Supplementary memorandum submitted by
Central Association of Agricultural Valuers (RPA Sub 02a)
| Part 1 | The mid term review of the CAP and England: a chronology
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Part 2 | CAAV Review: Implementation of Mid-Term Review
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Part 3 | Who are the new SPS claimants?
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Part 1—THE MID TERM REVIEW OF THE CAP AND ENGLAND:
A CHRONOLOGY
1999 Berlin Agreement settling the Agenda 2000 reforms for
2000-2006 and providing for a mid-term review in 2003 on a number
of points.
June 2002 First rumours that the Commission would propose
more significant reforms than expected.
July 2002 Commission publishes its Reflections paper proposing
a decoupled Single Payment but unclear as whether it would be
farmer-based (as proved) or land based.
From this point the CAAV, identifying this as a potentially
major change, opened its engagement on the principles and practical
details with DEFRA officials.
October 2002 Berlin agreement between President Chirac and
Chancellor Schröder agreeing on agricultural spending limits
to 2013. While it seemed that Chirac did this to defeat the proposals,
Commissioner Fischler spoke the following week to affirm his commitment
to taking the reform forward within the agreed budget.
The CAAV then went to Brussels in November to meet relevant
Commission officials.
January 2003 The Commission published its legal draft of what
became 1782/2003. This would establish the payment solely on a
historic basis to be introduced in 2004 based on farmers' history
of subsidy claims and associated area in 2000-02.
Within a week, the farmland sales market in the UK froze
as those with history saw they needed to stay, purchasers did
not know where they would stand and professionals struggled to
advise. The same effect bore on the letting market but its longer
lead times saw this apply more slowly. While we evolved tools
to address the issues once the legislation became more certain,
these results lasted at least until the 15 May 2005 application
forms were submitted.
The CAAV went again to meet Commission officials (including
the draftsman of the regulation) in February 2003 and continuing
to explore the practical effects of the wording with DEFRA officials
and to inform their negotiations.
The exploration of the proposals at official levels went
on through the spring only reaching serious engagement between
Ministers in the later spring and early summer.
June 2003 An intense and extended period of ministerial negotiations
saw then agreement on the regulation 1782/2003. One consequence
of late engagement by some continental countries was the delay
agreed in late may or early June of implementation until 2005.
The regional area payment option of Article 59 was also introduced.
July 2003 DEFRA made basic announcements on the reform—full
implementation from 2005 and separate management in each part
of the UK.
Sept 2003 Detailed discussions resolved the final text of
the regulation (published in October). Among other things, this
saw the inclusion of negative list (FVP) crops in the regional
systems despite their exclusion from the historic option.
October 2003 The DEFRA consultation on implementation options,
including history v area, closed.
Feb 2004 DEFRA announced area-based implementation having
divided England into two regions: SDAs and non-SDAs. The entitlements
would be allocated on the "dynamic hybrid" basis of
2005 area with their value set by two components: an area element
phased in to 2012 and the benefit of each farmer's historic claims
as applied to those entitlements and to be phased out by 2012.
Most organisations were very concerned at the impact on businesses
(especially dairy and beef) in the SDAs.
April 2004 Two major EU implementing regulations (795/2004
and 796/2004) giving much detail on definitions and mechanisms
were published—but inevitably throwing up more questions
and issues.
After industry representations, DEFRA revisited the division
of England and created a third region by dividing the SDAs into
SDA upland moorland and outer SDAs, thus ensuring that the higher
subsidy history of many outer SDA businesses would not result
in a final area payment diluted across all the moorland.
Domestic discussions increasingly focussed on the many issues
of implementation including cross compliance.
May 2004 Consultation on National Reserve and other issues
closed.
July 2004 The RPA sent out the first SP1 forms advising farmers
of its records of their historic claims and opening the way for
applications (using forms SP2, SP3 and SP4) for hardship, merger,
scissions, inheritance and pre-2002 new entrant claims. This was
a data-cleansing, administrative (rather than legal) process which
continued into early 2005 with the period for lodging hardship
claims being repeatedly reopened as new points were administered.
This process was affected by a further EU implementing regulation
agreed just after first forms went out revising 795/2004 to allow
hardship to see the exclusion not of whole years (as first drafted)
but of individual scheme years—so beef claim in 2002 could
be dropped because of foot and mouth without requiring the arable
claims in that year to be dropped.
CSC helplines started with immediate confusion following.
Nov 2004 DEFRA announced its response to its consultation
on the national reserve categories and levels of awards as well
as on land used by horses and other matters.
Jan/Mar 2005 Main period in Wales and Scotland for receipt
of most classes of national reserve applications
January 2005 DEFRA statement that payments will start in February
2006 with 96% made by the end of March 2006.
Feb 2005 Final administrative closing date for hardship applications.
It was clear from the planning of the CAAV's spring 2005
MTR conferences that RLR issues now featured prominently in any
meeting between members and officials.
March 2005 Mid-late March 2005—RPA circulated the SP5
forms to farmers.
31 March—milk quota held now set dairy premium element
of entitlement value.
April 2005 Blank forms and continuation sheets made available
in early April.
May 2005 Final statement of acceptable non-agricultural uses
on land being used to claim payment.
SP5 forms to be returned by 16 May (or 9 June subject to
payment penalty).
New activity in the land market (and some receiverships)
resumes driven by parties—but still depressed by lack of
knowledge of assets, national reserve rules and need to hold land
to be paid.
