UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 107-iii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE

(RURAL PAYMENTS AGENCY SUB-COMMITTEE)

 

 

THE RURAL PAYMENTS AGENCY

 

 

Monday 15 January 2007

MR JOHNSTON McNEILL

Evidence heard in Private Questions 1108 - 1294

 

 

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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

(Rural Payments Agency Sub-Committee)

on Monday 15 January 2007

Members present

Mr Michael Jack, in the Chair

Mr David Drew

James Duddridge

Lynne Jones

Sir Peter Soulsby

David Taylor

Mr Roger Williams

________________

Witness: Mr Johnston McNeill, former Chief Executive, Rural Payments Agency, gave evidence.

Q1108 Chairman: Can I welcome Mr Johnston McNeill, the former Chief Executive of the Rural Payments Agency, to this final evidence session with the Sub-Committee on the Rural Payments Agency inquiry. Mr McNeill, can I thank you for coming before the Committee. We kept our side of the bargain, which was that we made no publicity, although I think there were odd leaks from sources outside the Committee, but I think by and large we managed to keep the hordes of the media away and we are looking forward very much to talking to you about the events surrounding the single farm payment issue. Can I for the record say that this is an official meeting of the Sub-Committee. Gurney's will record our words and the words will be made public on Wednesday on the Committee's website, and at the conclusion of these proceedings we will be issuing a press release formally announcing that you have been here and the terms upon which whatever you say will be published as part of the evidence of the Committee. I do not think I need necessarily remind you of what has happened but perhaps it is worth refreshing our memories that as a result of the late payment of the single farm payment, as the National Audit Office report attested, farmers lost something like £21 million, the Department of Environment, Food and Rural Affairs went singularly over its budget and has now had to cut back on some of its areas of expenditure, the rural economy was, to say the least, disrupted, a lot of farmers suffered considerable stress as a result of the difficulties with various aspects of the process of applying for their single farm payment and to date, Mr McNeill, you are the man who has borne the entire burden in responsibility terms of what has happened, you lost the confidence of the Secretary of State and you were removed from your post. How do you feel, with the benefit of hindsight, about what happened?

Mr McNeill: Chairman, before I answer that question could I just say that I deeply regret that we in the RPA and I as Chief Executive were not able to make payments to farmers in the targeted timetable and am saddened by the consequences that have flowed from that and the injury to farmers by not having had those payments. I apologise unreservedly for that. Before we start these proceedings, Chairman, I think I should make that clear. The decision was taken by the Permanent Secretary, obviously, in agreement with the Secretary of State, on 15 March that their confidence in me as Chief Executive no longer was sufficient and as a consequence of that I was stood down. We have various expressions to explain what happened, Chairman. One is "stood down", one is that I am "on gardening leave" and the other is, I suppose the most accurate one, that I was suspended. At the time of being stood down by the Permanent Secretary, certainly in the meeting with the Secretary of State, I was thanked for my honesty and frankness in explaining the circumstances to her, and in the meeting with the Permanent Secretary it was noted that I had given 110 per cent over the years since my appointment in 2001, and certainly since 2003 I had given 110 per cent to make this work. As it happened, Chairman, and I am sure we will come to it, at the eleventh hour we realised it was not going to work.

Q1109 Chairman: Why?

Mr McNeill: I think Mark Addison summed up quite fairly the position that he found when he took over as Chief Executive. There were two issues in what has been described as "gumming up". One is that the final stage of the process of making payments is where payments in batches of 100 are assessed using a small part of the software of the RITA system, where they are assessed over six checkpoints until they meet those requirements. A sample of those 100 is assessed. What we were discovering was that if there was a certain level of failures the whole batch was rejected and had to be checked individually. The difficulty was that we had large numbers of batches that were failing that very final check. This came to light about the end of February because we had started making payments, I think, by 20 February, and we started to realise that batches were not going through and I was personally involved, along with Alex Kerr who was the Director of Finance then, and Gill Robinson, who headed up the internal audit and also the RPA's Assurance Working Group, in a detailed analysis, along with, of course, Defra Legal, Sally Lewis and others, in looking at first of all could we bypass those six checks in that we certainly felt some of that work had been done before. There were issues here about statistical analysis, what the real meaning was of these failings, looking at the whole picture, and we engaged in a number of activities to identify was this really of substance and what was the materiality of these failures. We were approaching the stage, where, following a number of analyses or pieces of work that were undertaken, we were coming to the conclusion that we could bypass those checks and in fact that happened. They moved from six to two and now to one with Legal approval, but at the time I was there we were not quite at that stage; we were some days off it, and so I had to report to the Secretary of State on 14 March, I think it was, that those batches would not be through. The second problem with those batches, of those circa 40,000 claims that had cleared level two validation - 30,000-40,000 claims, I cannot remember the exact number - was that a large percentage of those were small claims and so in terms of the target of achieving the bulk (as Mark put it in, generously considering that to be 51 per cent) that was not likely to happen because, and I cannot remember the exact figure, the percentage of the total value of the CAP fund was significantly less than that. Had we even had all those batch payments through, which we felt we would be able to do in a few days, we felt it was going to be unlikely that that would help us achieve the 51 per cent target. The second problem, where the "gumming up" I think really does come into play, was the level two validations. This is where, with the task-based approach which the Committee has heard of on a number of occasions, we were endeavouring to clear various categories of task on claims. We did not have, as think the Committee is now well aware, a claims-based picture as to which tasks related to which claims. We did have management information on the various categories of task and as a consequence we were able to initiate fixes through Accenture in some cases. In other cases, using what my group would call the resolution centre, who were the best experts we had on the scheme and the best experts in understanding how we could process these tasks without suffering disallowance or incurring the wrath of the Commission, what we did was that we had been working at the tasks category by category with a view to getting them resolved and as a consequence more of our payments through. The gumming up occurred, Chairman, because as we cleared tasks in a number of cases they generated yet more tasks. You cleared up an issue relating to land of a certain farmer and the interface with other farmers and you clarified what the ownership issue was. By doing so you may well produce one or even more tasks relating to another issue about another interface and whose land was that and where were the proper interfaces. Were there checks, for example, that had been done against the Rural Land Register, and so in fact at times, despite having diverted pretty much all of the staff we could onto resolving level two tasks, it became quite clear that this was going to be a slower process than we had anticipated. Unlike the old schemes, Chairman, where we would have had good information and previous experience on which to model the profile of performance that we would expect, this being a brand-new scheme, of course, it was extremely difficult and being the first year of this new scheme it was extremely difficult to have perhaps the same level of accuracy in the modelling of what progress we might expect to make. Hence Brian Bender, I believe quite rightly, made the comment in his second visit to meet you that the RPA's ability to assess its performance, including tasks, was not as good as it might have been, I would accept that criticism, mainly because it was a new scheme and it was a new way of working.

Q1110 Chairman: I want to read out a quotation from one of our witnesses, Lord Bach, and seek your reaction to it. When Lord Bach came he said the following: "On Thursday, 9 March, we were given advice that the bulk of payments would be made by the first few days of April, not the end of March but the first few days of April. On the 14th, five days later ... we were told that there was no chance at all of such a thing happening, that the bulk of payments would not be made anywhere near by the end of March and, of course, as you know, they were not. I frankly have to say that I do not think that that was satisfactory from senior civil servants whose job is to tell ministers the truth." That is strong stuff from a former minister. Why do you think he said that? He feels he was led well and truly up the garden path and he uses the term "senior civil servants", implying that there was more than one source of information who imparted this message to him. Who do you think he was talking about and do you agree with what Lord Bach said?

Mr McNeill: I can certainly understand Lord Bach's frustration. I can assure you it was mirrored certainly by the senior civil servants in the team that we had at the Rural Payments Agency. Lord Bach was in regular contact with the RPA Director of Operations who briefed him regularly, I think, towards the latter end of this process.

Q1111 Chairman: For the record, who was that?

Mr McNeill: That was Ian Hewett, who gave evidence to you at the same time as I think Simon Vry was here. Simon has also met with Lord Bach on a number of occasions and reported on progress, usually all with the perspective of systems development and the Change Programme in terms of the delivery of the IT. Ian was providing stats to Lord Bach, as I recollect, and actually pointing to the number of tasks that were outstanding, and I certainly think Lord Bach was aware, as indeed most of us were, of the importance of clearing those level two validations to enable us to move to payment of claims, and so the figures were provided and in actual fact it was those figures that eventually made it clear that we were not going to be able to clear the tasks at a sufficient rate to push ahead.

Q1112 Chairman: Lord Bach quotes 9 March and he quotes, as you do, 14 March. On 9 March he was confident that the payments could be made; by the 14th we are not. What changed between those dates?

Mr McNeill: It is difficult for me; I have not actually seen the reports that went to Lord Bach, whether those reports came from the RPA or from the policy side of Defra who were also kept fully informed of progress.

Q1113 Chairman: Why would you not have seen those reports?

Mr McNeill: I might have seen them at the time, Chairman, but of course I am no longer an employee of Defra and as such my access to records is rather limited. I have been able to access some of my own records but I have not as such got that report.

Q1114 Chairman: The reason I ask that question is to try and establish, as we will do throughout our detailed inquisition on this, who was actually responsible for briefing ministers about what was going on in the project, if you like, in its inception stage and then the reality of the delivery of the payments. Were you the person who told ministers what was going on or were there other channels of communication and information upon which they could draw?

Mr McNeill: General reports on progress in terms of developing the system and our progress towards SPS were produced jointly, from my recollection, in the main by Andy Lebrecht, who was the Director General, and myself. We were joint chairs of the CAP Reform Implementation Board. Often additional or other reports would also go forward, having had the feedback from the CAP Reform Implementation Board meeting which went to the Executive Review Group, which was chaired by Brian Bender, and to ministers on progress. Where it was strictly a matter of reporting operational issues those reports would in the main have flowed directly from the RPA, stating as a matter of fact things like how many tasks would have been outstanding, et cetera. In terms of expectations and this issue of had we raised Lord Bach's expectations, I can only say that in any dealings regarding this programme, which I am sure the Committee is well aware now was a high risk programme from its start in 2001, I was taken on to manage this process, this top-ten, high risk, IT-enabled Change Programme, made all the more risky by the CAP reform with a review in 2003. My recollection is that we made it clear to ministers that this was high risk all the way through this programme. I agree it must sound surprising that within a matter of days we may have moved from a higher level of optimism to having to say, "This is proving to be extremely difficult", at the eleventh hour. I can only say it came as something of a shock to us. We thought, having defined entitlements at the start of February, having started payments on 20 February and shown that the system worked on an end-to-end basis, with the progress we had made on clearing level two validations, our optimism was somewhat raised that we had finally crossed the last fence and were on the home straight, and, as I say, it came as something of a very serious shock to us when we suddenly discovered that there were serious issues arising.

Q1115 Chairman: You were talking about the reporting route up the tree to ministers and you implied that factual information about what was going on went direct from somewhere in the RPA to ministers. I am anxious to understand first of all who was the recipient within Defra of the information from the RPA and why there was this seeming split in the responsibility between what you as the Chief Executive might be saying, I presume to somebody in Defra, and these other channels of communication that were going also to somewhere in Defra. Who was gathering this information together and what was being done with it?

Mr McNeill: As I recollect, Chairman, we circulated the performance information on the operations, how many tasks had been cleared that week, and we had profiles identified which were shared with Lord Bach. I attended numerous meetings, certainly we attended meetings on a weekly basis with Lord Bach, and certainly towards the approach to the target of achieving payments he was also receiving, as I recollect, daily reports, as I have mentioned before, and profiles explaining our anticipated performance. I think those reports were accurate, I think they demonstrated that that we were running into trouble, and we were desperately trying to find some way round the difficulties that we were experiencing. Where it was an operational issue the reports would have flowed from the management information system that we had on the operation side looking at the clearance rate of level two validations, et cetera, and as a consequence of the operational issue that would have flowed straight through to Lord Bach's private office.

Q1116 Chairman: So Lord Bach's private office was the principal point of receiving all of this information?

Mr McNeill: Yes, and they would then, one presumes, make sure that Lord Bach was aware that --- certainly at meetings Lord Bach had the papers with him where he was aware of the reports.

Q1117 Chairman: Did ministers have access to anybody, if you like, who was not part of the process but who understood clearly what you were engaged in, because ministers' private offices are not experts in the way that complex systems operate? They are administrative receiving units for hundreds, if not thousands, of pieces of paper, bits of information, telephone calls, emails and everything else, and they filter things out for ministers. They do not give advice to ministers.

Mr McNeill: As I recollect, Chairman, if the information was for the attention of Lord Bach we sent it to his private office and they would make it available to him. As I say, at the meetings we had with him he had the information in front of him and had obviously studied it in some detail. He was obviously very close to what was going on.

Q1118 Lynne Jones: Did I hear you correctly when you said that the reports "demonstrated we were running into trouble"?

Mr McNeill: The reports clearly demonstrated progress against the various profiles that would enable us to achieve the targets, so towards the end when we started to --- I mean, it was a short period of time when we realised we were not going to get it, so it was not over months, but literally over the timescales that I have been referring to it became very apparent that the system was clogging up but the level two validations had reduced dramatically.

Q1119 Lynne Jones: So I did hear you say that the reports "demonstrated we were running into trouble"?

Mr McNeill: As I recollect, the operational information was clear. It was the same information that we were looking at. We did not hold anything back. We always made sure that the same information went through, and we were concerned about it and we put that on.

Q1120 Lynne Jones: I remember seeing reports and there seemed to be ever more tasks outstanding.

Mr McNeill: Absolutely.

Q1121 Lynne Jones: Is that what you are referring to?

Mr McNeill: Yes.

Q1122 Lynne Jones: And yet you were confident on 9 March and you then had a shock when it was not working. That does not seem logical to me, that the reports demonstrated you were running into trouble and more and more and more tasks, and yet you were shocked between 9 and 14 March when it did not work as you expected.

