EUROPEAN COMMISSION. State aid No N 327/ United Kingdom (Northern Ireland) Northern Ireland Beef Quality Initiative

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1 EUROPEAN COMMISSION Brussels, C(2002) 3246 Subject: State aid No N 327/ United Kingdom (Northern Ireland) Northern Ireland Beef Quality Initiative Sir, I have the honour to inform you that, having examined the information supplied by your authorities on the aid scheme for converting animal housing, the Commission has decided to raise no objections to the state aid scheme in question. In reaching this decision, the Commission based itself on the following considerations: 1. PROCEDURES The measure was notified by letter dated 14 May 2002, registered on 16 May 2002, by the Permanent Representation of the United Kingdom to the European Union. Additional information was supplied by letter of 30 May 2002, registered on 31 May 2002, and by letter of 2 August 2002, registered on 2 August 2002 (by ). 2. DESCRIPTION 2.1. Title Northern Ireland Beef Quality Initiative The Right Hon Jack Straw MP Secretary of State for Foreign and Commonwealth Affairs Downing Street LONDON SW1A 2AL United Kingdom Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2)

2 2.2. Budget 2 million per year 2.3. Duration From 2002/03 to 2006/ Beneficiaries About 4,500 farmers in the beef sector in Northern Ireland 2.5. Measures Competence development, breeding and health management The scheme is designed to encourage understanding of modern breeding technologies in farming in Northern Ireland. Farmers are not properly skilled in designing modern, efficient breeding plans due to the mature age structure and low level of formal education and training. Two formal learning programmes will be made available to producers: a) the devising and implementation of a breeding management plan; b) the devising and implementation of a cattle health management plan. Each programme consists of four half-day training sessions. The programmes have to be submitted for independent accreditation under the Northern Ireland Open College Network Training programme. The breeding management plan and/or the cattle health management plan have to be drawn up, approved and further reviewed and developed. This plan is monitored by technical advisers from the Department of Agriculture and Rural Development or their representatives. The aid will meet the costs of producers involved in attending the training programmes and in reviewing their plans annually. The eligible costs for assistance will be the cost of travel to the training centre, the cost of provision of relief services during the absence of the producer of the training course and the cost of the provision of relief services during time spent on reviewing and updating plans. The total payment per farmer under each of these programmes is estimated to be 475 over a three-year period High-quality breeding stock This scheme is meant to improve the quality of Northern Ireland beef animals. At present, there is insufficient use of good-quality breeding stock in the commercial beef herd. Five measures are proposed: Support testing to determine the genetic performance of pedigree beef animals Support the purchase of high-quality male breeding animals Support the keeping of male breeding animals, including registration and royalties Support the use of embryo transfer techniques 2

3 Support for the introduction of performance recording by commercial suckler producers. Re ) Farm performance recording should improve the genetic quality and yield of pedigree beef animals. Commercial services will weigh cattle and measure the muscle and fat depth through ultrasonic scanning. The information will be analysed and published allowing objective comparison of animals. The aid will cover 70% of the costs of the provision of the recording service. Re ) The first purchase of elite pedigree bulls from within the top one percent of national breed improvement schemes is eligible for aid. Each bull must have authenticated performance and/or progeny records. The aid will be limited to 40% (50% in less favoured areas) of the purchase price of an elite bull and will be subject to an upper limit of 5,000 (sourced outside Northern Ireland) or 4,000 (sourced in Northern Ireland). The grant will be paid when the bull is resident for six months in Northern Ireland. An aid can be claimed only once in the lifetime of any bull. There is a limit on the number of any single breed to ensure an effective mix of different breeds. Re ) Elite bulls will be eligible for support towards the cost of keeping male breeding animals, including registration and royalties if the herd owners register the minimum of four male calves annually from these elite bulls. The rate intensity will be up to 30% of the cost of keeping such animals. A Breeding Advisory Board will determine the standards for elite livestock. Re ) Top-quality female animals (identified through recording schemes) will be inseminated. The resulting embryos will be gathered and transferred to recipient cows or heifers. Aid will be paid to herd owners up to 40% of the cost of the preparation of donor and recipient animal. The maximum amount will be 270 for embryos produced in Northern Ireland or 240 for embryos produced from cows resident outside Northern Ireland. Re ) Commercial producers who are using an elite or superior bull with their suckler herd will be eligible to have the performance of the bull s progeny recorded. The animals will be weighed on-farm establishing daily live-weight gains. A minimum of five calves per annum from elite bulls or all calves must be the progeny of an elite or superior bull. Three sets of live weights have to be forwarded annually to the Department. The recording will be provided by an outside contractor. Aid will be paid at a rate of up to 100% of the cost of the service. The number of recipients is estimated at 4,500 farmers. The aid measure is financed from the Executive Programme Funds of the Executive Committee of the Northern Ireland Assembly Legal basis Administrative scheme, in accordance with the Northern Ireland Appropriation Order