October 2005 RPA sent out SP5e forms to collect information
on national reserve claims to be returned by 4 November.
Further EU implementing regulation confirms confused position
of energy corps. Claimants allowed to revise their 2005 SP5 forms.
Dec 2005 Wales, Scotland and then Northern Ireland (with its
static hybrid) commence substantial part payments.
EU Commission writes to advise that: "It is clear
that the delay in the definitive establishment of payment entitlements
cannot prejudice the farmer concerned and affect negatively his
capacity to transfer his entitlements." Definitive establishment
of entitlements should, under the regulations, have been done
by the RPA by August 2005 with a delay to December 2005 countenanced
if there were particular legal problems.
January 2006 First national reserve awards letters sent out.
This was the first major response to farmers from the RPA and
combined apparent chaos with no explanation.
DEFRA responds to Commons Committee report pledging that
payments would start in February (understood to be 14 February)
with the bulk paid by the end of March.
Feb 2006 First payments and entitlements statements (correct
or otherwise) received from 20 February.
National reserve deduction announced.
Definitive set-aside rates finally confirmed—should
have been done by August 2005.
RLE1 forms for transferring entitlements (and initially recording
land occupation changes until this was relaxed) issued for return
by 2 April if entitlements transfer to be valid for 2006 claims.
False trail over purported 19 March date for with land transfers.
March 2006 Announcement of 16 March that bulk of payments
could not be made by 31 March. RPA to be reviewed and Johnston
McNeill removed.
First SP5 forms started to be sent out on 20 March but, as aimed
first at the fully validated, few reached significant farmers
until into April with many waiting until almost the end of April.
Announcement on 30 March that closing date for RLE1s for 2006
transfers extended to 23 April. In practice, most forms have arrived
a month later than in 2005 and many not pre-populated with field
and other data.
RPA advised that as of 30 March, 55,000 were thought validated,
37,000 claims had been authorised and 29,000 (24%) had been processed
for payment (but as predominantly small claims this only accounted
for 14% of the money).
The RPA announced a number of changes to its systems including
a shift to a claimant based approach.
April 2006 DEFRA announcement that partial payments to be
paid to most of those not fully paid to commence when operationally
possible (excluding those to be paid in euros, those under €1,000
and some others). The intention is that farmers should have received
either a full or partial payment by 30 June. It is not clear how
this applies to the 20,000 or more thought not to be fully paid
and not to qualify for partial payment. Once this system is operational
in later May or June, full payments will cease. Work on full validation
will continue but we assume there will be a diversion of effort
from it.
Blank forms and continuation sheets became widely available
from 28 April rather than the intended 8 May.
May 2006 Advised that 132 entitlements statements still to
be sent—but it seemed many others had not been received.
As of 2 May, 67,000 were deemed validated, 62,000 authorised
and 56,000 processed for payment (47% of claimants but 34% of
the money).
Penalties lifted from SP5 forms returned by 31 May, rather
than 15 May.
Lord Bach leaves government. The Cabinet shuffle leaves no
minister at DEFRA who has been directly involved.
Part 2—CAAV REVIEW: IMPLEMENTATION OF MID-TERM REVIEW
Notes from Stakeholder Meetings, etc
1. Notes: These notes on the developing implementation
of CAP reform in England are built around Jeremy Moody's manuscript
notes of meetings held with DEFRA and the RPA from September 2003,
together with other records including Alice Russell-Hare's notes
and e-mails. Limited time has constrained the post-May 2005 coverage.
2. Up until May 2005, there were two rounds of main meetings
whose business often overlapped. They were separately chaired
by David Hunter of DEFRA and Lord Whitty, the Minister. The object
of the former was more technical as the regulations evolved and
the latter more policy based. After 16 May 2005, stakeholder meetings
were generally held with the RPA.
3. Until late August 2003 there had been no understanding
that anything other than the historic option would be pursued.
The emergence of the regional option in the main regulation had
been seen as a particular response to German circumstances and
an object of some entertainment.
4. However, the deferral of the implementation date for
January 2004 to January 2005 allowed both England and Brussels
that the luxury of a further 12 months in which debate could happen,
removing the pressure for urgent implementation.
5. My records suggest the first stirrings of interest
in the area option was at a CLA Executive meeting of 29 July 2003
after which Allen Buckwell prepared and circulated on 11 August
a discussion paper positively exploring it. The possibility was
mooted at a meeting on 30 July convened by the CLA to review possible
uses of the then national envelope option. This interest appeared
to reflect the perceived concerns of some arable landlords. In
mid to late August an article in the Financial Times reported
RSPB pressure for the area system.
6. The discussion then ran and late amendments were made
to the papers for the CAAV's first round of briefing conferences
in the week of the August Bank Holiday and the following week
to include a general (but still secondary) review of the area
option as protective text in what were otherwise papers briefing
professionals on the basis of solely the historic option.
7. NB. The references in the following notes
to `negative list' are to those crops grown for human consumption
subsequently known as FVP (Fruit, Vegetable and Potatoes) which
have subsequently given rise to authorisations attached to relevant
entitlements.
8. In reading the papers of the time, "regionalisation"
was the option of implementing the reform not at a UK level but
at lower levels. This would most obviously be along the lines
of the devolution settlement which made this inevitable. That
then allowed each area to make different choices about how implementation
would happen. What these notes call the area option was often
then called the regional average area option—that was a
matter for consideration once the decision on regionalisation
had been taken.
A. David Hunter Meeting 12 September 2003
9. At this first of the formal post-agreement David Hunter
meetings, he reported on the general state of play as the regulation
implementing the June agreement neared completion.
