every time someone clicks “Next”, the application is saved. In that way, if the connectivity failed, or if the site could not cope with the demand, everything someone did beforehand would be there when they returned to it.

Furthermore, given all the problems this year, why not make sure that the data that have been verified for each farm are automatically carried over into next year’s applications? If the data need to be amended because of a change in a farmer’s circumstances, that is fine. What a wonderful help it would be to farmers, however, to know that data they submitted this year, which have been verified, will already be there waiting for them next year.

What is the reversionary option for those with poor connectivity? I believe that the Department has indicated—the Minister might like to nod if this is the case—that farmers will have the option to choose a paper application next year. If that has not been announced, perhaps it would be prudent to announce it in the near future. Many farmers simply cannot soldier through incredibly poor connectivity—below 1 megabit per second—to go through the online application process. Until we can improve their connectivity, it is unfair to expect them to endure that.

What can be done to improve the mechanism for confirming a successfully completed application? The feedback loop at the end of the online application is not particularly reassuring, and that seems to be a bit of an open goal. I am not particularly talented when it comes to IT, but even I have managed to figure out how to put an auto-reply on my email so that someone who sends me something automatically gets something back. People might quite welcome having something as basic as that as part of the online application process so that they immediately get confirmation that their application has been submitted. Thereafter, they could get progress checks, as happens with many mortgage companies, so that they could see how their application was progressing.

What can be done to better communicate an application’s progress and to provide greater certainty over when payments will be made? This year, we have been able to tell people only that their payments will be made within fairly broad spans of time. If we are going towards an online system, why can we not guarantee that once someone’s application has been made and they have been notified when each check has been gone through, they will immediately get an email saying that the payment will be in their bank account on a specific day?

What if the IT fails again? What is the RPA’s contingency plan for processing paper applications in 2017 more quickly? This year the system fell over and the Government rightly said they would accept paper applications, but the RPA clearly was not immediately capable of setting about the verification of those applications—hence the delay.

What sanction do the Government have in their contracts with those who provide the IT system, should it fall over this year or next year? Equally importantly—many farmers will be keen to hear about this—what is the sanction against the RPA and its senior leadership if it all happens again and there is no improvement in its communication? What is the timeline for scrubbing the payments portal to make sure that all the lessons learned this year will be incorporated into the process, both to improve the applications mechanism and to make sure that the guidance that farmers receive for next year’s application will fully incorporate everything that has been learned? Farmers are only two or three months from the time when they will need to apply.

What are the plans to maintain RPA staffing and resource at current levels until the Government are absolutely certain that the 2016-17 payment process is running smoothly? As I see it, the problem is that at the moment the RPA is fixed on having to make this year’s payments. It makes me very nervous that because of the immediate requirement to make payments now, no one has gone off into a dark room to work out what has gone wrong and what needs to be improved, and to make sure all those things get done before people make their applications for next year. It seems trite to say it, but I think it is important to do so: a mistake is a mistake, but repeating it is incompetence. I hope the RPA is painfully aware of how it will look if the same mistakes happen next year.

That leads me to perhaps the biggest issue in the debate, and the one that I suspect farmers are most nervously awaiting: the Minister’s absolute assurance that he and his Department are 100% confident that what happened is just a teething issue for year one, that all the lessons will be learned and applied, and that next year we will be back to the same success rate for the making of payments at the start of December as in previous years.

There is another area of uncertainty. This year has gone badly. We hope next year will be better, but what of the year after that, if the nation votes in a referendum to leave the European Union? That is causing great uncertainty for farmers, and although I do not necessarily want the debate to descend into that issue, I will quote a comment made in June by the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Penrith and The Border (Rory Stewart):

“It is vital that, whatever happens in the vote on the European Union, the Conservative party—indeed, all parties in this House, I hope—and this country continue to provide deep support for farmers…We must take responsibility ourselves; we must say we believe in the support farmers currently get from Europe, and, whatever happens in the vote, we must continue to provide it”.—[Official Report, 1 June 2015; Vol. 596, c. 431.]

