Natural England

Implementing Reforms of the Common Agricultural Policy in England (AP03/30 - Annexes)

1.   In June 2003, agreement was reached in Luxembourg on mid-term changes to the Agenda 2000 CAP reform package (covering the period 2000 – 2006). 

2.   In 2001 the Countryside Agency published A Strategy for Sustainable Land Management in England.   The document set out our aspirations for reform of the Common Agricultural Policy.   These and other aspirations were confirmed by the Board at their meeting in February 2002 (Paper AP/02/01 refers) and have guided our research and influencing efforts and joint work with the Land Use Policy Group to influence change.

3.   This paper assesses the changes agreed in Luxembourg against our aspirations for long term reform of the CAP, and seeks the Board’s agreement to a set of principles to guide Agency advocacy for further CAP reform which may be anticipated in 2006 and to inform our views on how the 2003 reforms should be implemented in England.   The 2003 reforms include a number of measures where EU Member States have discretion on whether and how they should be implemented.   Defra is seeking views on options for implementation in England.  

4.   There are four annexes to this paper:

Annex 1 is a full draft of a proposed Countryside Agency response to Defra on strategic level options for implementing the 2003 CAP reform package in England.

Annex 2 is an extract from the Defra consultation paper.

Annex 3 is an analysis of the 2003 CAP reform package, comparing our aspirations with what was agreed in Luxembourg.

Annex 4 sets out the outline timetable for implementing the 2003 CAP reform package in England.

5.   Some of the changes agreed in Luxembourg were more extensive and radical than had been anticipated earlier in the year following an unexpected softer line by the French at the negotiating table.

6.   The key elements of concern to the Countryside Agency are:

·        the introduction of a single payment scheme  (SPS) for EU farmers, independent (i.e. decoupled) from production, with limited ‘coupled’ elements maintained where Member States consider this necessary to avoid abandonment of production;

·        the linking of the SPS to the respect of environmental, food safety, plant health and animal welfare standards, as well as to the requirement to keep all farmland in good agricultural and environmental condition (GAEC)  (cross compliance

·        provision for a ‘national envelope’ of up to 10% of the funds available by sector under the SPS in order to address environmental and economic needs which may arise as a result of decoupling;

·        a reduction in direct payments to finance rural development policy (compulsory EU-wide modulation

·        some new measures within the Rural Development Regulation (RDR);

·        a farm advisory service to be set up to help farmers meet the standards of modern, high quality agriculture;

·        a mechanism for financial discipline to ensure that the farm budget, which is fixed until 2013, is not overshot.

7.   The agreement is welcome, but falls some way short of the Agency’s aspirations.   In particular:

·        modulation is very limited (a maximum of only 5% by 2007), which is insufficient to meet planned spending under the England Rural Development Programme, so requiring additional ‘voluntary modulation’ within the UK.   Our aspirations were for progressive and steeper rates of modulation generating a growing budget for rural development measures and shrinking Pillar 1 support;

·        while the scope for full decoupling in the arable and livestock sectors breaks the link between production and support, it provides no link between support and public benefits;

·        unless all Member States opt to introduce full decoupling, there will continue to be distortions to the market and competition implications between Member States;

·        the cross compliance requirements in return for payment of the SPS are limited;

·        the poor EU allocation of funds to the UK for RDR measures (based on historic spend) has not been addressed;

·        there is no progress towards our long term objective of transforming the CAP into an Integrated Rural Development Policy (IRDP) with a new system of aid which addresses rural needs more generally.