10. The fourth point raised among those outstanding in
resolving the Council agreement concerned the "regional area"
option. We were told this would average out the accumulated entitlements
over the area including that in unsupported crops. It would not
pay out on negative list crops. The Germans and Danes were anxious
to disapply the negative list. The UK opposed the negative list.
Part of the thinking: "so those using alternative route suffer
having asked for it". Also a competitive point—if some
hort producers get aid and others don't. So UK argues against
relaxation. There was also concern about discrimination against
the UK from the relaxation—this could be an issue for ministers.
11. One concern was "wanted to simplify—don't
want arrangements adding to cost of inspection".
12. "DH prefers to see negative list applying but
sees argument both ways".
13. The RSPB thought area payments more de-coupled than
historic ones.
14. The RSPB issued a policy based review paper supporting
the area approach also in late September.
15. JM note beside this saying "but surely arable/livestock
division makes it more coupled". There was some background
of discussion of such a division in an attempt to recognise the
redistribution issues.
16. David Hunter spoke to the DEFRA consultation paper
and confirmed "the area approach is on the table". He
hoped to be able to report on the flavour of thinking at the 17
October meeting.
17. In reviewing implementation, Nigel Atkinson of DEFRA
thought that after a second consultation in January/February 2004
and the possible third focussed consultation later that spring,
SI's could be laid by the summer break. Application forms could
go out in early January 2005. There was concern about the urgent
need for early clarity in the implementing regulations. The plan
said these would be in place by December but there were risks.
18. Issues were raised over regional payments and cross
border issues and the interaction with ELS.
19. There was a brief note on the issues in the history
v area choice in the DEFRA Regulatory Impact Assessment of 1782/2003
of September 2003.
20. The CAAV produced an initial technical analysis
of what was still then a pure area option (rather than a hybrid)
on 23 September.
B. Lord Whitty Meeting of 8 October 2003—Chaired
by David Hunter
21. It was hoped to have all of the regulations by Easter
but tackling the changes for 2004 first.
22. He noted the "change for FVP because area based
countries unhappy with it" understood to be the inclusion
of negative list crops in the area option.
23. The NFU reported a long debate with some internal
pressure from unsupported crops (no-one else) for the area option.
If the only alternative was area, livestock problems made the
choice history. Some options get more difficult—separating
out livestock would make re-distribution worse.
24. The NFU discussion paper was produced on 10 October—while
its Council finally and predictably opted firmly for history,
the preceding open debate allowed to its horticultural members
perhaps obscured the NFU's inevitable stance.
25. The Countryside Agency had not yet chosen an option
but "fears unexpected consequences of radical change to area
based".
26. David Hunter said that "Ministers will consider:
— Policy Issues including the views of stakeholders,
the impact on dairy and sugar, are the beneficiaries undeserving"
27. It was noted that Eire going for 100% de-coupling
felt there was no way it could do area even though its agriculture
was more homogenous.
28. The Environment Agency had made no decision but was
leaning to area based because that would extend cross compliance
to all unsupported land.
29. English Nature was working on the subject, issuing
an equivocal paper later in the month. Difficult when looking
at implications to find a clear environmental issue either way
so not seen as environmental issue but whichever way will be environmental
effects. Cross compliance unlikely to be demanding. The big issue
is dairy. It saw the costs of delivery as the potentially decisive
issue—but what are they?
30. David Hunter responded on this point which I noted,
using capitals at the time: "TIME AGAINST US. Hunter says
very much more expensive for history because appeals. MORE EXPENSIVE
IS TO BLEND HISTORY AND AREA."
31. He noted the problems of consulting in Jan/Feb without
implementing regs agreed.
32. He thought "ministers would decide on the area
issue early. National envelope rules would be the subject of consultation
in January/February and hope to have area decision by then".
C. David Hunter Meeting of 17 October 2003
33. The meeting began with David Hunter saying the re-distribution
effect of moving to area payment was substantial. DEFRA's analysis
had been based on categories and not individuals but saw the total
of losses as some 14% on re-distribution. He confirmed it would
not be possible to take out the dairy area. The effective re-distribution
would alter with the exchange rate. Will work out percentage gain
from losses.
34. Note—DEFRA had issued ahead of the
meeting:
— a paper sketching the various options including
various hybrid models. This was the first significant official
review of the possibilities here; and
— an analysis, at a sectoral rather than business level,
drawn from Farm Business Survey data to appraise on the potential
redistributive effects of an area system. The CAAV thought this
understated the issue and, following press reports wrote to Farmers
Weekly (7 November) as well as making direct representations.
35. "RPA preparing figures for admin costs of broad
options".
36. Bill Duncan (RPA): "options all have to be sorted
at the beginning—once into system all maybe easier."
37. David Hunter said that ministers had stressed the
merit of reform as simplification. I pointed to two steps in assessing
this: initial allocation and then subsequent operation.
38. The meeting considered a paper prepared by John O'Gorman
of DEFRA outlining a range of options. In introducing this paper,
David Hunter pointed to the second indent of paragraph 5 (phased
change within historic model) and 8.3 (the area based limitation
on transfers within the region).
39. "Other member states not applying area payments
would want to see tight application of negative list rules".
40. "Hybrid schemes reduced re-distribution effects
but higher costs because use history. Increases grounds of appeal.
Issue over data on what is permanent pasture/grass.
