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Chamber and committees

Meeting date: Tuesday, May 31, 2016

Meeting of the Parliament 31 May 2016

Agenda: Time for Reflection, Common Agricultural Policy Payments, Taking Scotland Forward: Economy, Business Motion, Decision Time


Common Agricultural Policy Payments

The Presiding Officer (Ken Macintosh)

The next item of business is a statement by Fergus Ewing 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.


The Cabinet Secretary for Rural Economy and Connectivity (Fergus Ewing)

First, I pay tribute to my predecessor, Richard Lochhead. For nine years, he served rural Scotland as its champion. He worked tirelessly to promote our high-quality food and drink and to stand up for Scotland’s interests in fishing and farming here, in London and in Brussels. I and the whole chamber wish him and his family well. [Applause.]

I say at the outset that, among the farming and crofting communities and businesses in Scotland, the common agricultural policy payment scheme has caused anger, frustration, hardship and cost. As I have for 17 years represented a constituency with vital farming and crofting interests, I am very well aware of that. On behalf of the Scottish Government, I address three simple words to all farmers and crofters who have suffered as a result: we are sorry. Let me follow that up with four further words: we are fixing it.

Progress has been made, and I can now say that most farmers and crofters should have received most of their due payment. By the end of April past, all eligible farmers should have received a substantial payment from the Government unless they chose to opt out of the nationally funded loan scheme. That payment will have been worth around 80 per cent of their estimated entitlement.

We recognised the industry’s need for cash flow. We did not meet our targets, and we accepted that that created problems for businesses. We were determined to get cash out to farmers and crofters, and for that reason we put the nationally funded loan scheme in place. However, if any member’s constituents believe that they are eligible for the basic payment scheme and have not received a payment, they should contact their area office, and we shall establish what the position is with their claim.

We paid out more than 5,000 national BPS loans in April, which were worth more than £90 million. More than 40 per cent of those have been repaid already as the main European Union-funded payments have been processed, and at present we have made main EU-funded basic and greening payments to more than 15,000 businesses—more than 84 per cent of eligible farmers and crofters. The payments made total almost £200 million. Those farmers will be due further payments when we have finalised their entitlements, which are worth around £50 million. A further 3,000-plus farmers and crofters who have already been offered national loans need to receive their main payments, which total up to £95 million.

We also expect to start payments soon under the coupled support scheme for sheep and to complete payments under the two schemes for beef cattle. Those are pillar 1 schemes that are also subject to the EU’s direct payments deadline. The Government is doing everything possible to get those payments out before the end of June.

The Auditor General for Scotland’s report was published a week past Thursday, and we accept that it contains very serious criticisms. That report, which is Audit Scotland’s third, sets out recommendations that we are considering very carefully, and we shall respond to all of them in due course.

The resolution of the CAP problems will not be achieved overnight or by any single or simple set of actions. However, I believe that we shall substantially resolve those difficulties, and I pledge to all that it will be my first and foremost priority in my new role to bring about that resolution.

Commissioner Hogan confirmed that a number of member states across Europe face problems with the ambitious timetable for the new common agricultural policy. The Audit Scotland report notes that that timetable presented a challenge along with the complexity of the European policy and the additional features requested by the Scottish farming industry. That has lain at the heart of the difficulties that we have faced.

Payment performance this year has fallen short of the very high standards that the Government has delivered in recent years. The Government had already acknowledged those difficulties to Parliament, of course. As long ago as autumn 2014, in evidence to the Public Audit Committee, the Government accepted that the size of the task was massively underestimated at the start and that the time needed to recover from that start had left the Government with a huge challenge in meeting the CAP deadlines. However, as I have already said, we are fixing that.

I have three objectives: to complete the 2015 payments so that farmers get their money as soon as possible; to deliver compliance and minimise any financial penalties; and to see the 2016 payments placed on a proper footing.

I am pleased to report that there are positive signs within the programme. Area office staff have reported to me that they are making better progress. We have reduced costs—since January, we have saved more than £1.2 million on contractor reductions; that remains a key priority area to deliver further savings—and we have improved information technology delivery. However, we must be realistic. I am determined that, for the 2016 payments, we make clear to Parliament and to the farming industry what the likely timescales really look like. The farming industry needs to have confidence in the payment timetable and that we will do what we say. There must be no repeat of the problems that were faced in 2015-16.

I am also conscious that the Auditor General raised concerns about the budget for the programme. We accept that there are risks, but we are bearing down on all aspects of the spend and taking every opportunity to mitigate that risk further.