Mr McNeill: Two things had come together. One was that we had analysed the 30-some thousands of claims, I cannot remember the exact figure, between 30,000 and 40,000 claims, that had cleared level two validation, and we had done a lot of analysis of that. We had discovered that those claims, as I say, represented lower value claims and as a consequence --- had they been at the top end of the claims then we would have made the 51 per cent, but we realised that in fact the system was selecting smaller claims, probably because, if it was a matter of one fail or a pony paddock or whatever, the claim may well have flowed through without a lot of difficulty, whereas a claim involving a substantial number of fails in interfaces with other farmers could attract much more difficulty. We realised then that the way in which the tasks were being generated was producing clear claims which were of relatively small value, or a high percentage were of small value, so we realised that, even though we were getting large volumes of claims through, we were not getting as much into percentages as we wished. The second thing is that there were, as I recollect, a number of fixes and a number of approaches that were being developed which were supposed to clear large batches of claims. It was the case that where we could find a systems approach to clear off a batch of claims as opposed to staff having to call them up one at a time and deal with them, that reduced the workload substantially and you could then have a very dramatic reduction, and that had happened in the past and we had anticipation that some of those would also assist us.

Q1123 Chairman: Can we go back, because, following the line of Lynne Jones's inquiry, I saw some of the reports which I understood to be authored by you in which you were reporting to ministers in the previous September and the months before that about the mounting number of tasks, and I remember seeing in one report a figure of something like 440,000 tasks, and then by September it had gone up to 720,000. I have to say that the thing I found amazing was that there did not seem to be any sense of concern that this mounting tide of tasks was increasing. There was a sense of somehow it would all be all right on the night. What I find difficult to understand is why the growing awareness that you were not going to make it took such a long time to dawn whereas for lay people, - and I put my hand up and say I do not fully understand all the systems that were involved - with the benefit of hindsight and with the benefit of looking at the evidence, the tide of undone work and the inability to monitor the progress of that work seemed to be pointing in the direction of catastrophic failure and yet it was a bit like the king is in his altogether and nobody said anything.

Mr McNeill: The position regarding the number of tasks was the subject of, I would say, probably daily discussion within the RPA, and the operations team, largely based at Northallerton, were working pretty much day and night identifying how we could reduce these tasks. Some tasks could be removed by a simple system fix, in some cases in very large numbers, and often we would run an overnight process and a large number of tasks would have disappeared, with perhaps a corresponding small number of additional tasks being raised, so in actual fact it was not as if these were evenly weighted tasks. For some categories of task, as I say, it was identified that there would be fixes to resolve them, and so the general view from the operations team that was working on this and was very close to it, and their consultants who were working with them, was that this was doable. They were putting forward projections and they were doing projections from optimistic to totally pessimistic, and even at a totally pessimistic level it was still coming forward, certainly to myself as Chief Executive and in papers that we were then sharing with CAPRI and others, that this still should be doable. Then, of course, once we had cleared circa 40,000 tasks and those then were in a position where we felt we would be able to get them processed and through this final glitch of this batch authorisation in a matter of days, that gave us some level of confidence that that was going to work. As I say, on further reflection and as time went on we started to grow increasingly apprehensive that that would be the case.

Q1124 Chairman: Just for the record, when we talk about a level two validation, does that mean that the claim was effectively ready to go to the final point at which the remaining checks would be made before the actual money was paid out?

Mr McNeill: Yes. Once it has cleared level two validation the claim goes through the batch authorisation process. They are put in in batches of 100 and there is a quality assessment. I cannot remember the numbers now. Think it was four perhaps were taken out and checked against six criteria. If they passed then the batch went through. Then the file was sent across to Oregon, our financial system, which has been used to make payments under the previous regime of CAP schemes for some time. That was an upgrade that we put in, I think, some two or three years ago. Then the cheque is issued to the customer or a BACS payment is made, which is more likely to be the case these days.

Q1125 Chairman: In terms of the process that was involved with the checking part after the level two validation, what was the focus of those checks? Was it designed to avoid disallowance as a principal objective, or was it there for other purposes?

Mr McNeill: The checks and issues that were raised were based on the system design which was to make sure we complied with scheme rules and avoided disallowance, so where the system said, "I have got a problem here. There is a task. I just cannot let this go through automatically", then it had to be reviewed, or alternatively that category of task had to be considered by the resolution centre team based at Northallerton where we put as much expertise as we could on the job, and they would say, "We can fix this by an IT fix where we can, say, do another sub-routine and check this out and get those through", or they would issue desk instructions to the staff working in the offices, and say, "We would like you to focus on this task grouping and we would like you to follow these desk instructions and that will enable you" - we believe that they would have tested that and piloted that - "to clear these tasks as quickly as possible, and by that means they would reduce the tasks.

Chairman: Let me ask one thing which seems so fundamental to this whole process. Why did you not have an end-to-end test of this system with real live farmers' data?

Q1126 Mr Drew: Take 20 farmers.

Mr McNeill: This issue, I thought was quite well covered, Chairman, by Accenture in their evidence where they spent some time on it. I think part of the difficulty was that whereas we were able to generate data to put in testing for other parts of the new system, and indeed did do that, the difficulty - and I am not an expert in this area but I read the discussion at the time - was that because this was a new scheme we had not run it, we did not have a set of data from previous experiences that we could put in and properly and effectively test the system until we had run the scheme, so we were in a sort of catch-22 situation. I think Accenture covered that point and that was certainly the advice I was receiving.

Chairman: There are two things that come out of that. I do not think Accenture did cover that terribly well, and maybe it is my lack of understanding of the way that complex systems operate.

Mr Drew: They would only have done that if they were commissioned to do it.

Chairman: Let us have a little quote because we have now had the documentation which lays down what Accenture was supposed to do, but let me just continue my recollection of what Accenture said. They effectively tested each part of the system. They then said that the system was stable, and the impression I gained was that because they had tested individual components of it and all of them worked they then assumed that the whole thing would work. The document that we have seen, which lays down their agreement as to what they should do, is the RPA IT applications agreement, and I quote from it, "The system integration test will concentrate on proving the system requirements and end-to-end business processes, including end-to-end work flow. It will test the whole system and the integration into the other authority work programmes". That says to me they were authorised to do it, but the reality is that they did not appear to do it in a way that you could say, "Here are", as Mr Drew says, "20 real farm applications", because you have made clear that as we were coming towards the end of 2005 you had got level two validated claims which could go onto the system, but for whatever reason nobody decided to have a real evidence run to see if it worked.

David Taylor: They were more than authorised to do it. They were commissioned to do it, they were expected to do it and they were contracted to do it.

Q1127 Chairman: So why did they not do it and why did you not ask for it to be done?

Mr McNeill: I am sorry, Chairman. I can only suggest that I inquire further and respond to you formally. I have not got that information to hand at this moment in time.

Q1128 Chairman: But come to the simple piece of information. You made it very clear in your earlier statements that we were dealing here with a novel process, a complex process, a process where you were learning as you went along, a process where you were heavily reliant on experts telling you about things, and where your reputation was on the line with ministers because you kept assuring them that it would work. If I had been in that position I think I would have wanted to have something to reassure me at some stage before I knew I had to go live for real that it would work. I ask the simple question: why no test?

Mr McNeill: On that specific issue, Chairman, I am sorry, I will have to refresh my mind and come back to you. On the issue of the system working, as Accenture have said, and indeed it is proven by the fact that we issued cheques on 20 February, the system did work.

Q1129 Chairman: But the point is that at one time there was a clear expectation that payments would begin in 2005. Ministers eventually decided that they were going to do that, and Lord Bach, when he came before the Committee, rather told us to go and take a running jump because we had the temerity to suggest it would not happen on time. Effectively the only moment, going back to what you said, that you knew the system was not going to deliver was when the thing gummed up, and that is the bit that none of us can understand, why there was not some kind of evaluatory process with all the six checks and everything else to see if it actually worked before you had to put through the thousands of claims by which time had gone through this level two validation.

Mr McNeill: When I say the system did not work I am not saying the IT solution, RITA, did not work. RITA did work. We were able to define entitlements, part of the RITA solution, and we were able then to make payments, part of the RITA solution, through the batch authorisation process and pass the files in for payment through the separate financial system. The difficulty here was not with RITA not working. When I say "the system", it was the operation that had to be gone through by the business to clear level two validations. The system said, "I have all these issues I am not happy with. I cannot pass these because you have built in all these controls that must be complied with for you to avoid disallowance and to process these claims properly, but my difficulty is that these do not make sense to me. There is a problem with them", and therefore it was throwing out large numbers of issues or tasks -----

Q1130 Chairman: But that is so fundamental to a new system, to put some data through it that would have shown that, because the basic message is that when you came to try this thing in February with real live data, because you wanted to make certain it would work, going back to what you said before you said that you thought it would be all right notwithstanding the fact that it was not until February that you actually ran the thing for real, in February it did not do what it said on the tin. Given the fact that you then nailed ministers' colours to the mast of a payments schedule, basically you were stuffed. What I do not understand is why somebody did not try what you did in February a bit earlier.

Mr McNeill: The answer I provided, which was my best understanding at this time, was that we did not have a complete block of data to test the volume going to go through the system until we actually had run the system to that stage. I think that is what Accenture were saying basically. Our previous scheme's data was not going to be suitable for that purpose. We had done testing of that particular piece of work but we did not have a block of actual data from the claims on SPS because this was the first year we had run the scheme and the first time we had run through it.

Q1131 Chairman: Hang on a sec; maybe I am being a bit dim here, but towards the end of December 2005 you must have had a series of farmers' claims, the forms, the maps, where everything had gone past this level two validation, in other words a pile of things where you were saying, "We are basically happy to pay against this", and then they went forward into the system for a series of further processes to validate those claims so that they could then go through to the payment bit, right, so to say you did not have the data does beg the question as to what was going on as you were ticking through the claims in 2005. That is the bit I really do not understand. There must have been a pile of forms somewhere that were okay to proceed to the point at which you paid them. Were there forms in the way I have described?

Mr McNeill: I suppose with the old system we would have had a file with a form in it and the various sheets relating to a claim literally in a file, but I am afraid not. This was an electronic system.

Q1132 Chairman: So what you are saying then is that you did not actually know, because the claims were split up electronically, right? There was one heroic moment where you attempted to bring them all together and in February you had a few checks and then it stopped.

Mr McNeill: Hence the expression "gumming up", yes, Chairman.

Q1133 Chairman: And nobody thought that you could run any kind of test before then?

Mr McNeill: My best recollection at this time, some ten months after I left the RPA, is that the particular element had been tested but the end-to-end testing I was advised was not possible. That is my best recollection.

Q1134 David Taylor: Advised by whom?

Mr McNeill: In discussions with the programme office and the team that were working on it, in the discussions afterwards about why had we not tested this through.

Q1135 David Taylor: Was it an RPA person or an Accenture person?

Mr McNeill: I cannot recollect the details. Obviously, it was an issue of why had we not seen this as the first question you would ask when you find yourself in this situation.

Q1136 Chairman: I appreciate that these are events of a little time ago, but we have been active in this field for the best part of a year now and I think we have got reasonable recall as a committee about what people have said to us about this, so let us go back within the joint memory of, say, the last year. When you were designing this whole process and sitting down with Accenture we have got a paragraph here which says that there was supposed to be an end-to-end test. Did you not have any discussion with Accenture about how they were going to reassure you that the process they were involved in designing and which your own IT people were also involved in was actually going to work?

Mr McNeill: There was a testing regime that was agreed by the RPA Programme Board with Accenture that was put in place. We had quality control checks on that from people such as Karen Jordan, who was close to the testing side of things. We had others, like OGC, looking at the testing regime, and nobody said to me at any time, "This testing regime is not going to work or is unsatisfactory". We knew that the testing regime, as indeed it can always be, could have been better. You could arguably never do enough testing of a system but no-one ever said to me, "This testing regime is faulty. You should review that", or, "You should hold back now or modify it", or whatever. That discussion never took place.

Q1137 Mr Williams: When you were first appointed in 2001 one of your priorities was the Change Programme, the main thrust of which was reduction in staff working in the RPA from, I think, 3,500 to 1,900. How many were actually made redundant? How many posts were lost in the RPA?

Mr McNeill: I am sorry, Chairman, again, I just do not have those figures to hand, but they are easily obtainable from RPA and Defra. That was a part of the Change Programme. Reading through the various transcripts I think it might just be useful to mention that this Change Programme was about producing efficiencies, not by still having people tapping stuff into computers and checking claims but by making this system internet accessed where farmers would make their applications n line. In fact, Chairman, for four years we ran an e-IACS pilot on the applications scheme and Ben Gill, the then President of the NFU, made his application on line, where we were testing out customer perceptions on e-IACS, so we never actually envisaged that we would end up with a system that still had our staff processing claims. The intention was to have a particularly user-friendly system where customers could come on line and could process their claim, a bit like the Inland Revenue, and in fact we spent a lot of time looking at the Inland Revenue system, and that is where we anticipated efficiencies. The efficiencies were not realised because, of course, first of all we had delay with the 2003 CAP reform, which meant that we could not implement the initial programme. Secondly, we had the unfortunate situation where, with the decision that we went for the 2005 scheme, we had to put in a number of manual work-arounds and that is where Accenture said to us, "Right; this is the scope at this moment in time. If you want all this done we are going to have to take more time". The timetable was fixed and after the review in the start of 2005 we were projecting, as you say, Chairman, through to February 2006 as the start of payments, some 12 or 14 months later, and that was the most significant review up to that, but in between those times every time a change request came up or a significant amount of additional work or rework was required to the system because the policy was delayed by, as Accenture have said, almost a year, what happened was that we had to look at the scope of the programme and decide what had to be removed and what, whilst desirable, may not have been essential, and what we could do to strip this down to get it delivered. That also meant manual worker hours which also impacted on the number of staff there. The original vision of this was one of the reasons I did not apply for this job initially. It was after the closing date and I was approached by consultants and asked would I apply for the job. I had considered it and decided that it was very high risk. There were others who were closer, Jane Brown and George Trevelyan, who was Chief Executive of the Intervention Board, who I felt were probably closer to it than I was. I was asked to apply and I took on the job.

Q1138 Chairman: Who asked you to apply?

