Scots Lose Out in CAP Allocation

The Scottish Government has reacted angrily to the allocation of UK funds under the future Common Agricultural Policy.  DEFRA has announced that the split of funds between the four devolved regionsfor the next 7-year budget period will be in the same proportions as currently.  Scotland has been arguing for a greater share of the funds, as we wrote last month, but has not won the argument.

The UK as a whole will see its Pillar 1 (SPS/BPS) budget cut by 1.6% between 2013 and 2019 (around 13% in real terms).  This is a result in the cut in the overall CAP budget.  The reduction in the UK would have been even greater if it were not for the process of ‘external convergence’.  This is where countries with a below-average payment rate are being phased closer to the EU average.  Because the UK currently has a payment rate per hectare below the European norm then we are getting a slightly larger share of the overall (but diminishing) pot of funds.

However, if the four UK regions are looked at separately, then all but Scotland have an average payment rate above the EU average.  Therefore, the argument from the Scottish Government is that the extra money from external convergence is only being allocated to the UK due to Scotland’s very low average payment rate, and all the extra funds should go to Scotland.  This reasoning did not find favour with DEFRA.

A couple of concessions by DEFRA has done little to mollify the Scottish Government.  Firstly, it has been announced that there will be a review of the UK allocation basis in 2017 in preparation for the next budget allocation in 2020.  More usefully, DEFRA has made an offer to the Scottish Government that it could ‘borrow’ part of the UK’s coupled payments ceiling.  This would allow more than 8% of Scotland’s BPS funds to paid as coupled support.  It is not yet clear whether the Scottish Government will take up this option.

Over the period 2014-2020 the UK will receive €25.1bn in Pillar 1 payments and €2.6bn for Pillar 2 (Rural Development).  This last figure is slightly more than we had thought at one point, with an allocation of €2.3bn being quoted earlier in the negotiation process.  DEFRA appear to be slightly ‘spinning’ the amount of Rural Development money available.  It is quoting that the UK’s allocation of EU funds rises by 7.8% from the 2007-13 period to the new 2014-2020 one.  Whilst technically true, the level of funding had been rising steadily during 2007-13 as EU modulation rates rose.  Therefore comparing the average yearly payment for the next seven years with where we have got to in 2013 shows a sizable drop.

The full announcement, including details of the allocations for each country, can be found at –https://www.gov.uk/government/news/uk-cap-allocations-announced.  This additional information will allow us to revise our estimates of future BPS payment rates and we will publish these shortly.   The Scottish Government’s angry response can be found at http://news.scotland.gov.uk/News/Scotland-s-CAP-budget-cut-5f7.aspx.