My Lords, with the leave of the House I shall repeat a statement on the Rural Payments Agency made in Another place earlier today by my Right Honourable Friend the Secretary of State for Environment, Food and Rural Affairs. The Statement is as follows:

"With permission, Mr Speaker, I would like to make a Statement on the Rural Payments Agency. In my Written Statement of 9 May, I promised to keep the House informed on progress made by the Rural Payments Agency on the single payments scheme. At Oral Questions today, no Questions on the SPS were on the Order Paper. I therefore thought it right to give honourable Members the chance to raise the issue. In summary, there has been some progress, but the situation is far from satisfactory in a number of respects. As of Tuesday 20 June, some £1.38 billion, representing over 90 per cent of the total fund, has now been paid to over 100,000 applicants; 82,571 claims have now been settled in full; and 18,785 applicants have received a partial payment and are awaiting their 'top-up' payment.

"On 9 May I said that the top priority for the Rural Payments Agency would be those claims of more than €1,000 where no payment had been made. The number of such claimants in this category is now approximately 2,300. I recognise the hardship involved for them and deeply regret the distress caused. The Rural Payments Agency is taking further steps to pay those complex claims, including discussing issues direct with claimants and, where feasible, bringing parties together in cases of continuing disagreement. The Rural Payments Agency has written twice to all individuals concerned.

"I also recognise the importance of the unresolved hill farm allowance payments. Of the approximately 10,500 eligible HFA claims, 5,000 have been paid in full and a further 900 authorised for partial payments. Full and partial payments are continuing to be made.

"The European Union defined payment window for making 2005 single payment scheme payments runs from 1 December until 30 June. Work is continuing to pay as many claims as possible by 30 June. However, farming leaders have made representations to me on behalf of any farmers who do not receive the full sum due to them within the payment window—that is, by Friday next week. I have therefore authorised the Rural Payments Agency to make interest payments of the London InterBank offered rates plus 1 per cent calculated from 1 July, in respect of any payments where responsibility for the delay rests with the Rural Payments Agency. This will be subject to a minimum interest payment level of £50. Further details will be given on the timing of these payments once the Rural Payments Agency has assessed how they can be integrated most effectively into the existing payment schedule.

"Work on delivery of the 2006 single payments scheme is under way. As I said on 9 May, the 2006 scheme year will be very challenging. The Rural Payment Agency's interim chief executive, Tony Cooper, has made an initial assessment of the task ahead. He has confirmed that in respect of customer service and management information there is no quick fix. Possible options for the 2007 scheme—for example, the use of a minimum payment level—are not available for 2006.

"Against this background, farming leaders have understandably called for partial payments to be made under the 2006 single payments scheme. I have both discussed the need for the necessary EU legislation to make partial payments with Commissioner Fisher-Boel and authorised the Rural Payments Agency to start work on necessary systems. However, until the RPA's chief executive has had an opportunity to make a realistic assessment of the prospects for full payments, I do not want to commit to a particular timetable or specify whether or when partial payments might be made. Initial validation of 2006 claims is under way and detailed validation should start next month. By the time the House returns after the Summer Recess, therefore, we should have a better understanding of the prospects for the 2006 scheme and I will make a further Statement then.

"Given the position on the 2006 scheme, I have decided to simplify to the maximum possible extent the arrangements for the incorporation into the single payments scheme of additional support arising from last November's landmark EU sugar reform. In practice, that means that £52 million will be added entirely to entitlements held by sugar beet producers who meet defined criteria, rather than some of the funds being used to increase the flat rate value of all entitlements. Further details, including on arrangements for 2007, will be announced in due course.

"I can also report that an EU regulation has been adopted which provides for all 2006 single payments scheme claims to be accepted without penalty until 15 June. This extra time, above and beyond the extension to 31 May I referred to in my Statement on 9 May, will mean that around 4,000 farmers will not now be penalised. I am grateful to the European Commission for its understanding on this issue.

"The fundamental review of the Rural Payments Agency that my Right Honourable friend the Member for Derby South set in train earlier this year will be important for the future of the Rural Payments Agency when it reports at the end of this year. In the mean time, I know that this year's problems have caused real distress and I repeat the apology to farmers I have made before. I can assure the House that the Rural Payments Agency chief executive, with the support of the department, will be looking to take interim steps to aid the recovery process and improve the experience of farmers dealing with the agency to the maximum possible extent. I will keep the House informed as matters progress".

