Rural Economy and Connectivity Committee

Meeting date: Wednesday, January 25, 2017

Official Report 600KB pdf

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Common Agricultural Policy Payments

Item 2 is evidence from the Cabinet Secretary for Rural Economy and Connectivity on common agricultural policy payments. The session is intended to allow the cabinet secretary to update the committee following the evidence that he gave us in September 2016.

The cabinet secretary is joined from the Scottish Government by Elinor Mitchell, who is director, agriculture and rural communities; Eddie Turnbull, who is head of agriculture and rural communities information systems; and Annabel Turpie, who is chief operating officer, rural payments operation. I welcome you all.

Cabinet secretary, would you like to make an opening statement? I remind you that we are short of time, because there are a lot of questions on what is an important subject. I urge everyone to be as brief as possible.

Good morning, everyone. Thank you for inviting me to the committee to update you on CAP and on the extremely important fishing negotiations and their outcome.

Putting the 2015 CAP payments on a stronger footing and ensuring smoother delivery from the rural payments and services online payments system have been, as members know, my key priorities, and they remain so. They have been my key priorities since the inception of my role as cabinet secretary. As members know, we are making strenuous efforts to put the CAP futures programme and the 2016 payments on a better footing. That is what I promised at the outset that I would do, and that is what we are doing.

That has included reviewing staffing and team requirements, and we have put in place a new governance staffing arrangement. I am pleased to introduce today the leaders of that new—or nearly new—team. They are Elinor Mitchell, who is the director of the agriculture division and is the senior responsible owner for the futures programme; Annabel Turpie, who is the chief operating officer for rural payments and leads on ensuring that payments are being made and that we have in place systems and processes so to do, as well as on ensuring that we have CAP compliance; and Eddie Turnbull, who is the head of the information systems division, which is responsible for the provision of information technology services to the directorate, and whose role in the CAP futures programme is to ensure that we get the IT programme that we need to deliver the CAP payments.

We have made a great deal of progress on the 2015 payments since my statement to Parliament in September. This committee received a copy of the economy director general’s letter to the Public Audit and Post-legislative Scrutiny Committee, which provides a summary of recent progress. Since 8 December, an additional 1,658 payments have been made to customers, which is an increase in the total number of payments from 38,340 to 39,998. The value of payments made across pillar 1 and pillar 2 schemes has risen from £448 million to £455 million. For our basic payment, greening and young farmers schemes, which are the largest element of CAP funding, 99.7 per cent of estimated eligible claimants have now been paid, with payments totalling £343 million. For beef and sheep schemes, which make up the remaining element of our pillar 1 funding, we have paid 99 per cent of eligible claimants, with payments of a total value of £36 million.

Creating a dedicated payments control room has played a large part in turning around our payments performance, by enabling better co-ordination and quicker resolution of issues. For businesses that are awaiting payment, the national loan scheme that I established has provided much-needed support.

The president of NFU Scotland welcomed the loan scheme as going some considerable way towards filling the gap in the rural economy. The facts show that 16,357 businesses received more than £145 million to provide cover for the 2015 payment scheme. A large number of them have now received substantive payment.

In relation to 2016 CAP payments, my overriding concern is to ensure that rural businesses—our farmers and crofters—receive the 2016 payments as soon as possible and that we continue to support and grow the rural economy. As at 23 January this year, 13,172 businesses have been paid more than £271 million in loans until the 2016 payments are made.

Following the successful delivery of the majority of the 2016 loan payments, I decided to close the loan scheme to general applications on 20 January. A small number of top-up loans continue to be processed for businesses that have recently had a transfer of entitlements confirmed. Our loans team is working proactively with those businesses to ensure that any additional support is processed properly. Delivery confidence is improving and our attention is now firmly focused on meeting our commitment to complete the processing of 2016 pillar 1 payments by the end of June 2017, which is within the European Union’s prescribed payment period.

I draw the committee’s attention to a consequential factor around the recovery of loans, which I recognise is—understandably—an interest for members of the Public Audit and Post-legislative Scrutiny Committee. By recovering loans primarily through offsetting against the grant that is due, we have taken the initial decision to schedule recovery of such loans. That is necessary to recognise that expenditure on loans added risk to the Scottish Government budget. In practice, there should be no material detriment to anyone, as all applications should be handled within the overall payment window.

On the software side of things, we have received assurances from our contractor, CGI, that the IT system functionality for the 2016 scheme will be delivered early in 2017. I met Steve Thorn, CGI’s UK president, on 15 December and on 12 January to make clear the seriousness of the situation. He has now personally overseen the introduction of key contingency steps to deliver the IT. I am sure that members will want to get more detail about that, which I will not go into now; Annabel Turpie will be able to do that.

We are much clearer about the risks in the delivery of new IT functionality and how those risks should be addressed. The more robust testing methods that have been introduced pre-launch mean that the system is much more reliable and better meets the working practices of area offices and headquarters staff, as well as our customers, at the first time of asking. My officials are continuing to work closely with the IT contractor and we are monitoring the situation. There is also a continued focus on delivery and support for farmers in our area offices and here in Edinburgh, and I am being kept fully in the picture.

It is worth reminding ourselves why we are here and why we decided to build bespoke software. We were responding to clear asks from the rural sector, which wanted three regions, not one. We also faced a significantly reformed, delayed and complex regulatory requirement regime from Europe. The business case to automate some of that was strong then and remains strong now. A compliant CAP IT system will provide value for money. I am seeing progress, but significant programme and technical risks remain, which I am absolutely focused on.

I am seized of the on-going challenges as we approach our key deadlines; notwithstanding those challenges, I expect the programme to deliver the necessary components for CAP compliance within its £178 million budget. The original decision to develop a bespoke IT system was sound. The cost of the futures programme, which has helped to deliver our online payment system, represents about 4 per cent of the £4.45 billion of CAP funds that are due to be delivered to Scottish farmers under the new CAP regime by 2020.

Because of the complexity of the new CAP, attempting to deliver it without a bespoke IT system would have resulted in significant EU penalties. Our benefits analysis demonstrates that developing a CAP-compliant system will avoid potentially £276 million of financial penalties up to 2021-22.

10:45  

To deliver compliance within the budget, we have proactively improved quality and driven down costs by negotiating a number of improvements and changes to the contract with our main supplier. We are happy to answer questions from members about that.

On lessons learned, a number of interrelated factors have led to the issues that we have experienced with the CAP futures programme. We have implemented the recommendations of a number of audits and reviews to improve the situation, which is not characteristic of IT projects in the Scottish public sector. There are examples of good practice, including the Scottish electronic tax system, the building and planning business transformation programme and the Scottish wide area network public services programme. It is important to explain that we are applying lessons from other projects, and lessons from CAP are being fed back to other public sector IT projects. The Scottish Government has recently introduced new assurance processes that provide for a more robust and interventionist approach.

On staff involvement, my officials are working very hard indeed to get the payments out. I am in daily contact with my senior officials as we drive forward delivery of the CAP futures programme to ensure that support is provided to rural businesses. I have visited many of the rural payments and inspections division offices; staff on the ground have a key role, and their feedback is crucial.

