Select Committee on Environment, Food and Rural Affairs Second Special Report


The Environment, Food and Rural Affairs Committee has agreed to the following Special Report:C

The Committee has received the following memorandum from the Department for Environment, Food and Rural Affairs, constituting the Government's Reply to the Seventh Report from the Committee of the 2000-2001 Session, The Implementation of IACS in the European Union, made to the House on 28 March 2001.

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1.  This reply to the Committee's report is submitted on behalf of the Government by the Department for Environment, Food and Rural Affairs which, following a Government announcement on 8 June 2001, took over responsibility for agriculture and the food industry from the Ministry of Agriculture, Fisheries and Food.

Provisions included in EC legislation are directly applicable in Member States and are not open to interpretation (paragraph 8).

We commend the co­operative working arrangement found in France and Ireland both to MAFF and to representatives of farmers in the UK (paragraph 12).

2. The Department accepts this recommendation and will actively consider with the appropriate farmers' representatives how to develop more pro­active and co­operative arrangements.

We conclude that there is little intentional obfuscation of national practices but we agree with the NFU that the complexity of systems devised initially in Brussels but operated within Member States, particularly where there are federal constitutional arrangements, makes it difficult to gain a comprehensive picture of the realities of implementation. Where suspicions already exist, this can only exacerbate them. We also note that MAFF officials have had no brief to analyse systematically all alternative models. They should do that on a regular basis (paragraph 15).

3. The Department notes these observations. There have been useful exchanges with officials from other Member States on a number of IACS [Integrated Administration and Control System] issues including central databases, remote sensing checks, controls, GIS and area measurement both at meetings of the IACS Experts Group at specialist meetings. Officials have visited a number of Member States including France, Denmark, Sweden and Austria to discuss IACS issues and there have also been exchanges on livestock issues. The new Paying Agency will consider whether a more structured approach to visits and exchange would be beneficial.

We recommend that the UK Government, through the Council of Ministers, press the Commission for the publication of regular, up-to-date reports on the implementation of IACS in individual Member States. We further recommend that the Commission be required to highlight instances of best practice in such reports and to encourage the adoption of such practices throughout the Union, while realising that the central administrative role is a national matter (paragraph 17).

5. The Council of Ministers is actively involved in the implementation of IACS through the twice­yearly Conference of Directors of EU Paying Agencies. These conferences, at which the Commission is represented, provide an opportunity for Member States to exchange information on best practice and to describe the efforts they are making to improve scheme administration.

We welcome the European Commission's initiative to make new agricultural legislation as simple as possible from the outset and look forward to receiving reports on its progress (paragraph 20).

6. The Department will continue to take forward the work on simplification actively. This is of great importance both to the farming industry, as demonstrated by the work of the three Red Tape Working Groups set up in 1999, and to the Department as it moves forward with plan to modernise its implementation of the Common Agricultural Policy through the creation of the new Paying Agency.

Work on the simplification initiative is being taken forward in a Working Group chaired by the Commission. It covers a wide range of issues: codifying and simplifying legislation; harmonising requirements on e.g. deadlines, interest rates, import quotas; a review of reporting requirements; and suggestions for simplifying the various sectoral regimes. Several Member States, including the UK, have put in requests for simplification and the Commission gave an initial response to these at a meeting on 7 June. The Group has also discussed a draft Commission regulation setting the detailed rules for the Small Farmers Scheme, which was agreed by the June Agriculture Council. Work on codifying and simplifying the IACS rules is being taken forward by an Experts Group, which met to look at a draft regulation to replace the current regulation on 20­21 June. Further meetings will be held in September and October with a view to getting the new rules into place by the beginning of next year.

While it is easier to combine inspections of livestock schemes, we believe that the business­based inspection system should also extend to all other schemes under IACS, including arable schemes (paragraph 22).

7. Fully integrated business­based inspection is a long­term objective for the new Paying Agency but, given the nature of agri­businesses in the UKand the need to determine risk factors for both land and livestock schemes, implementation will necessarily be complex. Moving to a business­based approach to the bovine schemes, which is provided for in the new proposal currently under discussion in Brussels, is a first and significant step. The implications of this approach, both for farmers and for Departments, will need to be fully reviewed before it is widened to cover other schemes.

8. The Department is well ahead with the Combined Bovine Risk Analysis (CoBRA) project, which aims to select farms for a combined inspection under all the various beef subsidy schemes and the cattle identification rules, rather than selecting inspections on the basis of each individual scheme. This is in line with what the Commission is proposing.

