The EU Budget: modulating messages

The Common Agriculture Policy remains contentious and complicated yet, following the disastrous EU Budget deal (here), it is worth trying to make sense of it as it is the detail which matters.  After European haggling, attention now turns to Environment Secretary Owen Paterson and his counterparts in the devolved administrations who now have a chance to salvage something from the wreck of the EU Budget deal.

At the time of writing we still don’t know how much CAP money the UK will receive.  We're most interested in what happens to the UK’s rural development budget (the bit of the budget which funds wildlife-friendly farming).

The EU Budget deal last week slashed the rural development budget by 12% and on top of that a series of ‘sweeteners’ were given out to Member States “facing particular structural challenges in their agriculture sector or which have invested heavily in an effective delivery framework for Pillar 2 expenditure”, including France who received a huge ‘bonus’ of €1bn. The UK didn’t make it onto that list, almost certainly because David Cameron’s firm ‘cut the budget’ line meant he couldn’t ask for more for the UK in any policy area. These sweeteners reduced the rural development pot by more than €5.5bn – further reducing what’s left to be divided among other Member States.

The UK has received a very low rural development budget for political and historical reasons.  Because of this poor hand out, the UK has been left with little choice but to shift money away from direct support for farmers (aka Pillar 1) into rural development (aka Pillar 2) – a process referred to as voluntary modulation. And the UK Government and devolved administrations have all moved money at varying rates, with England consistently applying a higher rate.

These transfers, particularly in England, meant the difference between offering an open-to-all agri-environment scheme to farmers and not. Without modulation, we wouldn’t have been able to afford the entry level stewardship scheme in England as well as the higher level scheme. 

We think the higher level scheme offers the best value for money and those farmers that have entered this scheme tell us that this has now become a core part of their business (see here).  As I have written before here, the entry-level scheme needs work.  But the bottom line is we need well funded, well designed, geographically targeted schemes.  How much we need is not yet clear.  A study commissioned by the Land Use Policy Group suggests we should be spending somewhere between £1-3bn every year to meet our stated environmental objectives for climate, water, soil and biodiversity but even with voluntary modulation we don’t spend anywhere near that. That kind of spend is restricted to Pillar 1 direct payments, by far still the lion’s share of the CAP budget here.

So we know that voluntary modulation is going to be needed this time round, and as much of it as we can get.  But this is going to need some bold political decisions across the UK.  Environment Secretary, Owen Paterson, has been clear on the need to secure voluntary modulation and we look to him to turn these words into action. But the picture is not so rosy across the UK. For example, last year, the NI executive decided to opt out of voluntary modulation and ‘give the money back to farmers’ via their direct payments.

Not everyone likes modulation.  The NFU and CLA don't seem to like it.  For the life of me I can’t think why. The money stays in the farming and land management sectors, it's pretty flexible and agri-environment schemes provide a degree of economic stability for the duration of their (ten year) terms.  There’s strong evidence that agri-environment schemes have a ‘multiplier effect’ which means that for every pound spent, more money is generated in the local and national economies. When well designed, these schemes can really deliver for wildlife too and over the years many of the farmers we’ve worked with have become passionate about the birds, butterflies and other species these schemes have enabled them to support on their farms.

The usual criticism is that modulation undermines the competiveness of UK farmers.  But this should also be given short shrift.  Unlike direct support payments under Pillar 1 which lacks a clear policy objective, the rural development programme is partly designed to boost competiveness and its schemes are able to support farmers to adapt, diversify and adopt more sustainable land management approaches. If the NFU was serious about  competitiveness, and supporting farmers to reduce their dependency of direct payments, they would be championing modulation.

Yes, we have to accept that if we modulate from Pillar 1 into Pillar 2 and others don’t (or worse yet, choose to do the opposite) then our farmers will have to do different things to get their CAP money compared to their EU counterparts. But this is no bad thing – by supporting our farmers to earn more of their money through Pillar 2 schemes we’ll not only go a long way to meeting our environmental targets, we’ll help put UK farming on a more sustainable footing and justify the public’s investment long term. 

To modulate or not to modulate, what do you think?

It would be great to hear your views.