I will cut out some of my statement, convener, because I see that you are becoming somewhat impatient—perhaps not unreasonably so. However, we are doing a lot of work, and I think that it is reasonable for me to point some of that out.

I hope that I have provided assurance that the work that we are undertaking is having a positive impact on the completion of the 2015 payments and on putting the 2016 payments on a better footing.

I am not becoming impatient—I am simply aware that committee members have a lot of questions. We are always grateful for your full answers, so I would like to get some answers to specific questions.

Before we get into the questioning, Peter Chapman and one or two other members would like to declare their farming interests.

I declare an interest in a farming business back home.

I have a registered agricultural holding of 3 acres, from which I derive no income.

I declare an interest as a partner in a farming partnership.

The first question comes from Peter Chapman.

We are—sadly—still awaiting some 2015 payments. I thank the cabinet secretary for the updated information that he has given; it is good that something like 99 per cent of the pillar 1 payments have been made, but substantial moneys are still outstanding for pillar 2 payments. The biggest area is the less favoured area support scheme moneys. Approximately 2,400 farmers are still awaiting those payments, and £17.5 million is outstanding. That money is seriously late, and we need an explanation for why the process has taken so long.

Thank you for that comment. I am pleased that you, as a farmer, recognise that the 99 per cent performance figure is good, but I accept that it is not good enough. LFASS payments are perhaps the most significant area in which we have yet to complete the 2015 payments.

I will state the figures in the round and then pass over to my officials, who can provide a bit more detail. This area is extremely important to me. An estimated 11,380 businesses are eligible for less favoured area support and 7,532 payments have been made. The amount that has been paid is £46.7 million and the percentage of those who have been paid is 79 per cent. The number of businesses that are still to be paid is 2,408, which equates to a total of £18.8 million in unpaid moneys. However, I understand that a substantial proportion of that has in effect already been paid through the loans system. I will explain that.

The LFASS claimants were entitled to claim loans on their payments, which were risk assessed up to 100 per cent. I appreciate that an average refers to a cohort and that any individual case is very serious but, on average, each loan amounts to about 80 per cent of the total. The point that I am making is that, although the payments are not fully completed, in the round, most of those who are entitled to LFASS payments will have received a loan and the average loan will be about 80 per cent of the total. I say that not in any way to excuse the fact that we have not completed the job but to put the situation in context.

I know from speaking to Richard Lochhead that there is always a tail of cases in which CAP payments have not been made within the recognised time limits, on both sides of the border. Sadly, the tail is far more bushy this year than it was in previous years.

I will add a bit more detail to the figures. There are 2,408 payments still outstanding, in respect of which people will receive payment—that is, the loan is not the total money that they will receive. The cabinet secretary has referred to £17.4 million, of which £13.6 million has been paid out in loans and will be recovered against the payment, which leaves £3.8 million still to go to farmers.

When do you think that you will complete the process? When will all the payments be made?

The delay in payments relates mainly to common grazing provision, which will be addressed in the next release of functionality. That will be in place by the end of the first week in February, and I would expect payment after that. I would like to update the committee when we have more certainty about that date, as it is not helpful if we give a date and do not keep to it. That is what is holding up the payments.

The other significant part that is missing is land managers options payments, which you seem to be struggling with as well. What is the explanation for only 70-odd per cent of them having been paid?

We are now at 77 per cent and 471 LMO payments are outstanding, which are worth £500,000. We are doing our utmost to process those payments, but I believe that some of them are subject to the same release of functionality. I cannot give you a precise figure for how many of those payments are being dealt with, but we are steadily decreasing the number. I can write to inform the committee of that if that would be appropriate.

So the IT system still cannot handle those cases. That is the problem—that is where we are at.

The next release of functionality will aid that—that is correct.

I would like to ask two questions to follow that up. Regarding the 2015 payments, can you confirm that everyone has been sent a letter explaining exactly what the payment is for? I am still hearing that some people have not had a letter. Where are we on that, please?

Payment letters went out for the beef premium, greening and young farmer schemes. However, the reductions and exclusions letter, which explains exactly what makes up the payment letter, has not gone out yet. Again, that information is dependent on the release of functionality, and I am sorry to say that I do not think that it would be realistic to say that that release will happen before the middle of March, which I know is deeply unacceptable. However, that is what I believe to be the case. I am trying to be realistic and to give deadlines to which we can keep.

The problem is that some people who are completing tax returns have no idea exactly where the money is coming from. Also, they do not know what has been added or subtracted or where the payment is, so they do not know how to budget for future years. That is deeply regrettable for people who are trying to run businesses. Do you agree that the letters are becoming more vital with every day that passes?

I absolutely agree. We have mentioned letters before, and the issue was picked up in the PAPLS Committee and during the director general’s appearance at committee in September. Elinor Mitchell may want to say something about that.

Effort is continuing in order to ensure that we get the letters out. I appreciate the importance of people understanding not just the amount of money that they will receive, but the reductions and exclusions, so that they can understand whether their payment is correct. However, anyone who can access the system online can log in and see their payment amount, so for accounting, bank and tax purposes, each person can find out the exact amount of money that they will receive. Anyone who is struggling to do that can contact their local office for help.

The convener mentioned tax returns; there is, of course, a box on the tax return form in which people can say whether figures represent estimates rather than final figures. Have you had any indication that HM Revenue and Customs is alert to particular issues that might exist for farmers and that it is taking a responsible attitude in respect of figures being estimates rather than final figures?

As I said, the information is available to people if they log on to the system—they can find out the exact amounts. However, the information that is missing is the reductions and exclusions. That information will be in the letters, which they will not get for some time.

Yes—but I will press you on my question. I want to know that HMRC will not pursue people who clearly demonstrate that gaps in the information that they provide to HMRC relate to the exclusions to which you have referred. Of course, you are not responsible for HMRC, and I am not suggesting otherwise.

I go back to the point that the amount of money that individuals will receive is available for them to know. I have had no contact with HMRC.

Gail Ross has a short follow-up question, then we will go to Richard Lyle.

I will ask later about disallowance and EU penalties. Does the Government’s having not sent out letters to people incur EU penalties?

No.

I do not think that this question has ever been asked, so bear with me. We have quite a number of schemes in agriculture—basic payments, greening, young farmers, beef and sheep, rural priorities, land managers, less favoured area support and the options scheme. Why do we have so many schemes? Who made us have all those?

That is obviously a question for the cabinet secretary, but I think that he is gathering his thoughts. I can delay bringing you in and bring Annabel Turpie in, just now.

No—I do not need a delay. I am just amused by the question. In a sense, it is a perfectly pertinent one—particularly for people who are not versed in all the acronyms and all the different schemes. They might look a bit perplexing to the outsider; they are sometimes perplexing to insiders.

