5 July 2002

RICS research shows big risks in modulation

Farmings tough economic

climate was never far from

peoples minds at this

years Royal Show, but

there were plenty of ideas

to help turn things around.

First, Europe editor,

Philip Clarke, takes a

look at the possible

cost of modulation

BRITISH farming could pay a high price for modulation, suffering from a loss of income and environmental damage, according to research from the Royal Institution of Chartered Surveyors.

Presenting the results at a Royal Show breakfast on Tuesday (July 2), the organisation predicted a £132m – or 22% – drop in UK net farm income if modulation was raised to 10%, as favoured by Donald Currys policy commission.

"The effect on the competitiveness of UK farmers is completely disproportionate to the benefits gained," said RICS spokesman William Tew. "If modulation at high rates is applied in Europe, we will merely export our farming industry."

The study, conducted by SAC and Harper Adams, shows that holdings most dependent on direct payments will suffer more than those with lower dependency. For each 1% increase in modulation, the agricultural value of an additional hectare of arable land falls 0.6%, compared with 0.85% for grazing land.

The policy of shifting direct payments to rural development could also hit the environment. On arable farms, for example, the RICS expects that 8% modulation would lead to oilseeds being entirely replaced by cereals. "This represents a shift to greater mono-cropping."

The same rate of modulation on livestock farms would see beef cattle pushed out in favour of sheep production.

The RICS is also concerned that money taken from farmers by modulation will not be recycled. "If farmers are unable to regain the modulated funds, there will be adverse knock-on effects within the agri-supply industries," says the report.

But Brian Revell, of Harper Adams, suggested that this may be the aim of government policy. It was only an assumption that modulated funds should be recycled within agriculture. It could be that the government wanted to see funds leak to other sectors.

The RICS also highlights the problem of "additionality", whereby modulated funds cannot be paid out on existing environmental projects, but have to go to farmers in new schemes. This could be a particular problem in the English LFAs, where farmers have limited scope for further engagement in extensification, it suggests.

"If we are going to have increased modulation, it must be available to as wide a range of farmers as possible," said RICS rural faculty chairman Julian Sayers.

And Martin Lowry, chairman of the RICS countryside policy panel, criticised the current uncertainty for farmers who spend time and money applying for schemes, only to be told the funds have run out.

"Modulation is moving subsidies as of right into a system of competitive schemes. Its a bit like going from flat racing to jump racing, with some pretty major hurdles."

NFU president Ben Gill agreed that adequate funding was a prerequisite. "The UK has been under-funded in this area since Mrs Thatchers time."

France, conversely, had five times the amount of money and had recently suspended its modulation programme because it could not spend it all. &#42

Modulation funds must be made widely available, says Julian Sayers of the RICS.