Rural Economy and Connectivity Committee

Meeting date: Wednesday, June 28, 2017

Official Report 656KB pdf

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Common Agricultural Policy Payments

Item 2 is an update on common agricultural policy payments. I welcome Fergus Ewing, the Cabinet Secretary for Rural Economy and Connectivity. I also welcome the Scottish Government officials Annabel Turpie, the chief operating officer for rural payments; Eddie Turnbull, the head of agriculture and rural communities information systems; and Andrew Watson, the deputy director for agricultural policy implementation. We have a fairly busy agenda, with a stage 2 consideration to come, so this part of the meeting will finish by 11 am. I therefore ask all members and the cabinet secretary to keep questions and answers as concise as possible.

Cabinet secretary, would you like to make a brief opening statement of up to three minutes?

Good morning, everybody. Annabel Turpie is the chief operating officer for rural payments. She leads on making sure that CAP payments are being made and she leads our network of area offices. Eddie Turnbull is the head of information services and is responsible for the provision of information technology services to the directorate. Andrew Watson, who was appointed in March as the head of agricultural policy implementation, is responsible for CAP scheme management and the rural payments and inspections division’s status as a paying agency under the CAP regulations.

I welcome the opportunity to give a further update to last month’s update on CAP payments, and I hope that members have found the weekly updates that we provide to the committee officials useful. Today, we begin making payments worth £6.7 million to farmers and crofters under the Scottish upland sheep support scheme, or SUSSS. That pillar 1 scheme is of particular importance to hill farmers and crofters and is targeted at sheep production on the poorest-quality land. Payments will begin arriving in bank accounts this week and will be made to around 1,050 eligible producers by 30 June.

We also expect the vast majority of farmers and crofters to receive all their basic and greening payments by that date. However, I appreciate that members will wish to question me and my officials more closely on that. I therefore thought that it would be helpful to set out for members the exact details of all the payments that farmers and crofters have received under the 2015 and 2016 schemes, to reassure anyone who is labouring under a misapprehension that farmers have not received any money this year. Of the 2015 CAP pillar 1 payments, 99.9 per cent—worth £342.9 million—were made by the extended deadline of 15 October last year. That means that over 18,000 businesses were paid by that date. Since then, we have been working through the tail, and we now have only 25 claims outstanding.

On the 2015 less favoured areas support scheme payments, 85 per cent have been made, with approximately 1,700 claims, worth £3.5 million, remaining to be paid. It is worth remembering that 11,056 LFASS recipients effectively received up to 90 per cent of their entitlement through the loans that were provided in March 2016, worth £54 million.

On 2016 pillar 1 payments, it is worth bearing in mind that over 13,000 farmers and crofters effectively received 80 per cent of their entitlement through the national loans scheme, which meant that £275 million was paid out even earlier than might have been expected, through payments in November last year. Since then, payments have been made on the balance that is due to farmers and crofters. As at close of business last night, we have made basic payment scheme and greening payments to over 84 per cent—15,115—of those who are currently estimated to be eligible, and eligibility is key here. Of those businesses, 319 have received 90 per cent payment, with the remainder—that is, 14,796—receiving full payment. We have made or initiated payments—they take six days to clear in some cases—valued at £311 million. That represents around 82 per cent of the total payments that we expect to make.

Even at this stage, it is not possible to guarantee with 100 per cent precision what level of payments will be made by the end of this week because of the complex interactions between IT functionality, the validation of claims, which must be done in line with regulations, and the processing of payments by our offices across Scotland. However, the latest figures show that good progress is being made daily. We have the process and capacity to make tens of millions of pounds of payments each day. To put that in perspective, as at Friday 16 June we had made only 58 per cent of payments, but by last Friday the figure had risen to 76 per cent. On a daily basis, the percentage reach can increase quite significantly. The equivalent figure at the same point last year was 65 per cent.

We are seeking to minimise any financial penalties that may flow to the Scottish Government. For that reason, we have written to the commission to ask whether a repeat of last year’s penalty waiver would be possible. That application is under consideration and has not yet been finally determined. That forms part of the prudent, risk-based approach that we are committed to taking to cover all contingencies.

In conclusion, our key focus and motivation is to ensure that the vast majority of farmers and crofters receive their payments before the deadline. RPID staff in offices in Edinburgh and across Scotland are working very hard, and we are seeing good performance from the IT system as part of that action. That is what our stakeholders are entitled to expect, and we will spare no effort in the coming days. I thank the committee for the opportunity to make that factual opening statement.

Thank you, cabinet secretary. Before we go on to questions, of which there are quite a lot, I will go round the table and ask whether any member wishes to declare an interest.

I have a registered agricultural holding of under 2 hectares; I receive no financial benefit from same.

I am part of a farming partnership, as is shown in my entry in the register of interests.

Likewise, I am part of a farming partnership, as is shown in my entry in the register.

The first question is from Stewart Stevenson.

We are kicking off with a series of questions from various members on the technical assurance review and the Government’s response. My question, however, relates to something that the review appears not to address, but to which the cabinet secretary has made quite a few public references. There is one area in which we have not published everything, and I accept that we properly should not do so.