4 2.7. Aid intensity Variable 3. EVALUATION Under Article 87(1) of the EC Treaty, aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is prohibited, insofar as it affects trade between Member States. It is clear that there is an important transborder trade in livestock. The aid measure is financed from funds provided by the Northern Ireland Assembly. It favours certain enterprises of the livestock sector in Northern Ireland. It is therefore liable to distort competition and to affect trade between Member States. Therefore, Article 87(1) of the EC Treaty applies. According to Article 87(3)(c) of the EC Treaty, aid to facilitate the development of certain economic activities or of certain economic areas can be regarded as compatible where such aid does not adversely affect trading conditions to an extent contrary to the common interest. Concerning this aid, points 4, 14 and 15 of the Community guidelines for state aid in the agriculture sector 1 (hereinafter: Community guidelines) apply Skills development, breeding and health management; performance recording Aid for education and training in the area of skills development, breeding and health management improves the efficiency and professionalism of agriculture. These types of aid are considered by the Commission as soft aids which contribute to the longterm viability of agriculture in the Community while producing only very limited effects on competition. According to point 14 of the Community guidelines, such aid may be granted at a rate of 100% of costs. The total amount of support granted should not exceed 100,000 per beneficiary over any three-year period or, in the case of aid granted to undertakings falling within the scope of the Commission s definition of small and medium sized enterprises, 50% of eligible costs whichever is greater. For the purpose of calculating the amount of aid, the beneficiary is considered the person receiving the services. The two learning programmes for devising and implementation including also a review contribute (see above) to the long-term viability. The scheme covers the costs for travel and the provision of replacement services that are eligible costs under point 14.1, first intent of the Community guidelines. Therefore, the conditions of point 14.1, first intent are met. A subsidy for performance recording (see above) can be classified as technical support. Therefore, the measure of performance recording fulfils the requirements of point 14.1, second intent of the Community guidelines. 1 OJ C 232, , p

5 Investment in elite bulls The evaluation of investments in elite pedigree bulls is made according to point 4 of the Community guidelines. Conditions of a permissible aid are observance of the goals of the general development of the agricultural sector, compliance with the maximum aid intensity, demonstration of economic viability of the enterprise, certification of an appropriate occupational skill and competence and compliance with the Community minimum standards regarding the environment, hygiene and animals welfare and the proof of normal market outlets for increased production. This aid scheme complies with the goal of the improvement of production. The maximum aid intensity is 40% or 50% in the disadvantaged areas (point of the Community guidelines). The intended aid is limited to maximally 40% of the purchase price of an elite bull (50 % in the disadvantages areas) and will be subject to an upper limit of 5,000 (sourced outside Northern Ireland) or 4,000 (sourced in Northern Ireland). The economic viability is confirmed by a certification of economic viability or a business plan. The observance of the Community minimum requirements regarding the environment, hygiene and animal welfare is a condition for the grant of an aid. The United Kingdom authorities have given assurances that this aid scheme will not result in an increase in the total amount of beef available from Northern Ireland High-quality breeding stock Support for the maintenance and improvement of the genetic quality of the livestock sector is assessed under point 15 of the Community guidelines. The proposed scheme covers a variety of measures. Aid for tests to determine the genetic quality or yield of livestock may be granted at a rate of up to 70%. Therefore, the measure of farm performance recording (see above) fulfils the requirements of point 15.1, second intent of the Community guidelines. Aid for the introduction at farm level of innovatory animal breeding techniques or practices may be granted at a rate of up to 40%. The utilisation of embryo transfer as a reproductive technique is still limited at farm level and can be considered as an innovatory technique. Therefore, the measure of insemination of embryos of topquality female animals (see above) fulfils the requirements of point 15.1, third intent of the Community guidelines. Aid for the cost of keeping individual male breeding animals of high genetic quality registered in herd books can be granted at a rate of up to 30%. The high genetic quality is determined by a Breeding Advisory board. Therefore, the measure of keeping male breeding animals (see above) fulfils the requirements of point 15.1, fourth intent of the Community guidelines. The United Kingdom authorities have given an assurance that the Northern Ireland authorities will comply with the provisions of Council Directive 92/50/EEC of 18 5

6 June 1992 relating to the coordination of procedures for the award of public service contracts 2 or, if the Directive does not apply, to chose the entities entrusted with carrying out the works on the basis of an open, transparent and non-discriminatory procedure DECISION The measure complies with points 4, 14 and 15 of the Community guidelines for state aid in the agricultural sector. The Commission decides accordingly that the aid is compatible with Article 87(3)(c) of the EC Treaty. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to disclosure to third parties and to publication of the full text of the letter in the authentic language on the Internet site Your request should be sent by registered letter or fax to: European Commission Directorate-General for Agriculture Directorate H Office: Loi 130 5/120 B-1049 Brussels Fax No.: Yours faithfully, For the Commission Franz FISCHLER Member of the Commission 2 OJ L 209, , p Case C-324/98, Telaustria, judgment of 7 December