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Defra could face a further £370m in penalties if CAP reform fails

An additional £370m in fines could be faced by the Department for Environment, Food & Rural Affairs by 2021 if its revised CAP scheme fails to take off

The Department for Environment, Food & Rural Affairs (Defra) has estimated it could save itself from fines of up to £370m in the next six years if its reform of the Common Agricultural Policy (CAP) is successful.

According to a report by the National Audit Office (NAO), Defra has been considering ways to avoid further accumulation of fines, which could require investment of between £25m and £45m.

“Progress has been made by Defra over the past year in its approach to managing the financial penalties imposed by the European Commission. Nevertheless, the problems giving rise to financial penalties are persisting, and there are additional risks arising from the more complex CAP 2015-2020 scheme,” said Amyas Morse, head of the National Audit Office.

The NAO report said: “If it can successfully tackle all sources of mapping-related disallowance, Defra believes it could avoid future penalties in England of between £215m and £370m by 2021.”

Defra has already incurred a total of £642m in financial penalties in the past 10 years as a result of not properly controlling and administering rural payments to farmers in England.

A majority of these “disallowance penalties” were issued between 2005 and 2014 under its previous CAP scheme, as use of data mapping for verifying applicants and cross-compliance controls were poor.

But the NAO claims the failure of the new CAP system indicates there is still a huge possibility of error – and therefore further fines. It also expects there will be penalties issued in the first few years of the new scheme.

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The latest CAP payments system is part of Defra’s Common Agricultural Policy Delivery (CAPD) programme reform agenda. It was meant to be simple, but according to the NAO, the system has been more complicated and 15% more expensive to deliver than the previous scheme.

The digital-by-default rural payments system, which was rated as Amber/Red in September 2014, should have allowed farmers to register for European Union subsidies online, but was forced to return to a partially paper-based system due to poor website performance just weeks before the deadline.

“This increases the risk of errors and will delay savings anticipated from not having to input data manually,” said the report. “Future levels of disallowance are highly dependent on the final design of the system and the extent of any further delays in implementation.”

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