I am determined that the Government will learn the lessons from the futures programme not just for the remainder of that programme but for our wider portfolio of IT programmes. However, I do not wish to distract from the clear and present task of getting the last of the payments out to farmers and crofters. Now is the time to focus on that, and on meeting the payment deadline successfully, but I can say to members that there will be a process to learn lessons from the experience.

I will return to Parliament in the autumn with more details on our progress on the three objectives that I have outlined.

From day 1 in the job and for the foreseeable future, the resolution of the CAP payment issues is my top priority as cabinet secretary. I assure members and all those who are listening in Scotland’s rural communities that I will devote all necessary time and attention to that task. It is my number 1 priority. I give the chamber the categoric assurance that I am determined to oversee and drive forward the work that is necessary to bring the payment regime back on to an even keel.

The Presiding Officer

I thank Mr Ewing for his statement. I intend to allow 20 minutes for questions to the cabinet secretary. Members who wish to ask a question should press their request-to-speak button. I call Peter Chapman to ask the first question.

Peter Chapman (North East Scotland) (Con)

I am grateful to the minister for making the statement to the chamber today, and for providing an advance copy of it. However, his apologetic words do nothing to make up for the months of chaos and heartbreak in our rural economy that his department has caused. Time and again over the past six months, Government ministers have had to come to the chamber and explain that they need more time to get payments out. That is simply unacceptable, and it has completely eroded farmers’ trust in the Government. In order to regain that trust, I hope that the minister will commit to all payments being made to farmers and crofters by the end of June. That deadline is important not only because of how vital the money is to farmers, but because unless 95 per cent of the payment is paid by that date, the Government will be liable for fines from the EU of up to £125 million. Will the Government commit today to getting the payments out in time?

Fergus Ewing

I assure the member that I appreciate the serious consequences that have been caused by the matter. I alluded to and accepted that in my statement, and I provided absolute reassurance that everything possible is being done to make, in full, the 2015 payments as quickly as possible.

At present, we have made payments equivalent to 84 per cent of applications under the basic payment scheme and greening. As the member will know, there are pillar 1 and pillar 2 payments. Many of the pillar 2 payments are not to be completed by the end of June; they are not subject to the same deadline. Therefore, with respect, it is not quite as simple as saying that every single payment has to be made by 30 June. As the member will know very well, there are other aspects that do not have to comply with that deadline.

However, let me deal with the deadline. Last Monday, I visited two of the area offices, and before Cabinet this morning, I spent three hours in detailed discussions with and meeting the teams that are dealing with the farmers. I therefore know that many of the people in the area offices are of and from the farming community—they have the respect and the trust of the farming community; they are part of it. We want to support their excellent work, and at this time we should be boosting their morale, not subjecting them to undue criticism when they are busting a gut to complete the job. I fully support them in the work that they are doing.

Rhoda Grant (Highlands and Islands) (Lab)

I thank the cabinet secretary for early sight of the statement, and I congratulate him on his new post.

The whole scheme has been shambolic: there has been a lack of information and there have been many missed deadlines. In the run-up to the election, we had a cabinet secretary who spent his time trawling his old personnel files rather than ensuring that our farmers and crofters were being paid. Priority must be given to getting the correct payments to those who are still waiting, because genuine hardship has been caused by the delays and it must be dealt with. Given the cabinet secretary’s answer to Peter Chapman’s question, will he give a realistic timescale for full payment?

The cabinet secretary will also be aware that people have received payments to which they are not entitled and that others have received payments that they declined. Will individual circumstances be taken into account when the money is being clawed back?

Fergus Ewing

I assure Rhoda Grant that the efforts of everybody in my department are devoted to the task of timeous payment of the remainder of the payments. Having devoted some of my own time over the days since my appointment to updating myself, I also assure her that a huge amount of work is being done and that substantial progress is being made, week on week. The figure that I gave of 84 per cent is much higher than the figure a couple of weeks ago. Week on week, considerable progress is being made.

The absolute priority is that we are not distracted by other matters at the present time, whether by recriminations or by the need—quite rightly—to learn lessons at some time in the future, but allow the people who are doing the job to complete their work and to do so with the confidence of their elected representatives.