Mr McNeill: The recruitment consultants. I did not put in an application within the closing date. I was approached and said no, I was not really interested, and they were very persistent in saying, "You should apply for this job". I said, "There are other candidates", and they said, "You should apply for this job". I said that given that I had spent six years in my previous position --- I had hoped to move on after three, Chairman, but you may recollect that the Meat Hygiene Service went through a series of turbulent times with e-coli, BSE, et cetera, et cetera, so I felt I had been there a long time. I took on the job on the basis that I had been there for three years, and then I was asked in 2003 by the then Permanent Secretary, Brian Bender, to stay and finish the job. I have to say I was not that enthusiastic because I felt that I had spent another three years there and we had gone through foot and mouth disease, we had taken on the British Cattle Movement Service, we had achieved a lot and I felt I had done a lot, and actually I thought at that stage perhaps rather than spend another two or three years somebody else would be better to take over, but I was asked to stay and so I did, but the original intention was, and it still is as I understand it, to take this system that we have now, which I think we all accept is chunky, clunky and generally not as good a piece of work as it should be, again because of the sub-optimal decisions we have had to take to get it to deliver on time or, I am afraid, as it turned, not deliver on time, as opposed to our legacy system because it is now in much better shape to still move towards that objective of e-enablement.

Q1139 Mr Williams: When the Single Farm Payment scheme was first considered, were people considering then that people should be able to apply electronically?

Mr McNeill: On the SPS?

Q1140 Mr Williams: Yes.

Mr McNeill: No. There was a note went to Lord Whitty from Brian Bender following discussions at --- I actually came across it recently and it was put to him that we could not possibly take on SPS and continue with the e-enablement programme, with the SPS being internet accessed, et cetera; it was just a bridge too far, and that was de-scoped. I seem to recollect that Lord Whitty was concerned about that because, of course, he had been involved, as I recollect, with this concept that this Change Programme was about savings through e-enablement.

Q1141 Mr Williams: Lord Whitty says that in retrospect he thinks it is probably true that it was not sensible to have reduced the staff by that much. The decision had been made by senior management in the RPA and with Defra at a much earlier stage. As I understand it, even though the e-enablement scheme was jettisoned, the staff continued to be removed from the RPA.

Mr McNeill: Yes. There are a number of points worth noting. One is that we had to take decisions. We have obviously got a business plan, which was agreed with the board and indeed with Cabinet Office and Treasury in terms of it being funded. Ministers had to take decisions as to which offices were to close. A number of options were put to them and they decided on which offices should remain and which offices should go. In some cases we had little choice. Cambridge had to close because it was demolished. It was a PPP/PFI buyout where a new office block was built and there was no longer accommodation for the RPA staff in any event, so it was Hobson's choice for us; that office had to go. There were other offices, such as Crewe. The Regional Development Service had been set up at this stage and RDS wished to take on the experienced staff that we had at Crewe, which, after all, from a trade union perspective, our perspective and indeed a public purse perspective made eminent sense rather than making them redundant. There were job opportunities here and so those staff were transferred to RDS and Crewe disappeared. We did shut other offices because we also had to make decisions fairly early on in this process and that was where the investment in infrastructure was to be made because we had to put in new pipes, new computers, we had new Sun systems delivered into Reading, and we had to decide where that very substantial cost was going to be made, and so for a relatively small number of staff in Nottingham it was clear that that decision for the short term was perhaps not such a wise one. The other fact is that we had, in consultation with the unions, made it clear that staff were going to be potentially redundant, and indeed had indicated which offices were going to be closed, and obviously staff started to make plans. I can only assure you that Hugh MacKinnon and my Director of Human Resources went to Nottingham and we actually asked him to stay for a short time longer, some months, and, in the words of Hugh MacKinnon, whom I spoke to recently, he felt he was lucky to get away without being lynched in that a number of staff there had made their plans and had decided to move on, quite rightly. It was not as if staff were desperate to stay on. Having had the situation put to them and having decided to take an early retirement package they wanted to leave. The other important fact in this is that in the meanwhile we had taken on the British Cattle Movement Service. We had 450-plus staff based there. We had a call centre, we had experienced staff that we could divert to this work. We had them hooked into our infrastructure because they were going to be part of the RPA. We asked to take over the British Cattle Movement Service, Chairman, because we had gone through, and I think Brian Bender touched on it but he may not recollect, serious reputational damage at the RPA because of the very high - and I am talking hundreds of thousands - number of anomalies that existed on the British Cattle Movement Service database. Before April 2003, I think it was, the British Cattle Movement Service was the responsibility of a grade 3 within the core department. We were very concerned that every time we went to cross-check bovine claims against that particular database we were running into serious problems where we could not make payments because the animals were not there or they did not know where they were or whatever. It is a well documented piece of work. We therefore took the view that rather than spend large sums of money piping up offices where we had staff that quite rightly had made plans to move on, we would be much better making that investment into the British Cattle Movement Service and we would be much better preparing those staff to work with us, and now we have in my time a virtual call centre where we can seat 350 staff on telephones to deal with any crisis that might arise, avian 'flu or whatever. We have staff there who are multi-skilled who can assist us in scheme management. The big skill they have, of course, is that they are well used to talking to farmers, and if I am perfectly frank, Chairman, that is about the best skill that the staff in the offices we closed had, because they were used to a claims-based way of working which was completely different from the task-based way of working that we put in. They certainly had a skill in dealing with customers and that was I think the biggest attribute they could have brought to us. The BCMS I think has proved to be an exceptionally good merger. The other thing about the scheme is that we have moved from a raft of schemes, I think it was nine agricultural schemes, spread out throughout the year which kept staff busy all of the year, into one scheme. This creates a massive cyclic issue in terms of staff planning and that was the other reason we wanted to make the investment in BCMS, because BCMS can back off from their own core work to assist us during peak times and then move back into it, and from a longer term savings efficiency point of view it made sense to do that.

Q1142 Mr Williams: But having decided to go from an electronic scheme, although not implement an electronic scheme, to a task-based scheme, what assessment did you or the RPA make of the capacity of the staff that you had there to complete the task?

Mr McNeill: The decision to go task-based was made in 1999 following the PwC report. It was made two years before I came on the scene. It was never up for decision; that decision had been taken. No-one ever said it was not possible. It was something that I never even raised because I was handed a case saying, "This is what has to be put in. Do it", so in terms of the work I never actually got to see what assessment had been done about the ability of staff to transfer from a claims-based to a task-based scheme. I have to say, as you, Chairman, and others round the table have noted, our staff are totally dedicated. They were working double shifts on this piece of work night and day, at weekends, and I can only give them full credit. I do not think they would have had any problem in taking up a task-based scheme. My point is that for those offices that we said would close they had certain skills but they did not have the experience of task-based. They would have had to retrain. Interestingly, when we went to see the Passport Office as a lessons learned experience the RPA team was told that where staff had stayed working and had worked previously for the old paper-based approach to issuing passports many had found it extremely difficult to work simply on the screen and deal with things on that basis, whereas new people coming in did not have constantly to think about the old system or were not constantly deflected by the old system, and that was, I think, a fair comment.

Q1143 Mr Williams: So you are implementing a task-based scheme but it must have been clear to you that good customer relationships with the farmers was essential if the new scheme was going to proceed, and yet you seemingly lost the staff that could address both those issues.

Mr McNeill: Yes. On reflection I ask myself why that did not cross my mind. I had had little experience of working with CAP scheme management prior to that, but I remember that we spent a lot of time going round the offices talking to staff. I remember sitting listening to one of the operatives at a very early stage talking to a farmer, and, to be perfectly frank, it was an excellent service. It is the old bank manager in your local bank type of relationship able to sit down and almost on a one-to-one name basis, and I do not mean that inappropriately, and it really was excellent. However, as I say, our decision had been made. It did cross my mind, "This is going to be a hell of a cultural shock to customers to move to this new way of working", but then, of course, we were not looking at that relationship continuing with people on a task base. We were looking at internet access. We had the statistics which showed that a very large percentage of farmers, particularly after foot and mouth disease, had internet access. They had used it effectively during the FMD crisis to communicate and lots of them had computers and internet access because they have got children and families use them, and we had all those statistics. What we were aiming for in this e-enablement programme was that they would not be phoning us as such; they would be going on the internet and the system would tell them where things were wrong.

Q1144 Chairman: Who was the author of the Change Programme?

Mr McNeill: As I recollect, the initial authors of the Change Programme were PricewaterhouseCoopers.

Q1145 Chairman: So they would have been the ones to have made the recommendation to the Permanent Secretary?

Mr McNeill: I was not about, Chairman, but there was a board set up, was it the R2K Restructuring Board? I think Jane Brown, in her role as the Head of Regional Service Centres, chaired that, and indeed it was Jane I spoke to at the time of the advertisement for the job, and she had indicated that she was interested. I think at that time she was chairing that board, yes, and then a paper would have gone from the board, I would imagine, to the Permanent Secretary and senior Defra colleagues and then to ministers.

Q1146 Lynne Jones: Can I just come in on this business? I can understand what you are saying about farmers having been used to this cosy one-to-one relationship, but there would not have been a problem had there not been so many problems. We have had evidence from the Central Association of Agricultural Valuers and farmers about their frustrations at not being able to get answers about the whole mapping exercise. They would go through several bits of correspondence, maps being faxed out, they would get it nearly all right and then all of a sudden it would all unravel again.

Mr McNeill: Yes.

Q1147 Lynne Jones: The farmers were basically tearing their hair out about this. Surely you must have been aware that this was going on and that there was nobody who knew what was going on with any individual claim. We are talking about, going back, a process between 2003/2004 up to the point when you decided to outsource that particular exercise. Did you not think, "Is there something wrong with this system in that we have not got anybody who really knows what is going on and is this task-based approach the right approach?"? Did you ever query who had made the decision and whether it was the right decision?

Mr McNeill: A part of the vision was that we would deal with customers through a customer service centre.

Q1148 Lynne Jones: But nobody knew the answers, nobody knew what was going on to be able to deal with the customers.

Mr McNeill: I accept that. We launched the customer service centre on 14 February, and I was there and I spent pretty much three or four days a week there for the next five or six weeks, where we realised we were running into serious problems. The difficulty was that the customer service centre was based in Newcastle and I have to say that there was a resistance on the part of some staff in Newcastle, in fact a number of staff in Newcastle, to take up the posts in the customer service centre which we had not anticipated.

Q1149 Lynne Jones: It is not surprising if you have to deal with a load of justifiably angry farmers.

Mr McNeill: I accept that point, but part of it was a cultural thing. There were a number of customer service centres in Newcastle and they were not seen as particularly high quality jobs, and of course there has been a trend over some time now where customer service centres are outsourced to India or wherever, and I think there was concern on the part of our staff that this was going to be a retrograde step in terms of their future, so we had some difficulty getting staff in Newcastle where the customer service centre was based as part of our organisational design. That was problem number one, so we had to man the customer service centre with a number of temporary staff under the supervision of those staff that we could get to supervise it. In addition we brought expertise from the British Cattle Movement Service in Workington, which is not that far away from Newcastle, and we had them work with the customer service centre. The other thing was that the initial vision was for, I think, a 100-seat customer service centre which went nowhere near what we required to meet our customer base.

Q1150 Lynne Jones: I think we understand what the original vision was, and you said somebody had made the decision to go down this route and therefore you inherited it, but it was quite clear it was not working. It was a bizarre situation where you had nearly 4,000 staff to pay out 120,000 claims, which was only about 20-30 claims per member of staff which could have allowed a cosy one-to-one relationship. Did you not at some point say to yourself that there was something going wrong with the system and was that decision to go down the task-based route the right one? Did you feel that you had not got the power to change anything?

Mr McNeill: The 4,000 staff are not just based on this, they are paying out other claims. There are trader schemes, et cetera, in Newcastle, 300 or 400 staff there. There is the BCMS, 400 or 500 staff there. There is an inspectorate of 450 staff, et cetera. They are not involved in claims. I think it has been identified by everyone that the whole CAP procedures are complex and time-consuming if you are to avoid disallowance and SPS, which was supposed to be a simplification, has proved to be - I think it has been quoted by a number of people - one of the most complex that we have ever had to deal with.

Q1151 Lynne Jones: Did you ever query your inherited system?

Mr McNeill: Not the Customer Service Centre. What we did do was enable it to be expanded quickly using the facilities at the British Cattle Movement Services Centre.

Q1152 Lynne Jones: Not so much the Customer Service Centre but the inability of those operatives to actually have access to the information that their customers needed.

Mr McNeill: Yes. The difficulty with the Customer Service Centre was people were working off a question and answer brief on the screens in front of them, you asked a question and they tried to find a match on the screen, they were not scheme experts. Indeed, how could they be scheme experts or, indeed, how could that Q&A be comprehensive when this was a brand new scheme. Policy detail on it was not clear until the end of 2004 quoted by Accenture as a matter of fact, a matter of record, if you look at ministerial announcements. The fact of the matter is it was very difficult to get a Q&A brief because it was the first year of the scheme and there were new customers we had never dealt with before, some 40,000 of them, and existing customers who were very keen to talk to us about new land and other issues and, indeed, about the scheme. We developed a Q&A working with policy colleagues but the trouble was that farming is a complex business, every farmer has perhaps a different mix, different questions, novel issues that they want to raise and then we had to escalate those to policy advisers and, indeed, in some cases to lawyers for advice. It really was quite difficult. Particularly in the first year we knew it was going to be very, very painful and, indeed, we were very worried about out customers. We had statistics about the numbers of calls we were receiving, the numbers of people who were hanging up, and we were monitoring that certainly on a daily basis. Eventually we had to go to the Department and ask for - I think Brian Bender mentioned it in his evidence - additional funding to put on some external call centres from BT and others to cope with what we could see was going to be a massive spike of work that had to be dealt with.

Q1153 Lynne Jones: You did not think, "There is something wrong with the system we are operating, it is too chaotic to carry on like this"?

Mr McNeill: Unfortunately, at that stage it was probably too late. What was the option? We could not go back to a claims-based approach, we had no way of doing that.

Q1154 Lynne Jones: It was what Mark Addison did in the end.

