Saturday, 10 May 2014

Why Cameron's CAP doesn't sit comfortably on Scottish heads

David Cameron - Proud of his Scottish Heritage
Unlike many in his party, David Cameron is a keen supporter of the Union.  The Tories have hardly had a sniff in Scotland since Margaret Thatcher did so much to alienate even affluent or aspirational Scots.  Consequently, there are those in the Conservative Party who would not shed any tears if Scotland voted to go its own way in September’s referendum, but the Prime Minister is not one of them.

Partly no doubt he is aware of his own place in history.  He does not want to be remembered as the PM who lost Scotland?  Perhaps the fact that his own great grandfather was once a hill farmer near Inverness plays a part.  But more than any of that, he just has a genuine and deeply ingrained sense of Britishness, of Britain’s shared history, culture and traditions.

This is the reason that he has largely kept himself out of the debate.  He is well aware of how a southern, public school educated Conservative would go down north of the border, and particularly how Scotland’s redoubtable First Minister, Alex Salmond, could make political capital with that.  His one significant contribution was an impassioned plea delivered from The Olympic Park in London last February.  Speaking from the outside to the people of Scotland he said as emphatically as he could, “We want you to stay!”  He later revealed that his aides had tried to steer him off the subject, but he said, “I care far too much" about preventing the UK from being "torn apart" to stay out of the debate.

Ironic then that the Cameron Government’s handling of agriculture might turn out to be the issue which tilts Scotland toward a Yes vote.

The EU’s Common Agricultural Policy is a huge and unwieldy edifice.  Although reduced from its heyday in the 1970s when it accounted for 71% of the community’s expenditure it still makes up a whopping 39%, making it by some measure the largest of the EU’s initiatives.  No longer concerned exclusively with securing food production the CAP now includes targets for environmental protection, social cohesion and regional regeneration across the 28 member states.  Everyone agrees it needs to be reformed.  But equally everyone has their own differing notions of what needs to change and how it should be done.  Unsurprisingly then reforms take a long time to agree and implement.  They more or less come in ten year cycles with the latest version designed to cover the period from 2014 to 2020.

Negotiations were intense and often fraught, but the final deal, seen as a victory for the reformers, saw a 3% reduction in overall CAP spending from the Commission’s original proposal, translating to a 13% real-terms reduction in payments to farmers across the continent.  Payments are made in two so-called Pillars.

Pillar 1, The Single Farm Payment, is based on the number of hectares in stewardship.  This represents a shift away from the old measure of production.  Within Pillar 1 there is a commitment that by 2019 no member state should receive less than an averaged rate of €196 per hectare.

Pillar 2 is the Rural Development Programme designed to give additional help to areas with special needs.  Officially the calculations for the breakdown of the rural development budget between member states is based on a combination of past performance and 'objective criteria' such as area of farm land or number of farms.  In reality it is much more opaque than that, and several member states were able to negotiate additional funding.

The allocations from both Pillars are paid to national governments to distribute internally.  The UK Government’s allocation, to be further divided between England, Scotland, Wales and Northern Ireland, amounts to €3.549 billion in 2014, rising to €3.592 billion in 2019 under Pillar 1. Critically, this figure includes a “convergence uplift” because UK farm receipts per hectare fall below 90% of the community average.  Under Pillar 2 the UK will receive €2.580 billion for the period 2014 – 2020.

To complicate matters further, member states were given some ‘pillar to pillar flexibility’.  In most cases this means they can transfer up to 15% of the money from Pillar 1 to Pillar 2, or vice versa. The Commission had to receive notification of any proposed reallocations by 31 December last year.

The Scottish Government, and the Edinburgh Parliament, argued that the whole of the UK’s uplift payment should go to Scotland.  The rationale being that it was only Scotland’s very low per hectare rate that brings the UK as a whole below the EU’s 90 per cent threshold. Scotland’s average rate is only around 45 per cent of the EU average, think of those huge upland hill farms.  By comparison, England, Wales and Northern Ireland’s rates are either at or above the EU average.

Instead, the UK Government decided to pro-rata the Uplift payment among each of the receiving nations.  Accordingly Scotland will get only 16% of this uplift.

The SNP and the Vote Yes campaign have naturally painted this as a direct loss to Scottish farmers of €187m.

To make matters worse, after absorbing the 13% real terms cut to direct Pillar 1 payments, the average per hectare rate in Scotland will drop to around €128 per hectare by 2019, forecast to be the lowest in the EU.  Of course Alex Salmond can rightly claim that by the EU’s own rules, if Scotland were a member state and not merely a region, it would have to receive no less that €196 per hectare. In other words Scottish farmers are paying €68 per hectare for the privilege of being in the UK.

Pillar 2 payments fare no better.  Here the UK government has decided to retain internal allocations based on historical patterns.  Scotland will receive 18.5% of the total, around €477.8m.  But again on a per hectare basis that puts them at a miserly €12 per hectare.  Compare that with the allocation to the EU’s newest member, Croatia, whose Pillar 2 allocation works out at €250 per hectare.

Ordinarily much of this detail would go unnoticed by the mass of the population, but not this year, not with financial comparisons between Scotland and her southern neighbour very much at the heart of the referendum campaign.
Alex Salmond, Scotland's First Minister

“Tories have handed Scotland worst deal in Europe” howls the SNP website this week.  ”The Tories in Westminster…have handed Scotland the worst CAP deal in Europe and negotiated Scotland to the bottom of the CAP funding league tables.” 

Scottish farmers do have a case.  If the CAP serves any purpose then it should be to support struggling farmers in economically disadvantaged regions of Europe.  It was within the powers of the Westminster Government to bring about a fairer distribution of CAP money in Scotland, but for now it looks like a huge gift to the Yes campaign.

It will be ironic if David Cameron, the great grandson of a Scottish farmer, should go down in history as the prime Minster who lost Scotland because of his government’s agricultural policy.  

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