There are some matters that the publishing of information on might enable evil forces to attack the computer system’s security, structure and so on. I simply wonder to what extent the minister has been able, via his officials or otherwise, to interact with the contractor to make sure that those matters, on which we are not publishing details, are nonetheless being pursued to ensure that we have the most robust system possible that can reasonably defend us against the cyberattacks we have seen in the national health service and across the United Kingdom, and indeed across Europe in the past couple of days.

We have taken the Fujitsu report very seriously. We have, in a private briefing session, shared the report with members of this committee and with the Public Audit and Post-legislative Scrutiny Committee in an attempt to be helpful.

We have also published and made public the key findings of the report, but we have not published the full report, for two reasons. First, information contained in the report relates to the private contract and to future negotiations on that contract, and there is information that is of particular commercial confidentiality. Secondly, I have been advised by the chief officer regarding information and the disclosure of information in the Scottish Government that there are potential threats to cybersecurity in so publishing. It would be foolhardy for any minister to publish a document having been advised by the top person in Government that to do so would risk a cyberattack.

I heard on the news this morning—alongside the news of my impending grilling, as we are now enjoying—about a serious cyberattack throughout the world. These concerns are not fanciful, therefore; we must take them very seriously indeed.

I do not want to abuse the committee’s time, following the convener’s admonition—if more technical information is required, Mr Turnbull, who is on top of the matter, will be happy to provide it. However, I stress that I want to be as co-operative as possible. If I could publish the whole report without threat, I would do that, and I have brought forward the key findings earlier, I think, than might have been done by a Government 10 or 15 years ago. I have tried to be as open and transparent as it has been possible for me to be.

Perhaps Mr Turnbull could—

I will bring Stewart Stevenson back in first.

Just to be clear, I am not seeking technical information, because I accept the reasons why there are constraints. I simply want to be sure that those with technical responsibilities and the minister are pursuing the technical issues with our supplier to ensure that the issues that have been identified—

Yes, we are.

That is the bottom line, cabinet secretary.

I can answer that, because just yesterday I met—for, I think, the sixth time—Steve Thorn, who is the UK president of our main contractor, CGI. At that meeting, I sought various undertakings from him, which I can go on to describe, but I also discussed with him the Fujitsu report, and I can confirm to the committee that the supplier accepts the overall findings of the report. There are some points of detail that have been questioned, and they will be worked through between the Scottish Government and Fujitsu.

Steve Thorn has provided a confirmation, in which he says:

“I am pleased ... that my team have worked successfully and in close collaboration with your Officials in the input into a key report of the CAP Futures Programme.

It is positive that the overall conclusion of the report is that the architecture is fundamentally sound and the IT platform should be retained.”

That is very important, because it provides some reassurance to those people out there, particularly farmers and crofters, who think that the whole thing is useless and should be scrapped. That is not the case. It is fundamentally sound and it is working. It is not yet working to the strict time limits, and we have therefore had that acceptance from our contractor of the findings of the report.

I do not know whether Mr Turnbull has further comments to add.

As Stewart Stevenson is not looking for technical information, I would like to bring in Mike Rumbles. There may be a chance for Eddie Turnbull to come in on technical issues.

The response that you have published is, as you say, a selective publication, but the issues are clearly not all about computer security and commercial confidentiality. You have made the decision not to publish critical comments that the report has made. When you were before the committee previously, this comment from the report was put to you:

“many quality assurance and governance practices have been knowingly sacrificed.”

Why has that major criticism of the Scottish Government not been published?

I am not sure about the particular phrase, but—

It is in the report.

I entirely accept that the Fujitsu report says that remedial action is required, and that criticisms are made. I do not think that I have ever denied that.

The whole purpose of commissioning the report was to get an expert, third-party contractor view on whether the IT system was fit for purpose, because there were genuine questions from farmers and crofters about whether it works or whether we should scrap the whole thing—that was the fundamental purpose—and what remedial action we needed to take. I entirely accept there are technical aspects in which there are defects.

The use of the word “sacrificed” seems a bit strange to me. I do not quite recognise that, but we recognise that there are specific technical issues that need to be remediated—of course there are, because if there were not, the system would be operating perfectly.

Mr Turnbull can perhaps answer the question with a bit more precision, if that would help, convener.

Let me say from the start that we have not suppressed anything in the key findings of the report, which I agree, as read verbatim, are critical of a number of areas in the past that have led us to the point where we have a system that needs remedial action. There is no doubt about that. I hope that the committee will see that the key findings that have been published explain the situation we find ourselves in.

I suggest that the most beneficial thing for this committee would be to see the improvement actions that we are taking against those key findings, and to be assured that we are acting on them and we have a plan of action going forward that will ensure that farmers get paid on time into the future.

My view of this was exactly as the cabinet secretary said. We wanted to make everything open and take a warts-and-all look at the architecture that has been developed to this point in time, to understand the processes that are not working to an industry standard and correct them. I believe that we have been doing that since the review, which took place in January and February, although some improvements had been made before the review. I understand the public interest in this, but it must be about how we are improving rather than the state of the system as it was reviewed at a particular point in time.

