HC Deb 12 March 1999 vol 327 cc681-8

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hanson.]

2.32 pm
Mr. Gareth Thomas (Clwyd, West)

After today's announcement by my right hon. Friend the Minister of Agriculture, Fisheries and Food on the outcome of the Brussels negotiations on common agricultural policy reform, this debate has become rather more topical than I had expected it would be. May I express my pleasure that the Under-Secretary of State for Wales, my hon. Friend the Member for Cardiff, Central (Mr. Jones), has returned safely from Brussels? It is good to see him in the Chamber. I shall have some serious questions for him about the rather important issue of how common agricultural policy payments and subsidies are administered.

I should like, first, to concentrate on the system for distributing the moneys that play such an important part in sustaining agriculture, not only in Wales but across the United Kingdom. Although I accept that the Government have made progress on the matter, there is great concern that the current system is inefficient and subject to wholly unacceptable delay, and that it needs to be reformed root and branch.

The second theme which I wish to pursue concerns the manner in which European Union regulations governing payments of subsidies are interpreted and the overall issue of fairness. There is a perception—I can vouch for it from my own constituency postbag—that the rules are construed rather inflexibly and unfairly by the Welsh Office Agriculture Department.

There is a perception that Wales has been the poor relation in respect of the administration of the system of payments and the resources and the information technology required to deliver an efficient system. The Government have acknowledged that, as they have commissioned a major review. I expect that my hon. Friend the Under-Secretary can tell us more about the progress on that.

Let us remind ourselves of the importance of CAP payments and subsidies to Welsh farmers and the Welsh rural economy. In 1997–98, the payments amounted to £230 million and no fewer than 20,000 Welsh farmers received some form of payment or subsidy. I understand that the payments account for some 50 per cent. of farmers' net incomes.

I need hardly remind my hon. Friend the Under-Secretary that agriculture is in a difficult state. His Department's forecast for this year anticipates a drop in farm income of 41 per cent., leaving the average farmer in Wales with an income of about £6,000 per annum. If there were any need to disabuse the general public of the idea that small farmers in my constituency and in Wales as a whole are well off, the figures would speak for themselves. Farmers are going through a particularly difficult time as a result of world trading conditions and the aftermath of the BSE crisis. Farmers, particularly in the less-favoured areas in Wales, depend heavily on the hill livestock compensatory allowance.

Given the critical state of the Welsh rural economy, cash flow is crucial. The Government accept the need for public support for agriculture in the widest public interest, but we need a better system for delivering payments, which must be made more efficient and more timely.

A letter that I received recently from the National Farmers Union in Ruthin about the inefficiency of the present system stated: The dramatic fall in farm income has been compounded in recent years by continued delays in administration and processing of applications by the Welsh Office. These delays are unacceptable and have contributed to severe cash flow difficulties experienced by Welsh producers, thus placing them at a serious disadvantage with their English counterparts. As I said earlier, the Government have responded and, following a comprehensive review by the management consultants, Hedra, work is in progress on a three-year project to update the system. One of the key findings of the Hedra report was that the Welsh Office Agriculture Department, to which the task of distributing payments has been devolved—and it will subsequently go to the National Assembly for Wales—could not meet farmers charter targets. The report accepted that, for many years, the Welsh Office Agriculture Department had been operating under what was described as crisis management. There were severe problems with the IT system, which was regarded as outdated, and there were inherent difficulties in the paperwork and the forms.

On 15 December last year, the Secretary of State for Wales announced that he accepted the findings of the management consultants' report and that there would be a three-year project to revolutionise the payment system while retaining the present network of Welsh Office Agriculture Department offices. The aim to which the Government aspire is, in the words of the Secretary of State, to concentrate on treating farmers properly and releasing payments accurately, on time and with as few burdens as possible. In the light of that, I have some questions for my hon. Friend the Under-Secretary. First, what progress has been achieved? I appreciate that this is at an early stage, but an indication of what steps have been taken to implement the project would be much appreciated. Secondly, what resources have been put into the project? I ask that with particular regard to computer technology, which will form an important part of the updating process. Thirdly, when will the improvements come about? Fourthly, what steps will be taken to monitor the effectiveness of the changes? Fifthly, how will the system cope with recent and imminent changes to the common agricultural policy regime and the introduction of the all-Wales agri-environmental scheme, Tir Gofal, which was launched in my constituency last week? Sixthly, and crucially, will the Government consider accelerating the process of change from the anticipated three years to nearer two years or one year? If the implementation of the new computer technology is outsourced, why is it not possible to have real progress much earlier than in three years?

