Official Report: Minutes of Evidence

The Chairperson (Mr Irwin): I welcome Colette McMaster, assistant secretary; Lorraine Lynas, principal officer; Brian Ervine, principal officer; and Gareth Evans, principal officer. Forgive me: I am hoarse today. I tried drinking some water to help, but it is not much better. We will give you up to 10 minutes to make your presentation, then we will ask questions.

Mrs Colette McMaster (Department of Agriculture and Rural Development): Thank you, Chairman and Committee members, for the opportunity to provide you with a further update briefing on the approval of the 2014-2020 rural development programme (RDP). Lorraine Lynas, who is with me, is leading on developing the new programme; Brian Ervine is from environmental policy branch; and Gareth Evans is from rural development division.

Officials last briefed the Committee on the development of the RDP on 14 October, which was the day that the draft programme was formally submitted to the European Commission. The Commission has a requirement to respond within three months, setting out its observations on the submitted programme, which means that we were expecting a reply by mid-January. However, its observation letter on the draft programme was received formally by DARD on 31 March.

The Commission's letter makes a total of 315 observations or recommendations on the draft rural development programme. The document that we have provided to the Committee summarises the key points from the observations letter. Many of the observations are minor and technical in nature. These have not been reproduced in the summary. The Committee also has a copy of the full observation letter and the web link to the version of the programme that was submitted to the Commission in October. I would like to highlight to the Committee a number of issues in the observations letter.

Firstly, on areas of natural constraint (ANC), the observations letter refers to the method that is used for the calculation of income foregone and additional costs for the exclusion of the disadvantaged area and asks for this to be detailed in the measure sheet. This issue was discussed with the Commission prior to receiving the observations letter. We consider that this has now been addressed. The necessary calculations will be included in the measure sheet and we will seek to confirm this through the formal negotiations with the Commission.

As the Committee will be aware, the Department is seeking applications at risk to the 2016 ANC scheme by 15 May as part of the single application form (SAF) process. In the absence of formal Commission approval, it has been made clear in the scheme guidance that the scheme remains subject to Commission approval and, in the event that the Commission does not approve the scheme, any application made on the SAF may become void, with no payment being made. Similarly, if changes to the scheme are required, applicants will be notified accordingly. However, the Department does not foresee any difficulties at this stage.

The next key point relates to the environment and climate change. The observation letter places a very strong emphasis on the programme's environment and climate change objectives, which are a key priority for the Commission. The Commission has requested considerably more detail on the agrienvironment climate measures across the draft RDP, including more information on the environmental pressures arising from agriculture. It also asks for further detail on how the proposed interventions target identified needs and link to EU and national policies on the environment. In relation to the cross-cutting climate change objective, the Commission has requested more information on how mitigation and adaptation measures have been selected and targeted at particular sectors and themes. Specific performance indicators for climate change are also highlighted, which are being considered as part of the ongoing development of the RDP performance framework. Further baseline information is required for each measure in relation to cross-compliance and the minimum requirements needed to implement the nitrates, water framework and pesticides directives. For agrienvironment climate commitments which are similar to greening obligations, the Commission requires additional information on how double funding will be excluded.

The Commission has asked that environmental farming scheme (EFS) costs are included within the RDP. The draft EFS costs, along with the forestry scheme costs, are currently with DFP for verification and it is hoped that these will be available for the resubmission of the programme. We intend to seek clarification from the Commission in relation to its comments on the proposed land management programme. It is expected that this proposed scheme will require negotiation with the Commission to ensure that it can be programmed within the RDP in a manner that is acceptable to DARD. Given the focus on environment and climate change within the observations letter and the cross-cutting nature of this area across the RDP, significant input will be required in the weeks ahead from the policy and delivery officials working in this area.

A further issue highlighted in the observations letter is the lack of support for organic farming in the draft programme. Two types of financial support for organic farming can be provided through RDPs: first, funding for conversion to organic farming methods and, secondly, maintenance payments for those already farming to certified organic standards. DARD's public consultation on the draft RDP proposed that the next programme would not include a scheme to fund conversion to organic production methods. This position was shared by the majority of members on the RDP stakeholder consultation group. The proposal was based on the fact that uptake for the organic farming conversion scheme in the current RDP has been limited, with only 37 farmers participating. An annual organic maintenance payment as part of the environmental farming scheme was considered, but it was subsequently determined that such a payment would not obtain business case approval as additionality could not be demonstrated. That is because organic farmers would be receiving payment for actions that they are already carrying out. The Commission's observation is that the RDP does not include a single specific measure to support organic farming, although the land area under organic management in Northern Ireland is well below the EU average.

