“the largest capital grant scheme ever run by the Department of Agriculture”

The BBC’s Martin Cassidy notes the NI Audit Office report into the Farm Nutrient Management Scheme, through which some 4000 farmers received grants worth £121million – the largest capital grant scheme ever run by the Department of Agriculture.

When, in June 2007, the NI Finance Department gave its formal approval to extend the scheme to provide grant aid to all applications received before 31 March 2006, they had raised concerns about the affordability of the scheme.  One of the conditions of the formal approval was that [from the NIAO report]

“most importantly” the affordability issue in relation to the additional resources had to be satisfactorily resolved before any commitment to funding could be made. (This would be the subject of separate correspondence between the DARD and DFP Accounting Officers)

As the BBC reports,

The Department of Agriculture then came up with a plan to sell off the 84-acre plant testing station at Crossnacreevy on the outskirts of Belfast and use the money to boost the grant rate to 60%.

To do that it needed approval from the Department of Finance and Personnel which it provided with an informal valuation suggesting that with planning permission, the Crossnacreevy site was worth more than £200m.

The Department of Finance and Personnel was persuaded to provide the capital cover needed and gave the Department of Agriculture approval to increase the grant rate to farmers.

The Audit Office report said the persuasive point for the Department of Finance was that the £200m capital receipt was considerably larger than the Department of Agriculture was seeking approval to utilise in the farm nutrient management scheme.

The informal valuation though, turned out to be wide of the mark.

An official valuation by Land and Property Services in March 2008 judged the Crossnacreevy site to be worth a maximum of £5.8m and possibly as little as £2.28m.

The report by Land and Property Services also highlighted relocation costs of £6m associated with moving the plant testing operation to another site.

That “informal valuation” was made in June 2007.  The site remains unsold.

Additionally, as the NIAO report points out,

3.6 In the four weeks from the launch of the scheme on 26 January 2005 to 1 March 2005, a total of 11,191 preliminary applications (or ‘expressions of interest’) were received by DARD.  This represented some 40% of farm businesses in Northern Ireland.  Under the Department’s timetable, those that submitted preliminary applications had a further nine months to submit a full application.  However in October 2005, DARD extended the closing date for full applications to 31 March 2006, due to the low uptake.  By the original closing date of 30 November 2005, the Department had received only 372 full applications.  we asked the Department whether it had obtained EC approval to set or extend the closing date for the submission of full applications.  It told us that there was no need to do so as the EC was kept fully aware of its actions throughout.

3.7  By the revised March 2006 deadline, a total of 4,899 full applications had been received, 3,498 (or 70%) of which were submitted in the final three weeks. 

The NI Audit Office report contains other criticisms of the scheme.  Here’s an interesting comparison with similar schemes in England & Wales, Scotland and the Republic of Ireland.

And on the administration and impact of the scheme

4.29 There are a number of issues arising from the administration and impact of the scheme.

The Department cannot, at present, measure the extent to which FNMS has contributed towards improved water quality – it will take some time before the restrictions placed on farmers work through to improvements in water quality.

No milestones or targets were set to measure the success of the scheme –  before FNMS was launched, the Department did not agree a set of clear outcome measures and SMART targets defining what the scheme was intended to achieve.  One reason for this weakness was the absence of accurate baseline data of storage facilities on farms.

One of the main disadvantages of the scheme was its arbitary access – it is of concern that only those farmers who could afford to pay the difference between the cost of the work and the grant available were the ones who proceeded.

The average grant claimed was more than twice that projected in the Economic Appraisal – the consultants estimated that, on average, farmers would apply for a grant of around £13,600 but, following the settlement of claims, the average grant paid was £31,000.

Some 38% of planned farm inspections carried out by NIEA during 2009 detected at least one breach of the Nitrates Action Programme – NIEA carried out some 370 planned farm inspections during 2009 of which 141 were found to have breached the regulations.  In addition, another 84 farms were found to be in breach of the regulations following a complaint from other farmers, agencies or the general public.

In 2009, breaches of the Nitrates Action Programme were considered serious enough for NIEA to decide to prosecute three farmers – in 2009, 156 breaches were given a ‘high’ or ‘medium’ severity rating by NIEA, with three cases going forward for prosecution.

Cross Compliance penalties have been imposed on an increasing number of farms over the last three years – in 2007, 11 farms attracted Cross Compliance penalties of £1,375 for the pollution of waters caused by nitrates from agricultural sources, with this rising to 200 farms and penalties of £278,610 in 2009.

Changes to the Cross Compliance framework and a phasing in of Action Programme measures resulted in an increased level of penalty being applied in 2009.