Examination of Witnesses (Questions 1
- 19)
MONDAY 20 MARCH 2000
MR RICHARD
CARDEN, CB, MR
PAUL ELLIOTT
AND MR
PETER WATSON
Chairman
1. This afternoon we are considering the Comptroller
and Auditor General's Report on the Sheep Annual Premium Scheme.
I would like to welcome our principal witness, Mr Richard Carden,
to his first appearance before this Committee. Welcome. This is
a matter of some financial importance but we had not realised
quite what public interest there is in this too, we are being
televised. Could you start by introducing your two colleagues
to us, Mr Carden, and then we can get into the questions.
(Mr Carden) Good afternoon, Chairman.
I think you know I am the Acting Permanent Secretary and, therefore,
the Acting Accounting Officer for MAFF at the moment. On my right
is Mr Paul Elliott, Principal Finance Officer, and on my left,
Mr Peter Watson, who is the Regional Director at our North East
Regional Service Centre based at Northallerton.
2. Okay. Let us go straight into questions.
The report tells us on page one, in fact, that by 1998 the European
Commission disallowed an expenditure of over £27 million
in England in respect of years 1993 to 1995. That is a very high
price for the taxpayer to pay for the Ministry's failure in administration.
What are the lessons the Ministry has learned from this disallowance
and what are you doing to make sure we do not run this risk again?
(Mr Carden) First of all, Chairman, I agree that it
was a significant disallowance which we should take very seriously
and we are very concerned to draw lessons and avoid getting into
a similar state again. The first lesson is, as the Comptroller
and Auditor General's report says, that we must take great care
that we understand the Commission's view of regulations that come
from Brussels when we implement them. More specific lessons in
this case were drawn and acted on quickly. Again the information
is in the report. We moved very rapidly from the two retention
periods that had caused the Commission concern to a single period.
We stepped up our rate of inspections, confining them to the retention
period, which was what the Commission said was necessary in their
view. We made the first of those changes in 1996, we had moved
by 1997 and later years to achieving the ten per cent of inspections
in the retention period that the Commission were looking for.
We have paid constant attention to the quality of records kept
by sheep farmers.
3. Let me pick up those two items. Paragraph
2.18 in the report indicates that the European Commission was
raising concerns about inspection rates and flock records as far
back as 1991 and earlier. Could you perhaps explain to the Committee
why the Department were so slow to act on these issues and, frankly,
took a chance in 1993 to 1995 with conducting inspections outside
the retention period?
(Mr Carden) This case does illustrate that it is not
always a straight-forward matter to interpret Community regulations
or to know how the Commission will interpret them. The regulation
we were applying here contained an option of operating in the
way we were with the two retention periods and inspections, a
proportion of them outside retention periods, on condition that
flock records were continuous. The view that was taken at the
time by the Ministry was that records were sufficient to meet
that condition. The view taken by the Commission was that they
were not. It took quite some time to pursue that difference of
view to a conclusion. When I say "quite some time" it
was a conclusion really only reached in 1995.
4. Okay. Others will probably want to pursue
that. Let me press on. It appears from the NAO's conclusions that
it is reasonable to expect that the Commission will continue to
target the UK and to pursue problems identified from one region
or country to another. Apart from the high level co-operation
statements agreed with administrations in Scotland and Wales,
what exactly are the working arrangements you have for sharing
information on scheme controls with the other two countries?
(Mr Carden) We have arrangements for exchanges of
information at several levels. There are meetings between the
Minister of Agriculture and his fellow Ministers in the other
agricultural departments of the UK. Those meetings are not new
but they are now being held more systematically, about once a
month, since devolution. There are exchanges at senior official
level. At the next level below Permanent Secretary, the heads
of Directorates in MAFF meet with their counterparts and teams
from the other agricultural departments, again about once a month,
to go over the current business; and problems over a scheme of
this kind would come into those discussions. There are discussions
of a more specialised nature at head of division level and there
are groups that bring together the officials from the agricultural
departments scheme by scheme. There is what is called a Project
Board for this Sheep Annual Premium Scheme, which is chaired by
Mr Watson here and which will be meeting in a few weeks' time,
among other things to take stock of the outcome of discussions
here this afternoon.
5. Apparently, pursuing that, you have started
to build on contacts with administrators in other Member States,
outside of the United Kingdom. What are you seeking to achieve
from that? Will it help you compare costs, admin methods, interpretation
of rules, benchmarking of schemes, treatment of farmers? What
are you going to get out of it?
