Meeting of the Parliament

Meeting date: Tuesday, September 13, 2016

Official Report 875KB pdf

---

Common Agricultural Policy Payments

The next item of business is a statement by Fergus Ewing that is an update on common agricultural policy payments. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

14:51  

I thank all the staff working in Edinburgh and at the 17 area offices around Scotland who have worked flat out since May to progress the 2015 payments. On the visits that I have made, I have seen at first hand the dedication of our staff in helping to resolve the issue—often going above and beyond normal expectations—to ensure that farmers get their money as soon as possible. Their efforts have paid off. Substantial progress has been made. By 30 June, almost £310 million had been paid out to farm businesses, with more than £110 million of that since the end of May. Work has continued apace over summer to process and progress the remaining payments, which are the most complex cases. As a result, the tail of 2015 payments has been larger than we might normally expect, but I can assure members that we are working hard to resolve those and we aim to pay the majority of outstanding cases by the middle of next month.

Moreover, everyone who is eligible but who has not yet been paid should have been offered a loan. This summer, I asked officials to ensure that we were delivering on that promise and I am pleased to advise Parliament that over 30 new loan offers have been made in recent weeks. In many more cases, the need for a loan has disappeared as people have received their CAP payment. I can confirm to members that over 99 per cent of eligible claimants have now had either a CAP payment or the offer of a loan. However, I will not be satisfied until every single farmer and crofter who is entitled to a payment has received it in full.

Today we are publishing details of the 2015 CAP payments to date. As at last Friday, over £350 million has been injected into Scotland’s rural economy through the various payment schemes. Of that total, £326 million has been made in 2015 basic, greening and young farmer payments. Over 17,500 farmers—almost 96 per cent of those who are eligible—have received their full payment.

Under the less favoured area support scheme, loans of approximately £54 million out of an estimated total of £66 million were made in March. Technical issues are holding back the final LFASS payments but, as loans have already been provided to over 11,000 eligible applicants—mostly at the rate of 90 per cent—the vast majority of potential payment recipients are largely unaffected.

Rural priorities payments of £10 million have already been made with further payments expected later this month, and land manager option payments of £4 million are due to start from October. It should be noted that those payments are normally made after the payments under the other schemes.

The vast majority of sheep support payments were made in July as we said they would be, with more than 900 farmers receiving £4.3 million. We have also nearly completed payments under the mainland and island beef schemes, with £30 million paid out to more than 7,000 farmers.

Although we are close to completing payments for 2015, it is clear that we are not there yet. Members will recall the European Union-wide decision made by Commissioner Hogan in May, which was called for by the Scottish Government and other EU countries, such as France. That changed the situation radically, with penalties waived for payments made from 1 July to 15 October. Moreover, the penalty regime applies to the United Kingdom as the member state and any penalties will be determined by the performance of all four countries. The key now is to complete the vast majority of remaining payments by mid October, which is what we aim to do.

In May, I also undertook to put 2016 payments on an even keel. That work began with the information technology payment system. I have met the Auditor General, Caroline Gardner, to discuss Audit Scotland’s findings on the futures programme. I wanted to put matters right and she is helping us to achieve that. We are publishing our response to Audit Scotland’s report today, having accepted its recommendations in full. Next week, I will give evidence to the Rural Economy and Connectivity Committee, while officials will appear before the Public Audit Committee at the end of the month. The Auditor General will provide a brief update as part of her audit of the Scottish Government accounts for 2015-16. Officials are inputting to that process and co-operating with it in full.

We all recognise that there are lessons to be learned and I am keen to work with the Parliament and members to do just that. We have already learned much from this first year of the new CAP payment regime and that experience will help to smooth the 2016 process. However, some parts of the programme are still being added and developed and will feature for the first time in 2016. Our contractor, CGI, has assured me that the IT system functionality for 2016 will be delivered early next year and final processing will be undertaken thereafter. Therefore, I expect and anticipate that payments will be made and substantially completed between then and the end of the payment period, namely by the end of June. I am happy to report back to Parliament in January next year on progress.

