‘Fiscal discipline’ cancels out exchange rate bonus in SFP

A BRIEF flicker of optimism over a 4 per cent swing in currency boosting UK farm subsidy payments was quickly doused by the European Union’s proposed implementation of financial disciplines that will e­ffectively remove any benefit for Scottish farmers.

Jonnie Hall of NFUS: Currency volatility a worry for farmers

Farm subsidies in the UK are determined by the euro/sterling exchange rate at midday on 30 September. Yesterday the Scottish Government confirmed the rate to be used to calculate support delivered through the 2013 Single Farm Payment (SFP) would be €1=£0.83605. This is up on the figure of €1= £0.79805 last year.

While the total funding pot that Scotland receives in euros remains fixed, the better exchange rate will ensure a significant hike in the value in sterling of the SFP to Scottish agriculture when compared with the £443 million paid out in total in 2012.

However, pressure on the Common Agricultural Policy budget means that, for the first time, Europe will bring into play financial discipline measures. Scotland will have to readjust SFP and claims under the Scottish Beef Calf Scheme by just over 4 per cent, negating much of the exchange rate benefit.

Jonnie Hall, director of policy at NFU Scotland, said: “What the exchange rate has delivered to Scottish farmers on one hand this year, financial discipline will take away with the other.

“With 85 per cent of Scottish SFP recipients receiving payments in sterling, volatility in currency remains a constant worry for many businesses.”

Holyrood’s rural affairs secretary Richard Lochhead admitted that any benefit from the swing in currency was likely to be wiped out by the financial discipline imposed by the EU. However, he pointed out that his government had successfully lobbied to minimise the impact of financial discipline on Scottish farmers, declaring: “As a result Scotland is receiving about €4m less in cuts than had originally been proposed.”

He added that the Scottish Government had a strong track record in making early Single Farm Payments, with typically 90 per cent of farmers receiving their funds by the end of December.

He said: “We are striving to achieve a similar timescale for payments this year, but need early clarity from Europe on the level of financial discipline we will have to apply.”

Hall added: “We have also put down a marker with the Scottish Government about payment arrangements under the new CAP regime in the future.

“Under the new regime, we want Scottish Government to be in a position to pay out 90 per cent of support to an individual farm business as soon as such payments are permissible.

“That would give a comfortable cushion and minimal disruption should delivery systems be under pressure.”