We recommend that MAFF support the pilot small farmers' scheme and actively consider amendments which would make the scheme more appropriate to the UK with a percentage target (say, 10 per cent) for the number of farmers meeting the criteria. We also recommend that consideration be given to introducing a euro limit, which could vary for each Member State in relation to average subsidies (paragraph 24).

9. The Government has been broadly supportive of the Commission's proposal to introduce a "Small Farmers Scheme", which was agreed by the Agriculture Council in June. However, discussion of the detailed rules has only just begun and Ministers will need to consider the outcome of these discussions, together with the results of the consultation exercise, before deciding whether or not to introduce the scheme. The report records concern that only very few farmers in the UK would meet the eligibility criteria. The Committee may care to note that recent analysis suggests that some 15% of those UK farmers who currently receive payments under those schemes covered by the proposal would be eligible to apply.

We recommend that the UK Government continue to push for improvements to the penalty regime, which make a sanction proportionate to the offence (paragraph 27)

10. In common with other Member States, the Government is pushing for simplification and indeed better proportionality in the application of administrative penalties. However, the Commission which is concerned that proper control is exercised over expenditure on the CAP and sees the penalty regime as an effective disincentive for farmers to make inaccurate claims, is reluctant to soften its impact. While the UK generally supports measures that help to prevent CAP fraud, the Government feels that it would be possible to strike a better balance between fairness and deterrence and will continue to press this view during the discussion on the IACS changes.

We recommend that MAFF press the Commission for clarification on how environmental measures are to be dealt with within the IACS system and ensure that environmental objectives are not undermined by IACS rules (paragraph 28).

11. The IACS system is primarily concerned with controls and the proper enforcement of rules agreed by the Council for agricultural support measures. There is no intrinsic reason why these controls should jeopardise environmental objectives. A range of benefits and safeguards for the environment already exists in the land management practices permitted by the set­aside and extensification rules. MAFF advice on set­aside highlights these environmental advantages and maximises flexibility within the rules. The Commission is fully committed, as is the Council, to the integration of the environmental objectives into the CAP under the Cardiff process: as recently as April 2001, the Council agreed further conclusions driving forward this process of integration. The Government will continue to press for environmental objectives to be kept to the fore during any negotiations to reform the CAP schemes.

12. On the specific issue of the maximum width of field margins that could be included in claims for arable area payments, the Committee is already aware that, following intensive contacts between the Government and the Commission, a satisfactory outcome was achieved that took account of environmental concerns.

We welcome the Government's commitments on influencing European policy made in response to the Haskins report and we expect these principles to be applied to the details of implementation as well as to the formulation of new regulations (paragraph 30).

We recommend that MAFF ensure that the IACS scheme literature and supporting advice system be reviewed in time to implement the 2002 scheme guidance notes, regardless of the development of CAPPA (paragraph 34).

We recommend that MAFF use the data gathered at the time of the submission of IACS forms to access the real cost to farmers of the paperwork involved (paragraph 35).

The current error rate on application forms is unacceptable and must be reduced. As a first step, we recommend that MAFF conduct detailed analysis of not only what errors are commonly made but how and why they are made in order that the results may inform the future design of claims forms (paragraph 36).

We recommend that MAFF conduct a full analysis of the Irish forms with a view to reducing UK IACS forms along similar lines (paragraph 38).

13. These recommendations are noted and accepted in principle. However, while the Department undertakes to review the issues raised by the Committee and to make changes to the 2002 scheme literature where possible, significant change and innovation can only take place as the new Paying Agency implements its IT strategy and working practices. The Department will also consider whether it would be beneficial to adopt some aspects of the shorter Irish IACS forms. However, given the very different structure of farming in the Republic of Ireland and in England, where there are many more large arable farms, some additional complexity is likely to remain. Indeed, it is here that the most immediate benefits of electronic IACS forms, with their built­in front­end intelligence, are likely to be realised.

14. The Committee commented that the high rate of errors in aid claims was unacceptable. The Department accepts the need to bring the error rate down, both by simplifying the IACS rules and through the development of electronic forms and databases by the new Paying Agency. However, it also has to be recognised that the 'obvious error' rules, which allow certain types of mistake in claims to be corrected without penalty, are of benefit to farmers.

We recommend that MAFF develop plans to address the concerns expressed by the IACS and Inspection Working Group as to assisting the understanding of e­forms by the industry and ensuring that Government does not lose sight of the needs of those businesses which cannot embrace e­business (paragraph 40).

