Single Payment Scheme

Last updated

On 26 June 2003, EU farm ministers adopted a fundamental reform of the Common Agricultural Policy (CAP) and introduced a new Single Payment Scheme (SPS or Single Farm Payment) for direct subsidy payments to landowners.

Contents

The system of subsidy applies throughout the European Union according to rules agreed between the member states. However, exact details of implementation and grants vary from country to country within the outline rules. Transitional rules also apply for new member states which joined the EU in 2004 and more recently. States have a choice of whether to introduce the new scheme at once, or to phase it in over a period from 2005 to 2013. The UK Government decided to be one of the first countries in Europe to introduce the Single Payment Scheme and decided to start to phase it in from 2005. Introduction in the UK was strategically coordinated via Defra, with devolved responsibility to England, Wales, Scotland and Northern Ireland to independently implement the scheme.

The new scheme was intended to change the way the EU supported its farm sector by removing the link between subsidies and production of specific crops. This reform focused on consumers and taxpayers, while giving farmers the freedom to produce what the market wanted. Member States have the choice to maintain a limited link between subsidy and production to avoid abandonment of particular production. Current payments to farmers continue to reflect historic patterns of production for different crops in countries where the scheme has yet to be introduced, or as a proportion of the total payment where the scheme is being introduced over a period of years.

The Single Farm Payment is linked to meeting environmental, public, animal and plant health and animal welfare standards and the need to keep land in good agricultural and environmental condition.

History

It was an intention of the scheme to 'decouple' grant payments from production. This was in response to criticism from other World Trade Organization (WTO) countries (mainly the US), that the EU was unfairly subsidising farmers and providing an unfair competitive advantage. Under the SPS the farmer is no longer paid different amounts according to the crop he or she produces, but a set amount per hectare of agricultural land maintained in cultivatable condition. The intention is that choice of crop is based purely on market driven forces and not on production based grants. Decoupling of payments has allowed them to be categorised under the so-called blue box for the purpose of WTO negotiations, ensuring the legality and compliance of international obligations.

To gain funds from the SPS the Farmer has to cross comply – that is, to farm in an environmentally friendly way, with careful use of pesticides and fertilisers. The farmer also had to set aside (not farm) 8% of their productive land annually, in addition two metres on the perimeter of each field must be left uncropped to become overgrown. However, the requirement for set aside was suspended for one year in Autumn 2007 following sharp increases in prices for certain crops, and in consideration of the aim to grow more crops for biofuel production. [1]

Another stated goal at the outset was to simplify the existing process including applications. Eleven existing schemes were replaced by the SPS.

Implementation of the payments in England has been impaired by problems at the Rural Payments Agency. Payments under the scheme were intended to be made by around January 2006, but by December 2006 some 2% of claims still remained unsettled. Payments amounted to £1.5 billion distributed amongst 115,000 claimants, though most of the money went to relatively few of the claimants (according to the size of their holdings). Difficulties in implementation included double the number of expected claimants, as rules of the new scheme allowed many more people with relatively small areas of land to claim.

Applications are made annually by completion of the SP5 form, which requires claimants to declare all the land under their control, the land they wish to claim payment on and whether they are subject to Statutory Management Requirements (SMR) [2] or Good Agricultural and Environmental Conditions (GAEC). [3] In February 2008 RPA began accepting electronic applications via third party software. [4] The first application was submitted 27 February 2008 through Single Payment Supervisor by Paul Holliday Software. [5] Following the success of the project to accept electronic applications via third party software RPA took the next logical step and in March 2010 began allowing submissions directly through their own Whole Farm Approach website. There is speculation within the agricultural industry that paper forms will be withdrawn in an attempt to reduce costs.

The scheme replaced eleven previous subsidy schemes which were based on the production of crops and/or livestock e.g. dairy premium and arable area payments scheme. Initially the payments had a bias towards paying producers who historically received the highest subsidies. The payment bias works on a sliding scale with a move away from historic payments towards land based payments with payments in 2012 having no historic element.

