Simplification as a top priority in 2015

The heading of this post is taken from the title of the speech delivered by the Commissioner for Agriculture and Rural Development Phil Hogan when addressing the EP COMAGRI on 3 December last. It follows his commitment in his confirmation hearings to a simplification and subsidiarity strategy for the CAP. It seems simplification will be a big buzz word in CAP discussions in 2015. But what can we expect from this initiative, and how important is it likely to be in practice?

Simplification: a Sisyphean task

CAP simplification has been a mantra of all previous Commissioners. For example, shortly after taking up office as Commissioner for Agriculture in 1995, Franz Fischler, in a speech on 28 September 1995, declared:

For my part, I intend to contribute to review existing E.U. legislation, notably in my area of competence, so as to make the C.A.P. easier to understand and to apply. C.A.P. simplification is an overriding objective, not only because our farmers, in particular the smaller ones, seek it and need it, but also because, without it, it will prove exceedingly difficult to implement the C.A.P. in the acceding East European countries. For it is no secret that their management capabilities are, for the time being, below those in the West.

Similarly, when Mariann Fischer Boel succeeded Franz Fischler in 2004, she announced at the December 2004 Agriculture Council her intention to bring forward a communication on CAP simplification. The background to this and subsequent developments are described on DG AGRI’s simplification web page. The 2005 Communication was followed by a big simplification conference in 2006 and the publication of a rolling simplification Action Plan. The latter contained a commitment to reduce the administrative burden arising from the CAP by 25% by 2012.

Simplification was again in focus in 2009 when the Commission published a review of progress towards simplification. It concluded:

Thanks to considerable progress already made in simplifying the Common Agricultural Policy and other measures still to be carried out, the Commission is confident that it will meet its objective of reducing the administrative burden arising from the CAP by 25 percent by 2012.

Later that year, in November 2009, DG AGRI summarised its responses to 39 simplification suggestions submitted to the Agriculture/Fisheries Council in April of that year and which were incorporated into its rolling simplification Action Plan.

In November 2013 DG AGRI published its latest stock-taking of the rolling simplification action plan which at that stage contained 72 proposals of which 70 had been completed and the remaining 2 were classed as ‘work in progress’.

A focus on simplification and reducing administrative burdens is not unique to the CAP but has been part of the theme of better regulation launched as part of the EU2020 growth and jobs strategy. A High Level Group on Reducing Administrative Burdens (the Stoiber group) was established in 2007 to recommend ways to reduce red tape. In its final report delivered in October last year, the Group estimated that that cost of the administrative burden in agriculture was €5.3 billion, and that Commission actions over that period had reduced this cost by €1.9 billion, or by 36%. However, this reduction includes the disappearance of the one-off costs of €1.3 billion associated with the setting-up of the new Single Farm Payment, so the 36% is rather a misleading figure .

Simplification an objective of the 2013 reform

Thus, in the run-up to the debate on the CAP 2013 reform, both the Council and Parliament insisted on the need for further strong simplification of the CAP.

The European Parliament in May 2010 adopted a report on CAP simplification (by a margin of 91% to 8% with 1% abstaining). The Parliament’s resolution “Underlines that further simplification of the CAP is necessary to reduce its implementation costs for EU institutions, Member States and the beneficiaries themselves; in this way, the policy will also become more understandable to farmers and taxpayers” while also emphasising that “simplification should benefit farmers and not only national authorities”. “The objective should be to reduce the implementation costs of the CAP while reducing the administrative burdens on Community producers, to enable farmers to spend more time working their land.”

Agricultural Ministers also wanted further action. At the Agriculture/Fisheries Council in June 2010, 18 member states circulated a paper in which they insisted that “it is essential that simplification is an integral element of setting the future CAP after 2013, and simplification should therefore be an indispensable aspect of the Commission’s proposals for the CAP after 2013”.

In November 2010 the Commission put forward its initial proposals for the 2013 CAP reform. It noted that part of its rationale was “to pursue the simplification of the CAP implementation procedures and enhance control requirements and reduce the administrative burden for recipients of funds”. The Commission specifically highlighted the simplified small farmers scheme and simplified cross-compliance measures, but member states were not impressed.

A paper circulated by the Netherlands to the Agricultural/Fisheries Council in March 2011 and supported by 22 other member states at the time emphasised that “Real regulatory simplicity can only be ensured and maintained by enshrining some overarching principles into the policy-making process”. It proposed a set of six principles for the Commission to follow when coming forward with its legislative proposals for CAP reform.