I will try to answer the question. Plainly, the purpose of the schemes is to provide financial support to our farmers, crofters and land managers. The schemes have largely been influenced by EU policy. It used to be the case, of course, that the system was based on production, but that system became unpopular—perhaps because of food mountains. The system was therefore changed at the behest of the EU in about 2003 and member states were given three options for introducing the new land-based payments scheme, which has led, in turn, to a proliferation of schemes.

Schemes here have been devised by the Government in Scotland, working with representatives of the farming and crofting sectors, and principally with the NFUS. We—quite rightly—still work very closely with those representatives.

The situation at the moment is that we must allocate 4 million hectares’ worth of new payment entitlements, for about 400,000 fields, in three payment regions, for more than 18,000 farmers. I understand that the average field is the size of several football pitches. Each field needs to be mapped in a certain way, with a number of location points taken in order to establish the exact location of every single boundary. That work is required by the system because a digital map is required. The system has proved to be immensely complex. I say—with the benefit of hindsight—that perhaps all those who have been involved, including representatives of farmers and Governments, might have traded a bit of complexity for some administrative simplicity.

11:00  

I do not know whether members have any appetite for looking at the future of farm payments. I certainly do, because if the UK Government intends that we come out of Europe in March 2019, there will be only two more years of the CAP and I have no idea what will replace it. I note, based on a statement that she made recently, that Liz Truss does not know, either. As a pointer for the future, it should be recognised that there is a trade-off to be made in order to avoid a system that is so complex to administer that we have to devise a very complex IT system. I hope that Annabel Turpie will have the chance to explain exactly what we have been doing over previous weeks—she has been leading the work in a very vigorous and determined fashion—to implement one of the most complex IT systems that exists. Your question hit the nail on the head, Mr Lyle.

The Government is partly to blame for that complex system. Is the NFU also partly to blame, because it prompted the Government to develop all those systems?

I am not interested in blame; I am interested in responsibility. It is reasonable for me—without getting pious about it—to make the point that I have not shirked my responsibility. I have been open and transparent. I do not think that any minister has been subjected to so much scrutiny on an issue over so prolonged a period. I do not object to that, convener, because that is the committee’s job. No cabinet secretary has been more transparent about the issues that they face, or gone into more detail about the issues—and rightly so.

In the future, all of us who will have a duty to devise a perhaps different system, will have a responsibility to bear in mind and to recognise that how the system is administered is almost as important as the content and the substance of the system itself. I do not make that point as a plea in mitigation but, rather, as a pointer to the future. I do not know about you, but I am starting to think more and more about what we will do should Brexit go ahead—in particular, if it is a hard Brexit and especially if it happens in March 2019. In that case, there will be only two years left of the CAP, so when will we start looking at what we will do? However, I am happy to go over all the minutiae; in fact, I wanted to say more about the rural priority payments just to put things in context.

I am sorry, cabinet secretary, but I must ask you to stop there. The committee will look at post-2020 agriculture and everyone will welcome processes that will make it simpler. The very fact that the RPID budget has gone up from £34 million in 2014-15 to £62 million in 2017-18 suggests that we do not have a simpler system, so we will need to look at that in the future. I believe that the committee has an appetite for doing that. I thank Richard Lyle for his question. Gail Ross has a question on a different subject.

Because I am on this committee and the Public Audit and Post-legislative Scrutiny Committee, this is—rightly—the issue that I have scrutinised most. I thank you for your and the Government’s transparency.

I want to go back to disallowance in late 2015 payments. Elinor Mitchell told the Public Audit and Post-legislative Scrutiny Committee that the worst-case scenario estimate of disallowance for late payments was about €5 million. Does that estimate relate to late payments just for pillar 1, or for pillar 1 and pillar 2? If it relates only to pillar 1, are there estimates for pillar 2?

We are penalised only in relation to pillar 1 payments, so the estimate of up to €5 million relates only to pillar 1 payments. In order to finalise the figures, we are still in regular contact with rural payments agencies in the other parts of the United Kingdom. The estimate has not changed.

Have you estimated potential disallowance for any other infringement of EU CAP rules? How are other parts of the UK getting on with their administration?

It would be premature of us to estimate other disallowances—the audit processes have just started. We have had two European audits so far and others are planned—European Court of Auditors audits will be starting. There is a process of negotiation that goes on between those audit processes. We are informed of findings, then we negotiate and discuss with the auditors and come to an agreement. Until we are clear about what they have found, we would not estimate disallowance in relation to anything that they have come up with.

How are other parts of the UK getting on?

For the reasons that the cabinet secretary outlined, Scotland finds itself in a more complex situation in relation to the system that we are trying to process and the payments that we are trying to make. It is fair to say that Scotland has found it difficult to make CAP 2015 payments. However, Scotland is not the only part of the UK that has benefited from the extension of the penalty-free period, and no part of the UK has finalised the numbers yet. We are still agreeing a position.

Is there a timescale for the European audits?

We have a schedule of audits that we can share.

I am happy for you to answer briefly on the timescale, if you want, Elinor.

Certainly. The first beef 2016 audit was in April and was completed in June. A desk audit on the national reserve also took place in June. The next audit that we expect will be on land-based measures and will start in October.

We had the first European Court of Auditors audit, which is called the DAS audit, in November 2015. The 2016 audit was in June. The audit of the introduction of BPS was in October and we expect the next audit—of greening—in March.

The next question is on errors and overpayments.

We received a paper late last night in which you identified that, since your last committee appearance, there have been more errors in payments—we see that another 15 duplicate-payment errors with a total value of £490,000 have been identified. It seems that there is a shocking never-ending catalogue of errors in making the payments. That standard of operation is totally unsatisfactory. Something must be seriously wrong. You say that it is just a staffing and human-error issue but—surely to goodness—we need to get it right. It is totally unsatisfactory that another 15 people have been paid double and you have to ask for it back.

Are those duplicate errors different to the ones that were disclosed on 24 November?

Yes.

They are a different set of errors.

Yes—new errors were discovered that affect 15 businesses. I outlined at the PAPLS Committee some of the measures that we have put in place to try to get to the bottom of the erroneous payments. I should say that the error was made some time ago, but was discovered only recently.

What was unusual about the payments—and why the error was not discovered in checks that we did previously—was that they were made in euros rather than sterling. When we make a payment in euros, we have to extract bank details from the locally held system and then make the payment through the normal Scottish Government processing system. The first time we tried to make the payments to those 15 businesses, which was on 24 October, there was no European bank detail. Therefore, we went into the system, added the detail and the payments were subsequently made on 23 November. Unfortunately, although we were informed by email that the payments had been made, we did not use that information to update our master spreadsheet, which we held locally, so the payments were made again at the next payment run on 23 December. It was another human error and was made within the loans team. The difference was that it was a payment in euros rather than sterling, so the changes that we had made did not pick it up.

Since then, we have made some changes to our processing to make sure that such an error is not made again. We have taken all end-to-end processing for all euro payments back into a single team. A shared mailbox is used, so reliance on a single member of staff to take action has been removed. We have introduced a checklist approach to payment processing in advance of all payments, and we continue to implement recommendations from previous internal audit work on use of spreadsheets, which has been done on various teams. There is a training exercise in place on use of spreadsheets, which all staff who work on them are going through.

