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CAP budget negotiations - the facts

MoneyCAP budget negotiations – the facts

Reviewed/Updated 27 November 2014

  • What is the problem?
  • The budget position in 2013 sees Scotland receive the third lowest rate per hectare for direct payments (Pillar 1) - lower than all other parts of the UK and lower than all EU member states except Estonia and Latvia
  • Scotland receives the lowest rate per hectare for rural development (Pillar 2) funding – lower than all other parts of the UK and other member states

 

What will the CAP Budget deal mean for 2014 - 2020?

Overall CAP budget:

The final deal shaved a further 3 per cent off the CAP budget compared to the original proposal put forward by the Commission. Overall, this means a real term reduction of 13 per cent compared to 2007 – 2013 Pillar 1 direct payments:

  • The UK will receive €3.549 billion in 2014 rising to €3.592 billion in 2019. This includes a convergence                   uplift because UK receipts fall below 90 per cent of the EU average per hectare rate.
  • convergence mechanism - member states with payment rates per hectare less than 90 per cent of the EU average will receive an uplift designed to close by one-third the gap between their 2013 position and 90 per cent of EU average. Convergence to take place over 6 years from 2014 - 2019.
  • A commitment that no member state will receive less than an average rate of €196 per hectare by 2019. As Scotland is not currently a member state it will not benefit from this minimum payment rate (the UK average rate is already above €196 per hectare even though Scotland only receives around €130 per hectare).

 

Pillar 2 rural development:

  • The UK will receive €2.580 billion for the 2014 – 2020 rural development programme.
  • According to the Commission the breakdown of the rural development budget between member states calculation is based on a combination of past performance and 'objective criteria' such as area of farm land or number of farms. However, 16 member states successfully negotiated top-ups to their rural development budgets and it is unclear how this fits the objective criteria aim.
  • Pillar to Pillar flexibility – instead of modulation, the Commission’s proposals gave member states an option to transfer up to 15 per cent from Pillar 1 to Pillar 2. In addition member states had the option to transfer up to 15 per cent funds from Pillar 2 to Pillar 1 (reverse flexibility). Countries like the UK that qualified for a convergence uplift had the option to transfer up to 25 per cent from Pillar 2 to Pillar 1. Member states had to notify the Commission of their decision by 31 December 2013.
  • Cabinet Secretary for Rural Affairs, Richard Lochhead, decided that a transfer of 9.5 per cent from Pillar 1 to Pillar 2 strikes the best possible balance considering the overall reduced budget.  This decision has been notified to the Commission.

 

Scotland’s CAP budget for 2014 – 2020

The UK Government decision

Following negotiations within the UK, the UK Government announced on 8 November 2013 its decision on how the UK CAP 2014 – 2020 budget allocation will be divided between Scotland, England, Wales and Northern Ireland.

During the negotiations, the Scottish Government asked for the full Pillar 1 convergence uplift to come to Scotland. We argued that it was only because of Scotland’s very low per hectare rate that the UK as a whole falls below the EU’s 90 per cent threshold. Scotland’s rate is only around 45 per cent of the EU average rate while England, Wales and Northern Ireland’s rates are at or above the EU average. There was cross party support in the Scottish Parliament for this position. The Scottish Government also called for the UK Pillar 2 budget allocation to take account of objective criteria and not simply historic receipts.

Disappointingly the UK Government chose to ignore both these requests. The decision means the UK’s external convergence uplift will be divided on a pro rata basis between the four home nations. Scotland will therefore only receive around 16 per cent of the uplift. This results in a loss of €187 million to Scottish farmers and the Scottish economy over the six year convergence period.

Within Europe the UK Government negotiated Scotland to the bottom of the league table for both Pillar 1 and Pillar 2. Within the UK, it has done nothing to mitigate the situation despite our well founded arguments.

 

Pillar 1 – what the deal means for Scotland

  • Overall Scottish Ceiling will initially fall from €596.6 million in 2013 to €580.0 million in 2014 before rising slightly to €587.1 million in 2019
  • Scotland’s ceiling for 2014-2019 = €3,499 million
  • This is an overall fall of 1.6% in cash terms (or 12.6% in real terms) over the period.
  • By comparison, with the full external convergence uplift Scotland’s direct payment ceiling would have gone up 7.3%.
  • By 2019 Scotland’s average per hectare rate will drop to around €128 per hectare - the lowest in the EU
  • That is because countries like Estonia and Latvia (who will get €196/ha by 2019) overtake us.
  • Even new Member State, Croatia, will overtake Scotland by 2017 when its average per hectare rate reaches €141.7 per hectare and continues to rise.

 

Pillar 2 – what the deal means for Scotland

  • Scotland will get €477.8m in cash terms for 2014-2020, compared with €443.1m for 2007-13.
  • This is a 7.8% increase in cash terms but a 5.5% decrease in real terms.
  • UK Government has decided to allocate according to each administration’s share of the 2007 – 2013 Pillar 2 budget. This means:

      a) England’s share = 58.9%

      b) Scotland’s share = 18.5%

      c) Wales’ share = 13.8%

      d) Northern Ireland’s share = 8.8%

  • The deal means Scotland’s Pillar 2 per hectare rate will remain the lowest in the EU at around €12 per hectare.
  • By comparison new Member State Croatia’s Pillar 2 budget for 2014 – 2020 amounts to €2.325 billion which works out at an average of €250 per hectare per year – over 20 times that of Scotland.

 

How does Scotland compare to other countries?

Pillar 1 (in 2014)

Czech Republic has a smaller P1 eligible area than Scotland (3.5m hectares compared with Scotland's 4.6m hectares) and yet the Czech Republic gets 50 per cent more Pillar 1 funding than Scotland (€875m compared with Scotland's €580m) which means the average Pillar 1 rate per hectare in Czech Republic is almost twice that in Scotland.

Denmark has an even smaller area which is less than two thirds of Scotland's eligible area (2.7m hectares compared with Scotland's 4.6m) and yet Denmark gets more than 50 per cent more Pillar 1 funding than Scotland (€926m compared with Scotland's €580m) which means that the average per hectare Pillar 1 rate in Denmark is almost three times the Scottish average Pillar 1 rate.

Although Ireland has only slightly more eligible land under Pillar 1 than Scotland (4.64m hectares compared with Scotland's 4.60m) Ireland gets more than twice as much as Scotland to fund Pillar 1 (€1216.5m compared with Scotland's €580m) which means the Irish average per hectare Pillar 1 rate is just over double the Scottish average.

Pillar 2 (2014 – 2020)

Although the area of agricultural land is smaller in Czech Republic than the area in Scotland, the Czech Republic is able to pay Pillar 2 average per hectare rates which are more than 7 times those in Scotland (€88 per hectare in Czech Republic compared with €12 per hectare in Scotland).

Denmark with less than two thirds of the agricultural area of Scotland, has average per hectare Pillar 2 rates which are more than two and a half times as high as Scottish Pillar 2 rates (€34 per hectare in Denmark compared with €12 per hectare in Scotland).

Although Ireland has a slightly lower agricultural area than Scotland, its average per hectare Pillar 2 payment rate is almost 6 times that of Scotland (€69 per hectare in Ireland and €12 per hectare in Scotland).

The total allocation to Scotland under the Rural Development Regulation 2014 - 2020 amounts to €477.8 million. This compares to some €2.4 billion allocated to Finland – a country of similar size to Scotland in population terms (5.2 million people) or €2.2 billion allocated to Ireland – a country smaller than Scotland in terms of utilised agriculture area.