COMMON AGRICULTURAL POLICY—MODULATION
OF FUNDING FROM PILLARS 1 TO 2 (10014/06, 10016/06)
Letter from Lord Rooker, Minister for
Sustainable Farming and Food, Department for Environmental, Food
and Rural Affairs to the Chairman
Further to your letter of 20 July 2006,[71]
I wanted to give you a brief update on the progress of the above
draft regulation following its consideration in Lords' Sub Committee
D. I would also like to respond to your letter of the same day
to Barry Gardiner[72]
concerning rural development funding 2007-13, as the issues you
raise in both of these letters are closely related.
Taking modulation first, the proposal is currently
subject to consultation procedure with the European Parliament.
On 14 November, the Parliament voted in favour of rejecting the
Commission's proposal outright. The Special Committee for Agriculture
also discussed the draft voluntary modulation regulation on 14
November, and unanimously agreed that they remained supportive
of the proposal as it implemented part of the December 2005 European
Council agreement on future financing for 2007-13. We now expect
the Commission to refer the proposal back to the Parliament who
will allow the Agriculture Committee up to two further months
to reconsider it. This means that it is unlikely that the opinion
will be provided formally until January 2007 at the earliest.
When the consultation procedure has been concluded,
the dossier will be referred back to Agriculture Council for negotiation
and adoption. Once the new voluntary modulation regulation has
been formally adopted, the UK will be able to finalise rural development
financing arrangements for 2007-13, including the rate of voluntary
modulation and any domestic match-funding that will apply.
I can assure you that in all discussions on
this dossier at European level, the UK has objected to the aspect
of the Commission's proposal which, contrary to the December 2005
Council conclusions, would require voluntary modulation funds
to respect the minimum expenditure per axis rules governing other
rural development funds. The UK has also made strong representations
that voluntary modulation should continue to operate on a regional
basis without a franchise applying as it currently does.
Turning to other rural development funds and
your letter to Barry Gardiner, as you know, proposal 10016/06
set overall rural development budgets and received legislative
effect as Council decision 493 of 19 June 2006. This paved the
way for the European Commission to prepare the detailed breakdown
of this funding by Member State through Commission Decision 636
of 12 September 2006. This decision confirmed that the UK's allocation
for 2007-13 from the European Agricultural Fund for Rural Development
will be €1,909,574,420, approximately £1.3 billion.
You raise a number of concerns in your letter
to Barry Gardiner relating to the overall level of rural development
support, balance between the two pillars of the CAP, the allocation
of funds to Member States, and the levels of compulsory modulation.
It is no secret that the UK is disappointed with the allocation
methodology used by the Commission to share EAFRD funds amongst
Member States. Equally, we had hoped that the December 2005 European
Council would have agreed to increase rural development funding
as a proportion of overall CAP spending, as this would have been
consistent with the direction expressed in the joint Defra/Treasury
Vision for the CAP. In the absence of this, it was of course crucial
that the Council agreed the provisions which should allow the
UK to continue to use the voluntary modulation mechanism in order
to supplement its rural development spending.
The UK Government hopes that the issues you
have rightly highlighted will be addressed as part of the 2008-09
CAP healthcheck and subsequent EU budget review, both of which
were important aspects of the 2005 budgetary agreement. Commissioner
Fischer Boel has already indicated that she hopes to secure additional
compulsory modulation as part of the health-check, and the UK
is supportive of this notion. The health-check will provide a
valuable opportunity for all Member States to debate the long-term
future of the CAP, including the balance between the two pillars
and distribution of funds to Member States.
29 November 2006
Letter from Lord Rooker to the Chairman
I wrote to you on 29 November 2006 to provide
you with an update on the progress of the draft European Council
regulation on voluntary modulation of CAP payments, and undertook
to keep you informed of developments.
On 13 February 2007, the consultation procedure
for this dossier with the European Parliament was concluded. Although
the Parliament formally rejected the proposal, under the consultation
procedure this allowed the dossier to be returned to Agriculture
Council for negotiation and finalisation. The German Presidency
issued a draft compromise version of the text on 2 March and a
copy is enclosed with this letter. The Presidency's intention
is that the proposal will be considered in the Agriculture Council
on 19 March.
