Single Farm Payment scheme in England

Originally from: Farmtalking
                        
Secretary of State Margaret Beckett's statement on CAP reform: implementation of the Single Farm Payment scheme in England

 1. With permission Mr Speaker, I would like to make a statement. Last June I had the pleasure to announce that we had secured the most radical reform of the Common Agricultural Policy since its inception. I return today to make a statement on how I propose to implement key features of that groundbreaking reform in England.

2. To place those proposals in context, it is – as I said to the House at the time – hard to over-state the importance of the reform in transforming the core elements of the Common Agricultural Policy and laying down a new direction for its future evolution. Crucially, the link between the subsidy paid to farmers and the level of production has been broken – so called "decoupling". That means farmers' activities will no longer be dictated by what the subsidy regime requires them to produce with all the costs and bureaucracy entailed, but frees them to farm for what the market wants.

3. Decoupling also reduces the environmental impact of farming both by removing an incentive for intensification and over-production and by making subsidy dependent on compliance with a range of environmental standards.

4. Moreover, decoupling of subsidy from production reduces the trade distorting nature of the Common Agricultural Policy and paves the way for a deal in the current round of world trade negotiations.

5. But the challenge before us now is to how best to maximise the potential benefits of the reform with our approach to implementation.

6. In particular, which of the options that are available to Member States should we take up? How far should we decouple? And how should we apply the new decoupled scheme – the Single Farm Payment?

7. We consulted widely in the autumn of 2003 on these issues and received over 800 responses. I have given very careful consideration to the arguments put forward, which advocated quite a wide range of different approaches.

8. But in reaching my decision, I have been guided by several key principles, namely:

coherence with the Curry Commission report and our own Sustainable Farming and Food Strategy launched in 2002, in particular with the emphasis in both on bringing the industry closer to the market and on the increasing importance of environmentally-sensitive farming;

consistency with our wider objectives for the CAP, including greater simplicity, transparency, minimal bureaucracy and as few deductions as possible from the basic payment available; and

the need to attract the widest possible support of the stakeholder community, for ongoing payments to farming which, we believe, requires us to move towards a system in which public money is delivering public goods.

I was also determined to give as many details at this stage of the scheme as we can, so as to give the industry a clear path of adjustment so that farm businesses can plan.

9. Those principles lead me to a conviction that the more fully support is decoupled, the greater the degree of freedom farmers will be given in respect of their own business decisions. I have, therefore, decided that in England we should fully decouple all direct payments in 2005, including the new payments for milk producers.

10. So a Single Farm Payment will replace the plethora of existing schemes and simplify the bureaucracy associated with them. But the exact form of the payment is also important. The options available include a straight forward allocation of available monies on the historic basis of an individual farmer's receipts in the reference years 2000–2002; and allocation of different flat rate payments on the basis of whether land was under grass or under crops in 2003.

11. I have concluded that we should avoid a situation in which subsidy was allocated solely on the basis of past activities themselves undertaken in the context of production-linked support policies.

12. For England I do not believe that it would be right to adopt a purely historic approach. I do not believe we can justify to our public a situation in which at the end of this decade or later farmers would continue to receive aid wholly based on business decisions taken 10 years or more earlier, in a very different policy context.

13. Instead, guided by the principles I outlined earlier, and having listened carefully to the many compelling and carefully argued cases put to me by the NFU, the CLA, the RSPB and others, I propose to exercise the option in the agreement to adopt a flat rate payment per hectare.

14. Of course a fully flat rate system paid immediately in 2005 would have been the simplest and cheapest to implement. However the redistribution, and the immediate impact on some incomes which would result, would be too destabilising. Most importantly, it might act against the sort of behavioural change we want to see in helping the industry to become fit for purpose in getting closer to the market.

15. In order to mitigate these effects, I propose to introduce the flat rate progressively and to divide England into two regions: land in the severely disadvantaged areas of the less favoured areas (SDAs); and all other land. And a different flat rate will apply in those two regions.

16. During the transition years – and it would be the same period in both regions – a steadily increasing proportion of the funds available would be directed towards the simple flat rate payment, with most farmers receiving an additional but over time diminishing payment related to the subsidies that they received in the reference period of 2000–2002.

17. I have also decided that the period for phasing in of the flat rate payments will be eight years, starting in 2005 and ending in 2012. Accordingly, the proportion of the available funds to be allocated on the flat rate basis in each year will be: 10, 15, 30, 45, 60, 75, 90, 100. In other words, in the first 2 years there will be 10 and 15, and then rising in intervals of 15. My intention is that the flat rate payment element should be low in the early years to allow farmers time to adjust and plan for the situation that will appear by the end of the decade.

18. I recognise that the framework I intend to implement will involve some redistribution of current subsidies between farmers and between sectors and areas. However this will be introduced over a reasonably extended period of time, allowing farmers to adjust during the transition. We will end up with a system that is increasingly equitable between farm types, much more market focused, with a much more simplified bureaucracy and one which delivers a better landscape and environment and a more sustainable long term future for English farming.

19. There are many related issues which will need to be addressed over coming months. I can say now that I do not propose to take advantage of the option for so called 'National Envelope' measures in England. Although in certain circumstances these could offer potential benefits, I judge that the accompanying complexity and loss of transparency outweigh these advantages in English conditions.

20. As to cross compliance, conditions will attach to the subsidies that are payable and we will be consulting on the approach to be taken in respect of these so as to ensure that they are implemented effectively, proportionately and again with the minimum of bureaucracy, an approach which we will take to all forms of regulation. In addition, I am keen to ensure our implementation of cross compliance fits into the approach of the whole farm model for regulation which is currently being piloted in England.

21. I believe that this approach constitutes a forward-looking package of measures which fits the principles I outlined earlier. It is a decisive and irreversible shift which offers huge opportunities to the industry. I know that many in the farming industry would have preferred the Government adopt the approach of allocating aid on the basis of historic subsidies received. But many others including in the farming industry took a different view, as did some members of the wider stakeholder community, and I have to take all of these views into account in developing a workable system.

22. I and my Department will work with the industry over coming months to implement these decisions in the best way possible and in the spirit of partnership and cooperation with all stakeholders which has run through the Curry Commission and through our own Sustainable Food and Farming Strategy on both the central issues here and on any other measures that might be helpful in due course.

23. All in the farming community told us that they sought clarity in the direction of policy, simplicity and transparency with less bureaucracy and that they hoped that we would not implement all the options for deductions from the basic payment that were available to us. And we are heeding all of those calls.

24. I have set out today a basis for payment which I believe to be the fairest, because it moves us in the direction that public money goes to support public goods across the whole of farming.