10:15  

Not every member of the committee took advantage of Eddie Turnbull’s briefing on the Fujitsu report, but members might have seen the “ARE Futures Fujitsu Technical Assurance Review”. To use an analogy—I hope it is appropriate—if you were going along a road beside a ditch and there was a problem, the Fujitsu review identifies how deep the ditch is, but from reading the Government’s response, you get no indication of how deep or big the ditch is that we have to cross. That is what we are trying to identify. Cabinet secretary, could you be clearer about when you think more of the technical assurance review as produced by Fujitsu can be made available to the public?

Absolutely. I have sought to be as transparent as possible with the committee. I have appeared before this committee on numerous occasions and we provide weekly reports with all the figures. We have been transparent, which is what I want to be. As we make progress, I will look again at whether we can release more of the information. I do not want to withhold any of it. We have provided what we can for the moment, for the genuine and serious reasons I have given. I could not have acted in any other way in accordance with my responsibilities. It would have been foolhardy to disregard evidence of a potential cyberattack when the world is facing a plethora of these attacks in the public and private sector. It would have been the height of irresponsibility for me to do so. That this is happening throughout the world is why it is on the front pages of the newspapers today and one of the lead news items.

The report contains a lot of detail about the nature of the systems that are used. If we supply all that information, we will facilitate the hacker. It is not very complicated.

Having said all that, some of the criticisms made in the report have already been and are being tackled. For example, in the previous four releases of IT, the progress we have made has been made with far fewer defects and issues because of the excellent work my officials and the team led by Lindsay McGranaghan for CGI have been doing.

I have visited 10 RPID offices myself and I plan to visit another five in August. I made an offer to the convener and committee members to visit an RPID office to understand some of the practicalities involved. I gather that you decided not to take that offer up but I would be happy to make it again because speaking to the people in the RPID office, particularly the leadership, would help you to understand some of the processes better—I mean no disrespect.

I am keen for Annabel Turpie or Eddie Turnbull to explain some of the progress that we have made in answering some of the Fujitsu issues.

Cabinet secretary, I am sorry—the questions are stacking up and that was quite a long answer. I will let Mike Rumbles come in, then we have Rhoda Grant and Peter Chapman. Mike, could you be brief please?

I am pursuing the point because it has nothing to do with cyberattacks or anything like that; it is about being open and transparent. The major point is that many quality assurance and governance practices were knowingly sacrificed. That is a major criticism that people need to be aware of, but the minister does not even seem to recognise that it was in the report. If you and your team do not recognise an independent report on the situation and do not publish it, how can we be satisfied that you are addressing the issues?

You can be satisfied that we are doing so because we have the full report and we have gone through it with a fine toothed-comb—we have examined it thoroughly. As the convener mentioned, we offered all members of this committee and all members of the Public Audit and Post-legislative Scrutiny Committee a briefing on the full report, so members have had access to it, albeit that I appreciate that that access has been provided on the basis of confidentiality.

I would like Mr Turnbull to have the chance to explain the good work that he has been doing on the matter.

I can offer what I offered earlier. To measure improvement, we must have a baseline. As Mr Rumbles has suggested, the baseline is that things were suboptimal. In working on an improvement plan, we must look at where we were and where we want to get to and monitor progress towards that, which is part of the work that we are doing. That requires us to discuss the issue with our supplier so that we agree what the baseline is and how we will make progress against it. I am sure that members appreciate that.

I would be content to come back to the committee to take you through our plans to give you some confidence that we are acting on the detail in the report, if that would be helpful, but I can demonstrate that there has been improvement—

Very briefly.

I will do so very briefly. We have had a number of releases of software since the turn of the year. The release that was planned to be in place at the beginning of January was not implemented until towards the end of February. That is one of the reasons why we are challenged in making payments. Since then, we have applied better process and better governance, and subsequent releases have been delivered on time. That is an important fact. The number of defects that we carry forward into the live environment—which is not uncommon in a system—has been decreasing. Even in the live environment, we have cleared those within a couple of weeks.

If the committee would find it useful, I can provide those figures in detail.

The committee will consider that.

I am not confident that the system will ever work, but I understand that you are. I will ask a very simple question: when will it be fit for purpose?

The answer to that question is that it is working just now.

But it is not fit for purpose.

You asked me when it will be working. It is working just now.

No—I asked when it will be fit for purpose.

It is fit for purpose. At this moment in time, it is processing the claims that it requires to process.

The key point that I would make about the Fujitsu report is that it was about sustainability and whether the system would meet future needs; it asked whether we would be able to roll over from one application year to the next with the minimum of testing. The answer to that is that the system would not achieve that—we are having to put more effort into that than would be ideal. However, the remediation action that we are taking will mean that, as we move forward to subsequent years, we will have a platform that will be sustainable and which should be capable of bringing on whatever new schemes or polices we decide to implement.

But the computer system is not doing its job now, because the cabinet secretary has had to go back to the European Commission to ask for a payments extension. If the system was fit for purpose, he would not have done that. Are you saying that, year on year, we will go back to the EC to ask for extensions?