However, I am sure all members can agree that farmers and their families need certainty in these uncertain times. Despite that uncertainty, we are determined to build sustainable growth in Scotland’s rural economy. As part of that, I am holding a series of summits, including with the farming and food sectors, to explore how best to deliver investment, jobs and opportunities in rural and island communities. We will also develop a Scottish rural infrastructure plan in 2017 to better co-ordinate existing and planned expenditure and resources. That will allow a more cohesive approach to economic activity that benefits our rural, island and coastal communities.

Although such activity will help to support future growth, we must also secure the immediate needs of our farmers and ensure cash flow in the rural economy. I am confident that we are putting the 2016 payments on a better footing. I am also reassured that the arrangements we have put in place with our contractor mean that they should be able to deliver on the timescale they have committed to for payments. However, those arrangements are not risk free and, to be frank, I am not prepared to take those risks, particularly with families’ and communities’ livelihoods.

Therefore, every farmer and crofter who is eligible for a basic, greening or young farmer payment will be able to apply for a loan up to the value of 80 per cent of their entitlement. Letters will be issued before the end of the month to farmers inviting them to apply and everyone who applies by the deadline of 12 October will receive a loan of 80 per cent of their entitlement in November. Our aim is for the bulk of payments to be made in the first two weeks of November.

The new loan scheme will provide much-needed cash flow for normal business costs such as wages, feed and seed, fuel and fertiliser at a time of year when those bills often start landing on the doorstep. It will also give farm businesses the security and certainty that they need to take longer-term investment decisions, such as decisions about the purchase of new machinery, equipment or facilities. It will bring certainty not only to farmers and crofters but to those who are employed in and running supply-chain businesses in the wider agricultural sector.

Our estimates suggest that more than 17,000 businesses will be entitled to qualify for the loan initially, with work continuing on the making of offers and payments to the remaining eligible businesses by the end of the year. The scheme has the potential to inject up to £300 million into Scotland’s rural economy before the end of the year, securing jobs and investment, stimulating growth and acting as a bulwark in these uncertain times.

As I said, from day 1 in this job—and for the foreseeable future—the resolution of the CAP payment issues has been my top priority as cabinet secretary. I promised to fix the problem, and I am fully aware that we are still some way off from that. I reiterate what I said in May: we are sorry that, although we have made substantial progress, we are not there yet. However, I remain absolutely committed and determined to fix this, and I am getting on with doing just that.

To achieve that, we need to set a realistic timetable that our farming community can trust, and we need to be mindful of the extraordinary effort that is being put in by staff all over Scotland to achieve our objectives. I thank them for their continuing efforts and I also thank our farmers and crofters for their patience and their willingness to work with us to help us get it right. In the meantime, I want them, their families, their employees and everyone working in the agricultural sector in Scotland to know that, by offering certainty and clarity through our loan scheme, giving them the confidence and security that they need to get on with their everyday business and take longer-term investment decisions that are good for the rural communities in which they live and work, we are building growth in Scotland’s rural economy. I hope that that is an objective and an outcome that everyone in this chamber will welcome.

The cabinet secretary will now take questions on the issues that were raised in his statement. I intend to allow around 30 minutes for questions, after which we will move to the next item of business.

I am grateful to the minister for providing his statement in advance. I refer members to my entry in the register of members’ interests regarding farming.

Today, the minister has said that we need certainty going forward. However, he has just confirmed what we all expected: the IT system still does not work and is not expected to work until well into next year. That is why some £40 million is still outstanding for this year’s payments—nine months late. What a slap in the face for farmers who are sitting with a record level of debt, at a staggering £2.2 billion. That is also why he cannot deliver 100 per cent of payments in December, as we should be able to expect. Instead, he is offering an 80 per cent loan. That loan is an admission of failure.

However, we still have problems from this year to face up to, so I have two questions for the minister. First, when will he deliver the £8 million of LFASS money that is still outstanding? Secondly, will he recognise that his Government has lost the trust of farmers due to this fiasco and finally agree to a parliamentary inquiry into the 2015 CAP payments?

First, it is not for me, as a minister, to state whether the Scottish Parliament should hold an inquiry; that is a matter entirely for Parliament. I have indicated that I am to appear before the Rural Economy and Connectivity Committee, that my officials are to appear before the Public Audit Committee and that the Auditor General herself is to report further to Parliament. I welcome the opportunity to submit to the scrutiny of Parliament. However, it is not for ministers to suggest to Parliaments—far less order them—what to do.

