Subsidy ceiling will hit most UK farmers

By FWi staff

PROPOSALS to cut CAP costs by successive annual reductions in subsidy would hit almost all serious farmers in the UK.

The cuts, of 3% a year, would affect farmers receiving more than Euro5000 (£3500) of total annual payments, if approved.

The proposal for “degressive” payments is expected to be supported by a majority of the 15 member countries as a means of cutting the CAP budget without the need for a cap on total subsidies paid to individual farm enterprises.

The plan suggested would start to affect arable farmers from 2002, beef producers from 2004 and the milk sector from 2005. It has been given a cautious welcome by the NFU as offering the least unsatisfactory method of reducing CAP spending so far suggested.

“But the Euro5000 ceiling comes in very quickly,” says Francis Mordaunt, partner with Andersons farm business consultants. He has calculated the effective management thresholds for different enterprises.

Smallest farm businesses to be hit would be:

• Arable – 12.9ha
  For an arable farm in England growing cereals and oilseeds, anyone growing more than 12.9ha (32 acres), will suffer the 3% annual penalty. If proteins are grown, the acreage will be even lower, because of their higher levels of subsidy.
• Dairy – 159,000l of milk or around 30 cows
  For dairy cows, assuming the Government opts for the full implementation of the “national envelope” through the Dairy Cow Premium, the cut-off is equivalent to 159,000 litres of annual production – around 30 cows for herds with typical yields, but roughly half that number for top producers.
• LFA sheep – 170 ewes
• Lowland sheep – 222 ewes
  At first sight, sheep producers appear to come off a little better; based on 1998 Sheep Ewe Annual Premium values, flocks up to 222 ewes will remain untouched. But if those flocks are in areas where they also receive Less Favoured Area Supplement, their total subsidy receipts pull the threshold down to 170 ewes.
• Beef – as few as 15 suckler cows
  The position on beef is similarly complicated, and also as presently proposed would penalise most those enterprises that are in greatest need. Based on Suckler Cow Premium alone, there would be no reduction on herds of up to 27 cows. But should the potential national envelope allocation be added on, plus Euro100 Extensification Premium, all herds with more than 15 cows would be affected.

“Its a very clever way of squaring the circle in the search for unavoidable cuts in the overall cost of the CAP,” comments Mr Mordaunt.

He predicts that the impact of the proposals may in any case be cancelled by other developments such as changes in the world market place, including WTO negotiations, and by the likely devaluation of Sterling if and when the UK joins the common currency.

Theoretically, 25% of the CAP savings should be ploughed back into rural development funding, including agri-environmental schemes. It will be up to farmers to ensure that they receive their full potential share of such funds, says Mr Mordaunt.