41. A discussion followed on trade in entitlements.
D. Joint TFA/CAAV Meeting with Lord Whitty—13
November 2003
42. This meeting had been jointly requested to express
concern over the possibility of adopting the area option.
43. My note on coming out of the meeting reads "his
ultimate concern is how to justify payment in several years time.
JM said operation not calculation would be issue. JM stressed
future facts."
"Future facts" was shorthand referring to the situation
where announcing in winter 2003-04 that the basis for allocating
rights to payment under the new system would be area held in May
2005 gave a long lead time for potential claimants to protect
their position with distortions to the land market and farm structures.
E. David Hunter Meeting 14 November 2003
44. Over 200 responses have been received to the consultation
paper. Davinder Lal gave a review of the responses on all the
subjects.
45. Concerning area or history, there have been a lot
of comments. Generally the producers of the main commodities,
tenants and individual farmers favoured history. Those in unsupported
crops favoured area. Environmentalists range from supporting area
to being unsure. Many stress the need for more analysis.
46. The discussion of issues fell under four heads: policy,
economic, administration and environmental.
47. Policy—Farmers favoured history so
weak support for area. Farmers who have already diversified would
be penalised by area. Area could be "true de-coupling—chance
for radical change. Subsidy for public good—area a step
to that".
48. Economics—farmers fear that area would
hit individuals. Dairy risks of area (also sugar). The capitalisation
of area payments. Distortion to the rental market. Livestock faces
problems with area—"want some division for livestock".
49. Administration—"complexity of
hybrid". DEFRA should not use valuable resources on administration
of a complex system.
50. Environment—The arguments were not
strong either way so it should not dominate decision. Area would
extend cross compliance a little.
51. David Hunter said that it was not just a question
of choosing history against a flat rate. "So no single rate
across England but whether history is broadly preferable to one
or the other hybrid model blending area and history."
52. Other member states—nearly all asking same
sorts of questions. All troubled by re-distribution. Only Ireland
decided for history—very easy to decide from data that area
was too much political difficulty.
53. Other member states—informally—only two
were actively leaning towards area: Germany and Denmark. Finland
and Sweden were reflecting, hankering for area but not near a
decision and thinking through the consequences. The Dutch were
going for history—horticulture had never had payments so
why give them now. Luxembourg was having second thoughts about
area. Generally there was much flux.
54. Wales and Scotland were likely to go for history
with Northern Ireland perhaps area.
55. DEFRA had worked up a hybrid to ring fence arable
and livestock money. "Hybrid would be perceptibly more expensive".
56. Comment—David Hunter's closing remarks
here may illustrate the point at which the pure area option had
failed despite its attraction to ministers. The hybrid options
made for an elusive protean debate thereafter as there was never
one option on the table making objective comparison difficult.
57. On 17 November in an e-mail exchange Jeremy Moody
wrote to the manager of a major estate: "You should be aware
that the area option is looking less like a flat rate payment
than some form of hybrid but the animal keeps changing shape (like
Proteus) each time it is wrestled with—in ways which do
affect the land management arguments." In a later PowerPoint
presentation the heading for the side on the hybrid option was
"Solution or Bar of Soap?".
F. Lord Whitty Meeting—1 December 2003
58. After a brief review of WTO developments by David
Hunter, Lord Whitty discussed the decision on the basis for payments.
"Minds reasonable open—some constraints as to what
can do. Take a hard look over next few weeks. Unlikely to decide
for Christmas—around end of year. Have to take in next month
or so to get on and meet industry [need for answer]. Other Government
departments and devolved administrations." He noted that
the bulk of farmers' responses favoured historic but most environmentalists
were close to area. Some difference between arable and grazing.
Differences in the devolveds—Northern Ireland leaning to
"vertical decoupling". Expected some inter-relationship
between the national envelope and the new regime.
59. He was "looking to position of Ministers in
five years"—how to explain differences between fields.
There was a debate about defensibility and transition.
60. Those present restated their positions with the CLA
affirming its support for a hybrid.
61. After musing about the objectives of the next report,
David Hunter asked whether roots growers realised that the area
basis would lead to setaside and noted that an area basis would
see money moving into the moors and so to sheep (do we want more
sheep?). A new paper would be forthcoming with analysis but he
generally saw the analyses of administrative costs as not being
robust and not decisive in the choice.
62. There was then a long gap between formal meetings
as much waited on the decision of the option to be taken in England
while EU discussions moved slowly. The feeling was that meetings
would simply have retrodden the same ground. As frustration grew
at the Government's apparent inability to settle the matter, it
became more important for business planning to have an answer
than what the answer was.
63. On 18 December the CLA wrote to the Prime Minister
urging the adoption of a specific hybrid model though it concluded
more generally that "a reformed CAP is best achieved in our
view with a hybrid payment distribution".
64. Lord Whitty's Oxford Farming Conference speech
was just on 6 January 2004 reviewing Ministers' continuing dilemma
and from which we concluded that the options were either only
a temporary use of history (how within the regulations?) or some
sort of hybrid.
65. Note—The stakeholder meetings in December
and January were then cancelled in turn as any new discussions
depended on a decision on this key issue.
G. Lord Whitty Meeting—9 February 2004
66. Lord Whitty opened the meeting referring to the wide
range of consultation responses. "Not yet a finalised decision.
In discussions with the Commission and the devolved bodies. The
basis for SFP—everybody knows where stacking up. The majority
of respondents 2:1 history. The Government's view is history is
hard to defend where [ ... ]. So looking at moving away from history.
