1 Introduction
Negotiations on reform of the Common Agricultural
Policy (CAP) are in their final stages. Implementing regulations
need to be drawn up and the official text has yet to be published
but, one year later than hoped, the main points of the new CAP
have been agreed. EU leaders promised a "greener, fairer
and more efficient and more effective" CAP.[1]
The final agreement leaves a great deal of flexibility for Member
States to implement many aspects of the new CAP in a way which
suits them.
Our inquiry
2. This inquiry is part of our ongoing scrutiny of
the policy, administration and expenditure of the Department for
Environment, Food and Rural Affairs and its agencies. Our Report
builds on our previous work, The Common Agricultural Policy
after 2013 (published in April 2011) and Greening the Common
Agricultural Policy (published in June 2012).
3. Due to the compressed timetable of our inquiry
we have not been able to cover all aspects of the CAP deal—we
have focused instead on the areas highlighted as key by those
who responded to our call for evidence. We also decided not to
consider those aspects of the CAP deal on which Ministers had
already reached a clear view as set out in their October 2013
consultation Implementation of CAP Reform in England, such
as entitlements, coupled support and the small farmers' scheme.[2]
The negotiations
4. The Commission began with the intention to make
agriculture in Europe greener, reduce the problems of administration
and address the lack of a level playing field. Following ratification
of the Lisbon Treaty, this was the first time the CAP was subject
to ordinary legislative procedure—the requirement that both
the European Parliament and the Council of the European Union
must agree on the legislation before it is adopted. Between April
2013 and June 2013 more than 40 'trilogue' discussions took place
between the Council, Commission and negotiators from the European
Parliament. This work allowed the Council and the Parliament to
reach agreement on most aspects of the reforms in June 2013—political
agreement on the few remaining issues was reached at the discussions
on the EU's budget on 24 September 2013.
5. Main elements of this round of reform include
the provision that 30% of the direct payment is conditional on
the delivery of 'greening' measures, while the remainder can be
subject to redistribution or reduction; a top-up scheme for young
farmers; an increase in the permitted level of coupled support;
an active farmer test; and the ability for Member States to transfer
up to 15% of funding from Pillar I to Pillar II or up to 25% in
the other direction.[3]
The agreement also sees Member States moving to area-based payments
and includes provisions for farmers who receive payments lower
than 90% of the EU average to have their payments increased (internal
convergence), and for Member States whose direct payments per
hectare are below 90% of the EU average to have their Pillar I
budget adjusted upwards (external convergence).
6. The Commissioner for Environment and Rural Affairs,
Dacian Cioloº, described the June deal as a "paradigm
shift for CAP with a new focus on greening, young farmers and
a fairer system of redistribution between member states and farmers,
that enforces the concept of public money for public goods".[4]
Whether the final agreement stands up to the Commissioner's description
has been widely questioned[5]
but, as Dr James Jones, a farmer and consultant, told us, "anything
that preserves the Common Agricultural Policy and the flow of
money that it represents into the farming industry is a good deal
for the farming industry."[6]
7. The final agreement has left Member States with
a great deal of flexibility, some of which may cause aspects of
this reform to be more bureaucratic and less fair than its predecessor.
It is also unclear whether the greening element, which was significantly
watered down during the negotiations, will deliver any significant
environmental public good, and there is little doubt that its
imposition will increase the regulatory burden.
8. The UK wanted a CAP that improved the market orientation
and international competitiveness of EU agriculture, that delivered
greater environmental benefits and that was simpler for farmers
and implementing bodies. Rt Hon. Owen Paterson, Secretary of State
for Environment, Food and Rural Affairs, told us that:
[the CAP deal] is not really satisfactory from the
point of view of my strategic aim, which was to continue the progress
begun by MacSharry and continued by Fischler.[7]
There are certain points where we definitely go backwards; the
re-establishment of coupling is an example.[8]
9. The Secretary of State explained that the Government
had prevented what it considers some of the more regressive and
bureaucratic measures from being adopted:
We did stop a lot of bad stuff: the craziness of
the active farmer was an example. On the last night, late on,
there was a proposal to replace the milk regime with a really
seriously misguided proposal to penalise the most efficient 5%
of Europe's dairy farmers and to reward the most inefficient.
[...] I think we can take credit in some areas, such as the sugar
reform, where we really dug in and worked with allies against
some big opposition. It was always intended that 2015 would be
the end of the sugar regime. The proposal was to push it out to
2020, which would have meant that it would have gone into the
next round. Frankly, we would never, ever have got a stake through
its heart. By accepting 2017, we will have a free market.[9]
While the UK Government did not end up with the deal
it wanted, the final outcome might have been much worse and the
Secretary of State and his officials are right to take credit
for this.
