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The Future of Farm Support – the CAP Deal

A deal on Europe’s farm support system was agreed in Brussels on 26 June, the new Basic Payment Scheme (BPS) will replace the Single Payment Scheme in 2015.

In many ways it will be very similar, with entitlements having to be matched against eligible land which then generates a yearly payment as long as certain land management rules are followed (cross-compliance). However there will be more emphasis on flat rate regional payments and a larger ‘greening’ element. Some key aspects of the changeover are:

• Entitlement Roll-over. Countries operating the flat rate regional payment scheme (like England) will be able to rollover existing entitlements into the new scheme.
• Entitlement Grant. Countries operating the historic system (including Wales) will be required to issue new BPS entitlements. The reference year for creating entitlements will be 2014. Rather than a link back to claimants in 2011, the grant of entitlements will only go to those who made an SPS claim in 2013. There will be a ‘national reserve’ set up, comprising up to 3% of funds to deal with hardship claims.
• Convergence. For countries currently operating the historic system (like Wales) there will be no requirement to transfer to a fully flat rate system. By 2019 Member States are only required to ensure all farmers get at least 60% of the average regional payment. On top of this, losses for individuals can be limited to 30% of their present payment which may be used in Wales.
• Capping. Payments above €150,000 may be cut by 5%.
• Conversion Rate. For countries outside the Euro the conversion rate can be the average of exchange rates in September. This is instead of simply using the official 30^th September exchange rate and should help reduce the effect of currency fluctuations.

The Basic Payment Scheme will form the bedrock of the new support arrangement, but there will be a complex system of top-up payments possible. In particular there will be a compulsory Young Farmers Scheme. It will be funded by 2% of the total BPS budget and provide a 25% top-up in the value of entitlements to those under 40 years of age for five years. There will be a limit on how many hectares qualify but the maximum top-up is likely to be about £3,500 per year.

GREENING

The concept of getting farmers to provide environmental benefit in return for their direct payments is seen as a way of making farm support more acceptable to Europe’s taxpayers.

• Crop Rotation. On arable areas of 10-30 hectares two crops will be required. Three crops will be needed when the arable area is above 30 hectares. No crop should cover more than 75% of the farm area and the two main crops together should be a maximum of 95% of the area.
• Permanent pasture. There is still a requirement to retain at least 95% of the permanent pasture area compared with a base year. The permanent pasture ratio is likely to be set at a national level as at present.
• Ecological Focus Areas. EFAs will initially be set at 5% of a farm’s eligible arable area. Countries will be able to choose from a list of possible features to decide what qualifies as an eligible EFA. This includes landscape features (hedges and trees), buffer strips, fallow land, protein-fixing crops, agro-forestry and short-rotation coppice. Some features may carry extra weight – e.g. one hectare of especially environmentally valuable land could contribute 2 hectares of EFA. EFA would not be required on farms where more than 75% of the land is grassland (subject to a 30 hectare maximum).
• Payments. 30% of the BPS funding goes to greening.
• Penalties. Penalties for not complying with greening will not be introduced until 2017.

There are a number of financial issues outstanding which will be dealt with as part of  future EU Budget negotiations. The National Governments will have to make decisions about how they implement the reforms this Autumn.

Please contact us if you want to discuss how this will affect your business.

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