I will add a couple of general points. It is in the nature of the human species that we are fallible. When it comes to managing a group of people who are doing their best to get payments out to farmers, we should remember a number of things. First, the people in the RPID offices are absolutely determined to get payments out. Also, we have talked about the audit system: under EU rules, no payment can be made until it has been fully checked and validated. Penalties for errors are substantial, and the consequences for farmers of making errors are disproportionate—that opinion is probably common ground.

I know that some of the staff who made errors felt absolutely hellish about it. There are two things that I could have done: I could have beaten them around the head, in which case they would just have been demoralised and felt worse. Alternatively, I could have said, as I did, “You did a great job in getting the loan scheme out.” The big picture is that they got the loan scheme out, and that the payments were received earlier than they had ever been, at a time when, I understand—I am not a farmer—many farmers do their financial planning. That is just before the year end, in the dark nights when there is not so much that can be done on the farm. That was a calculated decision. The staff bust a gut to get the loan scheme payments—worth £272 million—out to about 13,000 people.

It is true that errors were made, but we will always make errors; errors were made in previous years. Members should read chapter 12 of the book, “The Blunders of Our Governments”, which is entitled “Farmers fleeced”. It reveals the errors that were made by our counterparts down south. I am afraid that we will never be able to avoid errors, but the best way to get the job done is to encourage and thank the staff, instead of there being an endless process of blame ascription and repetition of errors, in particular when most errors can be quickly corrected and all cases—as we have heard from Elinor Mitchell—can be sorted out.

That is the approach that I take. It is up to each of us to decide how we conduct ourselves and how we want to proceed. I ask members to spare a thought for the staff who are doing their best, under huge pressure, to get the job done well—I thank them for it.

Thank you for that, cabinet secretary.

I would like to make an observation, and I think that we share common ground on this: the penalties that farmers face if they make a mistake are disproportionate. Farmers find it a difficult process. I know from filling in the forms how difficult it is not to make a mistake, even when you have double-checked them. Therefore, it is always nice to hear that you are aware of that and will bear it in mind when the department becomes aware of mistakes.

Elinor Mitchell told us about the €5 million that may be asked for by the EU. Where is that allowed for in the budget? What contingency has been made for its payment?

I will say two things. There is 1 to 2 per cent disallowance every year, and provision is made for that in the Scottish Government’s accounts. In relation to the potential risk of having to pay €5 million, I cannot tell you specifically where provision is made for that in the accounts, but I can write to the committee on that point.

It would certainly be helpful to know where in the budget that €5 million will appear.

I have a technical accounting question on that. Are you treating it as a liability or as a contingent liability? If it is the former, you must make financial cover; if it is the latter, you do not need to.

I will cover that point in the update that I provide to the committee.

The next question is about the CAP futures programme. I noticed that Annabel Turpie wanted to come in on that, so this might be her moment.

11:15  

Could I just add something first? I should perhaps have signalled earlier.

Elinor Mitchell is all over this case. She has talked about a penalty of €5 million, and that is €5 million too much. However, let us recap on what the situation looked like when the Auditor General’s report was published—that was the day I was appointed, and I can assure you that it certainly concentrated the mind. The report said:

“A range of financial penalties is possible, with the potential range between £40 million and £125 million”.

At that point, we were looking over the edge of a cliff, quite frankly, because such a hugely substantial penalty would have been financially devastating.

We are not proud of the fact that there is a €5 million fine—that is not good, but it is a far improved position from the one that we faced on the day I took this job.

In May 2016, Audit Scotland said that the total costs of the CAP futures programme would be £178 million—I believe that the costs rose to that level in 2015, from £102 million in 2012 and £128 million in 2014. Interestingly, I note that Audit Scotland also said in its May briefing that it does not believe that the programme will ever deliver value for money.

The programme costs will be about £178 million, including £51.6 million of projected costs in 2016. The draft budget for 2017-18 includes £42.2 million for CAP compliance improvements. What is that £42.2 million for?

I will hand over to Eddie Turnbull on that point, but first I say to the committee that the CAP futures programme will close as planned on 31 March 2017, and the funding for that programme will be £178 million. Because of the difference in the financial years and the work that has been done, we will take some of the money from the £178 million into next year. However, the overall cost of the programme will be fixed at £178 million.

Eddie Turnbull can give you more detail about what the £42.2 million and other estimates will provide.

I will start by setting the issue in context. The initial build in 2015 created the foundation for a CAP-compliant system that would minimise the risk of disallowance and penalties. I think that members are familiar with that. We created what we called the minimal viable product—that was the foundation for certain things that had to be set up. In the past year, we have added new functionality, within the £178 million total that the convener spoke about. There are three features of that design that we are carrying over into the next year: the accounting element; the land parcel information system element; and the claims-to-payment functionality. We estimate that that will amount to roughly £6.7 million, which was in our budget this year and which, in effect, we need in our budget next year. That is the first call on the sum that you mention.

Of the remainder, around £23.5 million is for further IT development, which is about maintaining the solution that we have. We cannot just leave what we have built; it has to be maintained. Further, we still have to add functionality to that, such as any amendments that we need to put in place for the 2017 single application form processes. We have identified the types of amendment that we require, so we have an estimate of the cost of adding the functionality throughout the year.

The £12 million that we have left is for the futures programme’s transition back into the core business, particularly the area that I manage. We have a number of costly legacy IT systems that run in a different environment from the one that we have invested in for the futures programme. It is my plan—the directorate’s plan—to move those over, so that we do not have to maintain two environments.

We are planning to fund the transition of the CAP futures programme back to the Scottish Government across the information systems division and RPID. We will also fund a mixture of temporary and permanent staff. To refer back to what the minister said at the start of the discussion, those staff will undertake the intense technical work that needs to happen on land review visits and digitising maps.

It is for a mixture of IT and the new duties that the area office staff will have to undertake.

And headquarters staff.

Does Peter Chapman want to follow up on the futures programme?

No—we have had a fair answer on that one.

I am sorry to ask this after that lengthy discussion, but is Audit Scotland wrong when it says that the programme will not deliver value for money? Will it deliver value for money? I am unclear as to whom to believe.

I do not have the Audit Scotland report in front of me, but my understanding is that it said that the system would deliver CAP compliance. CAP compliance is the avoidance of penalties to a greater or lesser extent than we would usually seek to do. I believe that the £178 million will deliver a system that allows us to avoid penalties to a greater or lesser extent than we have been able to do in every other year.

So, in May 2017, when Audit Scotland reports again, it will say that the system is good value for money.

I would hope that it would report that the £178 million that we have invested gives us a system that allows us to process CAP payments in a way that maximises our opportunity to avoid penalties.

So it is good value for money.

It will allow us to avoid penalties which, as the minister said, would have been catastrophic.

I want to focus on and drill down into the loans scheme. Helpful information was provided to us last night, but I am more concerned about the information that has not been provided.

