As trilateral negotiations continue between the EU's legislative bodies, the NFU has joined a coalition of farming organisations from Germany, France, the Netherlands, Belgium, Finland and Denmark to derail plans that would see 15 percent of CAP funding made flexible for movement between Pillars One and Two. The process is technically called modulation.

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Under proposed Common Agricultural Policy reforms, many states will have the ability to transfer 15 percent of funding between pillars one (direct payments) and two (rural development). In the UK this is likely to result in a reduction in direct payments, as the government will be eager to cut subsidy funding to farmers. Elsewhere in the bloc, farmers may receive more funding as a result of the flexibility measures; member states whose direct support payments are below 90 percent of the EU average will be allowed to transfer an additional ten percent of the fund between pillars, which is predicted to result in widespread movement of funds from pillar two to one.   

Concerned that they could lose out on payments, a number of industrial farm groups from 7 EU states have joined together to pressure the European Commission, Parliament and Agriculture Council to reject or modify the proposal in ongoing negotiations. The farming unions have sent a joint declaration to all negotiators from the three EU institutions, urging against giving member states unilateral freedom to move money away from direct payments.

In February, Agriculture Ministers in the Council agreed to support modulation, without match-funding from member states. The European Parliament, however, later insisted that movements between pillars should be match-funded. As talks continue in Europe, the farming coalition will push for negotiators to ensure any transfers between pillars are co-financed by national governments. They are clear that their aim is to prevent the movement of funds from Pillar One to Pillar Two.

NFU President Peter Kendall also travelled to Brussels this week to meet with advisers to Agriculture Commissioner Dacian Cioloş. Mr Kendall said, "The free transfer of money from pillar one to pillar two, which would be at the member state's discretion, would result in grossly unfair competition between farmers across Europe. To stop this we have joined this coalition to ask for any money transferred from pillar one to pillar two to be match-funded by national co-financing. Only then will governments really be forced to weigh up the value of moving money into pillar two."

Kendall added that the recent hardships endured by farmers in the UK and elsewhere in northern Europe has demonstrated the importance of subsidy support to food producers.

Wildlife groups cautiously welcome 'flexibility' in UK

While farming groups have stated their staunch opposition to modulation, conservation organisations that could, in theory, benefit from the changes have also expressed reservations. RSPB points out that "While Member States will be able to continue to move money from Pillar I to Pillar II, only the UK and Portugal have, to date, ever shifted money like this and it seems unlikely that many will choose this option."

RSPB conservation director Martin Harper also pointed out that Pillar Two funding has been harder hit than direct payment provisions in EU budget cuts. Rural Development funding, which supports agri-environment measures, that can provide additional income for farmers, is facing cuts of 12 percent. However, he urged for a cautious acceptance of modulation in February.

Harper said that, in England at least, past "[modulation] transfers… meant the difference between offering an open-to-all agri-environment scheme to farmers and not." The UK's allocation under Pillar Two is the lowest of any member state.  

He added, "Without modulation, we wouldn't have been able to afford the entry level stewardship scheme in England as well as the higher level scheme… There's strong evidence that agri-environment schemes have a 'multiplier effect' which means that for every pound spent, more money is generated in the local and national economies."

The RSPB director also criticised the industry claims that modulation undermines the competiveness of UK farmers. He said, "Unlike direct support payments under Pillar I which lacks a clear policy objective, the rural development programme is partly designed to boost competiveness and its schemes are able to support farmers to adapt, diversify and adopt more sustainable land management approaches."

Ireland, the current EU president, remains hopeful that an agreed CAP text will be finalised before the end of June.