Scottish Government

8 PAYMENTS

8.1 Under Article 42, the EC aims to simplify and increase the National Reserve's flexibility which can be used to increase unit value and/ or the number of entitlements which farmers are allocated. Such entitlements would not experience the same restrictions as at present and from 2010 they could be considered regular entitlements.

8.2 The National Reserve must be used in such a manner that farmers in all Member States receive equal treatment, thereby avoiding potential market and competition distortion. Under the terms of the draft legislation, the National Reserve can be used for new entrants coming into farming for the first time. In addition, Article 44 permits Member States the option of determining which portion of the value of any payment entitlements being traded should revert to the National Reserve.

8.3 Respondents were asked "What are your views on proposals for increased flexibility in the use of the National Reserve, simplification of payment entitlements, transfer of payment entitlements, the move to making payments twice a year, and clarification to the meaning of a farmer and to the definition of a 'eligible hectare'?"

8.4 There were responses from 26 out of the 55 respondents.

Definitions

8.5 While the EC has not changed the definition of a 'farmer', Article 30 (2) allows Member States to disallow claims for SFP from businesses "whose principal company's objects do not consist of exercising an agricultural activity" and the majority of those commenting at this question talked about the need to ensure support goes only to those actively involved in farming; one farming stakeholder added that they should also be engaged in greater activity than currently required under GAEC.

8.6 A supply chain/ livestock stakeholder suggested that "a definition of 'active farmer' should be developed" with an organisation from the same sub-group supporting the proposed distinction between active and non-active farmers. A stakeholder from the wider interest group thought "active farming should involve a contribution to the output of the Scottish food & drink industry".

8.7 Three local authorities commented; one wanted a clear definition of 'active farmer' while another felt the definition needed to be tightened and that it should be linked to Pillar 1 objectives. The third respondent wanted to ensure that any definition does not exclude crofters who may derive the bulk of their income from other economic activity.

8.8 An eligible hectare is defined as "any agricultural area of the holding, including, the areas planted with short rotation coppice, that is used for an agricultural activity or, in the case areas are used as well for non agricultural activities, predominantly used for agricultural activities"; this is being extended under Article 35(2) (b) (ii) "to include areas that were eligible in 2007 and have been afforested under the Rural Development Regulation".

8.9 A farming organisation welcomed the clarified definition of an eligible hectare and one local authority and one wider interest organisation specifically welcomed the definition in relation to afforested land, another wider interest organisation did not support the proposed extension.

8.10 A farming stakeholder felt "the definition of eligible hectare must be based on agricultural activity redefined to include production". A local authority and a farming organisation also thought that eligible hectares should be based on agricultural activity. Three other stakeholders commented on the need for support to be linked to a minimum level of agricultural activity. An environment stakeholder suggested that compliance with exacting cross-compliance standards in order to deliver public benefit should be seen as eligible activity.

8.11 There was a suggestion from an individual that the definition be similar to the rule used in Ireland, they proposed " all land claimed must be within 35 mls radius of claimants business to justify being economically viable".

8.12 One local authority wanted to see eligible hectares defined as those paid on previously, this is in order to make sure no payments are made to sporting or other non agricultural estates.

Flexibility

8.13 There was support for increased flexibility in the use of the National Reserve, 10 respondents commented on this issue with one, a stakeholder from the environment group, expressing the hope that this will now allow top-up entitlements to farmers who were under SNH management agreements during the 2002-2003 reference period and so, in some cases, got unreasonably small entitlements. One farming organisation supported increased flexibility but wanted to ensure this was not to the detriment of existing entitlements.

8.14 A farming stakeholder felt that the National Reserve should be limited to new entrants or to those who do not have historical allocations. A local authority agreed that the National Reserve should be targeted towards new entrants; they added that other measures should be delivered through the National Envelope.

8.15 Any surplus should also be extended to deer farmers; one farming stakeholder felt that unsupported sectors such as deer farmers are at a disadvantage owing to exclusion from financial support and pointed out that deer farmers in England are subsidised. Support for deer farmers was also requested by one supply chain/ livestock stakeholder.

Payments

8.16 Comments on the proposals in relation to the option of two payments included support from 10 respondents; they agreed that this would help with cash flow. Two organisations, from the wider interest group and one local authority, cautioned that care should be taken to ensure administration costs do not increase. One farming stakeholder voiced support for the option of two payments provided this "does not compromise the early full payment of those claimants with straightforward claims".

8.17 One local authority, however, saw no reason to move towards twice yearly payments but felt that there could be a system of advance or interim payments to support businesses whose payments are delayed by administrative checks or inspections. This view was echoed by an environment stakeholder.

8.18 One farming stakeholder supported the reduction from three to two years of the 'use it or lose it' rule - "provided unused entitlements can be recycled back into the value of claimed entitlements" while an organisation from the wider interest group felt consideration should be given to requiring recipients to use all their entitlements every year rather than every two years.

8.19 The farming stakeholder also:

• welcomed the rule to reduce the value of sold entitlements and use this as a siphon to repopulate the National Reserve;
• did not support removal of the trading rule on allocated National Reserve entitlements but supported the restriction that they cannot be sold for five years;
• would like to see the Euro exchange rate calculated on the average over a one-month period as in previous schemes as this would be "less likely to cause unforeseen dramatic swings in support levels" than the use of a single date or operative event.