Brussels’ rural fund split could raise modulation

British farmers are to receive just 2.5% of the EU’s 78bn (£53bn) fund for rural development over the next seven years, following confirmation in Brussels of member state allocations for the next financial period.

The decision, which bases the distribution on historic use of rural development funds rather than actual need, increases the pressure on the government to raise more from UK farmers through national modulation.

Agricultural economists are currently predicting a modulation rate of 12%-20% to make good the shortfall, depending on the level of Treasury match-funding.

In total, the UK will get 1.9bn (£1.3bn) from Brussels for rural development, a figure DEFRA described as “disappointing”.

This compares with 17bn (£11.6bn) going to Poland, 10.7bn (£7.3bn) to Italy and 10.4bn (£7.1bn) to Germany.

At face value, the 1.9bn (£1.3bn) figure looks better than in the last funding period, when the UK received just 1.1bn (£750m).

But the new amount includes money that will be raised by the 5% EU modulation.

According to NFU chief economist Carmen Suarez, this accounts for more than half of the allocated funds. “This is not new money, but is cash that has been taken from farmers’ single farm payments.”

Of the rest, about 700m (£476m) is the UK’s share of the EU’s rural development pot and represents a sharp fall from what was received in the past and from what DEFRA says it needs.

But, while the total sums are now known, the actual amounts available for rural development in each region of the UK are still far from clear.

In 2000-2006, England received just 53% of the UK’s allocation, but it is not known if this will be repeated. It is also undecided whether modulated funds will be match-funded by the Treasury.

Head of agriculture at the Royal Society for the Protection of Birds, Sue Armstrong-Brown, points to other uncertainties. In particular, Brussels has yet to clarify whether England, Scotland, Northern Ireland and Wales will be allowed to set their own modulation rates.

The other issue is whether funds raised by national modulation will have to be spread among the three “axes” of rural development – competitiveness, environment and rural living. If so, then DEFRA may need even higher rates to raise enough funds for its agri-environmental schemes.

The NFU predicts that, depending on the outcome of these negotiations, DEFRA could be facing a £300m shortfall for agri-environment funding in England.