SINGLE FARM PAYMENT SCHEME AND CAP REFORM - FREQUENTLY ASKED QUESTIONS
AS AT 17 MARCH 2004
1. Single Farm Payment Scheme
1.1 What is the Single Farm Payment Scheme (SFPS)?
1.1.1 The SFPS is part of the package of measures agreed under the heading of CAP Reform. Its main legal basis is European Council (EC) Regulation 1782/2003. The intention is that SFPS will replace the existing direct, main support schemes i.e.
Arable Area Payments Scheme (AAPS)
Beef Special Premium Scheme (BSPS)
Extensification Payment Scheme (EPS)
Sheep Annual Premium Scheme (SAPS
Slaughter Premium Scheme (SPS)
Suckler Cow Premium Scheme (SCPS)
It will also include associated payments like the LFA Supplement on sheep.
1.2 How will SFPS be calculated?
1.2.1 Following a wide-ranging public consultation exercise, the Scottish Executive decided to opt for calculating the SFP on the basis of a business' track record of farming activity under existing subsidy schemes and the land used to support the relevant payments (sometimes referred to as the individual payment claims or historic or reference period approach)
1.2.2 The calculation is the average of the farming activity expressed as a financial value divided by the land area to arrive at a number and rate of Payment Entitlements.
Hypothetical Example: - Suppose the calculation based on the average number of livestock claimed by a sheep-only farmer leads to 4,517 p.a. in the historic reference period (2000 - 2002) and the average forage area used to support his claims was 100 hectares. The calculation to find out the unit value of each Payment Entitlement would look like -
Therefore, the farmer is said to have 100 payment entitlements at 45.17 each. Remember - the number of hectares in the reference area that a producer has is also the number of his payment entitlements. In practice, this kind of example will be subject to other variables, for example modulation and reductions to create the National Reserve and the National Envelope in the beef sector.
2. Eligibility
2.1 Who is eligible for the Single Farm Payment?
2.1.1 Farmers and crofters are eligible for SFPS if they received payments under any of the direct support schemes listed at paragraph 1.1.1 in any of the calendar years 2000, 2001, or 2002.
2.2 Is it the Landlord or Tenant who is eligible?
2.2.1 The principle behind SFPS is that the entitlement goes to the business that was farming or managing the land during the reference period. To receive the payment the business will have to have eligible land at its disposal in 2005, and each subsequent year, to claim its entitlement against.
2.3 What happens if my holding changes hands or my business changes its status?
2.3.1 There is provision in the EC Regulation to cater for holdings that merged or split up to 31 December 2004. This means the holdings will be put into a position where they will be no better and no worse off than if the merged or split holdings had existed since the start of the reference period.
2.3.2 There is provision in the EC Regulation for a farmer / crofter who inherits a business to be eligible to the same degree as the deceased.
2.3.3If a partnership or sole trader becomes a limited company, or there are any other changes in status of the business, this does not alter eligibility.
2.3.4 In the case of the sale of a complete holding (or part of a holding) the position is still be clarified through the Implementing Regulations. . In very broad terms, and subject to conditions, if a holding changes hands at any time prior to 31 December 2004, the payment entitlements earned will transfer to the purchaser if this is provided for in the contract and if the seller establishes the payment entitlements in 2005. Farmers who purchased land according to certain conditions and not later than 20 September 2003, are likely to have a call on the national reserve. This is currently being determined as part of the implementing regulations.
3. Reference Period and Amount
3.1 What do "Reference Period" and "Reference Amount" mean?
3.1.1 The reference period is the calendar years 2000, 2001 and 2002, except in certain circumstances, - see below. The SFPS is based on details of the farming activity in relation to the direct support schemes, i.e. livestock numbers in relation to sheep and bovine schemes and land in relation to area-based schemes, undertaken in this period.
3.1.2 The average of the farming activity (i.e. livestock numbers in relation to sheep and bovine schemes and land in relation to area-based schemes,) multiplied by rates specified in EC Reg. 1782/2003 gives the reference amount. It is important to note that the SFPS is NOT based on the average of payments received in the reference period.
3.2 Can a farmer / crofter choose a different reference period?
3.2.1 No. There is no free choice over the reference period to be applied. Different periods may be used depending on circumstances affecting production - see below.
3.3 What happens if my farming activity was adversely affected during the reference period?
3.3.1 Firstly, you must demonstrate that production was adversely affected by an event that can be classified as
force majeureor exceptional circumstances e.g.
the death of a farmer / crofter;
long-term professional incapacity;
a severe natural disaster gravely affecting the holdings agricultural land;
the accidental destruction of livestock buildings on the holding; and
an epizootic affecting part or all of the farmer's / crofter's livestock (e.g. Foot-and-Mouth Disease).
3.3.2 Secondly, if only one or two years from the period 2000 to 2002 are affected these will be excluded from the calculation and the reference amount will be based on the unaffected year(s). If the complete period is affected, an alternate reference period, 1997 to 1999, will be used.
3.3.3 Thirdly, if any part of the alternate reference period is similarly affected for the same or different reasons, you will have to demonstrate again that the force majeure / exceptional circumstance criteria has been satisfied. The reference amount will be based on any unaffected year(s).
3.3.4 Fourthly, in the event that the whole of the alternate reference period is also affected, SEERAD is obliged to calculate a reference amount according to objective criteria and in a way that ensures equal treatment between farmers / crofters.
Note: the above will be subject to the implementing rules and, clearly, each actual case would be determined on its own merits. Participants in Agri-Environment Scheme who may have restricted livestock numbers or reduced cropping areas as part of a management agreement may have similar rights to request an alternative reference period. This area too depends on the final implementing regulations and further advice will be issued when details are known.
4. Payment Entitlements
4.1 What are "Payment Entitlements"?
4.1.1 "Payment Entitlement" is the term for the rate of payment per eligible hectare under the SFPS. The number of entitlements refers to the number of hectares used in the reference period.