The letter refers to the Commission's action plan on organic farming, which recommends that member states should use opportunities and tools to support organic farming through their rural development programmes. The Commission therefore asks DARD to reconsider the decision not to support organic farming. Following previous representations from organic farming representatives, DARD had already committed to reviewing the support that it may be able to offer specifically to the organic sector. DARD will take the Commission's views into account as part of this review process.

I move now to LEADER. The observations letter highlighted the programming of LEADER to implement particular measures, namely business support, basic services and village renewal. The Commission commented that the approach undertaken in the current programming period, which restricted LEADER delivery to certain measures, is no longer applicable in the new programming period. It also says that the way that we have currently programmed LEADER in the draft programme does not fulfil the bottom-up approach of identifying local needs and ways to address them. The Commission has commented that the LEADER measure in the new programme should instead be designed in such a way as to offer the local action groups (LAGs) a broad scope of action, and we should not specify the eligible activities. The letter recommends that member states target support under LEADER by defining appropriate eligibility conditions and eligible costs to ensure that the measure contributes to the strategic objectives set for LEADER. There should also be sufficient scope for local action groups to add additional conditions in their local development strategies, which should be the main basis for the selection of projects.

To address that observation, officials are drafting a strategic design principles paper that will set out the themes that DARD will provide to LEADER groups as the framework for their areas for intervention, the overall aims for each, and the broad design principles within which LAGs can select and design schemes to meet the identified local needs. We propose to include that approach in the redrafted programme to address the Commission's recommendations on LEADER. We aim to complete our negotiations on LEADER by the end of April, to allow the guidance to LAGS to issue as soon as possible thereafter so that local strategies can be developed and agreed quickly by the LAGs and councils.

Finally, the Commission commented on the proposed measure for on-farm capital investment, which will be a significant part of the proposed farm business improvement scheme. The Commission's main recommendation is that there needs to be a targeting approach based on the evidence from the needs assessment and SWOT (strengths, weaknesses, opportunities, threats) analysis. It suggested that that targeting could be done according to size, competitiveness challenges for certain agricultural sectors, or geographically. On this aspect, we hope that the data gathered in the recent whole farm needs assessment survey will help to inform the EU RDP approval process and any targeting of the capital investment scheme.

The Commission also recommends that we make a reference to the potential impacts of capital investment on biodiversity and ecosystems, and, where appropriate, the need for mitigation in sensitive areas, such as Natura 2000. The Commission is encouraging the use of selection principles to ensure that the most environmentally or climate-friendly investments are favoured. It also asks us to explain how we will ensure that any negative side-effects of investment on the environment are assessed and mitigated.

The Commission made only minor comments on the other schemes that would be part of the proposed farm business improvement scheme.

We have started the formal adoption process, with the aim of having a programme approved as soon as possible, and ideally before the summer. We are also working on the necessary business cases and the design of the scheme in order to open the schemes as soon as possible once the EU and business case approvals are in place.

That is all I want to say at this point. We are happy to answer any questions or provide further clarification.

The Chairperson (Mr Irwin): Thank you very much for your presentation. Three hundred and fifteen observations seem to be quite a lot. Will the Department have difficulty addressing any of them?

Mrs McMaster: We are working through all those comments and making the necessary changes to the text. We will need further clarification from the Commission on a number of comments as to what they mean. In some cases, we will need to negotiate with the Commission on the level of the detail that it is looking for.

So far, we have had four videoconferences with the Commission to discuss the observation letter. We will continue that interaction with the Commission as we work through its comments. We are intending to send back each section of the programme as we have it redrafted. We have a plan to ensure that we are maintaining a steady flow of information to the Commission. I believe that we have another videoconference tomorrow, and more lined up.

At this stage, I am not aware that we have come across particular obstacles. There are a lot of comments on some of the areas, and in the opening statement I highlighted some of the main issues.

Mrs Lorraine Lynas (Department of Agriculture and Rural Development): I know that 315 seem a lot, but the guidance or feedback that we have had from the Commission is that member states' programmes have had in the region of 300 to 800 comments, so Northern Ireland's programme is actually at the lower end of that scale.

There is also a lot of duplication in the comments, which is why we provided a summary. We found as we went through them that you answered something and found the same comment again. You can also have one comment 10 times for each measure. Some are easy to fix and some a little bit more difficult. The main issue is more the time involved, particularly on the agrienvironment side, to get through the negotiations with the level of detail for each option in the programme that the Commission requires.

The Chairperson (Mr Irwin): Do you see this in any way holding up the approval process?

