27 February 1998

Subsidy revamp likely for countries outside

A REVAMP of the agrimonetary system is inevitable, to enable countries outside the euro (UK, Denmark, Sweden and Greece), to continue paying their farmers subsidies in national currencies.

Proposals are due from Brussels in June. But the new scheme is likely to be much less benign than present arrangements.

"Currently it is more difficult to trigger a green rate revaluation (cutting farm support) than a devaluation (boosting support)," Stephen Thornhill of the Home Grown Cereals Authority told the conference. "I cant see that continuing – the new system will be much more symmetrical."

He suggested the current 5% gap allowed between green rates and market exchange rates could be cut to 2%.

Of greater concern was the future for "frozen" green rates – used to convert area aid and livestock headage payments into sterling. These are currently fixed at 11.5% above the prevailing green rate, worth an estimated £900m in additional subsidies for UK farming, according to junior farm minister, Lord Donoughue.

Assuming these rates are "unfrozen", but allowing for a 5% weakening of sterling by the middle of 1999, the HGCA suggests the rate of area aid for English cereal growers would drop from £257/ha this year to just £225/ha next year.

This would rebound to £280/ha in the year 2000, bolstered by another 5% weakening of the £ and extra area aid under Agenda 2000. But support prices would be down from £84/t this year to £70/t.

According to NFU president, Ben Gill, the UK was likely to get a better agrimonetary deal if it was seen as a future member of European Monetary Union, rather than one which has totally rejected the idea.

Farmer Bill Madders: Wanted rate of 1.25 ecus to £, as did others.