2nd Report, 2007 (Session 3)

Voluntary Modulation Rates (SSI 2007/414)

CONTENTS

REPORT

The instrument
The Committee’s consideration
The Committee’s conclusion

ANNEXE A: ORAL EVIDENCE

Extract from Official Report, 4th meeting 2007 (Session 3), Wednesday 19 September 2007

ANNEXE B: EXTRACT FROM THE MINUTES

4th meeting 2007 (Session 3), Wednesday 19 September 2007

Remit and membership

Remit:

To consider and report on agriculture, fisheries and rural development and other matters falling within the responsibility of the Cabinet Secretary for Rural Affairs and the Environment.

Membership:

Richard Baker (from 13 June until 20 September 2007)
Sarah Boyack (from 13 June until 20 September 2007)
Roseanna Cunningham (Convener)
Karen Gillon (from 20 September 2007)
Jamie Hepburn
Des McNulty (from 20 September 2007)
Peter Peacock
Mike Rumbles
John Scott (Deputy Convener)
Bill Wilson

Committee Clerking Team:

Clerk to the Committee
Andrew Mylne

Senior Assistant Clerk
Mark Roberts

Assistant Clerk
Katherine Wright

Voluntary Modulation Rates (SSI 2007/414)

The Committee reports to the Parliament as follows— 

The instrument

1. The Common Agricultural Policy Single Farm Payment and Support Schemes (Scotland) Amendment Regulations 2007 (SSI 2007/414) were made on 5 September 2007, laid on 6 September, and referred to the Rural Affairs and Environment Committee as lead committee.  They are subject to annulment until 31 October, but come into force on 30 September.

2. Apart from updating previous such Regulations from 2005¹ to refer to EC Regulations of the same year², the main purpose of the Regulations is to specify rates of “voluntary modulation” that will apply in Scotland from 2007 to 2012.

3. Since reform of the Common Agricultural Policy in 2003, most of the support provided directly to farmers (under “Pillar 1” of the CAP) is in the form of a “single farm payment” (replacing previous subsidy regimes).  However, funding is also available for rural development and agri-environment schemes (under “Pillar 2”).  The purpose of modulation is to transfer funding from Pillar 1 to Pillar 2.

4. Some modulation is applied at EU level.  For 2007, this “compulsory modulation” is set at 5% (although the first 5,000 euros payed to each farmer is exempt).  However, the United Kingdom (together with Portugal) is entitled to set additional (“voluntary”) modulation rates of up to 20%.  Under devolution, Scottish Ministers are responsible for setting voluntary modulation rates for Scotland.

5. The previous Scottish Executive had consulted on the issue of voluntary modulation in the context of its draft Scottish Rural Development Programme (SRDP), but it was unable to announce voluntary modulation rates before the general election because of delays at EU level in agreeing the legal basis for modulation.  As a result, it fell to the new Scottish Government elected in May to decide on the voluntary modulation rates that would apply in Scotland for the next five years.  These were announced by the Cabinet Secretary for Rural Affairs and the Environment (Richard Lochhead MSP), during a Chamber debate on 31 May 2007³, as follows:

• 5% in 2007
• 8% in 2008
• 8.5% in 2009
• 9% in 2010 to 2012.

6. The current Regulations implement this announcement by giving these voluntary modulation rates statutory effect.

The Committee’s consideration

7. The Committee considered these Regulations at its meeting on 19 September.  In advance of the meeting, Mike Rumbles lodged a motion (S3M-458) recommending annulment of the instrument, so the Committee’s consideration consisted firstly of oral evidence from the Cabinet Secretary and supporting officials, and then a debate on Mr Rumbles’ motion.

8. At the end of the debate, the motion was disagreed to by division (For 1, Against 7, Abstentions 0).

The Committee’s conclusion

9. With the exception of Mike Rumbles, who remains strongly opposed to these Regulations, the Committee does not recommend their annulment. We recognise that, even if the voluntary modulation rates set by the Scottish Government are higher or lower than the rates we would have preferred, the opportunity for arguing for changes to those rates has now passed.  As the Cabinet Secretary explained, the rates had to be submitted for approval by the European Commission in June, as part of the Scottish Rural Development Programme.  Changing the rates at this late stage would risk disrupting the European approval process, which in turn could cause significant delays in the timescale for opening schemes under the SRDP and in making single farm payments. Particularly in view of the financial difficulties facing farmers as a result of the current foot-and-mouth restrictions, we believe it would be irresponsible at this stage to take that risk.

10. During the debate, Mike Rumbles referred to a press report suggesting that the Commission would shortly propose raising the compulsory modulation rate from its current 5% to as much as 13% in 2013. In his response, the Cabinet Secretary confirmed that the Scottish Government would be able to reduce the voluntary modulation rates in those circumstances, in order to minimise the overall impact on farmers’ direct incomes. We are grateful for clarification on this point, although different Committee members are likely to take opposing views on whether any such consequential reduction would be desirable.

ANNEXE A: ORAL EVIDENCE

Extract from Official Report, 4th meeting 2007 (Session 3), Wednesday 19 September 2007

ANNEXE B: EXTRACT FROM THE MINUTES

4th Meeting, 2007 (Session 3), Wednesday 19 September 2007

Subordinate legislation: The Committee took evidence from Richard Lochhead MSP, Cabinet Secretary for Rural Affairs and the Environment on the the Common Agricultural Policy Single Farm Payment and Support Schemes (Scotland) Amendment Regulations 2007 (SSI 2007/414).

Subordinate legislation: Mike Rumbles MSP moved S3M-458—

That the Rural Affairs and Environment Committee recommends that nothing further be done under the Common Agricultural Policy Single Farm Payment and Support Schemes (Scotland) Amendment Regulations 2007 (SSI 2007/414).

After debate, the motion was disagreed to (by division: For 1, Against, 7 Abstentions 0).

The Committee then agreed that a draft report on the instrument would be circulated by e-mail for approval.

Footnotes