• The CAP should be simpler and cheaper for national authorities and imply reduced administrative costs for recipients;
• A risk-based approach should apply to controls on administrations and recipients;
• Member States should be accorded discretion and flexibility in programming, defining detailed controls, monitoring and evaluation of schemes;
• Controls and penalties should be more proportional;
• Consideration should be given to full transparency and clarity of roles and responsibilities;
• A better use of technology should be encouraged.

The European Parliament in its response to the Commission’s November 2010 Communication also stressed “that simplification is fundamental and must be a driving objective of the future CAP, with the costs of administering the policy at Member State level being reduced, and that clear common legal bases are needed, which must be notified promptly and lend themselves to uniform interpretation”.

When the Commission published its legislative proposals for the 2013 CAP reform in October 2011, they were accompanied by a separate Annex on simplification as part of the impact assessment of those proposals. This built, in part, on an external evaluation of the administrative costs of Pillar 2 schemes which found that “irritation due to administrative procedures plays a big role in the beneficiaries’ feeling of complexity”. It also included recommendations from an ad hoc simplification consultative group consisting of the heads of paying agencies and coordination bodies from all member states as well as farmer representatives. Their views were taken into account as far as possible when preparing the impact assessment, which found that there would be a slight increase in the administrative burden for the Commission’s preferred ‘integration scenario’.

Agricultural Ministers were appalled that the Commission’s proposals did not sufficiently take into account their wish for simplification. In an attempt to allay their dismay, Commissioner Ciolos defended his proposals in a letter to Ministers and COMAGRI MEPs in November 2011 under the ironic title ‘The CAP reform: simple answers to complex challenges’. The annex to this letter set out a series of ten elements in his proposals which he defended as contributing to simplification.

Subsequently, a 2012 study by the LEI commissioned by the Dutch and Swedish Agricultural Ministries attempted to assess the extent of simplification for farmers/beneficiaries, national authorities and the European Commission arising from these ten elements. While it noted that different proposals had different implications for different beneficiaries, it concluded that there was little attempt to take account of the Council’s ‘six priniples’ and that, overall, the outcome would be a more complex policy.

The Council held a further meeting specifically on simplification and reducing red tape in the reform of the CAP under the Danish Presidency in March 2012. Prior to the Council meeting, the Danish Presidency had asked member states to contribute with concrete proposals on how to reduce red tape in the agricultural policy. In response, the Presidency received more than 300 pages of proposals.

According to the Danish Minister for Food, Agriculture and Fisheries Mette Gjerskov: “The Presidency has three basic goals: To make it easier for the farmers, to make it easier for the authorities – so we do not need to employ more inspection staff – and finally to make the rules more understandable for the farmers and ensuring the authorities are not later overruled by the EU”. The minutes for the Council meeting make clear many member states were not convinced that the proposals represented a step in this direction.

This brief review of CAP simplification initiatives taken since the mid-1990s underlines four things. First, simplification is a buzzword that all stakeholders can identify with; it is thus politically a relatively costless commitment to make. Second, there is nothing particularly novel in Hogan’s declaration that 2015 will be a year of simplification; in pursuing this aim he is following a path well-trodden by previous Commissioners. DG AGRI has had a rolling simplification action plan in place since 2006 which has reduced the administrative burden of the CAP (according to its own estimates, by one-third), yet opportunities for further simplification clearly exist.

Third, CAP simplification appears to be a Sisyphean task in that each new Commissioner appears condemned to tidy up the initiatives of his or her predecessors. Fourth, despite the overwhelming political consensus that simplification was one of intended objectives of the latest CAP reform, it seems clear that the policy has become even more complex both for farmers and national administrations. If one of the key objectives of the reform was that the future CAP must overall be simpler and cheaper for national authorities to administer, and have reduced administrative costs for recipients (as suggested by the Danish Presidency in March 2012), then the reform has failed on this account. The Commission’s impact assessment foresaw an increase of 15% in administrative costs for the future direct payments system. The LEI study, while also based on the initial proposals and not the final outcome, in its forensic analysis also concluded that the new policy was more complex than the old.

Against this background, it seems sensible to keep expectations low. Hogan himself has been careful not to oversell what might be achieved even as he tries to build momentum around the issue as one of his ‘grand designs’. However, the question remains, what might be expected from the simplification agenda by the end of this year?

