Auditors lambast farm pay scheme; Grant system is 'expensive and chaotic'.

Byline: Emily Beaumont

THE process for paying EU subsidies to farmers was a "masterclass of misadministration", it was claimed yesterday after a National Audit Office review criticised the high and increasing costs of the scheme.

The third examination by the NAO of the single payment scheme, which manages grants paid to farmers for maintaining land, found administration of the scheme did not provide value for money for taxpayers. The NAO's report accused the Rural Payments Agency (RPA), which administers the scheme, and the Department for Environment, Food and Rural Affairs (Defra) of showing scant regard for protecting public money in the process of handing out grants.

The NAO review said the cost of processing claims from landowners had risen by more than a fifth since the scheme first got under way in 2005, and now stood at an estimated pounds 1,743 per claim - compared to pounds 285 under the simpler Scottish system.

It added the IT system did not meet the scheme's needs and cost pounds 350m in total, with pounds 130m in upgrades and maintenance needed since 2007.

Since the single payment scheme's inception, it has racked up more the pounds 680m in "unforeseen additional costs" including pounds 304m in extra staff costs and pounds 280m paid to the European Commission for errors in administration and late payment penalties. The NAO also said there had been overpayments to farmers of between pounds 55m and pounds 90m but there was little clarity as to exactly how much money had been overpaid.

Chairman of the Public Accounts Committee, MP Edward Leigh, said: "The Rural Payments Agency's administration of the Single Payment Scheme for paying EU grants to farmers has been a masterclass of misadministration."

He accused the agency of shoddy book-keeping and "lamentable" communication with farmers, many of whom were paid late and the wrong amounts in the past few years.

He said farmers - many of whom rely on the payments - continued to have little idea how much and when they would be paid, and many received letters out of the blue demanding back sums which had been overpaid, even if nothing was owed.

The report found that payments to farmers had become more prompt, with more than 96% of 2008 claims paid by mid May 2009, compared to 80% by the same month in 2006.

But Amyas Morse, head of the National Audit Office, said that after looking at the single payment scheme for the third time, there were still "significant issues to be resolved".

"There has been a serious lack of attention to the protection of taxpayers' interests over the administration of the scheme."

And he said: "Previous assurances on overall progress in recovering overpayments from farmers proved optimistic and reflect a lack of reliable information on actual progress." He called on Defra to "urgently address" the risks to ongoing IT system support and the inaccuracy of data.