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Foot and Mouth: Payments to Contractors

3.5 p.m.

Lord Rotherwick asked Her Majesty's Government:

    What action they will take to settle the £100 million in outstanding payments to contractors who worked during the 2001 foot and mouth epidemic.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, in each of the past three financial years, Defra has achieved prompt payment of more than 90 per cent of all valid invoices submitted, with agreement and payment within 30 days. Defra is withholding some £53 million in dispute with

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businesses in connection with charges arising from the provision of goods, services and works during the foot and mouth outbreak. Those disputes are being resolved through negotiation, mediation, formal investigation and, where necessary, litigation.

Lord Rotherwick: My Lords, I thank the Minister for his Answer. However, is not the fraudulent case rather a red herring as only 1 per cent of the contractors involved in the foot and mouth epidemic are being investigated for fraud? Indeed, earlier this month, one such case was lost in the High Court at a cost of £2.3 million. With some contractors owed payments for more than 700 days and at least one liable to go into liquidation, I ask the noble Lord what Defra's terms of payment are when entering into a contract.

Lord Whitty: My Lords, Defra is governed by the same terms of payment as anyone else. If the invoice is not in dispute we by and large meet it, and we will continue to improve our performance in that respect. As for invoices in dispute, clearly a period of negotiation, sometimes with mediation and legal proceedings, has to take place in defence of government money. Of all the contractors who operated on behalf of the Government during foot and mouth -- there were 1,200 or more -- there have been serious disputes with only 50, and the vast majority of those cases have been resolved one way or the other. However, there are some outstanding cases, and it is the job of the Government to protect public money in that respect.

Lord Livsey of Talgarth: My Lords, given that it is two years since foot and mouth was declared over, will the Minister indicate what legal costs his department has borne in contesting the 50 cases that he mentioned? What has been the cost to the Exchequer?

Lord Whitty: My Lords, the total amount of money involved in all the contracting was £1.3 billion. Legal costs covering the whole matter, which includes some of the cases in dispute, amount to about £20 million. Of the 50 that I referred to as being seriously disputed, 29 have been resolved relatively straightforwardly, with 16 resolved through more formal proceedings such as mediation or formal negotiation. Five large outstanding cases are going through legal proceedings, mainly in the High Court.

The Countess of Mar: My Lords, how much compensation has the United Kingdom Government received from the European Union? How much was expected by the United Kingdom Government originally?

Lord Whitty: My Lords, I cannot answer that, because we are still in discussion with the Commission. It is certainly the case that our original expectations in relation to the amount that the EU would pay are not likely to be met. However, we are not at the point where those negotiations have been completed.

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Baroness Byford: My Lords, further to that question, is a newspaper article by Christopher Booker incorrect in suggesting that the figure that has not been claimed and that we are likely to lose is £1 billion? I gather that there are only 12 outstanding cases. As other noble Lords have said, two years have passed. Either Defra is inept in handling the matter or there must be some problem. Perhaps the Treasury is unwilling to loan money from its black hole, which gains in size each day.

Lord Whitty: My Lords, I do not follow the noble Baroness's argument at all. In the first place, it behoves every department to pay out taxpayers' money in accordance with claims that are validated. Regrettably, in such a situation, there are queries about many invoices, most of which have been resolved, but some of which appear to represent serious overcharging of one form or another -- whether or not they amount to criminal fraud. We must query those. By and large, we are using negotiation and mediation services to resolve them, but we are resolving some of them through legal proceedings.

The issue of money from the European Union is an entirely different part of the large expenditure that the Government incurred during the foot and mouth epidemic. The only compensation money that might -- and will in part -- be met by the European Union is direct compensation for loss of animals. The money we are discussing is money that falls entirely to the Exchequer and is money for contractors for clean-up, disinfection, and so on, not money paid in compensation to farmers. So we are discussing two large but different amounts. None of the delay is due to ineptness, it is due to the Government -- Defra in particular -- safeguarding the public purse.

Lord Palmer: My Lords, will Defra pay interest on the outstanding claims that are eventually proven not to be fraudulent?

Lord Whitty: My Lords, there are rules governing interest. Defra will cover those in some respects; clearly, if there is a court order, it may well cover that point.

Lord Rotherwick: My Lords, in one case, Cumbria Waste Management Ltd has been chasing its overdue money for more than two years. The company is owned by Cumbria County Council. Is Defra concerned about a serious overcharging in that case?

Lord Whitty: My Lords, it would be wrong to comment on any particular case, especially if it may result in legal action. Many cases have been partly settled with some parts still outstanding, even as regards the 50 to which I referred. However, that does not mean that they have not received any money. Such cases give rise to serious queries about the nature of the invoices submitted.

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