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CAP reform information

Dacian Cioloş, European commissioner for agriculture, told agriculture ministers meeting in Luxembourg in April that the European Commission will not compromise on including greening requirements for farm payments in pillar 1 of the Common Agricultural Policy (CAP).

Several ministers said that a Commission proposal to make the basic payments conditional on environmental improvements was too cumbersome. They said that such greening measures should be optional and should not be included in pillar 1 of the CAP, but that they should stay in the second pillar, which deals with rural development.

Cioloş said he would be willing to broaden the list of measures that can count as ‘greening', but only if the requirement remains in the first pillar.

Some ministers also worried that capping payments to larger farmers would have a detrimental effect on their agricultural sectors. Cioloş said the amount of the cap could be changed, but the existence of a cap is non-negotiable.

“Direct support to farmers' income cannot be unlimited,” he told journalists after the meeting. “For some member states the subject will continue to be discussed. But for me, discussion will continue to take place, but not on the existence of the capping scheme.”

Ministers held a public debate on direct payments at the Council meeting in Luxembourg (26th April '12).

They focused first on the proposed special measures to help particular categories of farmers - young farmers, small farmers and farmers in areas with natural constraints.

Ministers broadly agreed on the need for better targeting of payments to young farmers and small farmers, but many wanted the schemes to be voluntary for member states.

It was agreed that support needs to be increased, as currently only 6 % of all farmers across the EU are under the age of 35, raising concerns for the future of farming.

Some delegations mentioned the need for better coordination between first pillar and rural development provisions on this issue.

Although there was broad agreement on the proposal for measures relating to small farmers, Ministers wanted the proposals simplified. They were divided on the issue of whether or not small farmers should satisfy the greening or cross-compliance provisions.

Minister discussed the proposals for voluntary coupled support, and several member states argued that this way of increasing support would be of great importance in specific farming sectors or regions as a response to economic, social and environmental difficulties.

Some delegations regretted that this proposal went against what they saw as the main objective of CAP reform, namely to promote a decoupling of support, while others wanted the list of products for which coupling was possible to be extended. The fact that ministers were divided led the Presidency to conclude that the Commission proposal struck the right balance.

On the active farmer concept, there was broad support for the Presidency's suggestion to
focus on farming and, in order to avoid undue administrative burdens, not to require member states to control the proportion of direct payments received by recipients compared to their receipts from non-agricultural activities This would allow member states a greater margin of discretion.

Many delegations welcomed a Commission proposal to establish an additional "negative list" of
activities which would not be considered as active farming.

The capping of direct payments received by the largest farms in the EU is one of the issues in
the current negotiations on the multiannual financial framework for 2014-2020. Several delegations called for a simpler approach to calculation, while some member states remained opposed to the principle.

On internal redistribution, the Commission proposed that member states achieve a uniform level of direct payments at regional or national level by 2019. A considerable number of ministers had concerns about the impact of this proposal and underlined the need to proceed carefully. The need for greater flexibility and appropriate transitional periods was also highlighted.

The presidency conclusions from March 2011 (7921/11) already identified the need for flexibility at national/regional level, with appropriate transitional periods to avoid disruptive financial
consequences.

The CAP reform package was presented by the Commission at the Agriculture Council meeting in October 2011. The Council had already held policy debates on the CAP reform relating to the
proposals for regulations on direct payments, rural development and on the single common market organisation during the three last Agriculture Council meetings in November and December last year and January this year. In March this year ministers debated the simplification of the CAP.

The Presidency intends to organise further policy debates .before the end of its term in June.

The current rate of modulation (deduction from single farm payment to meet the cost of agri-environment schemes and other forms of rural development) is 19% in England.

While there was no specific provision for modulation * in the CAP reforms as tabled in October 2011, though there was provision for some member states (including UK) to switch up to 5% of payments from pillar 1 to pillar 2.

In a joint statement this week, the Presidents of the four main UK farmers' unions said: “UK farmers will be very concerned to hear that UK ministers are seeking to engineer ways to cut direct payments while other governments are looking for ways to increase them to their farmers through reverse modulation".

They went on “we recognise that it is inappropriate to argue for more money to be spent on direct payments at this time. However, the fundamental problem to be addressed here is not the level of support payments to UK farmers, but the inadequate Pillar 2 allocation that the UK receives.

The average payment in the UK is already below the 90% EU average and efforts to further reduce payments will only serve to exacerbate the disadvantage.

“Unfortunately it seems that our ministers are focusing their efforts on ways to reduce Treasury spend on rural development measures.”

As the statement points out, the UK receives the lowest per hectare allocation of Pillar 2 funds of all Member States. This is due to the reluctance of successive governments to draw down discretionary European funds - in light of the impact that this would have on the size of the UK rebate. This is compounded by the on-going use of a historical distribution key by the European Commission to allocate Pillar 2 funds between the member states.

However, the farmers unions need to consider whether making payments through pillar 2 ratther than pillar I actually disadvantages UK farmers. It can be argued that pillar 2 paymentsmake just as great a contribution to the competitive position of farmers.

More importantly, in the absence of modulation (and of any proposals to pay a fair share of total rural development funds to UK and others who lose out under the current syatem), the farmers unions need to consider how current levels of agri-environment support would be maintained after 2013.

But it is too early for ministers to concede that it will not be possible for UK to secure its fair share of rural development funds. The problem is that, as the farmers unions allege, the Traesury is keen to reduce reliance on measures which reduce the UK rebate.

So does the UK government really prefer pillar 2 measures as the means for greening the CAP?

There is no specific reference to modulation * in the reform proposals, except for the statement that "voluntary modulation for the UK and Article 136 "unspent amounts" will cease to apply by the end of 2013" under legislative changes already agreed.

The proposals do provide, however:

(43) With a view to strengthening their rural development policy, Member States should be
given the possibility to transfer funds from their direct payments ceiling to their
support assigned for rural development. At the same time, Member States where the
level of direct support remains lower than 90 % of the Union average level of support
should be given the possibility to transfer funds from their support assigned for rural
development to their direct payments ceiling. Such choices should be made, within
certain limits, once and for the whole period of application of this Regulation.

Section 4 of the explanatory memorandum states that some flexibility for transfers between pillars is introduced (up to 5% of direct payments): from Pillar I to Pillar II to allow Member States to reinforce their rural development policy, and from Pillar II to Pillar I for those Member States where the level of direct payments remains below 90% of the EU average.

Source: COM(2011) 625 final/2, tabled in Brussels, 19.10.2011, and replacing the proposals tabled on 12th October.
ec.europa.eu

cap-reform-post-2013-bishop-burton-070212-2-short.ppt (1.79 MB)
defra-cap-consult-response-050312.doc (69 Kb)

This Eurinco update contains footnotes with all the relevant article numbers - to save you having to find your way through the 350 pages or so of proposed legislation.

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