15. The Department's objective is to make full use of e­technology as part of the developing strategy for the Paying Agency strategy. Further promotional work will be undertaken to build on the introduction of e­forms for IACS this year.

16. The Paying Agency is developing a strategic architecture for electronic forms in order to establish a common approach to all claim forms. The Agency is looking to use web­form development tools to provide a user­friendly interface that: leads users through the questions in a way that is efficient and easy to understand; which reduces the time taken to complete the forms; and makes them attractive to complete. The aim is to develop an "inclusive" approach to electronic service delivery, supporting and encouraging both those who have access to the Internet and those who do not, so that both communities can share in the benefits of e­commerce. The Agency will, of course, continue to provide facilities for those who are unable or unwilling to access this new technology.

We recommend that MAFF support moves towards a paperless system of claims for support payments (paragraph 41).

17. This recommendation is accepted. The Department agrees that the bovine schemes may provide the initial opportunity for the development of a paperless claims system once the Cattle Tracing System is fully accredited by the European Commission.

We recommend that MAFF establish a permanent external panel on the simplification of IACS forms and guidance and related matters, along similar lines to Scotland (paragraph 42).

18. The Department notes this recommendation and accepts it in principle. As the Committee is aware, there are already informal consultation processes in place for all CAP scheme literature but there is merit in a more structured approach.

Given its name, the degree of integration between the administration and control of different scheme within IACS is far too low and we recommend that MAFF move towards a fully integrated system, either at its own discretion or through initiating changes at European Union level as necessary (paragraph 45).

19. This recommendation is agreed in principle and is one of the objectives for the creation of the new Paying Agency. This provides a unique opportunity for progress but, as acknowledged, some adjustments will also be needed to EU legislation. These are being addressed as part of the simplification process.

It is clear, from the reaction to GIS and to e­forms, that the industry is willing to embrace change and to make it work B if farmers can be persuaded that it is practical and desirable and has some direct benefit to them. Above all, it is vital that any new systems are designed so as to reduce the bureaucratic burden on farmers and administrators and to make the process less complicated, rather than more so. This means that there should be a preference within MAFF for reducing the number of forms, which a farmer has to complete, regardless of whether they are on paper or on line. Moreover, the technology has to work. IACS payments are too important to farmers to risk any mistakes or delay in their delivery. We expect MAFF, in implementing GIS and new computer systems, to show that it has learnt the lessons from failed Government IT projects of the past and has also taken steps to benefit from the experience of those parts of UK Government like the Inland Revenue which have had IT success as well as from other Member States which have already established similar systems (paragraph 47).

20. This recommendation is accepted. The Department is committed to reducing paperwork and is using the strategy suggested by the Committee. All forms are reviewed for need and content at least once every 3 years, often in consultation with industry. All new forms require the approval of Ministers and are trialled with users before being issued.

21. The Department accepts the need to monitor large IT projects, such as the implementation of a Geographic Information System (GIS) carefully and to learn the lessons of both earlier failures and successes.

We will continue to monitor progress on CAPPA and strongly recommend that if at any stage significant problems are identified, MAFF Ministers delay the CAPPA project rather than compromise the high standards required (paragraph 51).

22. The Department is taking a pragmatic approach to ensuring that the high standards of service necessary to make prompt and accurate payments to applicants are not jeopardised during the transition to the new Paying Agency. The transition will continue at a pace which takes account of other pressures on the business and will be guided by the risk management strategy already embedded within the Regional Restructuring Programme. Evidence of this approach can be found in the Quarterly Report on the Programme that was submitted to the Committee on 8 May. The decision has been taken to delay the timetable by six months in order to implement essential work that was not undertaken as a result of the suspension of the NURAD development. In addition, whilst the Department is continuing to drive the programme forward wherever possible, a decision has been taken to delay elements that depend on user input until the staff resources that have been diverted onto Foot and Mouth Disease duties can be recovered. This has required further re­working of the programme timetable and has added a delay of at least 3 months.

We support the establishment of an independent appeals mechanism in England in accordance with the industry's wishes and look forward to examining details of the outcome of the consultation (paragraph 55)

23. The farming industry responded positively to the Department's proposal for a three­stage appeals mechanism for IACS in England. A good deal of detailed work remains to be done but the aim is to work with industry so that the new arrangements can be introduced as soon as possible. A summary of the responses to the consultation exercise is attached at Annex A.

