European subsidies affair could bring hefty fines

The Scottish Government could face a fine of up to £700,000 for the late payment of European subsidies to farmers this year, MSPs have heard.

The penalty, estimated at between £500,000 and £700,000, relates to delays to 2016 Common Agricultural Policy (CAP) payments.

The figure is on top of potential financial penalties of around £5 million as a result of late payments in 2015 after delays caused by the introduction of a new £178m IT system.

A total of 90.4% of payments due to farmers were paid by the June deadline, with the European Commission (EC) rejecting a request from Scottish Ministers for an extension to the payment window.

However Holyrood’s Public Audit Committee heard there was likely to have been sufficiently good performance across the UK as a whole to meet the 95.24% target for the main CAP schemes.

Elinor Mitchell, director of agriculture, food and rural communities at the Scottish Government, told MSPs she was “fairly confident” there would be no penalties in relation to the Basic Payment Scheme and Greening, which make up the vast majority of CAP payments.

She said “modest penalties” were expected for the Scotland-only Voluntary Coupled Support scheme, which helps beef and sheep farmers, and for the cross-UK Young Farmers scheme.

“Across both schemes we’re anticipating penalties of around half-a-million pounds, between half-a-million and £700,000,” she said.

Acting convener Jackie Baillie MSP said: “It sounds as if what you’re telling me is this is one of the benefits of being part of the United Kingdom, that other areas outperform Scotland and consequently we all avoid penalties. Would that be correct?”

Ms Mitchell said: “It’s correct that ... we achieved payment performance of about 90% and the other paying agencies achieved much higher, higher 90s, which evened out across the country, yes.”

The Scottish Government could also face separate EC financial penalties, known as disallowance, if weaknesses in the administration and control of CAP payments are identified. A recent assessment from Audit Scotland warned the figure for this could be as high as £60m.