Until 2005, I thought modulation was a musical expression referring to a change in pitch or tone, but as is so often the case in the context of “EU diplomatic speak” this word popped up with quite another meaning when the CAP was last reformed in 2005. Its new meaning is basically a “tax” to be taken off one payment and added to another and in recent weeks this has become a hot topic of debate.
Under the forthcoming CAP reforms which are due to take effect in 2015, the government is proposing to modulate or effectively tax the payments due to be received by farmers by 15%. Farmers and farm leaders are not impressed and are urging government to reduce modulation to a much lower rate of 9%.
The reason for the argument is that the funds received from the EU to support farmers and the wider rural economy come under two funding streams or “pillars”; pillar one providing direct payments to farmers and pillar two providing wider rural economy payments.
Historically the UK has always had low pillar 2 funds compared to the rest of the EU, which at least in part stems back to the budget rebate negotiated by Margaret Thatcher in 1984. As a result when subsequent governments have wanted to increase funding for the wider rural economy they have effectively “taxed” or “modulated” the pillar 1 pot to supplement the pillar 2 pot.
Most recently one of the primary drivers for such modulation was to fund the environmental stewardship schemes which have been introduced widely throughout England and it is understood that around 70% of the farmland in England now falls within one scheme or another. However, in addition to the environmental schemes, pillar 2 funds have been used to fund a whole raft of measures in the wider rural economy varying from “knowledge transfer” schemes to helping fund small start up businesses.
My experience with the latter schemes in particular is that although they do have some merit, by the time it has taken the relevant authorities to develop the rules and implement the schemes, it often means it takes many years for the modulated funds to reach their ultimate destination. In these economically difficult times, such delays could be very damaging and therefore, although I would support the continued funding of the existing environmental schemes, I would suggest that increasing the money being fed in to pillar 2 funds at the expense of direct payments to farmers would be a bad idea.
To put it simply, paying funds direct to farmers and landowners will be a much quicker and more effective way of getting financial support out of the EU in to the our rural economy than would be the case if we invented a whole raft of new schemes with their associated rules and bureaucracy to reallocate the same funds, on occasions to exactly the same people, but often several years later than would otherwise have been the case.
It is appreciated conservation organisations in particular will disagree with this but it also has to be appreciated that like farmers they receive significant funds from the CAP in one form or another. It is understandable that they would like to see more funds directed to conservation but equally, many such organisations will have experienced the cash flow problems that occur when new schemes are introduced with the resultant delay in receipt of funds. Thus, in my view supporting a continuation of the existing environmental schemes as suggested by farm leaders rather than an expansion of pillar 2 funding as suggested by government is the most sensible approach in these uncertain economic conditions.
Under the forthcoming CAP reforms which are due to take effect in 2015, the government is proposing to modulate or effectively tax the payments due to be received by farmers by 15%. Farmers and farm leaders are not impressed and are urging government to reduce modulation to a much lower rate of 9%.
The reason for the argument is that the funds received from the EU to support farmers and the wider rural economy come under two funding streams or “pillars”; pillar one providing direct payments to farmers and pillar two providing wider rural economy payments.
Historically the UK has always had low pillar 2 funds compared to the rest of the EU, which at least in part stems back to the budget rebate negotiated by Margaret Thatcher in 1984. As a result when subsequent governments have wanted to increase funding for the wider rural economy they have effectively “taxed” or “modulated” the pillar 1 pot to supplement the pillar 2 pot.
Most recently one of the primary drivers for such modulation was to fund the environmental stewardship schemes which have been introduced widely throughout England and it is understood that around 70% of the farmland in England now falls within one scheme or another. However, in addition to the environmental schemes, pillar 2 funds have been used to fund a whole raft of measures in the wider rural economy varying from “knowledge transfer” schemes to helping fund small start up businesses.
My experience with the latter schemes in particular is that although they do have some merit, by the time it has taken the relevant authorities to develop the rules and implement the schemes, it often means it takes many years for the modulated funds to reach their ultimate destination. In these economically difficult times, such delays could be very damaging and therefore, although I would support the continued funding of the existing environmental schemes, I would suggest that increasing the money being fed in to pillar 2 funds at the expense of direct payments to farmers would be a bad idea.
To put it simply, paying funds direct to farmers and landowners will be a much quicker and more effective way of getting financial support out of the EU in to the our rural economy than would be the case if we invented a whole raft of new schemes with their associated rules and bureaucracy to reallocate the same funds, on occasions to exactly the same people, but often several years later than would otherwise have been the case.
It is appreciated conservation organisations in particular will disagree with this but it also has to be appreciated that like farmers they receive significant funds from the CAP in one form or another. It is understandable that they would like to see more funds directed to conservation but equally, many such organisations will have experienced the cash flow problems that occur when new schemes are introduced with the resultant delay in receipt of funds. Thus, in my view supporting a continuation of the existing environmental schemes as suggested by farm leaders rather than an expansion of pillar 2 funding as suggested by government is the most sensible approach in these uncertain economic conditions.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