So still looking at moving to area basis over a period of time.
Could be a different system for English SDA's. Want to sort out
this week ahead of parliamentary recess."
67. The CLA was concerned that the system should not
start with too small an area payment. Leaving this could lead
to a disruptive market in entitlements with much close-to-naked
land. If the move is too fast in regionalising livestock payments
that would be disruptive to business. No organisation had argued
for a dynamic hybrid. If not able to justify the objective risks
not being accepted and so delaying decoupling.
68. Lord Whitty responded that some did argue for progressive
movement. There may be a Commission view on where the process
starts but there was "a balance between taking it gently
and bringing it in". It could be linear or increasing—may
have to consult on this. Area was part of the final package. Countries
could take difference views—allowed by regs. The Commission
should have come forward with detailed regs by now.
69. The Commission's original concept was historic. Area
payments were an addition to the text. So Commission sees history
as norm and deviation to be justified. The Commission in difficulty
if objects to this. Sees more national policies than first envisaged.
Brussels losing control. Hardly anybody takes a definitive position.
There might be additional analysis and impact when make announcement.
Announcement might be later—probably not this week.
70. The Commission thought that 20% minimum area fraction
was needed. Nothing in Council regs. Could be in implementing
regs. The NFU had been told it could be tiny. The Commission seemed
to be shifting.
71. When asked what were the most important factors in
the decision, Lord Whitty replied "central issue—will
we finish with a system that makes UK farming more market oriented
and delivering...environmental outcomes. Concern that do not destroy
potentially competitive parts of the market. Fears that land market
could be counterproductive."
72. When asked about the SDA's, Lord Whitty mused about
two regions for England limiting re-distribution but would this
be justifiable in terms of outcomes.
73. Later in the meeting Lord Whitty said: "this
month's announcements would be broad conclusions. Need to discuss
further—devolveds—Brussels—industry. Fears more
difficulties with Brussels over a dynamic."
74. He closed the meeting saying "has been/is a
difficult process. Options [for announcement] are this week or
week after next. May happen very suddenly. Devolveds may not be
coincident in content or timing. Hoping next three weeks."
75. The announcement was first made on 12 February
2004
H. David Hunter Meeting—27 February 2004
76. This was to be the first of a series of monthly Stakeholder
Meetings.
77. David Hunter outlined the basis for the decision
on area. "Having discussed options, Ministers clear that
wanted flat rate option in long term but single rate would be
difficult—so two tier. Use SDA line. Transition period to
allow adjustment to redistribution."
78. At this stage discussion then focussed on the
manner in which England itself should be regionalised—two
or three regions it should also be noted that at this stage very
little was understood about the relationship between history and
area under the option taken and equally how cross border cases
(both within England and within the UK) would be handled.
I. DEFRA Technical Meeting of 15 March 2004 on New
Implementing Regs
79. Chaired by John O'Gorman, this meeting saw active
discussion of such matters as the definitions—permanent
crops, orchards, common land and the extent to which GAEC could
include fallow as we went through the various articles on what
became 795 and 796. Many technical points crystallised discussion
only to raise questions to be pursued in the negotiations. At
that point further consultation papers awaited review by Ministers.
80. The focus of industry discussions at this point
was whether England should be divided into two or three regions
with further representations being made on this to Ministers which
ultimately led to a fresh announcement in march re-dividing England
into three payment areas—rather than the two areas of the
February announcement.
J. David Hunter Meeting of 26 March 2004
81. The Secretary of State was thinking over the regionalisation
of England. Officials had not yet advised. If the position was
changed there would be a public announcement. David Hunter suggested
that if Ministers were minded to do anything on this they would
look at:
— Is there a real rationale coherent with the policy
objectives?
— Strength of industry consensus on this for the
rest of the implementation period.
— Administrative practicality.
— Legal issue—is it sound?
— Acceptable to Brussels.
82. He noted that the German model is giving some regional
redistribution within limits but the same system operates across
all Germany. The place of milk is still under discussion.
83. Nigel Atkinson of DEFRA outlined initial thoughts
as to how area might be calculated and history allocated. The
arable issues included unsupported crops and setaside.
84. After reviewing the emerging definition of permanent
pasture discussion focussed on the place of land such as orchards
and land used for horses—does it interfere with agricultural
area? Could it be part of GAEC? Fact not intention is relevant
under regulation."
85. DEFRA made an announcement re-dividing England
into three payment areas on 22 April 2004
K. David Hunter Meeting—30 April 2004
86. This meeting saw further engagement in the process
of detail the appraisal as David Hunter suggesting a mechanism
for handling detailed queries.
87. Note—I made the point to John O'Gorman
at an informal meeting on 4 May 2004 (as I would also have done
at other meetings) that the legal definitions meant that horse
land was inescapably within the definition.
L. Lord Whitty Meeting—10 May 2004
88. Among other issues discussed the potential application
of the regulation to orchards and other grazed woodlands for which
Commission guidance was awaited.
89. In reviewing the next steps and implementation, a
timetable was laid out with which concluded with applicants being
advised of their "amounts" in summer 2005.
M. David Hunter Meeting—28 May 2004—the
DEFRA consultation on the national reserve and related issues
had closed.
90. No announcement had yet been made on orchards.
91. The RPA suggested that National Reserve forms might
be sent out with the 2005 applications. Work was underway on the
ceiling for horticultural authorisations but no dates were given
for the work.
