Implementation of Common Agricultural Policy Reform The Single Farm Payment Model for Wales

I announce to the National Assembly the Welsh Assembly Government’s decision that, in implementing common agricultural policy reform, the historic model will be the basis for the single farm payment that will operate in Wales from 2005.

Over the past few months, the Assembly Government has carefully considered all of the options for the new CAP payment regime. Within the European Union legal framework, it is not possible to devise arrangements that would fully satisfy all in farming as well as other key interests, such as the environmental and conservation lobbies.

Officials have undertaken a detailed analysis of the options for the single farm payment, which is set out in the paper entitled, ‘The Economic and Distributional Impacts of the Implementation Options Available for CAP Reform’. I have made copies available to the opposition parties and have also placed a copy in the Library. The options available for the single farm payment all involve decoupling, which is a major change in the CAP support system. Agriculture is only now showing clear signs of recovery and growing confidence for the future.

To apply a flat area option, in which all farmed land receives an equal payment, would involve a major redistribution of current CAP receipts. In particular, this option would disadvantage the smaller Welsh traditional family farm that is the backbone of farming in Wales. Under the hybrid options, which combine area and historic elements, significant levels of CAP receipts are redistributed, again away from the smaller farms. I am not convinced, therefore, that any model for the single farm payment that involves an area element is currently in the best interest of Welsh agriculture. The historic option is the way forward for Wales. This will meet our commitment in ‘Farming for the Future’, is consistent with the stance that we, as part of the UK team, adopted throughout the detailed negotiations at a European level, and is supported by our farming unions. The historic model will allow farming to continue to contribute to the economic, social, environmental and cultural cohesion of rural Wales.

Importantly, the 2003 CAP reform package empowers the Assembly Government to shape reform to the needs of Wales and Welsh farming. Decisions on how we implement reform in Wales will have a long-lasting effect, and will dictate the face of Welsh farming over the next 10 years. It is a matter of public record that decisions on the CAP reform package are to be informed by extensive consultation with our external partners in Wales. I have placed in the Library a summary of the responses received to the consultation undertaken in the latter part of last year on options for the new payment regime and associated matters. Members will have an opportunity to debate this and related CAP issues in Plenary on 10 March. Consultation on the reform package and the dairy sector has recently ended. I am currently considering the responses and will announce decisions in due course.

Under the single farm payment system, farming must be actively pursued, and requirements relating to environmental, animal welfare and farming standards satisfied. This is referred to as cross compliance. Most of the standards will be based on existing EU directives and regulations and therefore do not present any additional burden to our farmers. Cross compliance will apply to the whole farm area. Failure to meet the compliance standards could result in payments to farmers being reduced. It is my intention that the cross-compliance regime should be based on minimum requirements. It is estimated that some 200 farms in Wales would be subject to annual inspection for compliance purposes. The existing 5 per cent integrated administration and control system inspection regime will be retained. A consultation paper will issue shortly on proposals for cross compliance, and I aim to announce the outcome in early summer.

There is discretion to establish a national envelope to address potential environmental issues that might arise from reduced production under decoupling or to support marketing or quality initiatives. An envelope can be up to 10 per cent of the Welsh financial ceiling. Possible options for the use of the envelope in Wales will be contained in a consultation paper, which will be issued shortly. However, I would need to be convinced that an envelope would bring overall advantage for Welsh farming that would otherwise outweigh the impact on individual farmer receipts under the single farm payment. My intention would be to announce whether we would have an envelope for Wales and, if so, how it might operate, in early summer.
As a consequence of opting for the historic basis to the single farm payment, we will need to establish a national reserve for Wales. This would be the mechanism from which those new to farming, or otherwise unable to demonstrate eligibility from the 2000 to 2002 reference period, would receive payment entitlements. I will consult on the criteria by which we will operate a national reserve in Wales.

The single farm payment application forms will be issued in the early part of 2005, we will set out the calculation of the individual payment to farmers. These forms must be returned no later than 15 May 2005. Inspections based on the integrated administration and control system and cross-compliance inspections will then be undertaken, and payments to farmers will be made between 1 December 2005 and 30 June in 2006. Clearly, the aim will be to issue single farm payment moneys as early as possible within that payment window. As part of this process, officials will be contacting around 20,000 farmers from late spring and asking them to verify the farm activity that was undertaken during the 2000 to 2002 period. This exercise will also be associated with major publicity so that we can ensure that all those eligible for payment under the new CAP regime are identified.

Today’s announcement on the historic model is a significant step forward in the process of reshaping the CAP regime to meet the needs of Wales and Welsh farmers. There are other major decisions to be made, but I believe that the adoption of the historic model is the key decision. The promised consultation on cross compliance, the national envelope and the national reserve will mean that those in the farming community and beyond will begin to see the overall shape of the direction that the Assembly Government is taking on CAP reform.