Mrs McMaster: It will really depend on how quickly we can do this. In my opening comments I highlighted a lot of work that will be involved in this, especially for the officials who are doing the policy and delivery work and are working on the environmental and climate change areas. We are aware of that, and we have developed a plan to enable us to work on it as closely as possible with the Commission. We are still aiming to work towards getting approval of the programme, ideally before the summer. We will need to see how the negotiations on some of the points that need to be negotiated progress over the next while, but at this stage we are putting resources towards working within that time frame.

Mr Buchanan: Given the financial pressures facing the Department, will this have any impact on staffing resources and their ability to deliver the programme?

Mrs McMaster: On the approval process itself?

Mr Buchanan: Yes.

Mrs McMaster: We have the policy and delivery teams in place, and they have worked on the draft programme to date. Those particular staff with that expertise will continue to work with the Commission as we negotiate this phase of the programme to achieve approval. There is a lot of work there and, as Lorraine said, it is very much about the time frame within which to do that work, because we are seeking to achieve it within quite a tight time frame, given that we just got the comments on 31 March. We are hoping to have that turnaround and approval of the programme ideally before the summer. It is challenging, but that is what we are aiming to work towards. At this stage, the plan is there and we will continue to monitor closely how that goes. In the business plan for this year, we have said that we aim to have the programme approval by September at the latest. While we are working towards getting Commission approval ideally before the summer, we are certainly hoping that the worst-case scenario is that we will have that approval by September.

Mr Poots: There is a comment there about young farmers. What observations would you make about what the EU is saying about that? It is at paragraph 116.

Mrs Lynas: The young farmers issue was in the programme, and it probably cuts across to pillar 1 as well. The definition of a young farmer in the rural development regulation, is a young person who:

There is a further definition in the RDP that relates only to the capital investment measure, where you can allow an additional 20% for young farmers who have become head of holding within the last five years. That is a slight difference, and it was introduced in the final stages of the negotiations in June 2013. It has provided a welcome flexibility because if the original definition had been there, only farmers who were becoming head of holding would have been able to access the additional grant. We lobbied very hard throughout the negotiations, through both the Department for Environment, Food and Rural Affairs (DEFRA) and the MEPs, for more flexibility. The definitions are in the basic acts, and DARD cannot change them. The comment there is about us clarifying our support. Although you can give up to an extra 20%, the DARD draft programme recommends only 10% additional, which is to enable us not to proceed beyond the 50%, or pound-for-pound, of funding. They are probably seeking clarification as to why we are only going for the 10% and not the 20%.

Mr Poots: So if someone became the head of a holding and an active farmer in 2011, would they qualify?

Mrs Lynas: It is at the point of application, so the key here is when we open the scheme. You might find that if there are different tranches of schemes throughout the programme, a young farmer may be eligible for one tranche but not for another because he may have fallen out of the five-year period, depending on the point of application. That is a basic act, so that is a key point to remember.

The Chairperson (Mr Irwin): In the old programme, DARD observed 73% of the programme budget. In the new programme, it is proposing to need an allocation of £37·2 million to deliver the programme. Has that situation changed, and is DARD still proposing to need £37·2 million of a budget to run the programme costs?

Mrs McMaster: Is that around the technical assistance issue? I will ask Lorraine to talk about that.

Mrs Lynas: We maximised the technical assistance in the current programme as well. The rules are that you can only use up to 4% of the EU funds on technical assistance. That means that the EU element that is there would be only £7 million. The way we set the co-financing rates — the associated national rate that will come with that — is only a 20% co-financing rate on the technical assistance measure. The fact that this is a much bigger programme than we have had previously; it has a large capital investment scheme in it that could be quite costly in terms of the staff needed to deliver it. We are still finalising or looking at the delivery options in the programme. The technical assistance element is there to be used to assist in carrying out the technical inspections that may be needed for building works, with surveyors, architects and so on. There is a whole range of activities that can be used.

The Chairperson (Mr Irwin): So, at this moment, it is not set in stone?

Mrs Lynas: No, it is not set in stone. Technical assistance is there to enable us to manage and deliver the programme. For example, some of the technical assistance costs will be for running the rural network, some will be for the costs associated with the monitoring committee and some are the costs that we have with the service level agreement with NISRA, which is looking after the evaluation. There are key parts that we need, but we have to look critically at how to use that most effectively going forward. That is a process that we will discuss with the Commission. DARD will still absorb the majority of the delivery costs in the programme; that will still only be a fraction of what is needed to deliver the programme.

The Chairperson (Mr Irwin): OK. Thank you very much for your presentation today.