26 November 1999

Aid cuts rumoured in bid

to fund rural programme

By Isabel Davies

SPECULATION is growing that MAFF is set to announce all farmers will have their direct payments cut by a set percentage, in an attempt to find money for its rural development programme.

Although the NFU is keen to emphasise no decision has been made, according to the Soil Association, all the indications are that modulation will happen.

So strong is their belief, the SA has already started campaigning for £150m to fund the Organic Farming Scheme. Meanwhile, senior NFU officials are insisting the battle against modulation has not been lost and promised to continue to fight against its introduction.

No announcement has yet been made, but some industry pundits believe the government is considering a cut of between 1-5%, spread equally across all producers. MAFF could take up to 20%

Ministers have always made it clear modulating payments is under consideration, despite the NFUs opposition.

And in its August consultation paper, MAFF indicated it favoured small cuts for everybody rather than targeting cuts towards larger farms.

On the basis that in 1998 the UK spent £2.27bn on direct payments, each 1% cut would raise in the region of £22m.

But with member states only having until the end of the year to submit their rural development plans to the commission, ministers only have a matter of weeks to make their final decision.

It was following the UKs disappointing allocation of European funds for rural development, that pressure to introduce modulation started to increase.

The UK has only ?154 million (£101m) to pay for all agri-environmental schemes, hill payments and a potential early retirement scheme. MAFF is keenly aware extending its rural programme – as it says it wants to – will require more money.

Those against the concept, have pointed to the fact any money raised through modulation needs matching by the Treasury.

But according to Simon Brenman, agriculture development director for the Soil Association, there are clear benefits for the Treasury if they agree to co-fund.

"The treasury could stop paying for crisis management and start paying for sustainable development," he told FARMERS WEEKLY. "Its a route out of the black hole of funding."

Another concern is there could be implications for competitiveness if other member states dont go for modulation.

At the moment only the French have said they will modulate direct income aids to farmers, starting next year.

According to the proposal, three criteria will be used – the total aid received, the enterprise gross margin and the number of employees.

Farmers receiving over ?30,000 (£19,200) in aid face an automatic reduction of 3%. In addition, there will be a sliding scale of cuts on farms above a certain size. The measure, which is still subject to final government approval following consultation with farm leaders, is expected to raise 1bn francs (£100m).