CAP reform talks just the start and don’t forget the budget

The European Commission has now published its proposals for the reform of the Common Agricultural Policy although a series of leaks over the past months has given the impression that all has been revealed much earlier.

Those leaks albeit of significant issues have merely scratched the surface. The proposals consist of 6 draft Regulations to be made by the European Parliament and the Council of Ministers, one draft Council Regulation together with an Impact Assessment all of which extend to over 850 pages.  Each of these proposals is now to be negotiated in detail by (i) the Commission with the Parliament, (ii) the Parliament with the Council, (iii) the Council with the Commission and (iv) all three institutions with Member States.

The Parliament and the Commission originally proposed a budgetary increase of 5.9% in spending against 2010 levels. The Council wants less than half of that increase prompting the Commissioner for Financial Programming and Budgets, with support from MEPs, to say that the Council’s proposed increase would not cover budgetary commitments, particularly for research projects.

The Executive Summary highlighting proposals to cap, to green, to define the active farmer, to promote the basic payment scheme, together with changes to the rules on cross compliance has been widely published. However, no proposal has yet been agreed and the overriding concerns of the Council are not only to limit the budget for the CAP but also to simplify its administration.

Although capping is once again on the agenda, the arguments put forward by the Council with the support of the Northern European Member States could well see this issue once again being kicked into touch. The Commission argues this proposal is merely an extension of the existing modulation policy and should be accepted as it will not affect the 30% environmental payment and is calculated net of salaries and other employment costs. Those against remain unimpressed by the Commission’s arguments.

In line with the Commission’s resolve to ensure fairness of the allocation of CAP funds between Member States, it is determined eventually to ensure a common unit value throughout the EU – the Regulation indicates this may take until 31 December 2028! To that end they begin this process by proposing the cancellation of existing entitlements on 31 December 2013 to be replaced by basic entitlements calculated by reference to eligible areas. The application for basic entitlements has to be made by 15 May 2014.

The Baltic Member States have already made it clear that they are very unhappy with the proposals for convergence of entitlement values. While the Commission has stated that this change would not significantly affect the UK because our entitlements are calculated more on a regional and less on the historic basis (unlike France, Austria, Italy and Spain), the relevant draft Regulation contains a hidden danger because landowners will wish to ensure that they are in possession of their land for agricultural purposes at the relevant date which could result in land banks being created to the exclusion of tenants and other third party occupiers.

Where an agricultural holding is also used for non-agricultural activities, the holding will still be eligible in relation to the activation of the payment entitlements if the agricultural activities could be exercised without being significantly hampered by the non-agricultural activities. It will be for the UK Government to establish the rules for the implementation of this provision subject to Commission guidance so hopefully no gold-plating!

The proposal that 30% of the basic payment is subject to a greening element involving mandatory conditions relating to crop diversification, the maintenance of permanent grassland, and an ecological focus area, i.e. fallow, buffer strips etc, is argued by the Commission not only to benefit the environment but also to represent a positive contribution to reducing the effects of climate change.

The Council is already arguing this proposal is likely to be an administrative nightmare while environmental lobbies argue it is too weak.

The reform proposals are not just concerned with payments under Pillar 1, but consist of a series of measures many of which will form part of the Rural Development Programmes and which make a positive contribution to the Commission’s primary objectives of a better targeting of support and to positively address environmental challenges, market volatility, food security and climate change, emphasising the CAP to be a truly common policy. The comprehensive Rural Development proposals will form the basis of another article.

The proposals also suggest that the Commission should have wide powers of control in relation to a range of initiatives:

• annual national ceilings for the basic payment scheme;
• rules on the allocation of payment entitlements and measures to deal with non-activated entitlements;
• transfers of payment entitlements;
• financial ceilings for the payment of agricultural practices beneficial for the climate and environment;
• annual payments for areas with natural constraints;
• payments to young farmers;
• voluntary coupled support;
• rules relating to voluntary coupled support;
• rules relating to producer groups;
• the establishment of a comprehensive farm advisory system; and
• the creation of risk-management measures.

The proposals are not just about headline topics, and all issues remain to be agreed.

Richard will be holding a series of workshops to discuss the emerging reform proposals. To register your interest in attending a workshop, please email [email protected].

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