The environment secretary, George Eustice, gave the go-ahead to a scheme to help traders move agricultural goods from Britain to Northern Ireland after Brexit, despite being warned it would be impossible to reduce the risks involved to "tolerable" levels.
Eustice issued a ministerial direction giving the Movement Assistance Scheme the go-ahead in December, after Department for Environment, Food and Rural Affairs permanent secretary Tamara Finkelstein said it fell short of every one of the Treasury's Managing Public Money tests.
MAS was developed by Defra to help traders moving agri-food and similar goods from Britain to Northern Ireland from 1 January at the end of the transition period, which brought about new requirements for inspection and certification of goods. The scheme, which sits alongside HM Revenue and Customs’ Trader Support Service, includes both advice for traders and financial support to offset costs to traders of complying with the new requirements.
Finkelstein wrote to Eustice on 3 December saying the proposals may not deliver value for money both in the short and the long term.
“The proposals have been developed at pace and consequently there is limited evidence that funding represents value for money,” said the letter, which was published yesterday.
She also said the scheme may not fulfil the regularity, propriety or the feasibility requirements of the Treasury guidance. Perm secs must request a written direction from a minister before pressing ahead with a scheme that they believe does not comply with the Managing Public Money criteria.
“In summary, the planned expenditure on this scheme presents risks across all the accounting officer tests which need to be balanced against the benefits of the scheme and the risks of not proceeding,” Finkelstein wrote.
“As a department, we would intend to take every step to mitigate these risks. However, it is not possible to reduce the propriety and value for money risks to a tolerable level.”
In his response, Eustice said the scheme was a temporary measure "being implemented in unique circumstances". He noted the perm sec's concerns, but said the scheme should go ahead after "weighing the potential risks this brings against the need to provide clarity and certainty to traders moving goods from Great Britain to Northern Ireland".
Finkelstein said some measures had been put in place to prevent costs escalating – including a cap on the cost of individual transactions and a review on the data arising from this after the first quarter of the year.
“However, we have limited data on likely volumes of trade, the impacts of market distortion resulting from the scheme and a lack of certainty about the number of certificates needed per consignment. These limitations are likely to restrict the effectiveness of cost controls,” she said.
There is also a risk that traders will come to depend on the scheme, making it “difficult to exit”.
And she added: “Evidence on the scale of benefits is limited. There is a persuasive argument relating to the avoidance of disbenefits associated with disruption in the trade within the UK, however these benefits cannot be quantified at this stage.”
The Movement Assistance Scheme rang alarm bells on the regularity and propriety front because of the risk that it could bring about an unacceptable level of fraud and error, Finkelstein said.
And, she added, the scheme would only be financially viable if the Treasury provides additional funding to cover the costs of the scheme in full for the first three months, and to cover the liability to cover all costs arising until it ends in 2023. “If funding is not received in full the project will not be able to proceed,” the perm sec said.
And while there were “no significant concerns” about the launch of the first phase of the scheme – advice for traders, which started up in December – she said other risks remained. They included the effectiveness of fraud and error controls, which had been inserted into the scheme. Finkelstein said it would not be possible to fully test them before the rollout, leaving Defra without “sufficient assurance that all these risks can be mitigated”.
“Based on the information available, it is not possible to construct a business case to clearly demonstrate that this funding represents value for money to the standards expected by Managing Public Money. Consequently, I am seeking a direction from you,” Finkelstein wrote.
“Given more time, it is possible that further analysis could have been developed which may have offered a stronger business case and there would have been more time to test the scheme design to ensure appropriate level of control. However, I recognise the potential adverse impact that a delay to implementing this scheme might have.”
Finkelstein also noted that there was a “strong policy rationale for these proposals”, given the extent to which Northern Ireland’s consumers rely on British goods. Northern Ireland imports 62% of goods from Great Britain, and bought £13.3m of live animals from Great Britain in 2019, according to the letter.
The perm sec proposed that the letter’s publication should be delayed until after 1 January “to allow work on these risks”.
She noted that there was the “significant public interest” in the movement of goods between Britain and Northern Ireland – which had been a stumbling block in Brexit negotiations, and has been the subject of much debate and anxiety in the run up to the end of the transition period.
Responding to the letter, Eustice wrote: “Weighing the potential risks this brings against the need to provide clarity and certainty to traders moving goods from Great Britain to Northern Ireland, I have decided that the scheme should be established.
“I am therefore formally directing you as accounting officer proceed to establish the Movement Assistance Scheme.”
The number of ministerial directions issued in the last year has shot up compared to previous years, as departments have sought advice on extraordinary measures to help them respond to the coronavirus crisis as well as to prepare for Brexit and the end of the transition period.
A report by the Institute for Government, published yesterday, found ministers had issued 19 written directions in 2020 – up from five in 2019, and seven the year before.