The Rural Payments Agency has announced that it will not be in a position to pay the majority of 2005 support payments to farmers by the end of March, as it has previously promised. Farmers are due some £1.6 billion in total with the delay in payments causing UK farm borrowing to rise to its highest ever level now approaching £10 billion.

Only on 31st January, Lord Bach reiterated the government’s constant promise that the bulk of Single Payments would be made to farmers by the end of March. However, Margaret Beckett finally conceded this week and announced that this was no longer achievable. Chief Executive Johnston McNeill was removed from his post and a review of the Rural Payments Agency was announced.

George Chichester Farm Business Consultant of Strutt & Parker says “We are not remotely surprised by this announcement. Despite continued assurances over the past year from DEFRA that they would be in a position to make the majority of these payments by late March, their administration and processing of the new Single Payment Scheme has been in such disarray that we have never expected them to be able to deliver on their promise.

“This new announcement is a crippling blow for the cash-strapped farming industry. Margins are already under great pressure due to low international commodity prices, high costs resulting in particular from high fuel and steel prices, employment costs which are (quite rightly) well above levels of those in many competing producer countries, and high costs of compliance for animal welfare and environmental protection. The addition of high and unexpected interest charges is especially painful at this time.”

Mr Chichester has called on the Government to make partial payments to farmers immediately, based on 75% of the estimated amount due, with final payment to be made when the allocation has been validated and in any case before the EU deadline of 30th June. He has also called on the government to compensate farmers for the additional costs of delayed payment which have resulted purely through DEFRA inefficiencies, by adding the equivalent of interest to the monies when paid, at the statutory Government rate.