I will answer that. We have made an application to the European Commission as a prudent, precautionary measure, in the event that it is required. That application is in the course of being determined, and we hope to hear the outcome shortly.

I stress that, first, the single application form payments went much more smoothly this year than they did last year and, secondly, we have paid 99.9 per cent of last year’s payments.

Cabinet secretary, I am sorry but I am going to have to stop you there. I make this comment as a general comment to everyone round the table. We have until 11 o’clock. I ask people not to repeat questions or answers. I am afraid that I will have to leave that question there if I am to have any hope of getting through the rest of the agenda in the time left.

We move on to the second question. I remind people once more to try to answer the question quickly. If they do not, it may seem rude but I will butt in to allow every member to ask their questions.

The committee has seen only a summary of the recommendations from the report on the 2015-16 European agricultural accounts audit. Will the full recommendations of the report be released?

Andrew Watson deals with audit matters.

We have provided an update to the Public Audit and Post-legislative Scrutiny Committee on the key findings of the audit. If that has not been made available to the committee, I will look into that following this discussion. In addition, the Audit Scotland report from May this year on CAP IT sets out some of the issues. A degree of information about the audit is in the public domain and available to the committee.

Why is it only the key points and not the full report?

We set out the key findings because that is the easiest way to digest the substance of the report. If it would be helpful for us to provide more information, we can look at that.

I am quite happy about a report being given to the committee confidentially, which we can then question in confidence—that happens frequently at the Finance and Constitution Committee and I do not have a problem with it—but if we do not even see the report, it makes it more difficult to ask questions.

Audit Scotland mentioned potential penalties of £60 million, and there has been some disagreement about that. Will you comment on that figure, cabinet secretary? Is it just a nightmare scenario or is it realistic?

We feel that the figure of £60 million is speculative. The Auditor General herself said that it was not her best estimate; it was a possible figure. We do not believe that there will be penalties of £60 million. As I recall, last year the Auditor General estimated that the costs would be in the range of £40 million to £125 million. I have previously said that our indicative figure at the moment—it is not an estimate, because these matters are not assessed until much later in the audit process—is around £5 million, not £40 million to £125 million.

We have made those points to the Auditor General. We feel that the predictions that were made in 2015 were inflated and that the update report this year also has an inflated figure. However, we are working extremely hard to mitigate those penalties, and doing everything that we can so to do.

The £5 million that you mentioned was for 2016.

It was for 2015.

And that is now a definite figure.

No.

It is still not finalised.

The process is very long and cumbersome. I do not think that we have time to go into it, although I am happy—

No—it is fine. Do you have any idea when we will get a final figure, even for 2015?

We would expect the EC to finalise that figure in the late summer or early autumn.

Jamie, do you want come in on that?

My question is on the issue of potential penalties and is, I guess, in the spirit of today’s transparency theme. On 21 June, the Scottish Government wrote to the European Commission seeking an extension to the payment deadline. I ask a simple question of the cabinet secretary. Was the First Minister aware of your intention to send that letter last Wednesday, prior to your sending it?

Yes. It was reported to the Cabinet that we were contemplating sending a letter. I am sorry—I probably should not have said that it was discussed in the Cabinet. It was raised as a possibility—as something that we may do. It was not decided until the date of the letter that we would make a formal application because, as I understand it—Mr Watson can provide more detail, because I appreciate that this is a perfectly legitimate area of concern—the protocol is that there is an initial engagement and discussion about these matters, which initiated at the end of May. That led to the formal application on 21 June. As with all such things, there is quite a lot of work that leads up to and paves the way and prepares properly for the submission of a formal application.

10:30  

So it was discussed in the Cabinet last week, prior to letting—

I cannot remember which Cabinet meeting it was. Bear in mind that we are not all in attendance at all Cabinet meetings. The First Minister was away for one meeting, certainly—she was in Aberdeen, as I recall—so she may not have been privy to the discussion.

Whether she was at that Cabinet meeting or not, was she aware that you were going to send the letter to request an extension?

It was something that was in contemplation—it was being considered. The final decision about making the formal application obviously was not taken until we made the application, because we did not wish to make an application unless we believed that it was a prudent and necessary step.

I am sorry to press, but who made the decision to send the application? It is—

I think that you have got as much from the cabinet secretary as he can give you.

It is a very unclear answer.

It may well be an unclear answer, but I am going to move on to the next question.

I know that, tomorrow, the Public Audit and Post-legislative Scrutiny Committee will look at the Audit Scotland report that has just been published, so I will be very brief—unfortunately, I will not be there to ask questions. Appendix 3 of the 2017 report touches on the recommendations that were made in the 2016 report. One of the four recommendations has been completed, and three are work in progress. When do you expect to have completed all those actions?

They are all in hand and a great deal of progress will be made by the end of the financial year. It is important to remember that some of the recommendations call not for specific actions but for continuous improvement and things such as the transmission of skills. Substantial progress has been made, and we accept all the recommendations in the report. We are pleased that it recognises that some progress has been made, although we point out that there are other areas in relation to which the report has not recognised the progress that has been made.