4.2 Are all entitlements the same?
4.2.1 No. Under the historic reference period method of calculation, payment entitlements will be calculated on an individual's track record under the existing direct payment schemes in the period 2000 to 2002.
4.2.2 The type of entitlement will also vary; i.e.
Normal Entitlements - these will be based on sheep, cattle and arable claims;
Set-Aside Entitlements - these will be based on the average number of hectares in compulsory set-aside.
Special Entitlements - Those who were granted payments but had no hectares during the reference period and those whose entitlements would otherwise be €5000 or more per hectare.
4.3 How will my normal Payment Entitlements be calculated?
4.3.1 There will be three stages:-
Firstly, the calculation of the reference amount. We will establish the level of farming activity in each applicable year of the reference period.
From SAPS claims, we will take the number of sheep that have been certified as meeting all scheme conditions. Similarly from bovine schemes, the numbers of cattle. The numbers of livestock will then be multiplied by the rates per head set for the 2002 schemes (irrespective of the reference period used). These amounts will then be averaged over the reference period.
From AAPS claims, we will take the number of hectares of cereals, oilseeds, protein etc crops and the number of hectares, if any, in excess of the compulsory set-aside requirement. Again, an average number of hectares will be calculated and this figure multiplied by the yield set out in the regionalisation plan for Scotland in 2002. The total calculated tonnage will then be multiplied by €63 per tonne, laid down in EC Reg. 1782/2003. (Note: the yields referred to are 5.21 tonnes / ha for the LFAs and 5.67 tonnes / ha for the NLFA.)
Secondly, the calculation of the reference area. Again this is an average of the number of hectares that gave rise to the livestock (i.e. forage), arable or set-aside payments concerned.
Thirdly, the calculation of the number and value of payment entitlements. The reference amount will be divided by the reference area to arrive at the value of each Payment Entitlement. The number of entitlements will equate to the average number of hectares in the reference area.
4.3.2 A possible approach is shown at ANNEX B: SFPS - EXAMPLE OF PAYMENT ENTITLEMENTS (LIVESTOCK SCHEMES). When looking at the example, it is important to bear in mind the accompanying explanation.
4.4 Will the value of my Payment Entitlements be affected if base payments were reduced because of penalties (i.e. over and above actual shortfalls)?
4.4.1 The value of payment entitlements depends, in the case of livestock claims, on the number of animals determined as meeting all scheme conditions. If a claim was penalised because of a shortfall of animals, only the number of animals certified as meeting all the scheme conditions will be taken into the calculation of payment entitlement.
4.4.2 In practice, if farmers and crofters failed to meet scheme conditions on any animals or over-declared land in the reference period then their claim will have been reduced and that reduction will be reflected in the calculation of their payment entitlement. Understandable that future payment should be based on farming activity, which met scheme conditions.
4.4.3 Any penalties over and above those will be discounted for the purposes of calculating a payment entitlement. In that way, penalties are not being imposed on all future payment - see examples below
Examples:-
1. Suppose Farmer Smith claims 100 sheep but only 96 were found at inspection. The level of penalty is 4.17% and payment would be based on 96 animals. This is the figure used in calculating the reference amount.
2. Suppose Farmer Jones claims 100 sheep but only 90 were found at inspection. The level of penalty is 22.22% (because any error over 10% is doubled automatically), and her SAP Scheme payment would be made on 80 animals. For the purposes of calculating her payment entitlements, however, a figure of 90 animals would be used because this is the number determined as meeting all scheme conditions.
4.5 What is eligible to be counted towards the reference area?
4.5.1 In broad terms, it is the same number of hectares that gave rise to the livestock (i.e. SAPS, BSPS), arable (AAPS) or set-aside payments concerned. The existing IACS definition of eligible forage area applies, i.e. the area available for a seven-month period of the calendar year for the rearing of animals including areas in shared use and which were the subjects of mixed cultivation. The "eligible area" will include land used to produce potato starch or seeds and which gave rise to payments. It will exclude, however, areas attributable to buildings, woods, ponds, permanent crops horticulture crops that did not give rise to direct payments.
5. SFPS Conditions / Requirements
5.1 What is expected in return for Payment Entitlements under the SFPS?
5.1.1 Farmers and crofters must maintain their land in good agricultural and environmental condition and respect regulations relating to public, animal & plant health, environmental protection and animal welfare. These areas are dealt with separately in the following paragraphs.
5.1.2 Payment is conditional on Payment Entitlements being matched (1-for-1) by eligible hectares. To be eligible, hectares must satisfy two conditions:-
The land must be used for arable land, permanent pasture (including common & shared grazings); and
The land must have been at the claimant's disposal for at least 10 months.
Two important points to note:-
"…used for…" excludes areas used for non-agricultural uses (e.g. buildings), permanent crops, forests, fruit, vegetables, table potatoes; and
The starting date for the 10 months qualifying date has not been fixed. However, it cannot be earlier than 1 September 2004 (because that is set in the EC legislation).
5.1.3 The remaining requirements come under the heading of "Cross-Compliance" and there are two elements to that, and can apply outwith the eligible hectares noted above (ie at the holding level). One is about maintaining land in good agricultural and environmental conditions (GAEC). European Regulation (EC) 1782/2003 governing CAP Reform sets out the framework that covers:
protecting the soil from erosion;
maintaining organic matter levels in the soil;
maintaining soil structure; and
ensuring a minimum level of maintenance for, and avoiding the deterioration of, habitats.
5.1.4 The other part of cross-compliance is the respect of regulations relating to public, animal & plant health, environmental protection and animal welfare. There are some 18 EC Directives and Regulations involved, known as Statutory Management Requirements, and whilst these are already in force, the EC legislation phases these in as cross-compliance requirements. The following are examples of legislation that apply from 2005:-
5.2 Who decides what good agricultural & environmental conditions (GAEC) are?
5.2.1 We have been in discussion with technical experts and interested parties (i.e. NFUS, SLF, SAC, FWAG, Environment LINK, SEPA and SNH) about what appropriate standards should be within the parameters specified in the legislation. The aim is to build-in sufficient flexibility to allow recognition of local factors such as differing soil or climatic conditions, cropping patterns, land use and farming structures.