92. Note—As we ran on through the summer
so I pressed (with support from others) at these meetings for
early action to collect the necessary information for the allocation
of FVP authorisations. The cropping of potatoes, onions, carrots,
etc had previously been entirely outside the subsidy system but
was brought in by the choice of the area option. The sector relies
heavily on such growers taking fresh land each year for which
there is a lively market in relevant districts—often at
substantial rents. The uncertainty over MTR implementation posed
major issues for this market as the first relevant lettings for
2005 were being negotiated in June 2004. As it happened we have
to handle two years of such lettings without knowing if these
occupations would earn the Single Payment or not—we still
do not fully now.
93. The issue became such that the CAAV and the NFU
published joint guidance on 14 August 2004.
94. The definition of permanent pasture was explored.
N. David Hunter Meeting—25 June 2004
95. This mainly discussed the responses to the second
wave of consultations.
96. Discussion continued on the understanding of the
ten-month rule.
97. On orchards, it was for DEFRA to come up with a clear
rule—they should be grazable though need not be grazed.
98. Acceptable non-agricultural uses requires a common
UK interpretation.
Note—This was only finally hammered out in the early
days of May 2005 as the last applications were being prepared.
O. Lord Whitty Meeting—12 July 2004
99. This meeting substantially discussed cross compliance
and other operational issues though it did touch on the orchards
question. It then concluded with WTO and sugar issues.
100. The CAAV again ran the need to collect early information
on FVP authorisations.
101. The SP1 forms to check each farmer's history
started going out from 9 July (later than intended because it
proved more complex that first thought). The CSC helpline opened
and almost immediately (by 20 July) generated significant problems
of misinformation—a recurrent feature of this service despite
the good will of those on the telephones. At one point in early
August 2004 we were able to secure an important clarifying statement
after a Yorkshire farmer was given advice read from the guidance
to Welsh farmers with their different system. The problems seemed
specific to the helpline as the points arising were not ones where
we differed from senior RPA staff as to the answer.
102. On 8 September, in an informal discussion after
a CAAV meeting with DEFRA and RPA officials involved in the reform,
Jeremy Moody and Alice Russell-Hare reviewed the draft SP5 forms
for 2005. It was already being stressed that the form, in both
structure and detail, had been dictated early by IT demands—it
would cost the RPA money to make changes. Among the concerns expressed
by the CAAV was the point that the form must clearly demand full
information from national reserve applicants.
P. David Hunter Meeting—24 September 2004
103. This meeting discussed a wide range of operational
issues. The RPA reported that it had received 10,000 hardship
application forms out of 100,000 farmers mailed.
104. Land used by horses "still thinking—to
be clarified". Land grazed by horses could be argued both
ways. Ministers asked what the Commission thinks to be right for
auditors. Race tracks were excluded. I raised stud farms and gallops.
Orchards were still under discussion with the Commission.
105. In a discussion on communication, David Hunter accepted
that the helplines were giving varied advice. I warned of the
litigation risks associated.
106. There was discussion of the lodging of the English
option with the Commission and the lack of a response.
107. Reviewing CAAV e-mails it appears that the first
signs of significant pressure on and difficulty with the RLR began
to emerge in late September 2004 and then grew steadily during
the autumn and into 2005.
Q. Lord Whitty Meeting—19 October 2004
108. After a discussion of cross compliance and set-aside,
Lord Whitty discussed:
— Horses "where land is for grazing then horse
grazing will be eligible"
— Orchards "want grazeable orchards to qualify—discussing
with Commission
109. Alan Buckwell CLA noted that the RLR wanted all
land on the register by next March [2005] but could fail—partly
because of the RPA workload. How can owners of land get forms
to make good application in 2005? When RLR information was not
being released to interested third parties.
110. The CLA point largely arose from owners of land
that had previously been held by tenants or used by graziers who
had made the claims.
111. Allan Buckwell and I jointly warned of inadvertent
inaccuracies in 2005 applications because of ignorance of the
Rural Land Register.
R. David Hunter Meeting—26 November 2004
112. More was being published on orchards. "People
keeping horses are capable of keeping GAEC".
113. Exact boundaries of the definition of permanent
pasture was still evolving.
114. In discussing communications, the second booklet
("brochure two") was due to be published for Smithfield
and being sent to a database of 180,000 addresses. This was based
on the records of holding numbers and it was widely expected that
this figure much exceeded the number of likely claimants (many
farmers have for reasons of history or management several holding
numbers) and while it wouldn't be likely to include all businesses
recorded as making claims in the base period including those no
longer active, I recall discussion of informing those who would
be new claimants whether existing or new businesses.
115. On 30 November Jeremy Moody e-mailed an adviser
regarding the RLR: "I agree that they want all RLR changes
on IACS 22. These will also be needed to get land on where wanted
for ELS. Processing will be slow and however hard I have been
encouraging people to send in IACS22 (now for horse land as well)
there will be some sent in with the SP5s in May. RPA recognise
that."
116. The same e-mail also said: "My gossip is still
that national reserve applications will be part of the IACS form.
Wales and Scotland are both trying to do it earlier but DEFRA
doubts how. They will be pushed to do it later as it is to be
sorted by 1 August."
S. Secretary of State's Reception for Stakeholders—1
December 2004
117. This was the general pre-Christmas reception for
a wide range of DEFRA stakeholders and not a part of the general
process of CAP implementation. It was attended by myself and the
then CAAV President. It is referred to here for the following
point. In her remarks to the meeting, the Secretary of State stressed
the importance of 2005 to her Department's work. As she elaborated
on this she dwelt on the forthcoming Presidencies of the G8 and
the EU—she made no mention of CAP reform—the largest
operational task confronting DEFRA.