On Mr Chapman’s first question, we aim to start LFASS payments in September. However, the vast majority of those who are awaiting their payments have already received a loan payment of around 90 per cent. It is fair to state the facts as a whole rather than selectively. The picture, as far as LFASS payments go, is that the vast majority of recipients have received loans. I believe that those payments started in March and April. March is when LFASS payments are normally made, not last December as may have been implied.

On Mr Chapman’s second question, I have been quite straightforward in accepting that there have been grave difficulties for the farming community. I still recognise that—that has not changed. When, over the summer, I attended eight area offices and visited about 11 farming and agricultural shows, game fairs and other events, I found that the farming community wanted a realistic assessment and an improvement in respect of 2016.

I was therefore disappointed that Mr Chapman and the Conservatives did not specifically welcome what I believe will be welcomed by the farming community around Scotland, namely that, earlier than ever before, in the first fortnight of November, we intend that there be distributed up to £300 million before the end of the year. Surely it is not unreasonable to expect that even the Conservatives could find it in their hearts to welcome that step, which I am sure will be appreciated by many farmers today, particularly those who traditionally plan investments at the end of the year.

I thank the cabinet secretary for an advance copy of his statement and join him in paying tribute to the staff who are working flat out to try to clear up this mess.

In a statement to Parliament in May, the cabinet secretary set out his three objectives: to complete payments; to minimise penalties and deliver compliance; and to set the 2016 scheme on a proper footing. It is clear from his statement that he has not achieved any of those. Will he at least tell us the value of CAP payments that are still outstanding, by which I mean the full CAP payment outstanding rather than that amount less any loan payment made? Will he confirm when 100 per cent will be paid?

I can tell the member that, as at 9 September, the total value processed for payment has been £326 million and that 17,744 eligible businesses for which we have processed payment have received those payments. Around 500 farmers have yet to receive their payment in full, but the majority of those will have received the offer of a loan. It is not possible yet to estimate precisely the total amount that remains to be paid because that amount is not fixed and depends on a number of other calculations. However, I will come back to the member with that information later.

So far as putting payments on a proper footing is concerned, we have made considerable progress over the summer months. In her report published on 20 May, the Auditor General warned of the possibility of penalties in excess of £100 million. I believe that we have demonstrated that we have dealt with matters in such a way that that will not happen. We have secured great progress in relation to compliance and are busting a gut to ensure that there will be the minimum difficulty in that regard.

Before I ask my question, I would like to put on record the fact that the First Minister has appointed me as parliamentary liaison officer for rural economy and connectivity, and I look forward to working in that capacity with members across the chamber.

I welcome the announcement of the new loan scheme, which will inject up to £300 million into the rural economy in my region and across all of Scotland this winter. Will the cabinet secretary provide more detail about how the loan scheme will operate, where potential applicants can find out more about the scheme and whether other countries operate a scheme like it for 2016 payments?

We will write with details of the loan scheme to all farmers and crofters who are eligible for the CAP basic payment scheme and greening 2016 payments. We aim to write to them by the end of this month; indeed, I have been involved in revising two drafts of the letter. We will write separately to inform any applicants who we believe will not be eligible for CAP BPS and greening payments in 2016 to explain why that is the case and we will write separately to any applicant who for any reason will be offered a restricted payment due to their specific circumstances.

I urge everybody who receives a letter to respond immediately if they can, as that will allow us to process their payment as quickly as possible. Applicants will receive details and terms and conditions in their letter, there is information on our website and there is a customer information line. I am happy to provide details to all members if that would be useful.

Those arrangements have been put in place and the aim is to invite people to return forms as quickly as possible and, at any rate, by 12 October, to ensure that payments can be made in the first fortnight in November to those individuals who do that.

I thank the cabinet secretary for the advance copy of his statement. In Galloway and West Dumfries, claims that are being approved by the local office are still being rejected by the IT system in Edinburgh. Although I and all my colleagues welcome the loan scheme that the cabinet secretary announced today and the stability that it will bring to farmers and rural communities over the winter months, does the cabinet secretary accept and agree that this is yet another admission of failure, this time over the 2016 payment run, with him being only hopeful that substantial payments will be made by June 2017?