In 2015, £455 million of support was given out to our farm businesses. However, the loans scheme for 2016 has only given out £271 million. From my figures—I have had to work this out myself—if the level of support is the same as it was in the previous year, £184 million has not gone into our rural economy. Can you confirm whether that is correct?

You said that loans payments were made to 13,172 farmers. Again, we have not been given the figures, but I believe there to be about 18,000 farm businesses. I need to find out, and I am sure the committee would benefit from finding out as well, whether you are saying that more than 25 per cent of farm businesses have not received any payment or loan payment—a quarter of our farm businesses have received nothing. Correct me if I am wrong, but I would like to know the answer.

Those are the two elements that I would like some clarity on, please.

I will start off before passing over to Annabel Turpie to respond on the detail.

Mr Rumbles makes a perfectly reasonable point. We will provide all the data, if we have not already done so. We will happily supplement whatever data we require to provide to ensure that the committee has all the facts—there is no doubt about that.

I have talked in detail about the loans scheme for which I am responsible and I will not repeat my previous comments. In principle, the desire was to urge all farmers to take advantage of the national payment. We took reasonable steps to do that through publicising it in the general and specialist press, and I think that there was a fairly widespread awareness of the scheme in the farming community.

We did not stop there. We did not just do it once—we did it several times. Our aim was that anyone who wanted to take the payment could do so. We also explained that, although it is described as a loan—it is also described as a national payment—there is no interest, except in the very unusual event where there is an overpayment in total after the claim has been assessed, and there needs to be a recoupment, and then that recoupment is not paid within the allocated time.

We took some time to encourage the take-up of loans. We reiterated and reiterated that message, and I think that it was generally communicated effectively. However, we found out that, as Mr Rumble says, about 13,000 of 18,000 or 19,000 people took up the loan. This is new information for the committee, because I do not think that I have been before the committee since this occurred. I asked the very same questions—“How’s it going? What is the take-up rate?”—quite early on, and it was lower than I thought it might be.

We therefore asked the senior officials to do a survey—an analysis, or a phone round. Annabel Turpie can give you a bit more detail about that. The survey showed that many farmers had decided, for a variety of reasons, that they did not want to take up the loan—it could have been that their financial circumstances did not require it—and they chose not to apply. That may seem to be a strange decision but it is entirely up to each individual whether they avail themselves of a scheme that the Government provides. That is, substantially, the commonsense explanation. However, I know that more detail requires to be given, so I ask Annabel Turpie to provide it.

On your first point, Mr Rumbles, this was the national basic payment support scheme, which was not looking at pillar 1 and pillar 2—it was just looking at pillar 1. You are correct. We looked at what the 2016 entitlements were likely to be so that we knew that we were offering loans with the lowest level of risk to the Scottish Government and therefore public money. As you know, we set the loan at 80 per cent in case there were changes, and we had a cap of €150,000, which we felt was fair.

Our latest figures show that all but 88 applicants have been offered a loan. Those 88 have not been offered a loan because we are still working through transfers of entitlement and they do not have a letter of comfort. We are prioritising them, so we will get in touch with them when we can ensure that we can pay a loan.

The first part of my question has not been addressed yet. I said that £455 million was put into the rural economy in 2015, but the figure was £271 million in 2016. I am really trying to get to the facts. The difference between the two figures is £184 million. Am I correct in saying that £184 million has not gone into the rural economy?

Yes, because the loans that we paid were not from the £455 million; they were from the pillar 1 element.

I understand that. I just wanted to check that that was correct. All that I am doing is drilling down into the figures. Am I right in saying that more than 25 per cent of Scottish farm businesses have received nothing—in other words, they have received no farm payment from their entitlements, and no loan has been offered to them?

That is right—they have not taken up the offer of a loan. The exception is the 88 applications that we are working through to ensure that we can offer those farm businesses a loan with appropriate levels of risk to the Scottish Government.

That is devastating for our rural economy. There are normally variations but, ever since devolution, that money has been paid out in December. I know that there is a June backstop, but normally the money goes out in December. It is part of the remit of the committee to look at the interests of the rural economy in Scotland. What we are seeing here is that there is a fantastic amount of money—£184 million—that is not out there.

If I may come in—

Briefly.

Of course. As I understand it, the pillar 2 schemes were never paid at that point in the cycle. Just as a clarification—

Yes, but the vast majority of the money has normally been out there in December. Thank you for your comments. My understanding is absolute correct.

I have a wee techie point. I want to be clear about what is meant by “farms”. I imagine that not every farmer is entitled to any payment. I believe, for example, that there is a snail farm on one of the islands, which I do not think is likely to receive any subsidy. When we talk about the number of farms, are we including farms that would not in any event be entitled to payments?

11:30  

No, we have—

So it is just those that are entitled to payments.

We have offered loans on the basis of the 2016—

I am talking in the generality of the numbers. When we talk about farms, are we talking about farms that would expect a payment of some kind?

Of course—yes.

That is all I wanted to know.

I believe that Peter Chapman has a brief follow-up.

This is a very important part of the whole thing. You said that 88 farmers had not received an offer of a loan because of difficulties with transfers of entitlements. Transfers of entitlements have caused huge problems all the way through the scheme. It is one of the biggest issues that I get letters about on a regular basis. Transfers of entitlements seem to have been one of the biggest problems. I wonder where you are with that issue, because I still get lots of letters from folk who are at their wits’ end because we cannot get transfers of entitlements done. Why has that proven so difficult?

I would like to write back on that, if that is acceptable. I do not want to give incorrect information.

Okay.

We will move on to the 2016 payments. Rhoda Grant has a specific question on that.

First, I will ask a quick supplementary. The loan applications are closing. In previous evidence, we were told that there was a deadline for getting in an application to guarantee payment. Now it seems that, if you did not apply by 20 January, you will get no loan and you cannot go back on that, even if your payment is further delayed. I thought that there was always going to be a backstop—that if you changed your mind, you could apply for the loan.

We have decided that we need to focus resources, as you can imagine, on processing 2016. We have asked area offices to contact everybody who has spoken to them about a loan but has not taken one up, to let them know that they should get in touch. We have said in the communications around the loan that if anybody is experiencing hardship, they should, of course, get in touch with us about it.

As for general applications, we feel that September to January is actually quite a long time frame. We have worked hard with partners to make sure that the information is out there. However, we are retaining a level of flexibility in that if there are people who have specifically asked about loans but have not taken one up, they are being contacted. Of course, we urge anybody who is experiencing hardship to get in touch if they do not already have a loan.

If someone’s payment is delayed indefinitely and they experience hardship, can they then come back and make a case to access the loan programme?

Yes, they can. Also, specifically on those entitlement cases, for the reasons that Mr Chapman identified, people will not be penalised because they were not entitled to apply for a loan when the loan scheme opened at the beginning of November. Each of those 88 cases will be contacted to ensure that they are aware that, because of the lateness in determining their entitlement application through transfers, they will be entitled to a loan. In other words, it would be wrong to have penalised them simply because of our lateness. I think that that is the principle that we applied.

