Rural Economy and Connectivity Committee

Meeting date: Wednesday, September 27, 2017

Official Report 481KB pdf

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Common Agricultural Policy Payments

Item 3 is on the common agricultural policy payments. I welcome the Cabinet Secretary for Rural Economy and Connectivity, Fergus Ewing; Douglas Petrie, head of area offices and agricultural profession; Andrew Watson, deputy director for agricultural policy implementation; Annabel Turpie, chief operating officer in the rural payments operation; and Eddie Turnbull, head of agriculture and rural communities information systems.

Before I ask the cabinet secretary to make a two-minute opening statement, I invite members to make any declarations of interest. I have interests in a farming enterprise that can be seen on my entry in the register of members’ interests.

Likewise, convener, I declare an interest as a farmer in Aberdeenshire.

Cabinet secretary, you now have two minutes for your opening statement.

I am grateful for the invitation to me and the relevant officials to provide evidence on the specific topics of CAP payments and CAP information technology.

As members know, following my statement to Parliament on 12 September, I announced that I would publish the CAP plan for stabilisation. The driving aim of the plan is to improve our customer service. As part of that, I published an extensive payment schedule, outlining when farmers and crofters should expect their money. That is with the view of focusing all business effort on giving customers what they need, which is certainty.

I am therefore pleased to be able to say that we are doing that. For example, I confirm that 80 per cent of claims from the less favoured area support scheme 2016 customers have been processed and customers will receive their payments this week in line with our commitment to start making payments by the end of September. It is clear that progress is being made, but we are not complacent. We will continue to implement improvements in our systems to underpin that progress.

Another key part of the plan was to offer loans to all eligible 2017 basic payment scheme customers. I confirm that we are on track to issue the first batch of letters to customers this week and I repeat what I urged when I spoke in the chamber recently, that all those who receive a letter should respond by the deadline to take up the offer of the loan and receive payment in November. People should get their forms back as quickly as possible if they wish to participate—that is the clear message.

I want to make an announcement relating to the Scottish upland sheep support scheme, which is relevant to CAP payments, of course, because they need to be made within time limits. Having listened to farmers and being conscious of the poor weather conditions that have hampered their ability to gather flocks from the hills and draw their future breeding stock, I have decided to extend the window for applications to the SUSSS until 30 November, subject of course to Parliament’s approval.

I hope that the committee will recognise that we are beginning to deliver on our commitments and we are making the decisions necessary to improve customer service and business efficiency. I am, of course, happy to take questions on the topics of the day.

Thank you, cabinet secretary. The first question is from the deputy convener, Gail Ross.

I want to touch on the subject of disallowance. We have spoken previously about the Audit Scotland assessment of up to £60 million. How accurate were those estimates of potential disallowance and penalties? Was the Scottish Government right not to agree with those estimates?

We do not recognise the figure of £60 million, which the Auditor General has come up with. Andrew Watson is the expert in disallowance and it might be helpful if he responded to the meat of the question, rather than me rabbiting on. As a start, however, we do not recognise the Auditor General’s figure.

I am conscious that the Auditor General, Ms Ditchburn and Elinor Mitchell gave quite a bit of evidence on this subject to the Public Audit and Post-legislative Scrutiny Committee fairly recently. Some of the background is therefore on the record.

The £60 million that was quoted by Audit Scotland reflects a combination of potential risk around late payment penalties and wider disallowances. The committee covered that the last time we were here. Effectively, that figure is derived from looking at the interaction between the different regulatory controls that we must abide by and the levels of disallowance that can be levied under particular circumstances. It is a mathematical construct based on the regulatory guidance on penalties.

In response, the Scottish Government said that, while a methodological approach can be used to derive that number, in reality and in practice—as Audit Scotland has indicated—the actual level of disallowance penalties that paying agencies receive depends on a wide range of factors, including experience of individual audits, the evidence that paying agencies can present in response to those findings, questions of interpretation about different bits of guidance and, in effect, an overall negotiation process that can take some months.

On the late payment penalties side, I know that the committee has been interested in that topic in the past. The issue is that the penalties are applied retrospectively after a long process. To be simplistic, you only know what your late payment penalties are when you finish making the payments, so the calculation of the sum depends on how late the payments are.

Overall, we have said that we do not expect to receive disallowance of that amount, for the reasons that I have described.

Do you have any idea what you expect the disallowance to be?

No. We do not have a comparable figure for the £60 million—if that is your direct question. For us, the issue is the overall uncertainty in the different outcomes that you can get from the process and the importance of the negotiation with the commissioner around the different findings.

We have made the known disallowance and penalties clear on a number of occasions. For example, we have made it clear that we expect the level of penalty for late payments for the 2015 scheme year to be up to around £5 million and for the 2016 scheme year to be in the region of £500,000 to £700,000. However, until the processes that I described are completed, those are estimates.

