Silver lining in EU farm budget

By James Campbell

The value of the Single Farm Payment (SFP) is not likely to be greatly eroded by "financial discipline'' cuts in order to accommodate the payments to new Member States within the European Union.

This is because huge cuts in the amount spent on traditional market support measures, such as intervention and export refunds, will leave sufficient money within the EU agricultural budget to meet most of the funding requirements of the SFP.

Apart from the effects of inflation, reducing the value of the annual payment over time, the two main threats to the SFP are "modulation'' - the mechanism by which a proportion of each farmer's aid entitlement is deducted at source and transferred over to rural development budgets - and "financial discipline'' - the rules which provide for automatic aid cuts in order to prevent total spending on the Common Agricultural Policy (CAP) exceeding pre-set budget ceilings.

While the UK regions are each implementing so-called "voluntary'' modulation at differing rates over the years, EU agriculture Commissioner Mariann Fischer Boel has suggested that the rate of EU 'compulsory' modulation should be doubled from the current 5% to 10% by 2013.

Such a move would create around an extra €1 billion a year within the EU for agri-environmental schemes, rural regeneration programmes and the like. But the proportion of each farmer's entitlement which would actually be paid to him each year would fall from 95% to 90%. How this would impact on voluntary modulation is still unclear.

Meanwhile, a new analysis by Agra Europe, indicates that the amount of money spent on traditional market support measures is likely to fall by almost half between now and 2013.

Its projections indicate that budget-related cuts in SFP payments will probably not amount to more than about 2% by 2013.