Delay in payments is an important issue. Farmers have experienced severe problems, causing tremendous cash flow difficulties. On the death of a partner in a farm partnership, the Welsh Office Agriculture Department freezes all payments of subsidy to the farm until it has received the grant of probate. That can take up to a year, during which no payments are received. I should like my hon. Friend to review that issue, about which the Farmers Union of Wales is particularly concerned. Could not written assurances from a solicitor be accepted? I appreciate that the Welsh Office needs assurances as to the identity of the right person for payment, but I hope that my right hon. Friend the Secretary of State will adopt a more pragmatic approach.

My second main issue relates to the fairness and consistency of the application of the integrated administration and control system—IACS—rules, particularly in the light of European Union regulation 3887/92, with which I am sure that my hon. Friend the Under-Secretary is familiar. My evidence is that it is applied inflexibly and unfairly. I appreciate that the European Union demands high standards of probity and accountability, and that there should be rules to prevent the risk of abuse, but rules should be for the guidance of wise men, not the blind obedience of fools. On many occasions, insufficient common sense and common justice have been applied. My hon. Friend knows of my keen interest in agricultural matters, reflecting my rural constituency, and I am due to see him next week to discuss some individual cases.

Mistakes arise as a result of the complexity of the paperwork. There are examples of claims being turned down because field areas were given in acres rather than hectares, because certain boxes were not ticked, because incorrect field numbers were given on the claim forms, because of a failure to submit a valid form due to ill health or because there was a mistake in copying an identification number.

I should like to refer to two cases, to which I do not expect a formal reply from my hon. Friend today. I am simply putting him on notice. He has received correspondence on the matter, and I look forward to a detailed response from him when I meet him next week.

The case of D. W. and E. F. Roberts of Tan-y-Crraig, Llangernyw, involves an incorrect forage declaration on the IACS form. There was absolutely no element of bad faith on their part. There was an error in so far as the field recorded on the form was the wrong one. That was due to the fact that the owner of the field had given my constituents the wrong number—an innocent mistake, which seems not to have been taken on board in the Welsh Office. I want the Welsh Office seriously to consider taking a sympathetic approach to that case.

The case of the well-established family farmers G. E. Edwards and Sons of Llanfwrog has also given me much cause for concern. There has been extensive correspondence between me, my hon. Friend the Under-Secretary and his predecessor on the matter. It concerns sheep annual premium and hill livestock compensatory allowance claim forms for 1997, which were rejected because they were submitted out of time. Rather unfortunate circumstances surround the case, arising from the illness of the senior partner, who would normally have provided the paperwork. I ask my hon. Friend seriously to reconsider the merits of the case, which is very sad. I want him to think again about it, even if it means stretching the rules. He can do so justifiably because they allow sufficient scope for discretion in order to formulate solutions that are consistent with common sense.

What progress has been made in agreeing the recently published Commission proposals, which would permit the waiver of automatic penalties for certain types of error? I would be interested to hear my hon. Friend's response. Article 11 of the regulations to which I refer deal with the vexed issue of force majeure. The European Commission accepts that, where the defence of force majeure is made, it can excuse claimants from failure to comply with certain conditions. How is that article interpreted? Does the Welsh Office have a definitive view? Is it a question for the Welsh Office Agriculture Department or for the Ministry of Agriculture, Fisheries and Food here in London?

I speak as someone who has a predilection for adopting a legal approach, since I was a lawyer before I entered Parliament. Article 11 gives very wide discretion as to how to interpret force majeure. Clause 3 of the article says: Without prejudice to the actual circumstances to be taken into account in individual cases, the competent authorities"— I query whether the competent authority is MAFF or the Welsh Office Agriculture Department— may recognize, in particular, the following cases of force majeure". They include the death of the farmer, long-term professional incapacity, a severe natural disaster, and so on. What is significant, and what I do not think the Welsh Office fully accepts, is that the list is neither exhaustive nor determinative of what amounts to force majeure. I want the Welsh Office to apply its collective mind to how to interpret article 11 fairly and consistently.

