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UK support for sugar reform revealed

By Anthony Fletcher , 25-Sep-2006

The UK's food and farming minister has revealed how almost £500 million of additional support for sugar reform will be incorporated within the Single Payment Scheme (SPS) over the next seven years.

Jeff Rooker announced in June that in order to simplify arrangements under the 2006 SPS, the £52m earmarked for this year would be added entirely to entitlements held by sugar beet growers who met defined criteria.

Those criteria are now confirmed as growers contracted tonnage for quota sugar for the 2005/06 marketing year.

"The consultation exercise raised a number of complex but important issues," said Rooker.

"I have been keen to ensure that we arrive at solutions which both balance the interests of sugar producers and all other SPS claimants and can be managed successfully by the Rural Payments Agency alongside its existing challenges. The fact that the vast majority of consultees supported the decisions we have announced today suggest that we have been able to meet those twin aims."

The announcement about sugar reform support comes just a few months after the new EU sugar regime was finally put into place.

This has been a long time coming. There has been intense pressure for years on the EU, the world's third-largest sugar producer, to change its heavily criticised regime that artificially which supported internal prices at three times the world level.

But the reforms, which came into effect on 1 July 2006, feature a number of concessions designed to give European sugar producers a viable future. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.

This has given the sugar industry reasons to be hopeful. A recent Standard & Poor's Ratings Services study, entitled 'Sweet'N Slow: Gradual Liberalisation Of EU Sugar Regime Preserves Credit Quality', said that the gradual nature of the reform should provide a fairly protected environment for European manufacturers over the next four years.

It was also confirmed last week that from 2007 SPS, option two in the consultation document has been chosen. This means that the additional support will be incorporated into the SPS on the existing flat rate / historic split, but that in the 2007-2009 period the annual increments in that support (relative to the 2006 level) will be added each year to the entitlements held, initially at least, by sugar producers.

The Single Payment Scheme was introduced in England in 2005 under the 2003 CAP reforms. Over £1.5 billion is expected to be paid out annually under the scheme to English farmers by the Rural Payments Agency (RPA), an executive agency of Defra.

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