Memorandum by the Department for Environment,
Food and Rural Affairs
Overview
Q1. What should be the long term objectives
of the CAP?
1. In December 2005, Defra and HM Treasury
published a vision for the Common Agricultural Policy (at: www.defra.gov.uk/farm/capreform/vision.htm)
which set out long term goals for how a reformed CAP could support
a profitable and sustainable farming sector. That vision proposed
that within 10 to 15 years, European agriculture should be:
— internationally competitive without
reliance on subsidy or protection;
— rewarded by the market for its outputs,
not least safe and good quality food, and by the taxpayer only
for producing societal benefits that the market cannot deliver;
— environmentally-sensitive, maintaining
and enhancing landscape and wildlife and tackling pollution;
— socially responsive to the needs
of rural communities;
— producing to high levels of animal
health and welfare; and
— non-distorting of international trade
and the world economy.
2. In order to achieve that, the CAP needed
to be reformed further so that it constituted:
— a free, fair and level playing field
throughout the EU for farmers to produce and market their goods
in a single market, as in other sectors of the economy;
— central to this, the integration
of agriculture within EU competition policy on the same basis
as for other sectors with rules set at the EU level;
— a clear framework, set at EU level,
to define the goals of EU agricultural policy, focussing in particular
on maintaining the environment and promoting sustainable rural
development, particularly in the more environmentally sensitive
regions of the Union;
— within this framework and in the
long-term, targeted, non production distorting measures defined
and applied at Member State, regional and local levels to achieve
these goals in accordance with local priorities and consistent
with EU competition policy;
— import tariffs for all farm sectors
progressively aligned with the much lower level prevailing in
other sectors of the economy;
— no price support, export refunds
or other production or consumption subsidies;
— social and welfare benefit support
as determined by the Member States would be available to farmers
on the same basis as other members of society but there would
be no income or production support payments which treat agriculture
differently from other sectors; and
— EU spending on agriculture would
be based on the current Pillar II and would support these objectives
as appropriate, allowing a considerable reduction in total spending
by the EU on agriculture and bringing this into line with other
sectors.
Q1. Does the title "Common Agricultural
Policy" aptly fit your perceived objectives of the policy?
3. There would continue to be a common European
policy, precluding unfair competition between Member States, but
one very different from that now in place. Price support would
be phased out as would other direct support to farmers; agricultural
markets would progressively open up; and there would be a central
rather than a peripheral role for rural development measures,
including those targeted on protection and enhancement of the
rural environment.
Q1. What do you consider to be the main pressures
on the CAP as it currently is?
4. We strongly welcomed the direction of
recent reforms, which we expect will have a positive effect. But
the evidence is clear that the CAP still gives rise to substantial
economic and fiscal costs for the EU's consumers and taxpayers,
and represents very poor value for money. The CAP is also inequitable,
both within the EU and internationally, whilst market price support
has contributed to the intensification of EU agriculture, with
associated environmental costs.
5. What is more, much of the CAP is holding
back the competitiveness of European farming in the context of
a globalising economy. Farmers need to be freed from the constraints,
bureaucracy and distortion of a managed market, so that they can
become fully connected with consumer demand and responsive to
market opportunities.
6. In summary, in the context of globalisation,
increasing environmental pressures, and the EU's Lisbon Agenda
for economic growth, the current CAP is not serving the long term
interests of European farming or society.
THE REFORMED
CAP
Q2 What has been your experience so far with
the reformed CAP? What has worked well and less well? And where
can lessons be learned?
7. The policy landscape under the CAP has
changed considerably through implementation of recent reforms.
8. The 2003 reforms should encourage a more
market-oriented focus to farm businesses. In particular, the decoupling
of direct payments from production allows farmers to re-assess
what they do in order to maximise their farm's returns from their
own skills and resources. It is regrettable that this message
has been obscured by the significant problems associated with
the introduction of the Single Payment to farmers in England.
We are determined that the right lessons are learned from that
experience, so that we move to a stable platform for making payments.
RPA and Defra are working closely with industry stakeholders to
that end.