Clause 2 of article 11 refers to the need to lodge the invocation of force majeure within 10 working days of the date on which the farmer is in a position to do so. That must mean that the farmer must be aware of the circumstances that enable him to invoke the force majeure defence. That was not acknowledged in the cases to which I have referred.

I want the Welsh Office to consider an appeal tribunal—a second independent opinion—for rejected claims. Such a tribunal exists in Ireland. Does the Welsh Office believe that the transfer orders under the Government of Wales Act 1998 allow the National Assembly for Wales to use its subordinate legislative powers to set up such a tribunal? That would certainly be much valued.

I am sure that my hon. Friend the Under-Secretary will agree that we must get the administration of payments right. That is necessary in the public interest and is essential for fairness and to ensure that farmers can survive what is a very difficult time.

2.51 pm
The Parliamentary Under-Secretary of State for Wales (Mr. Jon Owen Jones)

I am grateful to my hon. Friend the Member for Clwyd, West (Mr. Thomas) for raising such an important issue for debate at a time when farming and rural communities are facing a great deal of economic hardship. We are now facing major changes as a result of negotiations that were completed only a few days ago in Brussels. He has been assiduous in representing the interests of farmers in his constituency to the Welsh Office over many months, and he is joined today by my hon. Friend the Member for Delyn (Mr. Hanson), who has been similarly assiduous.

Sheep production makes a very significant contribution to the local economy in Clwyd, West, with more than three quarters of a million sheep and lambs on more than 900 holdings. Net farm incomes in the less-favoured areas of Wales are forecast to have fallen by two thirds in the past year, and the situation has been exacerbated by the continuing strength of sterling, the collapse of export markets in Asia and Russia, and the beef export ban, which we have been working so hard to overturn.

Farming communities are the bedrock of rural Wales and the Government are committed to supporting the industry as it meets the challenges of the years to come. Reform of the common agricultural policy is necessary as fundamental changes occur both in the European Union and in the liberalised worldwide market, with the reduction or removal of supply controls.

The Government are committed to the concept that environmental considerations must be integrated into subsidy payments to farmers. We cannot tolerate a situation in which the agricultural community becomes wholly dependent on direct subsidy from central Government and the European Union.

Since coming to power, in recognition of the difficulties faced by farmers, the Government have provided vital short-term help for the industry. My right hon. Friend the Minister of Agriculture, Fisheries and Food announced on 16 November a further major aid package for UK farmers totalling £120 million. Welsh farmers will receive £21 million of that, which will mean, on average, about £1,500 extra for all cattle and sheep farmers in the less-favoured areas.

A £5.6 million subsidy was targeted to suckler cow producers in Wales, and 98 per cent. of that has already been paid. The remaining £15 million earmarked for Wales means that farmers can expect an average increase of about 55 per cent. on current rates for hill livestock compensatory allowances. The payments are well under way and we expect to have paid the vast majority by the end of April.

The new all-Wales agri-environment scheme, Tir Gofal, will embrace the best practices from existing schemes. It is a whole farm initiative, to be run by the Countryside Council for Wales in partnership with the Farming and Rural Conservation Agency and Snowdonia national park.

My right hon. Friend the Secretary of State for Wales has launched three agri-food plans for the lamb and beef, dairy and organic sectors this week. They have been developed after wide industry consultation and are based on a common vision, linking the primary produce of Welsh agriculture to profitable markets. The plans form an important part of the Welsh Office's strategy to help farmers, and clearly demonstrate our continuing commitment to the industry. However, we cannot fully protect farmers from economic realities, though our short-term aid package will help to offset some of the financial hardship. The extra aid payments have placed additional burdens on the Welsh Office's payments regime.

The Welsh Office has made some progress with its standard CAP payments this year. For 1998–99 arable payments, 98 per cent. of advance oilseed payments were made by the due date last September, and 93 per cent. of the main arable payments were made by the end of December 1998, against 63 per cent. in 1997. I am also pleased to say that final oilseed payments commenced last month and we anticipate paying 100 per cent. of those claims by 21 April. Also, 97 per cent. of eligible claims from the sheep annual premium scheme have now been paid. Beef special premium and suckler cow premium advance payments commenced in November 1998 and have achieved a payment rate of more than 80 per cent. to date, against 75 per cent. in the previous year. General scheme performance against farmers charter targets is improving, but I acknowledge that it is still unsatisfactory when most schemes are achieving only between 70 to 80 per cent. of their required targets.