The NFU and farmers generally are rightly nervous about the outcome of the referendum, and I hope that the Minister, who is the Farming Minister, will agree with the Under-Secretary that it is inconceivable that the UK Government would not support agriculture if we were outside the European Union, in the same way that the EU currently supports it.

--- Later in debate ---

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am pleased to serve under your chairmanship, Mr Betts. I apologise to you and to Mr Speaker, because I did not intend to speak in this debate and that is why I have not written a letter asking to catch your eye, but I am delighted to be called. I congratulate my hon. Friend the Member for Wells (James Heappey) not only on securing the debate, which is of critical importance at this particular time, but on his clear and detailed understanding of the whole issue, which was very impressive. I am pleased to be following my good friend, my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham). I, too, would like to talk about farming conditions in Norfolk, because I farm there, but I will limit my speech entirely to my constituents in Gloucestershire.

In common with the constituency of my hon. Friend the Member for Wells, the south-west generally has experienced an extraordinarily wet year. Conditions have been difficult for all farmers in the south-west. Mercifully, as yet, we have not yet suffered the severe flooding that we have suffered in the past, but that does not mean that conditions for farmers have not been extremely difficult.

My hon. Friend and other hon. Members have mentioned the volatility of commodity prices. I am sure that his farmers have things in common with my constituents, and I have a number of dairy farmers who have been clinging on, although I do not think that some of the smaller ones will be able to cling on for too much longer. As a result of volatile, low commodity prices, I think I am correct in saying that farming is at an all-time high of indebtedness. For many farmers that means that cash flow is critically important. In particular, as my hon. Friend the Member for North West Norfolk said, they have tax bills to pay this week, and if they do not pay them by Monday they will start to incur late interest payments, although no such payments are paid to them if their basic farm payment is late. I join others in appealing to the Inland Revenue to be sympathetic. If those farmers who have not yet had their basic payment are late with their tax returns, they should not be charged late interest. That would only be reasonable of the Government.

I cottoned on to the whole business way back in March. I am sorry to remind the Minister of this, but I asked him then if payments would be late this year and he assured me that they would not. What I would like from the debate is a full reply from the Minister as to what my farmers can expect going forward. Others have made detailed points, but we need to ensure that we understand and learn the lessons of the mistakes made this past year.

We all know about the IT systems, but I do not quite see why they have led to some 13,000-odd people not being paid by the end of January—that “vast majority” phrase I used in my intervention on my hon. Friend the Member for Wells. What does the vast majority look like? When can those 13,000-odd farmers expect to be paid?

We then want to move forward and to ensure that the 2015 data of those who put in claims during 2015 are validated, so that they can start with that validated, prepopulated data on the system to make the whole business of the 2016 claim easier. I guess that claim will have to be done by the May deadline this year—it was extended to June last year—and that is not too long hence. We need to ensure that they have as easy a task as possible, and my hon. Friend made a number of really good points about that.

In common with many rural Members in the debate, a problem I have in many areas of my constituency is that they have no or very poor broadband connections. People find it difficult to make their claims. My hon. Friend made some good points about that as well, in particular about when the system drops out in the middle of a claim, so we need to ensure that up to that point it is saved, so that the whole thing does not have to be started again.

I have some questions about the IT system. Please will the Minister give us some realistic, concrete assurances that the IT system will be completed and up and running well before farmers have to start making their claims this year so that we do not repeat the poor start of last year? Is the IT system in-house or is it sent out to IT specialists? If the latter, will the same specialists be used next year and what lessons have they learnt?

We need assurance about 2016 payments because—while I do not want to cast gloom and doom on the industry—I suspect that if commodity prices stay where they are at the moment, conditions will be even more difficult by this time next year. It is therefore really important that farmers have certainty that their 2016 payments will be prompt, because when they speak with their bank managers they want to be able to negotiate a proper cash-flow system. I really hope that when my hon. Friend the Minister replies, he can give us some cast-iron assurances that turn out to be the reality.