Back in October, we urged everybody to apply for the loan at the beginning of November and to do so quickly, in order to get the money out. The NFU worked pretty closely with us. My understanding is that the NFU was satisfied that that was making a positive difference in most cases.

Can I ask whether any of the payments due for 2016 have been made? I know that loan payments have been made in lieu of them, but have any of the proper payments been made?

The payments have not started yet.

When might those payments start to be made?

There is one final functionality drop that we need to put in place. We are working very closely with our contractors to ensure that we are doing absolutely everything that we can to get that in as quickly as we can. As the cabinet secretary said at the start, we will not promise to meet dates that we cannot meet. We are over schedule on the predicted date of getting that release drop, and we are working with our contractors on a daily basis to get the drop in as quickly as we can.

How quickly will payments be made once that happens?

Once we have the functionality drop, it will be a matter of weeks. We will then start to make payments.

Would it be helpful if Annabel Turpie or Mr Turnbull explained what the process involves? That is absolutely crucial and an explanation from them might help the committee to understand how we are dealing with drop 6.

Yes, that would be very helpful, cabinet secretary.

Will I go first?

I am sorry, but I am conscious of the time, so a brief and succinct answer would be very much appreciated.

Absolutely.

The focus has been on improving quality. I know that, in the past, the system has not been reliable, so our focus over the system’s past few releases has been on absolutely ensuring that it works first time. That is the point to note.

We have worked with our technology delivery partner, CGI, to get a detailed programme over this phase. We can track the number of errors or potential defects that are in the system that is being developed on a day-by-day basis, and we are monitoring that on a day-by-day basis. That was not previously the case.

In this window, we are also looking at the nature of each of the faults and understanding how they impact on the payments, what particular payments they will impact on, and how we can ensure that we can fix them first, whatever the priority will be in respect of the size of the payment or whatever.

It is a joint exercise, and we are really pushing the contractor to deliver. As Mr Ewing said, he has had a number of meetings with the senior UK lead for the contractor to absolutely emphasise the importance of meeting our deadline.

I will not go into the detail of our quality process, but I am happy to share that in writing with the committee, if it so desires.

From the release of functionality in November, area offices have been processing the 2016 claims very hard. They have looked at priority errors and data errors so that we have the right information in and the SAFs are completed as much as they can be. With the new functionality coming in in February, as per the current timetable, they will move on to the next stage of processing, which is about assessing the information that we have collected. A number of claims will go through without touching the side. They will not require any manual input whatsoever, and they will go to a ready-to-pay status. Area office staff will pick up others. They are truly expert in assigning their staff, so the more experienced staff will go to the more complicated cases where more judgment is required. They will work with headquarters on all the technical regulatory questions that need to be addressed, and they will do all that work planning.

We are looking at the work planning on a weekly basis, and we will go down to a daily basis when the technology comes in so that we ensure that area offices are completely supported, that they support each other, and that we are taking sensible scheduling decisions to allow as many claims to be processed as quickly as possible.

At the start of any SAF process, once we have the ready-to-pay pot, there is a period of around two and a half weeks in which our finance colleagues have to do their checks to ensure that the right amount has been done. That is absolutely right to ensure that payments are compliant with all the regulation.

To answer Rhoda Grant’s question, when drop 6 comes in, there will be a gap of around two and half weeks for claims that go straight to payment, because finance colleagues have to do the necessary checks.

That is the order. We are working extremely hard to ensure that we are on top of work planning, that we are thinking about the tasks that have to be done, and that, although getting that work done is a priority, we are monitoring all the other work that should also be done. The reality is that staff are under pressure, and that requires a lot of attention to ensure that we do not accidentally drop balls.

I will add one point to round that off. You have heard from Eddie Turnbull and Annabel Turpie on these points. I know that it is not ideal to come before a committee at a time when we would expect to start making payments and not be able to give you a date. However, what gives me confidence in the process is the regular daily, weekly and monthly schedule of organisation and governance that we now have in place. Eddie Turnbull talked about the errors that are coming through the system, and for the first time there is an agreed process in place that triages the errors—it looks at whether they are critical for payment or not critical for payment.

Our attention is focused on what needs to be done by the right people at the right time. Annabel Turpie has daily meetings with staff and contractors to make sure that the focus is on the critical path to delivery. We are turning all our attention to ensuring that we can start to make payments to the farming community as quickly as possible. I am confident that we are doing everything that we can to get that done as quickly as we can.

I will stop that line of questioning and go to Richard Lyle, who has a question on the technical stock-take review.

You have answered some of the questions that I was going to ask. In December, an official from the Scottish Government told the Public Audit and Post-legislative Scrutiny Committee:

“We are undertaking reviews of a technical nature in the agriculture, food and rural communities futures programme, and that process will start shortly.”

Another official said:

“It is a technical stock-take review to look at the IT system as it is now and to stress test it under several headings for gaps”.—[Official Report, Public Audit and Post-legislative Scrutiny Committee, 8 December 2016; c 22.]

What information can you give us about the technical stock-take review that you commissioned? What will it seek to achieve, and when will it report?

Eddie Turnbull can answer that.

I will keep this brief and give you some assurance. I see the review as a vital piece of work that is important for the solution that we have got in place to meet the needs of the rural community. It is also important for me. Why? Because I am now going to have ownership of the system. As the programme comes to an end, it is mine and I want to ensure that what I am managing is properly built and meets the need.

The process is under way and we have an independent contractor in place who has been given all the technical documentation that they need. They have been given access to the system to look below the bonnet—if I can put it that way—and poke about in there to understand how it is built. They have also undertaken a good number of interviews with key technical folk within the programme. The contractor has been very open about letting the independent reviewer come in, and we will have an initial report by the end of January—next week. I will take an initial view on that, and there is provision for a deeper dive into any areas where we think that there are fundamental flaws in what has been produced.

Would you like to follow that up, Richard, or are you happy with that answer?

You will get a report at the end of January. Will we get a copy of it or will it be confidential?

Some elements of the report will be confidential because they are commercially sensitive and others because their publication would compromise the system’s security. The report will be developed in such a way that the key recommendations will be shareable, but the detail of how we might have to fix the system will not be shareable.

Once we have fixed it, will it stay fixed?

The first thing that will come back is an understanding of what we need to do to fix it—if we need to fix it. That is the next stage. We can then see where that takes us.

So, everybody’s money will be sailing out to them the next time they are due to get any.

As Eddie Turnbull highlighted, CAP 2015 was the building of the base system and CAP 2016 was adding on functionality to get to this point, where we still have things to do. From 2017 onwards, it will be more about care and maintenance of the system, although there will still be annual updates for me to do every year. Undoubtedly, in CAP 2017 we will still be catching up with all the work that we have been doing in 2015 and 2016. Therefore, my best estimate is that, by CAP 2018, we will probably be in a better place in terms of running the system on a normal cycle.

The other thing that I would add to what Eddie Turnbull said about the technical stock-take review is that we should not forget that this is not all about the IT system. A huge number of headquarters staff and area office staff effort goes into working with the farming community to ensure that they are ready and able to go through the process of payments at the right time.