Ms Grant mentions problems in relation to payments. As she knows, that is not a new problem; it is a systemic one in respect of the CAP system whereby some of the penalties exacted for relatively minor errors seem to be pretty swingeing in relation to the individual cases that we have all seen as MSPs. I make this plea to Rhoda Grant, to her colleagues and to all other members: if they know of individual cases of farmers who face hardship or who feel, as Ms Grant has alluded to, that mistakes have been made, they should contact the area office forthwith. I will write to each member with the full contact details of each of the 16 area offices in Scotland and of the helpline staff to whom I also spoke this morning, who were busy handling inquiries from farmers.

I hope that members will focus not on recrimination but on implementation of the system, supporting the excellent work of all the hundreds of people around the country who are determined to do right by the farming community.

Michael Russell (Argyll and Bute) (SNP)

I am sure that everybody will welcome the work that the cabinet secretary has been doing to make progress on the issue and to ensure that the hard work that is being done in the area offices is bearing fruit.

I address two very simple questions to the cabinet secretary. First, on future practice, what work is being done to ensure that payments can be made in the next round without undue delay, particularly at the opening of the payment window in December? Secondly, what thought has he given to the type of investigation that will be required at some stage in the future, to ensure that the situation cannot happen again and to give confidence to the farming and crofting community that lessons have, indeed, been learned?

Fergus Ewing

I will take the second question first. As I said in my statement, it is essential that we learn lessons. Therefore, as I stated, it is my intention—with the permission of the appropriate authorities—to come back to the chamber in the autumn to provide an update. By then, of course, the deadline of 30 June will have passed and we will have had the opportunity to carry out all relevant analysis of how matters stand at that point.

I undertake that, when I come back to Parliament, I will set out in detail my response to Mr Russell’s question about how best we learn lessons so that we do not see a repetition of the problems that have arisen.

I turn to Mr Russell’s first question. The difficulties with the 2015 payments have had a knock-on effect on the 2016 payments, as those who have read Caroline Gardner’s report will have noted. One of the obvious difficulties is the fact that time that should be being spent right now out in the fields doing inspections for 2016 applications is being spent in the office dealing with the 2015 payments.

However, on a positive note, I reassure the chamber that the processing of the 2016 applications has gone pretty well—it has gone much more smoothly, and with much less information technology difficulty, than the 2015 application process went at the same stage. In other words, progress is being made, but there are still a large number of practicalities—to answer Mr Russell’s question—that we must deal with. To allow us to do that is partly why I think it prudent to state that I will come back to the chamber to give more precise details about the 2016 payment profile in the autumn.

John Lamont (Ettrick, Roxburgh and Berwickshire) (Con)

The Scottish Borders normally receives some £50 million of CAP payments. That money not only benefits farmers but filters down to many other businesses, and the delays are causing problems for the whole rural economy. Can the cabinet secretary tell me what percentage of the total money that is due to Borders farmers has been received to date?

Fergus Ewing

I do not have regionalised information such as that before me. Last Monday, I had the pleasure of visiting the Dumfries area office, which administers a huge part of the south of Scotland. I am not certain that the information can readily be provided, but I undertake to write to the member on that matter.

I am not sure that I recognise the figure of £50 million as not being paid to Borders farmers. Perhaps the member could send me a computation of how that is made up.

I reiterate that we have made payments amounting to 84 per cent of applications, or nearly £200 million. I stress that it is not the case that we have made zero payments and all farmers are waiting for the money. That is the opposite of the case. Most farmers have received most of their payments. That is in no way to say that it is acceptable that, in many, many cases, farmers are waiting for payments, but the position is that 84 per cent of applications have been dealt with and nearly £200 million has been paid. We have also had—if I may say so—a loans scheme that, from information that I got this morning, operated efficiently and with great success.

I commend the public servants in this country for the excellent work that they are doing. I hope that that is a sentiment that other members will start to echo.

Graeme Dey (Angus South) (SNP)

Constituents of mine have highlighted to me an issue that appears to have contributed to the delay with their receiving payments, which is the identifying of small parts of their land as region 2 while the rest is entirely region 1. In one case, a constituent had a tiny section of wood deemed to be region 2 while the remainder was region 1. Is that experience widespread? How will it be resolved ahead of the 2016 payments?

Fergus Ewing

I am happy to look at that individual case if Mr Dey wishes to raise it with me. As I understand the case from his description, there may be arable land in region 1 and rough grazing in region 2. There can be a number of complexities in individual applications, which illustrates the challenges that the system has faced.