T. Lord Whitty Meeting—13 December 2004
118. Commons were now largely resolved so that in principle
entitlements would only go to commoners who could show that they
had been producers on the land—to equate to current system.
This gave rise to some discussion as to what constituted a farmer.
119. Later in the meeting further discussion on potentially
eligible land included acceptance of salt marsh and a discussion
on harvested reed beds.
U. RPA Meeting—10 January 2005
120. This meeting had been convened to review the draft
SP5 forms for 2005 (section SP5a to SP5d) and went through them
in detail. Again, the RPA's freedom was restricted by IT constraints
and any changes would cost it money.
121. Among the points made by the CAAV was the need for
the sections regarding the national reserve to address it in more
detail and clearly indicate the need for full submissions. The
section recording supporting documents made no provision for or
suggestion of this. Otherwise (and as proved to be the case) many
farmers would not submit them and (as proved to be the case) a
new forms (SP5e of October 2005) would be needed.
122. In the run up to May 16 Jeremy Moody advised
clients making claims on the national reserve to do so fully but
to prepare three copies: one to submit, one to keep as a record
and one to submit again when the RPA asked.
V. David Hunter Meeting—28 January 2005
123. There was a brief discussion of the possible advance
payment of part of the claimants' history. David Hunter said this
was being examined but there were many questions including administration,
National Reserve and other issues. Validation targets had to have
been reached before payments could be made because of auditing.
124. 12,000 hardship cases have been received out of
90,000 SP1 forms. About half of these reflected foot and mouth.
125. The RPA was able to get most forms out in late March
and early April to those claimants it knew about (though some
did not arrive until well into May)—well ahead of Wales
and well ahead of its performance in 2006. One immediate major
problem, again driven by IT, was its demand that all claims be
made on the actual forms provided to them with the linking bar
codes. Photocopies would not be acceptable. Enough forms had gone
out by the date of the CAAV's briefing conference at Cheltenham
on 22 March for it to be clear from members' questions that blank
forms and continuation sheets were each urgently needed in large
quantities. The IT system wished to hold the line that these should
only be available as a last resort from early May. It proved possible
to secure the release of blank forms in early April—the
CAAV itself consolidating orders for 6,000 forms for members and
their clients.
126. It is exceptionally unfortunate that with this experience
and the follow-up warnings made by the CAAV and others exactly
the same problem was hit in 2006 with blank continuation sheets
(now more important than entire forms) only becoming available
in late April—the intention was only to release them on
8 May, leaving very little time for them to be useful. It appears
that very few people who had seen the problem in 2005 were still
there in the RPA to prepare for (or even recognise the issue)
in 2006. These IT constraints have not been designed for the world
in which the system has to operate.
127. A related issue in both years has been the difficulty
the RPA's system have in recognising that they should correspond
with farmers' agents. Unless the farmer's agent has been expressly
authorised on a CReg01 form (which many farmers feel would include
the agent inappropriately within the business) all responses to
queries, mapping issues, forms, and other points are sent to the
farmer who then has to take them to his agent, simply building
delay, risk and complexity into the system. The SP9 form authorising
agents to sign for clients gives no further place in the system.
128. At an RPA meeting on 21 April 2005, we were advised
97,000 printed forms had been sent out since 9 March.
129. At an RPA meeting on 28 April 2005—140,000
forms sent out as at 27 April.
130. At an RPA/DEFRA meeting on 5 May (attended for CAAV
by Alice Russell-Hare)—180,000 forms sent out (30,000 back).
Many of these would be duplicates as the difficulty in obtaining
forms meant that some would be requested several times.
131. In an informal "sweepstake" in that meeting
on the number of forms that would be returned, a DEFRA official
thought 95,000, and an RPA official 103,000 while the CAAV said
125.000 (Jeremy Moody had said 120,000 outside that meeting).
132. At meetings with DEFRA in late April and early May
the issue of what were acceptable non-agricultural uses of agricultural
land being used to claim payment were still under discussion with
final rulings only being made on 12 May when this was critical
for some claimant's forms.
133. As an indication of the apparent inflexibility of
the IT systems, the main topic of the first RPA stakeholders'
meeting after 16 May (20 May) was the draft of the 2006 form.
We were surprised that the RPA did not talk about the processing
of the forms received.
134. 2 June 2005—RPA Stakeholders—RLR issues—Advised
that 30,000 IACS22 forms (for new land) received with SP5 forms
including 3-4,000 duplicating either where an IACS22 already sent
or where missing data field data sheet. CAAV highlighted this
potential issue at meetings the previous autumn and spring.
135. At this meeting it was being said that entitlements
statements would be sent to farmers by the end of 2005 and that
is could possibly be provisional, but would prefer to be final.
It was also said that letters would be going to farmers in autumn
2005 saying whether or not they had been successful with national
reserve applications—this did not happen as supporting documentation
had to be requested as it had been missed off the SP5 forms.
136. Subsequent meetings in June were able to begin to
address the growing urgency to understand how transfers of entitlements
would work. Despite much pressure and discussion over succeeding
months, practical answers were not forthcoming for a long time.
137. The initial priority given to RLR processing for
ELS applicants was abandoned in July.
138. Alice Russell-Hare attended a meeting with the RPA
on 9 September 2005 to which Simon Vry reported that:
— >1000% of normal annual cycle of IACS22s had
been received and that the RLR was not built to deal with that
capacity. The objective at that stage was to clear the backlog.
