Commission publishes CAP transition regulations recognising implementation of new CAP will be delayed

DG AGRI and the Commission have now officially recognised that, in view of the present state of play in both the Parliament and the Council, the basic acts governing the CAP post 2020 and the ensuing delegated and implementing acts will not be formally adopted by January 2020 and that, therefore, it will be necessary to plan for a transitional period. The new legal framework will now begin from 1 January 2022.

Although the current CAP Regulations continue in force until they are repealed, they need amendment to ensure that there is a legal basis for making payments to farmers in 2021. This is the purpose of the two draft Regulations published yesterday, one laying down transitional provisions in 2021 (including annexes) and the other extending the financial discipline provisions as well as the possibility to shift funds between the two Pillars of the CAP (including annexes).

This post examines the implications of the Commission’s proposals for Member States and farmers.

The 2014 transition regulation

There was a similar hiatus in CAP programming in 2014 due to the late adoption of the 2014-2020 Multi-annual Financial Framework (MFF) Regulation and the CAP reform package in 2013. On that occasion, the Commission put forward its proposal for a transition regulation in April 2013 to cover payments in the year 2014.

One important difference between now and then is that the European Council had agreed the MFF conclusions (including the pre-allocated amounts to Member States for direct payments) in February 2013 (although the European Parliament had not at that point in time given its consent to these conclusions).

Regarding direct payments, the basic approach was to postpone the legal changes (such as greening rules, payment degressivity, internal convergence of payments etc) but to implement the new financial ceilings that had been agreed by the European Council the previous February. This meant that the process of implementing the move towards a more uniform distribution of unit payment values between Member States – external convergence – already applied in the 2014 claim year. This was summarised by the then Agriculture Commissioner Dacian Ciolos as “existing rules, new budget”. The national envelopes for direct payments allocated to each Member State were set out in square brackets, indicating they waited on final legal confirmation.

For rural development, transitional rules were needed partly because the postponement of the new rules for direct payments had a knock-on effect for certain rural development measures especially as regards the baseline for agri-environment and climate measures and the application of the cross-compliance rules.

Transitional arrangements were also needed to ensure that Member States could keep on undertaking new commitments for certain area and animal-related measures in 2014 even if the resources for the current period had been exhausted. The transition regulation clarified that these new commitments, as well as corresponding on-going commitments, could be funded from the new financial envelopes of the rural development programmes of the next programming period. At this stage the annex with rural development ceilings by Member State had not been made public, so no change was required here.

The transition regulation also addressed some other financial issues. On financial flexibility between Pillars which the Commission accepted was a matter to be decided by the ordinary legislative procedure, its proposal recognised that, as of April 2013, there was a difference of view between the Council and the Parliament. The Council had taken over the European Council’s percentages on the shares of either Pillar that could be transferred to the other Pillar, while the Parliament wanted higher percentages. The Commission thus put this specific element in square brackets in its proposal to indicate it was not taking sides in this dispute.  It also decided that the new co-financing rate for rural development should apply to the transitional RD expenditure in 2014.

The 2019 draft transition regulation

The Commission’s transition regulation for 2021 follows the general principle enunciated by former Commissioner Ciolos of “existing rules, new budget”. For direct payments, the current rules are extended for the claim year 2021. This implies, for example, that Member States that adopted the derogation of the ‘tunnel’ or ‘Irish’ model of internal convergence can continue this process after 2019. The farm union Via Campesina regrets that the delay means that the Commission’s proposal for capping and the redistributive payment will not be introduced until 2022.

For rural development programmes, Member States are given an option. They can either extend their existing RDPs (schemes, rules etc) by one year, drawing on the proposed 2021 financial allocation to cover the funding. If they decide to do this, there are certain restrictions imposed. The extended programmes should aim at maintaining at least the same overall level of environment and climate ambition. In order to limit a significant carry-over of commitments from the current programming period for rural development to the CAP Strategic Plans, the duration of new multiannual commitments in relation to agri-environment-climate, organic farming and forest-environment should be limited to a period of maximum 3 years. The extension of existing commitments should be limited to one year.