In Scotland, 4 million hectares are subject to the basic payments scheme, which represents 400,000 fields. Each field is, on average, four or five times the size of a football pitch, and the degree of accuracy that the EU requires for audit purposes is the size of a goal mouth. If we look at the fact that there are 400,000 checks and 400,000 fields, and a very small margin of error, we start to appreciate the mammoth task that was faced in converting a manual system to an IT system. That is not in any way to write off or minimise the difficulties, but it is a matter of fact, and it is perhaps why there have been many similar difficulties down south in England and in France.

Claudia Beamish (South Scotland) (Lab)

Scottish Labour has called for a review of the payment process. Will that be forthcoming and done with maximum transparency? Can the cabinet secretary guarantee that responses to applications for next year will meet the appropriate timescales, with some additional support for farmers in view of the debacle this year?

Fergus Ewing

The payment window in 2016 is 1 December to 30 June, and obviously we want to make timeous payment.

In response to Claudia Beamish’s second question, I note that I have already said that I will come back in the autumn and, at that point, give information that is as precise as it can be. In response to her first question, where she used the word “review”, I have already said—to be fair to myself—that I will come back again and set out in detail what we propose in order to ensure that we learn the lessons.

I assume that Claudia Beamish is pleased with that forthright answer.

Mark Ruskell (Mid Scotland and Fife) (Green)

I thank the cabinet secretary for advance sight of the statement.

I was thinking about Robert Burns—an Ayrshire farmer, of course—who said that there is no such uncertainty as a sure thing. It is the role of Government to provide certainty, particularly for a sector that is dogged by uncertainty from year to year. That is not to say that things cannot go wrong—something has gone catastrophically wrong with the payments—but communication is absolutely key.

Will the cabinet secretary ensure that the chamber is given weekly updates, along with key stakeholders, about the remaining process for 2015, including information about the applications made, the mapping process that backs up the application process, the regionalisation process, the work that is being done on the entitlement rate, and payments that are being made under the national reserve?

Fergus Ewing

When Mr Ruskell said that he was going to quote Burns, I was a bit anxious that he might quote from “To a Louse” but, fortunately, he did not go down that particular road.

The request for information is perfectly reasonable, and we want to be transparent and open, so I will reflect on the member’s question. A weekly schedule would be a bit much and would impose too much of a burden on the very people who are leading the task but, in principle, I think that his view is correct. It is also one of the leading points in the NFU Scotland manifesto.

I am in favour of such an approach in principle, and I will write to the member once I have given thought to what information is available. With that letter, I will pass on the details of each of the area offices, which I hope all members will use to pass on inquiries from constituents who have concerns to ensure the swiftest possible resolution of those concerns.

Stewart Stevenson (Banffshire and Buchan Coast) (SNP)

I draw members’ attention to my joint ownership of a registered agricultural holding, which is let to my neighbour for rough grazing. I receive no financial reward for doing so.

The cabinet secretary sat on the parliamentary committee that looked at the IT difficulties in the Scottish Qualifications Authority programme under the Labour-Liberal Administration in 2000, and he will be aware of the London Ambulance Service IT failures in 1992 under the Conservatives. We are now dealing with a project that has had significant IT difficulties associated with it under the SNP Administration. Will the cabinet secretary indicate how the public sector in general can raise its game in how it uses IT for public benefit?

Fergus Ewing

I am not responsible for all IT systems across the Government—that is a somewhat pleasing reflection to offer the chamber. However, the member is perfectly right to say that, in her third report on the CAP payment system, Caroline Gardner said that she is reflecting on general lessons to be learned and will let us have her views shortly.

In the circumstances, the most sensible answer that I can give to Mr Stevenson, who—I did not appreciate it until now, although it does not come as a huge surprise—is a farmer among his many other occupations, is that I will reflect on his remarks and urge him to await the publication of Caroline Gardner’s further thoughts on these matters.

Douglas Ross (Highlands and Islands) (Con)

The cabinet secretary said in his statement that he will return to Parliament in the autumn, but that is simply not good enough. The farming community cannot wait that long. He has said that he will reflect on the appropriateness of weekly updates. Will he give an assurance that he will return to the chamber on 30 June, the EU deadline date and our last sitting day before the recess, to update Parliament on whether any farmers or crofters in Moray, the Highlands and Islands or across Scotland are still awaiting any of their entitlement? The Parliament and rural communities deserve to know whether the Scottish Government will miss the EU deadline and whether taxpayers will have to bear the brunt of a fine of up to £125 million.

