European Scrutiny Committee Contents

1 The CAP towards 2020



COM(10) 672

Commission Communication: The CAP towards 2020 — meeting the food, natural resources and territorial challenges of the future

Legal base
DepartmentEnvironment, Food & Rural Affairs
Basis of considerationMinister's letter of 22 March 2011
Previous Committee ReportHC 428-xi (2010-11), chapter 7 (15 December 2010)
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee A


1.1 Since 1992, there have been a number of reforms of the Common Agricultural Policy (CAP), aimed at replacing support provided through market-related measures (such as intervention buying) by direct income payments to producers, and at removing the previous need under Single Payment Scheme (SPS) for a link between current agricultural production and the receipt of such payments. In November 2007, the Commission put forward a Communication[1] comprising a "Health Check" of the CAP, in which it identified three main issues — the Single Payment Scheme; improving market orientation; and responding to new challenges (notably managing risk, climate change, bio-energy, water management and biodiversity, and strengthening the environmental pillar) — and it subsequently sought in May 2008 to give legislative effect[2] to the proposals contained in that document.

1.2 However, as the CAP still faces a set of challenges which require the EU to make a strategic choice as regards the long-term future of its agriculture and rural areas, the Commission put forward this Communication in November 2010. The document noted that discussions had shown an overwhelming majority in favour of the CAP remaining a strong common policy, structured around its two pillars — support for agricultural production (Pillar 1), and rural development measures (Pillar 2) — and that it was felt that the policy should seek to preserve food production potential on a sustainable basis; to support farming communities which provide quality food in a way which maintains the rural landscape and combats biodiversity loss; and to maintain viable rural communities. In addition, it was felt that reform of the CAP must continue to promote greater competitiveness, efficient use of taxpayer resources, and effective public policy returns, in line with the Commission's recent Communication[3] on the Budget Review.

1.3 As we noted in our Report of 15 December 2010, the Communication went on to set out the challenges facing the CAP in areas such as food security, environmental and climate change, and its territorial balance; and to suggest the changes which might be made as regards direct payments, market measures, and rural development. It concluded by identifying three broad policy options, all based on the two pillar system, but with a different balance between the pillars. These were:

Option 1

—  This would introduce further gradual changes to the present policy framework, building upon those aspects which function well, and focusing on adjustment to those areas attracting most criticism, notably the equity of the distribution of direct payments between Member States. The Commission said that this would ensure continuity and stability with the current CAP, thus facilitating long-term planning for those in the food chain.

Option 2

—  This would make major overhauls in order to ensure that policy becomes more sustainable, and that the balance between different policy objectives, farmers and Member States is better met, with this being achieved through targeted measures. The Commission said that this option would imply greater spending efficiency and greater focus on EU value added, and would also allow economic, environmental and social challenges to be addressed, and strengthen the contribution of agriculture and rural areas to the objectives of Europe 2020.

Option 3

—  This would imply a more far reaching reform, with a strong focus on environmental and climate change objectives, whilst moving away gradually from income support and most market measures. The Commission added that providing a clear financial focus on environmental and climate change issues through the Regional Development policy framework would encourage the creation of regional strategies in order to assure the implementation of EU objectives.

1.4 We also noted that, although the Government had provided a number of preliminary comments, endorsing the Commission's broad analysis of the challenges and opportunities for EU agriculture, it had pointed out that much of the Communication focussed on Option 2, whereas it believed it was important to consider all options for reform. The Government also felt that the Communication lacked the necessary ideas and ambition to bring about the transitional reform needed, but, as it intended to respond to the Commission's consultation exercise, we decided to take that response into account before considering the document further.

Minister's letter of 22 March 2011

1.5 We have now received from the Minister of State for Agriculture and Food at the Department for Environment, Food & Rural Affairs (Mr Jim Paice) a letter of 22 March 2011, enclosing — somewhat belatedly — a copy of the response sent to the Commission on 27 January 2011.

1.6 This says that the UK welcomes this opportunity for further reforms to the CAP, which it considers vital if EU agriculture is to help deliver the ambitions set out in Europe 2020, and to adapt to its many future challenges and opportunities. It notes that successive reforms have involved greater market orientation and focus on the delivery of public benefits, and says that the UK wants to see an acceleration of this process, as well as reform of the trade-distorting elements of the CAP, particularly those which are damaging to Least Developed Countries and which undermine EU objectives during trade negotiations.

1.7 The UK therefore shares the Commission's assessment of the many challenges ahead, and notes that there may also be many unforeseen challenges beyond 2020. However, it reiterates its concern at the lack of ambition in the Communication and the failure to recognise the difficult economic situation facing the EU. In particular, it believes that the CAP cannot be immune to the hard choices being made elsewhere, and that there must therefore be a very substantial cut to the CAP Budget during the next Financial Framework, with the remaining spending being prioritised to provide best value for taxpayers.