History has shown that we have successfully managed the position. We aim to keep the level of disallowance below 2 per cent of total expenditure. Over the last 10 years we are sitting at 0.99 per cent overall. Those percentages compare favourably with the United Kingdom.

Some people listening to our discussion will think that £5 million is a lot of money to pay for a penalty. Where does that money come from?

That would be absorbed in the overall Scottish Government budget.

That is why it is so important that we pay scrupulous attention to compliance with the rules, even if the rules appear to individual farmers and crofters to be disproportionately harsh on occasion. Those are the rules and that is why we have a pretty good record over the years of very largely adhering to them and keeping the disallowance element under 1 per cent on average overall.

People are concerned that the loan scheme that you have announced for next year shows a lack of confidence in the system that you will be operating by next year. When will the system be fully operational so that there is no need for any loans or late payments?

The scheme is substantially operational. As I have explained to Parliament, the scheme is working, although not quite quickly enough. I am not a fortune teller and my job is not to make predictions about what will happen in the future. My job is to ensure performance now and in the current year. With respect, convener, that is what my colleagues and I are absolutely focused on.

As I mentioned in my opening statement, I am encouraged by the fact that we have made good progress on the LFASS 2016 payments, for example. We have paid 80 per cent of those. Annabel Turpie can provide more information on that.

The loans are a practical expedient to ensure that, in most cases, those who are entitled to payments will receive 90 per cent of their basic payment around the first half of November—if their forms are returned on time. We have also said that there will be an LFASS loan scheme if necessary. Such schemes are designed to provide a reasonable measure of certainty to people who are in business—as I once was, and as you and other members still are, convener—and who need a degree of certainty to pay their bills and run their budgets.

It is not perfect, but it is a pragmatic expedient that has been broadly welcomed according to announcements made by the stakeholders following the parliamentary statement.

You are suggesting that the scheme is working. Perhaps I could give you a perfect example of why there seems to be a lack of confidence. On 14 August, 932 payments were outstanding; 53 payments were made on the week ending 18 August and 88 payments were made by 25 August. That is a total of 141 payments out of 932, which leaves 791 payments outstanding. Why were those payments not made at that stage?

As that is a question of detail, I will let Annabel Turpie answer.

Are you referring to the basic payment scheme for greening and new and young farmers?

Yes.

We have been balancing other work alongside that. As I have said to the committee and other members before, given the current position that we are in, we are asking staff to work on several years at the same time—it is an inevitable backlog from the position that we have been in. We are making payments as we go on.

We have to use our system to make payments, but because of the way in which we handle debts in our system—

I will interrupt you there, because there were no payments made for previous years in the payment forms that you made available to the committee. When I did further investigation, it was quite clear that 129 of the 791 payments were waiting for inspection, 221 were waiting for system validation and 582 were ready for payment. So there were 582 ready for payment and you paid 141. Given that, why would people feel confident that the system is working and that you are delivering payments when they are ready to go?

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Since then, and as of 26 September, we have made 17,646 payments, which total £378 million. We have to load the debts that are against people to get them off, so sometimes a claim is ready for payment, but it might take a bit more time.

We do not do payment runs every week because we schedule our systems to maximise efforts across all the schemes. The cabinet secretary mentioned LFASS with regard to pillar 2 payments for 2016. We have made 76.7 per cent of land management options payments; we have made 72 per cent of rural payments, which we started in August as our schedule said we would; we have made 26 per cent of agri-environment climate scheme payments, which we started at the end of August as our schedule said; and we have made 47 per cent of forestry grant scheme payments. We are scheduling all the work across the piece.

I appreciate the point that farmers want to get the money to which they are entitled and for which they are eligible as quickly as possible, but we are working through it. We are getting to the point at which we have paid well over 99 per cent of anticipated expenditure on the basic payment scheme for greening and new and young farmers, and we have paid well over 99 per cent on SUSSS—the Scottish upland sheep support scheme—and the beef scheme.

I recognise that they have not been paid as quickly as farmers expect and we are working to get better on that, but we do quite a complicated scheduling of payments across the period.

I will leave it on the point that, of 582 payments that were ready for payment, only 141 were paid two weeks after they were ready.

I know that we will drill down on some of the specific payments that have been made, but I have a general question. What has gone so catastrophically wrong that we are in a situation of constantly playing catch-up? Every time that the committee hears evidence from the panel on payments to farmers in Scotland, we hear the same thing about playing catch-up and never meeting targets. Is it the IT system, bad management, bad workforce planning or bad direction? What is going on?

That is well-trodden ground and, to be fair to us, we have covered that before. Annabel Turpie and Eddie Turnbull can give the technical answers.

It is relevant to compare the performance of LFASS payments for 2016 and 2015. There is no doubt that we were late with the 2015 payments and I entirely accept that, as it took until early November 2016 before the majority of payments were made.