(Mr Carden) Some of all of that, I would hope, Chairman.
We have always found it valuable to exchange notes with colleagues
from other Member States on how they are coming to terms with
central European Union rules. Again, we do that in various ways.
First and most frequently in margins of meetings held in Brussels
where there is usually an opportunity for an informal talk and
exchange of notes and problems. There are committees which exist
to bring together representatives of Member States to discuss
scheme problems and last, but certainly not least, we try when
we can fit it in to send one or two officials from here to other
Member States to look on the ground at how they are applying the
schemes. That can, as regards problems of the sort which occurred
here, perhaps be the most useful but it is time consuming and
expensive. There is probably no substitute for looking in detail
on the ground at how another country is interpreting and applying
EU rules.
6. I would imagine actually that most of our
constituents, and I suspect most of the farmers too, will be quite
surprised to get the impression from this report that we are,
as it were, bottom of the pile in terms of the administration
of these schemes in Europe, i.e. weaker than Spain, Italy and
these other places?
(Mr Carden) Disallowance is not particularly something
the Commission use against us in the United Kingdom. I was looking
at figures for disallowance over the period that we are dealing
with here, in our case with the Sheep Annual Premium Scheme. Only
one Member State in that period 1993 to 1995 suffered no disallowance,
that was Finland. Other Member States suffered disallowance of
varying amounts. The highest percentage disallowance was not on
us but on Portugal, and Italy suffered a higher percentage disallowance
on the Sheep Annual Premium Scheme than we did here. We are not
singled out, in other words.
7. All right. I suspect others will want to
hear a bit more about that at some point. Okay. Paragraphs 3.10
and 3.11 confirm that the quality and content of flock records
remain of importance for animal health and scheme control purposes.
Our experience in the UK with BSE, the export ban and other Member
States' keen interest in our control here leaves no room for error
or complacency. What are you doing to meet the Commission's view
on mandatory flock record formats and identification and tagging
of sheep?
(Mr Carden) We have been issuing to sheep producers
clearer and clearer guidance on the form of records that we need
and the Commission are looking for for the purposes of this scheme.
Most recently at the beginning of this year we have issued a model
form of flock record which would cover all the information needed
and which shows what in our view is the easiest format for that
information to be presented.
8. Okay. Again, I suspect others will come back
on that. Am I right in thinking that France, for example, has
universal tagging of sheep?
(Mr Carden) There is an issue over tagging of sheep
which we and the Commission are in discussion about at the moment.
We have in this country a relatively simple form of marking of
sheep. The Commission appear to think that we need something rather
more complex and that is a current issue between us and the Commission.
9. Again I suspect others will come back on
in reporting of results. What assurances can you give us that
all farmers in England are treated equally and fairly and that
the Commission will be satisfied with our inspectors' work?
(Mr Carden) It is an important issue and this Report
contains several examples in different places of difficult cases
which on the surface might be thought to be inconsistent judgments.
Perhaps we will come back to that but there are reasons why the
inspectors in each of the cases looked at here came to the judgment
they did. Having said that, it is an important concern for us
that inspectors should not be arriving at judgments subjectively
and inconsistently between one part of the country and another
and inconsistently between one producer and another. That is a
point we address by annual guidance to inspectors which we refine
year by year in the light of problems that have come up and points
on which—
10. Do you check the inspectors? Do you have
sample checks?
(Mr Carden) Yes, they are checked on and we involve
the farmers in assessing how operations each year have gone. A
proportion of farmers are given questionnaires to fill in and
are involved in a post mortem at the end of the season on how
the scheme rules have worked out and any issues of inconsistency
that could be picked out in that way.
11. Let us talk about what happens after inspection.
Paragraph 4.11 shows that in 1998, 84 claims were rejected in
their entirety because of errors in the flock records. Yet Figure
15 on page 43 shows that a farmer who claims for more sheep than
he is entitled to may merely have his payment reduced. Why does
the Ministry not apply a system of graduated penalties for cases
of errors in flock records?
(Mr Carden) We have for some years now been treating
faults in flock records very severely. I suggest that that needs
to be seen against the background of the problem at the start
of this story where it was faults in flock records that the Commission
homed in on. We have been having a very hard push to improve the
quality of flock records and the penalties that have been applied
for shortcomings in flock records have been part of that. As you
know Chairman, I am coming fresh to this and I can see a case
for looking now at a graduated system of penalties for shortcomings
in flock records. It is something that has been under examination
and I think we should take further.
