The UK may have to pay Europe up to £180m per year in fines due to the botched implementation of the 'digital by default' IT system for farmers' Common Agricultural Payments - the National Audit Office has said today.

In March this year plans to make the system online-only were scrapped following the failure of the online mapping interface for farmers confirming their field allocations. Instead the system was hastily returned back to a pen and paper approach.

The CAP system was a key GDS exemplar, designed to showcase its new agile and digital ways of working.

It was previously assumed that if the original £154m system had been delivered successfully, disallowance penalties - the amount the UK has to pay the European Commission in fines for under or over payment of farmers - would be contained at 2 per cent (£44m) each year.

Lifetime costs of the CAP system have also ballooned by 40 per cent to £215m, as a result of major problems with the project.

Amyas Morse, head of the National Audit Office, said "significant challenges" remain for the programme.

He said: “The Department [for Environment, Food & Rural Affairs], the Rural Payments Agency and Government Digital Service have not worked together effectively to deliver the Common Agricultural Policy Delivery Programme. There are serious lessons in this episode for all three.

“This means that costs have increased and systems functionality has not improved at the rate expected, either in the back office or the user-facing front end. This does not represent value for money at this stage."

CAP IT programmes have a history of problems. During the previous CAP period (2005 to 2014) they incurred disallowance penalties of £642m, primarily related to issues with the implementation of the system in 2005.

Since 2012 Defra had been leading the CAP Delivery Programme, required to implement new EC payment changes. But in 2013 the GDS became more heavily involved in the project following the implementation of the Cabinet Office's spending controls and proposed changes that would bring it into line with the government’s digital strategy.

The NAO blamed ineffective collaboration between the bodies responsible for the programme, noting "inappropriate behaviour at the senior leadership level at many stages of the Programme’s three-year history." It also said the GDS offered "patchy" support to the department in the delivery of the programme.

Many fundamental changes were made to the programme, significantly increasing the level of innovation and risk, it said. "It is not clear that the changes were all appropriate or that the Department and Cabinet Office fully understood the implications of implementing them all at once.

These changes included the introduction of the Cabinet Office's Verify system, which was nowhere near ready; new 'agile approaches' to the delivery of a system subject to an immovable deadline, and taking on an in-house system integration role without having the necessary skills or knowing that they would be able to obtain them.

"GDS provided limited continuity and insufficient insight into how to adopt agile on this scale. It was not able to identify and provide the systems integration skills required."

It said both Defra and the Cabinet Office did not ensure a clear and consistent vision for the programme with a manageable level of innovation. Nor did they effectively manage competing priorities.

"The result is that the department expects higher levels of disallowance penalties, increased programme costs, poorer customer experience and difficulties paying farmers accurately at the earliest opportunity. The programme has therefore not provided value for money at this early stage."

However, it praised the "speedy and effective" steps taken to withdraw the online application and replace it with “paper-assisted digital” applications in response to the serious failings of the system.

It said the moved "increased the likelihood that the majority of farmers will receive their basic payment scheme (BPS) payments in December." ®