Johnstone’s View - Managed to create perfect storm

In recent years, the European Union has chosen to support food production through direct payments to farmers rather than through market manipulation.

What this means in reality is that farmers often produce at below cost of production, but they get a payment at the beginning of December which makes up some of the difference; except for last year, when the payment never arrived.

It turns out that the Scottish Government and Rural Minister Richard Lochhead have managed to create the ‘perfect storm’ of policy failure and administrative incompetence.

In policy terms, the Government set out to move money away from productive farms in the south and east of Scotland and, instead, pay a much higher proportion of the EU funds to farmers and crofters in the highlands and islands. As a result, farmers in the Mearns already know that the payments, when they eventually arrive, will be only 50 to 60% of what they were a few years ago.

Worse than that however, the Scottish government decided to design a new computer system to administer the applications and payments. The problem is that it doesn’t work. They have known for over a year that it doesn’t work, but they have repeatedly mislead farmers, the press and even Members of the Scottish Parliament, to cover their tracks.

A picture is building from this fiasco of an incompetent SNP government failing utterly in the basic tasks of management. As SNP ministers were off campaigning for independence, they left the day job behind and allowed millions of pounds of taxpayers’ money to be wasted.”

The entire programme was expected to cost £88m but as of March 2015 was forecast to come in at £178m. The largest cost overruns have been in IT — the original budget was £29m but by March 2015 had risen 111% to more than £60m.

Fines imposed by the EU for missing strict milestones could be about to add another £100m to the overall cost. This development on the farm payment debacle follows an admission from Nicola Sturgeon at First Ministers Questions the week before that farmers could have to wait until June for their payments, despite Farming Minister Richard Lochhead promising they would be delivered in December.

During a meeting in Brussels of the ECR Rural Economy Policy Group, chaired by Scottish Conservative MEP Ian Duncan, the European Commission admitted that it will investigate reports that the Scottish Government could be fined if they fail to make Basic Payments to farmers on time. This follows newspaper comments made by former NFUS President Jim Walker, who raised concerns that the EU could impose fines of up to £100m if deadlines were not met.

Hosting the event, Ian Duncan sat alongside NFUS Vice-President Rob Livesey and Dermot Ryan of Commissioner Hogan’s Cabinet and Monique Remmers of the Dutch Council Presidency. As well as questioning whether the Scottish Government were in danger of failing to meet their obligation to deliver payments by 30th June; to which the Commission pledged to investigate and report back to Ian as quickly as possible.

Ironically, the meeting also heard about how climate change and COP21 targets will affect agriculture and why in any future reform, CAP should reward work and not area; exactly the opposite of what the Scottish Government are currently trying to achieve.

It comes as Mr Lochhead accused critics of “throwing bricks” in a radio interview this week, where he admitted there were “huge” issues with processing the CAP payments.

The Scottish Government needs to act to make immediate CAP payments to farmers without delay. This shambles has gone on long enough and it is a shambles that is 100% of the Scottish Government’s making.

So where does this leave the farming economy? Borrowing is going up as banks extend credit to cover the shortfall. Bills go unpaid as creditors recognise that a payment chain has developed which will not be resolved until the government acts.

It gets worse however. We are just reaching the time of year when farmers spend most on seed and fertilizer to start off another farming year. For some, that means two years bills for only half a year’s income.