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Minister Coughlan announced allocations from the 2005 Single Payment Scheme National Reserve

The Minister for Agriculture and Food, Ms Mary Coughlan TD, today announced the commencement of allocations to successful applicants under the 2005 Single Payment Scheme National Reserve.

The Minister said that there are four main categories under which farmers applied for entitlements from the 2005 National Reserve. Categories A, B and C are mandatory for Member States with Category D being non-mandatory.

Category A: Farmers who inherited or otherwise obtained a holding free of charge or for a nominal sum from a farmer who retired or died before 16 May 2005 where the holding was leased out to a third party during the reference period.

Category B (i) B (ii) B (iii) and B (iv): Farmers who made an investment between 1 January 2000 and 19 October 2003, which resulted in an increase in production capacity. Investments include purchase or long term lease of land, purchase of suckler and/or ewe quota or other investments.

Category C: Farmers who sold their milk quota into a re-structuring scheme between 1 January 2000 and 19 October 2003 and who converted to a farming sector for which a direct payment under the Livestock and/or Arable Aid Schemes would have been payable in respect of the years 2000 to 2002.

Category D: New entrants to farming since 31 December 2002 and farmers who commenced farming in 2002 but who received no direct payments in that year. The applicant's total income could not exceed €40,000 and any off-farm income could not exceed €20,000. Farming qualifications were required for this category.

In addition, the pool of money in the National Reserve is being used to fund successful applicants under the following measures:

  • Active dairy farmers who, because of force majeure, were unable to supply milk during the 2004/2005 milk quota year and were therefore allowed to temporarily lease out all or part of their quota.
  • Sheep farmers with commonage land who, while farming very extensively, were prevented from expanding production during the period 1999-2002 pending the publication of commonage framework plans.

The Minister announced that she had decided that the regional average value of entitlements used in calculating National Reserve allocations in the appropriate categories would be the District Electoral Division (DED) average. Minister Coughlan believed that this approach was the fairest way of dealing with the regulatory requirement in this matter. In making her decisions on the National Reserve allocations, the Minister acknowledged the assistance of the Single Payment Advisory Committee. The Committee, which comprised representatives of the farming organisations, Teagasc and officials from her Department, had made a valuable contribution to the consideration of appropriate objective criteria and regional average data to be used in administering the National Reserve, the Minister said. The European Commission was also consulted in this regard and the Commission's legal advice was that, having established the "regional average" the Member State is precluded from deviating from this figure by way of imposition of an overall cap mechanism or by way of application of a co-efficient. The Member State is also precluded from using a "hybrid" system, for example, the average of County and DED averages.

Minister Coughlan explained that some 5,000 successful applicants were receiving National Reserve allocations worth €10.9 million in the first tranche. She expected payments to follow shortly. Some 6,900 unsuccessful applicants were also receiving notification at this time. As many as 6,000 of the 17,500 farmers who made application to the 2005 National Reserve applied under more than one category and some of these cases are not covered in the first tranche of allocations. The regulations provide that the applicant can only benefit from the category that is the most beneficial. In addition some applicants to the National Reserve have already benefited from other measures such as Force Majeure and/or New Entrant during the reference period. The National Reserve applications from these farmers are still being assessed to establish whether the provisions of the National Reserve regulations which preclude double benefit or accumulation in certain circumstances are appropriate. In addition, Minister Coughlan also pointed out that about 11% of applications are still under query with the applicants concerned.

Allocations to successful applicants will continue over the coming weeks. The question of priority categories for the 2006 National Reserve will be decided in due course but the Minister pointed out that the only mandatory category for 2006 will be Category A while Category D continues to be a non-mandatory category. The Minister also said that, depending on available resources, she would give consideration to catering for certain "hardship" type cases who were unable to avail of any of the existing Single Payment measures.

Applicants who are dissatisfied with the Department's decision on their application may appeal that decision to the Single Payment Independent Appeals Committee. The Minister also reminded successful applicants that new entitlements allocated from the National Reserve must be used in full each year for five years and may not be transferred other than by gift or inheritance during that five year period. Similarly, applicants who qualify for a top-up on existing entitlements should note that where the top-up increases the value of existing entitlements by more than 20% then all of those entitlements are regarded as having come from the National Reserve and the "5 year" rule applies.

"I am satisfied that the criteria used in allocating entitlements is fair and reasonable," said the Minister. "The National Reserve is a relatively scarce resource created by reducing the value of existing farmers' entitlements. It will only be replenished by a claw-back on the sales of entitlements and the relinquishing of any entitlements that remain unused. My Department must therefore be prudent in determining how funds in the Reserve are administered."

12 April, 2006

NOTE FOR EDITORS

Ireland's National Ceiling for 2005 is €1,260 million of which 3% (€37.8m) had been provisionally set aside to fund the National Reserve. The cost of funding successful applicants under Force Majeure and New Entrants during the reference period has meant that the sum of individual entitlements has exceeded our National ceiling by some €15.1m requiring a 1.18% linear reduction of all entitlements. In effect therefore the National Reserve now represents 1.82% of the National ceiling amounting to some €22.7m.

The National Reserve exists to try and minimise the impact on farmers who, for a variety of reasons, may find themselves disadvantaged in the transition to the new decoupled support regime as a result of changes in their businesses during or since the reference period. The National Reserve can provide enhanced or new entitlements for certain farmers who made investments in production capacity or purchased or leased land on a long-term basis or who converted from dairying to a sector for which a direct payment would have been payable during the reference period. Such farmers, at the time when they took these decisions, had a legitimate expectation that the coupled regime of direct payments would continue into the future.

