Minister mistook costs of Defra Single Payment Scheme

A minister who publicly disputed audited figures on the costs of the IT-based Single Payment Scheme for farmers had misunderstood his civil service briefing, a top civil servant has claimed.

A minister who publicly disputed audited figures on the costs of the IT-based Single Payment Scheme for farmers had misunderstood his civil service briefing, a top civil servant has claimed.

Farming minister Jim Fitzpatrick disputed figures published by the National Audit Office when he spoke to millions of listeners of the BBC Radio 4 "Today" programme on 15 October 2009.

But his department's permanent secretary Helen Ghosh emphasised to MPs this week that there was no dispute over the NAO's figures.

Helen Ghosh told the Public Accounts Committee on Tuesday: "We are not arguing with the figures ... I think he [the minister] had misunderstood the nature of the briefing he had been given."

The episode highlights some of the difficulties facing Parliament, farmers, the media and the NAO as they try to learn more about the costs of the Single Payment Scheme and the extent of the flaws in the system.

Farmers are paid an EU subsidy by a £350m IT system run by Accenture and the Rural Payments Agency which is part of the Department for Environment, Food and Rural Affairs (Defra).

The rising costs of the Rural Payments Agency's IT system

The system - which was based on Oracle financial applications, a forerunner to the e-business suite - was originally due to cost less than £100m but it underwent major changes, some to the Oracle source code, some of which went undocumented.

An NAO director Phil Gibby told the Today programme that the costs of administering the Single Payment Scheme have risen by £300m more than anticipated. On top of that, the EU may impose penalties of £280m because many payments are incorrect; and a further £40m in overpayments may never be recovered.

The Today presenter Jim Naughtie put it to Jim Fitzpatrick that the NAO had calculated the costs of processing each farmer's claim at £1,700, which is about six times as much as the cost of processing claims in Scotland where a different system pays subsidies to farmers.

Minister disputes NAO's figures

Fitzpatrick replied: "We don't accept those figures for a start Jim. The Permanent Secretary of Defra and the Chief Executive of Rural Payments Agency will be giving evidence to the Public Accounts Committee later this month and answering fully. However we don't recognise that figure of £1,700. Our calculation is that it [the cost of processing each claim] has gone down from £750 to £700."

Head of Defra claims there is no dispute over NAO figures

But when Defra's Permanent Secretary Helen Ghosh, and Tony Cooper, Chief Executive of the Rural Payments Agency, appeared before the Public Accounts Committee this week they made it clear there was no dispute over the figures and that the £700-£750 per claim quoted by the minister excluded IT costs whereas the £1,700 included IT costs.

Public accounts MPs thought it pointless to calculate the costs of processing each claim without IT costs included. But Ghosh said it was difficult to show a reduction in the administrative costs of the Rural Payments Agency if IT costs - which sometimes jump - are included in the figures.

Public accounts chair attacks Defra for excluding IT in its processing cost estimates

Edward Leigh, the chairman of the Public Accounts Committee, told Ghosh: "How can you seriously argue that the administrative costs of each claim should not include the considerable costs of the bespoke IT system and other major overheads? It must do."

He added that Defra's lack of attention to IT costs and other overheads may be symptomatic of a lack of control.

The Public Accounts Committee and the NAO are powerless to stop costs rising and errors in payments continuing.

Jim Fitzpatrick's interview on BBC R4 Today programme - 15 October 2009

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