My Lords, that concludes the Statement.

My Lords, I declare an interest as an eligible farmer who, the noble Lord will be interested and pleased to hear, is fortunate to have received his full 2005 payment, for which I am immensely grateful.

I thank the Minister for repeating this Statement today, the more so since I am well aware that he has a particularly busy and crowded day, and putting this in has not been easy for him. He also has my sympathy for the bed of nails on which he finds himself. That said, as the Minister acknowledged, the Statement is about a situation that should not exist. The best that can be said of it is that it has moved from intolerable to bad. That is the reality. It is not comfortable for anybody in the department, the Minister's colleagues or for all those involved in the agricultural industry, particularly those adversely affected by not having received the payments they expected months ago.

I was at an agricultural show yesterday, where I spoke to bankers about these problems. Although they were immensely sympathetic and doing all they could to help affected farmers, they made clear that it was as difficult for them as for farmers who have not received their payments. A lot of work has been done by the banks and the agricultural industry to set up temporary loans arrangements to carry matters forward and keep farmers afloat. While on the subject of bankers, I say to the Minister with some gratitude that the prospect of interest payments for outstanding sums after 1 July is very welcome. I hope he will forgive me the rather acid comment that my understanding is that 1 per cent over LIBOR is generally less than a farmer could borrow at commercial rates from a bank. None the less, it is a very welcome move in the right direction.

I also welcome the Minister's remarks on sugar payments funding. Sugar beet growers will be particularly grateful for that statement.

What is the European Commission's attitude to this particular hiatus? The Statement says that we are moving towards the 30 June payments deadline. We still apparently have some £13.8 million outstanding. There is another week to go, so presumably that figure will go down. At 30 June it is possible, as I understand it, for the Commission to impose penalties for failure to pay. It would be interesting to know whether the Government can indicate yet what the likely cost to the Treasury will be of that.

I welcome the extension, to 15 June, of the period in which 2006 applications for single farm payments can be made without penalty. That date has now passed. According to replies given in Another place, it looked as though application numbers were dropping. Has the Minister any idea how many applications might have missed that deadline? I imagine that, based on past applications, he will be able to give that figure. More importantly, is he aware of any reason why that situation should have arisen? I always regarded filling in these application forms as about the best-value-for-money task I had on my farm in any year. Any farmer who does not take that view has his priorities seriously adrift, and I cannot believe there are any farmers like that in the country.

I know the Minister is doing all he can to sort this system out, and I hope that he succeeds, as does the whole industry. Yet it would have been better if we did not have to be here at all.

My Lords, I congratulate the Minister on getting things moving but, as I am sure he knows, his inheritance in this matter is absolutely dire. This Statement proves it. The situation has, no doubt, improved since the end of March, but there is still a long way to go. We know that it is not the Minister's fault, but the operation of the RPA has been totally unsatisfactory—and that is putting it mildly.

The Statement covers a number of important points. I am particularly concerned about the effect on England. From what I can see, of the approximately 10,500 eligible hill-farm claims 5,000 have been paid in full and a further 900 authorised for partial payments. Am I correct in extrapolating from this that approximately 4,600 hill farmers are still waiting for any payment at all? If that is the case, when will they receive the payment that they are due?

I agree with the Opposition spokesman that one per cent plus interest rate is totally inadequate. A headline in the Farmers Guardian about two weeks ago said that payments were being conducted by hand. Is this still going on, or was that an inaccurate report? The Statement addresses the 2006 claims. What proportion of the 2006 claims have been made by the deadline? There were 120,000 claims made for 2005, which were submitted to Defra in spring 2006. Roughly how many have been received for 2006? I noted that Defra had actually put some quite effective advertisements in the agricultural press urging farmers to get their applications in on time. How successful has this campaign been?

The Minister's department may have some idea about the number and nature of complaints made by members of the farming community to the Parliamentary Ombudsman. What is the scale of that, and is it being pursued? I realise that he cannot make a transparent statement on this, given that they have gone to the Parliamentary Ombudsman, but he may know the volume of complaints made.