However, I have just said that 80 per cent of LFASS 2016 payments were paid by the end of September so, rather than constantly painting it black, it would be good if members could recognise that, following the stabilisation plan and the hard work that I was engaged in over the summer months with officials, we are starting to see progress. Payments are being made on time and most of the payments have been made to farmers of the net LFASS payments that they are due. It is important that we are not drowned out by negativity when, in fact, we are starting to see the improvements to which farmers and crofters are entitled.

With regard to the technicalities, which I believe that Mr Greene asked for, perhaps Annabel Turpie and Eddie Turnbull can help out.

We are pushed for time, cabinet secretary. I would like to move on to questions from John Finnie, as each member of the committee has questions to ask you.

Cabinet secretary, I had two questions to ask about the Scottish upland sheep support scheme. You have answered one of them very favourably and I am delighted that you have taken on the issues that were highlighted to you about the extension of the application period.

I have written to you about the other question, and you have responded comprehensively but, for the record, it would be helpful to hear your response. The question is on a proposal by NFU Scotland to alter the scheme in relation to application retention periods and the targeting of payments. The significant phrase that jumped out at me prior to my writing to you was that the proposal was “budget neutral”. Will you explain why you have not gone with that proposal?

If I understand correctly, the member’s question refers to the request made by the NFUS and others that we make substantive changes to the scheme. Regrettably, there is no scope to make those changes, because the regulations simply do not allow more fundamental adjustments to be made. It is a case in which the European Union regulations that apply prevent us from so doing.

The issue is very complex, convener, and there is not time to go into it. I am happy to write to the committee and say exactly why that is, because it is important. Mr Finnie and the NFUS are right to raise the issue, and we have looked at it very seriously indeed. Because we think that extending the deadline is a minor change, and because the bad weather has made it very difficult in practice for farmers to comply with the dictates of the time limit set in Brussels—the system is not designed for bad weather in the west Highlands or other places—we have decided to do so.

I am sympathetic to the argument of Mr Finnie and others, including Mr Russell, who has been very active on the issue on behalf of farmers in Argyll, but, sadly, there does not appear to be scope for changes. However, I am happy to work with the committee; if it were able to find a loophole in the regulations, nobody would be happier than me.

Thank you very much.

Cabinet secretary, it would be useful to have a letter explaining that, which could be published with the committee’s papers.

Our next question is from Peter Chapman.

I will try to be brief. My question is about the IT system’s inability to change the hectarage of a new entrant farmer who has spent three years trying to get his correct area on the system, but it seems to be absolutely impossible to do so. He has had loans, but they have always been a third less than they should have been because the correct hectarage has not been on the system. It seems to be impossible to get that fixed. Why is that?

Have you written to me about that case?

I have.

I am not sighted on it today, because Mr Chapman did not raise it with me before the meeting. I am of course very happy to look again at any individual case, but perhaps one of the officials would like to talk generally about the way in which such matters are dealt with.

Cabinet secretary, when they do so, it would be helpful for them to talk about the letters that farmers expected in 2015, with entitlements listed, which were a requirement of the EU legislation. A lot of farmers received those, but they have proved to be fundamentally wrong in their assessments of the payments over the period of five years. Would it be possible to issue those letters, which might help?

We take that question very seriously. Perhaps Annabel Turpie could start off in answering it. Douglas Petrie, who is head of the area offices, is here for the first time today. He has bags of experience and I think that he has information about how such matters are dealt with in practice by the area offices, which it would be useful for members to hear.

Mr Chapman, I apologise that, since I do not have in front of me information on the case that you talked about, I do not feel confident in talking about it directly in the meeting. However, we will pick up on that.

As regards entitlement letters, the entitlements are available online, and anybody who is not online but works on paper can ask their area office to print it off for them and send it to them.

They are very inaccurate.

I will take away the point that you raise and look at it, but I know that the entitlements that are held on the system are available for people to see. I do not know whether Douglas Petrie wants to come in on that.

From an area office perspective and a customer service point of view, we certainly want to try to address such issues. I do not know the farmer in question, but if we can address the issue through a telephone conversation or a face-to-face meeting, we certainly will. We have had quite a few of those over the past few months and years, looking at entitlements and trying to address concerns where the entitlement level does not match the farmer’s expectation. Therefore we have started to address that.

It has been agreed at the area office that his entitlement is wrong on the system. It has been stated that it could be changed manually, but nobody seems to be prepared to do so, and it would need a significant upgrade of the IT system to get it done properly. The man is pretty desperate—he is a young lad and a new start, and he desperately needs the money. These issues have been on the go for three years, and we need to find a way to get them sorted.

It might help if I assure the committee that we recognise the fundamental issues that we are experiencing with managing the source information on land. I do not know of that particular case, but we work with Douglas Petrie as head of the area offices and we appreciate the issues that are being experienced.

