Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 280-299)



  280. Yes, if you would. That is very different from what you told Mr Steinberg when he asked the same question, whichever of you answered it. It is important when we ask questions that we get accurate answers. I am quite happy for you to write to me on that and on the other two—
  (Mr Bender) We will write in. I apologise if between us we misled. We will write with crystal clarity. The prosecution agreed to accept defence pleas to leave the offences on the file, therefore it did involve an element of plea bargaining, that is our understanding. We will be crystal clear in what we tell the Committee in writing afterwards.[18]

  281. So a deal was done.
  (Mr Bender) It looks as though that is the case.

  282. I just want it clarified. It is better to sort it out now. Secondly, on a completely different point just raised by Mr Trickett, the question of the police not prosecuting and leaving it to you to prosecute. I got the impression there is a certain bemusement on your part rather than amusement that they had not themselves taken the lead in the prosecution and had left it to you. I think it was you, Mr MacKinnon, who said you had come across several cases where they had not taken the lead in prosecution. In this case he was found guilty or was it—
  (Mr MacKinnon) Pleaded guilty, yes.

  283. In the other cases, do you remember whether there were many of those where subsequently, despite the police refusing to press the case, a guilty verdict was achieved?
  (Mr MacKinnon) No, my recollections are not of the detail and they go back over a number of years. Indeed, I would probably have some difficulty in locating cases.

  284. I see.
  (Mr MacKinnon) The police in this case, of course, although they were not prosecuting, they were aware from our investigators that we would intend to prosecute. They were not exactly washing their hands of it, they were aware that the prosecution would go ahead led by the Intervention Board.

  285. Okay. Jumping again to what you, Mr Bender, said earlier about the loss being to the Exchequer, which obviously it had to be because it was a system failure and therefore UK Government's responsibility, what was the total loss to the Exchequer?
  (Mr Bender) The department wrote off £111,000 and that covered the unrecovered sums of £80,000 under the Arable Area Scheme and interest and the then Intervention Board wrote off £11,000 under the Fibre Flax Subsidy.

  286. I see. Nobody in the department has been held responsible for the fact that situation arose?
  (Mr Bender) I would stand by the answer I gave earlier that this was an issue relating to the systems we were operating and, therefore, the Accounting Officer is accountable for it.

  287. That would have been your predecessor?
  (Mr Bender) Yes.

  288. Okay. Finally, following on a point raised by Mr Bacon, why, coming here today, knowing you were going to face a wide range of questioning, were you apparently unaware of the recommendations which Mr Bacon referred to from our previous report and not briefed on whether they had been implemented or not?
  (Mr Bender) Why is a very difficult question to answer, Mr Williams. I had thought I was briefed on the previous recommendations of the Committee. The one that I clearly was not adequately prepared for was the point, I forget whether it was Mr Bacon or another Member of the Committee, brought up about learning from other departments, and I apologise for the fact we were not prepared on that. Clearly it is something we should have already followed up and certainly will do so in the light of this hearing.

  289. As you will appreciate, it is important to us that the Accounting Officer takes on that responsibility otherwise we have to, with the NAO, assume responsibility for swooping constantly across Whitehall.
  (Mr Bender) I notice that one Member of the Committee ticked off the NAO for not doing this but I accept that the NAO should not be required to do it. They should audit whether we do it. I accept that it is the department's responsibility and I apologise for the fact that we did not do that, but I accept the responsibility.

  290. I just wanted to clarify that position. Can I make an observation and ask for a comment and ask the NAO something quickly. I have seen the figures which have arisen here and, again, Mr Steinberg in a way got half way to where I am going when he referred to the problems that he had outlined with the counting of the sheep in the field and the problem when the sheep moved and so on, their non-cooperation in not standing still while the counting was taking place. In view of the scale of the problems we have had here with fields, which are relatively static on most farms, although not in the case of this particular farm, although you might have got him under the fisheries legislation as well by the sounds of it, does this presage a rather perhaps stormy attendance here in relation to the compensation under the foot and mouth scheme?
  (Mr Bender) I think it would be unwise of me to prejudge the findings of the National Audit Office, who are presently doing a value for money study. Given the scale of the foot and mouth disease crisis I do not expect a comfortable hearing later this year although, as my Secretary of State has said on a number of occasions and her predecessor said, a lot was done very well.

  291. I was going to ask the NAO because I had forgotten whether they were or were not planning an audit.
  (Mr Bender) I think they are.

  292. It seemed an obvious candidate.
  (Mr Burr) Yes, we are putting a draft report together and the document that has been circulated to the Committee on their summer programme includes the foot and mouth report as one that we have recommended the Committee might wish to take before the summer recess.

  293. About a week or two before your report appears we can expect a pre-emptive statement from the department anticipating everything that is in your as then unpublished report.
  (Mr Burr) We shall see.