Mr McNeill: I do not think so. We had concluded early on that the task-based approach was not satisfactory. Accenture had already briefed that for the 2006 scheme that in actual fact we wanted to move back to a better understanding of the relationship between tasks and claims. The work that we had initiated, and I think it is fair comment, came to fruition and we were able to release those 44,000 claims and payments because we were able, with legal agreement, to remove those barriers and those six items became two. Once they went down to two that money went out.

Q1155 Lynne Jones: So you were already pressing for those changes, are you saying?

Mr McNeill: Certainly in terms of the legal discussion. Gill Robinson, who is the head of audit, led the assurance working group that was working with Defra legal to get this cleared.

Q1156 Lynne Jones: Sorry, what legal discussions?

Mr McNeill: The legal advice to the RPA is provided by Defra, we do not have our own lawyers, so if the Defra lawyers say to us, as was the case, "You do this and you will suffer disallowance", you obviously cannot do it.

Q1157 Lynne Jones: So you were just so focused on the idea of the disallowance that you were not getting on with the customer service?

Mr McNeill: No, on the contrary. As I have said, Gill Robinson, working with the statisticians I mentioned earlier, working with her auditors, was looking at the reasons these claims were failing with a view to getting those checks removed proving that in actual fact it was belt and braces to the satisfaction of Defra lawyers.

Q1158 Chairman: Let me ask this question. You have put a lot of emphasis on the newness of this scheme. If we go back to the introduction of IACS, that was as novel a scheme in its own way as this one was but I do not recall there being anything like the kind of problems that there were with this. There were some difficulties with the mapping but they were quite quickly resolved. In the days of IACS there were many more schemes than by definition when we went to SPS. I think that is the bit where if you are looking for a benchmark to say "We are running into problems", you would look back at the previous very complicated scheme on paper and say, "How come that went as smoothly as it did whereas we are into a mounting tide of difficulties on this new one?" You would have expected somebody at some point to have said, "This does not feel right".

Mr McNeill: Chairman, Bill Duncan, who unfortunately retired and has left the RPA, was a lead player at the time of the introduction of the IACS schemes. In fact, I think he was awarded his OBE for his tremendous efforts in that area. Bill was the lead player who we fielded in the discussions with our policy colleagues, and you will have seen some of the quotes attributed to Bill about this particular scheme. I have spoken to Bill at length, he is now retired and living in Scotland, and he assures me that he felt what we ended up with was much more complex than IACS. I remember a discussion even before his retirement, "Had IACS been as bad?" and I am afraid it is a bit like the good old days, there were many problems with IACS, Chairman, and many issues which took them some two or three cycles to resolve.

Q1159 Chairman: But if it was more complex, and that is quite an interesting observation, and you had got somebody like Bill Duncan who had a lot of experience of the previous system ---- It is probably Mr Duncan ringing you with some further information.

Mr McNeill: Sorry, Chairman.

Q1160 Chairman: You would have expected somebody in the senior echelons of Defra to have said, "Um, maybe we are trying to do too much in too short a timescale".

Mr McNeill: The particular issue I wanted to discuss with Bill was it was Bill Duncan and Hugh Mackinnon who had the best expertise that we had to offer. Hugh Mackinnon was the Director of Operations and had been involved in CAP scheme management for some 30 years; Bill Duncan likewise. They were the two people that we favoured to discuss what could and what could not be done. What has been said is true, Chairman, they never said, "This can't be done", but I have spoken to both of them at length and they are both clear they repeatedly said, "The more complex you make this, the more high risk this is going to be".

Q1161 Chairman: But when this programme was initiated and the design was evolving, the complexity was becoming clearer, who at the top of the office was saying, "Don't worry, this is the chosen course, it will be all right"?

Mr McNeill: Chairman, David Hunter is quoted as saying that the RPA will do what the RPA is told to do, and I have to say I do believe there was a significant element of that. We were an executive agency and we were there to do what the Department wanted and if they wanted that delivered we had to deliver it. I have spoken to Bill about it and he is quite clear that he certainly was very keen, as indeed were the NFU and others, that we should keep this as simple as possible from an implementation point of view.

Q1162 Chairman: In spite of this mounting tide of complexity there was never a time when you were responsible as the Accounting Officer that you had a scintilla of doubt, or even a serious doubt, that you felt you should have got hold of the Permanent Secretary or even ministers and said, "I'm going to try and do it but you have got to realise that this may not be doable within the timescale that you guys are indicating that you want the Change Programme implemented and SPS introduced and other things as well"?

Mr McNeill: The programme since 2001 before this started was high risk. I think it has been generally acknowledged from a number of people who have given evidence here that SPS added yet more to that risk. We have OGC reports at the back of the NAO report.

Q1163 Chairman: Indeed.

Mr McNeill: We have reports which have red all over them. We were reporting at the time of the policy discussions, "This is increasing the risk.". Did we ever say no?

Q1164 Chairman: Why I am ----

Mr McNeill: I understand the question.

Q1165 Chairman: Why I am asking this question is because, and we will probably come back to it at the end but let us face up to this, this is about accountability. Here we have got mounting complexity and problems, there are a lot of red marks, you are absolutely right, and yet onward sailed the ship heading towards the iceberg. What I want to know is who was on the bridge? Who was saying, "Keep going"? We are going to talk in a minute about the choice of payment model. There must have been a point certainly in 2004 when there was some flexibility about changing course or delaying the process of actual payment to give you a bit more time to try and evolve, explore, understand and ultimately deliver this high risk programme. The message I am getting is that from the top of the office, the top of Defra, the message to the RPA was clear: "You will deliver within this timescale". Who at the top was telling the boat to sail on?

Mr McNeill: Chairman, when the Commission were notified in July 2004, possibly August, that we were going for SPS in 2005 that was that fixed and there was no turning back. That was my best understanding of the situation. I think it was the case that we made it clear to the Department that this was doable, extremely high risk but doable, but also at the time we were saying that in 2003 we did not have the full details of what this scheme actually looked like. It took until the end of 2004 until the policy was clear and, as Accenture noted, the devil was in the detail. What we said was, "If you can tell us by the end of 2003 what this is and we can get Accenture started to build this without coming back and changing"---- I think Accenture quoted 60 change requests that came through, largely policy driven, 21 significant policy changes. At the time we asked the question, "When will the policy be clear?" we were advised it would probably be clear and we would be able to push on by the end of 2003 but it was 12 months later. That was what increased the risk dramatically.

Q1166 Chairman: When you talk about "risk", because the Office of Government Commerce attempt to quantify risk, what is your quantification of the risks at the beginning and then subsequently as difficulty mounted? Have you got your own McNeill risk score?

Mr McNeill: The difficulty was that one date as the target. As Mark Addison noted, once ministers had announced the target of starting payments in February, the bulk of payments out or 96 per cent were out by the March.

Q1167 Lynne Jones: That was from your advice though. That was what you told ministers.

Mr McNeill: On the contrary, that target was set for the Agency. We were keen to go for the EU requirement which was that payments be made by the end of June, but obviously that was unacceptable because we had been setting new track records on payments for the previous scheme for some time.

Q1168 Lynne Jones: If they were to be completed by the end of June they would have had to have started somewhere.

Mr McNeill: The window opens at the start of December and you can legally pay out on CAP payments.

Q1169 Chairman: Let us wind the clock back a bit because what you have just said is quite significant. You said that as the Chief Executive of the Agency you would have preferred to have gone for a payment window at the maximum point, that was June 2006. Did you at any one time communicate in writing to the Permanent Secretary, the Secretary of State or a minister, something that said, "I would prefer to do that"?

Mr McNeill: The setting of targets was an issue an issue that arose between the Agency and Mark Addison's Ownership Board unit. He headed up the Operations/Ownership Board unit function and when we were setting those targets, and I remember the discussion when I was setting them, it was made quite clear that would be totally unacceptable politically, that you could not have a scheme, old schemes that were paying out pretty much as the window opened in December and expect our customers to be able to ----

Q1170 Chairman: So it was a political decision that the tighter timescale was the preferred one?

Mr McNeill: That was certainly the advice I received.

Q1171 Chairman: Can I be very clear. I want to be very clear on this. When you were talking about the Ownership Board, can you confirm for the record that you actually told the Ownership Board that you would have preferred to have paid out in June 2006?

Mr McNeill: No, I did not say that, Chairman. What I said was that the targets for the Agency were a matter for discussion between the Ownership Board support unit, which was a part of Mark Addison's responsibilities, and the Agency.

Q1172 Chairman: You were the head of the Agency.

Mr McNeill: Yes.

Q1173 Chairman: I am not quite getting it clear between the Ownership Board and the Agency and you as the Chief Executive. You have just expressed to us a preference that you would have personally liked to have gone to June 2006, but you said there was some discussion between the Agency and I presume other senior people than yourself.

Mr McNeill: Yes, Chairman.

Q1174 Chairman: And the Ownership Board ----

Mr McNeill: Sorry, Chairman, no, not the Ownership Board. There is a secretariat or a support group that provides support to the various Ownership Boards within Defra and it is the communications between the Chief Exec, the senior team and those as to what targets might go forward to the Ownership Board and then to ministers.

Q1175 Chairman: What I am trying to understand is the input of the Agency's representatives into the process of deciding what the payment window or timetable was going to be. You made it very clear to us a moment ago that your personal preference would have been for June 2006, is that right?

Mr McNeill: Had it been possible, yes.

Q1176 Chairman: Had it been possible?

Mr McNeill: Yes.

Q1177 David Taylor: Had it been politically possible?

Mr McNeill: Yes.

Q1178 Chairman: When you say had it been politically possible, the impression I am getting is that the timetable was handed down to you with no discussion as to, "What do you think, Mr McNeill, we could do?" Do you understand why I am asking these questions?

Mr McNeill: I do, Chairman. Perhaps it would help if I explained. The legal payment window, as you know, Chairman, is from the start of December to 30 June. Facing what we faced it was a subject for discussion at the time of putting forward the targets to the Ownership Board, et cetera, and I was present at the discussion with the Ownership Board unit, the secretariat or the support service to the Board, on would it be possible to move the targets because our targets previously had been to make payments at the start of the payment window, but obviously with this being a new scheme with the associated risks, the learning curve, the Change Programme and all the rest, we did have a discussion, which I was present at, as to whether it would be possible, and we were advised it would not even be considered because obviously, and quite rightly - I can understand the point of view - it was the case that farmers had an expectation having had the payments made, particularly for the last few years, almost as soon as the window opened or very shortly after. It would be financially unacceptable, as indeed the difficulties we have experienced with SPS demonstrate, for farmers to wait until June for payment. That was the only point I was trying to make, Chairman. Legally the window is from December until the end of June but expectation and political understanding of that expectation is that farmers expect to get their money at the earlier stage.

Q1179 Mr Drew: If we could go on to the dynamic hybrid model, whose idea was it?

Mr McNeill: I think I am right in saying that I had practically no input into that discussion. We fielded a number of the best people that we could for that policy discussion.

Q1180 Mr Drew: Take me through the policy discussions. At what level were the policy discussions taking place, who was involved in them and who made the decision?

Mr McNeill: The policy discussions, as I mentioned earlier, involved Bill Duncan and Hugh Mackinnon from the RPA. They were dealing with David Hunter who, I think it is fair to say, working to Andy Lebrecht, was taking the lead in much of this work, as Andy was, of course, working closely with ministers on it. I was not involved. I had no input whatsoever bar providing the best expertise the Agency could who had been through the McSharry reforms, IACS, et cetera.

Q1181 Mr Drew: This changes the whole dynamic of the way in which the Single Payment System is going to work. This goes for the most complicated model possible. You have got to deliver this and yet you were not privy to those discussions which actually said, "Look, Johnson, this is what we want to do".

Mr McNeill: No, my expertise was not in that area. I explained before I took up the position that I had not 30 years of CAP experience, I did not have that expertise whatsoever, so I played to our best strengths and fielded the best people we had. They were feeding back to us on a regular basis, we were taking sessions on our Executive Board, they were feeding in initially it looked like the historic model was going to be it and that gave us great relief, of course, but then it became clear that there was a move to this much more complex system.

Q1182 Chairman: Could you just explain when in timetable terms that move from historic to another model started to evolve.

Mr McNeill: I am sorry, Chairman, I do not have that information to hand. Perhaps by perusing the Executive Board minutes I might be able to identify where we started to grow concerned about the increased complexity.

Q1183 Mr Drew: But you did not have any say at all on the decision of the model?

Mr McNeill: Personally?

Q1184 Mr Drew: Personally.

Mr McNeill: No.

Q1185 Mr Drew: No-one from the RPA?

Mr McNeill: I was never involved in a discussion as to the policy development and where it was heading, only to say at meetings, et cetera, that simplification was going to be much more to implement and the more complex the solution the more difficult it was going to be to implement and the more risk was involved.

Q1186 Mr Drew: So when Margaret Beckett announced this decision on 22 April, how much prior knowledge did you have of that decision?

Mr McNeill: We would have had the knowledge from the feedback from Bill Duncan and Hugh Mackinnon who would have been saying to us, "This is the line that is going to ministers. This is the way it is looking and this is likely to be what is going to be announced".

Q1187 Lynne Jones: There were people in your Agency who had some input?

Mr McNeill: Absolutely. I have mentioned three times Bill Duncan and Hugh Mackinnon who had been involved in the previous regimes. Hugh Mackinnon was our Director of Operations, he dealt with 21 CAP schemes on a daily basis, and had done for 30 years, and was now a senior civil servant. Bill Duncan headed up our Central Scheme Management Unit, he was our expert on all those schemes and had been involved, as I mentioned earlier, in the McSharry reforms, IACS, et cetera.

Q1188 Lynne Jones: I have been trying to find the record of it. We did have some information from the NFU about a meeting at which both Defra and the RPA people were present and one of them was attributed with the comments, in effect, that it would be catastrophic to go down this particular route.

Mr McNeill: Yes.

Q1189 Lynne Jones: Yet that view does not seem to have been conveyed to ministers. I cannot remember who it was. Andy Lebrecht is Defra, is he not?

Mr McNeill: Yes.