You will have heard that, as part of the programme, we are implementing a new land parcel information system—that is our current major development. Its focus is to improve the quality of the land information that we hold. That is not to say that we are working from a bad base, but there are instances in which the information that we have is not as good as it should be. That is currently our key point of interest.

Douglas Petrie will have some useful information to clarify the situation. With respect, if members want to raise a case with me, they should give me notice and we can look into it, but we have not been afforded that opportunity. Mr Petrie has an interesting point to make that I think is needed to correct the picture that has been portrayed here today.

I will be delighted to bring in Douglas Petrie. We need to take care to look at the overarching aspects of the situation rather than trying to drill down into individual cases.

We cannot drill down, because we have not had any information on that individual case.

It is unfair to ask you to do so. If Douglas Petrie wants to give us an overarching response, I am happy to bring him in, and then we will move on to questions from Rhoda Grant.

I just want to put the situation in context. I am not aware of a huge number of calls to area offices from farmers who are questioning their entitlements. There are certainly those who question entitlements and get an explanation, and we come to a settled position, but there is not a huge number of people who are saying that their entitlements are simply wrong. I accept, however, that there will be individual cases.

Thank you—we will leave individual constituency cases and move to questions from Rhoda Grant.

Cabinet secretary, I want to ask about Scottish rural development programme payments. Some time ago, you answered a question from my colleague John Mason on the changes from 2014 up to the 2017 scheme. There is a degree of concern because there have been cuts in those payments, in particular to less favoured area support scheme payments, which have fallen considerably. LFASS deals with some of the worst areas in Scotland. Why is that happening? Why are those areas suffering more?

I assume that Rhoda Grant is aware that EU rules specify that LFASS payments must be reduced by 20 per cent to 80 per cent of the former entitlement. I am very pleased that the European Parliament is looking again at that; we will see whether the European Commission acts on what I understand is a recommendation from the European Parliament to look at postponing the introduction of that reduction.

The decision to reduce the LFASS payments was made not by us but by the EU. Moreover, I think that I am right in saying that LFASS was eliminated down south seven years ago, whereas we have maintained payments to hill farmers.

Of course, I am very worried about what Brexit holds, because hill farmers are waiting for absolute clarity about whether LFASS money will continue to be paid. We have not had written confirmation from Michael Gove, although I questioned him closely on Monday about the matter and pressed hard for Scottish hill farmers. I asked him whether payments under LFASS, which is a pillar 2 scheme, will continue to be met in the event that Britain leaves the EU, as is intended, in just 18 months’ time. We do not know absolutely. Mr Gove seemed to say that the scheme would continue, and I hope that he will put that in writing to us very soon.

I emphasise again to Rhoda Grant that the decision to reduce LFASS to 80 per cent was taken not by us but by the EU.

Was not the reason for that decision that you had not brought forward a new scheme for areas of natural constraint? That would have given people in my area of the Highlands and Islands, which faces the greatest natural constraint, more funding, while LFASS payments would have continued throughout the whole of Scotland? It seems that there was a missed opportunity to rebalance the amount of funding that goes to those who are farming in the worst possible areas.

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We provide as much other support as we can to those areas, including crofters grants and other aspects of the finance available. However, it is not true to say that we chose to cut money to hill farmers. An areas of natural constraints scheme was an alternative approach, but it would not have increased the available budgetary amount and would have been immensely complex. There was no agreed scheme that would have done what Ms Grant described, so I do not accept that argument. Moreover, I am arguing that LFASS should be reinstated at 100 per cent—that is our preference. I am extremely worried that the real questions hanging over hill farmers at the moment are to do with Brexit and the fact that, even 18 months after the referendum, there is a lack of assurance from the UK Government that hill farmers will be valued not only for livestock production but for being the custodians of the countryside and at the centre of the communities in many rural and island parts of Scotland.

Notwithstanding that, you maybe missed an opportunity to support better those areas. You said in your defence that you were giving more money to crofters, but the CAGS—crofting agricultural grant scheme—has fallen by £2 million. Why is that?

I am very pleased that we have increased substantially the money for crofters. In the 10 years in which we have been in government, we have had 800 crofting grants, which means 800 families getting houses in their own parts of Scotland. I chose deliberately to increase the amount of money available to help individual families get their own house in their part of Scotland. Moreover, we have maintained the bull hire scheme as well as crofting grants. Ms Grant is presumably aware of this, but the general austerity has meant that we have had to make reductions in the budgeting. In many cases, that was achieved because the level of demand in the areas that were affected was not sufficiently high. We therefore chose areas where there would be the minimum impact. However, because of the austerity reductions by the UK Government on our DEL—departmental expenditure limit—budget, we had to take difficult decisions. I accept that but, frankly, that is what it is like being in government.