1.8 The UK also believes that farmers do not want to rely on subsidies in perpetuity, and that the key aim should be to encourage a competitive, sustainable EU agriculture sector, reduce reliance on subsidies, and focus resources on environmental public goods. With this in mind, it would like the Commission to be much more ambitious, and believes that there is scope for Pillar 2 to better reward farmers for the important public goods they provide. It would strongly support the Commission developing such proposals further, but adds that there is also a need to stimulate a change in behaviour rather than entrench reliance on subsidy, with farmers needing to find ways to boost their net incomes, reduce costs and increase their output. The UK believes that, whilst some proposals — such as those on producer organisations and improvements to the supply chain — will start to address these issues, much more needs to be done.

1.9 The Government says that developing measures to stimulate competitiveness and innovation, significant further simplification, ending coupled payments and removing market distorting mechanisms would all make important contributions to these objectives, and that there are considerable opportunities for farmers, not least due to increased global demand, where they need to be able to react to these changing circumstances. Whilst the UK recognises that price volatility can be a threat, it believes that this would be best dealt with by encouraging the development of market based solutions. However, it is concerned that other proposals — such as capping payments and greening Pillar 1 — would be counter-productive to the development of a competitive agriculture sector, and would risk entrenching continued reliance on subsidies. The UK also considers that there needs to be a more flexible policy, rather than rigid structures and blanket measures, and therefore wants to see a future CAP which focuses on enhanced Pillar 2 measures, delivering environmental public goods, adding that Pillar 1 needs to become a transitional measure, as tools to encourage competitiveness and reduce farmers reliance on subsidies are introduced and take effect.

1.10 The UK therefore sees the top priorities for CAP reform being:

  • a very substantially reduced and refocused CAP Budget improving value for money;
  • enhanced Pillar 2 measures, particularly for the delivery of agri-environment schemes;
  • measures to enhance competitiveness and reduce reliance on subsidies, without interfering with the level playing field within the EU;
  • increased market orientation, including a reduction in trade-distorting subsidies and measures; and
  • continued simplification of the CAP, ensuring a reduction in costs and complexity for both farmers and administrations unless benefits outweigh costs.

1.11 With this in mind, the UK would like to encourage the Commission to bring forward further detail on all of the options in the Communication, ensuring that there is a balanced assessment of the merits of each. In particular, it has urged the Commission to explore Option 3 more fully on the grounds that, of the three options considered in the Communication, this has the greatest potential for the development of ideas which will deliver changes consistent with the objectives for reform and meeting the challenges ahead — for example, by fostering a dual approach, under which measures to increase competitiveness would be considered in tandem with the reduction in subsidies, and by placing a greater emphasis on the short-term challenges and accompanying measures which would stimulate longer-term improvement in the underlying competitiveness of EU agriculture.

1.12 The Government's response to the Commission also identifies a number of more specific points. These include:

  • the need for any support providing a safety net to be clearly understood as a measure of last resort;
  • the need to phase out the remaining coupled subsidies during the next Financial Perspective;
  • the need for any targeting of support on active farmers to take subsidiarity concerns into account;
  • the need for the position of small farms to be met by improving their underlying competitiveness, and avoid any minimum level of direct payment for such farms;
  • the need to avoid any cap on direct payments to large farms;
  • support for the use of an objective key for allocating funds to Member States under both pillars;
  • the need for any support to areas of natural handicap to be focussed on the delivery of pubic benefits; and
  • a willingness to explore the possibility of greater integration between the Structural and Cohesion Funds, the European Fisheries Fund, and the European Agricultural Fund for Rural Development.


1.13 As we noted in our Report of 15 December 2010, this Communication provides a useful analysis of the various issues which need to be considered in relation to the future of the Common Agricultural Policy, but is less convincing in terms of identifying clearly the steps which need to be taken to address these. Having said that, it is nevertheless a document of some importance, not least in terms of the levels of EU expenditure at stake, and, having now received the comments which the Government sent to the Commission, we think this would be an opportune moment for the House to consider the document further. We are therefore recommending it for debate in European Committee A.

1   (29193) 15351/07: see HC 16-vii (2007-08), chapter 1 (9 January 2008). Back

2   (29703) 9656/08 + ADDs 1-2: see HC 16-xxv (2007-08), chapter 1 (25 June 2008). Back

3   (32097) 15285/10: see HC 428-xi (2010-11), chapter 4 (15 December 2010). Back

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Prepared 7 April 2011