THE MID-TERM REVIEW PROPOSALS
263. On 10 July 2002, Commission Fischler, European
Commissioner for Agriculture and Rural Development, unveiled the
European Commission's proposals for the Mid-Term Review of the
Agenda 2000 reform of the CAP.
264. The widely-held view of the proposals is that
they are "radical".
In the long-term, if the package is agreed by member states, farmers
would be paid a single aid payment per farm calculated on the
basis of past payments made, thereby 'de-coupling' aid from production.
The level of the direct payment each farmer received would be
determined by average total payments in previous years. A link
to the area of the farm would be maintained, by calculating a
rate of payment per hectare for each farm, to allow for land transfer
in the future.
265. Aid payments would be subject to far more cross-compliance
requirements, including an annual audit for 'professional' farms
- those previously in receipt of more than euro 5,000 per annum
in direct support payments - to address concerns about the mis-spending
of CAP in the past. Other standards, relating to the environment,
food safety and animal welfare, would have to be met to qualify
for aid. In order to achieve these, under 'new accompanying measures',
the Commission proposed two measures. First, that assistance should
be available to "help farmers to adapt to demanding standards
based on Community legislation in the field of the environment,
food safety and animal welfare". It proposed including the
"possibility to pay temporary and degressive aid to farmers
to help them implement [those] demanding standards". The
Commission said that such aid should last for five years and start
at a maximum of euro 200 per hectare in the first year.
266. Additionally, under the agri-environment chapter
it proposed "the possibility to offer animal welfare payments
for efforts that go beyond a mandatory reference level in line
with agri-environment schemes".
267. Commissioner Fischler has also proposed that
the set-aside rules be changed, turning it into an environmental
scheme rather than one intended to limit production. Land would
be set-aside for a ten year period. Participation in this environmental
set-aside scheme would be one of the cross-compliance pre-conditions
for the receipt of the annual direct payment.
268. The Commission also proposed 'dynamic' modulation.
All direct farm payments would be cut by three per cent per year
until total payments have been reduced by twenty per cent. Aid
payments to farmers receiving less than euro 5,000 would be exempted
from the modulation proposal. The money 'saved' by the process
of dynamic modulation would be retained in Brussels and used in
a rural development budget, being allocated across the European
Union according to need. This may result in the United Kingdom
becoming a greater net contributor to the European Union. It is
also worth noting that in future there would be no requirement
for domestic Treasuries to match monies received from this source.
269. The Commissioner's proposals also envisaged
a cap on payments of euro 300,000 per farm per year, with payments
foregone passed back to the rural development budget of the country
where aid has not been given under the rule. This proposal is
unlikely to find favour in the United Kingdom, where large farm
sizes are more commonplace than elsewhere (except perhaps Germany),
and, as a result, a higher proportion of farmers receive larger
270. No significant changes were proposed to the
existing commodity market support arrangements, except a reduction
in the cereal intervention price to the level originally proposed
by the Commission at the start of the Agenda 2000 process. In
line with the Agenda 2000 agreement, 50 per cent of the price
cut would be added to the cereals' area payment to compensate
for the price cut. The Commission paper described this as "completing
the reform process" in the cereals sector.
271. The dairy regime will operate in its current
form until 2006. We are disappointed by the failure of the Commission
to make concrete proposals for its reform (although they were
not obligated by Berlin until 2003), particularly in respect of
milk quotas. We firmly believe that now is the ideal time to bring
forward proposals to change the dairy sector policy so that dairy
farmers can operate in a marketplace unencumbered by quotas and
have an adequate period of transition to a new regime.
272. We are also disappointed that the sugar regime
is not mentioned in the Mid-Term Review proposals. The implications
for European farmers of the laudable Everything But Arms proposals,
to allow greater access to European Union markets for sugar imports
from developing countries, must be properly examined.
