Complex picture on cutting payments to big farms

A common complaint about the CAP is that too high proportion of the subsidies go to already prosperous farmers. The counter argument is that these farmers are the most efficient and the most internationally competitive. It all comes down to what you think the CAP is for and there has always been confusion about the objectives and their relative preference ordering.

From this year all member states are obliged to apply a 5 per cent degressivity tax on payments over €150,000. Let us suppose that you are an East Anglian grain baron receiving €1m in subsidies. This means that you would appear to lose €42,500 of your subsidy, but then the 30 per cent greening subsidy is exempt, so the actual sum comes in at under €30,000 (obviously the amount received in pounds is sensitive to the pound-euro exchange rate). The amount lost would be significant but not devastating.

However, any member state or region can impose their own cap. This option has been chosen by all the devolved regions in the UK, but on a different basis in each case: It's your choice

Northern Ireland has imposed an absolute cap at €150,000. There are not many farms in Northern Ireland who would receive more than this. Wales has come up with a particularly complicated system, but again there are not that many farms in Wales who would qualify for relatively large payments. Scotland, where there are some large farms, has set the cap higher. Indeed, their €600,000 starting point is the highest notified by any EU country or region.

It's not difficult to work out the politics of this. Farmers in Northern Ireland who are Democratic Unionist or Sinn Fein supporters are unlikely to be affected. In Wales, the more Welsh-speaking parts of the country are unlikely to be hit (although other aspects of Welsh Assembly Government policy have been a source of complaint). In Scotland, the Scottish Nationalists do not want to upset any constituency, but the relatively small number of farmers likely to be affected are not significant in electoral terms.

New ideas from Scotland

The interim report of the Scottish Government's Pack Inquiry has called for direct support to Scottish farmers to continue beyond 2013. You can find out more here:
Pack

No surprises there, but the report also proposes a new top-up find which would be financed by money taken out of the direct payment budget. This could be used to support measures such as fuel efficiency, renewable energy and animal health schemes (an area where Scotland has often been ahead of the curve).

Former auctioneer Brian Pack commented, 'Much more consultation and research is needed, but the idea is that a top-up fund would be used to back outcome and transformational change. It could be the new contract between producers and Scottish society and give the Scottish public the sort of efficient and sustainable agriculture they want to see.'

This is an interesting and innovative idea which deserves further consideration.

Scotland 'on message' on farm subsidies

Scotland is far more in tune with current thinking on farm subsidies in mainland Europe than England and Wales, claims Scotland's rural affairs minister Richard Lochhead.

Addressing farmers at a Christmas Carcass competition in Inverurie, Mr Lochhead brought them glad tidings about the deep divide in agriculture policies on the two sides of the border. 'My opinion on CAP reform is very different from DEFRA's view that all direct subsidies should be removed and we should rely on a free market. Scotland should not go down that route and our thinking is much closer to the mainstream of Europe which is that the pendulum is swinging back towards support for active agriculture.'

The minister felt that outgoing farm commissioner Mariann Fischer Boel didn't envisage that pendulum swinging too far, ruling out headage payments, but new commissioner Dacian Ciolos could bring in a new era.

There are certainly those in Brussels who think that Ciolos will favour more market support and help to smaller farms. However, others take the view that he is on message with the Commission view on reform and has been playing down his linkages with France to reassure pro-reform countries.

However, Christmas has come early for some English farmers, with over 80 per cent of farmers receiving £1.3bn in Single Farm Payments to date. That's approximately £15,116 per recipient. Not quite a banker's bonus, but welcome all the same. Organicduck tweeted from Devon, 'Hurrah and thank you RPA. Maybe off Christmas shopping or maybe pay off some overdraft.' Payments are also well advanced in Wales and Scotland.

Threat to cross-border trade

The internal market is arguably the greatest achievement of the European Union and from time to time we are told that it is now almost complete. However, regulatory decisions can easily derail it and a threat has arisen to cross-border trade between England and Scotland.

The Scottish Government is planning to capitalise on its low incidence of Bovine TB by applying to the European Commission for TB-free status. They have held back from making an immediate application after auctioneers and meat wholesalers expressed reservations. They warned that the sustainability of abattoirs and markets could be threatened as cross-border trade dried up.

It might also be counter productive in terms of containing the disease. Scottish finishers typically buy cattle from the north of England where TB is less common. However, if they are not prepared to pay the cost of pre-movement testing, they might start buying from high-risk areas in Wales and the West of England.

Another complication is that some farmers have holdings on either side of the national border. It is also unclear whether livestock taken from Scotland and not sold at an English market can then be returned north of the border.

It's sometimes a bit of an Alice in Wonderland world in agricultural policy. No doubt the move is seen as a patriotic one in Scotland, but whether it is good policy is another matter.

Changes proposed for LFA payments

The European Commission has unveiled proposals to make changes in the way in which Less Favoured Area (LFA) payments are made. A policy review was set in train following criticism by the European Court of Auditors in 2003 (these things take time) that some countries were abusing the definition of 'less favoured'. This particularly applied to so-called 'intermediate' areas.

In its Communication the Commission suggests that payments should be made in future on the basis of 'biophysical' rather than socio-economic criteria. The Commission's view is that future payments should be based on soils, drainage, climate and terrain rather than socio-economic disadvantage to satisfy the public that the money is being well spent.

The proposals have caused alarm in Scotland where 83 per cent of the land area is deemed intermediate LFA and attracts funding of about £61m a year into livestock farming into this areas. Wales also has 80 per cent of its land area designated as LFA.