Downsizing the CAP cake


The bigger a cake is, the easier it is to divide it to everyone’s satisfaction. The size of the Common Agricultural Policy (CAP) budget, then, has become the critical issue as far as Irish farmers are concerned, writes Matt O’Keeffe.

The proportion of the overall EU spend devoted to the CAP has reduced significantly over the years. Seven years ago, it accounted for over 40 per cent of the entire budget. Now the proportion devoted to agriculture has reduced to little more than 34 per cent of the EU budget.

EU funding deficit
There is now a real risk that the EU funding available for various projects and policies may reduce in real terms in the years ahead. The withdrawal of Britain from the EU will put a considerable dent in the finances. In addition, while there is a majority of countries in favour of increasing their contributions to the EU coffers, there is nowhere near the unanimity required to make this happen. At least six countries are steadfastly against any increased contribution beyond the 1 per cent currently in place. While there may be a change of heart in this regard, the odds are firmly against it. The EU Commission is encouraging Member States to increase their contributions to 1.2 per cent of gross national income (GNI), while the European parliament is in favour of lifting each country’s contribution to 1.3 per cent of GNI. Such increases would negate the expected reduction in the budget as a result of Brexit.

Total dependence on direct payments
The stakes are high. That is why Irish farm organisations are putting such emphasis into securing an increase in the EU budget in order to at least preserve current spending under the CAP. Speaking at an Irish Farmers’ Association (IFA)-organised mass meeting of farmers held in Kilkenny in April, Professor Thia Hennessy, economist, emphasised the importance of the payments that flow from the CAP and how most of the drystock sectors are mainly, or totally, dependent on direct CAP payments for their incomes. In addition, Prof Hennessy outlined the trickledown effect of the payments: “While the payments go directly to farmers, the effect of those payments is spread across the economy and supports the agri input sector, as well as the €13.5bn of Irish food, horticulture, drink and forestry exports.”

Increasing subsidiarity
The University College Cork-based professor went on to outline her thoughts on the possible shape of the CAP, post-2020: “Increasing subsidiarity is likely to be a feature of the next CAP, returning more responsibility to national governments for the distribution of CAP funding in various areas.” This was a point that was reiterated later in the meeting by European Commissioner for Agriculture and Rural Development, Phil Hogan, when he spoke to the thousand farmers in attendance. In addition, Prof Hennessy spoke about degressivity, essentially channelling more of the budget to active farmers as well a smaller-scale farm units. Putting a cap on direct payment levels is also likely to be prioritised under CAP 2020, she added. What is now generally accepted is that payments for the delivery of ‘public goods’, such as undertaking environmental improvements at farm level, is going to be a central feature of all payments in the years ahead. Prof Hennessy put it plainly: “In order to qualify for payments, farmers will have to make an increasing contribution to safeguarding the environment and assisting in climate change mitigation measures.”

Keep it simple
Commissioner Hogan made much of the ‘simplification programme’ that he has introduced during his tenure as Commissioner. While the changes are clearly worthwhile, farmers generally are still critical of the ongoing complexities of CAP as it affects them on their farms, despite the introduction of ‘yellow cards’ and the elimination of penalties for minor errors in form filling and land management. The Commissioner outlined his plans for the next CAP: “I am proposing a new way of delivering the CAP, to make it less complex for farmers. There will be a move away from a compliance, rules-based approach to a performance and results-based approach. We are giving every Member State the opportunity, in collaboration with farmers, to draw up a CAP plan. This will allow farmers to plan for a seven-year period where they will have an influence, for the first time, in building a tailor-made solution to meet the objectives laid down by the European Commission. Each Member State will submit a plan to cover their ambitions under Pillar I and Pillar II, with detailed outlines of how they will address specific issues, not just climate and environment, but also food security, nutrient management, precision farming, and the improved use of new technologies, in addition to plans aimed at encouraging young farmers to enter the industry. The management of pesticides, antibiotics and other critical issues must all be dealt with. Commission approval and monitoring of implementation of these plans will ensure that there is a level playing field across all EU states. The new delivery model will ensure that 100 per cent of direct payments will have conditionality attached in terms of environmental reform. Some of that is already happening on farms through cross-compliance. This will be a feature of policy in the future. It will allow Member States to have a mixture of mandatory and voluntary measures for payments under Pillar I and Pillar II to meet environmental objectives. The plan is to have national controls in place, thus reducing the EU’s dayto- day role in compliance.”

The Brexit fall-out
Commissioner Hogan outlined the monetary implications of Brexit: “After Britain leaves there will be a black hole of €12bn in the EU finances. There are increasing calls on EU funds, including migration, defence and security issues. In many people’s view, the CAP budget is an obvious target to secure funding for these initiatives. My strategy is to persuade others that farmers can do more to deliver on many of the objectives being pursued by the EU. In that way, agriculture makes itself more indispensable in areas like energy efficiency, climate change and job creation in rural regions. There are, however, up to six Member States, including the Danes, Dutch, Austrians and Swedes, that do not agree with increasing the EU budget. Without their consent, there can be no increase in finances. In fact, their aspiration is to downsize the CAP and cohesion budgets and move towards a ‘smaller Europe’. On the other side, French president Emmanuel Macron is in favour of greater integration and higher levels of spending to achieve that. Without unanimity, there will be no decision to increase the budget. At the extreme end of the spectrum, we have those who would argue for the abolition of direct payments entirely. Food production is no longer seen as a priority or an area in need of financial support. The bottom line for me is that farmers’ incomes must continue to be supported. EU agriculture exports €137bn of goods and accounts for 44 million jobs in the EU economy.”

Tags: Teagasc Phil Hogan Common Agriculture Policy Europe CAP Thia Hennessy