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- Farming and rural
Exchange rate confirmed for 2015 direct payments scheme.
The exchange rate to be used for direct farm payments in 2015 has fallen.
The rate has been set at €1 = £0.73129 by the European Central Bank, a fall of almost six per cent compared to last year.
The decision affects about 15,400 Scottish famers who choose to receive in sterling support under the Basic Payments Scheme, which has replaced Single Farm Payments in the new Common Agricultural Policy (CAP).
The CAP budget imposed on Scotland – despite the best efforts of the Scottish Government to secure a fair deal for Scottish farmers – will decrease in 2015 for a second year in a row.
In addition, the European Commission is proposing to apply a budgetary control mechanism called financial discipline for a third year, which would mean a further reduction of almost one per cent on all direct payments over €2000. This will be confirmed later in the year.
Rural Affairs Secretary Richard Lochhead said:
"The sterling / euro exchange rate has been on a downward path over the past two years and, whilst there has been a recent modest recovery in that last few months, many farmers and crofters will have been anticipating a reduction.
"Given the current challenges facing Scottish agriculture, producers will no doubt also be disappointed at the further reductions to payments from the financial discipline and also as the cuts imposed on Scotland's CAP budget begin to bite.
"Despite the best efforts of the Scottish Government to secure a fair deal for our farmers, they have been continually short changed by the UK Government, losing out on the full £190 million convergence uplift, the £1 million a year from the red meat levy and, most recently, in the allocation of EU emergency aid monies.
"The Scottish Government is pulling out all the stops to be able to start making payments by the end of this year. But with more than 21,000 funding applications to process and the EU having left so little time between policy decisions and implementation of the new CAP, it was always clear that 2015 was going to be a challenging year. That is why the Scottish Government has already been in contact with the banks to encourage them to support Scottish farmers at this difficult time."
All payments for direct farm payment schemes are set in euros. The conditions on how to convert these amounts into the national currencies of Member States that do not use the euro are set in European Commission Regulations. The regulations allow the European Commission to set in advance the date on which the exchange rate is calculated. For the 2015 scheme year, the rate for all direct payments is calculated on the average of all sterling / Euro exchange rates set daily over September.
The rate used in 2014 was £0.7773: the 2015 rate, therefore, represents a decrease of around six per cent.
Approximately 15,400 Scottish farmers choose to receive EU support in sterling, accounting for 85 per cent of all Basic Payment Scheme beneficiaries in Scotland.
The Treaty on the Functioning of the European Union states that the annual budget of the EU must comply with the Multiannual Financial Framework (MFF). When it comes to the CAP budget, there is a financial discipline mechanism provided in the current direct payment regulations. If it looks as if the ceiling for direct payments and marketing expenditure is likely to be exceeded, this financial discipline comes into play. The rules say that the European Commission must calculate an adjustment rate.
The European Commission has proposed a reduction of around 1.4 per cent on all direct payments in excess of €2000 (c.£1,460). Direct payment schemes that would be affected in Scotland are 2015 Basic Payments Scheme and the 2015 Voluntary Coupled Support Schemes for Beef and Sheep farmers.
Financial discipline exists to create a crisis reserve to assist European farmers who might be adversely affected by trading events, such as the recent Russian trade ban. It was activated for the first time in 2013 at a rate of 2.453658 per cent. Standing guidance to farmers on the Basic Payments Scheme, the largest element of direct payments in Scotland, carries the caveat that payments might be reduced if the European Commission invokes the financial discipline.