5.2.2 We have started a public consultation exercise on the proposed good agricultural and environmental conditions (GAEC). Public participation in the exercise will be important so that views can be taken into account when final decisions are taken.
5.3 Does GAEC mean minimum / maximum stocking densities?
5.3.1 The current consultation on Cross Compliance has provisions for over and under grazing but does not contain any stocking densities. If over or under grazing is found, conditions may be set to address this and these may include appropriate stocking densities for that particular farm.
5.4 What happens in the event of non-compliance with Cross-Compliance?
5.4.1 Where there is non-compliance, in whole or in part, with the Statutory Management Requirements or GAEC Payments Entitlements can be reduced or cancelled depending on the severity, extent, permanence and whether the instance of non-compliance is a first or repeated offence.
5.4.2 The exact penalties will not be known until the European Commission Regulations that detail the working rules of the SFPS are finalised (expected April 2004).
6. Business / Holding Payment Entitlements
6.1 How will I find out what my Payment Entitlements are?
6.1.1 Notification of payment entitlements will take two forms: details of planned payments published to meet regulatory requirements and indicative information issued to producers to enable business decisions to be taken at an early stage. These are dealt with separately in the following paragraphs.
6.1.2 We are required under the terms of EC Reg. 1782/2003 to send eligible farmers and crofters an application form showing the;
The application form will be issued with the Area Aid Application (AAA) form at the beginning of March 2005.
6.1.3 We also recognise that you, as a producer, will need to know what your payment entitlements may turn out to be at an earlier stage so that decisions on cash flow, planting / cropping schedules, etc can be taken. Accordingly, we are planning to issue indicative information in two stages:
Now decisions have been taken on the main flexibilities within the CAP Reform agreement, we will be able to issue details of farming activity (livestock and arable issues) together with reference area in the historic reference period. These will be a preliminary view based on information the Department holds. Given that the public consultation period closed on 6 January 2004 and important EC Regulations, with an impact on payment entitlements, are not expected before Easter 2004, the latest estimate is that this information will be issued by 1 June.
With continuing work on the computer system and the expectation that a number of the details about the SFPS and the business rules will become clear over the summer, we hope to refine the information on payment entitlements and issue further notification to farmers and crofters by the late autumn of 2004
6.2 What will the Notification of Payment Entitlements look like?
6.2.1 We cannot be specific at this time because the development work is still in progress. A possible approach is shown at ANNEX B: SFPS - EXAMPLE OF PAYMENT ENTITLEMENTS (LIVESTOCK SCHEMES). When looking at the example, please bear in mind the accompanying explanation.
6.3 Why is the process so long?
6.3.1 The simple explanation is that the final details of the scheme, will be emerging over time and we will not have the hard information necessary to calculate payment entitlements with certainty until late 2004. Final payments may not of course be worked out until we receive your 2005 application, as you would expect.
6.3.2 The regulation on which SFPS is based (EC Reg. 1782/2003) only takes matters so far. It covers the broad principles of the CAP Reforms but lacks the detailed information on how these should be implemented. Regulations covering these aspects are not expected before Easter 2004. In addition, many parts of the regulations, e.g. cross-compliance arrangements, hardship cases, criteria for applications to the National Reserve, require us to work out fair ways of dealing with the issues. These arrangements will need to be discussed with stakeholders to ensure fairness, other administrations to ensure consistency and with the European Commission to ensure acceptability.
6.3.3 There is also the question of "affordability". Because of the way the CAP Reforms are financed, we will need to settle details of farming activity for those producers whose production was adversely affected during the reference period (
see paragraph 3.3) before we can calculate final values of payment entitlements.
At the national level the total value of payment entitlements cannot exceed the ceiling set by the Commission. (Provision will have to be made to allow a National Reserve in relation to special cases who will be able to apply for entitlements, and for the National Envelope provision for Beef producers, the financing of these flexibilities will need to be accounted for before the calculation of SFPs.) By issuing indicative information from 1 June onwards, we hope that these cases can be reviewed and settled without harming the application or payment timetable.
6.3.4 Finally, it should also be borne in mind that this will be a major exercise involving working out entitlements for over 20,000 producers for Scotland alone. We will do our best to be as helpful as possible. Please help us by being patient when we are busy.
6.4 Will Payment Entitlements be paid in full? What reductions will be made?
6.4.1 There will be a number of deductions from payment entitlements:
The following are definite deductions although in some cases the exact amount will not be known until after the implementing regulations have been finalised or until we have finalised the calculation of entitlements:
A fixed percentage deduction to fund a National Reserve to help those in special situations. The exact percentage is still to be decided but it could be up to 3%;
A combined rate of Compulsory and National modulation. This was part of the consultation exercise and the Scottish Executive has decided that the level of modulation will be at least 10% by 2007, although this is subject to review following decisions on match funding and the EC implementing Regulations. The percentage deduction to fund compulsory modulation will be: 3% in 2005, 4% in 2006, and 5% every year thereafter until 2012. (Remember: the first €5,000 of direct payments is exempt from compulsory modulation - see paragraph 14.2.2.) A percentage reduction to fund a separate National Envelope for the beef sector. The deduction of 10% can apply only to those receiving beef-related subsidies during the historic reference period (i.e. those with entitlements based on SCPS, BSPS and SPS).
The following are possible deductions depending upon the calculation of total payment entitlements:
A linear reduction of the reference amounts in order to ensure respect of Scottish national ceiling;
A linear reduction of entitlements (over and above the mandatory reduction) in case the national reserve is not of sufficient size;
6.5 Can SEERAD's assessments be challenged?
6.5.1 Yes. By adopting the timetable set out in paragraph 6.1, we hope that farmers and crofters whose production was adversely affected in the reference period will come forward at an early stage so that the information on which payment entitlements are based can be reviewed.