In addition to the technical review, I commissioned an internal delivery review, to ensure that we were doing everything that we possibly could, at the right time and in the right sequence, to give us the best chance to act as soon as we got the IT in place. That came back with good ideas and recommendations for what we might do. Annabel Turpie is taking that forward.

11:45  

I will leave that there, as we still have quite a few questions to go. I ask John Mason for the next question.

Audit was mentioned briefly, so I will touch on that. If I understand it correctly, Audit Scotland is quite involved in the detail. It reports to the National Audit Office, which pulls things together for the whole of the UK. We mentioned disallowance. My understanding is that, if Audit Scotland was not happy with aspects of what it saw, there would be issues such as whether the Scottish Government could continue to be a paying agency, reimbursement of funds to the EU and so on. Do you have any concerns around that area?

You are right that Audit Scotland is asked to provide assurance to the National Audit Office and others about the auditing that is going on. It would be not be right for me to report to the committee about the on-going discussions that we are having with Audit Scotland on recent audits and what it has or has not found. There is a fairly lengthy process, in which it will present us with initial findings, then we will have a discussion with it and agree whether we think that what it has found is accurate. We have not finalised that process yet, and it would be premature of me to comment on whether it has found anything of concern.

Am I right in saying that the process will be finalised quite quickly? It is suggested that Audit Scotland is reporting in mid-February.

There is a deadline of the end of February, which we want to extend. Because of the nature of the delays that we experienced before, we have written to the Commission to ask for a derogation. We have not heard back from it yet; we are waiting to hear.

So something will happen: either the derogation or—

Yes.

Something will happen fairly soon and you can report back to the committee then.

Yes, we can.

We know that the European Commission and the European Court auditors also examine the Scottish Government’s performance directly. They carry out farm inspections and assess the distribution of funds, such as LEADER funds. The Government has stated that the most frequent issues that arise in those audits are overdeclaration of land and, in the area of cross-compliance, ear-tagging failures and so on.

Will you tell the committee about the direct European Commission audit process and the European Court of Auditors audit process for CAP in Scotland? Once you have enlightened us about those, will you tell us whether any irregularities have been highlighted by those processes?

As I mentioned, we have had a number of audits by the European Commission and the European Court of Auditors. We can share with the committee the schedule of the audits, if that would be helpful.

It really is too early to say whether they have come up with any areas of concern. As I said, there is a process: the auditors write to us and give us an initial assessment of what they have found. We have further meetings to discuss with them the nature of what has come up.

As you can imagine, and as the cabinet secretary has already highlighted, it is a very complex set of regulations. Often the individuals who come, particularly when it is a European audit, pick on individual cases. The regulations are open to a number of interpretations. In the past, there have been occasions when the auditors have interpreted them in a particular way and perhaps found fault in what we have done. After discussion and further exploration of why we have implemented things in a particular way, they have come to a different view.

It would be premature for me to discuss the findings of any particular audit, because they are subject to discussion and further agreement.

When will you be in a position to do that?

Not for some time. For example, the beef audit took place in April 2016 and we are having the bilateral on 9 February. After the bilateral there will be a further process of emailing between the two organisations to come to an agreement on the final position. These things take some time.

I think that it is fair to say that the committee will need to look carefully at the Audit Scotland report, which will be published in May, in seeking to build a picture of the future.

Jamie Greene has a question that builds on something that the cabinet secretary mentioned earlier.

Indeed it does. First, it is worth saying—no one else has said this—that, while it is the committee’s job to hold the Government and the cabinet secretary to account, we should acknowledge the hard work of the staff in many of the area and local offices in getting the payments out. I want to put that on the record and thank the staff for the work that they do.

My question relates to previous comments about the complexities of the subsidy system in Scotland and the UK, and its relationship with Europe. I hope that the cabinet secretary will answer the question in the spirit in which I ask it. Given that there is a very complex funding mechanism that involves the UK Government, the Scottish Government and—at present—the European Union, what provisions is the Scottish Government making for a post-Brexit scenario in Scotland? If we are to have the opportunity to reinvent a system that is currently so complex, I would hope that members of the Scottish Government are at the very least having initial thoughts on what a future payments system or a future subsidy system might look like. That question is not politically motivated; it is a genuine opportunity for the cabinet secretary to share his views on the matter.

It is a perfectly fair question. I appreciate your remarks about the staff, and I am sure that all members of the committee would express the same sentiments.

We have carried out a great deal of work to look ahead to what might happen post-Brexit. That work is predicated on the caveat that no one is sure exactly what is going to happen—that is a matter of fact. Nonetheless, Roseanna Cunningham and I have held a variety of stakeholder sessions. I have held numerous summits on various aspects of the rural economy, as I described last week in the debate on rural funding.

Just last Monday, we held an event specifically on food and drink and agriculture, looking forward at what might happen. There seems to be a feeling of apprehension mixed with a sense of opportunity, depending on the views of the people to whom one speaks. We have been doing a great deal of work in order to discuss what is happening with senior people in the industry, and I think that there is an appetite for that discussion. We have held a number of stakeholder sessions, and I have met Andrea Leadsom and George Eustice.

As was highlighted in the chamber debate last week, we need clarity on funding. We need to devise policies for what will happen post-Brexit, and we believe that we can do that better in Scotland. I hope that that will prove to be the case, whatever the outcome of Brexit.

Without reasonable clarity on what the funding will be, it is impossible to come up with any scheme. There anent, I seek to engage positively with UK ministers, and I have made that point in the chamber. I had a meeting with Andrea Leadsom—in this room, actually—back in October or November; it was fairly cordial.

However, I should point out—this is not meant to be political—that there was a clear agreement that Andrea Leadsom, my counterparts from the Welsh and Northern Irish Administrations and I were to have met tomorrow. That agreement was fixed several weeks ago, but it was unilaterally cancelled. Roseanna Cunningham and I, both of whom were due to travel to London tomorrow, found that very disappointing, not least because we have prepared a paper that sets out the details of the position in Scotland, with relevant information for our colleagues in the Department for Environment, Food and Rural Affairs and in the other devolved Administrations. It was really disappointing and, to be frank, not particularly respectful to have a meeting between several parties, who are supposedly being treated as equals, cancelled unilaterally by one of the parties. Nonetheless, one puts those things aside, and we will go on and seek clarity on the matter.

However, if Brexit is to go ahead in April 2019, we are only just over two years away. I gather from the hints and leaks that came from the Oxford party conference earlier in the year that there is to be a green paper. A green paper is a high-level document. If there is to be a plan for the 2019-20 financial year, the amount of time that is available to devise such a plan is very small indeed. If one links that to the fact that, as was said by many members in the debate on forestry yesterday, this is an incredibly long-term industry and that farmers themselves, as I understand it—Mr Chapman and the convener will know this better than me—have to plan not just one year but two years ahead, it is really not a political point to say that we are already behind the curve in respect of working together with the UK Government on a plan.