Q1190 Lynne Jones: Does anybody here remember who it was? It was Bill Duncan. Bill Duncan expressed the view that it was a crazy choice to make.

Mr McNeill: Yes.

Q1191 Lynne Jones: Did he say that to you? Did he say that as the representative of the RPA he was telling them this was a daft choice to make but he was being overruled by other people? Were you aware of any such discussion? Were you aware that was his view?

Mr McNeill: Absolutely. We had Bill Duncan and Hugh Mackinnon - Hugh Mackinnon was a standing member of the Executive Board - and we would have feedback from Hugh at least on a weekly basis, if not through emails in the interim, at EB on this issue, which was extremely important to us: what is this scheme going to look like and how complex is it?

Q1192 Lynne Jones: So your guys were telling the people that you thought this was a daft decision to make in the first year at least.

Mr McNeill: At EB we would discuss the consequences. We would have Alan McDermott telling us about the IT consequences, we would have Alex mentioning difficulties perhaps relating to finance and the cost of developing that and we would have Simon Vry telling us about the relationship with Accenture and what would happen there and the increased complexity and the risk. Round the table we would have discussions and we would ask Bill and Hugh to continue assisting Defra in this but to make it clear that we felt this was increasingly high risk, which they did.

Q1193 Lynne Jones: Did you never seek, as Chief Executive of that organisation, to perhaps talk to the Permanent Secretary about these severe concerns within your Agency from experienced staff that this would not be deliverable?

Mr McNeill: We never said it was not deliverable, we accept that. We said it was still doable. Nobody ever told us it was not doable. Accenture in their records do not say, "We told them it could not be done". That has never been said. Karen Jordan never said, "This cannot be done". OGC did not say, "This cannot be done". It was doable, it was just increasingly risky because of the increased complexity.

Q1194 David Taylor: It was daft but doable.

Mr McNeill: It is not for me to say. If ministers wanted to go down that road in the timescales that they indicated, my job was to say if I, as SRO and Accounting Officer, had any information I could have put forward in an objective way of some standing that said this was not doable I most certainly would have done so. I had a good working relationship with Brian Bender, who I respected greatly, and continue to do so, and I would have been able to have had that discussion without any difficulty.

Q1195 Lynne Jones: But high risk implies it is a high risk of it not being doable. If it is 70 per cent of risk, that is a 70 per cent likelihood that it is not going to be doable and a 30 per cent likelihood that it is going to be doable.

Mr McNeill: Chairman, there has been evidence in front of this Committee that we quoted probabilities as low as 40 per cent in terms of reporting on risk.

Q1196 Chairman: Those probability figures were figures which came out of OGC reviews. I come back to the risk which the Agency attached to the processes which were being considered by ministers. I would like to know whether the representatives of the Agency, when you were comparing and contrasting the different ways in which the Single Farm Payment System could have been introduced, ie historic, hybrid or something else, and did ministers and/or Lebrecht and/or Bender have a quantifiable risk rating according to the choice of system. Looking at the timetable there must have been a window of opportunity from when ministers agreed to adopt the Single Payment Scheme under the reform, which was in June 2003, as opposed to 12 February 2004 when Margaret Beckett announced the choice of the dynamic hybrid. There was roughly a six month window of discussion opportunity. During that period did the RPA quantify the various risks or the risk profile in a way that ministers would have known it was X per cent for this and X per cent for that?

Mr McNeill: The team that was fielded was the best team we had on policy, and that was Bill Duncan and Hugh Mackinnon. They were feeding back the response from the EB, which involved Simon, Brian, myself and others, and making it clear that it was increased risk with increased complexity. Once the decisions had been taken, such as the announcement that this was going to be a dynamic hybrid, we sought as quickly as possible to understand the implications of that and, indeed, as I recollect, produced a number of impact assessments. I notice that Accenture say they were not consulted in 2003 as to the consequences, I am sorry, I spoke with Simon Vry on that and particularly remember sessions that we had. I think part of the difficulty here is that Accenture's lead partner at that time, Barry Prince, is no longer with Accenture. Following a review of this programme by the head office in America, a chap called David Hunter, I am afraid Barry is no longer with Accenture and a new person has been put in. Certainly my recollection is we did have those discussions, we had to understand what the systems development issues were relating to that, we would have been foolish not to. We started to look at what would be the impact of the policy as we understood it at the time but, Chairman, the policy continued to develop and, in fact, continued to develop until the end of 2004 at which stage we even had the OGC at the start of 2005 saying, "Stop the policy changes". It was something of a moving target as to what the impact or the risk was. It was difficult to pin down the moving target because the policy was changing as we moved on until we reached the end of 2004. We did supply impact assessments. We were giving the best estimates of risk that we could at that time.

Chairman: I am mindful that James has been waiting very patiently to come in and I would like him to come in and then Peter.

James Duddridge: I will come in on the issue of special advisers later.

Chairman: Okay, fine, as long as you are happy.

Sir Peter Soulsby: You have been talking about risk, and we have been talking about risk, but when you were discussing risk were you talking about risk in terms of not being able to deliver on time or were you discussing risk in terms of what in fact happened, a catastrophic failure?

Q1197 Chairman: Can I add to that because having been a minister the normal form, which I gather has not changed significantly, is that the minister when they have to make a decision gets a note and the risks are quantified and there is a paragraph when it comes to the recommendation, "Ministers should be aware that..." I am trying, and I think Peter and my colleagues are trying, to understand upon what basis was it still decided that it was within the realms of achievable risks to go ahead with the most complex model where policies at the time to go down the dynamic hybrid decision road were not fully taken against a background of a Change Programme that was evolving, against the background of a new piece of IT architecture which had to be designed, in other words the number of unknowns was increasing with the passage of time, and yet at the beginning of the process the message I am getting is that the decision to go down the dynamic hybrid route was taken as a matter of principle without looking at this mounting tide of risk and saying, "Have we got the risk/reward ratio right?"

Mr McNeill: To the best of my recollection we were not asked to undertake sophisticated models of what actually each part of this new scheme or each dimension of this new scheme was going to be in terms of risk. The issue which I believe was quoted through the evidence that you have is the question was "is this doable", and that would seem to have been the issue. I do not recollect us constructing any models. We fielded people to advise as to whether we felt it was doable. Can I just tell you where we were at that time, Chairman? We were developing a new system for 21 schemes. In terms of SPS there were nine separate schemes, bovine and arable schemes. Some of those schemes were quite complex. Together that was a massive piece of work. Initially, Chairman, we had been sold the concept by Accenture that we were going to have a generic end-to-end process system for a claim to pay with separate rules where we could tailor the scheme almost without having to bundle miles of code and rewrite and all the rest, but I am afraid it quickly became apparent that with the packaged Oracle solution that we had been sold, which we were attracted to because our financial system was Oracle and that would remove the risk of the interface between the processing system and the financial system which pays out the cheques, that would not turn out. So we were in a position with Accenture where they had nine schemes to develop and it was quite apparent that this was probably not such a profitable contract, and you have discussions about were they making money and all the rest. The fact was it became clear at this price if they could not use that generic model this contract was probably under-priced. Along came the option of saying, "We will not build those nine schemes, we will build one scheme. It might be complex and it might be more difficult, but when you add it up and look at it in terms of resources and in terms of time and everything else, compared to nine separate schemes to develop and the risk of getting any one of those wrong, it is actually not unattractive". That is my recollection of the discussions that we had with Accenture and others. They felt, as I recollect, that this was doable, that we already had a programme office in place. That was another one of the reasons why we were not violently opposed to the idea of going to 2005. We had a world class supplier on the books, we had gone through an OJEC procurement at considerable cost, we were in contract, this was covered in the contract because we had recognised that whilst the CAP reform was going to come along although, as Brian Bender noted, no-one expected it to be so fundamental and such a massive change, but it was there, it was covered, so we did not have to do another procurement, we had been through the learning curve with Accenture, So when we looked at this, even though it was complex and all the rest, we thought, "We have a team sitting here now ready to do this". One of the big concerns, Chairman, in all these IT developments is keeping the right people, keeping the right expertise, particularly with your suppliers. If you let them walk off to another job you do not see them again, they could be there for two or three years on another programme. We had a team, we were in contract, we had gone through the OJEC procurement, one scheme was considered, even complex, to represent something we could achieve and that was why we said it was doable. What we were not clear about at the time we were being asked those recommendations was that they were going to take until November 2004 until we fully understood what this scheme looked like with the added complexity that was built on and built on down to things like fruit and veg, which might sound simple, Chairman, but has proved to be inordinately complex and difficult to reflect in the system's development.

Q1198 Lynne Jones: On that point, one of the changes was when Margaret Beckett announced that there would be three regions rather than two. You are complaining that there were all these policy changes but did you have Bill Duncan or anybody else in there actually saying, "Well, hold on a minute, do you realise this is going to increase the risk"? Did you attempt to keep things more stable and to stop those changes?

Mr McNeill: I do not think we had the slightest doubt. I have spoken to Bill Duncan, to Hugh Mackinnon and Simon Vry, I do not think there was any doubt that we probably almost on a daily basis were making the point, "You keep making this more complex". We were looking at a programme here that had red lights all over it.

Q1199 Lynne Jones: Who were you making that point to?

Mr McNeill: The points were being made at CAPRI where Accenture were asking when they would get the actual information to enable them to get on.

Q1200 Lynne Jones: That was between you and Andy Lebrecht. You were the most senior people on CAPRI.

Mr McNeill: Andy Lebrecht and I joint chaired CAPRI. He was the SRO for policy, I was the SRO for operations.

Q1201 Lynne Jones: If you were discussing it in CAPRI how did that message get to ministers? When Margaret Beckett announced that there were going to be three regions, not two, did she know that the staff responsible were saying, "This is making it less likely that we will be able to deliver and more likely that we will be in non-compliance with EU regulations"?

Mr McNeill: I cannot comment on that, I do not know what Andy Lebrecht said to Margaret Beckett. I do not know. I would have certainly thought he must have done.

Q1202 Lynne Jones: So the RPA per se, you and your people, were not saying that to ministers?

Mr McNeill: In my time in the RPA I met Margaret Beckett twice, and the second time was when I was dismissed.

Q1203 Lynne Jones: Okay, well when you were talking to the other ministers were you or your staff expressing any concerns about the deliverability?

Mr McNeill: If you were to look at the reports that went to Lord Whitty and the OGC reports and other information and if you looked at the discussions at the CAPRI board, the reports which I gather now some senior officials at CAPRI say they did not quite understand, which were of an agreed format, I do not think we could have said it any clearer.

Q1204 Lynne Jones: So nobody told you that they could not understand your reports?

Mr McNeill: Absolutely not. Those reports were developed by the CAPRI Board. We are talking about a number of directors-general and, indeed, the DRG permanent secretaries. I find it extremely difficult to know how you could not understand the reports. It really does surprise me.

Q1205 Lynne Jones: You would have expected Andy Lebrecht to report to his seniors in Defra that these reservations were being expressed at CAPRI?

Mr McNeill: And the concern about the increased risk. I accept fully we never said, "This is not doable" but we did make it clear that the more complex, the more risk.

Q1206 Lynne Jones: Did you express the view, "Why do they keep changing these policies? Why has she made that decision? Does she realise it is going to make it more and more difficult to deliver?"

Mr McNeill: I have had, bar two meetings, practically no contact with Margaret Beckett.

Lynne Jones: But did you ask?

Q1207 James Duddridge: I am surprised the Secretary of State only had two meetings with you. I understand her special adviser, Sheila Watson, who has moved with her to the Foreign office, was heavily involved and, in fact, there are some indications that the special adviser might have been chairing some of these meetings. Could you explain what the role of the special adviser was and what interaction you had with that particular special adviser, Sheila Watson, and perhaps other ministerial special advisers?

Mr McNeill: Yes. In terms of Sheila Watson, my recollection is that she often attended the weekly briefing sessions that took place with Lord Bach and sat beside him, or close to him, and was sent all of the associated papers, the reports et cetera, that related to the programme where we were on progress towards delivering SPS.

Q1208 James Duddridge: So everything that went to Lord Bach would have also gone to Sheila Watson?

Mr McNeill: Certainly for the meetings that she attended with Lord Bach, as I recollect, and I am sorry but we are going back ten months now, she was obviously well informed and had the papers, yes. Whether she received every paper or every submission that was put up, I am sorry, I could not say that, but certainly it was made clear to us that she had a particular interest in this and was to be kept informed.

Q1209 James Duddridge: Were you aware that Sheila Watson particularly was pushing the dynamic hybrid model?

Mr McNeill: Because I was not involved in the discussions about which policy, I do not know that.

Q1210 Sir Peter Soulsby: Can I just try once more my question about risk because I want to pursue that. Mr McNeill, can I just try it again with you. When you were talking about risk at the time, were you talking about risk of catastrophic failure or were you talking about risk of not being able to deliver on time?

Mr McNeill: We never said this was not doable.

Q1211 Sir Peter Soulsby: So all along it was whether you could get it by the timetable that had been set, there was never any serious discussion about the prospect that it might not just deliver at all?

Mr McNeill: We had developed a contingency on the basis that, indeed, there was a second system relating to partial payments that had been developed on the basis that we discovered there was some fundamental problem but, as it was, up until the eleventh hour we thought we were going to do this. When we started payments and they had gone through we thought we had done it, and it was obviously a shock to us to discover we had not. The fact was that were it to prove not doable we had a contingency system being developed and, indeed, a partial payments option. We had prepared for that event. We had reported, I think fairly accurately, up to certainly CAPRI and ERG, and from there to ministers, progress in a very fair way in terms of it being down to us to discuss the number of tasks being cleared on almost a daily basis.

Q1212 Chairman: I think the thing I struggle with is that you made it very clear to us that it was high risk at the beginning and it got riskier as time went on because of the unfolding nature of the policy, but in spite of that the message that was going through the various channels of communication still convinced ministers they could go ahead and by 12 February 2004 confirmed to a waiting world that the dynamic hybrid model had been chosen notwithstanding the risk messages from you. The risk messages that you put forward were never quantified as a percentage of hitting it because you said that it was doable and you also quoted as a high risk the figure of 40 per cent, which came from an OGC report, which said there was a 60 per cent chance of it not happening and a 40 per cent chance of it happening. Did you ever try and quantify for the benefit of Defra what you meant by "risk"?