It will take considerable time to clear this up, even in the current payments year. Yet I am pleased that Defra has gone ahead with negotiating the possibility of partial payments in 2006. That is a realistic assessment. Also, the tone is radically different from the statements made in March, particularly the RPA's amazing claims on when it would settle the problem. We know now that that was absolute fiction, though we thought so at the time. At least now this measured Statement lays bare the height of the problems confronted by the Rural Payments Agency. I sincerely hope that, when the future of the RPA is examined and reported on, there will be radical improvements to how it operates. It is possible that some totally new organisation will do its job in the future.

My Lords, I am grateful for the response from the noble Lords, Lord Dixon-Smith and Lord Livsey. I made absolutely clear that 2006 will be a difficult year, and the tone of the Statement indicates this, leaving aside what has happened in the past. I am interested in what has happened in the past from a technical viewpoint, but my main priority is the present and the future. That has been what David Miliband and I have concentrated on in the past few weeks. We will not be talking up 2006 because, as the Statement says, we are limited in what we can actually do. 2006 has already started and 2007 applications are only nine months away. We really must be careful about making fundamental changes to a system that has not delivered.

To answer the specific questions, I am grateful for the welcome of the Statement on interest payments. There will never be enough done, but we do not know how much will be paid until 30 June, because we cannot measure them until then. Some days after that date we will know how much has been paid out. The Statement was made today for the reasons I explained. There were Defra Questions in the other place, but there was none on the single payment scheme. We wanted to update the House as soon as possible. I also welcome the response on the sugar payments. It was bad enough seeing what had happened, but major changes on sugar for 2006 had already been agreed. Paying them separately is an advantage to the sugar beet producers for this one year, because the money stays within the family.

I will be more attuned to respond on the EU attitude to penalties after 30 June. There will be an opportunity to answer the question then because the House will still be sitting. We are moving heaven and earth to pay as much out as possible before then. I appreciate that the extension date of 15 June for applications for 2006 has already passed. The deadline was originally the middle of May, extended to 31 May. By 15 June we had received more than 4,000 applications which would have been subject to a penalty because they had missed the deadline of 31 May. We are grateful to the Commission for this, as some 4,000 farmers will now not be subject to the penalty. I was then asked whether any applications had come in since. Yes, the latest figure I had was some 60 plus, and they are still trickling in.

I will use—with his permission, although it is in Hansard—the words of Farmer Dixon-Smith, that the best value-for-money job he ever did as a farmer was filling in the forms. Filling in forms means you get money. That is what I have tried to put across. It helps to sign the forms when you have filled them in. The number of forms we receive without a signature is frankly unbelievable, but it does happen. As I say, it is now a trickle so we do not expect many people to be subject to a penalty next year. I cannot be tied to exact figures, but we have received some 110,000 plus out of the 118,000 that were requested. That 110,000 includes the 4,000 that came in after 31 May but before 15 June.

Of the 4,000 hill-farm payments that have not been made, priority is being given to making full or partial payments for the hill-farm allowance. The RPA set up a dedicated unit. That is the question I was asked, though I do not have the answer. The implication is that they cannot have the hill-farm allowance until the single payment is paid. That is one of the problems. Some of the 4,000 may have had a partial single payment but not the hill-farm allowance.

Before I sit down later, having answered other questions, I will try to have a more specific answer. I do not know anything about any ombudsman's inquiry but, given the scale of the letters that I keep signing to Members of the other place I would not be at all surprised if there had been applications to the ombudsman on the grounds of maladministration. I know of no payments made by hand. I regret that I did not see the story in the Farmers Guardian; I missed that; it was not drawn to my attention.

We are trying to use the system to make the payments. It is true that we have said that, if push comes to shove at the end of next week, we will do what we can, possibly including bypassing the system. We are very reluctant to do that because that in itself will create problems closing down the 2005 computer framework. Nevertheless, there are other ways to do that if we cannot get the payments out. I understand that there are two more payment windows before next Friday, so we will have a better view of the position by the middle of next week, but we have put in hand processes to try to maximise the payments to farmers.

