3 March 2000

Agreement still hurting farmers

An agreement struck between UK and EU officials 16 years

ago is still discriminating against this countrys farmers.

It shouldnt, argues NFU economist Frank Bowley,

in the second of a series of articles highlighting the need

for agrimonetary compensation

RECENT reports suggest the Treasury remains opposed to claiming any of the £362m of agrimonetary compensation still available to help UK farmers.

Time is running out. The money is available under EU rules to offset the damage caused by the strong pound – but most must be claimed by April.

While Tony Blair has recognised the crisis afflicting the agricultural industry and offered to help as part of a long-term strategy, it is vital that the urgent need for short-term assistance is not ignored.

All other EU countries have claimed aid to compensate for the effects of strong domestic currencies, but the UK has traditionally avoided taking most of it. The contrasting treatment between European and British farmers is due to the unique funding arrangement the UK has with the EU, particularly the Fontainebleau rebate.

This mechanism was agreed in 1984 to reduce the high gap between the UKs contribution to the EU and money received back through the CAP and other schemes. The rebate works by returning two-thirds of that gap, or net contribution, to the UK.

It has been hugely valuable, worth nearly £30bn at 1999 prices since its introduction. That point was recognised by the present Government as it successfully fought off attempts to remove the rebate at the Berlin Summit last year.

The problem for British agriculture, which was not realised at the time the rebate was originally negotiated, is that if the UK receives any extra money from the EU budget, the rebate is reduced.

So, rather than simply having to match Brussels £225m share of agrimonetary compensation, the UK would have to pay much more, since the resulting change to the net contribution will reduce the rebate by £160m. This leaves the Treasury facing a bill of £385 million, effectively funding 71% of any support from the EU takeover budget.

The NFU recognises that the Treasury must query any new expenditure, even with the present robust state of the UK finances leading to an expected £9 billion budgetary surplus.

However, its continued resistance to claiming agrimonetary compensation misses out the opportunity of securing £65 million of new funds from the EU for the UK and the rural economy.

It seems unjust that the Fontainebleau rebate, which already has annually benefited society by over £2bn a year, equivalent to nearly 1p off the basic income tax rate, is being used to discriminate against UK farmers, denying compensation which other EU countries consider routine.

It is especially unjust when it is remembered that the main reason for the introduction of Fontainebleau in 1984 was that the UK received relatively fewer funds from the CAP than the other EU countries, an imbalance that the Rebate is being used to perpetuate. &#42

AIDBLOCK

&#8226 Fontainebleau rebate has saved UK £30bn.

&#8226 Agreement used to discriminate against UK farmers. Treasury facing bigger aid bill

&#8226 Perpetuating CAP imbalance.

&#8226 Aid needed urgently.

Write to fight

As part of the NFUs campaign to convince the Government of the need for agrimonetary compensation, it is asking all farmers to write to their MPs drawing their attention to:

&#8226 Low farm incomes.

&#8226 Particular vulnerability of agriculture to exchange rate changes.

&#8226 Inequitable treatment of British farmers compared to their EU counterparts.