Farm deal ‘a bitter blow’ to Scottish farmers

24th December 2013

First Minister calls on Prime Minister to return CAP funds to Scotland.

The UK Government’s failure to pass on hundreds of millions of Euros rightfully due to Scottish farmers in EU payments is a bitter blow that has caused understandable furore across Scotland, First Minister Alex Salmond has told David Cameron.

In a letter to the Prime Minister, Mr Salmond said Defra had ignored reasoned arguments that the full Common Agricultural Policy (CAP) external convergence uplift totalling €223 million should be paid to farmers in Scotland. This is despite this money being earned in Scotland and the policy enjoying cross-party support in the Scottish Parliament.

Convergence uplift payments are made to benefit those parts of the EU with the lowest per hectare payment rates. But a recent Defra decision has seen the full uplift withheld from Scotland and shared pro rata across the four nations of the United Kingdom, despite UK only qualifying for this additional funding because of Scotland’s very low per hectare payment rates.

The First Minister said the “regrettable” decision by Defra not to pass the full convergence uplift directly to Scotland, which has been criticised by the industry, deviated from the EU approach and should be reversed so that Scottish farmers are put on a more equal footing with their UK and European counterparts.

Mr Salmond told the Prime Minister that, had Scotland already been an independent member of the European Union, Scottish farmers would be set to benefit from an extra €1 billion over the next CAP programme, thanks to an EU rule that ensures no member state shall receive less than €196 per hectare by 2019.

The full text of the First Minister’s letter to the Prime Minister is below.

Dear David,

I am writing in support of the recent joint industry letter to Owen Paterson concerning the UK Government’s decision on how the UK CAP budget should be divided within the UK. The signatories pointed to the fact that the UK Government decision goes against the EU’s core principles for the new CAP. This is a bitter blow to Scottish farmers and you are no doubt aware of the quite understandable furore this decision has created across Scotland.

It seems our reasoned arguments, which have also received cross party support in Scotland, have fallen on deaf ears in Defra. I am therefore appealing to you in person to revisit this regrettable decision now and ensure Scottish farmers are put on a more equal footing with their UK and European counterparts.

The EU introduced an external convergence mechanism so that Member States with the highest per hectare payment rates will see their future funding reduced in order to increase the funding for those with the lowest per hectare rates. In fact, recital 21 of the Direct Payments Regulation says, “...it has become increasingly difficult to justify the existence of significant individual differences in the level of support per hectare resulting from use of historical references…”.

The Commission confirmed that the UK CAP budget would include a convergence uplift. Yet, the UK only benefits from this uplift because Scotland’s per hectare rate is so low i.e. about 45% of the EU average, while England, Wales and Northern Ireland’s receipts are all at or above the EU average. We have therefore been calling for the full external convergence uplift to come to Scotland where it was earned. Once phased in it would amount to an extra €223 million for Scottish farmers over the period.

However, Owen Paterson has decided to take this money, that rightly belongs to Scottish farmers, and divide it on a pro rata basis between the four home nations. In order to justify this decision he uses the same arguments he made in an earlier letter in which he set out the various options for dividing the CAP budget. He deviated from the EU approach of considering funding in terms of average rates per hectare, and instead referred to average payments per farmer. As Richard Lochhead has rightly pointed out, this is not a reasonable argument. The UK should use the same methodology as the EU which recognises differences in farm size and structure across Europe.

In any case, I suspect Owen Paterson may be less keen to use this argument in future. According to Defra’s CAP consultation, with around 16,000 fewer claimants in future in England, we calculate that by 2019 English average payments per farmer will be around €26,600 and on a par with Scottish farmers. This is despite average farm sizes in England being much smaller than in Scotland.

Even if this decision is reversed, Scotland will be in the unenviable position of becoming bottom of the EU league table. Without the full convergence uplift, our average per hectare rate will drop to around €128 per hectare. By contrast, if Scotland was already a Member State we would benefit from the EU rule that no Member State will receive less than an average of €196 per hectare by 2019. This would give Scottish farmers an extra €1 billion over the next CAP programme.

With the convergence uplift, Scotland would have seen its direct payments ceiling rise by 7.3% by 2019 instead of falling by 1.6%. Although this would still leave us some way off €196 per hectare and trailing behind the rest of the UK and the EU, it would nevertheless have been a step in the right direction.

And let us not forget rural development funding where Scotland is already bottom of the EU league table and will remain there under the deal negotiated by the UK Government. It is indicative of the UK Government’s failings in these CAP negotiations – on the one hand Owen Paterson says he wants to see more support for rural development but, unlike sixteen other Member States, he fails to negotiate an uplift in the UK rural development budget.

I look forward to a positive reply.

ALEX SALMOND