Fergus Ewing

I appreciate that Mr Ross has not been a member of Parliament for long, but in order for me to say that I would come and make a statement on 30 June—the day of the deadline—it would be necessary for me to disrupt the work of officials at the very time that they would be trying to complete the task that we all want them to do. Of course, I will update the chamber as soon as I possibly can, but what I will not do—and what I do not think farmers want us to do—is play a blame game prematurely and distract our attention from the object of getting the final payments out to the farmers.

That is what farmers want—at least, the ones I have spoken to. I have already met the NFUS president and I recently visited the farm of John Kinnaird, former NFUS president. Farmers do not want to see a game of political partisan blame ascription; they want to get the situation sorted out and put on an even keel. That is what I have committed to do, and that is what this Government will do.

Mike Rumbles (North East Scotland) (LD)

I thank the minister for the advance notice of his statement and for last week’s briefing for Opposition spokespeople.

I have no doubt that the minister’s number 1 priority is indeed to clear up his predecessor’s mess. However, at the briefing, the minister’s civil servant said that they had far from given up hope of completing the necessary payments to our farmers by the end of June. That does not sound reassuring, despite what the minister said to members this afternoon. As Douglas Ross just said, if the minister fails to complete the payments, we face non-compliance fines of £125 million. How confident is the minister that he will meet the deadline and not be hit by fines?

Fergus Ewing

I am pleased that Mr Rumbles found the briefing that I provided for Opposition MSPs useful. Incidentally, that is how I try to do things; I try to provide Opposition MSPs with access to informal briefings, including with lead civil servants, so that they have the opportunity to inform themselves about the issues. That is the normal practice that I seek to follow.

I am absolutely confident that everything possible is being done to meet the 30 June deadline. The whole of my efforts are devoted to securing that objective.

Iain Gray (East Lothian) (Lab)

I appreciate that the cabinet secretary is saying that he is doing everything possible to get the payments out of the door, but he cannot escape the fact that if 95 per cent of the direct payments are not out and compliant before the deadline he faces financial penalties of between £40 million and £125 million, according to Audit Scotland’s estimates. What contingency has the cabinet secretary made, and from which budget would any such penalties have to be found?

Fergus Ewing

Obviously, our efforts are devoted entirely to minimising any conceivable penalty. The member is quite right in the figures that he quoted from the Auditor General’s report.

I have made public that my predecessor, Richard Lochhead, made extremely substantial efforts, in carrying out sensible and helpful work and making representations to the European Commission, to allow the deadline of 30 June to be extended. It is right that Richard Lochhead should get credit for the good, sensible work that he did. As a result of his worthwhile, detailed and protracted negotiations, I remain hopeful that the Commission might still provide us with more time beyond 30 June, which is certainly a challenging deadline—I have made no bones about that.

On financial contingencies, I have explained that the national loans scheme that we instituted has been tremendously successful, with loans paid to more than 5,000 people in April—and up to 50 per cent repaid by now. That is a tremendous effort, and I expect to return to the Parliament in autumn to report further on a successful and professionally conducted exercise.

I should say that down south in England there has been a loans scheme as well, and that in other EU states, including France—that has been published, but many other states’ names have not been published, perhaps due to understandable reticence—there have been similar difficulties. The issue is not unique to Scotland.

Finally, on penalties, which were the main thrust of Mr Gray’s question, I am informed that, over a 10-year period, payments in England have resulted in penalties approximating to more than £600 million.

We will look at contingencies as and when required, and I have had detailed discussions with the finance secretary on the overall financial consequences of the scheme. However, it is fair for me to say that we will come back to answer such questions, if they arise, most certainly by autumn.

The Presiding Officer

A final, brief question from Bruce Crawford.

Bruce Crawford (Stirling) (SNP)

Thank you, Presiding Officer, for allowing me in, given the time.

Can the cabinet secretary outline what discussions he has had with farmers and other stakeholders involved in the working of the CAP payment scheme since his appointment? In future, will he make the dairy industry a priority in that matter, given that the price of milk continues to fall in that hard-pressed sector?

Fergus Ewing

I am glad that Mr Crawford mentioned that issue. I am well aware of the pressures on farming in general and on the dairy sector in particular. In response to his question, I did have the pleasure of meeting in my official capacity Allan Bowie, the president of NFUS, and Scott Walker, its chief executive. I also had a very enjoyable visit last week to Johnny Kinnaird’s farm, and I look forward to spending several hours tomorrow at Scotsheep.

The Presiding Officer

Thank you, cabinet secretary. I apologise to the two members I was not able to call in that short time.