Select Committee on Public Accounts Twelfth Report

Summary

Reform of the Common Agricultural Policy

Farms in England received around £1.6 billion in market-related subsidies in 2003 under the European Union's Common Agricultural Policy. Major reforms agreed in 2003 will bring about fundamental changes to these subsidies. The Department for Environment, Food and Rural Affairs (the Department) is responsible for implementation of the Common Agricultural Policy in England.

The reform will have a significant impact on farm businesses. Subsidies will be "decoupled" — no longer be linked to production — freeing farm businesses to produce what consumers want rather than what the subsidy regimes dictate. From 2005, many existing production-related subsidy schemes will be rolled into a single payment to each farm (the single farm payment), which in England will be based initially on the subsidy farms received between 2000 and 2002. Between 2005 and 2012, the basis for payment will shift in stages to the area of farmland under management.

Encouraging better farming and rural development

All payments will be subject to "cross-compliance" with environmental and animal health standards, to deliver objectives such as a better environment, conservation and access for the public. Similarly, each member state has some discretion, through "modulation" and a "national envelope", to reduce farm subsidies and transfer those moneys to programmes for more environmentally-friendly farming and wider rural development.

Helping farm businesses adapt to the market

Farm businesses need help to survive in this new market-led environment. The Department is responsible for a range of measures to help farm businesses become more competitive, diverse and flexible. These measures include farm business development schemes, processing and marketing grants, a vocational training scheme and the Farm Business Advice Service. In all, some £250 million has been allocated to these support measures between 2000 and 2006.

Much of that support has been in the form of capital grants, but experience from other countries suggests that other measures could have more success. These include a greater emphasis on advice, better targeting of support on those farms most in need, streamlining the number of separate support schemes and application processes, and a greater focus on supply chains and more co-operative working.

Over the next few years, the Department will need to establish a new set of farm business support measures for the period 2007-2013, within European Union rules, to help farm businesses adapt to the new subsidy regimes and greater market orientation. This will provide a significant opportunity for the Department to implement our recommendations.

On the basis of a Report by the Comptroller and Auditor General,[1] we examined the Department on its plans to help manage the transition from a subsidy-led to a market-based environment; what forms of farm business support to provide and to whom; and how to deliver this advice and support most effectively.

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1   C&AG's Report, Helping farm businesses in England (HC 1028, Session 2003-04) Back

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Prepared 1 April 2005