6.5.2 Until the scheme becomes officially effective, there will be no formal appeals mechanism like the existing IACS Appeals machinery. However, such a system will be established and dealing with challenges on an informal basis will not undermine a farmer or crofter's right to formally appeal once the Scheme is operating.
6.6 Will SEERAD provide potential beneficiaries with copies of past claims?
6.6.1 Past claims would not be helpful, as they do not detail all the base information on which Payment Entitlements are calculated nor show relevant information in a way that farmers and crofters would find helpful to calculating payment entitlements for themselves. We plan to issue information on Payment Entitlements in a way that makes all the elements of the calculation clear and will enlist the help of stakeholders and the External Communications Panel to ensure that this objective is achieved.
6.7 What is the impact of exchange rates & inflation on Payment Entitlements?
6.7.1 Payment Entitlements will be calculated using 2002 rates fixed in Euros (€) but paid in the sterling () equivalent. We are required to use the exchange rate set in EC Regulation which is in fact the average of € / exchange rates over the December in the year preceding payment.
6.7.2 Payment Entitlements will not be increased to take account of inflation.
7. Applications and Payment
7.1 When does the Single Payment Scheme start?
7.1.1 The scheme year follows the calendar year: the first year will run from 1 January 2005 to 31 December 2005.
7.2 How do I apply for the SFPS?
7.2.1 We will issue you with an application form showing your payment entitlements (see paragraph 6.1.2). You must check and sign the application form to indicate acceptance of obligations and undertakings and return it to us. Facilities will be available to submit the application form electronically using SEERAD's SCOTFARM Online.
7.2.2 You will also have to submit an IACS / AAA form and associated field data sheets etc covering your current eligible land in order to "activate" entitlements.
7.3 When is the closing date for SFPS applications?
7.3.1 The last day for receipt of applications will be 15 May 2005. It is very important to note that, according to the latest draft implementing regulations, except in cases of force majeure, penalties will be applied for late submissions. If the delay is more than 25 calendar days the application will be inadmissible and the producer will not be allocated entitlements.
7.4 Why is it important to apply in 2005?
7.4.1 If you do not apply in 2005, your payment entitlements will be transferred to the National Reserve. This means that you will have forfeited your automatic rights to claim under the scheme. Completing the application means that you will have registered an intention to take up your entitlements and you will have 3 years to do so before any unused entitlements are transferred to the National Reserve.
7.5 When will I be paid?
7.5.1 EC Reg. 1782/2003 states that payments under the SFPS must be made between 1 December and 30 June of the following year. This means that we are planning to pay as many valid claims as possible at the earliest point in the payment window i.e. from 1 December 2005.
7.6 Will I be able to get an advance on my payment?
7.6.1 There is provision in the EC Reg. for advance payments but only under certain, very strict, specified conditions, which the Commission has set. Any arrangement for advances would have to be with the agreement of the European Commission. We do not have any plans at present to pay advances: the intention is that claimants will be paid in full during the payment window.
8. Transfers of Land & Entitlements - Sales & Leasing
8.1 What now for producers with land and entitlements?
8.1.1 For producers who receive an allocation of payment entitlements in 2005, that is, after the Scheme comes into being, they will be able to:
sell land and the equivalent number of payment entitlements either together or separately. In the case of the sale of payment entitlements without land a farmer may transfer his payment entitlements only after he has used at least 80% of his payment entitlements during at least one calendar year or, after he has given up voluntarily to the national reserve all the payment entitlements he has not used in the first year of application of the single payment scheme. .
lease out entitlements, but in that case an equivalent number of eligible hectares must accompany them from the same business. In the case of a lease arrangement, the land involved must have been declared as eligible as part of the IACS / AAA process on 15 May before the lease.
8.1.2 There is the option to apply a siphon on sale of entitlements. Details are still to be agreed in the implementing legislation and no decisions have been taken on whether this will be used in Scotland.
8.1.3 For producers who are granted reference amounts from the National Reserve, see paragraph 9.6.1.
8.1.4 See paragraph 7.4.1 for the importance of applying for payment entitlements.
Note: When farmers or crofters are contemplating buying or leasing land and / or entitlements, it will be their responsibility entirely to confirm the status, accuracy etc of the land and / or entitlements in question, and make the appropriate legal arrangements where necessary. They will be responsible solely for any commercial decisions taken on that information.
8.2 Will transfers of my payment entitlements be siphoned, like quotas?
8.2.1 EC Reg. 1782/2003 contains a provision to allow us to operate a siphon arrangement in the case of sales of entitlements. The provision may operate by either a proportion of the value or a number of entitlements sold being transferred to the National Reserve in order to help producers in special circumstances. Further details from the EC implementing regulations are required before reaching any decision on whether such an arrangement should be operated.
8.3 Will payment entitlements be ring-fenced?
8.3.1 It is not likely to be possible to transfer payment entitlements outwith Scotland. Further ring fencing will depend on any decision being taken to restrict transfer within Scotland.
9. National Reserve
9.1 What is the National Reserve?
9.1.1 The Reserve is simply a fund created by reducing all reference amounts to help certain categories of producers. The following category must be dealt with under the national reserve:-
Farmers and crofters who find themselves in "special situations" which at the moment are considered to be producers who inherit land that was leased to a third party in the reference period, those developing businesses prior to 29 September 2003, producers leasing land after 31 December 2002 but before 29 September 2003, and producers who are participating in a national program of production re-orientation.
The following categories may be dealt with under the national reserve.
New entrants to agriculture from 2002 who have not been involved in agricultural activity in the previous 5 years;
Farmers and crofters active in areas where publicly funded restructuring and / or development measures and who faced land abandonment or specific disadvantages because of developments.
9.2 How much is the reduction to reference amounts?
9.2.1 EC Reg. 1782/2003 provides for two forms of deduction, one certain, the other dependant upon demand, viz
A fixed percentage deduction to reference amounts to fund the establishment of the National Reserve. The exact percentage is still to be decided but it could be up to 3%;
A linear reduction of all entitlements to increase the amount of the National Reserve (over and above the compulsory element) to ensure that the Reserve is of sufficient size.
