The report highlights shortcomings in flock records

A report by the Commons Public Accounts Committee has said there is evidence of "a blind eye" being turned to fraud.

It also points to the possible collusion between some department staff and farmers.

It was the foot-and-mouth cull which helped unearth what the Public Accounts Committee described as "a quite staggering degree of fraud".

More than half the sheep farmers in one area had been attempting to cheat the system, it said.

The PAC said the department had failed in its duty as custodian of the public purse and needed to get a much firmer grip on the sheep annual premium scheme which paid out �170m from 1995 to last year.

The farming industry is a very proud industry but we are no different to any other walk of life and quite clearly we have rotten apples in our barrel John Gilliland Ulster Farmers Union

The committee said it found a "catalogue of errors and control failures" which, it said, pointed towards a "particularly slack regime".

The report highlights shortcomings in flock records, marking of sheep and the system of inspections.

The committee claims that departmental staff were at times complicit in turning a blind eye to the rules.

The committee said it was not convinced that collusion between farmers and departmental staff had not been an issue.

But responding to the report, Agriculture Minister Ian Pearson said he was content there was "no deliberate disregard" for the control requirements.

The department is now preparing a detailed response to the criticisms in the report.

Mr Pearson said he was pleased the report acknowledged the efforts made to crack down on the potential for fraud.

Edward Leigh, chairman of the Committee of Public Accounts, said: "It is clear that this scheme has not received the close management and supervision that it deserves.

'Undermined'

"The most damning aspect of the department's handling is the extent to which key requirements of the scheme were repeatedly ignored, over a long period of time.

"Non-compliance was not confined to unscrupulous claimants - there is evidence that departmental staff were at times complicit in turning a blind eye to the rules. As a result, the integrity of the scheme has been undermined."

However, Ulster Farmers Union President John Gilliland said that despite the problems facing the industry, changes would give greater transparency for tax payers and bring about a better quality of life for farmers.

"The farming industry is a very proud industry but we are no different to any other walk of life and quite clearly we have rotten apples in our barrel," he said.

"But it is important that for the name of 98% of farmers out there who are not law breakers that the other 2% do have a heavy hand on them.