The UK’s Department for Environment, Food and Rural Affairs (Defra) has set up a fund worth £230 million (€258 million) to cover penalties relating to the Common Agricultural Policy (CAP).
All EU member states are subject to disallowance penalties where there has been a mismanagement of payments made under the CAP, with the European Commission typically deducting these sums from a member state’s claim for reimbursement.
According to Defra’s annual report 2016-17, the department anticipates penalties of £198 million for the Basic Payment Scheme (BPS) and £21 million for cross compliance – both for the years 2015 and 2016 – as well as £11 million relating to further late payments under the BPS.
Over the years 2005 to 2014, Defra’s accounts included transactions for disallowance penalties totalling £647 million, with £616 million already paid off and a further £16 million put aside for fruit and vegetable trader schemes, the rural development programme and smaller schemes.
Based on the assumption that the UK exits the EU in March 2019, the department highlighted that there could be further penalties for larger schemes that are still potentially in line for an audit by the commission.
These include: BPS 2017 and 2018; cross compliance 2017 and 2018; the rural development programme from 2015 onwards; and fruit and vegetable trader schemes for 2016 to 2018.
The report said: “Limited notice is given of future commission conformity audits and it is not therefore known which scheme areas will be audited during the coming year.
“Disallowance will be accounted for once the audits have taken place and reliable estimates are available. Until an estimate can be made, an unquantified remote contingent liability is disclosed within the accountability section.”
The current head of Defra is Michael Gove, who recently suggested UK farm subsidies would be strongly tied to environmental objectives once the country leaves the EU.