So it is clear that you have cut the CAGS.

I will come back to the member with individual figures on the CAGS and on crofting in general. It would be useful to demonstrate that we have provided additional support in many parts of the funding available, but I will provide the committee with the figures in respect of CAGS, if that would assist.

Before we move on, I have a question on the beef efficiency scheme. It appears that you have cut the moneys that were put aside for that. Is the number of applications still declining? Are withdrawals increasing, or have you managed to stabilise the beef efficiency scheme?

The general position is that those who have applied to the beef efficiency scheme and have relevant applications will benefit from the scheme. It funds direct payments to participating farmers. As to the detail of the number of withdrawals, I do not have those figures to hand. Again, I can write to the committee about that. However, it is important to note that a great many applied to the scheme because they saw the potential benefits, and they have benefited from participating in the scheme. According to some farmers to whom I have spoken, the benefits are substantial. There was of course criticism from some farmers, who are entitled to their view. However, as I understand it, those who applied to the scheme have participated successfully in it. I do not know whether the officials can add anything in order to answer your other questions, convener.

It is on the number of people who have pulled out. Do you have those figures, Annabel?

I do not have those figures to hand, but we will update the committee on those following this evidence session.

Thank you. The next question is from Richard Lyle.

Good morning, cabinet secretary. Before I go on to my question, I thank you and, in particular, Douglas Petrie for an excellent visit to the Hamilton area office, where I saw for myself exactly the problem that you have. Aside from the issues with the computer system, people are walking around fields, measuring to the last inch, going over roadways and to the very edge of fields. It is no wonder that the computer system is trying to catch up.

I thank your staff for a very worthwhile visit to the Hamilton area office to see for myself exactly the problem that you have, why we are in this situation and how we are resolving it. I saw the actual technicalities around how things have to be loaded on to computers, and it is like the space age—the final frontier.

You may want to give us a few updates on that but I want to thank you for that work. I see exactly the problem that you have and why we have comments from people about how information can or cannot be loaded. I would prefer it if people took up such points with you privately rather than in public.

I want to ask about the schedule of dates for Scottish rural payments that you have published. You have said that payments will be made on certain dates. I am sure that many of our excellent farmers are, as anyone would be, waiting for the money to come into their bank accounts. Will those payment dates in the schedule be met?

Thank you very much indeed, Mr Lyle, for your gracious comments about the area staff. It is heartening to hear a member of the committee acknowledging that good work and it will be greatly appreciated by the staff concerned. I think that Mr Mason has visited an area office as well. As far as I am aware, the committee decided not to take up the suggestion that it visit an office, but I hope that it might reconsider that, because there is a lot to be gained from a closer understanding of how things work in practice.

The task is absolutely enormous and there is the physical nature of the task of carrying quite a heavy tablet around. For one individual I spoke to in the Perth office over the summer, it was not unusual to walk 16km with a very heavy pack. It is hard work. We have, I think, 4 million hectares and 55,000 holdings, and the data has to be taken to the accuracy of a goal mouth, so Mr Lyle’s question is absolutely spot on and it is a refreshing approach.

We have delivered the payment schedule, which you have in front of you, and it has been welcomed by the NFUS and other stakeholders. It is designed to provide clarity and certainty to farming and crofting businesses. Our job is substantially to adhere to that schedule. It was prepared after a lot of painstaking work with my officials—principally Annabel Turpie in this regard—and CGI. I met the vice-president of CGI numerous times over the summer and previously. We are aware of what we need to do for our customers and we have set out the payment schedule, which seeks to provide the certainty that businesses want. It is our job now to implement that schedule.

I have a question for Mr Petrie. I put on the equipment—I have a photograph of me standing in the Hamilton office with that equipment, which was quite heavy. Is it a fact that staff have to physically walk round every field that a farmer has and take in every inch of their land to ensure that the farmer gets the correct payment?

Mr Petrie—

I would like that question to be answered.

I would be delighted for Mr Petrie to answer the question, but I want to correct something before we go any further. A lot of committee members have visited their own area offices rather than taking up the offer of a central visit and a lot of committee members have a huge amount of knowledge.

I ask Mr Petrie to answer the question very briefly, because members have a lot of other questions.

Mr Lyle is correct. Those carrying out land-based inspections are carrying the equipment just as he describes and they have to walk every field boundary and view every parcel of land to determine any eligible features such as the crop in the ground, roads, which Mr Lyle mentioned, buildings and bracken. We are talking about a whole range of things, so I cannot deny the complexity, but we are certainly committed to getting it done.

I thank the staff for what they do.

I come back to what was mentioned earlier about the basic payment loan scheme and the possible additional loan scheme. What conversations did you have with stakeholders, and what concerns did they raise that led to the establishment of the plan?