1.           The Agency’s Strategy for Sustainable Land Management in England  proposed that by 2010 one third of CAP support should be for agri-environment measures, one third for rural development and one third residual Pillar 1 farm income/market support.   By 2020 all income/market support should be phased out 

Principles to guide Agency advocacy for further CAP reform and to inform our views on how the 2003 reforms should be implemented in England

8.   In the light of the above, and the previous stance of the Countryside Agency on CAP reform, the following principles are proposed to guide our further advocacy on CAP reform matters:

a.   as a principle, payments to farmers from the public purse should only be made where they provide clearly identifiable public benefits  (e.g. maintenance or improvement of landscape character and biodiversity or additional public access);

b.   the 2003 CAP reform package must be seen as a short-term transitional stage towards the phasing out of Pillar I direct payment/single payment system (SPS) supports and other market supports.  To achieve this will require further CAP reform as soon as possible;

c.    the SPS can only be justified as a transitional measure

·         there is no long-term justification why farm businesses but not other rural businesses should continue to receive an annual income support payment. This is the case whether the SPS is allocated on the basis of widely varying per hectare historic farm payments or as a regional average per hectare; 

·         the SPS decoupled payment will be unrelated either to production or to sustainable land management and will be conditional only on very limited land management requirements designed mainly to avoid specific environmental damage;

d.   the Rural Development Regulation (RDR) provides a good mechanism to

       deliver public benefits  and help the farming industry to adapt to policy and

       structural changes.   Funding for the RDR needs to be expanded in the short to

       medium term as Pillar 1 payments are reduced in order to: protect landscape character 

       from negative effects of structural change; help farming to restructure; support rural 

       communities; and help other rural businesses to develop to provide alternative 

       employment opportunities;

e.    decoupled payments should bring environmental and economic benefits but are also likely to result in some negative economic, environmental and social effects. Although some predictive research has been undertaken, no-one knows what the actual effects of decoupling will be. Structural change is likely to accelerate but effects will depend on many factors, including the extent to which farmers choose to respond and market related issues. Positive and negative effects are likely to vary widely from region to region and within regions and different sectors.  A mechanism is therefore needed to address any significant negative environmental or sectoral effects of decoupling.   The option of national envelopes provides such a potential mechanism. 

f.    if the objective of phasing out Pillar 1 payments is to be achieved, great care needs to be taken not to fossilise and legitimise them by applying apparent ‘greening’, for example by using national envelopes to pay for RDR type measures but with support limited only to the farming sector. The separate purposes of Pillar 1 and Pillar 2 payments need to remain distinct.  In particular, the broader scope, better targeting on public benefits and wider eligibility of the RDR needs to be built on. Otherwise there is a risk of undermining arguments for increasing (or even retaining) the RDR budget;

g.   in some areas, farming might cease.   Whilst for some people this would be perceived as a bad thing (particularly those farmers who had spent generations ‘improving’ marginal land), it could provide opportunities for alternative land uses that could achieve greater environmental and other public benefits  (e.g. woodland creation, water catchment and flood protection).   These benefits could potentially be achieved at less cost to the public purse as well as from re-directed spending;
 

h.    currently, for historic reasons, the UK receives a disproportionately low share of the RDR budget, limiting scope for supporting RDR programmes. Defra should continue to press the EC to allocate the budget from 2007 according to objective criteria;

i.     once Pillar 1 is phased out, removing related environmental and other negative effects, and structural change has been achieved, there could be a case to gradually reduce Pillar 2 payments, particularly those relating to capital investment;

j.      there would still be a case for maintaining a level of Pillar 2 support necessary to deliver those public benefits that cannot be achieved through the market.

ANNEX 1 TO AP03/30DRAFT COUNTRYSIDE AGENCY RESPONSE TO DEFRA CONSULTATION   

Options for reform of the Common Agricultural Policy 2003

SUMMARY of Countryside Agency ReSPONSE

·        To be drafted when full response agreed

Countryside Agency response to consultation on options for reform of the common agricultural policy 

Introduction

1.          The Countryside Agency welcomes the opportunity to contribute to this initial consultation on how the discretion to Member States offered within the June 2003 CAP reform package should be implemented in England.

