European Union Small Farmers Scheme: New avenues for financial support during trying times

That hard times have hit agribusiness is not news. Income from the industry, which is at its lowest level in 60 years, is less than half what it was five years ago. The latest statistics show that farmers are earning £5,200 per year, while their total borrowing has risen to over £10 billion. The industry's total income was £1.88 billion, which is £3 billion less than five years ago. However, there is support that may help you through the tough times.

There are recovery program incentives to compensate for the diseases and floods that have hit the industry over the past decade, such as European Union aid of £34 million, but this is by far not enough to cover everyone.

There is another way to get financial support for your agribusiness - through research grants, direct aid or state and local economic development programs for example.

The European Union Agricultural Council last month agreed on new rules to simplify direct aid payments to farmers, at a cut-off point of EUR1,250 per farmer per year. In participating EU member states, farmers can apply for a flat-rate aid payment for the years 2002-2005, based on the direct aid received either in the year preceding the year of application or the average aid in the three years preceding the year of application.

The scope of the Small Farmers Scheme

The Small Farmers Scheme (SFS) covers all of the economically important forms of direct aid, both in the arable crop sector and in the livestock sector. The European Commission estimates that up to one third of EU farmers could be eligible, whereby total expenditure would cover about two percent of total EU aid payments. During the trial period 2002-2005, the European Commission will study the effects of augmenting the EUR1,250-limit in the future, and possibly bring the SFS into the rural development pillar of the Common Agricultural Policy.

The main objective behind the new system is to reduce the administrative burden on farmers, national administrations and the European Commission. Savings will come from reducing the administrative costs of processing applications, making payments, and carrying out controls.

By setting the cut-off point at EUR1,250 per year, the European Commission estimates that up to one third of all EU farmers could be eligible, whereby the total aid payments under SFS would represent 2 percent of total EU aid payments. Large variations exist between EU member states with regard to proportionate shares of farmers eligible for SFS. The scheme would cover around 5 percent of the farmers in the UK.

Eligibility for financial support

If you are a farmer in a participating EU member state, you are considered eligible for SFS if you have received aid under at least one of the support schemes (as defined under SFS) during each of the three calendar years preceding the year of application. If you apply for the SFS payment, you will receive an amount equal to the highest of either the average of the applicable direct aids obtained during the three calendar years preceding the year of application, or the total amount of applicable direct aids granted in the calendar year preceding the year of application.

SFS will be available for the calendar years 2002 to 2005 - a period during which intermediate evaluations will be made and possibilities to increase the threshold in the future explored. Due to its temporary nature, participation in the scheme is on a voluntary basis, both for member states and farmers in the member states that decide to apply the scheme.

Member states may decide to implement SFS at a national or regional level. Once accepted as eligible for the flat rate payment, farmers are free to use the land for any agricultural purpose (except for the production of raw hemp or retted true hemp) provided that the land is maintained in good agricultural condition.