The Common Agricultural Policy after 2013 - Environment, Food and Rural Affairs Committee Contents

Conclusions and recommendations

Objectives of the Common Agricultural Policy (CAP)

1.  Given the strategic importance of food and the openness of markets within the EU, it is essential that the EU retains a common policy on agriculture. First, this helps to maintain fair competition for agricultural products within the EU. Second, agricultural policy affects cross-border issues such as food security and climate change where action at a supra-national level is appropriate. Third, through acting collectively, the EU is able to be a major player in global agricultural trade. (Paragraph 31)

2.  We believe that the EU will need to play a greater role in meeting food supply challenges in the future, particularly as future climate change may result in currently productive areas becoming less so. Until failures in the global governance system of food supply are addressed, there remains a strategic interest for the EU to retain a significant degree of food self-sufficiency. The first objective of the Common Agricultural Policy should be to maintain or enhance the EU's capacity to produce safe and high-quality food. (Paragraph 39)

3.  Enhancing the competitiveness and viability of the EU agricultural sector should be the second objective of the CAP. A competitive and viable EU agricultural sector is the key to producing more while having less impact on the environment and to reducing farmers' reliance on income support from the tax-payer in the long-term. (Paragraph 43)

4.  The third objective of the CAP should be to ensure the sustainable management of the EU's natural resources, biodiversity and landscapes, recognising that farmers are the managers of over half of the EU's land area. (Paragraph 46)

5.  The fourth objective of the CAP should be to help to maintain agricultural activity in areas where it delivers significant public benefits, such as the maintenance of biodiversity and cultural landscapes. However, the CAP should not aim to deliver an acceptable standard of living to every farmer in the EU through income support alone—farmers should be encouraged to look to the market for returns. (Paragraph 52)

6.  The fifth objective of the CAP should be to foster diversity in EU agriculture, where this is valued by EU citizens, but not enforce it. (Paragraph 57)

Drivers for reform of the CAP

7.  We believe that the absence of external pressures from the WTO should not prevent the Commission striving for ambitious reform. The aim for this round of CAP reform should be to enable EU farmers to achieve the 'sustainable intensification' that is required to meet the global challenges of feeding a predicted world population of 9 billion by 2050 without irrevocably damaging our natural resources. (Paragraph 64)

8.  The Government's position on the Common Agricultural Policy must be coherent with its strategy for ensuring food security. Defra should decide whether, and if so how, it intends to implement the previous Government's Food 2030 strategy, taking into account the recommendations of the Foresight Future of Food and Farming report and the UK's position on the future Common Agricultural Policy. (Paragraph 66)

9.  In the interests of fairer trade in the long-term, the EU should argue more strongly for recognition of standards of production (for example animal welfare, use of water, greenhouse gas emissions) within trade agreements. We believe this is essential in achieving the global shift towards sustainable intensification recommended by the Foresight Future of Food and Farming report. (Paragraph 74)

The CAP budget after 2013

10.  In light of current financial circumstances, we believe there is room for savings to be made within the CAP budget while still delivering its core objectives. However Defra must be mindful that severe budget cuts could incur greater costs in the long-term if they result in depleting the EU's natural and social capital. (Paragraph 82)

The Single Payment Scheme after 2013

11.  There are convincing reasons to maintain direct payments to farmers under the current conditions in agriculture, where over half of UK farms would be unprofitable without subsidy; where UK farmers are expected to adhere to higher standards than their competitors in third countries; and where farming businesses face high levels of price volatility. We recommend that direct payments be retained, at least until the end of the next financial period in 2020. They should be set at a level that is low enough to encourage farmers to seek greater returns from the market; while actions that deliver public goods beyond the basic level provided by cross-compliance should be rewarded through additional payments. (Paragraph 118)

12.  We are not convinced by Defra's arguments as to how to reduce reliance on direct payments: it is not clear that merely shrinking the direct payments will be sufficient to deliver a viable farming industry that can be competitive without government support. We recommend that Defra develop its position more clearly, setting out precisely the conditions that must be met before direct payments can be abolished and how reduced reliance on the single farm payment is to be achieved, including the measures needed. (Paragraph 119)