2.          We support the decision to implement the Single Payment Scheme (SPS) on a regionalised (i.e. England) basis and to introduce it as early as possible, from January 2005. We also welcome the decision to apply the full extent of decoupling allowed for in the agreement (i.e. not taking up the reduced options in the arable and livestock sectors).

3.          At their September 2003 meeting, the Agency Board considered policy in relation to future CAP reform. The Board’s views have informed this response. [Section to be amended if necessary in the light of the meeting]  The Board agreed that:

a.       as a principle, payments to farmers from the public purse should only be made where they provide clearly identifiable public benefits (e.g. maintenance or improvement of landscape character and biodiversity or additional public access

b.       the 2003 CAP reform package must be seen as a short-term transitional stage towards the phasing out of Pillar I direct payment/single payment system (SPS) supports and other market supports. To achieve this will require further CAP reform as soon as possible;

c.       the SPS can only be justified as a transitional measure because:

·         there is no long-term justification why farm businesses but not other rural businesses should continue to receive an annual income support payment. This is the case whether the SPS is allocated on the basis of widely varying per hectare historic farm payments or as a regional average per hectare; 

·         the SPS decoupled payment will be unrelated either to production or to sustainable land management and will be conditional only on very limited land management requirements designed mainly to avoid specific environmental damage;

d.          the Rural Development   Regulation (RDR) provides a good mechanism to deliver public benefits and help the farming industry to adapt to policy and structural changes.   Funding for the RDR needs to be expanded in the short to medium term as Pillar 1 payments are reduced in order to: protect landscape character from negative effects of structural change; help farming to restructure; support rural communities; and help other rural businesses to develop to provide alternative employment opportunities;

e.          decoupled payments should bring environmental and economic benefits but are also likely to result in some negative economic, environmental and social effects. Although some predictive research has been undertaken, no-one knows what the actual effects of decoupling will be. Structural change is likely to accelerate but effects will depend on many factors, including the extent to which farmers choose to respond and market related issues. Positive and negative effects are likely to vary widely from region to region and within regions and different sectors.  A mechanism is therefore needed to address any significant negative environmental or sectoral effects of decoupling.   The option of national envelopes provides such a potential mechanism; 

       f.       if the objective of phasing out Pillar 1 payments is to be achieved, great care needs to be taken not to fossilise and legitimise them by applying apparent ‘greening’, for example by using national envelopes to pay for RDR type measures but with support limited only to the farming sector. The separate purposes of Pillar 1 and Pillar 2 payments need to remain distinct. In particular, the broader scope, better targeting on public benefits and wider eligibility of the RDR needs to be built on. Otherwise there is a risk of undermining arguments for increasing (or even retaining) the RDR budget;

       g.         in some areas, farming might cease.   Whilst for some people this would be perceived as a bad thing (particularly those farmers who had spent generations ‘improving’ marginal land), it could provide opportunities for alternative land uses that could achieve greater environmental and other public benefits (e.g. woodland creation, water catchment and flood protection).   These benefits could potentially be achieved at less cost to the public purse as well as from re-directed spending;
 

             h.       currently, for historic reasons, the UK receives a disproportionately low share of the RDR budget, limiting scope for supporting RDR programmes. Defra should continue to press the EC to allocate the budget from 2007 according to objective criteria;

             i.        once Pillar 1 is phased out, removing related environmental and other negative effects, and structural change has been achieved, there could be a case to gradually reduce Pillar 2 payments, particularly those relating to capital investment;

                   j.        there would still be a case for maintaining a level of Pillar 2 support necessary to deliver those public benefits that cannot be achieved through the market.

Other comments from the Board meeting (if any).

Countryside Agency comments on specific options, including some key options omitted from the consultation paper 

       Single Payment Scheme (SPS)

4.          The consultation paper invites comments on whether the SPS should be applied using an approach linked to historical entitlement (called the ‘basic approach’ in the consultation paper) or as an ‘area payment’ spreading the available funds evenly across all the eligible hectares. We have considered the main advantages and disadvantages of each approach.

