Annual investment allowance

    CAP Reform and the Rural Development Programme


    CAP reform

    Given the extended period of economic uncertainty, it is unsurprising that the CAP continues to focus on keeping people in the countryside and by doing so discouraging migration to the more industrial areas of Europe.  An intensive series of meetings is centermetering the Commission’s proposals towards a conclusion, but the issues are beginning to change from justifying CAP to the non-farming taxpayer (through greening and capping) towards increased national flexibility.

    The three-way discussions between the Council (national ministers), MEPs and the EU civil service (the Commission) known as the triologues are fully underway.  The Council is attempting to find a compromise with the EU Parliament by the end of June when Simon Coveney, the Irish President of the Councils, finishes his term and Lithuania accedes.  The Council has to provide a qualified majority for the agreement to be approved and, assuming that the compromise presented is accepted by the EU parliament, MEPs will vote on it in July.

    In order to reach agreement, mini meetings have been proposed to discuss issues in between the major formal events.  Coveney has proposed a number of compromises.

    View the summary of trilogue negotiating points here


    Rural Development Programme

    While the direct payments proposals (the Single Payment Scheme) remain the most important (in terms of budget) and most controversial part of the proposals, the reform also involves arrangements for support (such as intervention, tariff barriers and export subsidies) and the Rural Development Programme, which provides grant funding and funding for stewardship schemes.

    The Rural Development legislation requires considerable national input once the EU framework has been created.  The discussion is underway, although final decisions will have to await top-level agreement.  For many farmers the New Environmental Land Management Scheme (NELMS) will be of most interest. 

    Funding has been reduced in the EU budget proposals (although not yet ratified, they are not expected to change).  The reform proposals assign the EU transfers from the direct payments (i.e. modulation) straight to the other pillar 2 schemes such as environmental stewardship.  The current arrangement provides UK funding without drawing down other EU money directly, as doing so would lead to a consequent loss of the EU rebate.  There are also various levels of compulsory and voluntary co-funding by the national government of the sums transferred.

    It will be increasingly difficult to separate cross-compliance, from greening stewardship schemes.

    In future, transfers will be permitted but these will probably be at a lower percentage than now and from a lower net direct payment.  At the moment, the proposals do not compel individual countries to co-fund the payment although there is an EU alliance of farmer unions seeking this guarantee. 

    Another complication is that the greening proposals in the direct payments scheme may overlap with the stewardship scheme so various options might be forced through as conditions of the single payment scheme.  Finally, as things currently stand, these elements may, or may not, be funded, through both subsidy systems.

    Clearly, it will be increasingly difficult to separate cross-compliance, from greening and from stewardship schemes in terms of action and funding.

    The current payment regime ends this year but will almost certainly be rolled forward until the new Rural Development Programme is in place.  As for the remainder of the CAP reform, Rural Development is also most likely to be put in place during 2015.  Agreements continuing beyond 2013 should not be affected if they started before 1 January 2012 but ELS and OELS agreements starting between 1 January 2012 and 31 December 2013 may change due to the revision clause in their agreements.  If these changes are not acceptable to agreement holders, they may withdraw from the agreement without penalty and without needing to return past payments received.

    Thoughts at present are that there will be three tiers:

    • a lower tier similar to the current ELS scheme open to entrants across the country.  The scheme will be the least important and consequently receive relatively low funding.  It is likely to be limited to the new options introduced on 1 January 2013 (the ‘MESME’ options such as hedgerow restoration, wildflower additions to buffer strips and field corners, supplementary feeding of wild birds, ryegrass for winter and spring bird feeding and legume and herb rich swards) and those featured under the Campaign for the Farmed Environment.  Options such as hedge trimming (EB1 and 2) and low input grassland (EK2) are likely to be removed.
    • a middle tier based on landscape scale agreements consisting of multiple applicants for areas such as commons, parishes and river catchments.  Advanced management options will become available to enhance the management of the priority feature that has been identified within that landscape.  This may focus on water quality, enhancement of bat habitat, butterfly habitat etc.
    • an upper tier targeted on a specific feature such as a SSSIs.  It will be by invitation and is likely to go largely to organisations such as the RSPB and Wildlife Trusts for their Nature Reserves.

    Likely to be a significant gap between the expiry of ELS and HLS agreements and start date of new scheme

    All agreements will have access to some level of Capital Works but again this will be highly targeted to a specific feature(s). There is also the possibility that some element of funding will be made available to farmers whether they are in a management agreement or not, similar to the approach taken by the catchment sensitive farming scheme. 

    All applications will be online and have a start date of 1st January. However, payments look likely to continue to be twice a year.  There is likely to be a significant gap between the expiry of ELS and HLS agreements and the start of the new scheme although Natural England would like to introduce a transition arrangement.

    A new IT system will incorporate all rural grant schemes including the Rural Land Register and Single Payment Scheme.  The programme will have online record keeping facility and mapping database.

    Large land management payments for most could be more difficult to come by

    Natural England has identified that there are 5000 ELS, CSS and ESA agreements due to expire in 2014.  Four hundred and thirty of these include priority agreements such as SSSIs or Scheduled Ancient Monuments.  It is unclear how these holdings will be dealt with but NE are working on interim arrangements, which may include deferral until the new scheme starts in 2016, granting of a provisional contract or even a new five or ten-year contract.  The 12,600 ELS agreements that finish in 2015 will most likely have to wait until 2016.

    Although there is still  uncertainty about the new scheme, it looks likely that large land management payments for the vast majority of farmers will be more difficult to come by.  For all three tiers there will have to be strong evidence that the options deliver environmental gain against specific targets.  It may become increasingly difficult to build agreements that fit comfortably alongside commercial farming, making a closer examination of the cost versus benefit more important.

    Capital grants might be available outside the stewardship schemes for environmental work but it is still difficult to tell whether it will be easier and quicker to put applications forward.  There is a suggestion that the Farm Environmental Plan (FEP) may be removed from the process, although some form of environmental assessment will have to be undertaken for the upper tier.