2 May 1997

£12bn grain error

THE EU Commission has admitted overcompensating cereal farmers by nearly £12bn for cuts in price support over the past four years.

It acknowledged the figure, revealed in a leaked MAFF report, but argued that the overpayments were due to miscalculations in arable aid at the time of the 1992 CAP reform package.

The excess payments amount to almost half the overall CAP annual budget, and the revelation is likely to lead to renewed pressure from the commission to cut arable aid payments as part of this years price package.

Gerard Kiely, spokesman for EU farm commissioner, Franz Fischler, said cereal prices had remained consistently higher than intervention prices since 1992, against all predictions.

That was due to the combination of poor world harvests and the introduction of set-aside, which had reduced internal supplies. And although EU cereal prices have fallen steadily over the past nine months, they were still an average 20% above intervention prices.

Mr Kiely did not dispute the overpayment figures and said the issue would lend support to Mr Fischlers plans to deduct £1bn from arable aid payments to help pay for the BSE crisis.

Meanwhile the commission is demanding £15.7m back from the UK government for irregularities discovered in 1993 CAP payments.

It is also considering charging the UK £15.1m for failing to ensure adequate ewe premium controls, claiming the UKs two retention periods and inadequate farm registers made the opportunity for illegal claims rife. &#42