5.          It is not impossible to make a fully informed assessment of the relative advantages and disadvantages of these approaches without more detailed information from Defra, for example on the likely level and range of payments under both systems, and possible distributional effects between sectors and regions. In the absence of this information, Tables 1 and 2 in the annex to this response make a qualitative assessment based on discussions within the Agency and with Defra and other stakeholders. The tables suggest that the ‘area approach’ appears to have significantly more advantages and fewer disadvantages than the basic approach.

6.          The only real advantage of the ‘basic approach’ is that it would minimise redistribution and disruption to existing farm businesses. However, it would perpetuate an unfair system by continuing, at least until 2013, to make SPS payments to cattle, sheep and arable businesses [1] simply because they received direct payments in 2000-2. Larger or relatively high intensity holdings at that date would get a higher per hectare entitlement than those holdings farmed less intensively but may have been delivering greater public benefits. There would be no link between levels of per hectare support and public benefits under either the ‘basic’ or ‘area’ approach. 

7.          Both approaches would provide what could be regarded as unjustified income support to farm businesses that is unavailable to other rural businesses. This could result in unfair competition from farm businesses having more available capital (from receiving the annual SPS payment) and who wanted to diversify.   Both approaches would also be likely to provide a strong disincentive to new farm woodland planting as SPS cannot be claimed on woodland area and land managers would be likely to be reluctant to give up the new flexibility in land use. The Forestry Commission consider that the SPS would be likely to have a significant negative impact on the achievement of biodiversity targets for new woodland habitats.

8.          The ‘area approach’ (allocating an equal per hectare entitlement across England for all farm land) would be relatively simple to calculate and administer and would be a fairer way of providing support. It would remove some of the disparities and apparent inequities of a system based on historic payment levels which would reward the level of farming intensity in 2000-2002, and more land might be covered by conditions for cross compliance and Good Agricultural and Environmental Condition (GAEC) if

currently unsupported sectors received the SPS. 

9.          There would, however, be ‘winners and losers’ under the area approach.   Averaging out the entitlement would reduce payments to producers that were intensive in 2000-2 and increase payments to more extensively managed holdings at that time.   And some land growing currently unsupported crops, eg potatoes and horticualtural crops, could become eligible for the SPS (this is subject to further EC negotiation).   Where redistribution was significant it would clearly benefit farm businesses that gained but could undermine those receiving much lower per hectare payments. This would probably particularly affect those that produced livestock intensively in 2000-2.

10.        On balance, from the information we have, we consider that the ‘area approach ‘ to allocating SPS is the better option. However, we acknowledge that moving immediately to the area approach could create problems for some farm businesses that would face significant reductions in support. This could be addressed by:

a.         applying the area approach from 2005 but providing a safety net, phasing in the reductions over 3-5 years to individual businesses  (a 3-year approach was applied in introducing the Hill Farming Allowance Scheme). This approach would have the benefits of administrative simplicity and transparency;

b.         starting with the ‘basic approach’ of variable historic entitlements in 2005, but immediately phasing in the new ‘area approach’ over 5 subsequent years.    This approach would be more complex to administer but would minimise adverse impacts on farm businesses.

11.        Whichever approach is adopted, it should be regarded as a transitional measaure towards phasing out Pillar 1 support (see comments above). 

Cross compliance, Good Agricultural and Environmental Condition (GAEC) and rules relating to permanent pasture

12.        We (and the other LUPG agencies) argued for Good Agricultural Condition to include an environmental component, so we strongly welcome the section on Good Agricultural and Environmental Condition (our italics) in the Regulation. It was a considerable achievement by Defra to successfully negotiate for the environmental reference to be added and to introduce reference to ‘unwanted vegetation’ in Annex 4. 

