ARCHIVE: Further information : Modulation question & answers

What is modulation?

Modulation is the transfer of EU CAP funds from Pillar 1 (guarantee expenditure and single farm payments) to Pillar 2 (rural development and agri-environmental schemes).

How has the system of modulation changed over recent years?

Since 2005, modulation has been applied on a compulsory basis in all EU 15 Member States. Farmers’ direct farm payments (Single Payment Scheme, Aid for Energy Crops, Protein Crop Premium and Area Payment for Nuts) are reduced by 5 percent each year. All farmers have the first €5000 of their payments effectively exempted from this form of compulsory modulation.

In March 2007, the UK (together with Portugal) secured agreement to enable us to continue to levy an additional (voluntary) national rate of modulation, over and above the compulsory EU rate. Voluntary modulation has been permitted by European rules since 1999, up to a rate of 20%. Using voluntary modulation in England in the past (since 2001) allowed us to fund Environmental Stewardship, the Entry level of which is open to all farmers.

How has modulation been affected by the CAP Health Check?

Following the CAP Health check in 2008, the levels of compulsory modulation will rise for all member states (new member states from 2013 only). For SPS 2009 the rate will increase by 2% to 7%, rising by an additional 1% per year to 10%. In addition, for farmers receiving payments over €300,000, they will see their payments over this amount modulated by a further 4%. There will however be a proportionate decrease in the rates of additional national modulation.

How will the money raised by EU Modulation be shared out?

The proceeds of Compulsory Modulation are shared out among EU-15 Member States on the basis of allocation criteria, set by the European Commission. A safety net provision means that no Member State will receive less than 80% of what is raised from its farmers. This rule does not apply to the compulsory modulation raised under the CAP Health check. Instead, all the modulation receipts will remain in the country in which they were generated.

What rules apply to additional national modulation?

The first €5000 of farmers' payments will not be exempt from additional national modulation. However, there will be no redistribution of these funds: 100% of the funds generated in England will remain in England.

Why do we need an additional (‘voluntary’) national modulation?

The additional national rate in England is necessary in order to finance our agri-environment schemes, and in particular the Entry Level Stewardship (ELS), which was recommended by the Policy Commission on the Future of Farming and Food. The ELS is open to all farmers to apply. Through simple yet effective environmental management, it delivers real environmental benefits over and above the levels that are required under cross-compliance measures.

What is the overall rate of modulation?

In England, farmers will not pay more in total modulation as a result of the Health Check. The combined EU and national modulation rate in England will be 19% for the period 2009-2012.

Will funds generated by modulation continue to be match funded?

The original EU ‘compulsory’ modulation will continue to be co-financed at 50:50 for axes 1 and 3 and at 55:45 for axis 2. However, the new compulsory modulation resulting from the CAP health check can be co-financed at a rate of 75:25. Ministerial decisions on the rate of new co-financing will be made shortly.  

From 2007 onwards, in England, 80% of voluntary modulation receipts will be spent on agri-environment measures under axis 2 of the Rural Development Programme for England. 10% of voluntary modulation receipts will be spent under Axis 1, and 10% under Axis 3. Voluntary modulation spent on Axis 2 measures will be co-financed at an EU: national ratio of 60:40. This means that for every €60 of voluntary modulation spent under axis 2, the Government will provide a further €40.

In Cornwall and the Isles of Scilly, (an EU designated convergence region) different co-financing rates apply.

How has the additional national modulation rate been calculated?

The additional national modulation rate has been calculated to generate sufficient funds to bridge the gap between the amount generated by compulsory EU modulation and our funding requirements for agri-environment schemes. For this reason, the rate of additional modulation will reduce in proportion to the increases in new compulsory modulation – the total receipts generated being the same.

Are the modulation rates different in Scotland, Wales and Northern Ireland?

The rate of compulsory modulation is set by the EU and is therefore the same across all the UK regions. However, the rules for additional voluntary modulation allow each administration in the UK to set modulation rates according to their own rural development needs and priorities.

Following the Health Check agreement, the total modulation rates (compulsory + voluntary) across the UK will be as shown in the table below.

Year

2008

2009

2010

2011

2012

England

5+13 =18%

7+12 =19%

8+11 =19%

9+10 =19%

10+9 =19%

Wales

5+2.5 =7.5%

7+2.2 =9.2%

8+2.8 =10.8%

9+2.5 =11.5%

10+1.5 =11.5%

Scotland

5+8% =13%

7+6.5 =13.5%

8+6 =14%

9+5 =14%

10+4 =14%

Northern Ireland

5+6 =11%

7+5 =12%

8+5 =13%

9+5 =14%

10+4 =14%

What are other EU Member States doing?

Under the voluntary modulation agreement, only the UK and Portugal are permitted to apply voluntary modulation.

 

Page published: 30 June 2009