I cannot be certain about the date of the 2006 payment. The first time that anyone will get a date from me about 2006 payments is when I know that the first one has been made. Given what happened earlier this year, we will be very reluctant to make promises, because we will not be believed. Therefore, we will under-promise and over-deliver. Either way, I have already had a complaint from some stakeholders that we did not tell them that 841 partial payments were to be made last week—I think that they were to hill farmers. Until the buttons were pressed, we were not certain that they had gone through the system, so we were not going to say, "By the way, we expect to make those payments", because we could not be certain. As I said, there are two more payment windows before 30 June and I cannot be certain how many will be covered. I know estimates of what may be covered but they are not promises that I can share with the House.

Finally, it is worth mentioning again that our top priority is those owed more than €1,000. Of course, there is a considerable number of people who have not had a penny whose claim will deliver less than €1,000—about 12,000 of them. They cannot be a priority. I know that it is important for some of them; £600 or €1000 is a lot of money if your total income is only five grand. I understand that, but they are not the top priority; the top priority is those owed more than that—the last 2,000-plus who have not had a bean and whose claim is more than that. Some sums owed are very substantial—into six figures, I understand. That is our top priority.

My Lords, I very much welcome the fact that, at last, the Minister has a grip on what is a very bad situation and the fact that there will be some interest payments, not only because of the money but because farmers will see that as a recognition that there is a real problem and that something practical is being done about it. I understand that the priority is to give money to people who have had nothing whatsoever, but payments over £1,000 will influence not just income but investment, purchase of stock, and so on. I understand that the Minister cannot say when every one will be paid, but are we talking about, say, three months or five months for payments that influence the running of the farm and investment, not just income? That is important for the longer-term future of some farms.

My Lords, first, it is not £1,000; it is €1,000, so we are talking about approximately £600. We have not stopped those payments, but the priority is those claiming more than €1,000. When the RPA staff are dealing with those payments and come up against queries because the system does not work, they do not then stop and twiddle their thumbs waiting for the next tranche of work to come through the computer, they then work on claims below €1,000. The fact is that they are not the priority; the priority is claims over that figure. That does not mean to say that the others are not being paid. We intend to get all the payments out as quickly as possible before or on 30 June and, if we miss any, as quickly as possible after 30 June. The initial priority for the workflow of the RPA staff must be those bigger claims.

My Lords, I have a minuscule interest to declare in respect of 30 acres of to-let grassland. I have watched this whole drama with bewilderment, certainly not with hostility. Can the Minister explain why so many continental countries have been able to resolve their agricultural claims in a much shorter period, whether he has studied their practices and whether they might be adopted by this country? Or are we landed with a computer program of such sophistication and ambition that we are likely to continue with these difficulties year after year?

My Lords, I certainly hope that the latter part of the question asked by the noble Lord, Lord Biffen, is not true. The fact is that not every member of the EU has gone into the new system this year for 2005. I understand that less than half of the members have operated a new payments system decoupling from food and livestock production. There was a choice. We, as the UK, were leading reform of the CAP, so it was inevitable that we wanted to use the new system as soon as possible. England has not been dealt with in the same way as Scotland, Wales and Northern Ireland, where payments worked faster and have probably—I do not know the full figures—met the payments deadline.

I understand that Germany moved on this. It has experienced some difficulties, and colleagues in the RPA will, over the summer, be discussing with colleagues from Germany some aspects that they found that they did not expect. There will be lessons to be learnt from the EU, but other members of the EU will be learning from us simply because we have been in the vanguard of operating this payment system. In the long term, it will deliver more money to farmers. It collapses 11 different payment schemes and more money will be paid out; it is just that it has not been paid out by the promised dates in the first year.

My Lords, I shall ask the Minister some elementary questions. I first declare an interest in that I have been involved in agriculture. We all greatly appreciate the position in which the Minister finds himself. There are one or two things that I do not understand at all. The first is that Scotland, Wales and Northern Ireland have managed to pay their people; why have we not? Is it just that the computer has gone phut; is the system too complicated; or are the civil servants finding difficulty with it? Or is it that people have not sent in their applications? I think that the Minister said that there are not many of those. I just do not understand how we can have got into that position. If he could give us a brief reason, I would be grateful.

When the Minister says that he is doing his best to get all the payments out by 30 June, what is the inhibiting factor? Is it that the machine does not say what is the amount to be paid or that the figures are not available? If they are available, what is likely to be unpaid by 30 June?

