Plans to limit the rate of transfer to 9.5% from direct payments to the rural development CAP budget in Scotland have been outlined by Scottish rural affairs secretary Richard Lochhead.

The proposals to introduce a 9.5% modulation rate in Scotland, which are subject to consultation later this month, heap added pressure on the UK government to change its mind on the modulation rate in England.

DEFRA has already outlined plans to increase the modulation rate from 9% to a much higher 15% to environmental schemes, which has come under fire from the NFU, CLA and this week, the Commons’ Environment, Food and Rural Affairs (EFRA) select committee.

Under the Scottish government’s proposals for the future of Scotland’s farming CAP budgets from 2015 – 2020, vital rural support for farmers, including Less Favoured Area funding for hill farmers (LFASS) would be protected and funding for agri-environment schemes increased.

The focus would also be on ringfencing funding for forestry, crofting, new entrants to farming, food and drink, and rural communities, explained Mr Lochhead.

“European rules allow up to 15% to be transferred between these budgets. I have said all along that I will not transfer money away from rural development as Scotland has the lowest payment rates in Europe – just one sixth of the EU average,” said Mr Lochhead.

“I also want to protect food production in this country and direct payments to Scottish farmers and crofters have already been cut twice, once at European level and again by the UK government, so I have to think carefully about the level of transfer.”

Mr Lochhead said Scotland is a food-producing nation and direct payments to farmers and crofters were essential for ensuring the survival and success of Scottish agriculture.

However, the country was facing difficult spending decisions due to the “atrocious negotiating and (CAP) budget decisions” taken by the UK government.

“DEFRA minister Owen Paterson argued for a ‘substantial reduction’ and phasing out of Pillar One payments but thankfully he did not succeed and we secured much needed continued support for Scottish agriculture,” said Mr Lochhead.

“That is why in this programme I am minded to limit the transfer from Pillar One to Pillar Two to 9.5% – a rate which I believe strikes the best possible balance between providing a rural development budget that allows us to address our obligations and supporting priority areas of the agricultural sector.”

The proposals would deliver a rural development budget of over £1.3bn over the next seven years, a level of annual funding similar to that of the final years of the current programme.

They would also see funding for agri-environment schemes increase by more than £10m per year to over £350 million over the seven year CAP period.

Mr Lochhead intends to maintain essential support of £65.5m per year for LFASS – a total of £459m support through Pillar Two for farmers and crofters on the hills, uplands and islands.

He said he was having to “deal with the fallout” of DEFRA’s recent decision not to allocate to Scotland the €223m “convergence uplift”, which he insisted “rightly belongs to Scotland’s farmers”.

And he repeated his claims that Scotland would have qualified for an additional €1bn in direct payments, if it had been able to negotiate its own terms as an independent country during the recent CAP talks.

The Scottish government will consult on the proposals for direct payments and rural development later this month.

In the meantime, Mr Lochhead is keen to hear urgent views from industry, environmental organisations and rural communities on government’s proposed 9.5% modulation rate by 16 December, 2013.

A DEFRA spokesman said: “Scottish farmers will continue to receive the highest payments per farm in the UK, and the one of the highest overall in the EU.  The 1.6% decrease to the UK’s CAP budget will be shared equally across Scotland, England, Northern Ireland and Wales.”

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