9. While it is too early to reach a conclusive
view, emerging anecdotal information suggests that the introduction
of cross compliance (linking CAP payments to compliance with a
range of environmental, public, plant and animal health and welfare
standards) is reinforcing the base level of responsible farming
practice. Beyond that the continued flexibility provided by voluntary
modulation, has enabled the funding and delivery of Environmental
Stewardship, a key policy tool in improving the environmental
performance of farming.
10. Recent reforms are, therefore, moving
the policy framework towards a point where farmers would be able
to compete freely in the market, unhindered by the historic constraints
of the CAP, and rewarded for the responsible management of our
landscape and natural resources.
11. The nature of farming and the fact that
the sector is made up of many thousand individual businesses,
mean time is needed for policy change to take effect on the ground.
The Agricultural Change and Environment Observatory Programme
has been set up to monitor changes arising from CAP reform and
other key drivers, and to assess the consequent implications for
the environment. Their first review is at: www.defra.gov.uk/farm/policy/observatory/pdf/execsummary-ar06.pdf
12. The Observatory is an important means
for identifying environmental risks from a changing agriculture
sector and an important part of the evidence base for charting
progress towards our vision for English farming, set out by David
Miliband in his Speech at the Oxford Farming Conference in January
2007. That vision is of a farming sector which is profitable in
the marketplace, continuing to produce the majority of the food
we consume, even when the subsidies have gone; making a positive
net environmental contribution, notably in respect of climate
change, but also more widely; and managing the landscape and the
natural assets that underlie it.
THE SINGLE
PAYMENT SCHEME
Q3. Do you consider the Single Payment Scheme
to be a good basis for the future of EU agricultural policy? What
changes might be made at the EU level to the Single Payment Scheme,
including to the rules governing entitlements, in the short and/or
the longer-term?
13. The introduction of the Single Payment
Scheme (SPS) reduced economic distortions and environmental pressures
associated with the schemes it replaced, and so represented a
significant landmark in the evolution of the CAP. However an agricultural
income support measure of this sort has no place in a sustainable
CAP and the benefits arising from cross-compliance can not begin
to justify the €33 billion per annum cost across the EU.
14. A managed phase out of the SPS requires,
in the short term, a move to full decoupling and significant simplifications
in the scheme rules (eg abolishing set-aside, reducing the number
of other types of SPS entitlements and introducing both less rigid
land eligibility rules and more proportionate control requirements,
particularly for smaller claims). Those should be actively considered
in the forthcoming CAP Healthcheck.
MARKET MECHANISMS
Q4. What short and longer-term changes are
required to the CAP's market mechanisms? Suggestions made by the
Commission have included re-examination of certain quotas, intervention,
set-aside, export refunds and private storage payments
15. In line with our vision we want to see
early fundamental reform, leading to abolition of the intervention
price system and all the associated policy instruments, such as
production quotas, set-aside, planting bans, aids for storage,
processing and distillation, other withdrawal mechanisms and export
refunds.
16. Farmers need clarity about such changes
so that they have sufficient time to plan and a transitional process
which enables them to adjust effectively, focusing in particular,
on early simplification measures and better consumer and market
alignment.
RURAL DEVELOPMENT
Q5. What is your view on the introduction
of the European Agricultural Fund for Rural Development (EAFRD)?
Do you consider that it is meeting its objectives thus far? Is
it suitably "strategic" in nature, meeting the needs
of rural society as a whole rather than being restricted to aiding
the agricultural industry? How well is it being co-ordinated with
other EU and national policies on regional and rural development?
17. The EAFRD implements Pillar II of the
Common Agricultural Policy. Introduced by the new Rural Development
Regulation (1698/2005) in 2005, the EAFRD only entered into being
on 16 October 2006. The move to the current arrangements is a
welcome improvement compared to the arrangements that applied
from 2000-06. However, it is too early to be definite about the
practical benefits which will arise, and there is certainly scope
to go further. The rural development programming period which
is supported by the EAFRD began on 1 January 2007. As at 7 June
2007, only 2 (of the expected 94) new rural development programmes
had been approved.
18. In principle, however, the new Rural
Development Regulation and EAFRD is a welcome step since it requires
member states to adopt a more strategic approach to their rural
development policies from the outset. Under the UK Presidency
of the European Union, Community Strategic Guidelines for Rural
Development were adopted which set out priorities for rural development
at European level. Additionally, under the EAFRD Member States
must also provide a National Strategic Plan for Rural Development
to complement their more detailed Programmes. However, until all,
or at least the majority of, new programmes have begun formally
it is impossible to say whether or not the EAFRD will prove to
be more strategic in practice.