In allocating entitlements to successful applicants in the mandatory categories the Member State is obliged to determine a "reference amount" based on objective criteria while ensuring equal treatment between farmers.

In allocating entitlements to successful applicants in the non- mandatory categories the Member State must ensure that the allocation does not have the effect of increasing the value of any existing entitlements above the "regional average" value of entitlements. Similarly, the value of any new entitlements allocated to non-mandatory categories must not exceed the regional average. The Member State is allowed to determine what will constitute the regional average.

The main allocation rules as follows:

Category A: Farmers who inherit, lease or otherwise receive a holding free of charge or for a nominal consideration, where the holding in question was leased out to a third party during the reference period. The farmer from whom the holding is obtained must have retired or died before 16 May 2005.

  • Successful applicants are awarded a reference amount calculated by multiplying the number of hectares acquired by the average value of payment entitlements in the DED associated with their herd number.
  • Where the land is leased a "nominal consideration" is regarded as not exceeding €100 per hectare.

Category B (i): Farmers who purchased land or leased land on a long-term basis (five years or more) between 1 January 2000 and 19 October 2003 resulting in an increase in production capacity in a sector for which a direct payment would have been payable during the reference period.

  • Successful applicants are allocated a reference amount calculated by multiplying the number of hectares acquired by the average value of payment entitlements in the DED associated with their herd number.
  • Investments by way of long-term lease (five years or more) of land cannot be equated with investments by way of purchase of land and therefore a co-efficient of 75 is applied to such investments.
  • The cost of purchasing or leasing the land must be greater than €100 per hectare in order to qualify as an investment.
  • Co-efficient of 50 is applied to that element of the allocation in respect of land purchased or leased during the period 1 January 2003 to 19 October 2003.

Category B (ii): Investment by way of purchase of Suckler Cow Premium Quota rights for years 2001, 2002 and 2003.

In these cases successful applicants generally already have Single Payment entitlements that either do not, or only partially, reflect the extra premium arising from the investment. Take for, example, a farmer who made an investment by way of purchase of Suckler Cow Quota in 2002. The Single Payment already established for this farmer only reflects one third of the extra premia arising from the investment in quota. A "reference amount" has been calculated representing the two-thirds of premia arising from the investment that is not already reflected in the Single Payment. The amount is determined by multiplying the appropriate number of quota rights purchased by the value of the Suckler Cow Premium and the any Extensification Premium. The existing Single Payment entitlements is topped up by this amount.

  • Farmers who purchased quota rights for a nominal amount (less than €10 per unit) are not regarded as having made an investment and are not therefore eligible.
  • A co-efficient of 50 is applied to that element of the allocation in respect of quota rights purchased for the 2003 scheme year.

Category B (iii): Investment by way of purchase of Ewe Premium Quota rights for 2001, 2002 and 2003.

  • The allocation is limited to 50% of the appropriate Ewe Premium rate. In all other respects the allocation is made in a manner similar to that applied to farmers who invested in Suckler Cow Premium quota rights.

Category B (iv): Other investments that resulted in an increase in production capacity in a sector for which a direct payment would have been payable during the reference period. (Farmers applying under this category will normally have invested in buildings, machinery etc. Successful applicants will have demonstrated that the investment was related to a sector for which a direct payment would have been payable during the reference period. In this context investments in the Dairy sector are not eligible for an allocation from the National Reserve.

  • A reference amount is calculated representing 10% of the net cost of the investment or the increased value of premia associated with the increase in production whichever is the lesser.

Category C: Farmers who sold their milk quota into a re-structuring scheme between 1 January 2000 and 19 October 2003 and who converted to a farming sector for which a direct payment under the Livestock and/or Arable Aid Schemes would have been payable in respect of the years 2000 to 2002.

  • A reference amount is calculated representing the potential value of the dairy premium foregone as a result of the decision to cease milk production. The maximum allocation from the reserve is the difference between the single payment already established and the decoupled dairy premium at 2005 rate. No allocation is made where the single payment already established arising from the conversion is equal to or greater than what the applicant would have obtained had he/she remained in milk production and availed of the 2005 dairy premium. Due account is taken of the level of single payment that would, in any event, have been established had the conversion not taken place.

Category D: New entrants to farming since 31 December 2002 and farmers who commenced farming in 2002 but who received no direct payments in that scheme year. The applicant's total income may not exceed €40,000 and any off-farm income may not exceed €20,000. Farming qualifications are also required for this category.

This is a non-mandatory category. At the time of drafting the application form and terms and conditions it was agreed that any new entrant whose holding comprised leased or rented land only would not be eligible for entitlements from the National Reserve. Such farmers had the option of leasing in any entitlements established for the farmer from whom the land is leased.

Where the land in question is being leased for a nominal amount from a farmer who retired or died before 16 May 2005 and the land was leased to a third party during the reference period then the applicant may qualify under Category A. Similarly, where the lease commenced before 19 October 2003 the applicant may qualify under Category B (i). Where the land being farmed has been inherited then any entitlements established for the farmer from whom the land was inherited will have been transferred to the new entrant.

  • The regulations provide that any entitlements allocated from the National Reserve must not exceed the regional average value of entitlements. The regional average is taken as the average value of entitlements in the DED associated with the applicant's herd number.

Date Released: 12 April 2006