Finlay Carson’s constituents will have their claims dealt with by the Dumfries office, which I had the pleasure of visiting some months ago. The Dumfries office has received 1,372 eligible claims, of which 1,303 have been paid in full, 29 have been paid in part and 40 are unpaid. I will not be satisfied until every eligible claimant has received payment in full, but those figures illustrate that the position is just not as bleak as the Conservative’s rhetoric makes it out to be. We have substantially completed the task and I have accepted that there is more work to be done.

Incidentally, I am pleased that Finlay Carson—unlike his predecessor, the Conservative’s official spokesman—welcomed the loan scheme. I assume that that is the Conservative Party’s official response.

I absolutely believe that farmers around the country will be pleased that today I, for the Scottish Government, have brought forward a practical, helpful, sensible response to the difficulties in 2015.

The cabinet secretary alluded to the uncertainty that Scotland’s farmers, crofters and rural communities face as a result of the Tories taking us out of the EU against our will. Can he advise what he is doing to seek guarantees about the future of Scotland’s CAP funding?

I do not want this to be at all political. I welcome the fact that there was—albeit after a little while—confirmation that the pillar 1 payments will be met by the UK Government. However, we have sought confirmation from the UK Government on the security of the money for Scotland’s rural community—namely the Scotland rural development programme money—that, for us as a member of the EU, was secure until 2020 under the European arrangements. That money amounts to £360 million.

Sadly, despite Mr Mackay’s attempts to persuade David Gauke of the Treasury to provide clarity about the future of that money, there is no clarity. The many farmers who have applied or intend to apply for payments from schemes under the SRDP element—pillar 2—are waiting for that clarification from the UK Government. It is a simple matter of fact that that is generating far more uncertainty than anything else that currently affects rural Scotland.

The cabinet secretary said that the loan scheme

“has the potential to inject up to £300 million into Scotland’s rural economy before the end of the year”.

Does he agree that that is in no way a good news story? It is a rationalisation, as the loans are necessary only if problems with the coming year’s payments are possible. Does he also agree that, although the scheme will provide 80 per cent certainty, that is still a sorry state of affairs?

I disagree. I hope that most farmers will agree that the scheme is an entirely practical step. Such an approach is mirrored in other parts of the EU—notably France. My announcement that farmers and crofters will be entitled to 80 per cent of their basic entitlement within the qualifying limits will greatly reassure those who are listening and who want to know when they will receive their payments.

I have been told not once but many times by many people at agricultural shows—I know that Claudia Beamish diligently attends them, too—that one thing that farmers want is clarity and certainty. They want me to say today when payment will be received. I have said that they will all be entitled to a loan if they wish to have one and are eligible. We aim to make those loan payments in the first fortnight of November. That is clarity, which I believe will be welcome.

It is good that the Scottish Government has accepted Audit Scotland’s recommendations in full and has begun to implement them, but it is clear that there are many lessons to learn. Will the cabinet secretary flesh out those issues?

The kernel of the issues relates not to the good work of the people who work in the 17 area offices but to the application of the IT system to an extremely complex process that involves 4 million hectares and 400,000 fields. Each field is the size of four or five football pitches, and the permissible area for the margin of error is equivalent to the area of a goalmouth.

That situation and the scheme’s complexity mean that the IT systems are complex. Mr Coffey’s question was about the pre-existing problems. We have addressed all the issues that the Auditor General for Scotland identified in her report and I met Steve Thorn, who is a senior director with the contractors, on 1 June and last week on 7 September. The contractors have made a number of changes to the computer systems.

Without labouring my answer, I suspect that I will have the opportunity to give the Rural Economy and Connectivity Committee more details of the work that we have done, the IT fixes that have been delivered and what we are doing to ensure that the IT fixes that have not yet been delivered are delivered.

A great deal of work has been done. I will be happy to account to the parliamentary committee with more details later.

I, too, thank the cabinet secretary for the advance copy of his statement. The word “certainty” was peppered throughout his statement, as it has been throughout his answers. I draw attention to the organic sector’s plight. As he said, farmers across Scotland face a critical time when they must make investment decisions. For organic farmers, that means investment decisions about habitat management and whether they wish to stay organic for the long term or to convert more land to that certification.

