2 May 1997

Union demands compensation for strong £

By Shelley Wright

NFU LEADERS will be hammering on the door of the farm minister, as soon as a new Cabinet is announced, to demand more than £500m compensation for the devastating effect the strong £ has had on farm incomes.

With two green £ revaluations already this year, and another due on June 5, the NFU says farmers, especially in the beef, milk, cereals and sugar sectors, could see more than 20% wiped off their incomes this year. The revaluations not only cut EU support payments but also increase the cost of imported inputs.

Under the EU scheme to compensate member states for support price cuts caused by major currency changes, the NFU believes that up to £507m should be paid to cover this years two revaluations. And a further £200m would be needed to relieve the impact of another change in June. Payments are made over three years.

But the compensation is not automatic. National governments must apply to the EU commission for it and then foot half the bill themselves. The commission funds the other half.

Ian Gardiner, NFU policy director, believes it will be an uphill struggle to get a British government, of whatever colour, to part with so much money. But, without it UK producers would be left to compete on unequal terms with their EU counterparts. Seven other member states, including Ireland and Germany, had already implemented currency compensation packages, he said.

Mr Gardiner said that both milk and beef prices had fallen by between 15% and 20% this year, and could fall even further. But when the NFU had previously tried to persuade farm minister Douglas Hogg to initiate the compensation package, he said he "was not minded to" because farmers had benefited from the 27% devaluations of the green £ between 1992 and 1995.

Mr Gardiner said beef and cereal farmers had been protected to some extent by the freezing of green rates in January. But the dairy sector, with no direct support payments, was left totally vulnerable. And Mr Gardiner believed that the revaluations could cut £450m from farm-gate milk prices this year.

A single currency would end such problems, he added. &#42