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Jonathan Guthrie: Debts, disputes and drownings

Jonathan Guthrie

Published: February 23 2004 Financial Times

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1075982751304

Last Friday, February 20, was the third anniversary of the foot-and-mouth outbreak, a date destined, I believe, to be marked by a new rural festival called Dead Cow Day. All across the land on Dead Cow Day simple country folk will commemorate the passing of another year during which the government failed to honour its remaning debts to contractors who helped defeat the epidemic.

I imagine a quaint village ritual in which an effigy of Alun Michael, the minister for rural affairs, is decked with spring flowers before being paraded through the streets and chucked into the duck pond. Morris dancers will caper among the irises, thwacking their sticks together and jingling their bells, as the dummy sinks. For me, the rural economy is generally something that gets in the way when I am late for a meeting. Usually it takes the form of an unhurried gentleman on a tractor known surely to his intimates as "that old bugger Ned". But my impatience with Ned and his kind thawed last week when I spoke to rural contractors about their three-year battle to extract payment from the Department for the Environment, Food and Rural Affairs.

Robert Pugh, proprietor of RV Pugh, a farm machinery business in the Welsh borders, has been shaken by the experience. He tells me: "In 25 years of trading with farmers, the hardest businessmen there are, nothing has destroyed my faith in human nature more than dealing with Defra." RV Pugh is still owed 500,000 out of a 3.5m bill for work that included building fences to separate diseased flocks from healthy ones. Mr Pugh says: "To start with, Defra paid in 30 days but then it got slower and slower and now we have seen nothing for 12 months."

I heard a similar tale from another contractor, who had 120 employees working flat out during a crisis that brought such miseries as finding the owner of an infected farm hanging from a beam. Defra is still haggling with the contractor over 200,000. It says he should have deducted money from staff payments for a daily half-hour meal break. "People were eating sandwiches while shifting carcasses," he says. "There was no time for lunch breaks."

Contractors claim that the government splurged money on beating foot-and-mouth disease. When the threat receded and their co-operation was no longer vital, it splurged again on chiselling down their bills. They tell of Defra running up legal costs of 10,000 to avoid paying an invoice for the same amount. They describe highly paid Defra lawyers making overnight trips to the country, solely to measure barns and check rental charges had not been inflated. Defra has so far spent a staggering 20m on checking suspect claims.

The Forum of Private Business, a campaigning body, believes Defra's unwillingness to settle has increased as the odds have lengthened on the European Union's paying the UK 1bn in crisis aid. That is why the department is haggling hard over the remaining 55m it owes, the FPB says.

However, that rearguard action suffered a serious defeat last month when a court ruled it should pay one big contractor, JDM Accord, 2.1m to cover disputed lunch breaks. This could help other contractors fighting similar cases. "We earned every penny we were fighting for and Defra's counter-claim was thrown out," says Rob Ratcliffe, commercial director of the Shrewsbury-based business, who adds that he is "tired and galled" by the department's intransigence.

"We will appeal," retorts a Defra official, adding: "No one won or lost." The way she sees it, litigation is a bit like rounders: taking part is what counts. Personally, I would set most store on hanging on to the 2.1m. And I am not convinced that her attitude towards the FPB - "that little business outfit" - is quite as loftily dispassionate as one would expect from a civil servant.

The official was correct, however, in saying Defra has a duty to spend taxpayers' money carefully. Indeed, Mr Michael implied last month in parliament that as much as 800m of contractors' claims had been questionable, more than 60 per cent of the amount paid out. The funny thing is that, according to the National Audit Office, only 1 per cent of contractors' bills have merited fraud investigations. None of these probes has so far yielded a prosecution. But it must be easy to get your figures muddled when you are worried that a bunch of plough jockeys might duck you in effigy.

Nick Goulding, chief executive of the FPB, sums the whole mess up nicely: "Government has a duty to take a lead on ethical payment practices but Defra has fallen far short of that."

I am hoping the Department of Trade and Industry, which itself has an impeccable bill-paying record, will remonstrate with Defra. Only last week a DTI official told me it wanted to "raise awareness" on the problem of late payment.

The FPB gripes that it has already "asked Nigel Griffiths, the small firms minister, to help, but he said he would rather not deal with Defra on this". I reckon he just needs a bit more encouragement. He has only to pop round the corner from the DTI's headquarters in Victoria to picket the offices of Defra. I am faxing him a map so he does not get lost on the way. I am also DHL-ing him some pond weed. I want Mr Griffiths to wave it menacingly at his fellow minister. That should remind Mr Michael of the watery ritual he risks being commemorated by on Dead Cow Day.

jonathan.guthrie@ft.com