Government has not assessed the impact of delayed subsidy payments on farmers and the rural community nor done enough to mitigate their impact, the Public Accounts Committee says.

The conclusion comes in a new report examining delivery of the Common Agricultural Policy (CAP), the European framework of subsidies and rural development programmes. 

The Department for Environment, Food and Rural Affairs has overall responsibility for CAP and the Rural Payments Agency (RPA), as the paying agency for all CAP payments in England, pays out £1.8 billion a year to English farmers and landowners.

Department must ensure "full payments are made in a timely manner"

The CAP provides direct financial support to farmers primarily through the Basic Payment Scheme (BPS), which accounts for around 80% of total payments.

The Committee says the extent of the RPA's failure to pay farmers in England on time and in full "is now clear" and provides a breakdown of figures in its report.

It calls on the Department to use better data and ensure "accurate, full payments are made in a timely manner" in the current payment window and to restore previous payment performance levels for 2017–18.

Penalties on department for non-compliance with scheme "far too high"

The Department must improve its understanding of the impact delayed payments have on farmers and the wider rural community, says the Committee, and in particular learn lessons from the floods of 2015 "to ensure payments to farmers in times of crisis are not delayed". 

The Committee welcomes the Department's decision to rename "hardship" payments but urges it to provide "greater certainty" to farmers about when they will receive funds through this route, concluding the availability of such payments "was not enough to mitigate the impact on farmers' livelihoods of late and partial payments".

The Committee raises significant concerns about disallowance penalties, imposed by the European Commission for not complying with the scheme's rules, which it concludes remain "far too high" at a level above those for nearly all other EU countries.

Record of failure does not inspire confidence

Leaving the EU does not absolve the Department from ensuring that the current high level of disallowance penalties does not continue, says the Committee.

It recommends the RPA is "at the table" to support discussions of any future subsidy payment scheme to farmers following Brexit.

However, the Committee warns: "The Department's record of failure when developing systems to support subsidy payments to farmers does not inspire confidence in its ability to cope with the challenges associated with Brexit that lie ahead."

Deputy Chair's comments

Richard Bacon MP, deputy chairman of the PAC, said: 

"The recent history of the Basic Payment Scheme is a sorry affair.

Farmers have suffered badly from the collapse in service levels and Government has done too little to help them cope with the fallout.

At the same time, taxpayers continue to be hit in the pocket by financial penalties arising from the Government's failure to deliver the scheme properly—penalties running to more than half a billion pounds for England in the current period.

Rapid and effective change is required during what is a critical phase for the Rural Payments Agency, whose chief executive is leaving at the end of this month, and the Department for Environment, Food and Rural Affairs more widely.

If farmers are to be properly supported through Brexit and beyond it is vital their interests are represented at senior level. In particular, the RPA must be at the table during discussions of any future subsidy payment scheme."

Report summary

The extent of the Rural Payments Agency's (the RPA's) failure to pay farmers in England on time and in full is now clear. 

The RPA paid only 38% of farmers under the Basic Payment Scheme on 1 December 2015—first day of the payment window—compared to over 90% in previous years. By the end of January this had risen to 76%, but at the end of March 2016 there were still 14,300 farmers (16%) who had not received any payment. 

Over 10,000 farmers who had received a payment had not been paid in full. Two thirds of the additional payments made to these farmers were in excess of €1,000 and were first paid in September 2016, over 9 months after the first payment could have been received. 

Department slow to address risk of penalties from European Commission

The Department for Environment, Food and Rural Affairs (the Department) has responsibility for rural affairs in England, but it has not assessed the impact of these failures on farmers and the rural community nor done enough to mitigate the impact on farmers' livelihoods of late and partial payments. 

The Department has been very slow to properly address the risk of financial penalties, known as disallowance, imposed by the European Commission for not complying with the scheme's rules which remain far too high and it has failed to learn lessons from other countries that have been more successful in avoiding these penalties. 

The Department's record of failure when developing systems to support subsidy payments to farmers does not inspire confidence in its ability to cope with the challenges associated with Brexit that lie ahead.