13         In the light of this, we are concerned that the options paper makes no mention of GAEC (Annex IV of the Regulation), which Member States will be required to define within the framework offered by the Regulation. However, we welcome the working group on cross compliance that Defra has set up. This will need to address issues such as:

a.          retaining landscape character,

b.          addressing public access needs,

c.          safeguarding historic/archaeological/cultural features,

d.          conserving and enhancing biodiversity, and

e.          basic resource protection.

14.        It will be important to try to ensure that the definition of ‘unwanted vegetation’ will provide scope for an increase in the area of woody species where this is desirable for landscape, biodiversity or resource protection reasons (e.g. heather regeneration and development of beneficial scrub and tree cover in semi-natural areas).   This should allow for up to 20% tree canopy cover without loss of the SPS [2]. It would be helpful if the definition could allow buffer strips alongside woodlands, boundaries and watercourses and on set-aside land, without any loss of SPS.   We would also like to see GAEC include provision to avoid environmentally damaging over-grazing and under-grazing, and for compliance with minimum legal requirements that relate to public rights of way and access.

15.               We recognise the need to develop a GAEC system that is clear to farmers, with verifiable but meaningful standards that can be audited/monitored cost effectively.   We are also aware that the level of GAEC will have implications for agri-environment measures and payments. However, we would be very disappointed if Defra chose to implement GAEC in a very minimalist way.  It is essential that GAEC conditions are set at a level that ensures that farmers receiving SPS payments do not damage the environment.

Permanent pasture

16.        The Regulation seeks to prevent land covered by the SPS under permanent pasture [3] (in December 2002) from being converted to arable land. The current IACS definition of permanent pasture covers improved as well as semi-natural grassland. We understand that the definition  of permanent pasture related to SPS is likely to be redefined in the EC Implementing Regulation. 

17.       Retaining all present permanent pasture will not be desirable.   Some flexibility is needed in order to:

a.                    prevent fossilisation of current land use patterns, limiting the benefits of                     decoupling;

b.                   encourage increased use of rotations, mixed farming and organic farming;

c.                    enable land eligible for SPS to be used for new crops, including energy crops; and 

d.                   reap the associated economic, social and environmental benefits. 

However, it will be important to retain pastures of high environmental value.   These will include:

·         semi-natural pastures of high biodiversity interest;

·         other areas of permanent pasture which are important in the landscape or from an historic environment perspective.   Such pastures will include “improved” as well as semi-natural grassland.

18.        A mechanism is needed to identify all pasture of high environmental value.   The forthcoming review of the EIA regulations for uncultivated and semi-natural areas provides an opportunity to link the EIA process with requirements covering permanent pasture under the SPS.

19.        The requirements under the SPS should be implemented in relation to maintaining the total area of pasture at the England level. If applied at the sub-England level it could create major problems for initiatives that are seeking to achieve regional/county/area land use and landscape change (e.g. community forests and the National Forest). For example, the South-West Forest project aims to increase woodland cover to 20% and bring associated benefits to the rural environment and economy and wider social benefits. This would be difficult to achieve if the area of permanent pasture in the South West had to be maintained. 

Farm Advisory System

20.        Member States must offer the new Farm Advisory System (FAS -Article 13) from 2007 but have the option to do so from 2005.   We are very disappointed that Defra’s options paper makes no mention of the FAS and that, as we understand it, Defra are not planning to introduce the FAS until 2007. 

21.       Good advice and information to farmers will be an essential part of supporting the implementation of cross compliance and GAEC from 2005. It will benefit farmers by helping them to understand and comply with the new requirements. It should also help to raise standards of environmental and landscape management and achieve other public benefits. For these reasons we would like to see the FAS introduced in 2005.  There are practical and financial, as well as environmental risks, of not doing so. For example, if FAS is not available from 2005, farmers might appeal to Defra against enforcement taken due to failing to comply with GAEC/cross compliance on the grounds that they were not adequately advised.   This could be very costly in staff and financial resources.   