13.   Given financial constraints on the EU budget, Defra should ensure that UK farmers are prepared for the level of direct payments to fall over the financial period to 2020. (Paragraph 120)

14.  Ending direct payments is unachievable in the short-term. Defra's adherence to this policy reduces the UK's ability to engage constructively with other Member States and could diminish the UK's influence in this round of reform. Defra should adopt a more pragmatic approach to the negotiations. (Paragraph 124)

A more equitable distribution of funding

15.  It is essential that the historic basis of payments is replaced with a more objective system, but we recognise that there is no easy solution to what this should be. Given the concerns over redistributive effects between areas within the UK, Defra should argue for national flexibility to allocate payments within Pillar 1, paying attention to the concerns of the devolved administrations. (Paragraph 133)

16.  Defra should use its experience of implementing the dynamic hybrid system in England to help guide the Commission's proposals to ensure any new method can be implemented without excessive cost or administrative burden. (Paragraph 134)

17.  Defra should argue strongly for a more equitable distribution of Pillar 2 funding. If modulation is to continue, the rate at which payments are reduced should be common across the EU. Defra should ensure that it can meet its ambitions for delivery of agri-environment schemes from its Pillar 2 budget without recourse to higher modulation rates in England than apply in the rest of the UK, or in Europe. (Paragraph 135)

The balance of funding between direct payments and payments for environmental public goods

18.  We agree that the CAP post-2013 should target more of the available funding on incentivising sustainable farming. However, 'sustainable farming' should not be synonymous with simply 'not farming': it is essential that ways are found to farm more productively while minimising inputs and reducing negative impacts on the environment. We recommend that any 'greening' of the CAP should be directed at activities that promote sustainability alongside competitiveness. (Paragraph 143)

19.  Defra should not support the Commission's current proposals for greening Pillar 1 as they risk reducing the competitiveness of UK farming and increasing the complexity of the CAP while not delivering an improved environmental performance. (Paragraph 159)

20.  We recommend that additional greening measures bear many of the characteristics of Pillar 2 agri-environment schemes, namely voluntary for farmers, incentives rather than regulation, and multi-annual. The design of the additional measures is crucial to the success of the scheme and the guiding principle must be to mainstream sustainability into successful, competitive agriculture. We believe that EU-wide buy-in is more likely if these additional greening measures are entirely EU-financed. Funding them from the existing Pillar 1 budget is one way to maintain budgetary discipline while incentivising farmers to implement the additional measures. (Paragraph 160)

21.  We encourage Defra to analyse the impact on the UK were the Commission to take forward the innovative ideas in the European Parliament Agriculture and Rural Development Committee's draft report for greening the CAP through EU-financed agri-environmental measures in Pillar 2, incentivised by reductions to farmers' direct payments if they do not adopt some of the measures. (Paragraph 162)

The future of coupled payments

22.  We support the decoupling of subsidies from production. However, we note that coupled payments may be an effective way of supporting particular production methods where these deliver public benefits, such as livestock farming in the uplands. We recommend that optional coupled payments should be retained in the future CAP, as long as these are held within strict limits and are compatible with the EU's existing World Trade Organisation commitments. (Paragraph 168)

Targeting payments to active farmers

23.  We are not convinced that a more restrictive EU-wide definition of an active farmer is needed, and are concerned that this will contravene the principle of simplifying the CAP through adding additional audit requirements. The onus should be on Member States to determine if additional criteria are needed to exclude particular groups beyond the existing regulations. (Paragraph 174)

24.  Defra must ensure that the Commission's final proposals do not disadvantage the UK's tenant farmers or commoners through restricting their access to direct payments or payments linked to agri-environmental measures. (Paragraph 175)

Capping direct payments

25.  Capping of Pillar 1 payments risks hindering the industry from becoming more competitive by discouraging farm consolidation and could be ineffective in the long-term as farm businesses find ways to avoid the payment ceiling. Defra should not support the Commission's proposal to place a payment ceiling on Pillar 1. (Paragraph 181)

Support for small farmers

26.  An EU-wide support scheme for small farmers is unlikely to offer many benefits to UK farmers and risks distorting competition if it takes the form of additional payments to farmers with holdings below a particular size. Options for reducing the administrative requirements for small holdings should be developed further, consistent with the overarching aim of simplifying the CAP. (Paragraph 186)