On the other hand, Member States can opt not to extend their RDPs and then they can carry over the budget allocation for RDPs in 2021 and add it to their 2022-2027 allocations. This option was implicit in the 2014 transition regulation. That gave Member States the possibility to keep on accepting new commitments for area and animal-based measures but did not oblige them to do so. This new draft proposal makes this option explicit. If Member States do decide to open existing schemes for a further year, this is not confined to “area and animal-based measures” but can also cover investment aids, young farmers’ installation aids, etc.

For some schemes, such as Areas with Natural Constraints and organic farmers, I expect Member States will roll over the payments. For agri-environment-climate measures (AECMs), many Member States may prefer to wait until the new CAP starts rather than re-open these schemes for new applicants. This would obviously adversely impact farmers who might wish to have the opportunity to participate in such schemes.

Interestingly, unlike in 2014, the Commission does not suggest that the new co-financing rates it has suggested in its draft legislative proposal should apply already in 2021. This may reflect recognition of the strong push-back this proposal has received from Member States.

For the national envelopes, the Commission has proposed the pre-allocated amounts reflecting its own draft MFF proposal. As in 2014, these amounts for direct payments reflect the further steps towards external convergence that the Commission has proposed. This could be controversial, as many Member States have objected to the cuts in the CAP budget implied by these figures so presumably will not be happy with the Commission’s way forward.

Unlike in 2014, the Commission does not have a set of European Council conclusions on which it can lean. Despite this, the amounts are not presented in square brackets as was done in 2014. The 2021 proposed ceilings for direct payments and rural development are shown in the following table. These figures are compared to the original 2020 amounts proposed in the 2013 regulations to avoid confusing the comparison with the transfers between Pillars made by Member States in 2020, and which they can continue to apply in 2021 but these decisions are not yet known.

In the Commission’s defence, it is hard to see how they could have proceeded differently given that the MFF ceilings for 2021-2027 are not yet agreed. Although not stated in the draft legislation, presumably if the MFF figures end up larger than what the Commission has proposed, a further amendment could be made to update the regulation.

Member States and the Parliament could argue for a different approach, one in which the 2021 amounts inserted into the Regulation are maintained at the 2020 levels, with the possibility to use the financial discipline mechanism to reduce these amounts to keep them within the MFF ceilings when they are agreed and known.

For the rural development ceilings, because the 2021 amounts represent an equi-proportionate cut on the 2020 ceilings for every Member State, the two approaches would end up with the same figures. However, using the 2020 amounts as the basis for determining the direct payment ceilings in 2021 would mean that external convergence would be delayed for one further year. Those Member States that benefit from the uplift in payments in 2021 (the Baltic States but also Poland, Portugal and Romania) would presumably object to this approach.

In any case, these pre-allocated amounts will be determined as part of the European Council negotiations on the MFF. Although they are formally implemented as part of a legislative proposal agreed under the ordinary legislative procedure, the Council will put forward the European Council’s conclusions and the Parliament would be wise not to challenge this (see discussion on the division of competences in this post).

The changes made in the accompanying draft legislative proposal on financial discipline and flexibility to transfer funds between Pillars are essentially technical, allowing the continuation of the measures in place into the 2021 financial year.

Conclusions

In summary, a delay in the introduction of new CAP legislation also occurred in 2014 where there was also a need for a transition regulation. A delay even for one year is disappointing where the new CAP rules are an improvement over the current ones.

The transitional regulation provides a legal basis for making payments to farmers in 2021. Compared to the 2014 transition regulation, the current Commission proposal provides Member States with a more explicit option not to open rural development programmes for new applications in 2021 if they want to wait to 2022. Where new commitments are made, for example, for AECM schemes, they are limited to a maximum of three years.

The transition regulation provides for pre-allocated national envelopes to Member States in line with the Commission’s draft MFF proposal. Many Member States have objected to the cuts in the CAP budget in this proposal, but presumably if there are changes to CAP funding agreed in the European Council conclusions on the MFF, these changes will automatically be included in an amendment to this regulation. The basis for the Commission’s proposal continues to be, as in 2014, “existing rules, new budget”.

This post was written by Alan Matthews

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