The full implications of the Welsh Government’s decision to transfer the maximum 15 per cent of Pillar 1 funds to Pillar 2 hit home this week as thousands of farmers started receiving letters informing them of a whopping 23.4 per cent cut to their entitlement values.
The 23.4 per cent cut represents a fall in the total Pillar 1 budget for Wales and all other regions of the UK of around 10 per cent - something which was beyond the control of the Welsh Government - followed by the 15 per cent Pillar transfer rate decided by natural resources and food minister Alun Davies.
However, contrary to what some have been told, no further reductions will be applied in December 2014, as the 15 per cent Pillar transfer replaces modulation, which previously appeared as a reduction on the Single Payment statements issued from December onwards.
“The 23.4 per cent figure and the reaction of the industry show why the FUW was so bitterly opposed to the Pillar transfer in the run up to the decision being made in December,” said union president Emyr Jones.
In terms of what farmers will actually receive this year in Euros, this means a reduction of between around 12 and 18 per cent compared with 2013, depending upon the size of their payment.
“This is because the rate of modulation was lower for the first 5,000 Euros in past years, whereas the 23.4 per cent reduction will be taken off every Euro,” said Mr Jones.
Mr Jones said the decision had made Wales stand out like a sore thumb on the map of Europe.
“Wales will have the single highest rate of Pillar transfer in 2014 not only in the UK, but in the whole of Europe, while the rate in the vast majority of EU countries will be zero.
“We have gone from having the lowest rate in the UK to the highest rate in Europe at a time when Welsh farm incomes have collapsed and people are struggling to pay the bills.
“We all understand and support the principle of using the Rural Development Plan to help businesses restructure and be more competitive, but the approach adopted feels more like a direct attack on the industry.”
FUW policy director Nick Fenwick said that the impact the cuts would have in Wales highlighted failures at an EU level to prevent significant renationalisation of CAP policies.
“Previously the EU was extremely protective of common rules, but in the last rounds of negotiations huge flexibility was introduced in terms of pillar transfers without the quid pro quo of co-funding.
“There now seems to be some sort of extreme view that taking more money away from an industry already reeling from a collapse in incomes will make it more resilient and competitive - this just doesn’t stack up when you consider we operate in a common market and that our main competitors will not have their incomes reduced in this way.”
“There are major concerns in particular as to how this reduction will hit tenant farmers and those such as young entrants who are struggling to pay the bank while trying to build up their businesses.
“However, the 15 per cent decision has been notified to the commission and cannot be undone, and the only option is to focus on getting money back to the industry from Pillar 2 in a meaningful way.”