Support for Less Favoured Areas

27.  Drawing on our conclusions in the Farming in the Uplands report, we urge Government to ensure that the areas currently recognised as uplands are properly represented by the new definition of areas of natural constraint. We are not convinced that the Commission's proposals for payments for areas of specific natural constraint in Pillar 1 offer any improvements over the current system. (Paragraph 191)

Enhancing agricultural competitiveness

28.  The Commission's Communication is lacking in both vision and detail as to how it intends to enhance the competitiveness of EU agriculture. While Defra is highly critical of the Commission's lack of vision, we did not find the Minister's own answers as to how the competitiveness of EU agriculture is to be increased particularly convincing. We urge Defra to present the Commission with an alternative vision and supporting measures, drawing on the ideas in this report. (Paragraph 195)

29.  After 2013, we urge Defra to revisit its balance of funding between the three axes of the Rural Development Programme to channel more funds into measures to enhance competitiveness, currently Axis 1 of Pillar 2. Given that the mechanism for delivery of the socioeconomic elements of the RDPE will have to change, there needs to be sufficient warning as to how funds will be administered so that those who qualify are able to access them. (Paragraph 199)

30.  Research, development and innovation are vital to achieving the science-led sustainable intensification that will be needed to meet global challenges. The CAP post-2013 must place a greater emphasis on knowledge transfer and farm extension services. The Commission should consider strengthening the Farm Advisory System and expanding its remit to include competitiveness and sustainability. (Paragraph 204)

31.  Imbalances in the supply chain result in poor returns to farmers, reduce their profitability and prevent them becoming less reliant on the single farm payment. The Commission has recognised this but has failed to provide concrete suggestions for improving the situation. Defra must ensure that the Commission's intentions are taken forward and expanded in the draft legislative proposals for the post-2013 CAP. (Paragraph 212)

32.  We urge Defra to work across Government to ensure that the forthcoming Grocery Code Adjudicator has sufficient powers to enforce the Groceries Supply Code of Practice and protect the interests of UK farmers. (Paragraph 213)

Market management measures

33.  Defra should resist any attempt to use current price volatility as a justification for re-establishing significant market management measures, including excessive price support or quotas. We welcome the reduction in the use of export subsidies and strongly recommend that they be removed from the CAP after 2013. There will continue to be a role for intervention buying in the CAP after 2013, but only as a safety net in times of genuine crisis. (Paragraph 221)

34.  We note that tools such as futures markets help some farmers manage price volatility, but we are concerned that smaller producers in particular will be unable to benefit from them. If Defra wishes to continue to promote these tools, particularly as a replacement for current market measures, it must ensure that they will be accessible to all farmers and that guidance and training on using them will be available. (Paragraph 222)


35.  We support the aim of simplifying the CAP and recommend that Defra robustly resist the imposition of policies that would create undue bureaucracy and burden for farmers or the government payment agencies. We are particularly concerned that the Commission's proposals for a multi-tiered single farm payment will necessitate expensive new computer and control systems. We encourage Defra to negotiate a simpler payment scheme that can be adapted to the existing instruments. (Paragraph 224)

Defra's handling of the negotiations

36.  Defra must balance its twin roles of representing English interests and negotiating on behalf of the whole United Kingdom. Agricultural conditions and priorities vary across the UK which can make it difficult to reach a common position; nonetheless, it is incumbent on Defra to ensure that the views of the devolved administrations are fairly represented in negotiations with the EU. We encourage Defra and the devolved administrations to produce a joint position statement on the CAP after 2013 swiftly. (Paragraph 228)

Conclusion on the Commission's proposals

37.  We believe that the Commission's Option 2 offers the most benefits to UK farmers, rural communities and the agri-food industry. However we have reservations about some of their ideas, in particular, 'greening' Pillar 1 through compulsory additional agri-environmental measures. We recommend that Defra offers its support to Option 2 while working proactively in Europe to negotiate changes to some aspects of the proposals and explore additional options for 'greening' the CAP, as outlined in our recommendations. (Paragraph 233)

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