Flatter Rate:

The Northern Ireland Experience

Future CAP for Scotland16 March 2011

Seamus McErleanDARD

Single Payment Schemealso known as Single Farm Payment (SFP)

Introduced in 2005.

Options:- Historical -or- Hybrid -or- Flat rate - If Hybrid then Static -or- Dynamic

In Northern Ireland we choose a Static Hybrid Model

SFP – Why Static Hybrid?

Preference for equitable system → historical system?

Other Considerations:1. Agriculture in NI dominated by livestock sectors (beef, sheep

and dairy).2. Coupled support concentrated at end of the beef supply chain.3. Beef production systems are typically not birth to slaughter.4. Previous coupled support capitalised into cattle prices.5. This meant that some support was being indirectly transmitted

down the chain to cow herd owners through calf prices.6. Decoupling would end this transmission process.

SFP – Why Static Hybrid?

Objective – to replicate the previous distribution, direct and indirect, of coupled support.

Key Driver – perceived fairness across as broad a spectrum of stakeholders as possible. This was an equity debate, not an economic debate.

Key drawback – it was recognised that what was seen as fair in the short term would be seen as increasingly unfair in the longer term. But a commitment at that stage to move to flat rates (via a dynamic hybrid) was a step to far - back in 2004.

SFP – Why Static Hybrid?

Approach used – 50% of the monies allocated to Beef Special Premium and Slaughter Premium with smaller contributions from other premia was used to create a flat rate payment available to all claimants.

Everyone who was awarded entitlements would get the flat rate amount per entitlement plus additional amount based on their historical claims (if any) less contributions removed (to create flat rate).

Final position a static-hybrid - retained large historical element but also attempted to deal with indirect recipients of coupled payments (using flat rate option) - this perceived to be more equitable than simple historical option.

What were the consequences of static hybrid model?

• Flat rate element and the allocation of entitlements according to area declared in a future year (2005) allowed those who had not claimed coupled payments to apply for entitlements under new decoupled SFP.

• Some redistribution (away from previous coupled payment claimants to new claimants)– overall this was low (4% of budget) and there was little opposition (it suited both landlords and tenants).

• 95% of agricultural area was claimed on.

SFP Claimant Profile in NI

Farm Type No. of Farms % SFP Current €m %

C&S LFA 13,500 31 152.3 42

C&S Lowland 4,000 9 48.7 13

Dairy 3,300 8 81.5 23

Cereals 500 1 7.9 2

Mixed 800 2 14.6 4

Landowners 12,800 29 13.7 4

Other 8,900 20 42.6 12

‘Conacre’ System of land rental

1. Conacre is a system of short term leasing – typically 9-11 months of the year with no rights conferred beyond this period – offers a lot of flexibility.

2. One third of all land farmed in NI is rented through the conacre system.

Problems encountered with the static-hybrid model in NI

1. Admission of land-owners as claimants.

2. Double claiming of land.

3. New Mapping system was introduced in 2005 but problems with it have resulted in a constant need to revise and recalculate entitlements.

CAP Reform Post 2013 – future instruments

Pillar I – direct payments

• Possible/likely move towards regional or sub-regional flat rates

• Better definition and targeting of support to active farmers

• Greening

Average SFP payments in SDA/DA/LL(2009 post modulation)

Severely Disadvantaged Areas €253/ha

Disadvantaged Areas €367/ha

Lowland €376/ha

Overall average €317/ha

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Distribution of SFP Payments Per Ha in Northern Ireland (2009 post modulation)

SFP – Northern Ireland Regional Flat Rate(existing budget)

Farm Type No. of Farms

SFP Current €m

SFP Flat Rate €m

% Change

C&S LFA 13,500 152.3 147.3 -3.3%

C&S Lowland 4,000 48.7 33.1 -32.0%

Dairy 3,300 81.5 53.3 -34.6%

Cereals 500 7.9 6.6 -16.5%

Mixed 800 14.6 10.9 -25.3%

Landowners 12,800 13.7 62.1 +353.3%

Other 8,900 42.6 48.2 +13.1%

Conclusions – Looking ahead

A move to a regional flat rate (landowners continue to claim):– Redistribution away from lowland to Severely Disadvantaged

Areas [possibly counter this with a sub-regional flat rate]– Landowners gain – C&S Lowland and Dairy lose

Removal of landowners using robust definition on ‘active’ farmers– Need to rebase entitlements or we will have a lot of unclaimed

entitlements.– Some landowners start farming and stop renting land to real

‘active’ farmers– If we rebase with landowners excluded then conacre rents could

increase dramatically – possible mayhem?– Still significant redistribution issues in any case.

Current distribution at a regional/sub-regional level reflects agricultural activity to some extent – so certain reluctance to moving away from this position.