Mr McNeill: Yes. I do not know if you have seen the reports, Chairman, I can only imagine you have, but we had a very sophisticated risk assessment model that was included in all of the papers that went to CAPRI and then to ERG. Have you seen that, Chairman?

Q1213 Chairman: I personally have not seen that one.

Mr McNeill: It was developed by Angus Ward of Bearing Point who was the programme manager for the programme, and I have to say it was a particularly sophisticated approach to assessing risk.

Q1214 Chairman: Did it generate something in statistical terms that as a layman dealing with risk matters I would understand?

Mr McNeill: I would say it was not that complex. I have to say the presentation of it would have been easy to understand.

Q1215 Chairman: Let us come back then to the results that it delivered. When you said that the programme was high risk at the beginning and then got riskier, can you quantify for me what the numerical assessment of risk was as this complexity grew?

Mr McNeill: No, Chairman. This is similar to the question you asked before, "Did we turn round and say 'This is 40 per cent likely, this is 30 per cent likely' or whatever", no, we did not do that.

Q1216 Chairman: So if you had such a sophisticated risk model how is it that I cannot, if you like, feel, touch, have something tangible to enable me to understand what you mean by the term "risk". I am anxious to understand the decision making process but against a background where you were sending out a message which you communicate linguistically to us that it was high risk at the beginning and got worse, that Defra still felt comfortable with the reassurance, to pick up your own phraseology, that "it was doable". By definition, if the risk was increasing it was becoming less doable; still doable but less doable. In other words, there was an increasing probability that something would cause the wheel to fall off. Yet on went Defra flat out, an announcement, "This is the way we go", no awareness that the policy was going to admit a whole raft of new customers, the people you identified who had never had any dealings with the RPA, larger numbers of very small claims coming in, none of the other practical problems. The message I am getting is that the decision makers were blind to the implications of what you were saying. Is that a fair assessment?

Mr McNeill: I do not necessarily think that is fair, Chairman. The CAPRI Board, of which I was joint chair with Andy Lebrecht, and to the best of my knowledge he attended pretty much all the meetings, he did not send somebody else, had frank discussions about the complexity and risk involved in this approach and, indeed, as then, the risk model I am referring to was once what exactly was involved in the scheme became clear this model was more valid in that it was not a moving target of, "Oh, by the way, we will add this, we will add this and we will add this". I believe there was an open, frank and assured reporting of what we understood the risk to be. I have to accept, Chairman, it was not as mechanistic or perhaps as sophisticated as the one you are suggesting. In the dynamic timescale we were talking about I think that may have proven difficult for us. I certainly believe that there was no doubt, and in discussions with Hugh Mackinnon and Bill Duncan, who were our lead players in the policy process, and, indeed, Simon Vry, who was reporting from a programme perspective as to what was doable, that anyone should have been left in any doubt that this was a high risk programme.

Lynne Jones: The trouble is you could have a situation where it is high risk, a 99 per cent risk of failure, but then you say it is doable and it seems everybody disregarded the worry about risk because you were always saying it was doable.

Chairman: It is a bit like saying you are going to win the Lottery because the odds of winning the Lottery are 20 or 30 million to one but it is still possible you might win.

Q1217 David Taylor: What is the difference between "doability" and "possibility"? As the Chairman has said, possibility can be vanishingly small but as long as it is non-zero it is possible.

Mr McNeill: This Department understood that this was a high risk, one of the top high risk programmes in government, before this started. It then introduced mid-way through a massive change where I had two officials who were adamant they made it clear this was going to increase risk, and the more complex, the more risk, but that it was still possible to do it.

Q1218 Chairman: I think we are going to have to move on because we could be here all night discussing this. I will summarise it, and tell me if I am wrong because we must make certain our understanding is correct. You signalled clearly in your judgment, and professionally, what the risks were to the CAPRI Board, therefore to the senior officials in Defra, and one must assume that they accurately transposed that information in recommendations to ministers. So, from this discussion can we conclude that Defra were aware of the risks and at a senior level and at ministerial level they accepted the risks and what they meant?

Mr McNeill: I cannot comment on the last part, Chairman, I was not involved in the discussions. All I can say is ----

Q1219 Chairman: But by definition ministers communicated that they wanted the dynamic hybrid model against a background of all the information that you had given them about the project and the change in policy and the complexities that were involved and against the background of the Change Programme. You had communicated professionally throughout all of this and your two key people had said there were mounting risks. If all of that information was parcelled up in language which Defra senior officials could understand and which ministers could understand and ministers made their decisions, by definition that says to me that at the top of Defra they accepted the risk message from you but, nonetheless, took the decision to go down the route they did.

Mr McNeill: Chairman, again I really do not want to comment on what happened with ministers, I was not there.

Q1220 Chairman: They took the decision.

Mr McNeill: I can only say that we fielded people who I have affirmed with them made it clear what the increased complexity added to risk.

Q1221 Chairman: By definition you provided Defra with information as part of their decision making process and Defra did not come back and disagree with your risk profile, did they?

Mr McNeill: I do not think there was any doubt they understood that increased complexity was increased risk.

Chairman: So if they understood it, and if they understood it and the decision was made on the basis of the information supplied, they must have accepted it. I cannot come to any other conclusion.

David Taylor: They must have accepted the risk.

Q1222 Lynne Jones: Did you not give them the cop-out by saying it was doable? Did you understand the risk?

Mr McNeill: At the time this was being announced we had a certain understanding of what the policy was going to be. It took until nearly a year later before we had all of the information we needed to do a full, thorough impact assessment.

Q1223 Lynne Jones: All the time you were telling them it was doable despite all of that.

Mr McNeill: Not all the time. Yes, we continued to find ways in which we could deliver the programme, I have accepted that, Chairman. We never turned to them and said, "This is not doable". In fact, we made payments but, unfortunately, at the fifty-ninth minute of the eleventh hour we had a problem which meant that we could not continue to get the cheques out of the door.

Q1224 David Taylor: At what point were Accenture selected and contracted to adapt and provide the IT systems?

Mr McNeill: I have got the date here, Chairman. 31 January 2003 was the initial contract and then the revised contract was about 12 months later.

Q1225 David Taylor: That will do. That is perfectly adequate for the purpose of the question I am about to ask.

Mr McNeill: Sorry, it was shortly after May 2004.

Q1226 David Taylor: Okay. Were you aware from your contacts with Sir Brian in 2003 of the concerns that there were that he made public in 2003 on "the quality of the people they were putting in for testing"? That was his quote. Were you aware of that concern in your role as Chief Executive in mid 2003?

Mr McNeill: Absolutely, Chairman. The briefs for Sir Brian Bender's meetings with Accenture were developed by the RPA. I saw every one of them and attended a number of the meetings personally. I would often have a pre-meeting with Brian, either I or Simon Vry mainly. We developed the brief, we supplied it to Brian in line with best practice from the OGC where they encourage contact at the highest level.

Q1227 David Taylor: So you fed him that comment to an extent?

Mr McNeill: Absolutely . I am not suggesting that he followed our line verbatim. We went through the major issues of concerns we had and Brian was able to explore that with Joanne Dominic on a regular basis.

Q1228 David Taylor: Thank you. Also, his further comment that the regret he had about Accenture's performance were issues around delays, that was his quote, presumably delays in delivery compared with the plan?

Mr McNeill: It depends what stage you are talking about. We had particular difficulties with Accenture at the start of the programme to do with business process re-engineering, which we never actually paid for. It moved on to concerns about the quality of the staff we had in terms of the design and build of the system. Then we had concerns about the quality of the testing regime and the number and quality of the staff in the testing regime, and so it went on. It depends what particular stage you are referring to.

Q1229 Chairman: Could I just be very rude and interrupt for a second. Mr McNeill, you have been very patient and we are about two hours into our questioning. Do you need a little break?

Mr McNeill: Unless the Committee wants one, Chairman, I am happy to continue.

Chairman: As long as you are we are happy to carry on asking questions, but I just thought we ought to take into account, as they say, the natural processes and ask the question.

Q1230 David Taylor: You will have read the NAO report, I am sure.

Mr McNeill: Yes.

Q1231 David Taylor: You may recall that they observed that Accenture fell short of expectations in the early stages of the new programme and that the OGC, who will crop up later again in questioning, expressed concerns in January 2005 over significant weaknesses in Accenture's management of their testing team. Were they observations which at the time you found to be accurate?

Mr McNeill: Yes, indeed. Those would have been some of the briefing that would have gone to Brian Bender for his discussions with Accenture.

Q1232 David Taylor: Earlier on the Chairman referred to the RPA IT Applications Agreement, the details of which we have, and he quoted one section in that and I will quote the immediately following paragraph: "The user acceptance test will enable the end user to execute the software that has been proven through the previous testing in a production like environment. The test will prove the functional requirements and the end-to-end processing of the system in combination with the procedures, and the links to external organisations." You were the user, were you not, you were the most senior person within the user agency?

Mr McNeill: I was the senior responsible owner. As I recollect in PRINCE methodology, the user was Hugh Mackinnon and then Ian Hewett.

Q1233 David Taylor: So they would have been the ----

Mr McNeill: The senior user, yes.

Q1234 David Taylor: They would have been the ones that signed off the acceptance test as the user of the system to comply with the contract within which Accenture were working?

Mr McNeill: Yes. The way it worked was the senior user was the business and, as I recollect, that was the Director of Operations, which was initially Hugh Mackinnon and then Ian Hewett. They would have been close to the findings of the testing regime and when the system was rolled out they would have accepted that it was fit for purpose.

Q1235 David Taylor: I am paraphrasing very, very heavily indeed but Accenture said to the effect, "We gave them what they wanted. We gave them what they specified", in other words that RPA and Defra in a sense designed the business process which underpinned the whole system and signed that off. Would that be correct?

Mr McNeill: Certainly Accenture were working to a fixed price and a fixed specification as they have stated in their evidence, that is correct. From that point of view, from the first contract to the revised contract my understanding was we specified what our requirements were and they worked accordingly.

Q1236 David Taylor: So the RPA did, under your leadership, did take on the whole design of the business process and also the IT specification and one presumes, therefore, accepted the risk that went with that?

Mr McNeill: I am not sure about the design aspect of that. My specification was, "This is a scheme and we require this to happen". In terms of the actual design of the system I would need to take advice, Chairman, but I am not sure that we designed the design, I think that was down to Accenture.

Q1237 Chairman: Our understanding was that Accenture did, if you like, some core functions but the Agency's own IT people did some other work that was bolted into it.

Mr McNeill: Having read Accenture's evidence, I think what Accenture were saying that there were many aspects to the whole package in the RPA that made up the system. For example, Chairman, the finance system was ours, we operated that, we did not use Accenture, it was an Oracle based package, we did an 11i upgrade and made sure it was pretty much state of the art. That was nothing to do with Accenture. I have to say this was a point of some concern on Accenture's part in that we did these pieces of work without engaging them. Accenture's work was delivering RITA, the RPA IT application, and we specified that initially for the nine schemes, although there was this concept of generic end claim to pay processing with the rules engine, we moved from that to where they were going to have design a scheme.

Q1238 David Taylor: Accenture deny that their systems failed, they say that in essence their operations were successful but the SPS patient died. We are still struggling with putting our finger on quite where the responsibility might lie.

Mr McNeill: If I can just comment on that. The difficulty with the Accenture system, and I think there was some comment made in the NAO report to a breach of contract letter, and ----

Q1239 David Taylor: I was about to come to that. What breach of contract did RPA allege against Accenture in the month of February?

Mr McNeill: The difficulty was not that the system did not work, the difficulty was its availability to our staff and the fact that the system kept falling over.

Q1240 David Taylor: Is that not why it is working or not working?

Mr McNeill: That is a fair point, I suppose. The difference was that when the system worked it did actually work as in you could process claims through the system. If it fell over there were a number of issues in there, one was its reliability and availability to our staff and there was a service credit issue which meant that we could go for breach of contract, in other words, "The system is here, it does work when it works but the fact is it is not reliable". We addressed that. Another issue we had with the Accenture systems, possibly as a result of the chops and changes that had been made to the system, was they were incredibly heavy on processing power. At one stage we were considering buying yet more computers, more hardware, to run the systems so heavy were they which is usually a sign, I was advised at the time, I think by OGC, of perhaps poor coding. It was something that would have been addressed in time by revisiting codes and discovering why. That type of issue did arise.

Q1241 David Taylor: What would merit the description "the system is working" is not a fleeting moment when the system does as was expected of it but that there are issues of stability and accessibility and timeliness and all those sorts of things and they are wrapped in with any reasonable understanding of what is meant by a working system, are they not?

Mr McNeill: I accept your point fully. Are Accenture correct in saying the system worked? If you want to take the view that we put in a claim this end, went through a number of processes, including business interactions, and a cheque came out that end, then the answer is the system worked. I take your point. If you are saying it only did that for two hours a day or it was not reliable or it was incredibly inefficient in terms of the amount of processing power then I can understand you might say it did not really work.

Q1242 David Taylor: I think we have done to death the process-based and claims-based problems that were created by that but I do have one particular question which is at a level of detail. Because it was a hybrid system and, therefore, ten per cent of the payment was based on the three areas that Margaret Beckett announced in the April or so, did that not mean that in essence every claim had to be in before any claim could be paid, that element of the ten per cent, so that we knew what the areas were? Do I misunderstand that?

Mr McNeill: No, you are quite right. To define entitlements we had a cake and we needed to know how many people wanted what section of it, I agree. What happened in the end, and there was extensive legal advice taken on it, was that we looked at the number of claims, some of which were fully through the validation process, others which had not quite made it through, and we took a view that we were able to define the entitlements.

Q1243 Chairman: In that context, why was the mapping system such a source of failure? There were a number of letters, and I was looking at one only today to refresh my memory. In one case it was taking something like almost two years to sort out problems. When we had evidence from the Royal Institute of Chartered Surveyors they brought us examples of where they as professionals had worked out the correct maps but seemingly the system in the example shown to us was utterly incapable time after time of producing a validated set of maps. Why did that go so catastrophically wrong?

