Welsh CAP Consultation

The Welsh Government favours a cap on direct payments and will split the country into two or three regions under the new Basic Payment Scheme.  There should be a five-year transition to a regional flat-rate and the administration does not favour re-introducing coupled payments.  These ideas are contained in a consultation on implementation of CAP reform launched at the Royal Welsh Show today (23^rd July).  Although the document is asking for the industry’s views, the administration’s preferences are fairly clear.

The consultation can be found at http://new.wales.gov.uk/consultations/environmentandcountryside/proposals-for-direct-payments-to-farmers/?lang=en and the closing date for responses is 15^th October.  Some of the key elements within the consultation document are summarised below.  In all cases what is being quoted is the intention of Alun Davies, the Minister for Natural Resources and Food.  This is not yet settled policy and could conceivably change if the response of the industry is overwhelmingly opposed to it.

The Minister is minded to impose an absolute cap on payments at €300,000 (as per the original EUproposals).  Under the mandatory EU requirements deductions would start at 5% above €150,000.  But Wales would impose additional deductions so that there would be 15% degressivity between €150K-€200K; 30% between €200K and €250K; 55% from €250-€300K, then no more aid at all once claims reach €300,000.  Greening payments would be exempt from capping.  There is no mention of whether Wales would use the salaried labour offset that is available.  It is estimated that very few businesses will actually be hit by capping – in 2012 the Welsh Government calculates only five businesses received over €300,000.

On the issue of ‘active farmer’ the adminsitration looks set to simply use the prescribed EU ‘negative list’ of claimants (airports, water companies etc.) and no add further ones.  It would set the minumum claim size at 3 hectares or €200.  There is no mention in the consultation of the issue of minimum agricultural activity levels on land being used for BPS claims.              

The Welsh Government appears intent on splitting Wales into more than one region to prevent too much redistribution under the BPS.  The options have narrowed down to either two regions or three, with a preference from the administration for a two-region model.  This would see a moorland classification and then all other land (SDA, DA and lowland) in the other region.  Modelling work is still being undertaken and a three-way split remains possible.  The favoured approach then would still be to keep moorland separate, but split SDA and DA/lowland into two.  The less productive land (i.e. moorland) wouldrecieve less per hectare, as currently happens under the English model.  Some indicative payment levels are provided suggesting an average payment rate across Wales of €196 per Ha if there were a single region.

The phasing from the current historical model to the regional flat rate payment is also a crucial national decision.  It is proposed that this be done in five years.  In the first year of the BPS the regional element within entitlements will be 20% (and historic 80% obviously).  The regional element would increase by 20% per year until fully regional payments were in place by 2019.  The adminsitartion does not seem keen on using the partial convergence model where all farmers get only 60% of the regional average by 2019. 

In terms of Top-ups, the Minister does not see the benefits of using the Areas with Natural Constraints flexibility.  Any support for hill areas would come simply through Pillar 2, Rural Development Schemes.  The Small Farmers Scheme would not be introduced, nor would the Redistributive Payment be used.  Interestingly, the administration has also rejected the idea of using coupled payments.  There would have to be a Young Farmers Scheme as this is mandatory at EU level. 

On ‘greening’ the presumption is that the three basic EU-wide measures would be used.  Although the Welsh Government has looked at the options of using Glastir or a new certification scheme to satisfy greening it has been concluded that this would be complex and could place additional burdens on the industry.  It looks very likley that the retention of permanent pasture will be measured at a national rather than farm level.

No clear decision has been made on modulation.  The Minister holds out the possibilty that the full transfer of 15% from Pillar 1 to Pillar 2 may be made in Wales, depending on budget allocations and co-financing rules.

The relatively high level of capping is probably the biggest surprise in the consultation.  The rejection of Top-up payments is perhaps also more emphatic than we thought likely.  The over-riding principle seems to be to keep it simple, to ensure there are the fewest possible administrative problems.  How this all goes down in the wider industry remains to be seen.