The level of disallowance to be imposed on the Scottish Government by the European Commission has been confirmed as £35 million.

The withheld funding – or disallowance - dates back to a 2009 audit and relates primarily to systems that were put in place between 2003 and 2007. Following the 2009 audit, the EC called for the Scottish Government to improve the accuracy of Scotland’s land maps to avoid the risk of farmers overclaiming for Single Farm Payment.

Rural Affairs Secretary Richard Lochhead said the amount of disallowance demonstrated that the Scottish Government’s efforts to keep the penalty as low as possible had paid off.

Mr Lochhead said:

“Confirmation of the level of disallowance which the Scottish Government would face has been long awaited – and has attracted a great deal of speculation.

“We have worked hard to limit the level of disallowance as far as possible.  Indeed, at less than two per cent of the total spend for the three years concerned, the disallowance level is well below the EC’s often-used flat rate of five per cent ‘financial correction’.

“And it is nowhere near the level of fines imposed on other countries – Sweden, for example, recently faced disallowance of £65 million while Denmark faced a penalty of £105 million, England was disallowed around £175 million and in Northern Ireland it was £80 million.  Indeed 24 out of the 27 EU member states received a disallowance relating to their area aid payments between 2005 and 2011.

“Working with farmers and the NFUS we have improved the accuracy of land maps to avoid the risk of farmers over claiming for Single Farm Payment and have made the inspection regime more robust. The EC recognised these improvements in an audit in 2010.

“We have already made provision to cover the cost of this level of disallowance in the Scottish Government budget in previous years and so there will be no impact on farmers or existing budgets.”

Disallowance is EU funding that has been held back by the EU following a failure to comply with European regulations. 

The amount of funding withheld is usually a flat rate percentage of the total expenditure. The starting point of disallowance for weaknesses in inspections and mapping systems is five per cent and can go higher.

The EU practice of applying disallowance of expenditure for poor financial controls that led or could have led to incorrect or ineligible payments having been made is widespread across Europe.

The disallowance arises primarily from Single Farm Payment Scheme and other systems that were put in place between 2003 and 2007. 

The main issue on farm payments related to the inclusion of ineligible areas not identified at inspection, the accuracy of the information held on our systems regarding field boundaries and the location and extent of ineligible features. 

Updating the Land Parcel Identification System - to capture up-to-date mapping and eligibility details of all agricultural land (around 440,000 fields) - to help avoid future disallowance is well underway.

The Scottish Government continues to invest heavily in improvements to both its mapping service and inspection process, to confirm eligibility. For example, aerial photography is made available to farmers to help in the accuracy of claims and revised guidance and training has been put in place to support inspectors.