The CAP: the most cost-effective EU policy for Finance ministers

Read our new policy briefing on budgetary aspects of the EC’s three main policies here.

In many Member States, Finance and Agriculture Ministers do not necessarily share the same political or strategic approaches to the CAP and how it might evolve. Agriculture ministers are more sensitive to the fact that by investing in agriculture the European Union is not only investing to meet its economic and local development needs, but is also creating public goods that are essential to society as a whole.

Whilst Agriculture Ministers focus their efforts on putting in place policy tools that are as finely tuned as possible to their country’s specific needs, Finance Ministers have been working to preserve national drawdown and transfer spending responsibilities from national budgets to the Community budget – with the need for budgetary discipline at the front of their minds throughout their deliberations.

Summary analysis of the initial phase of implementation of the new CAP

In light of the notifications made to the Commission in August 2014, the implementation of the 2015 CAP reform by MS will be characterised by significant variation that will need to be taken into consideration in both the post 2020 policy development work and the CAP simplification exercise, set to be implemented in 2016/17.

We note :

  • a very widespread use of degressivity and capping of payments, going further than the regulatory minimum, with the introduction of caps for individual farms in 8 MS, a move which has seemed unthinkable since 1992;
  • a reversal of the approach to the coupling of support. Systematic decoupling appears no longer to be the ultimate objective. With the exception of Germany, all MS are taking up the ‘recoupling’ option, which provides a generic response to the problem that uncoupled direct aid has been, by definition, unconnected to the needs generated by changing markets(these choices need to be understood in light of the economic context of the milk and meat industries at the time the decisions were being made).
  • a substantial use of national flexibility in relation to the greening objective by a majority of MS, which may introduce a source of market distorsion, as well as complexity in terms of implementing and managing the CAP.

The CAP reform has also introduced a degree of flexibility to the provision of direct aid payments (1st pillar of the CAP). This briefing note examines 6 key components of the implementing provisions brought in by the 2013 reform ; components that will have an impact on the positions of MS in future negotiations.

 1) The transfer between pillars meets a demand

11 MS have chosen to increase their allocation to pillar II. The most enthusiasatic being: the United Kingdom (10.8 % annually), Germany (4.5 %), Denmark (from 5 % in 2016 to 7 % as from 2018), the Netherlands (4 % in 2016 to reach 4.3 % in 2020) and France (3.3 %). The other MS are Latvia, Belgium, the Czech Republic, Estonia, Greece and Romania.

A number of MS are set to strengthen pillar I with funds from pillar II, including Poland (25%, as negotiated during the reform procedure), but also Hungary (15%), Slovakia (21.3 %), Croatia (15%), and, symbolically, Malta. This will have an impact on the next budget negotiations, particularly in light of Poland’s negotiating position in this regard in 2013.

2) ‘Recoupling’ : limited but real

27 of the 28 MS of the EU have opted, to varying degrees, to put in place coupled payments. Only Germany has not. The use of coupled payments is however very limited in 7 MS (Ireland, the Netherlands, Luxembourg, the United Kingdom, Austria, Denmark and Estonia – at between 0.2 and 3.5 %). Belgium, Finland and Portugal are taking up the opportunity of going further than 15 % (from 17 to 21 %). The majority of new MS are using their maximum authorised allocation. It should also be noted that Sweden has decided to allocate 13% of its direct support as coupled payments. This coupled support will first and foremost focus on meat, milk, sheep, fruit and vegetables and protein crops. It will also benefit beetroot growers in 10 MS where productivity is traditionally lower, as well as the Czech Republic, Slovakia and Poland.

3) Capping mechanisms: almost universally adopted

Degressivity and even capping mechanisms for direct aid will be applied in 19 MS. Among these, 8 have opted to apply an absolute aid ceiling, with amounts varying between 150 000 €/year (Flanders, Ireland, Greece, Austria, Northern Ireland, and Poland, without subtraction of salaries in the case of Poland), 600 000 €/year (Scotland), 500 000 in Italy, 300 000 in Wales and 176 000 in Hungary. In total, capping will save some 110 million €/year.

4) Strengthening support for ‘average’ sized farms

In parallel, redistributive payments allocating additional funds for the ‘first hectares’ will be applied in 8 countries (Belgium, Bulgaria, Germany, France, Croatia, Lithuania, Poland and Romania). With the exception of Poland and Bulgaria these countries have decided not to apply degressivity.

5) The marginal impact of the ‘Small Farmers Scheme’

While the scheme aimed at supporting ‘small farmers’ is being taken up in 15 MS, only 2 countries are using it to increase financial support for small farmers.

6) Greening : national flexibility is being used

8 MS will apply greening equivalence, with 6 (Austria, Greece, Ireland, Italy, Luxembourg and Poland) opting for agri-environmental and climate measures and 2 (the Netherlands and France) preferring certification schemes.

Regarding the geographic scale for the application of the permanent grasslands PG ratio :

23 of the 27 MS will apply the PG ratio on the national scale. Only Belgium, France, Germany and the United Kingdom will apply it on the regional scale.

Only 2 MS, the Netherlands and Poland, will implement Ecological Focus Areas on a national basis (EFA).

In Austria, Finland, Lithuania, the Netherlands, Slovenia and Spain the list of options that farmers may choose from to fulfil their EFA obligations is limited (between 2 and 4). In contrast, in Belgium, Bulgaria, Croatia, the Czech Republic, France, Germany, Hungary, Ireland, Italy, Luxembourg, Poland, Romania and Slovakia a much wider palette of options is available (10 or more).

The most commonly selected EFA options are : the area of nitrogen-fixing crops (all MS, except Denmark), land lying fallow (all MS except the Netherlands and Romania), short rotation coppice (23 MS or regions), catch crops (21), buffer strips (20), trees in groups (18), hedges (17), trees in line (16), hedgerows (16), afforested areas (15), ditches (15), isolated trees (13), ponds (12), area for agroforestry (12), forest edge strips without production (11), terraces (8), forest edge strips with production (8) and finally, traditional stone walls (7).

It should also be noted that 10 MS (Denmark, Finland, Germany, Hungary, Ireland, Italy, Latvia, Malta, Portugal, and the United Kingdom (Northern Ireland)) will, in relation to the EFA, take landscape features that are protected by GAEC into account, but which are not in this list.

Some MS will make full use of conversion factors (Belgium, Bulgaria, Croatia, France, Hungary, Ireland, Italy, Luxembourg, Poland, Romania, Slovakia and the United Kingdom) whereas others will use real dimensions for all or many of the options selected (the Czech Republic, Estonia and Germany).

In contrast, virtually all MS will apply weighting factors.