22.        A key issue will be how to fund the FAS. It could be supported under the RDR but the current very limited ERDP budget would not allow for this until the UK receives a more proportionate share of the EU RDR budget.  We propose that, given the importance of developing the FAS, a case is made now for transitional funds in 2005-7 through the 2004 Comprehensive Spending Review.  

23.        We welcome the acknowledgement in Defra’s Learning Skills and Knowledge programme of the need to help farmers to deliver the outcomes the government seeks from the CAP reform package and the need to link this to the development of the FAS and to delivery of the new agri-environment scheme package. 

24.        We understand that thinking on the FAS will be developed through the programme management arrangements for Defra’s Whole Farm Approach (subject to the Commission’s Implementing Regulations allowing sufficient national flexibility for the FAS to be implemented in this way). We also understand that, following the outcome of the ‘proof of concept’ pilot, some modules for FAS will be considered for piloting 

in 2004.   As stated above, we would like to see commitment from Defra to implement FAS in 2005 and to ensure that strong links are made with the cross compliance working group. 

25.        It is important that the whole farm approach and FAS goes beyond agricultural issues and addresses other issues related to sustainable land management, including forestry and woodlands.  

Implementing the so-called ‘national envelope’

26.        Defra research on the economic impacts of decoupling and the potential environmental effects (of the January 2003 proposals) has indicated that, while decoupling is likely to bring significant environmental and economic benefits, it is also likely to result in unintended negative environmental, social and economic   effects. These are likely to vary significantly from sector to sector, between regions and within regions. The actual effects are impossible to predict. However the research suggests that existing structural change trends are likely to accelerate, some producers are likely to significantly reduce livestock levels (especially lowland, and small to medium sized upland livestock producers) and some producers may continue to intensify.   In other areas, land could be partly or fully abandoned, with potentially both negative and positive impacts depending on how the land is managed.

27.       We support the principal of introducing national envelopes applied across the sheep, beef and arable sectors from 2006 as a precautionary tool to address unintended negative environmental or economic effects, should they arise.   In introducing national envelopes: 

a.                    effective monitoring systems will be needed from 2005 to assess actual 

economic, social and environmental effects of implementing the decoupled SPS  – in order to identify problem areas or sectors where envelopes might need to be used;

b.                   envelopes will need to be applied initially at a relatively low percentage - say 3% in 2006.   It is likely to take some time for the effects of decoupling to show but it will be important to be able to respond quickly if problems arise.  The level required will need to be reviewed each year,  as we understand that any money taken off the SFP to fund an envelope must be spent in that year or will be lost;

c.                  envelopes should not be used for measures that duplicate RDR measures;

d.                   we do not support the idea of using envelopes as a means of ‘greening’ Pillar 1 or as an alternative way to increase funds for RDR type measures.   Relative to the RDR, the national envelope measure is very limited – for example, in its scope [4] its support is limited to the farming sector, and there is no system for monitoring and review. 

Should the England Rural Development Programme be changed to use the new RDR options?

28.        We would not wish to see this option exercised if it means reducing funding from existing ERDP schemes. 

29.        We endorse Defra’s suggestion to provide aid for the management of integrated rural development strategies by local partnerships under Article 33, so long as this is funded from within the existing RES budget. Such strategies could help to:

a.                    target the RES budget more effectively;

b.                   integrate RES action more effectively with other ERDP measures and other rural development funding programmes;

c.                    achieve better value for money. 

30.        In relation to the other possible new measures:

a.         providing support for quality food production -   we consider that this objective can be effectively delivered through the existing Rural Enterprise and Processing and Marketing Grant Schemes;

b.          providing time limited aid to farmers facing new legislative requirements, is likely to be extremely expensive if applied widely; 

c.                    income support for farmers who use production methods over and above standard practice (animal welfare) – we support the principle of encouraging higher standards of animal welfare but  do not believe that scarce ERDP resources should be used for this purpose. This option would be  likely to be extremely expensive if applied widely. Research we have commissioned under our Eat the View [5] programme indicates that consumers are increasingly prepared to pay a premium for food produced to higher standards. 