Thank you. I was going to ask whether you accept all the recommendations but you have answered that. Do you agree with the statement that

“it is likely that the rural payments system will not be functioning as anticipated until SAF 2018 at the earliest”?

As Mr Turnbull said, the system is working; otherwise, plainly, we could not have paid 99.9 per cent of the payments. It is pretty obvious that it is working, but it is not working on time. It is really important to understand that. To answer to the question, we already have an operational system that is delivering benefits, but we have more work to do to put payments on the timescales that we want to see and to deliver the remaining functionality. I expect to see very significant progress over both this year and next as our programme of continuous improvement continues.

Just to clarify the matter, does the 99.5 per cent refer to the 2015 payments, rather than the 2016 payments?

That is right, but it was actually 99.9 per cent.

Sorry. Fine. I accept your correction and the clarification that it was last year’s payments.

It was 2015—that is right.

I have a quick follow-up to Jamie Greene’s question. The cabinet secretary said that the application to the EC was made on 21 June. That was the day on which we debated CAP in the chamber and no mention was made of it, and it was the day before the First Minister did not answer questions about it. I am assuming that in the chamber last Wednesday you knew when the application had been made, and that the First Minister knew that on Thursday when she was answering questions. Neither of you told the Parliament about it. How can we believe that you are being open and transparent if that is the case?

Before the cabinet secretary answers that, I make the point that, unless I have got my facts wrong, the debate actually took place on the Tuesday.

It was on Wednesday—the 21st.

It was Wednesday. Sorry—I stand corrected. The debate was on the Wednesday and the letter was sent on the Wednesday.

The debate was held and I provided a speech in response to the Conservative motion and dealt with the matters that were before us. I also wanted to speak to the amendment that I lodged. The Government and the First Minister have made it absolutely clear, and I am making it clear now, that the letter was taken forward as a prudent measure and the right thing to do.

So why hide it? There were two opportunities to let the Parliament know.

There was no question of hiding anything. I made a five or six-minute speech in which I dealt with the motion that was in front of me.

We have got into a who-why-what-where argument, but you made a comment earlier that intrigued me. You said that you offered the committee the opportunity to go into any office to see how the systems are working. I think that there is an office near me in Hamilton. Am I correct?

Yes.

I know of no invitation. Rather than ask, “Did the First Minister know this?”, I want to ask you, convener, about when we got an invitation from the cabinet secretary to go and see those offices. If we got that offer, why were we not told?

Truthfully, I am trying to find out. I will speak to the clerks and come back to you.

Jamie Greene is getting quite upset about the First Minister, but I am getting quite upset that we have not been told that we can go to those offices. I want to see how the system is working. If the committee is not going to go, I would be more than happy to go to Hamilton with Annabel Turpie or anyone else. It is only five minutes down the road.

Is this serious?

Allow me to clarify. The cabinet secretary made the offer when he came to a meeting, and I believe that it was followed up afterwards. It is up to committee members to discuss whether they want to do that. I will move on to the next question, which is from Peter Chapman.

Before we move on, we need to bottom out the question of the debate. In the debate on Wednesday 21 June, I specifically asked the cabinet secretary whether he was going to make the payments on time and whether he was going to ask for an extension. I specifically made that request in my speech before the cabinet secretary spoke. It is absolutely not correct to say that he answered all the questions. There was also an opportunity the following day at the Highland show, when the cabinet secretary spoke to the assembled industry at the Quality Meat Scotland breakfast and could have said exactly what was going on, but that did not happen. In the spirit of openness, I am afraid to say that that certainly did not happen. I just wanted to make that point.

Will 95.25 per cent of pillar 1 payments be made in two days’ time, by the end of June?

I try to be as transparent as possible. Here I am for the umpteenth time. We provide weekly reports. I was delivering a speech in what was, as I recall, quite a rumbustious debate, and I wanted to speak to the amendment in my name, to get across some of the positives about agriculture in Scotland. That is what I did. I sought to answer as many points as possible but, with respect, the speeches were fairly short and it was a short debate. There is a procedure for providing information to Parliament, which I have regard to and implement scrupulously, but that procedure is not to provide information in an ad hoc speech in an Opposition business debate; it is to write to the committee convener to inform him or her of what is happening, and I do that with great regularity and will continue to do so.

Members have not said so, but I hope that they will agree that making the application was the prudent thing to do. It is something that should be done only if it is felt that there is a reasonable possibility that the flexibility sought will be necessary. In other words, one should not make an application unless it is necessary. Because, in our opinion, we were fairly close to achieving the 90 per cent target—we may fall a few percentage points short—we did not wish to proceed with an application unless it was necessary. It only really became clear that it might be necessary fairly recently. That is it.

I will double-check whether I can do this, but I would be happy to share with the committee the terms of the letter to the Commission, if that would be of assistance. I want to be as open as I possibly can be. If the criticism is that, in a speech in a political debate, I did not mention things about a letter that was sent out on the same day, we are moving into somewhat fanciful territory.