19. That said, it is already clear from
the volume of European regulations, accompanying guidelines and
Commission requirements alone, that Member States must provide
a considerable amount of detailed information in order to get
programmes approved. The implementation and controls requirements
also combine to provide a complex operating environment for Rural
Development Programmes. Arguably, the effectiveness (or otherwise)
of the Fund will in one sense be gauged by how easy it is for
Member States to deliver rural development policy "strategically"
and effectively, without falling foul of the detailed rules governing
implementation.
20. In England, EAFRD funding will be targeted
strongly on schemes that deliver environmental benefits through
improved land management, notably in respect of maintaining and
enhancing biodiversity and helping to protect natural resources.
This approach is both consistent with the Community Strategic
Guidelines and the Vision for the CAP published jointly by Defra
and Treasury in 2005.
21. In terms of integration with other EU
and national policies on regional/rural development, the Commission
implementing rules do require programmes to contain a considerable
amount of information about demarcation with other funds/policies
in order to promote complementarity and avoid dual-funding.
Q6. Is there a case for a higher level of
EU financing of rural development? Do you have a view on the extension
of compulsory modulation from Pillar I (Direct payments) to Pillar
II (rural development)?
22. Since 2001, the United Kingdom has used
the voluntary modulation mechanism to increase the level of EU
financing for rural development by transferring funds from Pillar
I to Pillar II of the CAP. The UK is in favour of greater compulsory
modulation as we believe that Pillar II represents better value
for money than Pillar I.
23. In all policy areas, and looking ahead
to the EU Budget Review, the Government believes that spending
through the EU Budget should represent value for money, should
add value compared to spending through national budgets, should
be proportionate, and should be properly managed.
WORLD TRADE
Q7. What benefits can the EU's World Trade
Organisation obligations create for EU agriculture, and consequently,
for the EU economy as a whole?
24. The Doha Development Agenda (DDA) has
the potential to improve market access significantly (by reducing
import tariffs) for EU exporters in to third country markets;
to significantly reduce trade distorting domestic support globally;
and to eliminate all export subsidies by 2013. This is in line
with the UK's CAP Vision paper (see page 13)—helping to
foster an internationally competitive industry without reliance
on subsidy or protection; and one which is non-distorting of international
trade and the world economy.
25. In addition to the benefits to the developing
world that the DDA has the potential to bring, an ambitious outcome
will benefit EU consumers by improving their access to imports
and reducing prices in the EU; will allow EU producers and processors
improved market access to third countries for their exports; and
allow processors an increased range of imports. It is difficult
to be prescriptive about the levels or amounts involved in the
absence of a DDA deal and given the complexities of individual
commodities. However, assessments of the impact of the Uruguay
Round suggest that the benefits could be considerable.
26. Whilst recognising we need to manage
any kind of transition carefully, we believe that opening up the
EU market will be positive for consumers and competitive businesses
and so for the EU economy as a whole. WTO obligations also provide
for international sanitary and phyto-sanitary standards and a
disputes procedure for managing world trade.
ENVIRONMENTAL PROTECTION
AND CLIMATE
CHANGE
Q8. To what extent has the system of cross-compliance
contributed to an improved level of environmental protection?
27. Cross compliance measures have been
phased in since 2005. Cross compliance applies to all farmers
claiming direct payments including the Single Payment and, as
of 2007, claimants for new land based Pillar II Rural Development
schemes. Cross Compliance consists of two parts: Statutory Management
Requirements, derived from 19 existing EU directives and regulations,
which all farmers have to comply with irrespective of whether
they receive direct payments; and an obligation on farmers to
keep their land in Good Agricultural and Environmental Condition
(GAEC).
28. It is too early to reach a conclusive
view on the impact of cross compliance, but some anecdotal information
is emerging. For example, the 2006 annual survey of farmers for
Momenta (the cross compliance advice provider) indicated that:
— 40% of farmers have changed their
practices to meet cross compliance; and
— 35% have noted environmental or other
benefits, such as increased wildlife and reduced runoff from fields.
