There was great excitement last month as an agreement was finally reached on CAP Reform between the EU Commission, Council and European Parliament.
From what has emerged so far there does appear to have been a consensus on important issues, but by no means all.
There are continuing negotiations on the 2014-2020 budget and these will include decisions on degressivity and capping, transfer of payments between Pillar 1 and Pillar 2 and a crisis reserve.
Nevertheless, those decisions which have been made are important and, for Scotland, the main issues are:
l The Basic Payment Scheme (BPS) will replace the Single Farm Payment Scheme (SFPS) with effect from the 2015 scheme year.
The current SFPS will be extended for 2014 which will provide a new reference year for land area under the BPS – as well as presumably providing the basis for an historic reference amount.
The BPS will account for 70 per cent of the direct funding available, 30 per cent having been allocated for greening, after deduction for national reserve, young farmers top up, any coupled payments, and so on.
l The BPS will be phased from an historic to a regional basis. That process does not have to be completed by 2019, but all recipients will have to receive at least 60 per cent of the regional payment by then.
There will be optional measures for member states to apply so that no-one suffers a deduction of more than 30 per cent from the initial payment level – but that may not work arithmetically or politically – high values having been particularly associated with slipper farmers and naked acres.
It is still unclear as to how a regional basis might work. In England there are three regions based on land quality and it seems likely that Scotland will follow a similar methodology although more regions (and more complications) may be necessary.
l Whilst a regional basis of payment is likely to remove much of the issues regarding slipper farmers, there is no clear active farmer test other than a mandatory negative list of ineligible uses such as airports and waterworks ! It is hoped that some form of minimum agricultural activity will be necessary.
l To be automatically eligible for allocation of entitlements under the BPS, claimants must have submitted an SFPS claim in 2013.
l Greening will be introduced as a compulsory requirement attracting 30 per cent of the regional direct payment, irrespective of individual Basic Payment entitlement values.
Measures
In order to receive the greening element of the payment, these measures have to be met:
l Individual holdings will have to satisfy a requirement for 5 per cent of arable land qualifying as ecological focus areas unless the holding is less than 15 ha or has at least 75 per cent grassland up to a maximum of 30 ha (it is not clear if temporary grassland will qualify in this respect). Equivalent measures under stewardship schemes may qualify but in that case payments will be restricted to avoid double funding.
The interaction between ecological focus areas and existing stewardship schemes may be complicated.
Furthermore, there is asuggestion that the EFA requirement may be part met at national level.
l Where there is more than 10 ha of arable land there must be at least two different crops to provide diversification. Over 30 ha there must be three different crops. The main crop may cover up to 75 per cent of arable land and the two main crops up to 95 per cent.
l A minimum of 95 per cent of permanent grassland must be retained – the retention ratio may be applied at national, regional or farm level. Under the existing scheme it has been applied at national level. Further details will emerge but permanent grassland is still to be properly defined.
l There is also a sting in that greening is mandatory and there will be a penalty if not adopted – claimants who have not met the greening requirement by 2017 will lose the equivalent of 125 per cent of the greening element of the Basic Payment – not simply the greening element itself.
COMPULSORY ISSUES
There must be a new entrant young farmer top up scheme.
l Coupled payments – optional but all regions allowed up to 8 per cent of funds as coupled payments.
l Rural Development Programme – Pillar 2. At least 30 per cent of the rural development funding budget must be spent on land management and climate change mitigation measures. New agri-environment – climate schemes to be distinct from “greening” to avoid double funding.
l Less Favoured Areas to become Areas of National Constraint but this change will be delayed until 2018.
l Member states must offer advice to farmers on cross compliance, greening payments, maintenance of land eligible for direct payments, the water frame work and sustainable use of pesticides directives, and some rural development measures, via a Farm Advisory Service.
l Small Farmers Scheme – optional.
WHAT NOT AGREED?
Degressivity and capping – possibly provision for a small deduction from larger payments – 5 per cent over €150,000? Capping appears to be optional at present.
l Modulation.
l Transfer of funding between Pillar 1 and Pillar 2 – direct payments to Rural Development.
l Establishment of a Crisis Reserve Fund.
These last issues will hopefully be decided by Autumn 2013 by which time more detail of what has been agreed will have emerged.
For the meantime, it appears certain that there will be less money available to farmers who should budget on a 5 per cent reduction in Single Farm Payment this year and, probably a further 5 per cent in 2014.
It is therefore important that individual businesses start to assess the likely effect of changes with assistance from their professional advisors.
Assistance with the cost of assessment can be obtained through the Whole Farm Review Scheme.
For more information contact Hugh Jones at the Galashiels office of Edwin Thompson LLP – 01896 751300 or email ha.jones@edwin-thompson.co.uk