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1. In early summer 2000 the Scottish Executive Rural Affairs Department (SERAD) initiated a review of its approach to the administration and implementation of the Common Agricultural Policy (CAP) in Scotland. The Review remit was:-

"To review the management and administration in Scotland of payments under the Common Agriculture Policy; to consider options for change and improvement in processes and structures, within the EU regime; to make recommendations; and, as appropriate, to oversee their implementation".

2. The Review is being conducted under the supervision of a steering group chaired by the Head of Agriculture and Food Group, with 2 outside representatives: one from the National Farmers Union of Scotland, and an independent business representative - a list of members of the Steering Group is at Annex A attached. The work is being carried out by a small Departmental project team. The Review will report in 2 stages - an interim report early in 2001 (this current report) and a final report in summer 2001.

3. A very large proportion of SERAD’s resources is taken up in implementing CAP. The CAP Schemes are worth some £500m per year in Scotland and in total over 127,000 applications from some 22,000 applicants are processed each year. Further details are set out at Annex B.

4. Current operational structures evolved from the MacSharry reforms of 1992, with the introduction of the Integrated Administration and Control System (IACS). The change of focus at that time - away from end price support and towards direct support for producers - required a considerable change in focus in scheme implementation, involved greater attention to Scheme eligibility, and required the design and implementation of a computerised system and the ability to check and cross-check claims. The regime of inspections and penalties associated with IACS is seen by some in the industry as having changed the relationship between the Department and farmers. In general, the new systems developed have operated well, and have equally coped with the various changes introduced since 1992.

5. Given the changes, however, and the fact that the new systems have been in operation for almost 10 years, SERAD initiated the Review essentially to take stock of progress. The principal drivers for the Review are as follows:-

Customer Care and Communication: While SERAD has to apply absolutely the requirements for EU Regulation on financial control, there was a desire to review how we can improve both the way information and advice on Schemes is provided to farmers, and the clarity and effectiveness of communications within SERAD.

Information Technology: SERAD wish to establish a clear business strategy for the development and implementation of leading edge information technology to support CAP Scheme administration - but also to take a wider look at how IT should be changing processes and ways of working.

Agenda 2000 costs: The new and expanded Agenda 2000 Schemes will increase administration costs by between 10% and 20%.

EU and UK level audit procedures: Audit requirements imposed on Paying Agencies at EU level are strict as part of the fight against fraud, and more complex, as the CAP Schemes have changed.

Management Accountability: Since 1992, scheme administration has continued to be spread across SERAD and consideration is required as to whether an alternative organisational structure might lead to gains in efficiency and effectiveness.

6. The Review recommendations are designed to:-

- Improve customer service

- Make the best use of information technology (building on what has already been achieved) in order to modernise the CAP Scheme administration.

- Streamline processes and maximise the scope for efficiency.

- Ensure the best approach to the management of CAP Schemes in order to improve strategic direction and streamline decision making.

- Maximise the reliability of payment systems in the light of European requirements

- Ensure accountability for CAP expenditure by SERAD

- Take into account any parallel developments in England and Wales.

7. The vision statement agreed by the Steering Group applying to the CAP implementation work as a whole, is as follows:-

"To implement the CAP Subsidy Schemes in Scotland efficiently, effectively and in line with EU requirements, providing a fair and first class service to farmer customers and ensuring that the public funds disbursed are subject to proper financial control".

8. Much of the work so far has been in analysing who the main customers are for the services provided ie the stakeholders, how these services are currently provided, and whether they require change - to meet the broad objectives set out at paragraph 6 above. A key aim has been to provide focus for the future widespread introduction of electronic services, to ensure that future implementation arrangements are flexible enough to accommodate fully, and to gain maximum benefit from, such services.

9. Annex C attached provides an analysis of the key stakeholders for the CAP implementation work together with a link to where each fits in to the vision statement, their main expectations and an assessment of how well the current system of implementation meets these expectations. Annex D identifies the key areas for improvement - linked to the Annex C analysis - and provides an assessment of both the impact of change to the CAP administration business and the degree of difficulty to achieve change.

10. The picture which emerges from Annex C is an operation which has a mixture of strengths and weaknesses. The three key elements identified as requiring further work, are as follows:-

(a) External Communication - the need for a clear strategy, in terms of scheme forms and guidance, letters and direct contact with farmer customers. This will need to embrace moves to electronic service delivery and also consider matters of tone and content of literature, guidance and information.

(b) Internal Communication - the need to ensure that everyone involved in the CAP Implementation work in SERAD is kept up to date with developments and that there are clear lines of communication - particularly in relation to contacts with farmer customers.

