17 April 1997

Danger for UK if governments take control of subsidies

By Philip Clarke

GIVING national governments greater control over the allocation of farm subsidies, as proposed under Agenda 2000, has inherent dangers for UK producers.

Returning from a recent fact finding mission to Brussels, Deloitte and Touche head of agriculture, Vincent Hedley Lewis, said he was amazed at just how much of the total budget was being divested to national authorities.

"Whitehall will be able to recoup direct payments from producers who do not meet certain environmental conditions. There is great uncertainty over what will happen to this money."

There is similar concern over the treatment of cash in the so-called national envelopes, which account for about 30% of beef and dairy cow support. "We got conflicting messages from Brussels on this," said Mr Hedley Lewis. "Some said MAFF would be obliged to spend the money, others said the wording was open and it may not be compulsory. We need clarification of this point, as any opportunity the government has not to spend money may be seized upon and produce a distortion in the market-place."

There was more encouraging news on the exact nature of the environmental schemes. "We were told that the measures were not intended to be Draconian, and governments would only be obliged to introduce a scheme if there was an environmental problem to be tackled," said Jonathan Armitage of Strutt & Parker. "Having said that, it is expected that MAFF will want to make area aid conditional on environmental schemes. But at least there will be guidelines from Brussels which members states will have to fit in with."

Peter Fane of consultants Eurinco, which organised the mission, said the UK spent relatively little on environmental policies -about £140m a year, compared with £1.2bn in Austria and £700m in Finland. But he was encouraged that producers who had already taken steps to farm in an environmentally friendly way would not have to start again from scratch.

As for putting a ceiling on individual aid payments (capping), it emerged that the EUCommission had no intention of tying farm businesses to a date-based scheme and there would still be flexibility for farm structures to change.

"Capping is wrong in principle and discriminates against efficient farmers," said Mr Armitage. "But at least the current proposal is more lenient than was initially feared and Brussels believes it provides little incentive for farmers to restructure their businesses."

The greater concern, he added, was the lack of enthusiasm in Brussels for agri-monetary reform. "Proposals are due in May and could have a devastating impact on farm incomes if we lose the protection against the strong £. But nobody we met had much idea about what the proposals might contain." &#42