Cabinet secretary, both you and Peter Chapman have had a chance to bat that around. I would like to drag you back to the question that he asked you, which I believe was whether you will have made 95.25 per cent of pillar 1 payments in two days’ time.

Obviously, we have given that particular thought, and we have made substantial progress. Our central forecast is that we will make around 90 per cent of payments by that time. In other words, we will fall short by a few percentage points.

We are making a large number of payments each day to achieve that. It is very important that the farmers and crofters who are listening to the meeting, or who see the reportage of it, know that I expect the remaining payments to be made fairly shortly after 30 June. In other words, they will not be made within the deadline but fairly shortly thereafter. We expect virtually all eligible pillar 1 payments to be made by the end of August.

The deadline of 30 June is very important for the European Union and for penalty determination, but what farmers want to know is when they will receive the balance of their money. Let us remember—because it seems not to be reported frequently—that most farmers and crofters have received most of their money with respect to the basic payment and the LFASS loan scheme. I think that that pragmatic step needs to be stressed, as it is a very important measure for those farmers and crofters, and that is our primary concern.

I remind everyone again to please answer the specific question as directly as possible. I understand the points that you want to make—I understand that everyone wants to make points—but I urge you to please answer specific questions.

Given that you have said that you will miss the 95 per cent payment deadline, cabinet secretary, how big do you think the EU penalties for that will be?

It is impossible to be precise about what the penalties might be, but we are confident that they will be far less than the £60 million that the Auditor General has opined. As soon as we have further information on that, we will of course share it with the committee.

The £60 million is for non-compliance, not missing payments. That would be a different figure.

No, it is for penalties and disallowance.

The cabinet secretary has explained pillar 1 payments and the projections for them. When will 2016 pillar 2 payments be made?

We have a schedule for that. I looked at it earlier this morning, and Annabel Turpie has it in front of her. We have a large volume of statistics in front of us, so as she finds the relevant document, let me say that pillar 2 payments are not subject to the same time schedule as pillar 1 payments, for which the payment window is December to June. Pillar 2 payments do not have that deadline, as I am sure the member is aware. Generally speaking, the aim is for pillar 2 payments to be made in the autumn. In the interests of saving time, I am happy to provide that schedule in writing very quickly, if that would assist.

Annabel Turpie seems to have found it.

In our current payment schedule for pillar 2, we are looking at LFASS payments being made in summer 2017—I believe that we have told the committee these dates before. Payments for rural priorities are to be made in 2017; for the agri-environment climate scheme and the forestry grant scheme in autumn 2017; for the beef efficiency scheme in autumn 2017; and for land manager options in autumn 2017.

I point out that we are working with our suppliers to make sure that those can be delivered. We will of course update the committee, and the Public Audit and Post-legislative Scrutiny Committee, if there is any slippage.

Cabinet secretary, “summer” and “autumn” are constantly mentioned. It is very difficult to get a handle on the dates, so when you write to the committee, would it be possible to give months rather than those generic periods?

Yes, we will do that.

Thank you.

10:45  

I reinforce the point that farms are businesses and that quarterly deadlines are quite vague, so more specificity would be helpful. Are there any farmers or crofters who are—or have been—eligible but have received no 2015 or 2016 LFASS payments and no loans? Have any farmers who are eligible for money received nothing?

We are checking this out, but based on the preliminary information I am not aware that there are any cases of such non-payment. Is that Andrew Watson’s understanding of the situation?

We are confident that all eligible customers for the 2016 LFASS loan scheme that started in March have been either offered a loan or given the opportunity to provide more information to enable them to receive a loan, so the cabinet secretary is correct.

So anyone who was eligible for a loan has been offered one and anyone who has wanted one has accepted one.

Yes. Those are opt-in schemes, so it is up to the farmer or crofter to indicate that they wish to take up the offer of a loan.

Okay. Thank you.

Rhoda Grant has the next question.

When will the 2015 payments be made in full?

Across pillar 1 and pillar 2?

For BPS, greening and young farmers, we are looking at early summer 2017 for the 25 claimants who are still to be paid. I appreciate the convener’s point about specifying the month, so I will confirm that, but I would say that early summer is July. Eight claimants are still to be paid for voluntary coupled support, which is the beef and sheep schemes, and that money will also be paid in early summer. For LFASS, we still have to pay 1,700 claimants and we are again looking to pay the majority of them—I am pleased to say that we have fixed all known defects in the system—and we are also looking to do that in July. For rural priorities, we are now down to what I would call the tail. Those are very complex cases where we are quite often looking for more information. There may be disputes over the information between different applicants, or legal issues may be in play. We still have to pay 30 claimants for rural priorities and we have 50 claimants to pay for land management options. We are going through them steadily.

How much money is still outstanding that has not been paid either as a loan or as a substantive payment?

Net of loans, there is just over €162,000 for BPS. For sheep and beef, the figure that I have is that we have £500,000 to pay—I want to confirm the figure, so I will give you the information in writing.

It would be useful to get all those figures in writing.

Yes, of course.

For LFASS, net of loans the figure is £3.5 million; for rural priorities it is £90,000; and for land management options it is £400,000.