  294. I hope we will not and I say that to the department.
  (Mr Bender) I am puzzled by that, I am not conscious that my department has made such statements in the past.

  Mr Williams: It is not an unknown practice in Whitehall. I would be delighted if your department had not done anything like that and does not make its first venture into that field on this occasion. Thank you very much.


  295. Thank you very much for what has been a very interesting session. I have just a few points to put to you if you can come back with a note. The first is to underline the fact that we would like to see a breakdown of each payment scheme. I think Mr MacKinnon said that there are 50 or 60 such schemes. That is the first point. The amount paid, point two. Point three, the number of claimants/farmers claiming. Point four, the administration costs of each scheme. On all of those four headings the irregularities and frauds connected with them, say over the last ten years, so we can get a feel for the trends of what is going on. 20 I think we would also be interested in the number of days on average per prosecution when it actually comes to trial.
  (Mr Bender) I am sorry to interrupt, Chairman. Do you mean the number of working days required or the number of days past?

  Mr Bacon: From start to finish.
  (Mr Bender) It is the length of time.

  Mr Bacon: Yes.
  (Mr Bender) Forgive me for interrupting.

  296. The total number of prosecutions per investigator I suspect will be very low indeed. Thirdly, the number of successful prosecutions per investigator. 21 Another question from a colleague: under the new regulations the verification is that the processing of the fibre is complete and deliveries of the crop are checked from contractor to processor. Is it possible for a farmer to outsource the fibre flax store or perhaps any flax even from outside the EU, deliver it and have it processed without ever growing it, claim subsidy and grow another crop?
  (Mr Bender) Can we take delivery of that question? 22

  297. Another question from a Member, was Mr Bowden told in advance that the inspector would be visiting his farm to inspect the harvested crop in 1995?
  (Mr MacKinnon) No.

  298. If so was he warned before the barn was set on fire?
  (Mr MacKinnon) Our practice is not to announce the visits beforehand. I cannot actually categorically say there was no warning given in that case. There should not have been and I do not expect there to have been.

  299. Without going into a long lecture about it, you were saying that it was not possible to commit this sort of fraud before the area payment support in 1993. It would be interesting to get a feel of what the cereal support system was before then. It seems to me there is an obvious fraud to claim for two crops on the same field. There seem to be remarkably few successful prosecutions. I want to get a feel of what has been going on historically. Do you want to answer now or give us a note?
  (Mr MacKinnon) The market support arrangement was an institutional target price, a target price within the European Union supported by levies on imports, export refunds on exports and some support buying within the Community so we would buy cereals into intervention. The aid was not delivered at the farm level it was delivered to cereal traders, cereal exporters, those sort of things. It was a very expensive regime because we ended up at various times with very large quantities of cereals in our intervention stores at very high cost. When the target price was cut farmers were compensated for their loss of income through an area aid which began in 1993 and was associated at that time with the new system of control, the IACS system, so that each farm was registered with all the details of its fields and its enterprises.

  Chairman: I think we will leave it there. Can I just outline this point which has already been raised. I think it is a very important point. It is the point about the Twenty-Fifth Report of 1998-1999. It is put there very emphatically. "In 1996-1997 alone the Ministry detected 2,700 irregularities in scheme claims and applied administrative penalties in 820 of these, but between 1993 and 1997 only 25 cases of suspected fraud or serious negligence had been submitted for investigation. Only seven of these led to prosecution, of which six were successful. We recommend that the Ministry review its criteria for prosecution, such as the potential size of judicial penalties, the value of the irregularity and the claimant's past behaviour. This review should take into account the approach of other Government departments such as the Benefits Agency, and the deterrent effect of prosecution on others tempted to abuse the system." There is absolutely no point in us sitting in this room and putting these sort of questions and taking up a lot of your time if we make these recommendations and they just go into some black hole in Whitehall and are forgotten about. I think this is a very serious point indeed. I know you have already apologised for it but I hope others who follow our affairs in other Government departments will take note of this. Thank you very much for coming this afternoon, gentlemen. Thank you for answering our questions. I know that this is a narrow case but I think it has been a very useful exercise and a good exercise to repeat perhaps in the future because we can draw wider conclusions from just one fraudulent case and I think it has brought it home. There have been some interesting points made. Thank you very much.

20 Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex C.

21 Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex A.

22 Note by witness: The situations described are clearly fraudulent and anyone trying this type of subsidy scam would risk being caught and punished. Fibre flax is now an eligible crop under IACS. All land used for growing the crop has to be recorded on the IACS database. It is not possible for a claimant
to grow and claim for two crops on the one area of land. Transport costs of importing flax would reduce any financial incentive to carry out the type of fraud suggested.

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