We are more or less in constant dialogue with key stakeholders—the NFUS, the Scottish Crofting Federation, the National Sheep Association and the Scottish Beef Association—and we meet about all sorts of matters, as you would expect. I met the NFUS recently to discuss its future plans. In the absence of being able to predict and guarantee perfection in meeting the expected payment profiles, those stakeholders have all advocated that we provide a loan scheme, precisely because it will give farming businesses the certainty that the vast majority of their income will be paid at a certain time from the schemes where there are loans.

Stakeholders have welcomed the provision to increase the amount of the payment in the basic payment loan scheme from 80 per cent last year to 90 per cent this year, and the announcement that, if we require it, there will be an LFAS scheme—LFASS recipients know that they will get their money next year around the April to May period. Stakeholders obviously want the IT problems to be sorted out—as we all do—but they welcome the pragmatic approach that we took last year and the announcement of this year’s improved version.

I was keen to make these announcements in September at the earliest opportunity of the parliamentary year. In June, we decided that we would have several meetings, a workload and a range of discussions with CGI so that we could come back to Parliament at the first available opportunity—namely, on the Tuesday of the second week back. That is exactly what we have done, so that businesses around Scotland have had the maximum notice of when they can expect to receive the majority of their funds.

You have mentioned Brexit; was that a factor in creating this plan? In the interests of time, I take into account your previous answer—and I do not think that you will be able to give a definitive answer—but do you know when you would be able to say for definite whether the additional loan scheme for LFASS will be used?

The concerns that are manifest in rural Scotland are now among pillar 2 support recipients, particularly—but not only—among hill farmers. That is because Mr Gove’s written assurance, which we welcome, applies only to in-farm support and pillar 1. We are told that there is an assurance for pillar 2 but we have not yet received that in writing. Some members of the House of Lords may have received something, but we are not the House of Lords—we are elected people here. It would be nice if, as elected people, we were shown the courtesy of being told things. I will not dwell on that—it is not like me to labour the point, as you know, convener.

On the point that you have made, I can get that—

Can Mr MacGregor remind me of his other question?

The question was whether you have a date in mind when you will know about the additional loan scheme for LFASS.

That is a good question. We have not fixed a precise date. We have reassured LFASS recipients that they will get their money around a window in April or May next year—probably in May—rather than in September or October. That is the key thing, but we will come back to Parliament—probably to this committee—to provide full information as soon as we can.

That decision will be informed by how well we process everything else in between and by the timing of inspections, which have to be completed prior to payments being made. Mr Lyle has helpfully cast light on the hugely onerous nature of the inspection work that we have to complete. I anticipate that we will come back at some point early next year to say whether an LFASS loan scheme is needed. If there is need for one, there will be one.

Thank you. I remind everyone to keep their questions as short and focused as possible, because we have quite a few questions to get through.

11:15  

It is my understanding that a large minority of farmers did not take up the loans that were available last year. What percentage did not do so? Given that we are now moving to a new loans scheme, what assessment has been carried out to establish why there has not been better uptake of the loans? I would have thought that it is unusual for farmers not to take out the loans on offer. What proportion of farmers have not taken out one of the loans and why?

We have an array of specific statistics, which Andrew Watson can talk about.

We have been over this ground before. You are absolutely right—a number of farmers decided not to take up the loans that were on offer. You asked what assessment we did. We immediately contacted the farmers to tell them that they could take out a loan and that no interest would be payable, except in circumstances in which the loan was in excess of their entitlement and the excess was not repaid within the agreed time, which is 30 days.

Why would farmers not take out the loan?

We wanted—and want—farmers and crofters to take the loans. I think that some individual farmers might not have liked the idea of taking out a loan. We took the opportunity to communicate individually with those farmers. We told them that, in effect, it was an advance payment. Although we have to call it a loan, it operates as an advance payment to most intents and purposes. Farmers took individual decisions. People are free to make their own decisions in life. The Government is not responsible for overturning such decisions, nor should we be. Some people—perhaps for moral reasons—might not want to take up the facility that is available.

As I stressed to Parliament, the money is for farmers and crofters—it is not being taken away from the national health service or any other Government service. I am pleased that Mr Rumbles has chosen to raise the issue again today, because it has given me the opportunity to repeat that plea to farmers. If you want the stats—

But you do not know why some farmers have not taken up the opportunity to take out a loan.

You would have to ask individual farmers. I have given an explanation in the chamber and again today, and I would be happy to put it in writing if that would help.

I am loth to bring in Andrew Watson or Annabel Turpie, purely on the grounds of time. The cabinet secretary has answered the question as best he can, so I would like to move on.

Could the Government write to us to tell us what proportion of farmers have not taken out a loan?

It would be helpful to get that figure, but we must move on.

Which course of action has been decided on in terms of remediation for the IT system? You were presented with a number of options, to which various costs were attached. Each of which had pros and cons. What was decided? What is the estimated cost of going down that route?

