11 MID-TERM REVIEW OF THE COMMON AGRICULTURAL
POLICY
(24234)
—
COM(03)23
| (a)
Draft Council Regulation establishing common rules for direct support schemes
under the common agricultural policy and support schemes for producers of
certain crops.
(b)
Draft Council Regulation amending Regulation (EC) No. 1257/1999 on support
for rural development from the European Agricultural Guidance and Guarantee
Fund (EAGGF) and repealing Regulation (EC) No. 2826/2000.
(c)
Draft Council Regulation on the common organisation of the market in cereals.
(d)
Draft Council Regulation on the common market organisation of the market in
rice.
(e)
Draft Council Regulation on the common organisation of the market in dried
fodder for the marketing years 2004-05 to 2007-08.
(f)
Draft Council Regulation amending Regulation (EC) No. 1255/1999 on the
common organisation of the market in milk and milk products.
(g)
Draft Council Regulation establishing a levy in the milk and milk products sector.
|
| Legal base | Article 37EC; consultation; qualified majority voting
|
| Department | Environment, Food and Rural Affairs
|
| Basis of consideration |
SEM of 21 May 2003 |
| Previous Committee Report |
HC 63-xi (2002-03), paragraph 1 (5 February 2003)
|
| To be discussed in Council
| 11-12 June 2003 |
| Committee's assessment | Politically important
|
| Committee's decision | Cleared (by House's Resolution of 12 February 2003)
|
Background
11.1 In July 2002, the Commission produced a Communication[19]
setting out its conclusions on the mid-term review of the Common
Agricultural Policy (CAP), together with a Report[20]
on the future of the milk quota system. These documents were
followed in January 2003 by the present document, comprising seven
draft Regulations which aim to give legislative effect to its
Communication, though it has also sought in the process to take
into account both the earlier reactions to those proposals and
the budgetary ceiling for CAP market expenditure agreed last October
by the European Council in Brussels.[21]
11.2 As we noted in our Report of 5 February
2003, these proposals contained three main features, over and
above a number of adjustments to the detailed support mechanisms
for the three main commodity areas covered by the review (cereals,
beef and milk). These were:
- that all the existing direct
payments (with a few minor exceptions) should be integrated into
a single decoupled income payment per farm, equivalent to that
received on average in the period 2000-02, and dependent upon
certain environmental, food safety, animal health and welfare,
and occupational safety standards being met;
- that direct payments to farmers receiving more
than €5,000 should be reduced by progressive percentages
between 2006 and 2012 (degression), with those receiving more
than €50,000 being subject to higher percentage cuts;
- that part of resultant savings would be devoted
to rural development (modulation), distributed to Member States
on the basis of agricultural area and employment and a "prosperity
criterion" to target specific rural needs, with the balance
being used to enable future reforms of market support to be financed
from within the budget ceilings laid down.
11.3 We also noted that the Government broadly
supported the Commission's proposals, which accorded with its
strategy on sustainable development and sustainable agriculture,
but that its final position would depend upon the results of negotiation
with other Member States. In the meantime, we recommended that
the latest proposals be included in the Floor of the House debate
on 12 February 2003,[22]
which we had previously recommended on the Communication and
report on milk quotas.
Supplementary Explanatory Memorandum of 21 May
2003
11.4 Although the Government provided an
initial Regulatory Impact Assessment following publication of
the Commission Communication, it said then that a full Assessment
would be possible only after the legislative texts had become
available. Such an Assessment has now been supplied with the
supplementary Explanatory Memorandum of 21 May 2003, which we
have received from the Parliamentary Under-Secretary of State
(Farming, Foods and Sustainable Energy) at the Department of Environment,
Food and Rural Affairs (Lord Whitty).
11.5 In many ways, this new Assessment amplifies,
rather materially alters, the earlier one, its main conclusions
being that:
- overall, the proposals are
expected to give rise to net economic benefits[23]
of €600
to €900
million in the UK, and €4.9
to €5.6
billion in the Community as a whole;
- decoupling will improve farm incomes in
the UK by €500 million to €1 billion, as producers no
longer have to produce a specified commodity (often at a loss)
to receive subsidy: furthermore, the dynamic adjustment arising
from the reforms will encourage productivity growth and restructuring,
which the Government estimates is likely to generate economic
benefits of about €400 million in the UK;
- production of beef
and cereals will decline, but, assuming the Commission manages
the market to maintain rates of export refunds, Community beef
prices will increase as the level of imports is unlikely to rise,
given current tariff rates;
- the overall effect on the environment
is expected to be positive, with potential benefits from decoupling
and cross-compliance (though there may be adverse effects in certain
localised areas);
- the impact on the taxpayer is expected
to be small, with the effects of decoupling and degression offsetting
the budgetary costs of the commodity reforms, and the budget ceiling
agreed at the European Council in October 2002 remaining intact;
- the overall impact on food prices will
be very small, with consumers benefitting from lower support prices
in the dairy sector, but with the cost of cereals, beef and sheep
likely to increase as a consequence of decoupling;
- by 2013, degression is likely to generate
funds of some €3.3 billion in the existing Member States,
of which about €1.5 billion will be recycled for rural development,
and the remainder used to finance market reforms;
- the corresponding figures for the UK are put
at €485 million and €145 million, the principal concern
then being that the latter sum would be insufficient to meet the
proposed levels of expenditure under the Rural Development
Programme currently funded by voluntary modulation.
11.6 The Minister also draws attention to
the results of the Government's consultation exercise on the legislative
proposals, which he says were in general welcomed by the majority
of those who responded. On specific aspects, farming organisations
supported decoupling, on the grounds that it would simplify administration,
enable production to become more market-based, and make the CAP
more compatible with World Trade Organisation rules, though concerns
were expressed about such payments being linked to the producer
and not the land. Decoupling was also welcomed by environmental
organisations, subject to the need for it to be supported by cross-compliance
and rural development measures, though with the caveat (shared
by farming organisations) that the latter should not be overly
expensive and bureaucratic. The main concerns expressed were
over the proposals for modulation, and in particular the danger
that the allocation of funds envisaged between Member States for
rural development would reduce the amounts spent in the UK as
compared with the present voluntary modulation arrangements.
Conclusion
11.7 Since the proposals to which this
further information relates were debated on 12 February, we are
at this stage simply drawing it to the attention of the House,
noting in particular the concerns over the level of funding likely
to be available in the UK for rural development under the arrangements
envisaged for degression and modulation.
11.8 More
generally, we understand that the Council may reach some kind
of agreement at its next meeting on 11-12 June. We would be glad,
therefore, if the Minister would keep us informed of developments,
and let us have a sight of any agreed texts.
19 (23670) 10879/02; see HC 63-vii (2002-03), paragraph
2 (15 January 2003). Back
20
(23732) 10896/02; see HC 63-vii (2002-03), paragraph 3 (15 January
2003). Back
21
That the level of market support expenditure under the CAP should
between 2007 and 2013 rise by no more than 1% a year as compared
with 2006. Back
22
Official Report, 12 February 2003, Cols. 973-1004. Back
23
Defined as the sum of producer returns, consumer savings and environmental
benefits less costs to the taxpayer. Back
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