CAP Transition Provisions 2021 Regulation delayed

In June 2020 the Council and COMAGRI negotiators reached a partial provisional political agreement on all essential aspects of the Commission draft Regulation extending the CAP provisions beyond 2020 (I discussed the Commission’s draft Regulation in this post). This followed a decision by COMAGRI to enter into negotiations with the Council without first seeking a Parliamentary first reading position on the basis of its legislative report on the draft Regulation agreed in May 2020. While most of the provisions of the CAP direct payments regulation would apply as long as that regulation remains in force, the transition regulation is necessary to provide a legislative basis for other CAP spending after 1 January 2021.

It had been intended that this political agreement would have been brought to the Parliament plenary taking place this week for a first reading/single reading approval. This did not happen. Instead, the transition regulation has got caught in the crossfire of various political disagreements. On the one hand, the Council and Parliament want a two-year transition while the Commission is still holding out for a one-year transition. On the other hand, at least some Member States in Council and COMAGRI want the additional funds proposed for rural development in the European Council conclusions in July 2020 as part of the Next Generation EU recovery instrument to be included in the transitional regulation for release and spending in 2021. The Commission’s draft regulation on Next Generation EU and the Recovery Instrument programme for rural development does not foresee this spending taking place until, under its timetable, the CAP Strategic Plans are in place on 1 January 2022.

The reason why the political agreement between Council and Parliament in June was only a partial one was that the key Annexes setting out the national ceilings for direct payments and rural development could not be filled in pending agreement on the MFF totals. Thus, all provisions with budgetary implications were left aside until the MFF negotiations were complete. Before reviewing the two ongoing political debates, we first examine some of the other changes to the draft transition regulation that have been agreed by the Council and Parliament.

Major amendments proposed by Council and Parliament

The major amendments to the Commission’s draft transition regulation are described below.

Funding for rural development. The Commission had proposed a dual approach to the continuation of rural development programmes in the transition year. Member States without unused funds from the 2014-2020 programming period could extend their existing programmes using the EAFRD allocation under the 2021-2027 MFF for the year 2021. Member States with unused funds could use these funds to enter into new commitments in 2021, and could carry over any unused funds from their 2021 EAFRD budget allocations to the later years 2022 to 2025. The Commission would have the power to reject applications that used ‘new’ 2021 money if it thought these were not justified. The European Court of Auditors predicted that only a small share of Member States would make use of their budget allocation for the year 2021. At the end of 2020, unspent funds for the current programming period are expected to range from less than 10% for Finland and Ireland to almost 50% for the Netherlands.

The rationale for this dual approach was not clearly spelled out in the preamble to the Commission’s draft Regulation. It seems the Commission was trying to ensure that as much of the new EAFRD money in the 2021-2027 MFF would be spent according to the new MFF rules with its anticipated higher levels of environmental and climate ambition. This objective now conflicts with the desire of the co-legislature to increase EAFRD spending in 2021 in response to the COVID-19 pandemic, and indeed the Commission itself has proposed the front-loading of €2.68 billion of EAFRD funds in current prices to 2021. In this context, it does not make sense to incentivise Member States to hoard these funds until later years in the MFF.

The common position does away with any restrictions and insists that Member States should have the possibility to finance their extended rural development programmes from the corresponding budget allocation for the years 2021 and 2022. Regulation (EU) No 1303/2013 would continue to apply to programmes supported by the EAFRD under the 2014–2020 programming period and to the programmes for which Member States decide to extend the 2014-2020 period. The main consequential change would be a requirement on Member States to amend their targets established in the context of the rural development performance framework to establish targets for 2025.

Green ambition. The common position would require that extended programmes should aim at maintaining at least the same overall share of the EAFRD contribution reserved for the environment and climate measures defined in Regulation (EU) 1305/2013 (which includes spending on ANC areas). This closes a potential loophole identified by the European Court of Auditors in the Commission’s wording that could have been taken to mean that a Member State that had spent more than 30% on environment-climate measures to date could pursue a lower allocation in the transition period.  Rather cheekily, the common position justifies this maintenance of the status quo by stating that it is “in line with the new ambitions set out in the Commission’s Communication of 11 December 2019 on the European Green Deal”.  On a practical level, where the Commission proposal limits new commitments in 2021 mostly to three years, the common position would allow a longer period for certain environment-climate commitments including organic transition.

Relaxation of rules for phasing out payments to those who lost entitlement to ANC payments because of the new delimitation of ANC areas. The new criteria for designating Areas of Natural Constraints meant that some areas lost ANC status. Provision was made in the 2013 Rural Development Regulation that, for farmers adversely affected by the new delimitation, payments could continue to be paid for a maximum period of four years but only until 2020. Because of the long delays in many Member States to complete the new designations, the initial deadline was extended to 2019. In these cases, as the phasing out of payments had to be completed by 2020, they could not benefit from the maximum four years extension. The Council/Parliament common position would allow these transitional payments to be continued in 2021 and 2022 provided they do not exceed €25 per hectare.

