MAFF expected to announce aid cuts

26 November 1999



MAFF expected to announce aid cuts

By Isabel Davies

SPECULATION is growing that the government is set to announce a cut in the aid payments to all farmers in an attempt to fund its rural development programme.

The National Farmers Union is keen to emphasise that no decision has been made, but the Soil Association says all the indications are that modulation will happen.

So strong is their belief, that the Soil Association has already started campaigning for £150 million to fund the Organic Farming Scheme.

Meanwhile, senior NFU officials are insisting the battle against modulation has not been lost and promised to continue to fight its introduction.

Some industry experts believe the government is considering a cut of between 1-5%, spread equally across all producers. MAFF could take up to 20%.

Ministers have always made it clear modulating payments is under consideration, despite strong opposition from NFU leaders.

In its August consultation paper, MAFF indicated it favoured small cuts for everybody rather than targeting cuts towards larger farms.

On the basis that in 1998 the UK spent £2.27bn on direct payments, each 1% cut would raise in the region of £22m.

With member states having only until the end of the year to submit their proposals to the commission, ministers only have a matter of weeks to decide.

Pressure to introduce modulation started to increase following the UKs disappointing allocation of European funds for rural development.

The UK has only 154 million (£101m) to pay for all agri-environmental schemes, hill payments and a potential early retirement scheme.

MAFF is keenly aware extending its rural programme – as it says it wants to – will require more money.

Those against the concept, have pointed to the fact any money raised through modulation needs matching by the Treasury.

But there are clear benefits for the Treasury if they agree to co-fund, according to Simon Brenman, agriculture development director for the Soil Association.

“The treasury could stop paying for crisis management and start paying for sustainable development,” he said.”Its a route out of the black hole of funding.”

Another concern is there could be implications for competitiveness if other member states dont go for modulation.

So far, only the French have said they will modulate farm aid starting next year, based on the total aid received, enterprise gross margins and number of employees.

Farmers receiving over 30,000 (£19,200) in aid face an automatic reduction of 3%. In addition, there will be a sliding scale of cuts on farms above a certain size.

The measure, which is still subject to final government approval following consultation with farm leaders, is expected to raise FF1bn (£100m).