Rural Payments and Services

The exchange rate to be used for direct farm payments in 2016 has increased.

The 2016 exchange rate will be €1 = £0.85228, an increase of around 17 per cent compared with last year. This is based on the average of the European Central Bank rates set over the month of September.

The decision affects around 16,500 farmers who have chosen to receive their 2016 Basic Payment Scheme support in Sterling.

In addition, the European Commission has proposed to the application of a budgetary control mechanism called Financial Discipline for a fourth year, which would mean a reduction of just over one per cent on all direct payments over €2,000 – affecting around 14,500 farmers. This will be confirmed later in the year.

Rural Economy Secretary Fergus Ewing said: “Farmers who choose to receive their Basic Payment Scheme support in Sterling will see an increase of approximately 15 per cent when compared to the 2015 rate, after taking account of the Financial Discipline arrangements. This marks an increase for the first time in three years and is to be welcomed given the current challenges facing rural Scotland.

“In addition, farmers should receive a letter today setting out how to apply for the national BPS and Greening loan scheme announced earlier this month. Those eligible and who apply by 12 October will receive 80 per cent of their 2016 Basic and greening payment in the first two weeks of November.

"I hope this, combined with the confirmation of the exchange rate today, will provide some clarity and certainty which farmers need to enable them to plan for the year ahead while driving 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 2015 was £0.73129: the 2016 rate, therefore, represents an increase of around 17 per cent. Approximately 75 per cent 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 1.36 per cent on all direct payments in excess of €2,000. Direct payment schemes that would be affected in Scotland are 2016 Basic Payments Scheme and the 2016 Voluntary Coupled Support Scheme for Beef and Sheep farmers.