See also paragraph 6.4 (reductions to entitlements).
9.3 Are amounts issued from the National Reserve a one-off payment?
9.3.1 No. Reference amounts granted from the National Reserve will be available to the recipient in future years and so will need to be funded each year.
9.4 How will SEERAD allocate the National Reserve?
9.4.1 This again is something that will depend on agreement as part of the implementing regulations as to how the National Reserve will operate. We will need to examine the scope to exercise flexibility within the implementing regulations but we will consult the agriculture community on the detailed rules to be applied.
9.5 Will payments FROM the Reserve be at the same as payments TO the Reserve?
9.5.1 No. For the moment, under the terms of EC Reg. 1782/2003, successful applicants to the National Reserve will be granted a reference amount (not a number of payment entitlements) which is based on objective criteria and is not higher than the regional average. This will convert to a number of payment entitlements depending on the number of hectares the producer declares as part of his / her IACS / AAA form.
9.6 Will there be any conditions attached to any entitlements I am granted from the National Reserve?
9.6.1 Yes. You will be barred from selling the relevant payment entitlements for a period of 5 years (timed from the date of allocation). In each year of the 5-year period, any unused entitlements will go back to the National Reserve. You can, however, lease out land and the equivalent number of payment entitlements. For a lease arrangement, the land involved must have been declared as eligible as part of the IACS / AAA process on 15 May before the lease.
10. Appeals
10.1 Will I be able to appeal against SEERAD's SFPS decisions?
10.1.1 Yes. Our aim is to provide information on farming activity (and therefore the basis of payment under the SFPS) as early as possible. By doing this, it is hoped that farmers and crofters whose production was adversely affected in the reference period or who believe they are in special circumstances will come forward. This will allow the information on which payment entitlements are based to be reviewed. This stage is likely to occur over the course of 2004 and into 2005. This will not prevent a farmer or crofter from appealing formally to the external panel and the Scottish Land Court once the Scheme is operating.
10.1.2 The relevant parts of the Regulation upon which SFPS is based, come fully into effect from 1 January 2005 and our aim is to put in place an appeals system based on the existing formal appeals mechanism, the Agricultural Subsidies (Appeals) (Scotland) Regulations 2000.
10.2 What will be involved in a formal appeal?
10.2.1 The aim of the appeal process is to provide accessible and affordable systems to allow many appeals to be resolved without the need for expensive judicial involvement. The process is likely to resemble closely the existing system i.e. will consist of three stages:
An internal SEERAD review;
A review by an external panel; and
An appeal to the Scottish Land Court.
Any appeal that is fully or partly rejected at the first or second stage may move on to the next stage.
10.3 What kind of decisions may be appealed?
10.3.1 In very broad terms, they will be our decisions to refuse, reduce, or recover support under the scheme rules put in place.
11. CAP Reform - Other Flexibilities
11.1 What is involved? What has been covered? What is still to be covered?
11.1.1 The CAP Reform Agreement covered a number of aspects of agriculture. The following have been covered above:-
11.1.2 The following are not being covered in this paper although that decision will be reviewed if needs change:-
11.1.3 The following are covered separately in the following paragraphs:-
12. Dairy Sector and CAP Reform
12.1 What is in CAP Reform for the Dairy sector?
12.1.1 There are three aspects;-
A Dairy Premium to apply from 2004 to 2007. This will be based on the milk quota held by the business on 31 March each year converted to tonnes and multiplied by €8.15 per tonne in 2004, €16.31 per tonnes in 2005, and €24.49 per tonne in 2006 and 2007.
An Additional Dairy Payment to apply from 2004 to 2007. The CAP Reform agreement only contains a global, UK figure for this payment and it is still to be decided how this money will be allocated. The Commission have laid down certain ground rules i.e. the criteria used must be: objective; ensure equal treatment between farmers; avoid market distortions; and, free from linkage to market prices. If the Additional Dairy Payment were to be paid as a straight top-up to the Dairy Premium, it would equate (roughly) to €3.66 per tonne in 2004, €7.35 in 2005, and €11.01 from 2006.
(Note: the Dairy Premium and Additional Dairy Premium are intended to be compensation (in part) for price cuts.)
Decoupling from production. The Scottish Executive has decided to use the option to decouple from production at the same time as the other sectors, i.e. from 2005, so that the Dairy Premium and the Additional Dairy Payment, based on Milk quota held on 31 March that year, will be absorbed into the SFPS from that year.
12.2 Who is eligible for the Dairy Premium?
12.2.1 Producers holding milk quota on 31 March each year whose holding is located in Scotland and who produce and market milk. See EC Reg. 1788/2003.
12.3 How is the Dairy Premium worked out?
12.3.1 Suppose a Scottish farmer who produces and markets milk holds 1,000,000 litres of milk quota on 31 March 2004. Her Dairy Premium (DP) and Additional Dairy Payment (ADP) calculations would look like:
The combined Dairy Support would be made up of the following:- |
Dairy Premium per tonne | € 8.15 |
+ Additional Dairy Payment per tonne | € 3.66 |
= Combined Dairy Support = | € 11.81 |
| |
The milk quota would be converted to tonnes as follows:- |
Milk Quota (in litres) | 1,000,000.00 |
Converted to kilos (x 0.971kg per litre) | 0.971 |
Milk Quota expressed as kilograms | 971,000.00 |
Converted to tonnes (÷ 1,000kg) | 971 |
| |
The combined payment would be worked out as follows; |
Milk quota in tonnes = | 971 |
_ combined dairy support per tonne = | €11.81 |
= Combined Dairy Support (DP and ADP) | € 11,467.51 |
For the purposes of completing the above example only, the amount in Euros should be converted to Sterling at the latest available exchange rate (0.642116) to give an additional payment of 7,363.47.
In practice, this kind of example will be subject to other variables, principally modulation and reductions to create the National Reserve.