Implementation of the Single Payment Scheme in Wales was the responsibility of the Welsh Assembly Government. Payments totaling £250m were paid to more than 98% of eligible farmers between 1 December 2005 and 30 June 2006, including £110m to about 75% of Welsh farmers on the first possible day, which made them amongst the first in Europe to receive the new payment.

Scheme details

The Single Payment Scheme (SPS) rewards farmers for managing their land to minimum ("Cross Compliance") standards for crop production, animal welfare and the environment. Farmers can submit a claim annually by declaring (1) all of the agricultural parcels (crops) on their farm and (2) their payment entitlements for activation. The farmer's declaration of her payment entitlements for activation is the farmer's request for a 'Single Payment'.

The farmer is paid against her declared payment entitlements that are each matched against an eligible hectare of declared land ('activated for payment'). The 'Area Declared' for Single Payment is respective; meaning that it relates to the two factors of (1) declared agricultural parcels and (2) payment entitlements declared for activation.

By way of example:

A farmer holds 102.00 payment entitlements.

The farmer declares all of his agricultural parcels that total exactly 100.00 eligible hectares.

If the farmer declares 102.00 of his payment entitlements for activation, the 'Area Declared' for Single Payment would be 100.00 hectares (the lower of the eligible hectares declared and the payment entitlements declared for activation).

If the farmer declares 98.00 of his payment entitlements for activation, the 'Area Declared' for Single Payment would be 98.00 hectares (the lower of the eligible hectares declared and the payment entitlements declared for activation).

Basic Payment Scheme

Political agreement on CAP reform was reached in 2013. In January 2015, the Single Payment Scheme was replaced by the Basic Payment Scheme (BPS). [6]

See also

Related Research Articles

<span class="mw-page-title-main">Organic farming</span> Method of agriculture meant to be environmentally friendly

Organic farming also known as ecological farming or biological farming, is an agricultural system that uses fertilizers of organic origin such as compost manure, green manure, and bone meal and places emphasis on techniques such as crop rotation and companion planting. It originated early in the 20th century in reaction to rapidly changing farming practices. Certified organic agriculture accounts for 70 million hectares globally, with over half of that total in Australia. Organic farming continues to be developed by various organizations today. Biological pest control, mixed cropping and the fostering of insect predators are encouraged. Organic standards are designed to allow the use of naturally-occurring substances while prohibiting or strictly limiting synthetic substances. For instance, naturally-occurring pesticides such as pyrethrin are permitted, while synthetic fertilizers and pesticides are generally prohibited. Synthetic substances that are allowed include, for example, copper sulfate, elemental sulfur and Ivermectin. Genetically modified organisms, nanomaterials, human sewage sludge, plant growth regulators, hormones, and antibiotic use in livestock husbandry are prohibited. Organic farming advocates claim advantages in sustainability, openness, self-sufficiency, autonomy and independence, health, food security, and food safety.

<span class="mw-page-title-main">Common Agricultural Policy</span> Agricultural policy of the European Union

The Common Agricultural Policy (CAP) is the agricultural policy of the European Union. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce the EEC budget cost and consider rural development in its aims. It has, however, been criticised on the grounds of its cost and its environmental and humanitarian effects.

<span class="mw-page-title-main">Agricultural subsidy</span> Governmental subsidy paid to farmers and agribusinesses

An agricultural subsidy is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

<span class="mw-page-title-main">Ministry of Agriculture, Fisheries and Food (United Kingdom)</span>

The Ministry of Agriculture, Fisheries and Food (MAFF) was a United Kingdom government department created by the Board of Agriculture Act 1889 and at that time called the Board of Agriculture, and then from 1903 the Board of Agriculture and Fisheries, and from 1919 the Ministry of Agriculture and Fisheries. It attained its final name in 1955 with the addition of responsibilities for the British food industry to the existing responsibilities for agriculture and the fishing industry, a name that lasted until the Ministry was dissolved in 2002, at which point its responsibilities had been merged into the Department for Environment, Food and Rural Affairs (Defra).

