The Impact of Common Agricultural Policy Reform on UK Agriculture

Written evidence submitted by Country Land and Business Association (CAP 18)

CLA general view of the reform proposals

1. The CLA’s 35,000 members in England and Wales are all directly or indirectly affected by the Common Agricultural Policy. We have been heavily involved in the debates over the last two years leading to the publication of this Communication. As the paper was only published on 18th November we have not been able to consult our members so these comments are provisional.

2. The CLA’s public reaction to the document has been to say that is broadly on the right tracks. The paper suggests three rather sketchily explained options: (i) some adjustment and more equity; (ii) major overhaul of the policy and (iii) far reaching reform to move away from income support and market measures. It seems clear to us that the right option is the middle one and indeed this is the only one on which any ideas are explored by the Commission. The status quo in option 1 does not respond to the real reform pressures, and option 3, what has been describes as the ‘British/Swedish’ vision of eliminating Pillar 1, has plainly commanded no general support despite being on offer for five years.

3. The main indication of the direction of Commission thinking is in the section entitled future instruments. The Commission is adamant that the CAP must retain the two pillar structure but we have suggested not being dogmatic about the character and purpose of the two pillars or talking about good and bad Pillars.

4. A key part of Commission thinking is that the new CAP must do more for public goods, and furthermore that this should be focussed in the next reform by an overhaul of Pillar 1. They are not proposing further shift of resources to Pillar 2. There is no suggestion of more modulation – compulsory or voluntary. This marks a significant change in direction to the strategy since 1999. Second the paper seems to be suggesting that the ‘targeting’ in Pillar 1 should have two components. The first a general approach across the whole territory (perhaps akin to English entry level stewardship, or the Austrian base level of stewardship), and the other is support for farming in what we currently call the Less Favoured Areas.

5. These broad ideas were more or less exactly the approach suggested to the Commission in the CLA response in July through our European organisation. So we naturally applaud that this is the Commission’s suggested direction.

6. This said, the paper is very light on details and there are many very important points with which we have serious difficulty. These concern: payment ceilings, any narrowly defined concept of active farmers; the balance between the proposed new components of the single payment; the obsession with annual payments for multi-annual commitments in Pillar 1; the treatment of LFAs; the lack of detail about any redistribution of funds within and between the pillars and the fate of modulation, and the scope for distorting competition by remaining coupled payments. We also point out that our support for the broad direction of reform and commitments to providing more public eco-system services is conditional on the appropriate resources being available to cover the real costs of their delivery.

Turning to the questions posed

Impact on UK’s agriculture’s capacity for being internationally competitive?

7. The main CAP measures helping competitiveness are in the current axis 1 of pillar 2, there are no new measures spelled out in the document. So the proposals are broadly neutral in this regard. It is of course of concern to farmers that if they are asked to provide non-market environmental or indeed ‘social’ services in addition to being competitive producers of food, fibre and energy, then they must be properly paid for such services or this could indeed impede their international competitiveness in agricultural products. But also see paragraph 10 below.

Do the proposals ensure fair competition within the single market?

8. They have to. This is imperative and it is the Commission’s job to ensure that fair competition in the Single Market is maintained. This is one reason why it is right to consider putting the broad-application, basic, stewardship programme into Pillar 1. This ensures it has common rules across the EU as proposed in the mandatory Greening component. But of course the more the CAP is involved in the complex business of paying for environmental co-products of agricultural production the more complex this task inevitably becomes. This is why it is vital that there are common programmes and standards applied within a common agricultural policy. Inevitably farmers in each country will always suspect that EU rules are being more rigorously applied in their own territory than in other Member States.

Will the proposals achieve the right balance between productivity and sustainability?

9. There is no structural reason to suggest these ideas will prevent this right balance being struck but there is plenty of scope for the negotiation process to push too far in one or other direction. The big underlying proposition in this reform is that the current balance in the CAP is insufficiently weighted in the direction of environment sustainability. However, we must remember that agricultural produce are highly tradable and many other big agricultural producing and exporting regions are seemingly not as concerned with the sustainability agenda as the EU. There is a very real danger that we could overload our producers, impeding their economic competitiveness and thus sustainability. Again it gets back to the appropriate resources for delivering the higher environmental services mandated. The resource question lies outside the CAP reform in the EU Budget debate. Our fear is that the UK will set extremely high ambitions and expect them to be delivered from an unreasonably low budget, which will merely export the unsustainable food production somewhere else.

Will the proposals redress the imbalance in support to different sectors created by historic supports?

10. The difficulty in answering this question is that there is no strong consensus about what the ideal balance of support should be. There will be disagreements about the distribution of supports as between the crop and livestock sectors; between the uplands and lowlands; between paying for environmental services and agricultural production. Also the proposals are encouraging further discussion about small versus large farms, and of course the ‘equity’ of the distribution between member states and, by extension, between regions within member states. As a member organisation with members crossing all these divides it is very difficult to be definitive. There is no doubt that these distributional discussions will be at the heart of the discussions of this reform. There will inevitably be losers and gainers from the reforms; that is the nature of redistribution and so differences in view about whether imbalances have been redressed.

What aspects of the proposals should be common policy and which left to the Member States?

11. The CLA considers that all aspect of the new proposals in this document must be part of a common policy because repatriation of measures will lead to market distortions. Note that there is no contradiction between this statement and the present feature of Pillar 2 that the balance of measures adopted from menus of options are selected by regions and member states and adapted to their conditions. The CAP has long developed the capacity to create common frameworks within which local requirements can be fitted.

Can the proposals be implemented simply and cost-effectively within a short time scale?

12. They have to be. There is no choice in this. Note that what the CAP is seeking to do is not simple. It is perhaps misguided to elevate simplicity to be a top-level objective. The present Single Payment System at its heart was a simple replacement for a bewildering battery of commodity price supports. The core of new proposals is to better target these payments referring to sustainability. Sustainability is a subtle and complex mix of economic, environmental and social objectives. The environment itself contains some really complex interactions between biodiversity, landscape, heritage, water and soil protection and climate stabilisation. To expect this to be simple is to create false expectations. Regarding timeliness, it is vital that any new legislative proposals are agreed by the end of 2012 because we have learned from bitter experience that the Defra needs plenty of time for the administrative and IT preparations to implement changed regulations.

December 2010