Weeks after Farm Business Survey data revealed a devastating fall in farm incomes - with hill sheep and beef farms hit worst by a 60 per cent fall in net farm incomes for 2012/13 - natural resources and food minister Alun Davies opted for a maximum 15 per cent CAP modulation rate that could lead to a fall in direct payments to Welsh agriculture.
FUW president Emyr Jones refers to this decision in his New Year’s Message that follows….
On December 18, Scotland announced a modulation rate of 9.5 per cent, citing the “essential” Scottish Less Favoured Area Support Scheme as one of the key justifications for ensuring sufficient funds are made available for rural development.
On the same day, Welsh Natural Resources and Food Minister Alun Davies announced a modulation rate of 15 per cent with no such assurances regarding our own Less Favoured Area (LFA). Meanwhile, levels of modulation in England, France, Germany and Italy will be 12, 3, 4.5, and 0 per cent respectively.
The decision, which could represent a real terms fall in Direct Payments to Welsh agriculture of as much as 20 per cent by 2019, comes just weeks after Farm Business Survey data revealed a devastating fall in farm incomes, with hill sheep and beef farms hit worst by a 60 per cent fall in net farm incomes for 2012/13 - down to £11,377.
While the aspirations of the Minister in terms of using Pillar 2 funds to make farms more profitable are ones we would all agree with in principle, his decision reflects a particularly British and Anglo-Saxon trait, which is to ignore the fact that we are part of a common market in which moves which undermine the financial stability of our own farm businesses simply strengthen our competitors in other countries - countries which better understand the crucial role direct payments play in maintaining food production and rural communities, and without which we would have seen a far worse outcome to the recent negotiations on the CAP.
And, of course, we have yet to see any Welsh plans which will guarantee the replacement income lost through modulation, not to mention the abolition of LFA payments which the Scots regard as “essential” for rural communities.
But above all else, the decision to implement the full 15 per cent modulation rate goes against the Government’s stated aim that it wishes to minimise the inevitable disruption which will accompany the move to flat-rate payments - disruption which will occur whichever model is implemented.
With a Ministerial announcement on direct payments and the domestic co-funding of modulated monies due on January 14t, two key decisions remain available to the Minister in terms of reducing the adverse impacts that 15 per cent modulation and the transition to flat-rate payments will cause for Welsh farm businesses:
Firstly, by match-funding, £1 for £1, modulation monies, the Government would demonstrate that it is genuine about its commitment to using rural development monies to make good the potential losses faced by our food producers.
And secondly, by returning to its original position on the transition period to flat-rate payments by allowing a transition period of more than five years - as is allowed by the Regulations - the Government can ensure that those businesses which face the greatest disruption under the new CAP will have more time to adjust.