273. Initial reactions to the proposals in the United
Kingdom have generally been positive. The Secretary of State for
Environment, Food and Rural Affairs said
"to help secure profitable and sustainable
farming and a better deal for consumers and taxpayers
we need radical proposals for change. Today's proposals are consistent
with much that we and Sir Don Curry's Policy Commission want to
"We fully support the Commission's vision of
a CAP which delivers economic viability and integration with our
environmental and rural development objectives, while removing
its tradedistorting aspects, especially those which damage
"They are on the right lines, and I welcome
the proposal to shift the emphasis of support from productionlinked
aid to measures that promote wider rural development. However,
the proposals do not go far enough. In particular, they do nothing
to control the burgeoning growth in the budget because they simply
recycle money in the agriculture budget. We need year on year
savings in the cost of the CAP.
"We will be looking to build on the positive
elements in the proposals. There is some hard bargaining ahead
and the United Kingdom will be playing an active and constructive
role. We want to hear what stakeholders across the United Kingdom
think, as our negotiating position will be formulated in consultation
The Tenant Farmers Association said that its immediate
reaction was that "there is much of merit in the package
announced by the Commission", although it was concerned that
making the de-coupled payments on an acreage basis "would
only serve to add value to land, increase rents and therefore
provide no benefit to the farming community".
The National Farmers' Union has been guarded, and has asked for
greater details of many of the proposals. It viewed "the
establishment of a franchise for small farms and labour use, the
mechanism for redistributing the modulated funds, and the apparent
lack of national matchfunding as issues of very serious
On the other hand, the Farmers' Guardian reported that
"a broad alliance of consumer, environment, international
development and animal welfare groups has called for reform of
the Common Agricultural Policy to go further than the radical
proposals put forward".
274. The core of these proposals - commuting payments
into a single sum - has a long pedigree, not least in ideas developed
in the United Kingdom by agricultural economists such as Sir John
Marsh and Professor David Harvey for a bond of entitlement to
be issued to farmers. The idea of the cut-off point is also familiar
terrain designed to address the complaint that the big farms get
the big money. This ceiling is certainly negotiable. The degressivity
is a welcome part of the proposals (it will be fiercely resisted
by some European Union Governments) though the United Kingdom
would like to see the possibility of more extensive reductions.
The proposals are compatible with a pro-active stance in the WTO
talks and will probably assist the process of enlargement where
the European Union 'offer' to accession states is based on a single
payment to farmers. The Commission dismisses somewhat unconvincingly
the criticism that payments - based on area - will serve to buttress
the inflation of land values above their inherent worth.
275. Any changes to the CAP should not lose sight
of the need for Europe to have a cost efficient farming industry.
In drawing up its reform proposals the Commission must show that
it recognises that the size of a farm can have a marked effect
on the cost of production and so schemes that might be biased
against larger British farms may damage prospects for European
agriculture as a whole.
276. We believe that the RSPCA is right to call on
the European Commission to explain how the green box could be
used to encourage high animal welfare and welcome Commissioner
Fischler's acknowledgement of the importance of this issue. Such
an approach may help to demonstrate to our negotiating partners
that the policy is addressing a particular demand from society
and is not a means of agricultural protection. In the meantime,
given that the European Union internal market is still protected
against foreign competition by considerable tariff barriers and
market prices are above those prevailing outside the European
Union, we believe that there is already a justification for delivering
higher animal welfare standards across the whole of the European
Union. If such an approach is followed now, there must be
discussion about how those higher standards can be maintained
as European Union tariff barriers are reduced.
277. The Mid-Term Review proposals overtake in some
respects the recommendations of the Policy Commission. For example,
the Policy Commission said that its 'broad and shallow scheme'
should be funded through moving quickly to modulating 20 per cent
of direct payments to farmers. Commissioner Fischler has proposed
compulsory modulation increasing by 3 per cent each year until
it reaches 20 per cent across Europe. The proposals made by
Commissioner Fischler in respect of modulation move in the same
direction as the recommendations of the Policy Commission, although
using different and more radical mechanisms. We are strongly in
favour of compulsory modulation in order to maintain the framework
of a common policy within the internal market.
