Sheep National Envelope: England (Hansard, 26 June 2002)

§ Lord Whitty

Under the revised EU sheepmeat regime national envelopes were introduced to provide member states with an element of flexibility in how they support their sheep sectors; funds under the envelope can be used to provide extra support to producers, improve the marketing and production of sheepmeat and encourage more environmentally friendly farming practices. National envelopes can be implemented on a regional basis; this is being done in the United Kingdom.

In England, the national envelope is worth £5.4 million in 2002. There is also a provision in the revised regime permitting member states, or parts of member states, to increase the size of the national envelope by reducing the basic rate of sheep annual premium by up to one euro. This could increase the size of the envelope in England by around £5 million.

The Government issued a consultation letter in January seeking views on how the national envelope should be used in England. We have now considered the responses we received, and have reached decisions on the way forward.

The Governemnt intend to make maximum use of the flexibility we negotiated at the Agriculture Council to switch support from subsidies per breeding ewe to 144WA support for restructuring and modernising the industry in line with the strategy set out in the Curry commission report. This means that, after a transitional year this year, we will by 2003 use the maximum available under the scheme to reduce sheep numbers in historically overgrazed areas by encouraging extensification in the uplands and to improve the quality and marketing of sheep.

For the transitional year of 2002, we intend to introduce a scheme to reduce sheep numbers in areas subject to historic overgrazing. Under the scheme the Government will purchase sheep quota from producers, who in return will be required to undertake to maintain lower stocking levels on the land in question. The scheme will operate by tender; in deciding which offers should be accepted we will take into account both price and other relevant factors such as the extent of historic overgrazing. This scheme will be open for applications in the autumn, and we hope that offers will be dealt with before the close of the next quota-trading period.

£2 million will be allocated to the quota purchase scheme in 2002. The remains of the 2002 national envelope will be paid to producers as a top-up to sheep annual premium payments; this will be worth some 46 pence per eligible animal.

For 2003, and in subsequent years, we intend to make full use of the opportunity in the new regulation to increase the size of the national envelope by reducing the rate of the sheep annual premium. This will enable us to fund a range of schemes from the national envelope.

The quota purchase scheme will be retained in 2003 and beyond; the level of resources allocated to the scheme will be decided in the light of our experience this year, but we expect it to be at least £1 million a year.

We are minded to introduce two further schemes in 2003: an upland extensification scheme and an industry development scheme:

the upland extensification scheme will be linked to hill farming allowances, and will pay additional sums, on a per hectare basis, to producers in less favoured areas who stock sheep below certain stocking levels. There are likely to be different stocking criteria and payment rates for different categories of land;

the industry development scheme will seek to encourage producers to participate in existing initiatives intended to improve the marketing and quality of sheepmeat. The details of the scheme still need to be developed, but the intention is to pay producers, via an uplift in their sheep annual premium payments, who participate in eligible schemes. These might include recognised assurance schemes; sire referencing and genetic improvement schemes; schemes linked to the National Scrapie Plan; recognised local-marketing initiatives.

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We will be consulting interested parties further on the details of these two schemes. We will also be considering, in the light of further views we receive, whether any further schemes should be introduced in 2003 or thereafter. Schemes will be operated by the RPA.

The Goverment believe that these schemes will make a major contribution towards addressing the problem of historic overgrazing in the uplands and improving the responsiveness of the sheep industry to the market. We recognise, however, that schemes funded from the national envelope can form only one element of the co-ordinated programme of measures needed to restore habitats damaged by historic overgrazing. We will be looking to English Nature to take appropriate action under the Countryside and Rights of Way Act, encouraging producers to make use of agri-environment schemes and considering what steps we can take, including use of the cross compliance rules where appropriate, to reduce stocking pressure on land in unfavourable environmental conditions.