The draft compromise text is significantly different
from the version that was retained under scrutiny following consideration
at a meeting of Sub-Committee D on 19 July 2006. Importantly,
the compromise text recognises that special considerations are
required for those Member States who have operated voluntary modulation
in the past, principally (but not exclusively), the United Kingdom.
Consequently, this version of the compromise text, if adopted,
would permit the United Kingdom to operate voluntary modulation
on a regional basis, with different rates allowable in England,
Scotland, Wales and Northern Ireland. The new version of the text
would also allow us to continue to operate voluntary modulation.
without it being subject to the €5,000 franchise governing
compulsory modulation. This would help us to keep the rate of
voluntary modulation applied to a lower level than would otherwise
be the case. You may recall that these issues concerning regionalisation
and the franchise were two of the key UK concerns about this dossier
highlighted in my Explanatory Memorandum of 14 June 2006, so these
are welcome developments.
The third concern expressed in the above-mentioned
Explanatory Memorandum was that the regulation ignores the European
Council conclusions with regards to the minimum expenditure per
axis rules. There has been no change to this aspect of the regulation
in the draft compromise text, so as drafted, 10% of voluntary
modulation funds would have to be spent on Axis 1 measures, and
10% on Axis 3 measures.
There are two further issues addressed in the
compromise proposal. The first is an indication, in Article 1,
that if there were to be any future increases in compulsory modulation,
which applies across all Member States, then voluntary modulation
would be reduced. The UK supports this approach, which also addresses
one of the key concerns raised by the European Parliament.
The second addition is a requirement on those
Member States intending to apply voluntary modulation to demonstrate
that they have made an assessment of its impact. Again, the UK
is content with this requirement—we would in any case expect
to provide a justification for our use of voluntary modulation.
As you may be aware, discussions on voluntary
modulation are still continuing with the European Parliament.
Although the formal consultation procedure on this dossier has
concluded, as a result of its objections to voluntary modulation,
the European Parliament has held in reserve 20% of the 2007 budget
for rural development. The Presidency is seeking a solution which
would enable this reserve to be lifted. We are continuing to press
for voluntary modulation to be settled as quickly as possible
in a manner which provides the necessary flexibility we need in
the UK.
There is therefore no guarantee that the Presidency
compromise text will not be subject to further change in the final
stages of negotiation. It remains a possibility, however, that
the proposal will be put to a vote at the Agriculture Council
on 19 March. I should be grateful therefore if your Committee
would now give us clearance on this proposal to enable the UK
to reach the best deal possible in the Council. I shall, of course,
report back on the Council's deliberations.
8 March 2007
Letter from the Chairman to Lord Rooker
The above dossier was considered by Sub-Committee
D at its meeting of 14 March 2007 on the basis of your letter
of 8 March.
In your letter of 29 November 2006 you emphasised
that the UK Government had three priorities in the negotiations—to
ensure that voluntary modulation can operate at the regional level;
to ensure that it should continue to operate without the €5,000
franchise; and to avoid the imposition of "minimum expenditure
per axis" rules.
We understand from your letter that the Presidency
Compromise has resolved the first two issues but not the third.
We understand also that the Compromise is expected to receive
the support of the Commission and all Member States. In addition,
we understand that the European Parliament has been using its
budgetary powers to oppose the Proposal but that the Parliament
may well agree to a text restricting voluntary modulation to the
UK and Portugal.
We appreciate the importance of gaining agreement
on this dossier, particularly as the right of Member States to
apply voluntary modulation was agreed as part of the December
2005 budgetary compromise, and we are therefore content to release
the Proposal from scrutiny in the expectation that the above policy
objectives will be met in the final text. We would, however, appreciate
written information from you on the content of the final agreement
and further clarification of the likely impact of the "minimum
expenditure per axis rules" throughout the UK.
15 March 2007
71 Correspondence with Ministers, 40th Report of Session
2006-07, HL Paper 187, p 235. Back
72
Correspondence with Ministers, 40th Report of Session 2006-07,
HL Paper 187, pp 233-234. Back
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