Under the Agenda 2000 agreement the position is that headage grants in the disadvantaged areas are to move from a payment per animal to a payment per hectare basis. This part of the agreement was well signalled. Under transitional arrangements the headage schemes, as they have operated up to now, will continue to apply for this year. A new area based scheme is to be introduced with effect from next year.
As provided for in the Programme for Pros perity and Fairness, a task force, representative of the Department and the main farming bodies, was established to formulate a new scheme. The task force met on a number of occasions and, having considered a range of options, the group recommended a scheme which would involve, inter alia, a payment per hectare depending on the type of livestock on the holding. It was envisaged that each livestock unit would attract one hectare payment. The group noted that any scheme, which does not have a link to production, produces winners and losers whereas the scheme proposed resulted in very little redistribution of aid. The Minister announced details of the proposed scheme on 29 May last and at the same time he announced a £120 million increase in the overall allocation of money for disadvantaged area payments. That scheme took particular account of the difficulties facing sheep farmers in mountain areas. Effectively, he increased the annual provision for compensatory allowances from £120 million to £140 million over the period 2001 to 2006. The proposed scheme was then submitted to the European Commission.
The Commission was unwilling to accept this on the grounds that it did not represent a clear shift from headage related payments to area related payments. The Commission viewed the fact that each livestock unit would attract one per hectare payment as continuing the link to production. In these circumstances a number of alternative proposals were examined. The only scheme acceptable to the Commission is one which totally breaks the link to production.
The Government has already committed £360 million extra to the fund. The Minister has, however, negotiated a compensation package for losers under which 90% of losses will be made good in 2001, 80% in 2002 and 50% in 2003. Under these arrangements the average loss in 2001 will be about £32 rising to £64 in 2002. He has asked my officials to carry out a review of the scheme to see if an equitable long-term solution can be found to the problem of reduced payments, both in mountain and other areas. As I indicated, these losses will be about £32 in the first year. The Minister's immediate priority, therefore, is to concentrate on putting arrangements in place for delivery of the new area based system in 2001. He is anxious to find an equitable solution to this issue. It is hoped the review will be carried out early next year.