Further encouragement for risk management instruments. In order to further promote the use of mutual funds and of the income stabilisation tool for farmers of all sectors, the common position would relax the threshold of 30% that triggers the compensation of farmers for the drop in production or income applicable to the respective tool. The reduced threshold should not be fixed at a percentage lower than 20%.

Transitional national aid. Under the 2013 direct payments Regulation, Member States applying the Single Area Payment Scheme could decide to grant Transitional National Aid (TNA) in the period 2015-2020 to avoid a sudden decrease of support in those sectors benefiting from TNA until 2014. The maximum TNA payments allowed for these sectors decreased gradually from 75% of the 2013 level of SAPS aid in 2015 to 50% in 2020. The latest data (for claim year 2018) indicate that the ten Member States applying SAPS intended to provide around €623 million in TNA although, because of budgetary restrictions, actual payments were somewhat less at €501 million. Although TNA payments were intended to cushion a drop in support that occurred in 2014, the common position would allow this support to continue in the years 2021 and 2022 under the same conditions and limitations as in period 2015-2020 to ensure that “such aid continues to play its role in supporting the income of farmers in those specific sectors”.

The common position calls for a two-year transition

A new Recital (3) in the preamble notes that the legislative procedure for the CAP post 2020 still needs to be concluded and the CAP Strategic Plans to be developed with the need to consult stakeholders. Thus, it provides that the period for the continuation of the current CAP framework should be two years and not one year as the Commission proposed. The common position argues that the longer period would facilitate a smooth transition for beneficiaries to a new programming period and the possibility to take into account the Commission Communication on the European Green Deal.

Until now, the Commission has not been willing to budge on this issue (more under pressure from DG BUDG rather than DG AGRI, it would seem). However, in his intervention before COMAGRI in early September, Commissioner Wojciechowski seemed to suggest that a solution would be found in the context of the agreement on the disbursement of Next Generation EU funds for rural development. This is the other main political disagreement holding up ratification of the Transitional Regulation.

Disbursement of Next Generation EU recovery instrument funds for rural development

As I noted in a previous post, the AGRI coordinators in COMAGRI have decided to integrate provisions on the management of the NGEU/ERI-funds into the future CAP Transitional Regulation. The objective is to merge the two ongoing procedures into a single and final act. Paolo de Castro MEP is the rapporteur on the Commission’s draft legislation authorising expenditure from the European Recovery Instrument for EAFRD rural development spending.

The Commission’s original proposal for the ERI would have allocated €15 billion in constant 2018 prices (€16.5 billion in current prices) as assigned revenue to the EAFRD. Its draft legislation proposed that 50% of this total would be committed in 2022 with a further 25% being committed in the each of the years 2023 and 2024 (with payments continuing to be made until 2027).  

The European Council conclusions reduced this addition to EAFRD spending to €7.5 billion in constant 2018 prices. Like the AGRI coordinators, a majority of Member States in the Council in early September wished to frontload this spending to 2021 and 2022. The Council noted that the Commission has brought forward standard EAFRD MFF spending to 2021 and has proposed that the additional assigned revenue would be divided on a 30:70 basis between the 2021 and 2022 financial years. This differentiated allocation will compensate the effect coming from the frontloading of the original EAFRD funds. The compromise Commissioner Wojciechowski seemed to be hinting at is that the Commission might be prepared to accept bringing forward this spending if, in turn, the co-legislative were to limit the transitional period to the one year it originally proposed.

Conclusions

If all had gone according to plan, the Council and Parliament’s common position on the transitional regulation should have been approved at first reading in the Parliament’s plenary session this week. This would have provided certainty on CAP rules and funding in the coming year.

This timetable has now been further delayed, in part because the common position provides for a two-year transitional period rather than the one year favoured by the Commission, and further complicated by the desire of the Council and Parliament to incorporate accelerated spending from the Next Generation EU recovery instrument for rural development purposes in the Transitional Regulation.

The COMAGRI meeting scheduled for 12 October 2020 provides for a vote on amendments to de Castro’s draft report on the Next Generation EU draft regulation as well as scheduling an exchange of views on the CAP files. This will be an opportunity for an update on where the negotiations have reached both on the MFF, Next Generation EU, CAP Strategic Plans and Transition Regulation files.

Finally, the reason why the political agreement between Council and COMAGRI in June was only a partial one was that the key Annexes setting out the national ceilings for direct payments and rural development could not be filled in pending agreement on the MFF totals. The Commission published the Member State ceilings consistent with the European Council MFF conclusions last week. They make for very interesting reading and I will explore these figures in a separate post.  

This post was written by Alan Matthews

Photo credit: European Parliament used under a Creative Commons CC by 2.0 licence

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