20 February 1998

£80,000 top for

aid payment on

reform agenda?

By Philip Clarke

Europe Editor

SUPPORT for farmers is likely to be capped and renationalised under Agenda 2000, potentially placing UK producers at a competitive disadvantage.

Formal CAP reform proposals are not due until the middle of next month. But the process of leaks is already well under way in Brussels.

Modulation, or capping support payments, seems likely to feature strongly, with a figure of £80,000 (100,000ecu) being widely quoted as the limit for aid payments made to individual farms. Thereafter, payments are likely to be scaled back progressively, though how this will be done remains unclear.

UK government representatives in Brussels say they will oppose the plan. "Modulation contradicts the (EU) commissions own objective of getting a more efficient industry as it discriminates against efficient member states like the UK," said a spokesman.

This view is endorsed by the NFU. "The implication of modulation is that the CAP has become a social policy," said senior economist Tony Donaldson. "But we see it as a mechanism for helping farm businesses adapt during the transition to world market prices. It should not discriminate by farm size."

As well as modulation, details are also emerging of farm commissioner Franz Fischlers plans to renationalise some of the CAP budget, giving more power to individual member states to allocate support funds.

For example, in the dairy sector, leaked documents point to a direct headage payment of £80 (100ecu) a cow compared with the £116 (145ecu) a cow proposed in the original Agenda 2000 document last summer. The payments are to compensate for a 15% intervention price cut.

The saving on headage rates is now expected to be put in a "national envelope" – worth up to £90m (113mecu) in the UK – to be allocated either as additional headage payment or as area aid for dairy farmers. As yet it is unclear whether governments would have to pay all of this or some of it. Similar arrangements for the beef sector are also likely.

The NFU is concerned about the prospect, insisting that UK producers will lose out if there is any renationalisation, regardless of which party is in government.

But commission officials believe the move will offer greater flexibility to allocate support in the most appropriate way for each country.