Scottish Government Faces £60M Fine Over Failed IT System

Farm Subsidies IT System

Audit Scotland has released a new report warning that the Scottish Government could be fined up to £60M over an I.T. system failure for the payment of subsidies to farmers.

The £178M Business and Change programme was introduced in 2012 to bring payments in line with reforms to the European Common Agricultural Policy (CAP). Instead, the farm subsidies IT system resulted in delayed and missed payments to hundreds of farmers, many of whom were experiencing financial difficulties caused by low milk prices and flooding.

Auditors first warned of “serious cost operational and problems” in a previous report published in May 2016, where they made a number of recommendations to mitigate further risks. They have now suggested that difficulties encountered in previous years are continuing to have a significant impact on the processing of current applications and payments.

The Scottish Government is also at risk of not delivering on its aim to minimise financial penalties charged by the European Commission (EC) for not complying with regulations. Whilst the Scottish Government estimates it will incur penalties of around £5M, Audit Scotland has stated that the figure may stand closer £60M.

The project was originally projected to cost around £102M, but has a final budget of £178M with a reduced scope.

Backlogs & Delays

It was also hit by claims of conflict of interest after it emerged that a former delivery director of the project, Dominic Prabhu, had supplied dozens of contractors from his own company to work on the programme.

According to the National Farmers Union Scotland (NFU), as many as 1700 farmers are still waiting on payments for the 2015 Less Favoured Areas Scheme, totalling £12M. A further £6M from the 2016 Hill Sheep schemes has also yet to be paid.

Andrew McCornick, president of NFU Scotland, said:

“For three years, we have been highlighting the problems of the farm subsidies IT system. Several loan schemes have been won by NFU Scotland and put in place to bypass the IT system and deliver much needed funding to farms and crofts.

“But we know that the loans don’t work for everyone. While loans ensure the majority get some assistance, the only way to ensure that everyone gets what they expect and need is to fix the IT system.

“This report clearly shows that the system still requires much work and cost to get it up to the standard we want and expect.”

The report did acknowledge improvements that have been made to the system since last May, particularly with regard to the application process for subsidies. However, it concluded that difficulties encountered in previous years are continuing to have a “significant impact” on the processing of current applications and payments.”

Government Responsibility

There is speculation suggesting that the farm subsidies IT system’s failings are linked to SNP support in affected rural areas such as the north east. The Scottish Government’s former rural affairs secretary, Richard Lochhead, was forced to step down in 2016 after facing criticism over the IT system’s problems.

His successor, Fergus Ewing responded to the report, saying:

“Clearly there is more for us to do and I recognise that we are not there yet, but I welcome that this updated report from Audit Scotland recognises a range of improvements that have been made and reinforces the actions we have taken since last may. We will consider the findings carefully in the context of the significant improvement activity under way.

“However, it is disappointing that overall the key points do not fully reflect all the progress made. In particular, some of the conclusions reached bear further scrutiny. For example, the loan schemes we established have been a prudent measure and have offered positive benefits for farmers.”

Auditor general for Scotland, Caroline Gardner, said:

“The challenges of building a complex rural payments system mean the Scottish Government is juggling multiple demands on its time and resources. This has had an impact on its progress over the past year. It’s crucial that knowledge is effectively transferred to staff so the system can be maintained and payments made on time for 2017.

“The Scottish Government also urgently needs to fully understand the financial risk it faces, so that it can target funding at ensuring the system is compliant and secure.”

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