29. Other changes noted in some parts of
the country have been a decrease in blocked public rights of way.
30. These are encouraging signs, which Defra's
monitoring and evaluation programme will be looking to investigate
further in 2008/09. However, we also recognise that the EU legislation
makes the administration of cross compliance restrictive and burdensome
in places, and we are engaging with the EU review/report process
with the objective of enabling more flexibility and simplification.
Furthermore, Defra's Regulatory Impact Assessment estimates that
the costs to farmers of cross-compliance are modest relative to
the size of the budget for direct payments and that the benefits
of cross-compliance could be achieved much more cost effectively.
Q8. How is it linking with other EU policy
requirements such as the Water Framework Directive?
31. The Water Framework Directive is not
incorporated into the current cross compliance arrangements but
a number of cross compliance measures contribute, in some respects,
to reducing diffuse water pollution. In order to keep their land
in Good Agricultural and Environment Condition farmers are obliged
to draw up a simple risk-based soil management plan—Soil
Protection Review—to identify and resolve soil-related problems
on their land. They must not cultivate or apply fertilisers, manures
or pesticides to land within 2 metres of the centre of any watercourse,
and they must prevent overgrazing and unsuitable supplementary
feeding to reduce damage to natural or semi-natural vegetation
and potential erosion. Statutory Management Requirements cover,
among other things, the protection of groundwater from various
pollutants, the use of sewage sludge on agricultural land, Nitrate
Vulnerable Zones, and restrictions on the use of plant protection
products.
32. The European Commission has established
a Strategic Steering Group to assess the extent to which agriculture
needs to contribute to the delivery of WFD objectives and to help
Member States to optimise the contribution from Rural Development
programmes, and is also considering the role of cross-compliance.
The current mandate runs from 2007-09.
Q9. How can the CAP contribute to mitigation
of, and adaptation to, climate change?
33. The 2003 CAP reforms were not designed
for the purpose of climate change mitigation and adaptation, but
they may foster changes in agricultural practices and market responses,
which bring about some reductions in greenhouse gas emissions,
improvements in the efficient use of inputs, or a reduction in
the volume or intensity of agricultural activity. For instance,
as noted in the Climate Change Programme 2006, decoupling of direct
payments from production is likely to lead to a reduction in livestock
numbers and an associated decrease in methane emissions estimated
at some 0.68 MtCe per annum in 2010. Similarly, it is expected
that trends towards lower input agriculture and better soil nutrient
management will be reinforced with a consequent reduction in nitrous
oxide emissions.
34. The extension of cross-compliance from
1 January 2007 claimants to new land based Pillar II Rural Development
schemes will result in an increasing focus on some aspects of
environmental management that, together with changes driven by
decoupling, may have positive effects on greenhouse gas mitigation.
For example, the requirement to implement Soil Protection Reviews
should help to reduce soil organic matter loss (and therefore
carbon loss). Defra's cross compliance monitoring and evaluation
programme in England will be looking to assess the impacts of
cross compliance in 2008-09.
35. Environmental Stewardship (ES) and previous
agri-environment schemes, under which farmers receive payments
for environmental "goods", though not designed to address
climate change at present, have encouraged low-input agriculture
and are likely to have contributed to decreased emissions (eg
through decreased fertiliser use, buffered waterways against fertiliser
run off, and reduced grazing intensity). Defra-funded research
into the impact of ES on greenhouse gas emissions is due to be
published shortly. This will contribute to the Defra and NE review
of progress on ES which has just begun. Under the review of progress
ways of increasing the scheme's contribution to climate change
mitigation will be examined.
36. Under the Rural Development measures
we have supported the establishment of perennial energy crops
to encourage additional sources of biomass.
Q9. What do you consider the role of biofuels
to be in this regard?
37. The CAP currently offers a production
based energy aid payment of €45 per hectare to support the
growing of crops for energy use. However, as a production linked
subsidy, such a payment involves undesirable economic and trade
distortion. The Government's preferred approach is to stimulate
demand for bio-energy for heat, electricity and transport
fuels. To stimulate renewable electricity we have introduced the
Renewables Obligation and the Government is undertaking work on
potential measures to support renewable heat. We will, be introducing
a Renewable Transport Fuel Obligation (RTFO) from April 2008 to
require the UK's fuel suppliers to ensure that a minimum level
of their total fuel sales are from a renewable source. Since similar
mechanisms are being introduced in other Member States, the need
for production based subsidies should be eliminated in due course.