Such farmers need certainty. What is the Government’s commitment to running the agri-environment climate scheme, notwithstanding the points that the cabinet secretary made about the SRDP’s future?

We have shown considerable commitment to the greening and agri-environment schemes. Indeed, just two weeks ago, I had the pleasure of meeting Soil Association Scotland representatives. We discussed in detail some of the opportunities and challenges facing the organic sector at the current time.

Obviously, we want to continue to provide appropriate supports on all the measures, but it is reasonable to say that that task is made literally impossible to perform at the current time because of the lack of any clarity from the UK Government about the future of pillar 2 and rural development programmes.

It is a cause of some embarrassment to me as a systems engineer that a computer development problem is at the heart of the problem. It is clear that farmers have experienced pain; the Government has experienced pain to its budget, too. Will the minister ensure that the contractor also shares some of the pain of fixing the IT problem?

I assure Mr Stevenson that, in my meetings with the contractors and the project team in Saughton house, we have had full and frank discussion of all the issues resulting in, as I reported to Parliament earlier in the year, a substantial saving on the contract, a driving down of costs and performance improvements. Therefore, the contractors have responded to our requests and, indeed, to our requirements to secure better value for money.

I know that Mr Stevenson has an on-going interest in IT projects. He will have copious knowledge about all the matters from his previous experience of implementing them in practice, so perhaps it is a shame that we did not have his input into the project some five years ago. I hope that he will be pleased to hear that a great deal of work has been done to address precisely the issues that he—correctly—raises.

The minister has just confirmed that more than 500 farm businesses still have not been paid what they were due nine months ago and that, for the coming year, his 80 per cent loan plan means that the average farm business will still be £6,000 out of pocket—and for goodness knows how long, because the minister has confirmed that the IT system is not working and will not be running until well after all the payments are supposed to have been made. It is a dreadful admission that this year’s payments are not going to work. How does that square with his commitment in his previous statement to Parliament that the 2016 payments would be put on a proper footing?

Were it the case that Mr Rumbles’s series of assertions were accurate, perhaps there may be something in his points.

You just said that.

However, since they are not, I am afraid that there is no point. He has accused me of making a statement in which I promised that payments would be made after the due period, but that simply is not the case. I said precisely the opposite—that we seek to have the majority of the payments paid by the end of the payment period. Therefore, his first point does not follow.

This is disgraceful.

His second point also does not follow from his assertions. Although I said that 500 cases remain to be paid, I also pointed out that the farm businesses involved in all those cases should have received an offer of a loan.

So I am right.

Mr Rumbles, please stop shouting from your seat. Carry on, please, cabinet secretary.

I have made it absolutely clear that the businesses involved in most of those 500 cases will have received a loan. More than that, precisely because I was concerned to ensure that that was the case, I asked my officials to go back over the matter in the summer. As I said in my statement, an additional 30 cases were identified as a result—if Mr Rumbles wants to read the statement later, he will see that. I will not be satisfied until every farmer and crofter has been paid in full. I will get on with that job.

What assurances can the cabinet secretary give to those recipients of payments whose cases are deemed particularly complex but who still require timely payments to be made?

I assure all individuals in those circumstances that work is being done to deal with their applications. Many members of this Parliament will be aware that, every year, there is a tail of cases that present particular difficulty. Such cases generally fall into categories such as cross-border cases, private contract clause entitlement cases and cases in which there is dispute about the area of land that is permissible for the purposes of the claim. I think that it is accepted that complex cases generally cause problems for some people. However, I want to assure every individual who is in such a position—it is a relatively small minority of people—that everything is being done to process their claim as quickly as possible.

The cabinet secretary referred to the decision to waive penalties for payments made between 1 July and 15 October. Given that the decision was exceptional, will future penalties for late payment not also be waived? If not, how much will the penalties cost?

The First Minister and I lobbied Commissioner Hogan—I think it was on 20 May—and were pleased that our efforts and those of other EU member states, including France, which sought a similar approach, received a sympathetic hearing. That means that the fears that the Auditor General for Scotland quite reasonably identified in her report will not come to pass. That is a major step forward and a tribute to all the hard work of the staff in the area offices.