13. Farm Advisory System (FAS)
13.1 What is the aim of the FAS?
13.1.1 The aim will be to make available to farmers and crofters a source of advice on land and farm management. The range of advice offered will, at a minimum, cover the requirements to maintain land in good agricultural and environmental condition and respect regulations relating to public, animal & plant health, environmental protection and animal welfare.
13.2 How does FAS fit in with other advisory arrangements?
13.2.1 We have a National Strategy for Farm Business Advice and Skills and as part of that, ran a Whole Farm Review (WFR) pilot scheme. As a result, it is planned to rollout the WFR Scheme over the course of 2004 and consideration will be given as to how the FAS can compliment this and other advisory networks.
13.3 When does FAS start?
13.3.1 At the latest, the service will be available by 1 January 2007.
13.4 Is FAS compulsory?
13.4.1 No, participation by farmers and crofters is voluntary.
13.5 What are the arrangements for FAS? Is it on a "first come, first served" basis?
13.5.1 The details of FAS are still to be worked out. We will be obliged, however, under the terms of EC Reg. 1782/2003 to give priority to those farmers and crofters who receive more than €15,000 in direct payments (principally the SFPS).
14. Modulation
14.1 What is "modulation"?
14.1.1 Modulation is the name given to the amount of money taken away from direct support schemes, like SAPS or the forthcoming SFPS, and made available to a range of measures designed to assist with rural development. Currently, we modulate payments at a rate of 3.5%. The Treasury matches the amount of money raised in this way, and the total is available to be spent in Scotland.
14.2 What is different under CAP Reform?
14.2.1 Under CAP Reform, there will be new additional compulsory modulation at the same rates across the EU and an increased range of rural development measures that can be funded. These rates will be 3% in 2005, 4% in 2006, and 5% for the period 2007 to 2012. These modulated funds will be distributed across the Community in a way aimed at helping less prosperous (more economically dependant on agriculture) member states, but contributing member states will be guaranteed to get back at least 80% of their contributions.
14.2.2 The first €5,000 of payments under the CAP Reform arrangements is exempt from compulsory modulation.
14.2.3 The CAP Reform agreement allows member states to continue to apply National Modulation.
14.3 Will HM Treasury continue to match-fund National modulation?
14.3.1 There can be no guarantee that matched funding will either continue or continue at its present level. The commitment to match funding is only valid for the Spending Review period for which it is made and the case will be reassessed alongside other spending priorities.
14.4 What will the rates of modulation be?
14.4.1 Following the public consultation exercise we took the decision, subject to further decisions on match funding and to the forthcoming EC implementing Regulations, to set a combined rate of European (compulsory) and National Modulation of 10%, by 2007.
14.5 What is SEERAD's justification for modulation?
14.5.1 Modulation is used to fund Rural Development measures, which (in the main) are designed to help farmers and crofters build a more financially and economically sustainable future. The money is still available to farmers and crofters but in a way that has a stronger focus on delivery of economic, social, and environmental outputs that the public wants. We have recognised past problems with the number of producers able to access the rural development schemes although the situation has improved over the last year. Further improvements might be possible through the implementation of options within Land Management Contracts where the focus is on designing a menu of measures that all farmers and crofters can access and be paid for.
15. National Envelope for Beef Producers
15.1 What is this?
15.1.1 There are options in the EC Regulation to retain 10% of payments under each of the relevant sectors to establish a national envelope (i.e. a ring-fence sum of money) to address the protection or enhancement of the environment or for improving the quality and marketing of agricultural products.
15.2 What has been chosen for Scotland?
15.2.1 The option to make use of the National Envelope provision was part of the public consultation exercise and the Scottish Executive has decided to operate a National Envelope for the Beef Sector. This will be worth around 18m each year. The aim is to provide an incentive for the retention of cattle in more peripheral areas both for environmental and social reasons.
15.3 Is this extra money, over and above the SFPS?
15.3.1 No. The amounts shown in the preceding paragraph can only be subtracted from the money available for the SFPS for beef producers. In other words, the 10% limit for the envelope mentioned above counts towards the National Ceiling for Member States which opt for them. See paragraph 6.3.3 on "Affordability".
16. Business-type Questions - Miscellaneous
16.1 How will common and shared grazings be dealt with under the SFPS?
16.1.1 There will be no change to the way these types of grazing arrangements are catered for under the SFPS. Grazings that were accepted as valid in the reference period(s) will be used to calculate the reference areas. For ongoing declaration i.e. to declare common and shared grazings as eligible for the purposes claiming payment entitlements, farmers and crofters should continue to declare such land as part of the IACS / AAA process. Details of each common and / or shared grazing should be provided as normal i.e.
16.2 Will Producers who increased production since the reference period lose out?
16.2.1 See paragraph 9 on the National Reserve. The detailed rules on how the National Reserve will operate are still to be agreed as part of the implementing regulations. The draft implementing regulations do currently recognise producers who had invested to increase production since the reference period and before 29 September 2003 as possible candidates for those to be covered by "special situations" as potential beneficiaries from the National Reserve.
16.3 Will SEERAD compensate producers for the loss of Suckler Cow and Sheep Quota?
16.3.1 No. All quotas were originally given to producers without charge. The buying and selling of quota subsequently were commercial transactions between private individuals. Additionally, there will be no need for quota systems after 2004, so there is no requirement for us to buy back quota units.
16.4 Is SEERAD still committed to developing Land Management Contracts (LMCs)?
16.4.1 Yes. The Scottish Executive's Partnership Agreement gives a commitment to implementing LMCs "to deliver CAP support which takes account of diversity of Scottish Agriculture and its economic, social, and environmental impact".
16.5 What about cross-border producers i.e. those farmers with land in Scotland and, say England?
16.5.1 The exact details of how cross-border producers will be handled are still a matter for discussion between the Administrations. It is planned that whatever arrangements are put in place, the existing arrangement of one claim to cover all administrations' interests will continue. The rates and rules applying to land in, e.g. Scotland, will however apply to the land in Scotland.
