Common Agricultural Policy beyond 2013

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News article

Common Agricultural Policy beyond 2013

January 2011

rural consultancy news

The publication of the European Commission CAP Paper and Budget Review last autumn was the start of the CAP review process that will continue for some time.  It seems likely that the next 18 months will be a period of consultation and negotiation before any new CAP rules and budgets are agreed between mid and late 2012.  The consensus is that the existing scheme will run on from 2013 and the new CAP begins on 1 January 2014.

Three options have been put forward with the Commission’s preference clearly being the second one which takes a middle line between the other two extremes. The three options are:

  • Enhanced status quo – similar to the existing scheme but with a re-allocation of funds between the Estates, some strengthening of risk management tools and a focus under rural development on climate change issues.
  • More balanced, targeted and sustainable support – the middle way.
  • Abolished market and income support – direct payments to be phased out in their current form with limited payments providing environmental benefit and other public goods and for less favoured areas.  Most market support arrangements would go and rural development would focus on climate change measures and the environment.

While the document issued last autumn didn’t shed a lot of light on the proposals, the Commissioner, Dacian Colos, spoke at the Oxford Farming Conference last week and outlined the challenges and opportunities facing the CAP beyond 2013 which has given an indication of his current thinking. The views expressed in his speech are broadly:

That with over 90% of the European agricultural payments now de-coupled from production, the markets are now the key driver in production decisions not subsidies. However, any reformed CAP needs to be able to address the challenges of food security and climate change which are strategic security imperatives for Europeans. While food production will remain the number one objective for farmers the CAP must also help them preserve the natural resources and maintain a countryside that people want to live in.

He believes there is a clear role for public funding to reward farmers for providing public goods and the CAP is the best mechanism to achieve this.In essence his views seem to be:

  • CAP direct payment should be maintained as a base income support function but must be seen as a recognition for the provision of public goods not remunerated by the market.
  • He believes the Policy needs to be focused on active farmers to maintain and justify the direct payments.
  • It is his view that justifying payments over a certain level to individual businesses is difficult and therefore proposes to establish capping to address this.
  • The second pillar (rural development) measures will be targeted towards supporting farmers who wish to fight climate change and protect the environment and natural resources.
  • The Policy needs to be focused on active farmers and not people or organisations whose activity has no relationship to farming or land management.
  • Some market intervention measures will remain as a safety net or back-up in the context of climate change and price volatility.

It must be remembered that these proposals and the CAP reform are against a background of what will probably be the toughest CAP budget negotiations ever. What can be achieved and the funds available will therefore be driven by the budget settlement more than ever before.

At this stage it is too early to say what the impact will be on UK farmers; however, there are several areas which will require careful watching:

  • The proposals on capping – these have been proposed and discarded twice now in the previous reforms, but with the budget constraints may be implemented this time.
  • The definition of active farmers – this may have an impact on those who have ‘sham’ contract arrangements or landlords who claim Environmental payments, and careful consideration will have to be given to these arrangements in the future.
  • For those farmers in Scotland and Wales with historic payments, it seems very likely that these will go to a flat rate.
  • The boundary between cross compliance and ELS may shift to make cross compliance more onerous.
  • England has a flat rate payment which is very close to the European average. It may well be that the adjustment for English farmers therefore is relatively little compared to the devolved regions, France and other European countries which still have the historic based system.  Eastern European countries are likely to gain from a reallocation.

The UK Government will continue to put pressure on the Commission to reduce the overall CAP budget and direct payments but their influence on the European Commission is relatively small. The current European financial situation will, however, put pressure on the budget settlement and ultimately on the policies that the Commission can afford. 

If you would like to discuss this further then please contact David Kinnersley on 01295 226294 email david.kinnersley@fishergerman.co.uk

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