Further written evidence submitted by
the Welsh Assembly Government
CAP REFORM POST-2013
INTRODUCTION
In November 2010, the European Commission published
high-level policy proposals for the shape of the CAP 2014-2020.
The Commission has initiated also a consultative process. The
Welsh Assembly Government welcomes the EFRA Committee's inquiry
into the impact of CAP Reform on UK Agriculture. The purpose
of this paper is to set out the Welsh Assembly Government's initial
views on the proposals from the Commission.
The Commission's proposals, and associated consultation
paper, lack any form of meaningful detail from which it is possible
to reach an informed view at this stage on a range of issues where
final decisions will have far reaching consequences for Wales
and Welsh farming through to at least 2020.
BACKGROUND
On the CAP itself, the Welsh Assembly Government
has been consistent in making clear that the funding available
makes a vital contribution in sustaining farming and food production
in Wales as well as enabling the farming community to deliver
a range of environmental outcomes that are valued by society.
Interaction within food supply chain mechanisms, and the inability
of farmers to make profitable returns from the market, results
in the CAP Single Payment Scheme (SPS) typically contributing
between 80% and 90% of Farm Business Income.
On the latest income figures for 2010, it is evident
that all farming sectors in Wales would be non-viable without
CAP payments, despite a 16% increase in income compared to 2009
building on an increasing income trend in recent years. The SPS
support plays a significant role in solidifying Welsh Assembly
Government strategic aims for sustainable agriculture in Wales
and actions to improve the efficiency and profitability for primary
food producers.
MAINTAINING THE
CAP AND THE
2 PILLAR STRUCTURE
Against that background, we are firm in the view
that there must not be any fundamental change in the underpinning
purpose of the CAP to provide income support for farmers, to sustain
food production and to continue to support sustainable land management
action.
The Assembly Government can welcome the Commission's
view that a strong CAP is essential towards ensuring food production
within EU 27, providing a stable income base for the farming industry
and ensuring environmental outcomes. Furthermore, we believe it
is important to retain the two Pillar structure for the CAP as
this offers the basis for maintaining the competitive edge of
Welsh farming more widely as well as making a key contribution
to the socio-economic and environmental cohesion of rural Wales.
Viable farming and food production also require effective
management of our natural resources and responding to the challenges
of climate change. Again, we have little difficulty with the Commission's
overall position on linking these complex agenda items. The Glastir
scheme is a dedicated response from Wales to recognise the key
role that farming can undertake in shaping primary food production
activities in a way that also delivers on broader societal outcomes
associated with carbon, water, soil, habitat and biodiversity
management.
THE COMMISSION'S
PROPOSALS: WALES'
ISSUES
Our starting position is that the Pillar 1 arrangements
under which direct payments are provided should guarantee an effective
and transparent level of income support to farmers across EU 27.
We are not altogether persuaded that the Commission's preferred
option for providing a basic payment, a mandatory "greening"
payment and a discretionary payment for farming in a marginal
area is a logical way in which to proceed. It lacks transparency
and falls short in providing certainty and stability on the value
of the pillar 1 income that will not aid future planning business
decisions at individual farm level.
Furthermore, the Commission suggests that there should
be a progressive move towards delivering a more equitable distribution
in direct payments compared to the current position, in particular
to tackle the marked differences in average receipts between the
former EU 15 and the newer Member States (EU12).
Whereas we can support this as a long term aspiration,
it will be critical for the Commission to spell out in detail
how this might work in practice. Agriculture and farming systems
across EU 27 are very diverse as are costs of production at farm
level and, within very different national economies, there are
substantial variations in relative costs of day-to-day living.
Capping of payments to larger farms is not a major issue for Wales
but I support the general principle. A labour adjustment to capping
could be unworkable in Wales where contract and self-employed
labour is a regular feature of the farming sector.
We need also to consider this move for a more equitable
distribution on Pillar 1 receipts between EU27 in the context
of the significant re-distribution of the SPS within Wales consequent
to moving from the current historic SPS model in Wales to a flatter
or area based payment from 2014. The Welsh Assembly Government
is clear that it is not justifiable to maintain a direct payment
regime based on production levels achieved some 10 years ago.
We have undertaken an impact analysis on this change that points
up starkly that there would be significant redistribution of payments.
It is for this reason that we will be arguing for a lengthy transitional
period of at least five years so that farmers can adapt to an
area based payment new system. We cannot see why it would be necessary
to retain the complexity of the current entitlement regime under
a generalised area-based payment system, particularly if we can
ease the difficulties that new or young entrants face under the
historic model for the SPS.
