Rural Payments and Services

The exchange rate to be used for direct farm payments in 2017 has increased by around 5% compared with last year.

The 2017 exchange rate will be €1 = £0.89470. This is based on the average of the European Central Bank rates set over the month of September.

The decision affects around 16,400 farmers who have chosen to receive their 2017 Basic Payment Scheme support in Sterling.

Rural Economy Secretary Fergus Ewing said:

“I can confirm that farmers who choose to receive their Basic Payment Scheme (BPS) support in Sterling will see an increase of around 4% when compared to the 2016 rate, after taking account of Financial Discipline arrangements.

“In addition, and as detailed in the recent CAP Stabilisation Plan, farmers and crofters will shortly receive a letter outlining how to apply for this year’s national BPS and Greening loan scheme. Those eligible will receive 90% of their entitlement in the first two weeks of November to a maximum of €150,000.

“I hope that confirmation of the exchange rate will provide farmers and crofters with some degree of certainty that will enable them to plan for the year ahead and continue to drive forward the rural economy.

Background

All payments for direct farm payment schemes are set in Euros. The conditions on how to convert these amounts into the national currencies of Member States that do not use the Euro are set in European Commission regulations. The regulations allow the European Commission to set in advance the date on which the exchange rate is calculated.

The rate used in 2016 was £0.85228: the 2017 rate, therefore, represents an increase of around 5%. Approximately 75% check figure of EU support is paid to Scottish Farmers who opt for payment in Sterling.

The Treaty on the Functioning of the European Union states that the annual budget of the EU must comply with the Multiannual Financial Framework (MFF). When it comes to the CAP budget, there is a financial discipline mechanism provided in the current direct payment regulations. If it looks as if the ceiling for direct payments and marketing expenditure is likely to be exceeded, this financial discipline comes into play. The rules say that the European Commission must calculate an adjustment rate.

The European Commission has proposed a reduction of 1.39% on all direct payments in excess of €2,000. Direct payment schemes that would be affected in Scotland are 2017 Basic Payments Scheme and the 2017 Voluntary Coupled Support Scheme for Beef and Sheep farmers.