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SFP Benefits of Exchange Rate Lift Stripped Away by Financial Discipline

The Scottish Government has today (Monday, 30 September) confirmed that the exchange rate to be used to calculate support delivered through the 2013 Single Farm Payment (SFP) Scheme is €1= £0.83605.
 
This compares with the exchange rate for the 2012 SFP of €1= £0.79805, the 2011 SFP which stood at €1 = £0.86665 and the 2010 rate of €1 = £0.85995.   The 2013 rate represents a 4.76 percent improvement in the value of the Euro compared to last year – but much of that benefit to Scottish farm businesses will be stripped away by the impact of financial discipline across Europe.

While the total funding pot that Scotland receives in Euros remains fixed, the exchange rate will ensure a significant hike in the value in sterling of the SFP to Scottish agriculture when compared to the £443 million paid out in 2012.

However, pressure on the CAP budget means that, for the first time, Europe will bring into play financial discipline measures.  That means Scotland will have to readjust SFP and claims under the Scottish Beef Calf Scheme by just over four percent, negating much of the benefit from the exchange rate lift.

NFUS Director of Policy, Jonnie Hall said:

“What the exchange rate has delivered to Scottish farmers on one hand this year, financial discipline will take away with the other.

“Today’s exchange rate setting is a huge factor in determining the value of support delivered to all eligible farm businesses in Scotland.   Last year, financial turmoil in Europe saw significant weakening in the Euro but much of that ground has been recovered.  With 85 percent of Scottish SFP recipients receiving payments in sterling, volatility in currency remains a constant worry for many businesses, especially when the rate setting process comes down to a single day.  

“The exchange rate also means that those businesses receiving their SFP in Euros will have to think very carefully about how they manage their funds when they convert them to sterling.

“This year, the exchange rate has worked in favour of many businesses but, for the first time, the impact of financial discipline across Europe will bite the vast majority of SFP recipients.  To balance budgets, virtually all Member States must cope with a four percent reduction in direct support schemes.  For us, that means SFP and beef calf scheme payments taking a hit.

“As for delivery of the 2013 SFP, we have already sought reassurances from Scottish Government that the payment run will commence at the earliest opportunity in December.  Meeting that timetable is important given the difficult winter and spring endured by a great many Scottish farm businesses.  

“The Scottish Government has a good track record in payment delivery but given the challenges to cash flow faced by a lot of Scottish farms, having prompt delivery of support payments in bank accounts this December will provide valuable stability to businesses.

“Looking ahead, we have also put down a marker with Scottish Government about payment arrangements under the new CAP regime in the future.  The shift from SFP being paid on a historic basis to an area rate will bring complexity and challenges to administration and payment systems. Under the new regime, we want Scottish Government to be in a position to pay out 90 percent of support to an individual farm business as soon as such payments are permissible.  That would give a comfortable cushion and minimal disruption should delivery systems be under pressure.”

Notes to Editors

  • The exchange rate used to determine the value of the SFP is set by the European Central Bank.   The Bank uses the Sterling/Euro exchange rate on a single day and the day traditionally chosen is 30 September, or nearest working day.  The rate sets the amount that those who take their SFP in sterling will receive.  Under the new CAP, the exchange rate will be determined across the whole month of September.
  • Scottish Government estimates that 85 percent of SFP recipients opt to receive payments in sterling (accounting for 58 percent of SFP budget) and 15 percent of SFP recipients (accounting for 42 percent of the SFP budget) have opted to receive payments in Euros.
  • The annual budget of the EU must comply with the Multiannual Financial Framework (MFF).  When it comes to the CAP budget, if the ceiling for direct payments and marketing expenditure is to be exceeded, then financial discipline comes into play.  The rules say that the Commission must calculate an adjustment rate.
  • The Commission has proposed a reduction of 4.001079% on all direct payments in excess of €2,000 (c.£1,700). Direct payment schemes that would be affected in Scotland are 2013 Single Farm Payments and the 2013 Scottish Beef Scheme.

Ends

Contact Bob Carruth on 0131 472 4006

Date Published:

News Article No.: 114/13


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