Further "greening" of Pillar 1 payments
is also a difficult area as approaches such as compliance in relation
to permanent pasture, green cover, crop rotation and ecological
set-aside would inevitably require more administration or "green
tape" which seems counter to the agenda to reduce the bureaucratic
impact of the CAP - at farm level and for the Welsh Assembly Government.
We believe that the cross compliance regime should
continue to set a minimum baseline and that where farmers are
asked to provide environmental enhancements, these more properly
belong to actions under Pillar 2 and axis 2 of the Rural Development
Plan regime. In Wales we have well established mechanisms under
the Wales RDP to provide funding for farmers' sustainable land
management actions. That is the way that the Glastir scheme has
been developed. The Commission, through its "greening"
proposal, is attempting a one-size-fits-all approach that fails
to recognise the progress made by certain individual countries
such as Wales. We would not want that progress restricted and
will be looking to the Commission to recognise past performance
and initiatives already in place to support environmental action
by farmers.
In Wales we remain opposed to continuing any form
of voluntary coupled support that does little to encourage farmers
to make market based production decisions and also leads to competitive
advantages and disadvantages between Member States. Wales, as
with the rest of the UK, implemented the decoupled SPS in 2005.
There is no case for allowing pillar 1 payments that link directly
to production. In addition, providing area based payment support
for specific sectors and regions (with specific natural constraints)
would not represent extra funding; rather such support would in
effect be generated by a "top slicing" mechanism, resulting
in reduced payments for the majority while at the same time adding
a further element of administrative complexity.
There is then the complex matter of who should receive
the CAP payment and determining what is meant by "active
farmer". The Commission raises an important issue that actually
has two intertwined aspects: whether the land is being actively
farmed and how we identify who the payment for that land should
go to. There is a strong argument that payment should be provided
where it can be demonstrated that the farmed land is the principal
source of economic livelihood. This also begs the question whether
there is a minimum size of farmed land from which an economic
living can be made. Circumstances in Wales are different to the
rest of the UK and even more marked where comparison is made at
an EU 27 level. Our farmland is a natural and rich resource that
should be used to optimise both food production and environmental
benefits. Whilst the concept of targeting support to "active
farmers" seems wholly appropriate, there is clearly difficulty
around how the term is defined and the control measures.
In terms of Pillar 2 and the rural development the
proposals, these will enable us to further our advances in improving
competitiveness of agriculture and forestry, managing land sustainably,
local empowerment and capacity building in rural areas. The Europe
2020 strategy of smart, sustainable and inclusive growth is embraced
and the increased emphasis on innovation is to be welcomed, while
a less rigid structure would facilitate this and also enable cross-cutting
economic and environmental gains. Integration of Natura 2000 and
HNV into environmental measures already fits with Glastir. Similarly
the emphasis on local production, procurement and market development
sits comfortably with our policies.
Although potentially a welcome development, the risk
management toolkit approach towards addressing both production
and income risks through insurance and mutual funds needs more
consideration to determine its appropriateness to Welsh agriculture.
A key issue to resolve under pillar 2 relates to
the inequitable share made available historically to Wales and
the UK. The current EU funding arrangements significantly disadvantage
Wales and place an enormous pressure on the Welsh Assembly Government
to make its own resources available to ensure a meaningful programme
of actions under the Wales RDP. The current Plan has an overall
spend commitment of £795 million between 2007 and 2013, of
which some £600 million is provided directly by the Welsh
Assembly Government. This domestic funding commitment is wholly
disproportionate when comparisons are made elsewhere within EU
27. It is disappointing that the Commission's public documentation
remains silent on future action.
Related to this funding aspect, the Commission's
documents avoid any reference to whether "modulation"
will continue under the CAP regime from 2014. Modulation has been
the mechanism by which the Welsh Assembly Government has "top-sliced"
the SPS receipts to generate funding to advance agri-environment
action by our farmers. It is inextricably linked to addressing
the historic under-funding for Wales by the EU under the pillar
2 arrangements.
CONCLUSION
To summarise, there are a number of points in the
Commission's documents that fit well with the needs of Wales and
our overall position on CAP Reform. It is difficult to reach a
starting point for the proposals overall in the absence of real
detail. It is also highly relevant that the future funding for
the CAP will have a key impact. It is deliberate on our part to
avoid comment on the budgetary position. That is not the purpose
of this paper. What we would say is that the absence of detail
on the future direction of the CAP from 2014 does not provide
the basis for taking a positive view at this time.
Finally the Welsh Assembly Government remains committed
to a CAP reform outcome that:
- Maintains direct support;
- Provides the basis for sustainable food production;
- Strengthens the competiveness of our land based
industries;
- Recognises the role of farming in safeguarding
and enhancing the natural assets of Wales; and
- Contributes to the socio-economic development
of our rural communities.
December 2010
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