It has been recognised for some time that the administration of EU agricultural subsidy payments has been problematic in Wales. The current payments system is out of date and labour intensive. Most of the schemes are difficult to administer and are underpinned by a plethora of EU regulations and accompanying UK statutory instruments.

The payment of £200 million of EU subsidies, via 160,000 transactions to 20,000 farmers each year in Wales alone, necessitates the production of a complex suite of computer programmes. Those have to be tested and rolled out to our divisional officers who strive to give the best possible service, but it is clear that improvements to that service can and must be made.

We fully accept that farmers should receive their subsidy payments on time, notwithstanding the complexities of the current EU rules governing those payments. We recognise that delays in payment have been an added problem for farmers. Our failure, in Wales, to meet farmers charter targets is not acceptable.

As part of the Government's comprehensive spending review in 1998, the Welsh Office appointed consultants to assess the options for securing improved administration of payments to farmers in Wales under the CAP rules. All options, including transferring the work to the Ministry of Agriculture, Fisheries and Food or the Intervention Board Executive Agency, involved developing new computer systems and business processes for making payments. Following widespread consultation with farming unions, Welsh Members of Parliament, Welsh Office staff and trade unions, it was decided to retain the work within the Welsh Office.

As hon. Members in Wales will know, my right hon. Friend the Secretary of State announced on 15 December 1998 a major three-year project that will improve the payment system to Welsh farmers. It will develop joint delivery of services with other public sector bodies in Wales, and establish front offices for the National Assembly at the Agriculture Department's divisional and local offices. The project will develop local accessibility of services to farmers and safeguard approximately 500 jobs in rural Wales.

The £16 million project is a new investment and will not be funded from existing provision for Welsh farmers. It is one of the largest single projects facing the Welsh Office and the National Assembly, and demonstrates our commitment to improving the service provided to farmers and others living in rural Wales. Three quarters of the funds have been secured from the Treasury's new invest-to-save budget which is intended to encourage cross-boundary working between Government Departments to ensure more efficient and effective public services. That will involve a new farmer-centred approach to the administration of the CAP in Wales and will reduce the administrative burden on farmers. An early priority will be the simplification and standardisation of services.

Over the coming months, we will work closely with the farming community and others in rural Wales to find out what improvements they want. We will also look at how the common agricultural policy is administered in other member states so that we can adopt best practice. I regret that I cannot answer specifically some of the questions that my hon. Friend asked about the payment process and its development. However, I trust that he understands that we recognise that the present payment regime is inadequate and are actively seeking to improve the system.

While attempting to make our services more customer friendly, we have to acknowledge the need for good regulation and control. Regulation is unavoidable as United Kingdom farmers benefit from around £3 billion-worth of European Union and domestic support measures. We have to take account of operating systems in all member states in order to ensure consistency of approach.

Taxpayers' money cannot be spent without controls, which are in place to ensure that the right amount is paid to eligible farmers. Controls also need to be seen to be in place, particularly in the context of lifting the beef export ban. Member states presently have little discretion over how European Union rules are implemented, and EU auditors frequently check that the United Kingdom territories are administering the schemes correctly. The penalties for not doing so can result in substantial financial disallowance of European Union funding, with a consequential cost to the United Kingdom Exchequer.

I shall meet my hon. Friend to discuss the particular cases that he has brought to my attention. However, he will understand that I cannot address those specific problems from the Dispatch Box today—and it would not be advantageous to those concerned if I were to do so. I trust that I have been able to demonstrate that, subject to the constraints of ensuring consistency across the United Kingdom and the European Union, I shall do all I can to make sure that the rules are operated in a manner that takes account of human frailty. I ask my hon. Friend to accept my reassurances for the time being. I will be glad to discuss with him and with any other Welsh Members specific cases in depth if they require me to do so.

Question put and agreed to.

Adjourned accordingly at two minutes past Three o 'clock.