Crop insurance is purchased by agricultural producers, and subsidized by the federal government, to protect against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities. The two general categories of crop insurance are called crop-yield insurance and crop-revenue insurance. On average, the federal government subsidizes 62 percent of the premium. In 2019, crop insurance policies covered almost 380 million acres. Major crops are insurable in most counties where they are grown, and approximately 90% of U.S. crop acreage is insured under the federal crop insurance program. Four crops—corn, cotton, soybeans, and wheat— typically account for more than 70% of total enrolled acres. For these major crops, a large share of plantings is covered by crop insurance.

The Countryside Stewardship Scheme was originally an agri-environment scheme run by the United Kingdom Government set up in 1991. In its original form it expired in 2014. It was relaunched for the Rural Development Programme England (RDPE) 2014-2020 with £3.1bn of government subsidy for agriculture and forestry, replacing the previous Environmental Stewardship scheme.

Environmental Stewardship is an agri-environment scheme run by the Department for Environment, Food and Rural Affairs in England which aims to secure widespread environmental benefits. It was formally launched on 18 March 2005, although the first agreements did not start until 1 August 2005.

<span class="mw-page-title-main">Rural Payments Agency</span>

The Rural Payments Agency (RPA) is an executive agency of the UK Department for Environment, Food and Rural Affairs (Defra). The RPA delivers the European Union (EU) Common Agricultural Policy (CAP) payments to farmers and traders in England, paying out over £2 billion in subsidies each year. The Agency managing more than 40 schemes, the largest of which the Basic Payment Scheme (BPS) paying more than £1.5 billion to around 105,000 claimants a year.

<span class="mw-page-title-main">Set-aside</span>

Set-aside was an incentive scheme introduced by the European Economic Community (EEC) in 1988, to (i) help reduce the large and costly surpluses produced in Europe under the guaranteed price system of the Common Agricultural Policy (CAP); and (ii) to deliver some environmental benefits following considerable damage to agricultural ecosystems and wildlife as a result of the intensification of agriculture.

<span class="mw-page-title-main">Food, Conservation, and Energy Act of 2008</span> United States federal law

The Food, Conservation, and Energy Act of 2008 was a $288 billion, five-year agricultural policy bill that was passed into law by the United States Congress on June 18, 2008. The bill was a continuation of the 2002 Farm Bill. It continues the United States' long history of agricultural subsidies as well as pursuing areas such as energy, conservation, nutrition, and rural development. Some specific initiatives in the bill include increases in Food Stamp benefits, increased support for the production of cellulosic ethanol, and money for the research of pests, diseases and other agricultural problems.

<span class="mw-page-title-main">Hill farming</span> Hill farming or terrace farming is a Type of agricultural in upland areas

Hill farming or terrace farming is an extensive farming in upland areas, primarily rearing sheep, although historically cattle were often reared extensively in upland areas. Fell farming is the farming of fells, a fell being an area of uncultivated high ground used as common grazing. It is a term commonly used in Northern England, especially in the Lake District and the Pennine Dales. Elsewhere, the terms hill farming or pastoral farming are more commonly used.

The agricultural policy of the United States is composed primarily of the periodically renewed federal U.S. farm bills. The Farm Bills have a rich history which initially sought to provide income and price support to US farmers and prevent them from adverse global as well as local supply and demand shocks. This implied an elaborate subsidy program which supports domestic production by either direct payments or through price support measures. The former incentivizes farmers to grow certain crops which are eligible for such payments through environmentally conscientious practices of farming. The latter protects farmers from vagaries of price fluctuations by ensuring a minimum price and fulfilling their shortfalls in revenue upon a fall in price. Lately, there are other measures through which the government encourages crop insurance and pays part of the premium for such insurance against various unanticipated outcomes in agriculture.