31.        We note that further consultation is envisaged on priorities for rural development expenditure over the next programming period – we welcome this. This debate should be informed by the outcome of the ERDP mid-term evaluation which is currently underway.

Options for Management of set-aside

32.        If rules allow, opportunities should be taken to manage set-aside land to deliver long-term environmental benefits and to target it at those areas where the environmental benefits would be greatest. We would like to see set-aside land used to improve access.  

Should decoupling of dairy premia be brought forward to 2005?

33.        In principle we support decoupling at the earliest opportunity. However, this is not an area on which we have sufficient expertise to offer a definitive view at this stage. Working with the LUPG agencies, we are seeking advice on the implications of this proposal. 

Monitoring and evaluation of the effects of implementing the SPS system

34.        It will be important to put in place monitoring arrangements.   We would be pleased to discuss with Defra and other relevant agencies monitoring requirements which will need to address the environmental, economic and social effects of decoupling and the introduction of the Single Payment Scheme.

September 2003
Annex to CA response to Defra

Table 1:   Advantages of variable Basic and equal Area payment options for allocating the SPS

Table 2   Disadvantages of variable Basic and equal Area payment options for allocating the SPS

ANNEX 2

EXTRACT FROM DEFRA CONSULTATION LETTER

The issues on which discretion has been given to the Member State and on which we are currently seeking your views are listed below 

On three points, however, Ministers have already taken the necessary strategic decisions:

First, implementation of the Single Payment Scheme in the UK will be on a regionalised basis in the sense that the Agriculture Departments in England, Scotland, Wales and Northern Ireland will make their own arrangements for their farmers. 

Second, the new Single Payment Scheme will be introduced in the UK from the earliest date permitted under the agreement, namely 1 January 2005.

Third, the options for reducing the extent of decoupling in England in the arable and livestock sectors will not be taken up.

These decisions are in line with the approach taken by the UK throughout the negotiation, which in turn reflected the clear majority of views expressed in response to our earlier consultations.

The remaining points for consideration now are as follows:

1.          The proposal offers an exemption which would allow the seed sector payments to remain fully coupled.   This is a relatively small sector, which has its own specific concerns, and we would be particularly interested in its views.  Should direct payments on seeds be decoupled?

2.          The Single Payment Scheme can be introduced in one of several ways.   By adopting a regionalised approach, we have the further option of applying it in the form of an area payment (the available funds would simply be spread evenly across the eligible acreages).   Such an approach would have the benefit of extending cross-compliance to more land than the basic approach - linked to historical entitlement - but it would also have very significant re-distribution effects within the agricultural sector.   There has been little interest shown in this option to date but views are invited as to whether we should adopt an area payment approach in England.

3.         Should we bring forward the decoupling of the dairy premia to 2005? Consistent with its general wish to see decoupling take place as soon as feasible, the Government is minded to make use of this option in relation to England.   Initial views are sought – given the various issues relating specifically to implementation of the dairy reforms, these will be the subject of a separate consultation exercise in the autumn.

4.         How should we introduce the so-called national envelope?   The agreement allows Member States to retain up to 10% of direct payments from each sector in a national envelope to be used either to encourage specific types of farming which are important for the protection or enhancement of the environment or to improve the quality and marketing of agricultural products.   Schemes can apply to all sectors or to some specific ones.   The UK argued strongly for a national envelope and we are minded to use it.  But to what extent should we use it and which sectors should be covered? Livestock, dairy, arable or all three?  Do stakeholders have any preliminary views on the types of measures we might consider supporting?   There will be further consultation on the details, so extensive proposals are not necessary at this stage; but general views on the lines above would be valuable.

