Select Committee on European Scrutiny Seventh Report


FLAT-RATE AID FOR SMALL FARMERS


(22008)
14795/00
COM(00) 841

Draft Council Regulation amending Regulation No. (EC)
1259/1999 establishing common rules for direct support
schemes under the Common Agricultural Policy.


Legal base: Article 37 EC; consultation; qualified majority voting
Document originated: 15 December 2000
Forwarded to the Council: 18 December 2000
Deposited in Parliament: 17 January 2001
Department: Agriculture, Fisheries and Food
Basis of consideration: EM of 7 February 2001
Previous Committee Report: None
To be discussed in Council: Following receipt of European Parliament opinion
Committee's assessment: Politically important
Committee's decision: Cleared

Background

  17.1  Since the 1992 reforms, an increasing proportion of the payments made to farmers under the Common Agricultural Policy (CAP) has been in the form of direct aids, to compensate for the reductions which have been made in market support. However, the Commission says that this has resulted in an increased administrative burden, and that, although there are considerable differences as between Member States, a large number of farmers within the Community as a whole receive very small amounts of aid. For example, of those covered by the Farm Accountancy Data Network (FADN), 23.2% received payments of less than 1,000 euros (£630) in 1996-97, and 42.8% less than 2,500 euros (£1,575), and the Commission believes that many of those outside the FADN field are also very small. It points out that, although some simplified schemes exist (for example, for farmers producing less than 92 tonnes of cereals), the administrative provisions of the aid schemes in general make no distinction according to the amount received.

The current proposal

  17.2  The Commission has accordingly proposed that, in order to reduce the administrative burden, particularly for farmers receiving small amounts of aid, there should until the end of 2005 be a trial period under which a simplified payment system would be established. Participation would be open to those farmers who have already received direct aid during a three- year reference period, and those entering the scheme would have the right to remain within it throughout the whole trial, provided they continued to fulfil the necessary conditions. They would make one single application when they entered the scheme, and receive one global payment a year, covering all the relevant direct aids. This payment would be based on the direct payments received by the farmer during the reference period, and would be the higher of the simple average over that period or the payment in the most recent year, subject to a maximum payment of 1,000 euros: farmers whose payments during the reference period exceeded this maximum would also be eligible, but would receive no more than that amount. Participants in this scheme would be excluded from receiving any of the direct aids which it replaces, but would be entitled to apply for other forms of direct aid not covered by the scheme.

  17.3  The Commission says it will assess the effects of the scheme during the third year of the trial period.

The Government's view

  17.4  In her Explanatory Memorandum of 7 February 2001, the Minister of State (Commons) at the Ministry of Agriculture, Fisheries and Food (the Rt. Hon. Joyce Quin) says that the UK favours simplification and the "decoupling" of CAP subsidies, and that this scheme represents a step towards these goals. She adds that it may provide a model for future schemes which would be compatible with World Trade Organisation (WTO) rules.

  17.5  The Minister also points out that the scheme is likely to be of limited importance in the UK, where only 3.8% of farmers are estimated to fall within its scope (although she suggests that eligibility rates are likely to be higher in Scotland, Wales and Northern Ireland than in England). She says that the Government is considering whether to implement the scheme in the UK, but that it is not certain that it would reduce the administrative burden for the paying agencies (who might well face increased costs), or for the target group of producers. Among the points she identifies as having to be considered are whether it would be necessary to apply the scheme throughout the UK, and whether payments under it would be subject to modulation[51] (which she says would have a bearing on the level of funding available for the UK Rural Development Programmes).

  17.6  Finally, the Minister notes that, to the extent that the measure merely provides for the payment of existing aids through a simplified procedure, the Commission considers it to be budget neutral, but that in practice it could lead to some savings, since future aids are scheduled to rise relative to those available during the reference period for this scheme. Also, some producers currently receiving more than 1,000 euros aid may opt to join it. Notwithstanding this, she comments that, if the scheme were to be applied in the UK, a significant resource commitment would be necessary to make it operational by 2002, and, in the long term, the cost of running it might outweigh the benefits.

Conclusion

  17.7  This proposal strikes us as a worthwhile initiative, and, if it is agreed, it will be interesting to see in due course whether it meets the Commission's expectations. In the meantime, although we think it right to draw the proposal to the attention of the House, it does not seem to us to raise any issues which require further consideration. We are, therefore, clearing it.




51   This entails a reduction in the direct aid payable to producers, the rate rising from 2.5% in 2001 to 4.5% in 2005. Back


 
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