Commission multiannual budget plan protects the CAP budget

The publication of the Commission’s proposals for the next Multiannual Financial Framework (MFF) 2014-2020 brings a little more clarity to its thinking on the likely shape of CAP reform post 2013.

Overall, the proposal represents a slight increase in the total size of the EU budget in the next programming period, by between 3.5% and 5% depending on whether one looks at commitment or payment appropriations. While a number of member states have sought a total freeze in real terms, this still represents a much more modest increase than that proposed recently by the European Parliament (which was a 5 percentage point increase in the share of the EU budget in GNI). The Commisison proposal would see the share of the EU budget in GNI shrink (in payment appropriations) from 1.06% in the current MFF to 1.00% in the next MFF.

The CAP budget

In commitment terms, the proposal allocates €281.8 billion for Pillar 1 of the CAP and €89.9 billion for Pillar 2 of the CAP (representing 76% and 24% of the total CAP budget, respectively).

Overall, the CAP share of total budget commitments would be 36%, which would represent a small decline compared to its share in the current 2007-2013 MFF.

Comparing the absolute size of the CAP budget with that available in the current MFF is more difficult, given that CAP expenditure on direct payments in the new member states will only reach its full level in 2013 (2016 in Bulgaria and Romania). One useful measure is to compare 2013 commitments multiplied by 7 with the total budget allocated for the 2014-2020 period. This gives a notional period spending (in commitment appropriations) for 2007-2013 of €401.8 billion compared to €371.7 billion allocated for the period 2014-2020 (both in 2011 prices). On this calculation, the reduction in the CAP budget in real terms is just 7%.

However, some additional proposals in the fine print also need to be taken into account. The Commission is proposing an additional €3.5 billion for crisis management measures in agriculture to be funded outside the MFF. In addition, farmers would become eligible for funding from the European Globalisation Fund designed to assist in adjusting to globalisation (compensation for beef farmers adversely affected by a Mercosur trade deal is an obvious candidate but apparently it may also be available to address problems of price volatility).  Expenditure on food safety (€2.2 bn) and food aid for deprived persons (€2.5 bn) will be moved to other headings in the budget. Finally, an additional €4.5 billion will be ring-fenced in the research and innovation budget for research on food security, the bio-economy and sustainable agriculture. Thus, up to €386.9 billion could be available for agricultural spending in the next MFF, or virtually the same level as in 2013 in real terms.

In overall terms, given that the bulk of expenditure on direct payments is fixed in nominal terms (and will thus decrease in real terms over the next programming period), the Commission proposal represents a stunning victory for farmers and agricultural ministries in holding on to their EU resources. It is now clear that no reduction in Pillar 1 direct payments is envisaged when the Commission’s proposal for CAP reform is published in the autumn.

Specific CAP measures – convergence of payments

The Commission proposal also bring greater clarity to two contentious issues in the CAP reform dossier, namely, the redistribution of Pillar 1 direct payments between member states and the greening of Pillar 1 payments. It also confirms that the Commission intends to proceed with proposals to cap the ‘basic’ Pillar 1 direct payment on larger farms, and to integrate rural development spending better into a common strategic framework for all structural funds.

Convergence of payments across member states will be achieved in a purely mechanical way rather than through the use of objective criteria. All Member States with direct payments below the level of 90% of the EU-27 average (defined as per hectare of potentially eligible land rather than utilised agricultural area) will, over the period, close one third of the gap between their current level and 90% of the EU average direct payments. This convergence will be financed proportionally by all member states with direct payments above the EU average.

This represents a very conservative approach to redressing the imbalances between member states and is about the minimum that the Commission could have got away with.

Specific CAP proposals – greening the CAP

Here the proposal is that 30% of direct support will be made conditional on ‘greening’, which is the first time we get an idea of the relative importance of this component of direct payments in the future. Greening means that all farmers must engage in environmentally supportive practices, going beyond cross-compliance, which will be defined in legislation and which will be verifiable, if they wish to be eligible for this DP component. The idea is to shift the agricultural sector significantly in a more sustainable direction, with farmers receiving payments to deliver public goods to their fellow citizens.

Much more information is required before the implications of this proposal can be assessed. In particular, a key issue is how much deadweight will be involved, i.e. paying farmers for practices they already engage in, such as maintaining permanent pasture. The greater the deadweight, the less onerous the conditions will be for farmers in claiming eligibility for these payments.

The Commission proposal should be seen as a vindication of Commissioner Ciolos’ strategy in seeking to hold on to the agricultural budget by building alliances with environmental interests in the Commission and in civil society. As a strategy, it has worked! However, the proposal represents only the opening shot in the negotiations on the next MFF which will not be concluded until late 2012 at the earliest.

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1 Reply to “Commission multiannual budget plan protects the CAP budget”

  1. How do you intepret this on page 16 regarding convergence of direct payments “to ensure a more equal distribution of support, while taking into account of the differences that still exist in wage levels and input costs”.

    That sounds like some objective criteria (PPS?) entering the DP allocation key.

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