Written evidence submitted by the Department
of Agriculture and Rural Development,
Northern Ireland Assembly
CAP REFORM POST 2013 AND THE IMPORTANCE OF
THE CAP TO THE NORTH OF IRELAND
Thank you for the opportunity to provide input to
your inquiry on reform of the Common Agricultural Policy (CAP)
post 2013.
The recent EU Commission Communication on the future
shape of the Common Agricultural Policy (CAP) marks the formal
beginning of a reform process that could have far-reaching consequences
across a broad spectrum of rural life here in the north of Ireland.
Over 70% of our farming land is classified as Less Favoured Areas
and the CAP plays a critical role in supporting both local agriculture
and the wider rural economy. For example, some £290 million
was paid through Single Farm Payment (SFP) to local farmers in
2009 and without CAP support, the income of our agricultural sector
would have been negative. This has generally been the position
since 2005, when the SFP was first introduced.
Our farmers and rural communities, therefore, rely
very heavily on CAP support, and the upcoming reform raises a
number of issues that are of great concern. As a starting point,
while recognising that the budget for the CAP will be influenced
by broader fiscal realities, I am committed to maximising the
share of the CAP budget that is available to us over the next
financial perspective, under both agricultural support and rural
development funding. I cannot support calls for significant reductions
to the CAP budget and, in particular, to direct support for agriculture.
I agree with the need to improve the competitiveness
of EU Agriculture. However, I do not believe that the removal
of direct subsidies would lead automatically to an improvement
in competitiveness. Competitiveness is a complex issue which goes
much further than a measurement of efficiency, and needs to take
into account agriculture support regimes in non EU countries whose
farmers are in direct competition with EU producers. Furthermore,
requirements placed on EU farmers in areas of animal welfare,
environment etc, while appropriate and justified, do have an impact
on costs of production. Although the impact may seem low when
calculated relative to overall production costs, the effect is
much more significant in terms of profit margins and, hence, on
the ability of EU producers to compete with other global producers.
Economic studies show that the removal of direct payments at this
time would result in a substantial fall in EU production, particularly
in the beef and sheep sectors and in regions where production
is marginal. This, in turn, gives rise to well-founded fears about
land abandonment and environmental degradation, as well as the
knock-on impact on rural communities. Therefore, I take the view
that while the next CAP reform should certainly seek to improve
the competitiveness of EU agriculture, it cannot be assumed simplistically
that an attack on the level of direct support is the way to achieving
this.
I would, however, support in principle the imposition
of a €100,000 cap on individual payment claims. It is difficult
to justify individual claims that are higher than this, and such
a mechanism would help reduce any need for reductions to be made
to payments received by smaller farmers. However, there would
need to be an effective mechanism to prevent farmers from circumventing
the cap by splitting their businesses, and such a mechanism must
not place undue bureaucratic burdens on the administration of
the regime.
I accept that there needs to be a move away from
historically based payments. However, I have grave concerns about
the potential for huge re-distribution of funds, both
at regional and at individual farmer level if there was a move
towards a flatter rate payment across the EU. For example, just
for illustration, under an EU flat rate system and with the benefit
of the current CAP budget, the north of Ireland
would lose about 28% of its current Single Payment budget. That
would have a major detrimental impact on the industry, given its
heavy reliance on this support. Any changes that are made to the
Single Payment system should, as a minimum, be phased in over
a period of years to allow farmers to adequate time to adjust.
The EU Commission Communication raises the prospect
of providing a definition of an active farmer. I can understand
the motivation for this. However, if the Commission is to pursue
this, then I must emphasise the need for a clear definition of
an active farmer which is not open to debate or interpretation.
We cannot have a regime that is difficult to administer and open
to audit criticism and sanctions
On the issue of market measures, I want to see the
existing market management mechanisms (intervention) retained
at the current "safety net" levels (where market distortion
is minimised). We have all witnessed the damaging effects of market
volatility in recent years, particularly in the dairy market,
and we need to retain an ability to respond to the extremes which
are beyond the capacity of individual farmers to address.
The CAP is, of course, vitally important to the health
of our rural environment, both by sustaining traditional agricultural
activity via Pillar I and through targeted environmental interventions
under Pillar II. A major theme of the Commission Communication
has been the concept of increased environmental requirements for
Pillar I payments, with the idea of a "green" top up
component. It is difficult to comment on this suggestion at this
point in time, given the lack of detail. I can certainly understand
the underlying motivation, but the possibility of increased administrative
costs both for farmers and Government is clearly a concern. I
would also add that it is a mistake to assume that Pillar I is
currently devoid of any green credentials, given its underpinning
support for traditional agricultural activity and land management.
You will certainly be aware the Britain receives
a very low share of rural development funding which compares very
unfavourably with that received by the south of Ireland, for example.
It is critical that we move towards a more objective and fair
means of distributing rural development monies for the next rural
development programming period.
It is also important that there is sufficient regional
flexibility on how CAP funding is deployed so that local decisions
can be taken to reflect local priorities (whilst avoiding market
distortions). Pillar II, for example, enables us to pursue an
important broader rural agenda, seeking to strengthen the social
and economic position of rural communities. The issue of simplification
must also be given high priority. The current reform process offers
an opportunity to simplify the system both for administrators
and beneficiaries. Although lacking in detail, I fear that the
direction of travel implied by the EU Communication is likely
to have a detrimental impact on simplification. Any new reform
proposal should have to pass a minimum threshold with respect
to simplification prior to the negotiations end game.
Finally, it is vital that there is positive engagement
at the EU Council on the detail of the emerging proposals for
CAP reform and that this engagement recognises the valuable role
of the CAP. I know that the British Government is focused on the
size of the future EU budget, but it must not let this become
its sole objective to the point where it finds itself marginalised
and isolated in the CAP negotiations.
Michelle Gildernew MP MLA
Minister of Agriculture and Rural Development
January 2011
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