Cross compliance – application of penalties and fairness

Last year, in connection with its report on the Performance of the Rural Payments Agency, DEFRA reported that “Farmers remain dissatisfied with the RPA’s performance”. Farmers have raised concerns for many years in connection with the RPA’s administration of EU subsidies and DEFRA even admitted that “The RPA’s multiple failures are causing significant harm to farmers across the country”.

Of particular concern to farmers will be how the RPA applies penalties (reductions in payments) under the cross compliance rules. The RPA uses a guide and spreadsheet matrix to calculate penalties (the “calculator”), penalties are applied as a percentage deduction in subsidy payments. The calculator creates a sliding scale of percentage deductions, depending on whether the act is intentional or not, the likely effect of a breach (both on and off farm), the severity and permanence. Finally, the RPA considers whether the breach is a repeated offence. In principle, this seems a very sensible approach.

However, farming clients have raised concerns about the RPA’s approach to penalties under the cross compliance scheme. We can only speculate regarding the added pressure following the DEFRA review (and possibly Brexit preparations), but it appears that in some circumstances the RPA may be seeking to apply disproportionate penalties to seemingly technical breaches of the rules.

The calculator is not readily available online, but can be obtain by request from the RPA. Where a farmer or landowner has received a substantial penalty s/he may wish to request a copy of the calculator (for the relevant year) and check it to ensure that the penalty applied is in line with the calculator. There is also a question over whether the calculator itself has been prepared appropriately by the RPA, if it produces outcomes where minor (unintentional) breaches might result in considerable/disproprtionate penalties. Further, if the RPA inspector retains a certain level of discretion over penalties, notwithstanding the calculator, is that discretion being exercised appropriately? Inspections are stressful enough for farmers and landowners, without that additional worry.

Farmers have reported being left waiting months, and even years, for the RPA to rectify errors related to subsidy payments. We note that the DEFRA report recommended that complaints of payment inaccuracies should be thoroughly investigated and responded to as quickly as possible. Now, that is not the same as the RPA’s application of penalties in connection with technical breaches (if the breaches were in fact proven), but it does indicate a possible change of attitude and focus by DEFRA regarding the RPA’s practices.

Some may argue that there needs to be a more common sense approach to technical breaches, consideration of the intention of the rules rather than their technical substance (e.g. timeframes in connection with livestock movements), otherwise the RPA may be opening itself up to scrutiny of the fairness of its practices, via a legal action.

We are always interested in meeting our agricultural contacts on farm to see what you are doing to innovate your business and how we can help you. Please get in touch with Joanne on j.saye@ashfords.co.uk or 0117 321 8037.

Joanne Saye is an Associate in the Commercial Dispute Resolution Team, specialising in disputes within the agricultural sector.