The primary finding of the Fujitsu report was that the system was fundamentally sound but that it needed to be remediated. Mr Greene is absolutely right to say that, after we had carefully analysed the Fujitsu report, discussed it with Mr Thorn and CGI and had an interchange—at some length, as I recall—with the committee, we decided what to do. I think that Mr Turnbull is best equipped to provide the answers to Mr Greene’s questions.

We shared with the committee the 23 points that were raised in the Fujitsu report. We have been working through those key recommendations, under each of which there are subordinate actions that we have prioritised. I restate to the committee that the Fujitsu report was not focused only on the CGI element; it looked at the whole of the IT organisation within the information systems division.

We now have an arrangement with CGI on what it is responsible for correcting. When we set out a work order and say what we intend to produce in the next release of the system, we discuss that in advance and we agree a cost.

Do you know the cost of that?

If you are asking whether I know the cost of the full remediation as laid out in the Fujitsu plan—

Yes.

The answer is no, I do not know the cost, because we are working through pieces depending on the impact that the remediation will have. I think that that is the simple answer.

Okay. Cabinet secretary, you published a stabilisation plan with six headings and 31 action points, which contained several improvements that you are looking to make across the board in terms of how you work. I have that plan in front of me, and it is missing dates, deadlines and review points. It contains a commitment and actions, but we do not get a real understanding of how you will feed back progress on the action points or, indeed, of any deadlines you have tagged on to them.

To be fair to ourselves, the key dates are those in the schedule of payments. The key dates that our customers—farmers—are interested in are the dates when they will get paid. With respect to Mr Greene, as members know, we have provided those key dates. That is the whole point. We have provided a schedule with indicative dates in each case. Those are the dates that our customers are really interested in, and I respectfully suggest that we have done that. However, it would surprise me greatly were I not invited to come back to this committee, and in the event of that occurring, I would of course be happy, as I always am, to keep the committee fully updated on all germane matters.

Cabinet secretary, I am sure that the committee will take you up on that opportunity to see those dates and probably also a review of what this has actually cost. On that note, I will move on to John Mason.

I thank the witnesses for my visit to the Ayr office. I think that the convergence money is £160 million. Is Michael Gove going to give us it?

I took the opportunity both in my initial meeting with Mr Gove at the Royal Highland Show in June and on Monday this week to reiterate what I believe is an unchallengeable claim—that Scottish farmers, and particularly hill farmers, have been short-changed to the tune of £160 million.

Europe decided some years ago that there would be funding for farmers in the toughest areas who received the least payment. Our farmers in Scotland fell into that category, and £190 million was paid to the UK, as the member state, only because of Scotland. In other words, had Scotland not existed, the UK would have got zero, because the average payment to farmers in other parts of the UK exceeded the minimum threshold of €90 per hectare, whereas our farmers received about half that.

That money was intended by the EU solely to benefit those who received the least per hectare. That was the purpose of the money. A reasonable person would therefore conclude that the money should have come to Scotland for our hill farmers. It would have been worth £14,000 to each farmer over the six-year period. I made the point to Mr Gove that the Treasury appropriated that money because it could. Ever since, UK ministers have repeatedly promised that they will look into the issue and have a review. Sadly—this is a matter of record, and of course it gives me no pleasure to say so—every single minister, including Mr Gove and Mrs Leadsom, has breached that pledge. However, Mr Gove agreed on Monday to have discussions, and I look forward to taking part in those discussions in a constructive manner, as always.

May I ask a supplementary question?

If it is a very quick yes or no question, yes.

I wish him well with his discussions, but will he guarantee that, if that money comes to Scotland, it will go to those who are paid the least? That is in his gift.

Well, it will not be him who guarantees that if the money comes to Scotland—it will be me.

That is what I am saying—will you, cabinet secretary, guarantee that?

That is a fair question. I will guarantee that that money must come to rural Scotland. I would not be part of a Government under which this money, if we got it back, went to anyone other than those in rural Scotland who deserve it. That would be absolutely disingenuous.

I am not sure that that is an answer to the question, which was quite specific.

No, that is not the answer that I was looking for.

No, because it was a categoric assurance—perhaps you were not expecting that. I want this money for hill farmers, because they have been short-changed by the UK Government. That money has been snaffled by the UK. That is an outrage, and I am determined that it is put right. I am delighted to have the opportunity, thanks to Ms Grant, to raise that point.

Thank you, cabinet secretary. We will move on to the next question.

What work is the National Council of Rural Advisers undertaking, and what will be the outputs of that? Will those outputs be made available to the public so that we can see what advice the council is giving you? If so, when will that be?

I was delighted to attend the first formal meeting of the national council just last week. Its role is to provide advice and recommendations on future rural policy and support to create a vibrant and sustainable rural economy. That economy includes agriculture, but it also includes tourism, renewable energy, community developments and a range of other things. It is not only about farming, forestry and fishing. The council also provides advice on the implications, were the Brexit plans to proceed.

