By Shelley Wright
NFU leaders are asking farmers to consider very carefully whether or not they want modulation introduced in the UK.
A consultation paper released from union headquarters this week highlights the modulation options available to national governments as part of Agenda 2000.
Three possibilities exist, but the NFU believes the complexities of two – linking aid to labour units or to a farms gross margin – will rule them out.
"However, the third option needs very careful consideration," the union says. It would allow member states to set a ceiling on individual farm payments, at any level they liked, and then cut payments above that by up to 20%.
Money saved would be available for additional support in the member state for early retirement schemes, hill payments, agri-environment projects or forestry schemes, as part of the EU rural development package. The cash could not be directed to any other programmes, the NFU states.
Farm minister Nick Brown is due to consult the industry in the summer on the modulation option. The NFU wants to have an agreed position by then.
If adopted, the paper points out, capping direct payments would affect only arable, beef and sheep farmers. "However, the money saved would be redistributed to potentially all categories of farmers, or to different sectors."
The union also highlights the "considerable doubt about how the money would, in practice, be redistributed".
And it emphasises the "complication" of switching money from direct aid, which is 100% EU funded, to the rural development budget – where payments from Brussels have to be matched, to different degrees, by national governments.
"Our understanding is that the money saved by modulation could be transferred as an additional EU contribution to the eligible rural development measures. This would then require a matching contribution from the UK Treasury.
"In this case, modulation might appear to be an attractive option, because it would result in a net increase in funds available for UK agriculture," the paper states.
"However, it seems very likely that the British government would try to avoid this outcome, because it would not wish to increase public spending. If government tried to ensure that the impact on the UK Treasury was neutral, they would be able to do so by recycling only a portion of the money saved by modulation to rural development."
The paper asks members if they favour modulation. If so, it seeks advice on what ceiling should apply and what proportion of direct payments should be withheld.