Mr McNeill: It is an area of difficulty that I personally spent an inordinate amount of time on. I would suggest, whilst I try to answer it, that there are people in the RPA who could give you this in detail which would explain it. There were a number of issues. The volume of maps was a problem, ten-plus times the number of IACS 22s or requests for changes to maps that came through. We had the issue of 40,000 new customers who wanted land maps, so there was a volume issue. There was also a systems issue. The RLR rolled out, as I recollect, towards the end of 2003 and there was an issue about the clumpiness of the system, the system was incredibly slow. I remember in that quarter the Ownership Board was in Exeter and Ian Watmore, who now heads up the Cabinet Office unit, noted to the Ownership Board that were it his system he would put his fist in it, so appalled was he at the slowness of the response of the system. I do not know if you remember the TV series Knight Rider, Chairman, but the staff called it the Knight Rider system because a little bar would come up whilst they were waiting for the system to figure out what it was they were trying to map, et cetera. We had appalling problems there which had to be resolved. Then there was the issue moving forward from that, Chairman, that we were advised by lawyers, by Defra legal again, that the scheme interpretation required us to send every customer a set of maps, which we did at the start of 2005, before they made their application under SPS. So we sent out all our understanding of your holding, or every other customer's holding, and that created an absolute plethora of issues and requests that came forward about the maps and that added to the difficulties where people had not seen all of their maps and being aware that the scheme was land-based they wanted to make sure that every boundary was right and every fence was right, et cetera. Another issue was the tolerance level we worked at on the system - we could have gone for a lesser tolerance - so we ended up with issues which were called "slithers" and this was where the boundaries were slightly out and you had a little slither between the two, whose land was it, et cetera. If we had gone for a broader tolerance we would have probably got away with a lot fewer problems. The difficulty was this was a major investment, a national asset, and the view at the time was that we needed to make sure that the system was as good as it could be, so that was a problem.

Q1244 Chairman: And it was Defra's lawyers who set all these parameters?

Mr McNeill: No, I am not sure about the tolerance one, Chairman, I cannot recollect where that came from. I am sure there are others in RPA who could advise you. I cannot recollect that. The issue that the Defra lawyers were clear about was to avoid disallowance we had to send out the maps. At the same time where changes were made to the maps, Chairman, we sent out an actual note of the changes. We would send a map and say, "These are the fields that we have changed" but we would not show the other fields in the way the system operated. That caused great concern to people who thought their other fields had disappeared, but if you read the letter it is quite clear that this is about the fields you have adjusted as opposed to us sending all the maps yet again. That created difficulties. A lot of the queries were coming through the Customer Service Centre which just was not equipped to deal with mapping issues in terms of the fact they could not see the map on the screens, they were working on a Q&A brief, so they were of little help and, again, you had the cultural problem.

Q1245 Chairman: So this was another failure of this task-based system not being fit for purpose.

Mr McNeill: I am not sure it was task-based, Chairman. It is a failure of a move from where you used to be able to phone up John or Gill or somebody in your local office perhaps and explore these particular problems, you now came through this new route into the organisation and they were not set up to deal with you. We always knew, and I think it was the case, it was going to be a first year problem and I suspect as we rolled into the second year of SPS the number of letters in MPs' postbags was greatly diminished; at least I would hope so. We have now done it. There was a separate issue from this, Chairman, but which was related which was there was a linkage between the actual land and the fields the customer registered. You may recollect we sent out customer registration forms with the initial SPS applications and that created difficulties as well. There were also issues about the customer database and the land database as well. I suggest, if it helps the Committee, that the RPA be asked about this and I suggest in the first instance if you ask Simon Vry, he gave me a contact number to refresh my own memory on this, and I am sure he can put a note up to the Committee to assist you.

Q1246 James Duddridge: In late 2004 the RPA identified about 23 changes to the IT system. The question I was going to ask - I think I need to ask you a prior question - was what discussions did you have with the Permanent Secretary and ministers about your alternative choices? Given I was quite surprised that you had only met Margaret Beckett twice perhaps you could put into context what access you had to ministers and the Permanent Secretary generally and then specifically in relation to those alternatives in 2004?

Mr McNeill: I was very pleased to be able to work closely with Sir Brian Bender in his role as Permanent Secretary of Defra. I had a series of bilaterals with him, one a month. Brian was very close to the programme, he took an in-depth personal interest, as I am sure you have seen when he has given evidence here, chaired the Executive Review Group and, indeed, the RPA Ownership Board. I think our working relationship was very sound. He was particularly keen, and I think it is an important point which he himself has made, that the policy side and the operational side should work closely together, hence the creation of CAPRI which was joint chaired by Andy Lebrecht and myself. I read that, Chairman, whether rightly or wrongly, as the issues we attempted to resolve more on a verbal basis and in meetings and discussions rather than engaging in some form of warfare where "You are doing this and you realise this is going to do that". Our relationship was more of discussions at CAPRI Board and frank discussions. I had a number of discussions with Andy Lebrecht about particular issues and concerns about policy delays, complexity, et cetera. I do not think you will find that minuted, Chairman, because the relationship was supposed to be one of working together to deliver the end product.

Q1247 James Duddridge: We talked about the role of Sheila Watson in hopefully keeping the Secretary of State up to speed, but Margaret Beckett in 2005 was described in various places as "bloody livid" or in other places "angry" at the delay that was caused, yet her ministers and her special adviser had been kept in the loop throughout. Was this anger or being bloody livid more about PR or was it a genuine anger and confusion coming out of the Secretary of State's office in your view?

Mr McNeill: I remember that quote, I cannot remember what the issue was.

Q1248 James Duddridge: She was telling the NFU Conference on 21 February that she was "bloody livid with the situation", namely the two month delay.

Mr McNeill: Yes.

Q1249 James Duddridge: That rather surprised me because she had all the information coming through her minister, through her special adviser, what was she livid about?

Mr McNeill: I think we were in similar confusion at the time and very concerned that we had staff who were working their socks off and, indeed, consultants working very hard, the whole team working very hard to get this done and it was not very helpful in terms of staff morale.

Q1250 James Duddridge: It strikes me as a bit of pointing of fingers. The RPA initially developed a stop-gap claims-based back-up system to make payments and that cost about £8.4 million. Why was that abandoned at the end of 2004? What was the rationale for that?

Mr McNeill: We engaged with Xansa and Sunguard, two suppliers we had worked with on our legacy systems for some time, and they developed our legacy systems to enable us as a last resort to come off RITA and do the entitlements calculation and to work through to payment. We had a particular resistance to doing that because a major problem was the bulk uploads and downloads of data between systems, particularly when you had a very old legacy system and a fourth generation or whatever it was new system. This was one of the reasons why we took our time in reaching a decision to outsource the mapping to Infoterra, a similar problem downloading files to them for them to update with the IACS 22s and then put back into the system. Our Director of IT and, indeed, others were very, very concerned that this might not work for us. As it was, thankfully, after some testing we were able to make it work. The reason we decided not to go ahead in 2004 was that we had had the delivery of the functionality to enable level one, level two validations working through to entitlements which had been tested. It was working, we had got them through and used them. In actual fact, the functionality that was left in that package, RITA was ahead of it in some respects. Also we had done more testing on where it went from there through the batch authorisations into payments. We had this horse riding alongside RITA but, in actual fact, the RITA system was our first and we were satisfied that the contingency did not add any value. As we said, the actual RITA system did work. Can I just make one point. There was a serious tension with the contingency because Accenture and others, and Karen Jordan, I recollect, was giving advice that we needed to be extremely cautious here. Karen Jordan now chairs the Cabinet Office Audit Committee and has had tremendous experience with Transco and other large organisations in programme management. Karen Jordan - Helen Ghosh mentioned Karen - was very heavily involved in the programme of providing assurance to us and insight to us as to the best way ahead and, indeed, providing assurance to Brian Bender and Helen Ghosh. There was a concern that you could deflect excessive effort, resources and expertise into building a contingency and as such the main programme, what you are trying to build, suffers. Accenture had that particular concern and voiced it regularly.

Q1251 James Duddridge: I would like to turn on to your responsibility as the Accounting Office. I am fascinated by the lines of accountability. Did you ever speak to Brian Bender about considering getting a formal ministerial instruction in relation to the introduction of the Single Payment Scheme because of the risks of disallowing of value for money? In retrospect, is that something you wished you had done?

Mr McNeill: No. I have made it quite clear here, Chairman, and Brian and others have quoted the same, we never turned and said, "This is not doable". As I said, only at the fifty-ninth minute of the eleventh hour did we discover we had a problem which did not make it doable. We thought we could do it with the elements of risk associated, of course, but we thought it was doable.

Q1252 James Duddridge: Can I ask about the nature and number of informal meetings you had with the Permanent Secretary just in the final months of 2004 and the early part of 2005?

Mr McNeill: When Helen Ghosh took over from Sir Brian Bender and, indeed, when Mark Addison stood in for a brief period we continued with the monthly bilaterals which lasted about an hour. They were particularly frank discussions about where we were and what was happening. There was useful feedback from what was going on at the top of the office because, after all, we were based in Reading and were not as close to things that were happening in Nobel House, so it was very useful in that respect and also gave me an opportunity to give a very frank and thorough briefing as to where we were.

Q1253 James Duddridge: Did special advisers sit in on those meetings?

Mr McNeill: No.

Q1254 David Taylor: It is the sixth anniversary this month of your appointment as Chief Executive of the predecessor body to the Rural Payments Agency and shortly after your appointment you appeared before our predecessor committee, the Agriculture Committee, and acknowledged that you were persuaded against your instincts into the job and one of the concerns you had was the IT background that you did not have. Would that be fair?

Mr McNeill: I think that was the situation, yes.

Q1255 David Taylor: The high priority for you at that time, February 2001, was to avoid flying blind. In the land of the blind the one-eyed man is king. Was your one-eyed man, Alan McDermott, appointed on a very generous contract shortly afterwards? Was he the person that you saw as your backstop on IT matters, an area that you say was not a solid part of your CV?

Mr McNeill: Yes. We went to quite significant effort to find the best person to fill the post of IT Director for the business. We went through a large recruitment organisation. As I recollect, we had some 30-plus applications. I had those analysed by a consultant from PA Consulting to split down those applications. This was personally, such was my concern about getting the right person. I looked at those in some detail with the consultant who was very experienced in IT and development programme management. We went through that and what became clear was that of that batch of applications, I do not know if it is standard in the industry, and this was after extensive advertisement, I seem to recollect, in Computer World and all of the international magazines, et cetera ----

Q1256 David Taylor: But he was there for five years and what surprised me about this whole saga is that is a bit like the poem Macavity the Cat, that whatever happens he is not there, and yet I would have expected that he would have been at the core of what was happening in relation to the SPS system. Were you satisfied with his performance in regard to this?

Mr McNeill: Sorry, yes I am rambling on about the appointment. The point I am trying to make is that it certainly seemed to me and, indeed, the panel that appointed him with external advice that he was the best candidate and certainly he had the experience. The point I was trying to get to was he had the experience of actually taking a programme from conception, in our case the enabling model, et cetera, and delivering it, and had done that in TNT, in an international environment, and from that point of view certainly appeared to be the strongest candidate. Alan joined us and played a full and, I felt, extremely valuable role in the organisation. He was not the only expert we had in IT, we had Glenn Rogers who came from California, a senior partner in Accenture, brought in not through Accenture but brought in separately to assist us.

Q1257 David Taylor: But if he was the only expert in the IT area, something that was at the very core of the doability of SPS, I would have expected his views and recommendations to have been more apparent in the evidence that we have heard and the records that we have inspected. His presence does not seem all that obvious to me.

Mr McNeill: I think I have explained the process of considering what the impact of the various policy options were, that was where Hugh Mackinnon and Bill Duncan would come back to our Executive Board.

Q1258 David Taylor: I am thinking about the IT side now.

Mr McNeill: Alan sat on the Executive Board, he was a director, and he would input. As Hugh would talk about it from an operations perspective and Simon would talk about it from a programme management perspective, so Alan would talk about the IT consequences and what they meant.

Q1259 David Taylor: So Alan would have said, "Johnson, it is doable"?

Mr McNeill: Yes.

Q1260 David Taylor: "Tough but doable".

Mr McNeill: Absolutely.

Q1261 David Taylor: Doable meaning a non-zero prospect of it happening. It could be vanishingly small but it is doable.

Mr McNeill: There was obviously concern on the part of the Board that as we increased complexity so we increased risk, that was the doubt. The question was, "As we now stand with our understanding of this, is this doable?" and the answer round that table unanimously was, "This is doable". On that basis I did not discount it as an SRO saying, "This is not possible".

David Taylor: I am surprised he lasted five years.

Q1262 Lynne Jones: I understand that Simon Vry was the officer who had most contact with Accenture. What contact did Alan McDermott have with Accenture? Was his role not to brief you on what was going on with Accenture?

Mr McNeill: It was from a technical point of view. Simon Vry is not a technical expert. Simon Vry was a programme director, again within the PRINCE methodology, or a managing successful programmes methodology, the OGC framework in which we worked. Simon was a programme director and he was also responsible for the management of the contract between Accenture and the RPA in terms of contract management and, indeed, would have been behind the notice that was served at the latter stage of the process for breach of contract. Alan was responsible for the technical issues, the design authority, he was heavily involved in that, understanding what Accenture was putting forward, assessing whether he felt that was the right solution, et cetera, assessing testing regimes and that sort of thing. Technical issues would have been within Alan's expertise.

Q1263 Chairman: Can I just ask this question. We have got the benefit of hindsight. What was it that these experienced, well-paid experts missed? What we now know with the benefit of hindsight is that when it came to delivering the system did not. What we know is that there were all kinds of continuing delays that were being built up. I just find it difficult to understand what it was that they missed. With the benefit of hindsight, what did they miss that did not enable them to say, "Ooh, that looks a bit nasty at the end of the pipeline, this thing is not going to do what it is supposed to do"? What gave them this fundamental belief that it was still doable right up until the eleventh hour and fifty-ninth minute?