10. Where the United Kingdom Government has come
in for most criticism has been over its handling of the negotiations
for the allocation of Pillar II funding, aimed at environmental
and rural development schemes. While countries such as France
and Italy saw their allocations increase by €1bn and €1.5bn
respectively, the UK's budget for 2014-2020 is 5.5% less than
for the previous CAP period. Without modulation (the transfer
of money between Pillars) this means that annual Pillar II spend
in England would be 16% less in 2014 than in 2013, and by 2020
it would be 27% less. The European Council stated that the allocation
of funding would be based on 'objective criteria and past performance'
but the Commission has not revealed how it interpreted this guidance
in practice or what objective criteria
were used.[10] On his
CAP reform blog Alan Matthews, Professor Emeritus of European
Agricultural Policy in the Department of Economics,
Trinity College Dublin, considered that "the idea that Rural
Development funds are distributed according to 'objective' criteria
is a mirage. But it still leaves open the question how the agreed
distribution was arrived at." [11]
11. As we will discuss later in the Report, such
a poor outcome over the budget allocation for Pillar II may have
ramifications that go beyond rural development. In order to meet
policy objectives under Pillar II, the Government proposes to
transfer 15% of funds from Pillar I into Pillar II. The NFU told
us that such a transfer of funds out of the direct payments budget
could harm the ability of English farmers to compete with farmers
elsewhere in the UK and Europe.[12]
The main challenges of implementation
12. The Government has undertaken to keep implementation
as simple as possible while seeking to achieve good value for
taxpayers and good outcomes for other policy goals.[13]
A new IT platform is being developed, and application will be
digital by default. We have no intention of rehearsing the problems
that occurred during the implementation of the last CAP—the
scale of which both the Rural Payments Agency and Government denied
for far too long. However, all concerned with implementing the
new system, from the RPA to the farmers who make claims, expect
the lessons learnt from those difficulties to be applied this
time around.[14]
One of the main lessons from that period is the need to get the
new IT system right. It is absolutely crucial that it performs
effectively. This remains one of the stand-out challenges. The
proposed digital by default approach must also take account of
the lack of adequate broadband in some rural areas.
13. It is clear that there is much work for the RPA
to do. Dr James Jones told us:
There is no doubt that there is a lot more work in
this for the RPA and the agencies because, whatever their requirements
are at the moment, they are going to be added to by requirements
such as determining the age of a young farmer and whether they
are eligible for that slice of the payment. There are the greening
measures, and in particular the detailed mapping exercise that
will have to be done to back up the determination of whether a
farmer has 5% EFA on his holding as part of the arable area.[15]
14. The implementing bodies have much to achieve
in a very short time. As Jo Broomfield, Director of the CAP Delivery
Programme at the Department for Environment and Rural Affairs
(Defra), pointed out "One of the biggest challenges I face
is the limited time that we have to deliver the new solution,
so this is a challenging programme that we are embarked upon,
and we absolutely do not want to make the mistakes of the past."[16]
The new direct payments system will be implemented on 1 January
2015. 15. Given the added complexities of the new CAP,
it is important that farmers are engaged in the process of change.
Effective communication is critical, not least in the area of
agri-environment schemes. Dave Webster, Chief Executive of Natural
England, described his main challenge as maintaining business
continuity and quality customer service during the transitionary
period: "We have over 45,000 multiannual agreement
holders. Clearly we have to communicate a phased closure of the
current schemes and the introduction of the new schemes to our
customers, and clearly we have got to take those same customers
through digital by default."[17]
Not only are the implementing bodies developing and testing new
procedures and systems, they also have to ensure business as usual
under the existing mechanisms. We discuss these challenges in
more detail later in this Report.
1 European Commission Press Release, Commission outlines
blueprint for forward-looking Common Agricultural Policy after
2013, 18 November 2010 Back
2
Department for Environment, Food and Rural Affairs, CAP Reform
in England: Status report on Direct Payments, August 2013 Back
3
Coupled support refers to payments directly linked to production,
for example per head of cattle; Pillar I payments are drawn from
the European Agricultural Fund and support farmers' incomes through
direct payments and market measures; Pillar II payments are drawn
from the European Agricultural Fund for Rural Development and
provide support for rural development and environmental schemes. Back
4
Irish Farmers' Journal, Cap deal agreed, 26 June 2013 Back
5
Q 33 [David Baldock] Back
6
Q 5 Back
7
Previous European Commissioners with responsibility for farming Back
8
Q 175 Back
9
Q 175 Back
10
www.caprefrom.eu, The CAP budget in the MFF Part 3-Pillar 2 rural
development allocations, 10 July 2013 Back
11
Ibid. Back
12
Ev 82 [NFU] Back
13
Department for Environment, Food and Rural Affairs, CAP Reform
in England: Status report on Direct Payments, August 2013 Back
14
Ev 82 [NFU]; Q 150 Back
15
Q 5 Back
16
Q 97 Back
17
Q 97 Back
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