Recommendation 5
We recommend that Defra, in conjunction with the
devolved administrations, commission research into the likely
effects on farming production of adopting different single farm
payment regimes in the nations of the United Kingdom. We further
recommend that it consider what support and assistance it might
be able to offer farmers particularly affected, such as those
who operate on either side of the border between the nations.
Farmers whose holdings are divided by a border should have the
right to opt for the regime which they consider most appropriate
for the whole of their holding. (Paragraph 21)
Scotland and Wales intend to determine eligibility
to the Single Payment on the basis of historic receipts. England,
following a long transition period phasing out historic payments,
will be using a regional flat-rate system and Northern Ireland
will use a model which combines historic and flat-rate elements.
In all four countries however the payments will be fully decoupled
from 2005; in other words, the linkage between production and
subsidy will not exist from that date. The single payment will
be conditional on land being kept in good agricultural and environmental
condition and meeting other cross compliance requirements. Farmers
will be free to decide what and how much to produce on the basis
of market demand and their own costs of production. The payment
regime will not therefore fundamentally affect the profitability
of production between the constitutional parts of the UK. It will
no doubt take time for farmers to adjust to decoupled payments
particularly in some sectors which have received high per hectare
levels of support and where therefore a greater market reorientation
is necessary. The scheme to be adopted in England allows for a
seven year transition period to facilitate this adjustment. It
is decoupling which will have the main impact on farmers' decision
making and production patterns rather than the method for creating
eligibility for entitlement to the single payment. Defra has published
various research projects which examine the impact of decoupling
on livestock and arable production in the UK. The results of these
projects produced quite a wide range in the projections of future
production and underline the uncertainty associated with quantifying
the effects of decoupling on output. We also recognise that changing
the distribution of subsidy in England will have impacts on farmers'
wealth and perhaps attitudes to risk which may in turn affect
some production decisions. We intend to monitor the impacts on
agricultural production patterns and incomes (see response to
recommendation 3 above) and we are considering the feasibility
of further analysis to project farmers' rational economic responses
to the Single Payment in England.
The Regulations would not allow the latitude suggested
by the Committee for farms that straddle borders. To give such
flexibility to some in a region but not others could be said to
be discriminatory. We are currently in discussion with other agriculture
departments to see how the question of holdings that cross internal
boundaries can best be dealt with.
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