Since the motion that was passed by a substantial majority last week, our task is to seek a fair funding solution—I think that that was the terminology that was used—but until there is clarity about the amount of funding that will be available to replace the current funding, we really are running out of time.

There is a related question, which is perhaps what Mr Greene was asking about—are we to use this IT system that has been devised at enormous expense? It would be pretty crazy not to. We have the IT system and we have a digitised map, which is always being updated because boundaries are always being changed. We have that facility but we do not know whether there is any plan to continue with basic payments, for example. What DEFRA wants is the subject of a lot of speculation in the press but, as the cabinet secretary, I can only go on hard information and that has not just been in short supply—there has not actually been any.

I am very keen to answer the question in the spirit in which it was intended—namely, not in a political, partisan way—but I will just make a plea to my colleague Andrea Leadsom. Please come to Scotland; please tell us what your plan is; please tell us whether the clear undertaking, without a shadow of a doubt, that George Eustice made that the existing level of funding at £2 billion would be maintained, will be kept; and please share with us what your thoughts are about a good plan for rural Scotland and rural Britain; we are ready to work with you—let us have that meeting that you cancelled last week and let us get round the table with something on the table and discuss it in a constructive fashion.

Thank you, cabinet secretary. I think that Mike Rumbles wants to come in next—that will be the last question before my question.

Thank you, convener. The cabinet secretary referred to the motion that was debated last week and I was very pleased that the cabinet secretary accepted my amendment—in fact, every MSP across the chamber voted for it at decision time. The effect of my amendment, which the cabinet secretary accepted, was to suggest that an expert group be set up from all the stakeholders who are relevant to this process in order to advise the cabinet secretary. I know that that was only a week ago, but does the cabinet secretary have any idea when that might happen?

We have appointed four rural champions. I made that announcement last week, I think. They are all very well-respected senior figures with expertise. We are already consulting and advising a group of people but not in the specific form that we have agreed to do following our amicable discussions last week, followed by our support of Mr Rumbles’s amendment. I expect to make an announcement regarding that fairly soon, but we have not yet put a timescale on it.

However, as I am sure that many or perhaps all committee members have been doing, we have been in almost continuous discussions with leaders of each section—with Jim McLaren at Quality Meat Scotland, with Sybil and George in the sheep sector and with leaders in the forestry sector—in order to work together to find a way forward, building on the tremendous success in so many areas of farming and of rural life.

I am sure that we all wish to build on that success, while answering, if we possibly can, the questions about labour, the free movement of labour, the continued ability to have a workforce in forestry, farming, food processing and fish processing; about access to the markets, which we have taken for granted; and about the ever-increasing worry about tariffs. Until we get more clarity on all those matters, it is pretty difficult, if not impossible, to come up with the plan that I am sure we would all wish to see.

12:00  

Thank you, cabinet secretary. There are two questions outstanding, but I am mindful of the time and of the fact that we need to move on to fisheries. One of the questions relates to new entrants; another is a question that Stewart Stevenson wanted to ask. I would like to submit those questions to you in writing after the meeting, and I ask that you respond to them as a matter of urgency.

Before I ask you whether you would like to make any concluding remarks, I want to pick up on two comments that you have made. One was about the importance of planning, and the second was about the importance of hard information. In light of the fact that you consider those things important—I know that farmers also consider them important—will the 2017 payments be made in December this year, as such payments have been made in the past?

Are you talking about next year’s payments?

I am talking about the 2017 payments, the forms for which will be submitted this May. Will they be paid in December, as has always been the case in the past, except for the two strange years that we have had?

I will answer your question in my own way. Our first task is to complete the 2015 payments and to get the 2016 payments on a proper footing. I am very conscious that many farmers have made it clear to me that what they have found particularly irksome is that the promises that were previously made about when payments would be in their bank accounts were, in some cases, not kept. I could not count the number of farmers with whom I have had a general discussion who have made that point, and I think that it is one that is very well made. Therefore, I am not going to overpromise and underdeliver.

However, what I can say—with respect, I do not think that I have made this absolutely clear, and it is important that I do so, because I think that it is what farmers want to hear——is that I am confident that, this year, the substantial majority of farmers will receive their pillar 1 payments within the allotted timescale as prescribed by the EU, which expires on 30 June. I wanted to make that clear to the committee.

As Elinor Mitchell has clearly laid out, we had a number of problems in 2015, we have solved a number of them and we have paid out 99.7 per cent of pillar 1 payments. Building on that success, I expect that the performance in 2017 will be better. However, there are various reasons in relation to inspections and other matters—about which I will be happy to write to the committee—why the practice under the new CAP system is more complex than the previous practice. Elinor Mitchell might want to add to that.

I have made a specific point of not looking back at the past. I accept that you were given a difficult situation to deal with, and I echo the comments that committee members have made about the hard-working people on the front line who are trying to deliver payments. I specifically asked whether the payment that is due will be made in December 2017. In your answer, you said that the timescale in which it will be paid will extend to June 2018. My problem is that I have seen it in writing that there will be no loan scheme for 2017. Therefore, I am trying to identify whether farmers will have to make their own arrangements on the basis that there is no guarantee that they will get the money that would normally be paid in December until June of the following year.

My question is, when will that money come and what do farmers need to do?

I am not going to overpromise and underdeliver. I have said that I am confident that, this year, the substantial majority of farmers will receive their pillar 1 payments within the prescribed timescale—namely by 30 June—and I expect improved performance in the subsequent year.

As far as financial decisions that are taken about the year after that are concerned, I can come back to the committee on that, if it would like me to do so. I would be happy to provide more detail about why, under the new system that we have under the CAP, there are practical problems that prevent the previous practice of payments being made in the month of December from being replicated. I would be happy to write to the committee about that, because I do not want to provide an off-the-cuff or simplistic solution—I want to avoid that—and I think that that is what farmers would expect. I will provide more detail on that in writing, if you wish, because I appreciate that the clock is against us, although I think that Elinor Mitchell is straining at the leash to add something that I might inadvertently have omitted to mention.

Not at all. I just wanted to add to the point about the complexity of the regulations that we are working with and the decisions that we are making around the regions. That, layered with the geography and topography of Scotland, means that the amount of work that staff need to do on an annual basis in relation to inspections, including on the digitising of maps, is such that it would be incredibly difficult to get all that work done by the end of the year—by the end of December—for the SAFs 2017. As the cabinet secretary said, the European regulations make it very clear that all the checks must be done before a payment is made, so we would be in danger of disallowance if we were to make payments in advance of that.

Thank you for that answer. I had assumed that, because the CAP futures programme would have been delivered and would be working on time by that stage, the extra staff who have been taken on to deal with the problems with that would have been moved over to inspections and that, therefore, farmers could have hoped to receive their payments by December, but I will leave it at that. I look forward to receiving the cabinet secretary’s written response.

Are there any brief closing remarks that you would like to make, cabinet secretary, before we move on to deal with fisheries?

No, I think that I have covered everything.

Thank you.

I suspend the meeting while we rearrange things for the next part of the meeting.

12:06 Meeting suspended.  

12:09 On resuming—