THE bungling Government department that handles farm payments has been accused of conducting a "masterclass of misadministration" after a report outlined the hundreds of millions of pounds it has wasted.

The chaotic system of handing out EU subsidies has again come under fire after the National Audit Office (NAO) claimed Defra had shown "scant regard" for taxpayers' money.

The independent body launched a withering attack on the management of the Single Farm Payments scheme in England, which was supposed to simplify the process of ensuring desperately needed European grants reached farmers. The Rural Payments Agency (RPA), overseen by Defra, racked up £304 million of additional staff costs and requires six times more money to administer a claim compared to the system in Scotland. It has also lost around £43 million in overpayments it cannot retrieve.

The NAO singled out the agency's £350 million computer system for stinging criticism, describing it as "complex, expensive and at risk of obsolescence".

Amyas Morse, head of the National Audit Office, said: "There has been a serious lack of attention to the protection of taxpayer's interests over the administration of the scheme. There has been a lack of senior management ownership of the scheme in the agency and Defra, even though the risks were previously highlighted."

The NAO report underlines long-standing criticism of the fiendishly complex system of payment introduced in 2005 by then-Environment Secretary Margaret Beckett. The move from separate crop and livestock subsidies to a single payment based on land area led to a bureaucratic logjam as "everyone with a pony in a paddock" made an application, causing widespread computer problems.

Farmers were left short-changed and a £75 million fine, handed-down by Brussels, had to be picked up by the taxpayer. Scores of Westcountry farmers, reliant on the hand-out, were pushed to the brink of financial ruin as a result of Whitehall bungling. Around £1.5 billion was paid late and tens of millions of pounds underpaid.

The report points out that concerns over value for money raised in two previous NAO scrutiny papers – as well as a Committee of Public Accounts investigation, which accused Defra of "poor financial management" – have not been adequately addressed. It alighted on a computer system that "does not meet the scheme's needs", the cost of processing claims that "continued to increase" and an overall administration that is "not value for money".

One appreciable improvement – ensuring farmers were last year paid earlier – was overshadowed by spiralling costs, the NAO said. It calculated that the average cost per claim is £1,743, an increase of 22 per cent on the 2005 scheme. The Scottish system, widely seen as being far simpler, costs just £285 per claim.

The report went on to say that an additional £304 million was spent in the past four years on staff it had not accounted for in its initial business plan. Since 2005, the RPA has also had to set aside £280 million for withdrawn payments and penalties, and has written off £43 million worth of overpayments.

The NAO litany of charges also condemns the £130 million spent upgrading and maintaining a computer system with "complex, expensive software". Correcting processing errors has cost a further £119 million, the report continued.

Edward Leigh, chairman of the powerful Committee of Public Accounts, said despite the heavy investment, the RPA had "ended up with a clunky, patched together" computer system. The RPA's hallmarks were "lamentable" communication with farmers and "shoddy bookkeeping", he added.

"The Rural Payments Agency's administration of the Single Payment Scheme for paying EU grants to farmers has been a masterclass of misadministration. It sends letters completely out of the blue demanding back large sums which it has overpaid, causing considerable distress, and, in some cases, it has transpired that the farmer actually owes nothing at all."

Defra said last night the NAO report would prove "valuable" evidence for a review into how the agency is run, announced by farming minister Jim Fitzpatrick in September.

A spokesman said: "The NAO report recognises that the RPA has delivered substantial improvements in the timetable for payments to farmers and ensured the agency's formal payment targets have been met. Equally, Defra acknowledges that further work is required to ensure that the RPA can deliver an improved, reliable and cost effective service to the farming industry in the years ahead."

WMN Opinion – Page 10