278. However, the Government must address three issues
relating to modulation. First, increasing modulation may lead
to changes in the enterprises pursued by farms, which may in turn
affect the United Kingdom's entitlement to direct payments. The
Government should study the impact of changing levels of direct
payments on the attractiveness of enterprises which do not receive
direct payments under various scenarios of modulation. Second,
we are concerned about the competitiveness of the United Kingdom
within Europe if different rates of modulation are applied. Rules
relating to modulation must be promptly and properly enforced.
The Government should strongly support the proposal for compulsory
modulation across the European Union but not the centralisation
of the Rural Development budget. If, at the end of the Mid-Term
Review process, compulsory modulation is not agreed by member
states, attention needs to be paid to the effect increasing modulation
rates unilaterally will have, including differences of approach
within the United Kingdom. Third, the Government should
produce a clear indication of the redistributive impact of modulation
within England and seek the same information from the devolved
administrations elsewhere in the United Kingdom.
279. Commissioner Fischler's proposals have similar
objectives to the recommendations of the Policy Commission on
the Future of Farming and Food, but they are more radical and
will apply across Europe. They are designed to represent a significant
shift from producer support to rural development. The proposals
are clearly intended to have an eye on the enlargement of the
European Union: the conversion of individual supports to block
grants in existing Member States would sit alongside the Commission's
proposals for support for agriculture in accession countries.
It would be difficult to proceed to a full implementation of
the Policy Commission recommendations without a clear idea of
their relationship with the policies which will emerge from the
long and complex negotiations of the Mid-Term Review. However,
the differences in timetables of the Mid-Term Review and the Policy
Commission would give the Government the opportunity to conduct
trials on the basis of the 'broad and shallow scheme'. It has
already announced that it will pilot the 'broad and shallow scheme'
over the next two years. We recommend that the pilot project be
used to examine what the practical impact of the scheme would
be, and whether it was value for money, with an aim to have derived
preliminary conclusions before any European schemes are brought
280. We share the Government's view that CAP reform
should be rapid and it should be radical. In order to open up
for farming the full benefits of the market, however, CAP reform
must go well beyond the reduction of subsidies. Restrictions and
distortions caused by the CAP, such as quotas, the impact of 'set-aside'
payments on land prices, and their effect on input prices, must
also be addressed. We trust that the Government will put down
markers on these issues in the Mid-Term Review process, although
we accept that the Review itself is limited in scope and that
Commissioner Fischler has already pushed it well beyond most expectations.
281. The Mid-Term Review proposals will now be
considered by member states. Discussions of them will continue
until agreement is reached next year. Negotiations over the proposals
will inevitably prove to be difficult. We have already begun our
own analysis of the proposals, and we will report on them in due
course. They are obviously of vital importance in shaping the
future direction of farming in the United Kingdom.
489 See "Towards sustainable farming":
Commission presents EU farm policy Mid-Term Review, Commission
News Release, issued on 10 July 2002; the press release can be
viewed on the internet via the Europa website, at: http://www.europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/02/1026|0|RAPID&lg=EN&display=. Back
See, for example, Commission tables radical blueprint for single
CAP aid payment, Agra Europe, 28 June 2002. Back
Mid-Term Review of the Common Agricultural Policy, pp.
Mid-Term Review of the Common Agricultural Policy, p. 13. Back
DEFRA news release 275/02, 10 July 2002. Back
CAP reform proposals could be made to work, TFA Press Releases,
12 July 2002. Back
Mid-Term Review (MTR) - Initial Proposals of the European Commission,
see: www.nfu.org.uk/info/mtrevorg.asp. Back
Reforms must go beyond 'tweaking', Farmers' Guardian, 12
July 2002, p. 4. Back