Mr McNeill: I can assure you in my current position I have pondered this at length and I am certainly of the view that it was our ignorance of the consequences of taking a task-based approach to a claims-based system. For example, we could not even prioritise larger value claims. If we had wanted to hit the target - I am not suggesting politically it would have been acceptable - if we could have had a claims-based process we could have hit all the biggest claims instead of the smallest ones, or a large percentage of the smaller ones that the system did.

Q1264 Lynne Jones: That is not the consequence of a task-based system, that is a consequence of an IT system that cannot do what you need to do with a task-based system.

Mr McNeill: Yes. I accept the point. If we could, and that was the intention, certainly plans were afoot in my time there, we needed to move this back to where we could get it to a claims-based process. What we did not understand, and I think it was a lack of experience of working with it, was the consequence of the task-based system, the fact that clearing tasks produced new tasks so you ended up with this horrendous situation of people working double-shifts, working away trying to clear things up, fixes going in, and yet you ran a process, and I think ----

Q1265 Chairman: Your reports are unbelievably optimistic. You can see the statistics. As I say, one report shows 440,000 and two months later we are up to 720,000. To my lay reading that says mounting problems. The other side of the point is this: when we went to Germany and talked to them about what they did, the penny had dropped with these guys that because they had got lots and lots of little claims they had to have a de minimis, they had to have some cut-off to keep out the tiny claims and some way of dealing with the priority issues. They spotted that and they had four different IT systems with 18 or 19 different lšnder, so 18 or 19 RPAs, four different systems, but they did two things, one they had de minimis and, two, they had interim payments, and they got it right.

Mr McNeill: I cannot speak about the German system.

Q1266 Chairman: Did you not go and talk to them?

Mr McNeill: We went to talk to and had feedback from a grouping of paying agencies about what others were doing but, of course, some were not implementing in 2005, they were implementing in 2006.

Q1267 Chairman: Can I just ask about who was running the show because according to the NAO they said on the basis of what you told them that where CAPRI was concerned you felt that the Board had come to supersede your role as the responsible officer for the project. Did you ever feel that Mr Lebrecht was running the show and was trying to dominate what was going on and push you into the background?

Mr McNeill: No, I did not feel that at all. I had a very good professional working relationship with Andy Lebrecht, but he was the SRO. Within this methodology of SROs we had two and that is not usual. He was the SRO for policy and I was the SRO for implementation.

Q1268 Chairman: Was there a conflict at all between these two processes?

Mr McNeill: The only tension was when we were pressing for when we would get decisions to enable us to push on and build this system and when we would get the policy clarification we sought. The Countryside Landowners' Association make the point, and I think it is a fair one, that once the policy was decided certainly my experience was we found it difficult to get the speed of response that we wanted from the policymakers.

Q1269 Chairman: Can I just be clear about this because the language you are using rings true to the type of language that was being discussed when we investigated the disposal of refrigerators. There was a great argument within Defra about whether it was the gases in the fridge system or the polyurethane in the fridge door that was actually covered by the new directive. Let me just be entirely clear: in terms of interpreting in the British context, or the English context to be absolutely accurate, the policy which the Council of Ministers had agreed, were the delays within Defra in translating into the English environment the policy decisions which had been agreed by the Council of Ministers?

Mr McNeill: For us, in terms of the policy issues, the devil is in the detail so we were interested in the minutiae in some respects of the policy. Once the policymakers had taken the decision, the Council of Ministers had interpreted it, developed it, et cetera, my only point is we ended up, as the CLA have mentioned, with a relatively small number of experienced people from the policy side who could work with us in making sure we got the proper interpretation for implementation.

Q1270 Chairman: Let us be absolutely clear. Are you suggesting that Defra's interpretation, translation, from Council of Ministers' decision to English application was a slow process?

Mr McNeill: Well, it took over a year.

Q1271 Chairman: It took over a year.

Mr McNeill: Yes, from when we expected the decision from the end of 2003 it was the end of 2004. Whether that is slow or not, I cannot comment. It is a complex issue.

Q1272 Chairman: That was why I phrased my question in the way that I did. Our time is drawing to a conclusion and I want to return to the area of accountability. Let me see if I can sum up what you have told us because I am sure we could probably spend another hour looking at lots of detail but let us come back to where I think we are. You have described to us that Defra was, if you like, a knowing and well-informed customer of the RPA, it knew what it wanted, it told you what it was expecting from you and it decided the timetable. You sent back up the line all the messages about the system, the risks, in every aspect you kept your principal customer fully informed of everything that was happening, and that dealt with the technicalities, the resourcing, the timing. In other words, from the Defra ministerial team to the Defra senior management, if I have understood you correctly, they should have been left in no doubt as to exactly what was happening, why it was happening, what was not happening and what the risks were, they were a knowledgeable, well-informed customer. Is that a fair summary?

Mr McNeill: I think that is a fair summary, yes.

Q1273 Chairman: Right. The only person who is excepted and has had to deal with the element of accountability on this is you and yet we have just agreed that all of the other people in Defra, ministers and senior officials, were exceedingly well-informed from the information which your Agency provided and, therefore, had a good factual basis upon which to make any decision and all the decisions that they had to make in deciding to move to the Single Payment Scheme. The message I am getting is that there is an element of shared responsibility in terms of the decision making process, but in terms of accountability you are the person who has had to pay the price of losing their job. Is that fair?

Mr McNeill: If I could just pause for one moment and go back to your question earlier about my response and my suggestion in discussions with OGC. The fact of the matter was papers were put to CAPRI, I jointly chaired it, so every other meeting I was chairing it, I was the joint chair, then it went to ERG where I was a member, chaired by Brian Bender, and decisions were taken there and then in many cases it went to ministers. If I was an arm's length agency where I was the Accounting Officer and senior responsible owner I would not expect that level of contribution from the Department, I do not think. I could expect an oversight, a board every quarter or whatever. We were having these meetings almost weekly and decisions were being taken on a regular basis. Papers were being escalated. This was noted by the OGC who also noted, and this was a discussion I had with them and it did not come from me, and expressed concern to me at the time, that Bob Assirati, who was the Deputy Chief Executive of the OGC at that time, headed up, I think I am right in saying, pretty much every one of those reviews and that was why we held them in some esteem. The report of the team that Bob put forward made the point that there should have been one owner, and I do not disagree with that. If you want to hold somebody responsible you let them get on with it and you supervise it. We also had people like Karen Jordan, appointed by Brian Bender, now Chair of the Cabinet Office Audit Committee, seriously experienced in project management, in audit and systems testing, et cetera, who was involved extremely hands-on. Only by looking at some papers recently can you see how often Karen was inputting into what should be done to make this right, et cetera. That was a departmental appointment and another person almost in a non-executive role looking at it. My only point is this: we had two SROs and we had that whole chain so, yes, I share your concerns that I seem to be in the frame for it and I am the one who has had to carry the can.

Q1274 Chairman: With this shared ownership of the management, you have just mentioned about the Executive Review Group being chaired by Sir Brian Bender, the CAPRI Board was jointly chaired by you and Andy Lebrecht.

Mr McNeill: As directors- general.

Q1275 Chairman: When it came to the key decisions being made there was an element of joint ownership.

Mr McNeill: At CAPRI, and I was a member of the Board. I did not disagree with the decisions that were being made but it was almost by committee when you look at it.

Q1276 Chairman: But if that is the case then all of the partners, you could argue, should accept some degree of the responsibilities for what did not happen as much as what did happen. If Karen whatsername was that good you are left asking why some of the things were not spotted. I suppose I am looking to see whether you feel that others also have a degree of responsibility that they should accept for what has occurred because they were part of the decision making process and they were as well-informed as you were about what was happening or what was not happening, what the timetables were, what the resourcing issues were, what the practicalities were. They had some degree of responsibility for the decision making process.

Mr McNeill: Chairman, from where I sit there is no doubt in my mind that we kept them fully informed. OGC reports were circulated untouched. Those are for the chief executive but they were always shared. I am unaware of any piece of information that was ever withheld from that process, therefore I can understand your point of view.

Q1277 Lynne Jones: The OGC recommendation of one person being put in charge, presumably if that had been you and you had the last word and you could have overridden all these other people, would you have done things differently?

Mr McNeill: No, Chairman. I made the point that I do not necessarily disagree. I was looking at this as a system and I was left in the situation as SRO where there were all these other committees taking these decisions.

Q1278 Lynne Jones: So the fact that you were not in charge, although at the time you think you would not made anything different, did you feel you were lulled into some kind of complacency because all these other people were sharing the responsibility?

Mr McNeill: I can assure you that complacency was something that we did not feel at that time. I had a team that was working round the clock and I was heavily engaged.

Q1279 Lynne Jones: You were working round the clock but you were just working on a treadmill that was not getting anywhere.

Mr McNeill: Well, it did get to the eleventh hour and fifty-ninth minute, unfortunately. Had the payments gone ----

Q1280 Lynne Jones: Not getting where it should.

Mr McNeill: Had the payments gone through it would have been satisfactory.

Q1281 Chairman: When the decision was communicated to you by Helen Ghosh that your services were no longer required, what did she tell you? What were the reasons that she gave?

Mr McNeill: I do not believe at that meeting she went into the loss of confidence issue, et cetera. My recollection, and I do have a note of it, was that she said to me that I was to be stood down following discussions with the Secretary of State the previous day, that I had been totally professional and had given 110 per cent. I was to speak to no-one, hence I have spoken to no-one since that day.

Q1282 Chairman: You just received this message and said, "Thank you very much", you did not say, "But could you explain this to me", because as far as I understand you had an unblemished assessment record as a chief executive.

Mr McNeill: Yes, I did.

Q1283 Chairman: Box one ticks all the way through, is that right?

Mr McNeill: Pretty much 11 years of it, yes.

Q1284 Chairman: You never received any kind of written warning, appraisal or other indication of poor performance?

Mr McNeill: A full bonus every year, give or take one or two per cent.

Q1285 Chairman: Box one ticks, doing a fantastic job, pat on the back, "Well done, McNeill, for good and faithful service" and when it comes to 14 March you were stood down, no reasons given. Did you not ask why?

Mr McNeill: I was expecting correspondence, which I have yet to receive. I was dismissed on 1 December.

Q1286 Chairman: So you have had no formal communication from Defra explaining in words of a limited number of syllables easily understandable reasons as to why you were stood down?

Mr McNeill: No, but I have read Helen Ghosh's comments in the various ----

Q1287 Chairman: If somebody has not delivered and you are going to be stood down, one of two things happens, you are either going to be redeployed or that is it, the curtains come down and the job ends. The enquiring mind, because clearly you have got one, usually would suggest you would ask why.

Mr McNeill: I was expecting some formal correspondence detailing that, as one would do. I am a Chartered Fellow of the Institute of Personal Development and one would expect to receive a statement of the concerns of your employer and to have the normal opportunity of some disciplinary hearing, possibly an appeals process, and the possibility of appeal outwith that. The fact of the matter is I have received two letters from Defra, both of which are about two-thirds of a side of A4. The first one tells me the grounds on which they intend to dismiss me and part company with my services and the second one does dismiss me. I have had no disciplinary hearing, no statement of the case against me. I am still unaware, when I read third party in various reports, as to why I am in this position. I have an unblemished track record, I have been through BSE, the E.coli crisis, the Phillips Inquiry, praised for work that I and the Meat Hygiene Service have done, and even in this job in the time of BCMS we have managed to have the beef ban lifted because the BCMS records are now some of the best in Europe and that means there is proper traceability which meant that the FEOGA auditors were very pleased and were able to recommend we could move to that. I can list any number of other successes in my time at the RPA. The one thing that unfortunately did not get delivered, not due to any lack of any effort and it is with deepest regret to the customers who have suffered, was that we were not able to make the SPS payments in the timeframe defined by ministers.

Q1288 David Taylor: On Tuesday 14 March 2006 you told the Secretary of State that all the payments would not now be made in line with the expectations. Was that at a face-to-face meeting?

Mr McNeill: It was, yes.

Q1289 David Taylor: What was her reaction, very briefly?

Mr McNeill: The Secretary of State was obviously concerned by that. I think more visibly affected were others round the table, they were obviously very concerned.

Q1290 David Taylor: From who?

Mr McNeill: I had left that meeting. We were asked to leave the room. I raised this issue about the legal concerns about the batch authorisation et cetera and Donald Macrae, the legal director, was called in and we left at that stage. I think there was some considerable sympathy around the table that at the eleventh hour we found ourselves in that position. I would not say the Secretary of State displayed any particular emotion. She thanked me for my honesty, that was the only thing I remember.

Q1291 David Taylor: She was not obviously "bloody livid"?

Mr McNeill: Not from where I was sitting, no.

Q1292 Sir Peter Soulsby: You have told us several times in your evidence that you believed throughout it was doable right up to that last minute. Did anybody, and from what you have said I think I know your answer to this, ever question the fundamental doability of the project with you as opposed to whether it was going to deliver on time?

Mr McNeill: No.

Q1293 Sir Peter Soulsby: Nobody ever questioned your belief that it was fundamentally doable?

Mr McNeill: Accenture never said it was not doable, they gave evidence to that effect. The OGC never said it was not doable, in fact the assessment was Amber and we had improved dramatically up to that stage. The operations team that I had still felt they were going to pull it off and that was the basis of the operational reports. No, nobody. I was with Karen Jordan after we started payments and the general perception was that because the system worked for some we anticipated that it would work for rest. The answer is if you can find someone who told me it was not doable I would like to meet them.

Q1294 Chairman: Mr McNeill, thank you very much. You have been patient with the Committee. I am glad you agreed after our discussion to come before us. I think it has been very helpful for us to have an insight from your perspective as to what occurred. I hope you feel you have had a fair hearing in terms of the questions we have asked. I am sure many of the farmers will read with interest your unequivocal apology for what occurred. There may be one or two points of further detail that we might want to correspond with you about. Thank you very much indeed for coming and putting on the record your version of what occurred.

Mr McNeill: Thank you, Chairman.