Single Payment Scheme Round-up

David Miliband, the new Head of DEFRA, has admitted that the Rural Payments Agency (RPA) has missed its payment target for 2005. Under EU rules, 96% of payments needed to be made by the end of June. It was calculated that around 94.9% were issued by the deadline. This represents £1.438bn out of an estimated total figure of £1.515bn for England. By the payment deadline there were still 8,500 claimants out of a total of 116,474 who had yet to receive anything (admittedly, the vast majority of these had very small claims). In addition, 16,000 had received a partial payment but were still awaiting their top up. In order to achieve the 96% threshold, DEFRA is looking at submitting combined UK figures. Thus, Wales, Scotland, and Northern Ireland, where the payments process went much smoother, may help DEFRA avoid being fined further by the EU for late payment.

The RPA will pay interest where full payment had not been received by the end of the payment window (30 June). This will be at 1% over the London Interbank rate, which tends to be slightly higher than the base rate (currently 4.5%). It will only be applicable where the delay in payment is due to the RPA, i.e. not where the RPA is waiting for more information from the applicant. It will also be subject to a minimum payment level of £50. More details will be available shortly.

Due to a derogation granted by the EU Commission, the latest date for submission of SP5 forms without penalty was put back to 15 June. So those applicants who filed their returns after the original (extended) deadline of 31 May will not be penalised unless the forms went in after 15 June. Apparently, this covers some 4,000 farmers.

David Miliband has stated that the 2006 scheme year "will be very challenging" with "no quick fix". In response to the industry’s calls for an interim payment in December 2006, he was non-committal. However, he has asked the RPA to work on the necessary systems to make such payments. A further statement will be made in the autumn once the RPA has undertaken initial validation of the 2006 applications.

In order to simplify the operation of the 2006 Single Payment Scheme (SPS) in England, it has been announced that compensation from the Sugar Reform will be ring-fenced for sugar producers. This means that the money available will no longer be split 85% to 15% with the 15% going into the Regional Average Payment pot. According to our calculations, this means that producers will get around £6.80 per contract tonne in 2006 instead of £5.80 (gross before deductions). Remember that this aid is all still decoupled (i.e. no need to grow beet) and is likely to be based on contract tonnage in the 2005 year.

We are grateful to Andersons, the farm business consultants, for their contribution to this bulletin. We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Limited 2006.