12. Okay. Others may come back on that. It does
strike me that you are swinging from penalising the taxpayer to
excessively penalising farmers for relatively minor errors but
others may come back on that. I understand from paragraph 1.4
that your objectives are to administer payments fairly and in
full accordance with European regulations. Have you any ideas
for ways in which you can meet the Commission's requirements and
yet reduce the administrative burden on farmers and cut the red
tape in some sense or is that impossible?
(Mr Carden) I do not think it is impossible. Again,
looking afresh at this, it does strike one that the current rules
on producer groups have caught quite a high number of producers
in problems. That is a part of the system that a number of producers
every year seem to run into difficulty with. Again this is not
a new issue. The Ministry has pushed a number of times with the
Commission for those rules to be changed. They were introduced,
incidentally, for the benefit of the United Kingdom going back
a number of years, but there is now a case for removing them.
That will remove an area of problem. We are giving a fresh push
to that spurred on most recently by the red tape review that the
Minister and farming unions have been running. The report by Mr
Curry on the IACS schemes specifically recommended that we should
have another push with the Commission for change. The Minister
of Agriculture met Commissioner Fischler the other day on simplification
and some of my colleagues will be having a meeting with the Commission
in just two days' time on that point. It is an area where the
rules could be simpler.
Chairman: Let's widen it out and go to Mr Gerry
Steinberg.
Mr Steinberg
13. Thank you, Chairman. Mr Carden, on page
4, figure 1, then later on in figure 2, page 58, it shows a couple
of graphs or a couple of tables and reading the Report I found
the statistics quite incredible, almost unbelievable, to be quite
honest. Can you explain why, for example, the United Kingdom has
such a huge difference in terms of disallowance compared with
Spain when the flock is not much different?
(Mr Carden) The explanation is over the difference
of view that emerged in the early 1990s between us and the Commission
over what was required to control the expenditure under this scheme.
Our receipts under the scheme are larger. We are at the top of
the league in figure 1 for numbers of sheep on which premium was
paid, so there was a large amount of money at issue, and when
the Commission finally reached their verdict on how we had been
operating the scheme and decided that we should forfeit a percentage
of the receipts, it was a large amount of money.
14. So basically what you are saying is that
you interpreted the rules differently?
(Mr Carden) That is right.
15. It seems to me that, for example, if you
add Spain and Greece together you have something like 29 million
sheep with less than £1 million disallowance and we have,
as I say, the 19 million sheep with £87 million disallowance.
You are blaming that on interpretation, are you?
(Mr Carden) I do not disagree that it was a very costly
outcome. It was a difference of interpretation on what the rules
required. The Ministry took the interpretation that it did with
two concerns: to try to spread the 10 per cent of inspections
that are needed over a larger part of year with the aim of both
holding down administrative costs because it is more expensive
if you have the operation bunched in a short period—
16. This is very arrogant on behalf of your
Department, is it not? Spain and Greece are going along and accepting
the recommendations or the guidelines or the rules of the Commission
or the EU and here is the British Government or the British Ministry
of Agriculture saying we will do it our way.
(Mr Carden) The second point on which we differed
from the Commission was the number of retention periods. We adopted
two periods. That is an option in the regulation—
17. You should not be different really.
(Mr Carden)—for the sake of the producers.
18. You should not be different because the
rules are quite clear. If it was not for the fact that Italy,
and that does not surprise me at all, the Italians and ourselves
are the only ones who differ, and they differ on almost about
every single EU regulation, so they are hardly to be trusted in
this situation, I would have thought we would have accepted the
Commission's ruling and not lost the taxpayer £87 million?
(Mr Carden) What we were trying to do was to exercise
an option which had been included in the Community's regulation,
I think at the request of the United Kingdom, to cover the geography
and seasonal pattern of sheep production in this country which
means that farmers with sheep on the hills lamb at several months
difference in time from farmers with sheep on the lowlands. There
is quite a big difference in the rhythm of sheep farming in different
parts of the United Kingdom. That is a particular feature of sheep
farming in this country.
19. I suspect there are a few hills in Spain,
are there not?
(Mr Carden) Yes, there are. I do not know that sheep
live on them in the winter.
Mr Wardle: The rain in Spain stays mainly on
the plain.
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