5.          Should we make use of the options for the management of set-aside land, and in particular the environmental criteria for allowing a minimum strip width of 5 metres?   In general, set-aside land has to comply with the wider cross-compliance conditions relating to general agricultural and environmental conditions.   But there could be a read-across between these management conditions and the exercise of some of the other options available to farmers, for example in respect of rotation and the growing of non-food and energy crops.   It would be helpful to have early views on the extent to which we should seek to introduce requirements at Member State level which seek to regulate the way in which the various options may be taken up.

6.         Should we make changes to the existing England Rural Development Programme to transfer funds into new schemes making use of options which have been added to the Rural Development Regulation?   The possible new measures allow spending to:

-           provide support to producers for quality food production;

-           provide time limited aid to farmers facing new legislative requirements; 

-           provide income support for farmers who use production methods that are over and above standard practice; and

-           provide aid for the management of integrated rural development strategies by local partnerships under Article 33.

Defra’s initial view is that the new measures do not provide strong grounds for the diversion of resources away from the existing England Rural Development Programme (2000-2006) schemes although the widening of the scope of Article 33 to provide aid for the management of integrated rural development strategies by local partnerships may be a useful option under the Rural Enterprise Scheme.   The objective and principles of the animal welfare option are welcomed, but since extra funding (beyond that already required for the introduction of an entry-level agri-environment scheme) will not be available, very difficult decisions on reductions in other schemes would have to be taken if it was wished to broaden the ERDP in this way.   Further consultations will, however, take place over the coming years on the arrangements, objectives and priorities for rural development expenditure over the next programming period (2007-2013).

Defra    22nd July 2003

ANNEX 3 

2003 CAP REFORM PACKAGE 

COUNTRYSIDE AGENCY ASPIRATIONS, OUTCOMES FROM THE 2003 REFORMS AND FURTHER ACTION NEEDED

ANNEX 4

Defra Outline timetable for Implementation of the June 2003 CAP package

There is no fixed timetable for implementation and considerable uncertainty until the EC has published the Agreed Council Regulation and the Implementing Regulations. The deadline for Defra to introduce the Single Payment System, changes to agri-environment schemes and to set up procedures for cross compliance and Good Agricultural and Environmental Conditions (GAEC) is 1st January 2005.   This will be very challenging.   

The outline timetable is:

[1] the   dairy sector would also get new phased-in SPS payments as reform takes place, but based on quota.

[2] the international definition of forest is 20% or more tree cover.

[3]We understand that the current IACS definition of permanent pasture is any pasture more than 5 years old.

[4] to ‘specific types of farming that are important for the protection or enhancement of the environment, ‘ or for ‘improving the quality and marketing of agricultural products under certain conditions’. 

[5]Cconsumer Attitudes to Eat the View.   IGD, 2002 for the Countryside Agency

[6] Countryside Agency press release   - 21st January 2002 

[7] Agency evidence to the enquiry into ‘The future of UK Agriculture: Farming beyond subsidies? December 2001 

[8] i.e. not limited to the four ‘Accompanying Measures’ - agri-environment, afforestation of farmland, early retirement and Less Favoured Areas

[9] LUPG/WWF Europe, Europe’s rural futures – the nature of rural development, 2002

[10] Assessing good practice for the achievement of Integrated Rural Development (IRD) projects within local communities, 2003 CRN64

   Integrated Rural Development, 2003, CRN 65

   Integrated Rural Development and European Programmes, 2003, CRN 66 

[11]‘degressive payments’ mean that the direct commodity supports received by farmers would be   reduced each year. The Agency has supported recycling of a significant proportion of the funds released within a Member State into an expanded second Pillar. If degressive payments were returned to an EU pot for redistribution on proposed objective economic criteria, this would be likely to disadvantage the UK

[12] We supported the principle of the sheep national envelope within the current sheepmeat regime, provided that it is used to deliver clear public benefits