16.6 If a producer quit farming in 2003, do they still get Payment Entitlements?
16.6.1 Yes, providing they received direct subsidy payments in the reference period they will be allocated entitlements if they apply in 2005. In order to receive payment against each entitlement, it must be accompanied by a hectare of eligible land. If a farmer has less land now than previously, he may not be able to activate all his entitlements. It would be possible to lease in land to activate entitlements. After three years, he will lose unused entitlements to the national reserve. He will not be able to sell his Entitlements unless he has activated at least 80%
ANNEX A: GLOSSARY OF TERMS
Agricultural Activity means the production, rearing or growing of agricultural products including harvesting, milking, breeding animals and keeping animals for farming purposes, or maintaining the land in good agricultural and environmental condition as established under Article 5,
Agricultural Products means the products listed in Annex I of the Treaty, including cotton, but with the exception of fishery products.
Application Form means the form SEERAD is required under the terms of EC Reg. 1782/2003 to send eligible farmers and crofters showing: the Reference Amount; the number of eligible hectares used in the reference period ( Reference Area); and, the number and value of Payment Entitlements. The application form will be issued with the Area Aid Application (AAA) form at the beginning of March 2005.
Area-Based Approach means to calculate on the basis of the total amount of direct payments paid to an area and dividing this total by the number of hectares in the same area that gave rise to those payments. Produces a uniform, flat rate per hectare as a basis for paying SFPS. Not being adopted in Scotland
Council Regulation 1782/2003 establishing common rules for direct support schemes under the CAP aka the Horizontal Regulation.
Cross Compliance means the conditions that a producer must respect (maintain their land in good agricultural and environmental condition and respect regulations relating to public, animal & plant health, environmental protection and animal welfare) in return for support under the SFPS.
Dairy Premium and Additional Dairy Payment mean support for Dairy Producers (i.e. those who produce and market milk and milk products) paid based on milk quota held on 31 March.
Direct Payment means a payment granted directly to farmers under an income support scheme listed in Annex I,
Eligible Land means the same number of hectares that gave rise to the livestock (i.e. SAPS BSPS etc), arable (AAPS), or set-aside payments concerned. The existing IACS definition of eligible forage area will be used. See also Reference Area.
Eligible Producers means farmers and crofters are eligible for SFPS if they received payments under any of the direct support schemes listed at paragraph 1.1.1 in the calendar years 2000, 2001 and / or 2002.
Exchange Rate means conversion factor used to convert payment rates in Euros (€) set in EC Reg. 1782/2003 to sterling for payment purposes. The average of € / exchange rates over the December in the year preceding payment will be used.
Farm Advisory System means a source of advice from 2007 onwards on land and farm management. The range of advice offered will, at a minimum, cover the requirements to maintain land in good agricultural condition and respect regulations relating to public, animal & plant health, environmental protection and animal welfare.
Farmer means a natural or legal person, or a group of natural or legal persons, whatever legal status is granted to the group and its members by national law, whose holding is situated within Community territory, as referred to in Article 299 of the Treaty, and who exercises an agricultural activity,
Financial Discipline means the control mechanism that will ensure that the CAP budget of €300m will not be exceeded. Operates, if necessary from 2007 onwards and will take the form of a percentage deduction applied to Payment Entitlements.
Force Majeure and Exceptional Circumstances means abnormal or unforeseen circumstances outside the claimant's control: a specific unpredictable event, which prevented the claimant from meeting the requirement, which he or she would have been able to fulfil. The claimant must have been unable to guard against the consequences of the abnormal occurrence despite taking all reasonable precautions. To qualify as Force majeure,both conditions must be satisfied. See paragraph 3.31 above.
Good Agricultural & Environmental Conditions (GAEC) means the standards / requirements set out in European Council (EC) Regulation 1782/2003, governing CAP Reform, namely: to protect the soil from erosion; to maintain organic matter levels in the soil; to maintain soil structure; and to ensure a minimum level of maintenance for, and avoid deterioration of, habitats.
Historic Reference Period means a business' track record of farming activity under existing subsidy schemes and the land used to support the relevant payments (sometimes referred to as the individual payment claims in the period 2000 to 2002, used as a basis for SFPS.
Holding means all the production units managed by a farmer situated within the territory of the same Member State,
Hybrid Approach means to calculate on the basis of a combination of the Area-Based Approach and Historic Reference Period (sometimes referred to as the hybrid option). This is what is intended to be adopted in England. Not being adopted in Scotland
National Ceiling means the limit set by the European Commission for the total value of Payment Entitlements within a member state or in SEERAD's case, Scotland's share of the UK ceiling. All aspects of CAP reform (SFPS, National Envelopes, etc) are paid from the National Ceiling.
National Envelopes means the options to retain 10% of payments under each of the relevant sectors to establish a National Envelope (i.e. a ring-fence sum of money) to address potential problems with CAP Reform or go towards improvements quality and marketing or encourage specific types of farming. Funded from the National Ceiling. Scotland is only opting for a National Envelope for Beef Producers.
National Reserve means a fund to help those in special situations who would otherwise have no, or a reduced Reference Amount.
Partial Re-Coupling means, effectively, the continuation in whole or in part the support measures in any of the relevant sectors i.e. Arable, Beef of Sheep regimes. Payments would be tied to production so that the existing control measures would continue i.e.: Quotas; Retention periods; Livestock replacement requirements; Crosschecks with the British Cattle Movement Service; Etc. Not being adopted in Scotland
Payment Entitlement means the rate of payment per eligible hectare under the SFPS. The number of entitlements refers to the number of hectare used in the reference period.
Payments in a Given Calendar Year or Payments in the Reference Period means the payments granted or to be granted in respect of the year/years concerned, including all payments in respect of other periods starting in that calendar year/years,
Payment Window means the period between 1 December and 30 June of the following year being period stipulated by EC Reg. 1782/2003 in which payments must be made.
Reference Amount means the average of the farming activity over the relevant Reference Period at rates specified in EC Reg. 1782/2003.
Reference Area means the average of the number of hectares that gave rise to the livestock, arable, or set-aside payments used in the calculation of the Reference Amount.