(c) Management Information - the need to measure more clearly how well we are doing against present targets both to gauge efficiency and to provide a means to reallocate resources to meet changing business requirements.

11. Work has now started on each of these three areas. An external communications strategy is being drafted - under the supervision of the External Communications Panel (which was set up to review external communications in response to a recommendation of the Red Tape Report) - and will be published shortly. This will include an action plan with target deadlines for completion.

12. An internal SERAD group has been set up to review internal communication. The group, which will also consider organisational issues, aims to report in summer 2001 - as part of the final report of this review.

13. Work has also started on management information systems and again this will be reported in the final review report. Annex E attached details the preliminary measures identified together with their link to the vision statement.

14. The analysis conducted so far confirms that change is needed in the three areas noted above - and action is in hand to identify the nature of that change.

15. Coupled with these drivers for change within existing systems, changes are also required to accommodate the future widespread use of electronic systems. There are two main initiatives here as follows:-

(a) Electronic service delivery: A broad timetable has already been set for the introduction of electronic submission of forms, for all the CAP schemes. The plans will be included in the external communications strategy document - which will be published shortly. We are also extending access to electronic versions of forms through the SERAD website.

(b) Electronic Data Transfer/Electronic Identification: Access to the Cattle Tracing System database will be available shortly (first quarter 2001) and the roll-out of EID systems is scheduled to start from summer 2001.

16. Both of these initiatives permit very significant changes, and greater flexibility, in the way farmers will be able to submit claims and also in the way SERAD will be able to process them. Within the next 3-5 years they herald the prospect of major reduction in paper based systems and form filling.

17. Both initiatives are being considered in the further work on communications (external and internal) and management information noted above. It is highly likely that there will need to be a concerted programme for change to electronic systems - to make best use of them - involving both the farming community ie to maximise the number of applicants submitting their forms electronically, and SERAD, ie how the electronic forms are processed.

18. The key immediate objectives are to advance the work on communications and management information, and also the electronic systems initiatives. This is likely to involve further detailed analysis of existing procedures and processes.

19. In addition, the Review will be addressing the following key areas:

1. An overall business strategy for the CAP implementation work.
2. Internal organisation, including the Area Offices, to provide greater focus on outputs and greater accountability both for financial management and delivery of services to farmer customers.
3. Smarter, faster, more efficient and more joined up administration of the Schemes, making maximum use of electronic systems.

20. A final report from the Review will come forward in summer 2001.

CAPM Division
February 2001

ANNEX A

LIST OF STEERING GROUP MEMBERS

David Crawley, Head of Food and Agriculture Group, SERAD (Chairman)
Andy Robertson, Chief Agricultural Officer, SERAD
Jim Wildgoose, Head of CAP Management Division, SERAD
Walter Ferguson, Head of Information Systems Division, SERAD
Douglas Morrison, NFUS
Richard Kerr, Assistant General Manager, Corporate Development, Standard Life
Margaret Horn, SERAD-CAPM Branch 1 (Secretary)

ANNEX B

SCHEME IMPLEMENTATION AND RESOURCES DEPLOYED

1. SERAD is responsible for administering schemes worth some £500m per year as part of the CAP. These include the arable and livestock schemes:

Arable Area Payments Scheme
Grain Legume Scheme
Beef Special Premium Scheme
Suckler Cow Premium Scheme
Slaughter Premium Scheme
Sheep Annual Premium Scheme
Extensification Payment Scheme
Hill Land Compensatory Allowance (now replaced by the Less Favoured Areas Support Scheme).

In total, some 127,300 applications are handled per year, from 22,000 applicants.

2. There are also the various agri-environment measures and schemes relating to afforestation of agricultural land:

Countryside Premium Scheme
Environmentally Sensitive Area
Farm Woodland Premium Scheme
Farm Woodland Scheme
Habitats Scheme
Heather Moorland Scheme
Organic Aid Scheme
Rural Stewardship Scheme

These now involve expenditure of over £19m per year, with 6,800 beneficiaries.

3. There are about 550 full-time equivalent SERAD staff engaged in administering CAP schemes. These are divided:

• policy development/overall scheme management - 93 FTE on CAP scheme work;
• Agricultural Staff and their associated administrative support - 405 FTE on CAP work;
• Information Services Division - 100 staff working on CAP and related support;
• Corporate Services Finance Division - 7 FTE on CAP work.

1. Management Information (costing/performance)
1. Improve guidance for staff: administration and induction
2. Improve guidance for farmers
3. Inertia/Complacency
4. Reliance on key staff
5. Inconsistent implementation across schemes
6. Farmer interfaces (how we communicate)
7. Different legal interpretations
8. Inadequate communication within implementation group
9. Debt recovery
10. Organisational responsibilities