There is a lot of uncertainty about how the replacement for the Less Favoured Area Compensatory Allowance (LFACA), the so-called Areas of Natural Constraint (ANC), will be funded in future.

Last week, DARD officials said at a meeting with MLAs at Stormont, that a final decision would only be taken in light of responses to the consultations which have now closed on Direct Payments (Pillar I) and the Rural Development Programme (Pillar II).

Despite this, Agriculture Minister Michelle O’Neill announced in January that the LFACA will continue in its current format in 2015. That will involve around £24m being taken from the next Rural Development Programme (2014 to 2020) to fund the scheme.

However, from 2016 onwards, it is not clear what will happen.

The work done by DARD on new ANC maps (a process that must be complete by the end of 2017) suggests that most land in the Disadvantaged Areas (DA) will drop out. That would affect around 7,100 farm businesses in the DA which currently receive an average payment of £600 per farm, leaving (at best) 490,000ha classed as ANC.

At present, 440,000ha of land is classed as Severely Disadvantaged Areas (SDA) and, while most of this land is likely to move into the ANC, the DARD map suggests that some significant pockets of SDA land could be excluded.

That has left farmers in these areas angry about the criteria used to draw up the maps.

The process involves applying standard EU-wide criteria (based around soil, slope and climate), followed by fine-tuning criteria, which the European Commission has suggested are based on agricultural output per hectare in electoral wards. In simple terms, electoral wards where agricultural output per hectare is above the NI average are out.

In their responses to the DARD consultation on direct payments, a number of farm organisations argue that ANC should be classified on the basis of townlands, not electoral wards. They also maintain that a transition payment should be made to those farmers in Less Favoured Areas who are pushed out under ANC.

That follows into a debate about whether a future ANC scheme should be funded from Pillar I (Direct Payments) or Pillar II (Rural Development), given that a transition payment would not be possible in 2016 if ANC was fully in place and within Pillar I.

Advantages

While DARD has proposed moving ANC to Pillar I, keeping it in Pillar II has some other advantages. In particular, the money can be targeted at active farmers – at present, the average LFACA payment in the SDA equates to €64/ha. If the money was spread over all eligible land in the SDA (as would happen in a Pillar I payment) it would be significantly diluted.

However, the argument made by a number of environmental groups in their consultation responses is that ANC should move over to Pillar I, maximising the pot of money available for agri-environment schemes in Pillar II.

If that were to happen, it would mean that 5% is taken off all direct payments and used as a top-up payment on land mostly in the SDA. The total pot of money available would probably be around €16.2m per year, which is considerably less than the £24m paid out annually under the LFACA.