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Voluntary Modulation and the New Rural Development Programme for England

Volume 458: debated on Thursday 29 March 2007

In my written parliamentary statement of 20 March, Official Report, Col. 38W, I announced that political agreement had been reached at the European level on a new regulation on voluntary modulation which would open the way to the implementation of the new rural development programmes in the UK for the period 2007-2013. The regulation was adopted formally by the Council on Tuesday 27 March.

Now that this regulation is finalised, I am able to announce that the overall budget for the next Rural Development Programme for England (RDPE) 2007-2013 will be £3.9 billion. As was the case during 2000-2006, funding an ambitious programme of this size is only made possible through continued use of voluntary modulation. Shifting funding from farm subsidies to payments for environmental services—green farming—is consistent with the Government's long term vision for the reform of the Common Agricultural Policy.

Details of the voluntary modulation and co-financing rates that will apply are as follows.

Rates of voluntary modulation

The rate of voluntary modulation to apply in England for Single Payment Scheme (SS) 2006 payments was already established under the old voluntary modulation regulation at 6 per cent.

For the SPS scheme years 2007-2012, I intend to apply the following rates of voluntary modulation, all significantly below the ceiling of 20 per cent. established in the new regulation:

2007-12 per cent.

2008-13 per cent.

2009-14 per cent.

2010-14 per cent.

2011-14 per cent.

2012-14 per cent.

Money generated from modulating SPS in any given year is made available for spend in the subsequent year (i.e. modulation of SPS 2007 is available for use in 2008).

Co-financing

In England, voluntary modulation is essential to enable us to deliver on the commitments we have made to implement effective agri-environment schemes under Axis 2 of the Rural Development Regulation. I attach very high priority to the environmental outcomes we wish to achieve through the Environmental Stewardship Scheme. I am therefore prepared to add a significant amount of national co-financing to voluntary modulation under Axis 2 in order to deliver on these objectives. I shall therefore provide national co-financing for Axis 2—which will account for 80 per cent. of the voluntary modulation funding—at a rate of 40 per cent. In other words, for every £60 taken from pillar 1 direct payments and transferred to Axis 2, I shall add a further £40 from national funding. I do not intend to provide national co-financing for the 20 per cent. of voluntary modulation receipts which will apply to Axes 1 and 3.

Programme budgets

The total programme budget of nearly £4 billion is more than double the amount of money made available under the old England Rural Development Programme 2000-2006.

The budget for the next Rural Development Programme in England is constructed from an EU European Agricultural Fund for Rural Development (EAFRD) allocation of around £750 million, plus co-financing from the Government (including some state aided expenditure) of around £850 million. As set out above, this will be supplemented with approximately £1.5 billion generated through voluntary modulation (under the new and old voluntary modulation mechanisms), which will be co-financed with approximately £800 million of national funds.

Of this nearly £3.3 billion will be used to achieve environmental outcomes under Axis 2. A further £277 million will be applied to axis 1, which will be used to help make agriculture and forestry more competitive and sustainable, and £277 million will be applied to Axis 3, which will be used to enhance opportunity in rural areas.

Some of the additional VM receipts for Axis 1 will be used to fund a specific package of measures designed to assist the livestock industry in tackling some of the particular environmental challenges it faces. I shall make a further announcement as soon as we have worked out the details.

Next Steps

As we have agreement on the overall financing for the new programme for England we can now make quick progress towards finalising all the relevant programme documentation for submission to the Commission for approval. We expect to be able to submit the completed programme by late in the Spring, in preparation for which we shall shortly be consulting further with stakeholders on our plans. Our aim is that this should clear the way for speedy approval of the programme which will enable us to begin the new programme formally in the autumn. Until then, we shall continue to keep the Environmental Stewardship scheme open to new applicants with agreements entered into on a provisional basis.