Vry: "They were taken by surprise";
— there were problems with the CSC as the volume
of calls was greater than expected. They were two to three weeks
behind demand due to staff numbers not being sufficient. He said
that they were developing greater capacity to deal with 2006;
— almost all data from the SP5 2005 forms had been
captured by the date of this meeting. All scanning was almost
complete as well. The scanned data then needed to be joined with
the captured data. Then the validation process commences—they
were apparently 40% through Level 1 validation at this stage and
were moving on to Level 2 checks;
— final block of IT software to be dropped 3 October
to calculate the entitlements. Vry reported that there had been
various technical issues with the system being overloaded and
crashing;
— February payments are seemingly deliverable, but
that if the October IT drop doesn't go to plan then this date
will be "untenable";
— provisional notification of entitlements will
cause stretch in RPA resources in terms of CSC; and
— eligibility inspections carried out were finding
large inaccuracies in terms of mapping between what was on the
ground and what was on the RLR.
139. Ian Hewett of the RPA reported that the SP5 validation
system had been in place 6 weeks by the date of this meeting.
Part 3—WHO ARE THE NEW SPS CLAIMANTS?
CAAV Note—8 May 2006
140. The RPA was clearly surprised to receive 120,000
SP5 forms in May 2005.
141. There are several structural reasons why it was
always likely that there would be more claimants in 2005.
142. Three reasons are inherent in the overall system:
(a) the 2005 claim was the one opportunity for anyone
with any claims on the system to establish those rights;
(b) anyone with any history of claims in the reference
period of 2000-2002 who could hold land in 2005. In an industry
of family businesses where there is always a turnover as farmers
die or retire, partnerships divide and new enterprises start,
many older businesses (including the executors of deceased farmers)
stayed on to secure their rights; and
(c) the various opportunities to claim on the national
reserve and other ways to enhance history.
143. Regulation 1782/2003 changed the definition of farming,
so that it now includes those who are simply keeping arable land
and permanent pasture in good agricultural and environmental condition.
That makes more land and a few more people eligible under any
application of the reform. However, under the historic system
the effect of this was generally no more than to offer a safety
valve for those with history (or entitlements) to find land on
which they could be paid. Nonetheless, technically land used by
horses is just as much a part of the system under an historic
approach as under an area approach but there is less pressure
to take it up. In Scotland, areas of open hill and deer forest
previously outside the system are being used to give it flexibility.
144. Under the area choice of February 2004 with its
2005 land base set by 1782/2003, this definition had a much greater
effect in offering opportunities to many who had not been claimants
before. This was the more so as it necessarily gave fifteen months
advance notice. The main sources of new claimants appear to include:
(a) those in unsupported but agricultural businesses such
as horticulture (there are a lot of small market garden units
as well as larger specialists), turf, poultry, outdoor pigs, alpaca,
ostriches and so forth. These would have been foreseeable at the
time of the choice, albeit perhaps unquantifiable;
(b) the ability to concentrate history under the hybrid
area system (possibly not foreseen in the autumn 2003 debates
on pure area but certainly foreseen by the beginning of 2004)
did add to the encouragement noted above for old claimants to
be present in 2005;
(c) where land that had been let on tenancies (whether
for grazing or otherwise) which ended between January 2003 and
May 2005, many owners took on that land in hand in readiness for
the new scheme since they could comply with the new rules. This
was a foreseeable part of what the CAAV referred to as distortions
in the land market. Many saw the prospect of securing entitlements
and the new payment as important, protecting their interests and
as perhaps more secure than rents based on decoupled production.
Equally, there was a fixation on entitlements that substantially
disrupted the high value short term horticultural lettings markets—in
many cases in apparent defiance of economic rationality;
(d) those who newly qualified by managing what was usually
permanent pasture—these obviously included larger equestrian
businesses, some conservation interests and a number of other
uses The CAAV could not see how these could be excluded but it
took DEFRA a long time to accept this consequence with the final
announcement only being made in November 2004; and
(e) new holders (by purchase or tenancy) of land who chose
not to pay the outgoer for the transfer of his history under the
private contract rules but rely on the prospect of the area element—effectively
creating two claimants where there had been one. This limited
factor only emerged as the operation of the private contract rules
of 795/2004 became evident.
145. The logic of the new system combined with the opportunities
created by 15 months forward notice of the key date worked its
way through in many ways as parties could optimise their own facts,
whether as direct claimants or by contracts with potential claimants.
Some of this was defensive as other reasons also led to business
changes. For example, once the use of land for horses was recognised
as agriculture and so susceptible to cross compliance, some farmers
separated out land used by family horses in order to insulate
the larger farming business from any cross compliance liabilities.
146. It has been easy for common discussion to suggest
that many of the new claimants only have pony paddocks. While
there will obviously be some among the 120,000 claimants, most
of the claimants on very small areas will be those with some history
who have concentrated it on those small areas. It is not obviously
rational to undertake the paperwork and assume the liabilities
when the initial payment is of the order of £7 per acre in
2006 and the long run payment perhaps £60 per acre.
147. Equally, anecdote suggests that only a limited number
of the smaller residential occupiers (or new purchasers of a house
with some land) have entered the system. Some have consciously
avoided it fearing that recording land under the regulation's
odd definition of permanent pasture could expose them to possible
future extensions of public access. More have begrudged the paperwork
and compliance burdens, some will have been unaware of it.
May 2006
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