The member asked what will happen in future years. That will depend on whether we remain fully in the EU, as we wish to do, will it not? Currently we have had absolutely no plan from the United Kingdom Government for what will happen in the next five years. However, we will always work to minimise difficulties and maximise compliance, as we have done with some success over the past few months.

What engagement does the cabinet secretary plan to have with members of the farming industry to inform additional improvements to the system?

We engage with farmers through our area offices. Indeed, from my visits I have discovered that many of the people who work in our area offices throughout the country are members of the farming community and have been or are farmers themselves. We provide a great deal of information through our area offices, whose staff are extremely adept and capable of providing helpful information.

On other means of providing information, I have made it clear that we are contacting every eligible farmer about the loan. The process for that has been set up with clear leadership, which is reporting to me. We are also happy to use excellent organs such as The Scottish Farmer to promote with great accuracy the steps that farmers must take if they are to take up the loan scheme, which will deliver up to £300 million to rural Scotland and the farming community in the early part of November.

I have been contacted by many constituents in the Borders who have been adversely affected by the Scottish Government’s failure to deliver their CAP payments on time. Many have incurred significant consequential losses. What is the minister’s response to people who say that the Government should pick up those losses?

I respond to any individual case that a member of the Scottish Parliament, including Mr Lamont, raises with me. I do not believe that I have received any such case from Mr Lamont. If I do, I will study it carefully.

I do not think that many Governments have accepted the case for consequential loss, for a number of pretty good reasons. However, if Mr Lamont writes to me and can come up with arguments in the context of any relevant case, I promise to consider them.

Mr Mountain is next, and I have two more requests to ask a question. If everyone is fairly succinct, we will manage to get everyone in.

I declare an interest as someone who is part of a farm partnership.

I join the cabinet secretary in thanking the staff in the area offices for all the extra work that they have undertaken in unpicking the CAP payments disaster, which was predicted but not admitted at this time last year. Can the cabinet secretary please tell us the cost of the extra work that the staff have undertaken, including the cost of the overtime and the extra hours that they have put in, as well as the cost of the extra people who have been employed, over and above the IT costs that he will no doubt tell the Rural Economy and Connectivity Committee about next week?

I value the extraordinary effort that has been made by staff throughout our rural payments and inspections directorate offices, and I assure Mr Mountain and all members that the focus has been on making absolutely certain that the claims are processed as quickly as possible. If that has involved an element of overtime, that is money well spent. If Mr Mountain’s committee wishes to pursue the issue I can examine it further, but I think that the effort that the staff have made has been well worth paying for. In the circumstances, that was absolutely the right thing to do.

Statistics are often thrown about in this chamber, but statistics can be people, and in this case they are Scottish farmers. Does the cabinet secretary recognise that mention of the percentage of farmers who have received some payments is of cold comfort and little help to those whose debt—in the absence of their CAP payments, which are now nine months overdue—continues to rise?

I have made it clear on several occasions that I entirely accept that any farmer who has not received payment in full will obviously feel disappointed, angry or aggrieved about that. That is why I am very pleased that we have made such progress since the most recent occasion on which I reported to Parliament on the matter. We will continue to leave no stone unturned in order to get all payments out to all farmers as quickly as we can.

I declare an interest as a farmer.

The cabinet secretary will be aware of the reducing profitability of Scottish farming, as evidenced by the accumulated farming debt of £2.2 billion. There is a need to encourage new entrants into farming. How does he think that will be achieved against the background of reducing profitability and growing debt that the Scottish Government has overseen since 2007?

First, I think that Mr Scott would agree that it is reasonable to point out that the support of the banks during difficult periods over the past year has been very much appreciated. We greatly value the joint working that we do with banks—I met some recently—and I would like to thank all the banks that are involved in the farming community in rural Scotland for their efforts.

Secondly, it is reasonable to point out that, although the recent average debt statistics reveal that the average debt per farm has increased in Scotland, our friends in the Opposition have not mentioned the fact that it has increased by more in the rest of the UK. Of course, the decision to take on more debt is made for a number of reasons.

On a positive note, I was pleased that some of the sales reported very good prices, not least one that I heard about involving the sale of 11,000 lambs at Dalmally. Everything else aside, I hope that we can all agree that that is a good thing.