Anyone who wants to respond to ongoing DARD consultations on the future of support in Areas of Natural Constraint (ANC) has until Friday 29 April to get their submissions in.

In total, there were two ANC related consultations opened by Minister for Agriculture Michelle O’Neill in February 2016. The first deals with future options to provide funding in the ANC, while the second looks at possible options to re-designate the ANC, something that every member state must do by 1 January 2018.

The ANC scheme is worth £20m annually to around 10,000 farmers operating in the severely disadvantaged area (SDA). Potentially, the 2016 scheme (applied for in 2016; paid in 2017) could be the last, as there is currently no budget provision within DARD beyond that date.

As a result, (and rather conveniently for the departing Minister O’Neill) a new Minister of Agriculture, appointed after the May Stormont election will have a difficult decision to make – will they be able to find the money given current budget pressures within DARD and, if they do, what must be sacrificed in return?

The DARD consultation puts forward a number of funding alternatives, some of which are more realistic than others.

The first option is to do nothing and let the scheme end in 2017. It is not the option likely to be favoured by farm lobby organisations, but unless something changes, it is the most likely outcome.

The second option is to dip into the CAP Pillar I payments (direct payments to farmers) as a source of the funding.

To put that option into context, it might be worthwhile to reflect back on the divisive debate over a two-region CAP model favoured and promoted by the Ulster Farmers’ Union (UFU) during the last CAP reform process. That model would have resulted in a different flat rate of payment in the SDA (€263/ha) compared with the rest of NI (€379/ha). It was an idea opposed by many farmers in the SDA and, ultimately, was rejected by DARD. Instead, all claims move to the NI regional average of €329/ha by 2021. However, perhaps that divisive debate has worked in favour of the Department, as it has left farmers in the SDA in a weaker position to argue for the retention of ANC payments. As pointed out in the DARD consultation document, the movement towards a single flat-rate payment across NI acts to redistribute money from the lowland and disadvantaged area (DA) and to the SDA.

By 2021, total subsidy going into the SDA (without ANC payments) will be €136.3m, the same as in 2014. By contrast, money into the lowland will be down from €118.2m to €104.6m in 2021, and in the DA will be down from €104.6m to €88.6m.

It is for this reason that a number of the options explored in the DARD consultation document, which use Pillar 1 direct payments as a source of money, are simply non-runners. It would be untenable for a future Agriculture Minister to take money off all farmers (by top-slicing all direct payments) to fund a payment back into the SDA.

However, despite all that, it should be recognised that there are a significant number of livestock producers in the SDA who had subsidy payments above the NI average. Their direct payments will fall as we move towards a flat-rate payment, and for them, the loss of ANC money will be another significant financial hit.

Favoured

That leaves one remaining option in the DARD consultation and the one most likely to be favoured by farm lobby organisations. It involves making a case to the Stormont Executive for funding from 2017 on.

Given the current pressure on Government finances, the judgement from within DARD is that the probability of receiving money from the block grant would be low.

One other option might be to look at the future make-up of the Pillar II Rural Development Programme (RDP). The RDP is the source of funding for the ANC scheme in 2016 and 2017. It is also used to fund various other schemes including agri-environment.

Despite the European Commission and DARD continually emphasising the importance of agri-environment schemes, it was the one major part of the new RDP that was put on hold by DARD in late 2014 in response to budget and resultant staffing pressures. A new environmental farming scheme is due to be opened later this year, with agreements starting in 2017. It is the only compulsory element of the RDP.

But, as yet, nothing has been confirmed. In fact, there is a concerning lack of detail emerging about the content of the new environmental farming scheme. Could it be that an ANC scheme (with built in minimum stocking rates) might actually deliver greater environmental benefits in marginal areas?

Irrespective of the arguments, a decision to drop agri-environment and use the money to fund ANC would have to be agreed with the European Commission, and that looks unlikely.

Running alongside a consultation on funding options for the ANC is a separate consultation on the future designation of these areas.

It is a process taking place across all member states, and must be complete by 1 January 2018. The biophysical criteria used to designate these areas are based on soil, climate and slope, with member states also required to fine-tune the initial map by removing areas where physical constraints have been overcome by economic activity.

At present, the ANC payment goes to farmers in land classified as SDA but, in the future, the new designations will apply, with some land in the current SDA dropping out. Currently 448,000ha are classified as SDA in NI.

While in one regard, this redesignation process could become redundant if there is no ANC payment (or if the UK votes to leave the EU), it still could be relevant to farmers, perhaps if different rates of financial support were offered in the ANC as part of future schemes.

The new ANC maps have been drawn up by staff at the Agri-Food and Biosciences Institute (AFBI) and are mapped down to electoral wards.

Some favour using townlands rather than electoral wards, but the argument made by DARD is that the use of wards creates a more uniform coverage. To be included in the ANC, a ward must have at least 60% of its eligible agricultural area affected by at least one of the criteria related to soil, climate and slope.

There then is the fine-tuning process, with wards removed where these physical constraints have been overcome by economic activity. The method favoured by DARD uses gross value added (GVA), which is calculated using data collected by the NI Farm Business Survey. GVA is the value of farm output minus costs such as depreciation, labour and conacre.

The average GVA/ha over the five years from 2008 to 2012 was £325.72. Map A includes all wards that are constrained by at least one biophysical criteria, and where GVA/ha is less than 80% of the NI average. It produces a map with an ANC of 422,000ha.

Map B is similar, except it includes wards where GVA/ha is less than 90% of the NI average, producing a map with an ANC of 487,000ha. The wards included in map B, but not in map A, are listed in Table 1.

According to DARD, European Commission guidance suggests that 80% of the GVA regional average should be used as the threshold (map A). Therefore, if the ANC is to be designated as per map B, a robust case will have to be made to Europe.