Brussels closes in on voluntary modulation deal

Farmers will soon have a clearer picture of how much of their 2007 single farm payments will be syphoned off for rural development through voluntary modulation.

New EU regulations are expected to be agreed at the next meeting of EU farm ministers on 19 March.

Government will then be in a position to decide how to share-out EU rural development funds worth about €264m (£180m) between the four regions of the UK, what level of voluntary modulation to apply and how much (if any)  co-financing the Treasury should provide.

Voluntary modulation is viewed as essential to allow the UK to fund its rural development programmes. The UK only gets about 2.2% of the EU rural development budget and, without additional resources, would not even be able to maintain its existing environmental schemes.

The new regulation was expected to be approved last year, but ran into problems in Brussels due to opposition from the European Parliament. But a new compromise, just issued by the German presidency, should satisfy many of the parliament’s objections and is expected to be signed off by farm ministers later this month.

Crucially, the new text allows the UK to set different rates of modulation for England, Wales, Scotland and Northern Ireland, to meet the different needs of the different regions. This has been a main UK demand since heads of state agreed to the principle of voluntary modulation in 2005.

Another key part is that the new proposal allows the UK to apply voluntary modulation to a farmer’s entire SFP, unlike the 5% compulsory EU modulation, which exempts the first €5000 (£3400). This will allow government to maximise its voluntary modualtion “take”.

But the UK appears to have lost its battle to direct all modulated funds towards its environmental schemes. At least 10% will have to go towards improving agriculural competitiveness and 10% towards diversification.

To appease the European Parliament, which is still threatening to block some 20% of the EU’s rural devlopment budget this year, the German presidency also wants to build in a clause that links any future increase in compulsory modulation with a coresponding reduction in voluntary modulation.

This prompted heated debate in committee meetings this week in Brussels, with some member states saying this pre-empted the 2008 CAP “health check”. “This may be hard to get into the regulation,” said one UK source. “The solution may be for the UK to give a declaration that this is what we will do if, in the future, compulsory modulation is increased.”

The UK may also have to give a commitment not to apply the maximum 20% voluntary modulation rate allowed. The NFU has predicted a rate of between 12% and 20%, depending on the level of Treasury match-funding.