7 Adjustment of direct farm payments
for 2013
| (35391)
14460/13
COM(13) 712
| Draft Council Regulation fixing an adjustment rate to direct payments provided for in Regulation (EC) No. 73/2009 in respect of calendar year 2013 and repealing Commission Implementing Regulation (EU) No. 964/2013.
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| Legal base | See para 7.7 below
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| Document originated | 16 October 2013
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| Deposited in Parliament | 16 October 2013
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| Department | Environment, Food and Rural Affairs
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| Basis of consideration | EM of 28 October 2013
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| Previous Committee Report | None; but see footnote
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| Discussion in Council | See para 7.9 below
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
7.1 According to the Commission, it is a fundamental rule of the
Treaty on the Functioning of the European Union (TFEU) that the
Union's annual budget must comply with the Multiannual Financial
Framework, and, in order to ensure that this principle is observed
as regards the financing of the Common Agricultural Policy (CAP),
Council Regulation (EC) No. 73/2009 provides for an adjustment
to be made to market related expenditure and direct farm payments
when expenditure forecasts indicate the relevant annual sub-ceiling
will be exceeded.
7.2 Because the first estimates for the 2014 draft
budget indicated that expenditure in this area was likely to exceed
the financial ceiling agreed by the European Council in February
2013 as part of the Multiannual Financial Framework for 2014-20,
the Commission put forward in March 2013 a draft Regulation[7]
which would have reduced by 4.98% all direct farm payments[8]
in excess of €5,000 for the 2013 calendar year (for which
the payment falls under the EU financial year for 2014).
7.3 As we noted in our Report of 24 April 2013, the
Government recognises the need to prevent overspending on the
CAP, but was concerned at the proposed exemption for any payment
below €5,000, believing there should be an equal proportional
reduction for all such payments, that the proposal would wait
provide an incentive for some Member States to call for increased
expenditure in the knowledge that a large proportion of their
own farms would not be affected, and that it would create an additional
burden for paying agencies. It also pointed out that the percentage
reduction in the direct payment budget for the UK would be somewhat
larger than in most other Member States as it has a higher than
average proportion of payments above €5,000.
7.4 We commented that, whilst it was clearly right
to prevent overspending under the CAP, we noted the Government's
concerns particularly as regards the disproportionate effect which
the exemption proposed for payments under €5,000 would have
on Member States like the UK. Consequently, although the Government
had said that it would try to have the exemption removed, we believed
the proposal raised issues which the House should consider further,
not least in terms of the precedent it could set for the future
application of financial discipline in this area. We therefore
recommended the document for debate in European Committee A, and
this duly took place on 17 June 2013.
Subsequent developments
7.5 When the proposal was put forward, we were told
that Regulation (EC) No. 72/2009 required it to be adopted by
the European Parliament and the Council by 30 June 2013, failing
which the Commission had the power to make the decision. In the
event, the Council and European Parliament were not able to adopt
the proposal by that date, and, as a consequence, the Commission
adopted on 9 October 2013 an Implementing Regulation ((EU) No.
964/2013), proposing that there should be a somewhat smaller reduction
of 4.001%, reflecting the ceiling on CAP expenditure implied by
the political agreement reached in June 2013 on the Multiannual
Financial Framework for 2014-20. The Regulation also reduced from
€5,000 to €2,000 the threshold above which this reduction
would be applied, this lower figure reflecting a political agreement
reached by the Agriculture Council in June 2013.
7.6 We were also told that, if the Commission had
new information, it could, if appropriate, propose an adaptation
of the adjustment rate, and that the Council would then have until
1 December 2013, which marks the opening of the 2013 payment window
for direct payments, to adopt that rate. The Commission has accordingly
now put forward this draft Council Regulation which would retain
the €2,000 threshold, but further lower the reduction in
the payment rate to 2.45%, in line with the lower budgetary appropriations
now forecast for 2014.
The Government's view
7.7 In his Explanatory Memorandum of 28 October 2013,
the Parliamentary Under Secretary of State for Farming, Food and
Marine Environment (George Eustice) refers first to the legal
base for this measure, pointing out that the Council Legal Service
disagrees with the Commission's proposal that this should be Article
18(5) of Council Regulation (EC) No. 120/2005, and believes that
it should instead be Article 43(3) TFEU, which gives the Council
alone power in a matter of this kind. The base has therefore been
amended accordingly by the Lithuanian Presidency.
7.8 As regards the substance of the proposal, he
says that the UK supports a reduction of 2.45%, and that paying
agencies need an urgent decision to avoid any potential delays
in payments to recipients. He also points out that, although the
UK was opposed to the original exemption for payments below €5,000,
it was subsequently prepared to compromise on a figure of €2,000,
and, although it would ideally still prefer there to be no exemption,
he regards it as extremely unlikely that the Council would agree
to amend the proposal. He also notes that the proposal would cut
about €90 million from the UK's direct payment budget of
€3.3 billion.
7.9 Finally, the Minister says that, if the proposal
is not adopted by 1 December 2013, the Commission's Implementing
Regulation, proposing a cut of 4%, will take effect. Consequently,
although the next Agricultural Council is on 18-19 November, many
Member States would like to adopt the proposal at any other Council
before then, if possible.
Conclusion
7.10 Since the original proposal was debated in
European Committee on 17 June 2013, we think it sufficient simply
to draw this latest proposal to the attention of the House, but
to clear it. In doing so, we note that the smaller percentage
cut would help to reduce the overall impact of the measure, but
that, despite the lower threshold, it would still, on average,
have a slightly greater effect on the UK than on most other Member
States. Also, operating any threshold would have administrative
implications for paying agencies.
7 See (34803) 7935/13: HC 86-xxxix (2012-13), chapter
1 (24 April 2013). Back
8
Except in Romania and Bulgaria, which are still in the process
of phasing in direct payments, and Croatia. Back
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