British agriculture is facing its biggest crisis since the 1930s. It is a terrible thing that this system, which is so deeply complicated, should be imposed on British agriculture. Is there any way that the Minister or the European Union can make the system easier, because it seems a perfectly absurd thing to land on the industry?

My Lords, I am grateful for the noble Earl's questions. On his first question, the system that was adopted in England is not the same as that adopted in the devolved Administrations. Each was able to adopt the scheme slightly differently. England adopted a much more detailed, robust and forward-looking scheme. On paper, there is no doubt that it is the best way to go. The problem is how it has been applied in the first year. There are lessons to be learned from that. I have spent a year with responsibility for Northern Ireland. I did not deal with single payments because we were paying the money out from December. There were other issues there.

The noble Earl also asked the valid question: what is stopping the payments on the last 2,300 of the 120,000 claims? Those are the large claims; there are obviously some small ones. One cannot be precise. There are still disputes about field boundaries and about more than one application for a field; in other words, two farmers claiming the same field. I am not making an excuse, but there are more than 200 probate cases in the system that will have to be removed because it takes a lot longer to deal with them. It is unfortunate, but it is a factor. I am told that, as the system currently operates, when the operator thinks the payment is ready and when it appears on the screen the snag that stopped it going out the first time has been dealt with. However, there might be another snag waiting down the line which will not be flagged up until the first one has been cleared, so you do not know it is there. Sometimes, given how the forms are filled in, a duplicate page might be mistakenly filled in or a whole host of things can happen at the last minute.

We have paid out over 90 per cent of the money, with more than 82,000 full payments and a considerable number of partial payments. We are at the tail end of some complicated, awkward cases that have built up on top of the problems caused by the delays earlier in the year. One thing has fed off another. I cannot identify for the noble Earl one single problem to be fixed which would enable us to press the button and make all the other payments. If that were the case, I could say with confidence that we could make all the payments by next Friday, but I cannot.

My Lords, the noble Lord's predecessor, the noble Lord, Lord Bach, repeatedly told us that staff in the Rural Payments Agency were working incredibly hard and for long hours to get the payments through. But according to newspaper reports, in the Newcastle office at least, staff seem to have been swinging naked from chandeliers and drinking champagne. Will he prevail upon the chief executive, Mr Cooper, to ensure that, fun-loving though these people may be, they get back to do the work they are paid for?

Yes, my Lords. The RPA has 900 staff, of whom probably only a handful have brought odium upon the others who are doing a decent job. They do work other than on the single payments, which account for only about 10 per cent of the workload. There is no evidence that any single payments have been delayed because of those unprofessional activities. Senior staff from the RPA's headquarters were dispatched to Newcastle to sort out the issue. That is all I can say about it at the moment, as an internal inquiry is going on.

My Lords, what has been the cost of this long, sad saga? Resolving the issue has clearly caused a hole in Defra's budget. The very welcome interest charges will be another cost, and there is always the possibility—is there not?—of infraction proceedings after 1 July. Has the Minister any idea what will be the total cost to Defra?

No, my Lords, I could only make wild guesses at the moment because the legal payment window was from last December to the end of June. We are still in the legal payment window. We have let down those who say they should have been paid earlier in the year, because we gave them a specific promise and did not pay them. But until the legal payment window ends on 30 June we will have no idea of the possible interest payments, how many big claims are left and the other complaints that, clearly, we will get. Making partial, top-up payments can be complicated, which is why we prefer to make full payments if possible.

My Lords, Scotland, Wales and Northern Ireland all produced schemes that worked, when ours did not. Is that Ministers' fault for choosing such an awkward scheme?

My Lords, that is a question about the past; we are a new team of Ministers. The Select Committee is carrying out an inquiry about what went on and is taking evidence from Ministers, former Ministers and civil servants. I do not know. I understand that the schemes in Wales, Northern Ireland and Scotland are not exactly the same as each other. The devolved Administrations had a degree of choice about the schemes. I am not in the game of indicating fault at the moment; I just do not have the evidence and I freely admit that I have not spent my time looking for it in the past five weeks. I have tried to concentrate on the present and the future rather than the past, as plenty of others are doing that.