Reference Period means calendar years 2000, 2001, and 2002 or the alternate period 1997, 1998 and 1999.
Single Farm Payment Scheme means the measure designed with the capacity to replace all of the existing direct support schemes (AAPS, BSPS, EPS, and SPS & SCPS). Part of the package of measures agreed under the heading of CAP Reform. Its legal basis is European Council (EC) Regulation 1782/2003.
Scheme Year means the calendar year, that is the first year of the SFPS runs from 1 January 2005 to 31 December 2005.
Special Situations means … [ awaiting details from the final implementing regulations]
ANNEX B: SFPS - EXAMPLE OF PAYMENT ENTITLEMENTS (LIVESTOCK SCHEMES)
NOTE; - THIS EXAMPLE IS FOR ILLUSTRATIVE PURPOSES ONLY AND SHOULD NOT BE TAKEN AS DETAILING AN ACTUAL PAYMENT
The following page attempts to show how a hypothetical producer's Payment Entitlements might look under the SFPS. In practice, the calculation might be subject to other variables, and may change depend on the EC implementing rules.
Background
The producer claimed under the various livestock schemes throughout the reference period (2000 to 2002) and declared areas of forage as part of the IACS / AAA form process as at 15 May in each year of the reference period. Note:-
BSPS 2000 was subject to scale-back. The scaled-back animal numbers are taken forward into the calculation;
The EPS variant for this producer was the high rate option.
EPS 2001 animals are equal to or less than the average of the 2000 and 2002 animal numbers because of the application of the correcting co-efficient due to FMD control measures. (NB: this is a very basic summary of the adjustment).
The example excludes OTM animals under the SPS for 2000 and 2001. Numbers held by SEERAD for 2002. (The missing details were to not to hand at the time of drafting.)
Under SCPS, the Beef National Envelope (BNE) operated in 2001 and 2002 and paid as a top-up to the SCPS rate;
Under SAPS, the Sheep National Envelope (SNE) was introduced in 2002 and paid as a top-up to the SAPS rate;
The 2002 rates used are the actual payment rates in force, calculated on the basis of the € / exchange rate in force during December 2001.
Calculation
The Reference Amount for each scheme is: the number of animals x 2002 rate ÷ 3
The Total Reference Amount is the total reference amount for each scheme involved (70,159.09)
The No of Entitlement is: Total hectares in the reference period ÷ 3 (384.63)
The Value of Entitlement is: Reference Amount ÷ No of Entitlements
In this example, items 1 to 3 above are shown in the following table. Item number four looks like:-
70,159.09 ÷ 384.63 hectares = 182.41 per hectare
Adjustments
The above represents the gross figure (gross estimated unit value of entitlement = 182.41 per hectare) and does not take account of anticipated adjustments to payments.
In practice, this figure will be reduced in order to provide a contribution for the National Reserve (not yet decided, but can be not more than 3%) and Modulation (European or compulsory modulation at 3% and a percentage for National Modulation yet to be determined). As the producer is also a participant in the beef sector, a contribution to the National Envelope for Beef Producers would be levied. The Net Unit value of the payment entitlements multiplied by the Number of entitlements will equal payment under the Single Farm Payment Scheme.
Comparison
For comparison purposes, the producer would have received the following amounts under each of the relevant schemes in 2002 (before Modulation):
| = | 11,870.78 |
| = | 26,795.08 |
| = | 14,193.98 |
| = | 6,641.04 |
| = | 11,293.75 |
| = | 70,794.03 |
DIRECT SUPPORT SCHEMES | N os of Animals | 2002 Rates | Total Per Year | Total Per Type | Reference Amount |
2000 | 2001 | 2002 |
Beef Special Premium Scheme |
Steer 1 | 36 | | | 92.92 | 3,345.12 | 8,492.89 | 2,830.96 |
| 28 | 2,601.76 |
| 27.4 | 2,546.01 |
Steer 2 | 25 | | | 92.92 | 2,323.00 | 6,838.91 | 2,279.64 |
| 31 | 2,880.52 |
| 17.6 | 1,635.39 |
Bulls | 54 | | | 130.08 | 7,024.32 | 21,697.34 | 7,232.45 |
| 53 | 6,894.24 |
| 59.8 | 7,778.78 |
Suckler Cow Premium Scheme |
SCPS | 171.6 | | | 123.89 | 21,259.52 | 65,438.69 | 21,812.90 |
| 175 | 21,680.75 |
| 181.6 | 22,498.42 |
BNE | 0 | | | 23.66 | - | 8,437.16 | 2,812.39 |
| 175 | 4,140.50 |
| 181.6 | 4,296.66 |
Extensification Payment Scheme |
EPS | 286.6 | | | 49.56 | 14,203.90 | 42,596.82 | 14,198.94 |
| 286.5 | 14,198.94 |
| 286.4 | 14,193.98 |
Slaughter Premium Scheme |
Adults | 156 | | | 49.56 | 7,731.36 | 22,748.04 | 7,582.68 |
| 169 | 8,375.64 |
| 134 | 6,641.04 |
Calves | 0 | | | 30.97 | - | - | - |
| 0 | - |
| 0 | - |
Sheep Annual Premium Scheme |
Basic | 640 | | | 13.01 | 8,326.40 | 24,653.95 | 8,217.98 |
| 630 | 8,196.30 |
| 625 | 8,131.25 |
LFA Supp. | 640 | | | 4.34 | 2,777.60 | 8,224.30 | 2,741.43 |
| 630 | 2,734.20 |
| | 625 | 2,712.50 |
SNE | - | | | 0.72 | | 449.42 | 449.72 |
| - | |
| | 625 | 450.00 |
TOTAL REFERENCE AMOUNT - ALL LIVESTOCK SCHEMES = | 70,159.09 |
|
FORAGE AREAS | N o of Hectares | Total N o of Hectares | Average N o of Hectares | |
2000 | 2001 | 2002 |
378.77 | 384.38 | 390.75 | 1,153.90 | 384.63 |
TOTAL REFERENCE AREA = | 384.63 |