--- Later in debate ---

[George Eustice]

I will come to that, but we should remember the experience of 2005. Some hon. Members have said we should learn lessons. Let us remember that in 2005 no one was paid in December, no one was paid in January, no one was paid in February and no one was paid in March. The first farmer to be paid was paid in March. Then, the last Labour Government decided to switch to a part-payment system and got themselves into a complete muddle that took a couple of years to sort out because of all the reconciliation that had to be done afterwards. They found that farmers had received inaccurate payments and it caused all manner of difficulties. For that reason, we should be cautious.

We should realise that, as a number of hon. Members have pointed out, the payment window does not open in May, but closes in May. The next application window opens in March, which is not long to go—five or so weeks. I want staff in the RPA to be working on making sure we get next year’s applications right and through, rather than messing around doing part-payments of this year’s applications.

I want to say what we have done. We have introduced a hardship fund. We have worked closely with groups such as the Farming Community Network that provide a triage process. If a farmer is suffering real hardship and cannot, for example, buy feed for their cattle, they are fast-tracked. In some cases, if we can we speed up an application, we make we sure we get it through as quickly as possible. In other cases when we suspect they will not be paid in a hurry, we have in many cases made part-payments on account cash-flowed by the Treasury—not EU-funded, which would expose us to difficulties, but on account from the Treasury.

[Geoffrey Clifton-Brown]

Will the Minister give way?

[George Eustice]

I will not give way because I want to cover a few more points and leave time for my hon. Friend the Member for Wells.

Some hon. Members have talked about the banks. I have been meeting them regularly and encouraging them to show forbearance to farmers. One reason why we sent a letter last November to those who were not expected to get their payment at the end of January was that they could take it to the banks, which were ready for that.

A number of hon. Members talked about communications. As I said, a letter went out in November and a further letter has gone out to those not receiving payments now, in January. The RPA has held almost weekly meetings with key NFU office holders and regularly attends NFU councils, so I do not accept the allegation that people have been kept in the dark and not informed. What I can understand is the understandable frustration among farmers who have not yet received their payments. That is spilling out in criticism of communication, which is probably a little unfair.

I want to talk about next year. A number of hon. Members asked about lessons. The reality is that we now have all these data on the core system. For next year, farmers will start from the position they left off in this year. We are confident that having done all the difficult work to get those applications on, from here forward it will be far easier. We will offer paper applications to those farmers who want them next year, but we hope that those who were previously online—about 70% up until 2014—will return to being online.

I want quickly to cover the issue of commons, which was raised by a number of hon. Members. We had a legal challenge from a local authority in Minchinhampton. It challenged the very basis on which we used to make payments and it caused huge difficulty for everyone. The issue is not about just having a plan B; the problem is that the methodology that it has now forced on us through its challenge means that it is impossible to pay anyone on a common until we have resolved all those claims. Our biggest difficulty in relation to many of these commons is that the National Trust has a large, complex claim that has always taken a long time to resolve. That has caused us a particular difficulty with common land, but we are recognising that and doing what we can to try to speed things up.

I want to leave a bit of time for my hon. Friend the Member for Wells, but I will answer these questions. My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) asked about the deadline for this year. It will be May; it will go back to the normal time. My hon. Friend the Member for Brecon and Radnorshire (Chris Davies) talked about some of the difficulties that the Welsh Government have experienced with requirements imposed by the EU, particularly in relation to accurate mapping and the difficulties with shade from woodlands. This goes back to my initial point. We are now in an era with an incredibly complex CAP, causing many difficulties.

We have had a very important debate, covering many different issues. We have not got on to the exciting issue of the European Union and the potential impact of the referendum, but we will have much more time to discuss that in the months ahead.