You have told us before that the 2015 and 2016 payments cannot be made at the same time. How are the 2015 payments currently being handled? Are they holding up the 2016 payments or are they being done manually?

The payments for BPS, VCS and LFASS will go through the system. Because of how we manage our debts we cannot run them through the system at the same time. To be clear, that is because of a policy decision that officials have taken around debt management rather than because of the system. What will happen is that in July debts will come off for BPS 2016 and we will then load the 2015 payments on, because we have fixed the known defects. The payments for rural priorities and LMO are manual payments, so they will carry on.

I have a brief question. You might want to write to the committee to answer this question, or you can even tell me when I come to visit you.

I have a lot of figures in front of me. The figures indicate that for pillar 1 schemes, 30 payments are still outstanding under the basic payments, greening and young farmers schemes. How many people were in those schemes? For the beef and sheep schemes, 36 payments are still outstanding; for the rural priorities scheme, 42 payments are still outstanding; and, for the land managers option scheme, 50 payments are still outstanding. I know how many payments are still outstanding, but I would love to know the original figures. You might want to write to us with that information.

I will write to you to confirm this, but I believe that the figure for BPS was 18,321. The figure for sheep and rural priorities is 99 per cent. I will write to you with the numbers, but that shows you the scale. We are dealing with a very small tail—with the exception of LFASS.

The first figure was 18,000, and there are only 30 payments left to make. Is that right?

It is 25 actually.

So, only 25 of the 18,000 are left to be paid.

That is what we would consider a normal tail. I know that the people who have not been paid will not be happy with that description, but those cases are the genuinely complicated ones where there might be disagreements over land, for example—two people might have claimed the same land. We are looking for information.

I think that you said in your answer to Gail Ross that you were running the 2016 payments and then you were going to reload the 2015 payments. Did I hear you right?

That is to do with debt management. We have to load the debts on for each scheme year.

I am not sure that I totally understand that.

I can write to the committee to clarify it.

I think that we have got the point that you cannot run the two things at the same time. Eddie Turnbull told us that at a previous meeting.

That is by design, rather than because of any issue with the system.

I repeat my offer: if members want to visit Saughton house or one of the offices to discuss these issues, they can do so. I followed up the verbal offer that I made at the committee previously, convener. I understand that you rejected my initial offer in writing, but I am happy to renew it today.

I would be happy to take up your offer.

Richard—thank you. I invite Mike Rumbles to ask the next question.

I want to focus on the knock-on effects of the focus on the CAP IT project on other issues, such as the beef efficiency scheme. Does the Scottish Government’s focus on the CAP IT and payment issues mean that other schemes such as the beef efficiency scheme are being neglected, which has led to hundreds of farmers withdrawing from them? Will there be an underspend in the beef efficiency scheme budget as a result of such drop-outs?

A brief answer to that would be appreciated.

We responded to concerns that farmers and NFU Scotland raised by making amendments to the scheme. The take-up has been high in terms of the number of cattle but lower in terms of the overall proportion of farmers involved. Farmers have made individual choices. This is just my view, with which others might disagree, but I do not think that the fact that take-up was lower than we had hoped—it is still substantial—is a causal result of any difficulties with the CAP IT payment. It is because farmers were not persuaded that the responsibilities and compliance duties under the BES were worth taking, given the financial compensation, although there are differing views on that. I have spoken to some farmers who think the scheme is very good and others who are very critical of it.

You are reported as saying that 330 farmers have withdrawn from the scheme. Why is that?

I do not think that that is to do with IT. That is the point that I am making. I am happy to come back and deal with that on another day, or in writing, but I just do not think that it is to do with the topic in hand today. I might be wrong and, if so, I would certainly want to correct the record, convener, but although it is a matter of speculation as to why precisely those individual farmers chose not to stay in the scheme, I do not think that it was a result of CAP IT issues.

I think it would be fairer to let Mike Rumbles finish his question. He had not quite finished it before you answered, cabinet secretary.

I am not suggesting that those farmers have withdrawn from the scheme because of the CAP IT project—that is a red herring. What I am trying to get at is why 330 farmers have left the Government’s beef efficiency scheme. Is it because it is too complicated? You must have a view as to why those 330 farmers have left the scheme. I would like to know what it is.

There were certain issues with the scheme, which we dealt with. It is important that I make this clear, because we had particular dealings with the NFU. There was an issue with the timing for issuing tissue sampling tags, particularly in relation to spring-born calves, which are often sold in the early autumn sales.

There were also health and safety issues in relation to tissue sampling bulls—not a task for the unwary, one might think. We reached agreement with the industry to resolve those issues, first, by issuing an early selection for those producers of spring-born calves who recorded all their calving details on the system by 9 June. Three hundred and nine producers took advantage of that, and a sampling selection is currently under way. Secondly, we reached agreement on allowing vets to do blood sampling instead of tissue sampling.

These matters are highly technical, and with respect, I did not come here primarily with the thought that I would be addressing them. However, I respect the question itself, and, accepting that it is a perfectly reasonable one to ask, I undertake to reply in writing to Mr Rumbles with any further information that we can provide in response.

