Call for level-playing field on subsidies amid dairy fears

Published on Wednesday 6 June 2007 01:10

FARMERS in Scotland, albeit reluctantly, are admitting that the plans for the new rural development programme position them at some advantage to their colleagues elsewhere in the UK.

Richard Lochhead, the Cabinet Secretary for rural affairs in the new minority SNP-led administration at Holyrood, is widely viewed as having come up with a workable package in his announcements last week while finding additional funding for specialist measures.

Indeed, there was a hint of envy yesterday on the part of Peter Kendall, president of the National Farmers' Union of England and Wales, when he spoke during a major conference on the future of the dairy industry at Stoneleigh in Warwickshire.

He said: "Dairy farmers in England are already at an immediate disadvantage to their counterparts elsewhere in the UK and many other parts of the European Union, due to the manner in which the single farm payment has been implemented.

"On top of that, we face a modulation rate - the taxing of the SFP [single farm payment] - of 19 per cent in 2009 compared to 15 per cent in Northern Ireland, 14 per cent in Scotland and just 5 per cent in the Netherlands.

"Ministers continue to say that higher modulation puts us in a better place than other countries and devolved regions.

"However, the fact is that dairy farmers in England are effectively being treated like guinea pigs in some vast experiment to see how far milk producers can be squeezed between ever-higher environmental standards on the one hand, and an even lower level of resources on the other. Any further, and it will be a test to destruction.

"We need to be moving back towards standard EU-wide rates of modulation, so that the reformed common agricultural policy does not end up repeating precisely the sort of competitive distortions that it was supposed to eliminate."

Kendall, rather like his counterpart Jim McLaren of NFU Scotland, has a reputation for speaking his mind. The Scottish option during the discussions on CAP reform in 2003 was one of making a simple decision: the level of SFP would be based on the historical average of the total level of support payments received by farmers in the reference years of 2000-2. England decided to go down a far more complicated route with the result that the Rural Payments Agency found it difficult to process claims, far less pay the cash out to farmers.

The end result is that a large number of farmers in England are still awaiting the final balance of their 2006 payments.

That is costing a veritable fortune in terms of added bank interest and disruption to cash-flow predictions. Meanwhile, Scottish farmers may not be making a fortune, but at least the money due to the vast majority was paid on time at the turn of the year. But milk producers on both sides of the Tweed still remain under considerable pressure, especially in relation to the high standards of production expected from them.

Jim Begg, the director of Dairy UK, an industry-wide organisation funded by producers and the trade, shared many of Kendall's concerns when he addressed the conference.

He said: "Clearly, society's expectation of what is an acceptable environmental impact from any industry is changing, and we must respond. We must engage actively on this agenda, which we are doing on the farming and processing sides of the industry." But Begg added: "Nowhere in the world is the environmental agenda more advanced and more demanding than in the UK.

"Potentially, this is a good thing because it puts us ahead of the field; but it also thrusts an enormous responsibility on us to ensure that policy is driven by robust science and a full understanding of cause and effect so that we can be confident that we are pursuing the right activities to deliver the greatest good."

The vast majority of thinking farmers share that perception, but higher standards come at a cost. Despite some recent and modest increases in the ex-farm price of milk, producers still feel consumers are the big winners.

Begg said: "The greater profile that this issue attains, the more important it is that the science is beyond reproach. We must also bear in mind that increasing regulation can impose additional costs, which will create competitive disadvantages."

Many of the most productive areas of Scotland have been declared as nitrate vulnerable zones (NVZs), which is likely to restrict the ability of farmers to spread fertiliser and slurry during the late winter and early spring months. This will impose considerable added costs on the dairy and pig sectors. To many, the background science of these designations is questionable.

Begg agrees: "We look to government to ensure that enforcement is proportionate and to provide appropriate support." However, it does appear, though the fine detail is still to be published, that in Scotland there will be some new support for additional storage of slurry.