Wednesday, 6 March 2013

How is CAP reform shaping up?
Oliver Lee from Andersons’ Farm Business Consultants provides some insights on the current situation.
 Keeping up with the developments in the Multi-annual Financial Framework (MFF) for 2014-2020 and the associated Common Agricultural Policy reform sometimes seems like a full time job for those of us advising land managers.  Everyone wants to know just how it’s going to affect us here in the UK, who is going to be better or worse off, will Environmental Stewardship carry on in a similar form, or will it be all change?  And will the results be good or bad news for farmers, consumers and the environment?  None of this has been at all clear.  But recent events have provided a bit more clarity on what will happen over the next 7 years, even if we don’t yet have the full picture of how this will affect us at farm level. 
A compromise was eventually reached during negotiations that was acceptable to both contributor countries such as the UK and Germany, and countries like France, Italy and many of the new Member States who were arguing for a ‘strong Europe’ (code for high spending). In headline terms future spending will be around 3% lower than in the current 2007-2013 seven year period at €960bn.

In terms of CAP, total spending has dropped by around 9% in real terms to €373bn over 7 years – i.e. around 39% of the total MFF. Due to changes in modulation rules there is likely to be a significant drop in Rural Development funds. The ‘new modulation’ at 15% (a drop from 19%) does not have to be match-funded by national Treasuries, and it is unlikely to be by the UK Treasury even at this lower rate.

All issues to do with money have been dragged into the discussion on the MFF. Therefore capping of direct aid has been included in the deal. The text states simply that ‘capping of direct payments for large beneficiaries will be introduced by Member States on a voluntary basis’. It seems pretty clear that it will be left up to individual countries to decide whether they want to cap or not, it is unlikely that Defra in England will introduce it.

Again, because it is a monetary issue (and perhaps because EU leaders like to call the shots), ‘greening’ has been dragged into the Budget discussions. The proportion of direct aid going towards greening is to be fixed at the original figure of 30%.  Interestingly, the text states that there will be a ‘clearly defined flexibility for Member States relating to the choice of equivalent greening measures’. This seems to suggest that Defra’s preferred option of greening via the ELS will be allowed.

The new MFF still has to be ratified by the EU Parliament. The Parliament has always been a strong supporter of ‘more Europe’ – i.e. greater spending. It is unlikely to be happy at the cuts that Heads of State have agreed. Whether the Parliament will actually block the deal is unclear. It may simply flex its muscles a bit and then acquiesce.

With so much tied-up already it doesn’t seem to leave much for Farm Ministers and the EU Parliament to decide within the CAP reform negotiations. At least the fixing of the Budget now allows these negotiations to progress. We, at Andersons, would hope that the full Parliament can sign off the European Parliament’s position within the next month, and Farm Ministers can also agree their version. That would still give an opportunity for a political agreement on CAP reform by the end of the Irish Presidency in June. As ever, the devil is likely to be in the detail. The comprehensive ‘Implementing Regulations’ setting out this detail are unlikely to be available before the autumn. So, although the Budget deal has taken a step forward, there is still some way to go before the final shape of the CAP post-2014 is known.

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