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Cross compliance: tough new standards or money for nothing?

During last week’s furore over trading in CAP subsidy entitlements, the question of what farmers must do in return for their subsidy was raised. In a speech on 6 March 2007 in India, Agriculture Commissioner Mariann Fischer Boel said that the CAP’s new Single Farm Payment (SFP) is conditional on farmers observing “tough standards of environmental care, animal welfare and public health”. But a new report from the Institute for European Environment Policy provides some evidence that the conditionality of subsidy payments is something of a mirage. Only in a very small number of cases do the requirements actually exceed what was already required by member states’ pre-existing laws on environmental pollution and animal welfare.

‘The Possible Impacts of Cross Compliance on Farm Costs and Competitiveness’ was written by Martin Farmer of the Institute for European Environment Policy and published in January 2007. It examines the legal basis of cross compliance, evaluates the costs of complying with any new obligations and makes an initial survey of inspection rates and the number of times farmers have been found to have breached cross compliance rules.

Farmer observers that “Many, if not all, [cross compliance] standards are likely to have been legal requirements for some years before cross compliance was introduced in 2005.” The point is that even in the absence of the new ‘carrot’ of the Single Farm Payment, there has always been the ‘stick’ of the law. Farmer observers that whatever he or she receives in subsidy, “the farmer still effectively needs to comply in order to avoid the possibility of criminal prosecution”. Farmer makes the case that “cross compliance provides the incentive to achieve full compliance with pre-existing legal requirements.” In other words, European farmers are being paid €30 billion to observer pre-existing laws against pollution and mistreatment of farm animals. This seems an unusual practice.

However, there are some instances of new obligations arriving with cross compliance. For instance, “in Italy, the requirement to maintain olive groves was introduced with cross compliance, as was the requirement to create a buffer strip alongside watercourses in France.”

Turning to the question of the costs of compliance, Farmer’s conclusion is that “the overall value of the Single Payment [is] in the majority of cases…likely to vastly exceed the total related costs”. This goes against the view often heard that cross compliance is strangling farmers in red tape and inspections. Looking at inspections, Farmer found that inspection rates were rather low and it was very rare for inspectors to find farmers in breach of the law. In France, which has 614,000 farms, there were 8,000 inspections (a rate of 1.3 per cent). Of those inspections, there were 940 breaches (a rate of 12 per cent). In Denmark, the rate of breaches was much less, ranging from 0.2 per cent for the Nitrates Directive to 0.7 per cent for the Habitats Directive. In the Netherlands, the highest rate of breaches was 0.2 per cent of inspections. The report does not contain any data on the penalties that were applied, though in the UK, the experience has been that most penalties are just 1 per cent of Single Farm Payment receipts, which is the minimum penalty allowed under the legislation. In the Italian region of Veneto, most of the breaches were considered unintentional and no penalty was applied.

You can download the report (and others on cross compliance) from here.

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