First, MAFF could demonstrate more clearly its recognition of the burdens imposed on farmers by the IACS system and ensure that the impact on the industry of new or amended regulations is fully taken into account during negotiations and implementation. We welcome the progress made in this area with the ongoing simplification process but the difficulty caused by the inadequate notification of changes to the two metre rule shows that such consideration are not firmly embedded in MAFF's current thinking. Second, MAFF should recognise the importance of IACS payments to farmers and aim to pay all but contested claims on the very first day of the payment window. MAFF's current plans to meet this target are reliant on the industry moving to electronic forms. We believe that MAFF should be able to do this even with paper submissions, by planning backwards from that target date. Third and perhaps most importantly in terms of proof of change in attitude, MAFF should recognise that it is too restrictive in its definition of the advice function of its staff (paragraph 57).

24. The Department accepts the need to keep the industry informed of changes to scheme rules. On occasions, as in the period leading up to this year's IACS deadline, when it was imperative to provide farmers with the flexibility on scheme rules that they needed to cope with the impact of flooding and Foot and Mouth Disease (FMD), changes have to be introduced at short notice. Farmers were informed of these changes by letter. However, the Department accepts that in normal circumstances adequate notice of changes should be given.

25. The Department also recognises the importance of IACS payments to farmers. Although this year's processing of claims will be complicated by the changes to scheme rules, and in particular, by the facility for farmers to make adjustments to their claims up until 15 June, the Department will endeavour to make as many payments as possible during the period from the beginning of the payment window on 16 November.

We recommend that MAFF establish plans, within the new arrangements for IACS administration, to be more proactive in its assistance to farmers, always keeping the right side of the European Commission rules on control (paragraph 58).

26. The issue of culture and practice is indeed important and an objective of the new Paying Agency is to develop its business in a way which minimises burdens on applicants. The aim is therefore to develop a culture, which improves the way customers interface with the Agency and provides them with the information they need to make their claims efficiently, so that payments can be made quickly.

27. The issue of advice is a sensitive one. Advice and information needs to be unambiguous so as to ensure the customer can make appropriate claims. However, the Paying Agency must work within the legislation and there will always be cases where applicants will need to take specialised advice on practical issues. The Department does, nonetheless, accept that it is important for guidance to cover the regulatory requirements adequately and that the Government should strive in the European context to seek practical solutions that meet the industry's needs.

No explanation was given as to why three per cent had been chosen as a target reduction for MAFF's efficiency indicators relating to CAP administration; some effort should be made to justify this figure (paragraph 59).

28. During 2000/2001, the Regional Service Centres worked to the targets for CAP administration set out in the bullet points in paragraph 59 of the report. As part of the process of improving their efficiency, they were also set a 3% efficiency target in respect of 3 types of processing cost. These provisional targets were set within the Business Plan for the Regional Services Group for that financial year and were derived from data for earlier financial years With the transition to new regional structures and the creation of the new Paying Agency, the Department now has a Public Service Agreement target for improving value for money, which is "To achieve a reduction of 10% in the unit cost of administering CAP payments by March 2004" ".

We recommend that MAFF undertake a benchmarking exercise between the four paying agencies in the UK which operate similar systems (paragraph 60).

29. The Department keeps in close touch with the Agriculture Departments in the other parts of the UK which operate similar systems of direct payments to farmers. There are regular meetings and exchanges between those involved in the operations of the four paying agencies and these provide opportunities to exchange information on best practice and innovative projects. Further consideration will need to be given as to whether it would be beneficial to undertake a more structured benchmarking exercise on particular aspects of scheme implementation.  

We recommend that MAFF examine the possibility of developing an agreed protocol with farmers' representatives in England on improvements in the quality of service, its delivery and the information provided by MAFF and its agencies to farmers with the emphasis on those matters which are most important to farmers (paragraph 61).

30. The Department is already committed to introducing IACS appeals arrangements for farmers in England.The new Paying Agency is giving serious consideration to how best to interact constructively with the industry and has established an Industry Forum to enable major customer representative groups to input into its development. Once these developments are in place, consideration can be given to whether an agreed protocol with farmers' representatives would offer additional benefits.

We cannot make recommendations aimed a private sector organisations but we hope that farmer's representatives will give positive support to any attempts by MAFF to simplify the system and to change the culture of administration (paragraph 62).  

31. The Government notes the Committee's comments and would welcome support from the industry on its drive to simplify CAP schemes and their administration.

Department for Environment, Food and Rural Affairs
2 August 2001

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