The group met informally in August. It includes four agriculture champions, who were appointed in January and cut across rural issues as a whole. They were appointed by me not because of Brexit, but because of the vision that we published in the summer of 2016 at the Royal Highland Show. That vision was the result of a detailed consultation that my predecessor initiated, which set out a vision for the future rural economy in Scotland.

I am delighted with the council’s work. When will it deliver some outputs? We have asked it to give us an interim set of recommendations before the turn of the year and a final report in the spring to summer of next year. I am delighted that so many independent people—which Parliament required them to be, rather than a group of stakeholders—have voluntarily offered their time, expertise and knowledge to inform our future rural policy with a view to maximising sustainable development in rural Scotland.

Before we go any further, I should advise the committee that although there are quite a lot of questions on Brexit, we will not get to them today. We are going to ask the cabinet secretary to return to the committee in November, when I hope that we will be able to delve further into Brexit and its effects on agriculture.

Mike Rumbles has a brief follow-up question, which will be followed by questions from John Finnie and Peter Chapman. Those are the last three questions that I can take.

My question is on what the cabinet secretary has just said. If I have got it right, you appointed the National Council of Rural Advisers on 22 June, but it had its first formal meeting only last week. Has it been at work for the past three months, or did it start work last week? The issue is a matter of urgency. Has the council started work yet?

I think that I have answered that question already, but I will restate the situation. The advisers met Government officials informally in August and were briefed fully about the council’s remit, its scope and how it would work. They were told that they would have access to information and advice from officials. That was during the summer, when people take their summer holidays—members will accept that it is not customary to have business as usual during the summer, when many people are away—which is why we had the first formal meeting of the council last week. I assure you that it is working hard.

Mr Rumbles overlooks the fact that four very senior people who are known to members—Archie Gibson, Henry Graham, John Kinnaird and Marion MacCormick—have been working hard since January in all aspects of the rural economy. The aim was to have those four individuals sit on the national council with the legacy—the bequest—of the work that they have been doing, and, my goodness, they have been working hard, including in sub-groups. If Mr Rumbles wants hard work, I am not disappointing him.

11:30  

Cabinet secretary, I have a very brief question on an issue that I have written to you about before; I appreciate that you have a heavy workload.

I do not doubt the quality of the people who are involved in the council or their endeavours either to date or in the future. However, at a meeting of the cross-party group on crofting, a concern was raised that the crofting communities were not directly represented on it. Is that something that you will consider?

As I think I said recently to Parliament, I have written to more than 200 stakeholders. At its meeting, the council decided that it wished to engage with the crofters union, the NFUS and others. We have already involved stakeholders, as Parliament has required us to do. The council will absolutely engage with crofters. I am happy to give that undertaking to Mr Finnie, and I will make sure that it is followed through, because I think it is absolutely essential that their voice is heard. Of course, separate from that, we are working on a crofting development plan, which I hope will encapsulate some of the aspirations of people in the crofting communities.

The final question—and it will have to be one question—goes to Peter Chapman.

With regard to the SRDP funding, why has the agri-environment climate scheme funding been cut from £350 million to £308 million?

As I think I have explained, there was a need to make savings in SRDP schemes across the board, because with the setting of the UK budget there was an overall reduction in the Scottish DEL budget. Our budget is dependent on that budget, and we had to take certain decisions to avoid the scenario of our receiving less money from Europe and to maintain the maximum amount of European money available. I am sad to say that the UK Government cut our budget. When you run a budget, as I do, you have to manage things accordingly, and that is what we had to do. We had to make adjustments to many of the components of the SRDP budget—indeed, one or two have already been alluded to—but that is the reason why we had to take that step.

I should point out that, compared with 2010-11, the overall discretionary budget in Scotland is expected to be 9.2 per cent lower in real terms in 2019-20 as a result of UK austerity cuts. Of course, that is on top of the £160 million that has been mentioned, which I hope that all members of all parties agree should be paid to Scotland for our rural communities as intended.

It is a complete red herring to mention the £160 million, because it was never in the budget in the first place.

In that case, I hope that, like former members of the Conservative Party, you will support moves to get this money for Scotland. I will wait and see what the Tory party says about it; I do not know what will happen, but it is obviously a decision for the Conservative Party. In any case, the budget cuts were imposed by a UK Conservative Government, and there is no hiding place as far as that is concerned.

We will allow you to have the last word on that, cabinet secretary.

I thank the cabinet secretary and his team for coming along this morning. We will welcome the bits of written evidence that you have said you will provide, and we will take you up on your kind offer to return to the committee at the relevant time to discuss Brexit and CAP IT.

11:33 Meeting suspended.  

11:36 On resuming—