Archive Article: 1997/07/05

5 July 1997




A SIMPLE mistake made in a few weeks time could be all that is needed to trigger penalty losses of many thousands of pounds when next years IACS form is completed.

Even worse, trying to cover up a simple oversight could lead to the loss of all arable area payments if MAFF suspects an attempt to defraud. Expert Francis Mordaunt believes the system almost encourages deception.

He argues that most cases where penalties are imposed for breaches of IACS discipline involve only simple mistakes or misunderstanding of the highly complex and sometimes ill-explained IACS rules.

"There is provision in the legislation for obvious mistakes to be corrected, so long as they do not increase the claim. But, in practice, it is almost impossible to get MAFF to accept anything as an obvious mistake other than a simple clerical error such as the inversion of two figures on the claim form," says Mr Mordaunt, of Andersons farm business consultants.

"This situation leads each year before the IACS deadline of 15 May to much stress for farmers, their advisers and to MAFF staff, who would like to help but cannot.

"Most of these mistakes only come to light when the IACS is being filled in. At that stage it is usually too late to correct because set-aside should have been in place since 15 January, and once land has been drilled it cannot be switched to set-aside by destroying the crop or by over-sowing to make an unharvestable mix."

Legitimate

There are three legitimate ways of salvaging something: accepting the loss and claiming only on the remaining allowable set-aside crops; registering a spring industrial crop by 15 April; and by transferring the set-aside shortfall to another willing farmer within 20km (12.5 miles) before the IACS cut-off.

All three are far from ideal solutions, so Mr Mordaunt admits growers are tempted to cover up their mistakes by setting aside land which does not meet all the current strict criteria and hoping MAFF doesnt detect it.

"While such an action cannot be condoned, it is understandable because land is actually being set-aside, not cropped, for that season which fulfils the main purpose of the arable area payments scheme.

"The alternative is the honest route of accepting the financial loss but when honesty does not pay there is something wrong with the system.

"Far from discouraging fraud, the way the current legislation is operated in the UK actually encourages fraud," says Mr Mordaunt. "This defeats the whole purpose of the penalty system which is to prevent fraud. This aspect of the scheme should be reviewed and changes made to make the penalties proportionate to the offence."

The downward spiral into hefty financial loss could start soon when growers finalise their plans to drill winter industrial crops.

Several pitfalls await the unwary who dont follow the guidelines laid down by MAFF for arranging contracts or, through oversight, get the contract details wrong.

Mr Mordaunt has identified a number of these errors which have led to growers being penalised (see panel above). Such mistakes often go unnoticed until just before the IACS form is submitted, and when it is too late to make adjustments.

In other cases, says Mr Mordaunt, the mistakes are only picked up by MAFF during routine processing or through inspections. "At this stage it is definitely too late to do anything about it," he adds.

How severely MAFF applies penalties depends very much on the severity of the offence but there are also implications for legitimate set-aside on affected farms.

Current IACS penalty thresholds allow for a nil penalty for errors of less than 3% (or 2ha) of the area which should have been set aside, although payments are based on the lower area found. For errors of more than 3% (or 2ha), the penalty is equal to double the value of the error being deducted from any payment. Where growers have miscalculated by more than 20%, all set-aside payments are lost.

Budgeting

Just how easy it is to make this 20% mistake is demonstrated by Mr Mordaunts example based on a 243ha (600-acre) farm budgeting for the minimum 5% set-aside for 1997. If just 2.1ha (5.1 acres) of the required 12.14ha (30 acres) is found to be invalid, the business would lose all its set-aside payments for 1997.

Not only this, however, there is a knock-on effect from area aid being paid pro rata only on the other crops covered by the remaining 10.04ha (24.8 acres) of set-aside. This means that instead of the 230.76ha (570 acres) covered in the original set-aside claim of 12.14ha (30 acres), just 190.76ha (471 acres) of crops are covered by the 10.04ha (24.8 acres). As shown in table 1, the total financial loss for being 2.1ha out in the set-aside claim is a hefty £16,225.

This loss has been exaggerated by the advent of 5% set-aside which was not envisaged when the rules were drawn up. At 15% set-aside, 1ha of set-aside covered for 5.67ha (14 acres) of eligible crops such as cereals, proteins, and oilseeds. Now, with 5% set-aside, Mr Mordaunt says that 1ha covers for 19ha (47 acres) of these other crops (table 2).

At an average payment for eligible crops of about £300/ha (£121.50/acre) for each ha of set-aside ruled out, the loss of payments on other crops is now nearly £6,000.

Avoiding trouble with your IACS claims should start now, reports David Millar.


See more