<span class="mw-page-title-main">Agriculture in the United Kingdom</span> Economic sector in the United Kingdom

Agriculture in the United Kingdom uses 71% of the country's land area, employs 1% of its workforce and contributes 0.5% of its gross value added. The UK currently produces about 60% of its domestic food consumption.

Pigford v. Glickman (1999) was a class action lawsuit against the United States Department of Agriculture (USDA), alleging that it had racially discriminated against African-American farmers in its allocation of farm loans and assistance between 1981 and 1996. The lawsuit was settled on April 14, 1999, by Judge Paul L. Friedman of the U.S. District Court for the District of Columbia. To date, almost $1 billion US dollars have been paid or credited to fewer than 20,000 farmers under the settlement's consent decree, under what is reportedly the largest civil rights settlement to date. Due to delay tactics by the U.S. government, more than 70,000 farmers were treated as filing late and thus did not have their claims heard. The 2008 Farm Bill provided for additional claims to be heard. In December 2010, Congress appropriated $1.2 billion for what is called Pigford II, settlement for the second part of the case.

<span class="mw-page-title-main">Food Security Act of 1985</span> United States federal law

The Food Security Act of 1985, a 5-year omnibus farm bill, allowed lower commodity price and income supports and established a dairy herd buyout program. This 1985 farm bill made changes in a variety of other USDA programs. Several enduring conservation programs were created, including sodbuster, swampbuster, and the Conservation Reserve Program.

In the agricultural context, diversification can be regarded as the re-allocation of some of a farm's productive resources, such as land, capital, farm equipment and labour to other products and, particularly in richer countries, to non-farming activities such as restaurants and shops. Factors leading to decisions to diversify are many, but include: reducing risk, responding to changing consumer demands or changing government policy, responding to external shocks and, more recently, as a consequence of climate change.

The Single Farm Payment is an agricultural subsidy paid to farmers in the EU.

<span class="mw-page-title-main">Agricultural insurance in India</span>

Agriculture in India is highly susceptible to risks like droughts and floods. It is necessary to protect the farmers from natural calamities and ensure their credit eligibility for the next season. For this purpose, the Government of India introduced many agricultural schemes throughout the country.

The Pradhan Mantri fasal bima yojana (PMFBY) launched on 18 February 2016 by Prime Minister Narendra Modi is an insurance service for farmers for their yields. It was formulated in line with One Nation–One Scheme theme by replacing earlier two schemes National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS) by incorporating their best features and removing their inherent drawbacks (shortcomings). It aims to reduce the premium burden on farmers and ensure early settlement of crop assurance claim for the full insured sum.

The Department of Agriculture and Farmers' Welfare (DA&FW) is one of the three constituent department of Ministry of Agriculture and Farmers' Welfare, the other two being Department of Agriculture Research and Education (DARE) and Department of Animal Husbandry and Dairying. The Department is headed by Minister of Agriculture and Farmers' Welfare.

References

  1. Waterfield, Bruno; Clover, Charles (26 September 2007). "Set aside suspended". The Daily Telegraph. UK. Archived from the original on 13 July 2008. Retrieved 1 November 2007.
  2. Cross Compliance Statutory Management Requirements Archived 27 September 2009 at the Wayback Machine
  3. Cross Compliance Good Agricultural and Environmental Conditions Archived 27 September 2009 at the Wayback Machine
  4. "RPA: Submit your SPS application using your farm software package". Rpa.defra.gov.uk. 13 April 2011. Retrieved 24 April 2011.
  5. "Single Payment Supervisor – SPS e-Channel". Farm-software.co.uk. Retrieved 24 April 2011.
  6. CAP Reform – an explanation of the main elements, European Commission - MEMO/13/937 25/10/2013