38. The European Union set a reference value
of 5.75% biofuel penetration for 2010 under the Biofuels Directive,
and more recently the European Union Spring Council has endorsed
a binding target for 2020 of 10% to be achieved by all EU Member
States for the share of biofuels in overall EU transport petrol
and diesel consumption, to be introduced in a cost-efficient way.
The binding character of this target is subject to a number of
important conditions, including second generation fuels becoming
commercially available and production being sustainable. For example,
the contribution of biofuels to climate change mitigation depends
upon the extent to which it displaces fossil fuel emissions once
account has been taken of the whole production, processing and
distribution cycle. This can vary considerably by feedstock and
by production conditions.
39. Further consideration needs to be given
to how best to promote "second generation" biofuels
from perennial energy crops, which, together with forestry material
and wastes provide better carbon savings returns per hectare than
annual crops thus reducing pressure on land.
FINANCING
Q10. Do you consider the current budget to
be sufficient?
40. Rural development expenditure has been
maintained at roughly its current level and once the EU modulation
agreed in 2003 is included, that means that the focus of the CAP
on rural development in the current financial perspective is greater
than under the last one.
41. As set out in the Government's CAP Vision
paper, we believe there is a strong case for expenditure under
the CAP to be substantially reduced. In all policy areas, and
looking ahead to the Budget Review, the Government believes that
spending through the EU Budget should represent value for money,
should add value compared to spending through national budgets,
should be proportionate, and should be properly managed.
Q10. Do you consider co-financing to be a
possible way forward in financing the Common Agricultural Policy?
42. In line with the views set out in the
Government's CAP Vision paper, we think that Pillar I should be
phased out by 2015-20. Co-financing of Pillar I is one of a range
of ways of managing the phase out of Pillar I that could be considered.
But Pillar I co-financing is not an end in itself.
ENLARGEMENT
Q11. What has been the impact on the CAP of
the 2004 and 2007 enlargements and what is the likely impact of
future enlargements of the EU on the post-2013 CAP?
43. The 2004 and 2007 enlargements have
resulted in some additional costs to the CAP which have so far
been absorbed within the budgetary ceilings agreed in 2002. While
these ceilings will come under increasing pressure as higher payments
continue to be phased in in the newer Member States, the Financial
Discipline Mechanism (FDM), agreed as part of the 2002 Brussels
Agreement, ensures that the ceilings cannot be breached. Current
estimates suggest that the FDM will not be activated before 2009.
44. Enlargement has highlighted problems
with existing CAP market management instruments, particularly
in the cereals sector, where there has been a large increase in
intervention. As a consequence, the Commission has proposed the
abolition of maize intervention.
45. The CAP needs to adapt in order to absorb
new Member States into the EU in future—for which the UK
is a strong advocate. Our vision is clear about the benefits we
see to both old and new Member States from the changes we are
proposing.
SIMPLIFICATION OF
THE CAP AND
OTHER ISSUES
Q12. How could the CAP be further simplified
and in what other ways would you like to see the Common Agricultural
Policy changed in the short and/or the long term?
46. The Commission Communication on CAP
Simplification was published in October 2005. As Presidency, we
prioritised progress on the dossier, and reached agreement on
Conclusions at the December 2005 Agriculture Council. In these
we achieved a high level of ambition, including a request to the
Commission for an Action Plan with concrete proposals. Ambition
is increasing in the Action Plan, and new measures relate to simplification
of cross compliance requirements, a clear concern for farmers.
47. We believe that the best way to ensure
that simplification proposals tackle the right issues is to put
in place the necessary evidence base first. This is why we have
led a project at EU level to accumulate all available data on
administrative burdens in the agriculture sector. This was presented
to the Commission and Member States in April, where the Commission
encouraged Member States to develop simplification proposals on
the back of the evidence. We will be working with colleagues in
Europe to make progress, looking forward to the 2008 Health Check
of the CAP, as an opportunity to deliver real simplification benefits
to farmers, through steps such as the abolition of compulsory
set-aside.
11 June 2007
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