Thank you, cabinet secretary, and I am sure that you will direct that response to the committee, too, so that we all get the benefit of it.

The next question is from Peter Chapman.

You might not be ready for this question, either, cabinet secretary, but it relates to the fact that LFASS is not supposed to continue after 2017 and that we are supposed to move on to a support scheme for areas facing natural constraint. The NFUS does not think that the Scottish Government is up to speed on this or that it will be able to move on to the new system. As a result, we will have a parachute system of 80 per cent of LFASS payments as we go forward into 2018. Is that a result of the focus being on the CAP IT system? Is that system taking up everybody’s time to such an extent that new schemes are not being taken forward in the way they should be?

No, it is not. The decision to go for the LFASS 80 per cent parachute option was taken substantially on policy grounds, and I think that it has been welcomed as giving clarity.

Secondly, I am aware that the Commission is looking at requests from the European Parliament to permit 100 per cent of that year’s payment to be made. There is therefore the possibility of the parachute option being deferred by a year, and I hope that that takes place.

Thirdly, we want to continue to make LFASS payments. As I am sure those who know hill farmers are very well aware, they are very valuable, but I am unable to give assurance on the LFASS budget for 2019, because despite repeated requests the UK Government has still not guaranteed the funding of LFASS in 2019. I raised the issue in my initial brief meeting with Mr Gove last week.

The penultimate question is from John Finnie.

Good morning, cabinet secretary. We could spend all day on the subject of Brexit, but I suspect that we have only two minutes.

I want to ask about the Scottish Government’s handling of the existing arrangements. Some of us would like a future scheme to have more of a concentration on environmental priorities. Are you able to talk about any future arrangements, and are you confident that the mechanisms to support them, however they might come about, are in place? I appreciate that there is a lot of uncertainty about this.

The Scottish Government strongly believes that in many cases the environmental schemes serve valuable purposes, and we therefore want to continue them. When I met Mr Gove last week, I expressed concern about the lack of clarity about the continuation of funding post Brexit. Until we have clarity about the budget, it is a bit difficult to start making arrangements about its allocation. As a brief response, though, I would say that we recognise that environmental schemes should be in place, and that issue will very much be taken forward by me working closely with Roseanna Cunningham.

I see that Christine Grahame would like to ask a question. Given that she has not asked any yet, I will give her the penultimate one.

It is just a quick question, convener. I am pretty ignorant about IT systems, but given that this one has had to be tweaked—that might not be a big enough word—to make the payments work, will it now be able to operate whatever arrangements are in place? I realise that you are looking at this with regard to payments coming from Europe, but once we are out of Europe and the payments start to come from, say, the UK, will the system be able to adapt so that we do not have to go back to payments to farmers being delayed?

That is an extremely good question. Plainly, the system was devised in the expectation that the UK would remain in the European Union and therefore devised to meet the compliance requirements for the reformed common agricultural policy. Were a totally different system of financial support to be put in place, the current IT system would obviously need to be adapted considerably to cope with that—and it is by no means clear that it could.

The key thing about the current system is that it records each land holding digitally. That is of great value, given the move from paper to digital records for all farm holdings—of which there are, I think, 54,000 covering 5.5 million hectares. I hope that the answer is in the affirmative, because it would be an extraordinary waste of money if one of the consequences of Brexit was the requirement to purchase new IT systems. That would, I think, create further real concern on top of existing concerns.

11:00  

The last question, which I am going to ask, requires just a yes or no answer, so we should keep within our timescales. Will we need a loans scheme for payments for this current year—in other words, for 2017? Yes or no?

I have actually prepared an answer to what is a very important question, convener, and given its importance, please let me answer it in this way. I am in no way dodging the question.

First, we aim to complete the functionality of the CAP IT system to ensure that loans are not required, but a judgment will be made shortly as to whether a further loans scheme is necessary. If so, there shall be a loans scheme for the basic payments, as there was last year.

The question whether a scheme is necessary will be determined following the outcome of the further discussions with CGI, which I met yesterday and pressed for assurances on effective delivery of the IT systems on time to enable timeous payment. We will provide clarity on this issue as soon as possible but in either event—and this is the key point—we will ensure that farmers continue to receive the substantial majority of the payments to which they are entitled within the payment window, either through full payment in the normal course or through a loans payment scheme. I expect to announce our decision on this matter later this year, probably in September.

Thank you, cabinet secretary. I am sure that those who have been listening will make up their own minds as to whether that was a yes or no.

The committee would really appreciate being kept up to date on the response from the European Commission on the request for an extension to the deadline for payments, and it would also appreciate an indication, as soon as they are known, of fines that might emerge from the failure to meet payment deadlines. We also request that the cabinet secretary come back to the committee in the autumn to provide an update on the issues that we have discussed today.

I thank the cabinet secretary, Andrew Watson, Annabel Turpie and Eddie Turnbull for coming to the meeting, and I will have a brief suspension to allow the witnesses to leave.

11:02 Meeting suspended.  

11:07 On resuming—