Modulation Rates Announced

The English, Welsh, Scottish and Northern Irish Governments have all announced their ‘inter-pillar’ transfer rates for 2014 to 2019:

• England 12% ( with a possible shift to 15% for 2018 and 2019 following a review in 2016)
• Wales 15%
• Scotland 9.5%
• Northern Ireland 7%

This is the rate at which Direct Payments (Pillar 1) will be reduced and the funds transferred to Rural Development (Pillar 2).  Previously this was known as modulation.  Under the new legislation the rates have to be confirmed with the European Commission by the end of the year.

The English rate is the biggest surprise, lower than previously expected, it was announced in DEFRA’s ‘summary of responses and its response to the consulation on the implementation of CAP reform in England’, in which a number of other key decisions have been announced – we will include more commentary on these and the ‘inter-pillar’ transfer rate shortly.

The Welsh decision sees the maximum (15%) rate being applied and according to the Welsh Government will result in an extra £286m being available for Rural Development schemes.  In making the announcement the Minister for Natural Resources and Food, Alun Davies said he was concerned that Pillar1 could ‘stifle modernisation and innovation’ and that there was a wide gap in performance levels of livestock farms across Wales.  Consultation on the next RDP round will begin in February 2014 with the aim of improving take-up of best practice, providing target support for upland farmers and communities.

After a short consultation the Scottish Government has decided to remain with its proposal of a 9.5% transfer from direct payments to Rural Development.  The Rural Affairs Secretary, Richard Lochead believes this will ‘strike the right balance’ between support for farmers and rural development.  Mr Lochead expressed his dismay over having to decide the rate so soon in the consultation period.  He said the Government were still consulting on a number of issues including greening measures.  Responding to concerns raised in the consultation over the LFASS he said the Scottish Government will review the scheme as it moves to a system of support for Areas facing Natural Constraints (ANC) by  2018.  

Northern Ireland were the last of the four to make the announcement. Agriculture and Rural Development Minister Michelle O’Neillconsiders Rural Development a ‘key mechanism in delivering positive change’. The decision has already come under fire with the Democratic Unionist Party starting legal proceedings to try and overturn it in favour of a lower rate. The announcement will result in a transfer of around €137.5million  from Pillar 1 to Pillar 2 over the funding period.