+++ Health Check deal +++

European farm ministers have reached a deal on the CAP health check. The principal points are these:

* Five annual milk quota increases of 1% each with effect from April 2009, prior to total abolition of the quota system as from April 1 2015 (unchanged from Commission proposal). As is now traditional, when it comes to milk quota, Italy will receive a special derogation that allows it to increase its quota by the full 5% in the first year.

* The rate of modulation (shifting funds from direct aids to rural development aids) will be raised from 5% at present to 10% by 2012. The increase will be made gradually: 7% in 2009, 8% in 2010, and 9% in 2011. The progressive modulation concept has been watered down; only recipients of more than €300,000 will face a higher modulation rate: 4 per centage points higher than the standard rate. The resulting money will be allocated for ‘new challenges’ – climate change, energy, biodiversity and water management but will it will also have to fund “accompanying measures” for the dairy sector.

This looks like a setback for the Commission, which had hoped to ‘walk the talk’ on increasing the emphasis on targeted policies like farmland conservation and rural economic development over traditional farm handouts.

The Commission’s green paper of November 2007 floated the idea of a basic modulation rate of 13% by 2013, rising to 23% on payments over 100,000 euros, 38% on payments above 200,000 euros and 58% on payments above 300,000 euros. By May 2008 the Commission had scaled back its ambitions to a basic modulation rate of 13% by 2013, rising to 22% on payments above 300,000 euros. Today the Council has agreed a basic modulation rate of 10% in 2013, and that there should be no intermediate bands of higher modulation, with just a 14% band for payments above 300,000 euros.

According to previous impact assessments, the budgetary effect of this is to transfer 1.2 billion euros for rural development by 2013 (less than this in the earlier years). This is from a total direct payments pot of some 36 billion euros a year. As a rule of thumb, each percentage point of modulation skims off 200 million euros a year.

This represents a victory for those who want to preserve the CAP as a system of income entitlements for landowners and a defeat for those who want to see public money targeted at public goods.

* The existing partial coupling options for arable crops will be abolished from 2010. For nuts, protein crops, flax and hemp, the end of partial coupling has been delayed until 2012.

* A maximum of 10% of each country’s single farm payment allocation may be re-allocated under Article 68 schemes that allow for sectoral targeting of aid. The Council increased the proportion of this money that may be coupled to production from 25% to 35%. €90m per year saved by the abolition of energy crop subsidies will be allocated for Article 68 measures in the 12 new member states.

* Single Farm Payments will not be paid below a minimum value of €250, or a minimum one hectare of SFP-eligible farm area. Countries may be entitled to vary this threshold upwards or downwards, according to their own circumstances.

Download the full Presidency press release (in French). Versions in other languages will be available here.

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