Farms should prepare for 12% less SFP cash for 2014

Single Payment Scheme claimants need to budget for a cut of at least 12% in their 2014 payment, warn advisers.

“It’s not a nice message but it’s an important one to get across,” said NFU senior policy adviser Richard Wordsworth.

This follows the exchange rate for calculating 2014 UK payments being set at €1 = £0.77730, the worst for seven years as a result of the recent strengthening of the pound. This rate is 7% lower than last year.

Rates are set on 30 September each year by the European Central Bank to convert payments for claimants in countries not using the euro.

In addition to the currency effect on payments, there is 10% compulsory modulation for 2014 payments and a 12% transfer from direct payments (Pillar 1) to rural development (Pillar 2). These amount to 22% but their net effect on payments this year compared with last year amounts to about 3% because 2013 payments were modulated at 19%.

There is also a 1.6% cut in the UK Cap budget this year, points out Mr Wordsworth, who is the NFU’s senior adviser on the Basic Payment Scheme (BPS) and Single Payment Scheme (SPS).

Sfp claims of more than €2,000 will also be reduced by the implementation of the European Commission’s Financial Discipline Mechanism (FDM).

This mechanism was applied for the first time in 2013 and will apply annually from now on. The rate for 2014 is proposed at 1.3% but this could change up or down, said Mr Wordsworth.

NFU vice-president Guy Smith said: “For many farmers, looking at increasingly tight cashflow projections in the face of plummeting commodity prices, news that SPS payments are also going to be down will feel like another unwelcome turn of the financial screw.

“Farmers should always be wary of crying ‘wolf’ too early but many of us are getting nervous that there might be some serious financial difficulties on the horizon at the moment,” he said.

SPS 2014 payments can be made from 1 December. “We know it has been and continues to be a busy period for farmers, but please do not neglect the paperwork especially if it relates to the SPS claim,” said Mr Wordsworth.

The commission will use the money from the FDM to create a financial reserve, put aside to help support the farming industry in times of crisis.

Entitlement values

Any money that is not used is refunded in the following year to claimants who had a deduction made for the FDM in that year, so for 2014 SPS payments, farmers who have FDM applied this year may receive a refund from last year’s FDM deduction.

The details of the FDM deduction rate and the amount remaining in the financial reserve will be announced next month, as will entitlement and claim values. Because the total number of entitlements changes slightly every year, their values are rebased annually.

From next year when the Basic Payment Scheme is introduced, the Euro exchange rate used to calculate sterling payments will be the average of the European Central Bank rates set over the month of September.

The RPA is urging claimants to check that they have given the agency the correct bank details. Bank details can be updated on form CReg10.

This is available from the customer registration section on the RPA area of the Gov.uk website, by email to csc@rpa.gsi.gov.uk or through the customer service centre on 0345 603 7777.