What Hogan has promised

Commissioner Hogan has described his simplification ambitions both in his confirmation hearings before the European Parliament in October and in his first address to COMAGRI MEPs in December. At his confirmation hearing, this is what he said:

If I am confirmed as Commissioner for Agriculture and Rural Development … I would ask my services to carry out a comprehensive screening of Common Agricultural Policy (CAP) legislation to see what can be simplified without putting the effectiveness of the policy and its sound financial management at risk. In addition, I would want the concept of subsidiarity to play a bigger role in the CAP.

… On the basis of this screening, I would intend to present within the first year of my mandate a simplification and subsidiarity strategy for the CAP which will include concrete initiatives together with a realistic planning for their implementation. It will also describe the way stakeholders will be involved in the process.”

“Within the first twelve months we will look at the potential for further simplifying direct payments: in particular as regards greening, rural development, quality policy and the fruit and vegetable scheme.”

“I can already say today that I would see it as a two-step approach with a first step being realised in the near future and a second step focusing on mid-term initiatives. The first step could thus include the following initiatives: after the first year of experience with the reform, a review of whether our policy, notably on direct payments, is designed so that it is being properly applied in practice. Where this is not the case, I will propose to amend our rules with a view to making them simpler and more efficient. This exercise will of course include the arrangement on greening and the Ecological Focus Area (EFA) measure, in line with the commitments made by the outgoing Commission.

Reviews and, where appropriate, proposals concerning: possibilities for further harmonisation and simplification in the area of geographical indications; the simplification potential with regard to the fruit and vegetable scheme.

Commissioner Hogan elaborated on this agenda in his address to the COMAGRI MEPs in December:

While awaiting the results of the screening exercise and the ideas coming from you and from the Member States, I can already see four important areas where our rules can and should be simplified over the next months and years:

Firstly, I will make sure that any proposal that is on the table delivers in terms of simplification and, where possible, its simplification potential is reinforced in the legislative process.

Secondly, more than 200 Commission regulations implementing the Common Market Organisation will be revised. This exercise has a significant simplification potential for operators in the agri-food sector, which we should exploit to the fullest extent possible.

Thirdly, the new direct payments regime. I shall, of course, honour the previous Commission’s commitment to review, after the first year of application, the rules on the Ecological Focus Area. I think, however, that we should not stop there. We should seize the opportunity to also simplify the other rules of the new direct payments regime, provided that we do not re-open the basic policy decisions of the 2013 reform in this area, as democratically negotiated and ratified by you, Honourable Members.

Fourthly, I want to take a close look at the rules for Geographical Indications. Geographical indications help food producers make more money and keep jobs in the countryside. I want this success to continue and grow; and I want to be sure that the rules we have in place are as effective and simple as possible.

Hogan has therefore identified at least six policy areas where he sees the potential for further simplification (if we add rural development and fruits and vegetables legislation to the list of four just mentioned), while holding open the possibility that other areas might be added following the consultation process he plans.

What does simplification involve?

The LEI study provides a useful definition of simplification. It defines it as:

a reduction of administrative burden (e.g. complexity, time needed for administration) for farmers and other beneficiaries; a reduction of implementation costs for national authorities/paying agencies, which covers costs for implementation, control, monitoring and evaluation; and a simplification of the work of the European Commission (Rosa and Selnes, 2012).

The 2005 Commission Communication on Simplification and Better Regulation for the Common Agricultural Policy introduced a distinction between technical and policy simplication.

Technical simplification
(i.e. within a constant policy framework) implies revision of the legal framework, administrative procedures and management mechanisms to achieve streamlining and greater cost-effectiveness and attain existing policy objectives more effectively, without changing the underlying policies. Examples include revising a legal document to make it clearer, streamlining administrative procedures, or simplifying forms by reducing requests for detailed information in applications. Other examples might be reduced reporting or monitoring requirements.

Political simplification is about changing underlying policies in ways which make them simpler. This can occur through the abolition of rules and schemes (e.g. abolition of the Energy Crops Scheme in Health Check saved national administrations €61 million according to the 2009 Stoiber Group report; another example would be the elimination of production quotas in dairy and sugar which does away with the need for complex legislation to control supply). It might also occur by exempting certain beneficiaries from obligations under particular schemes (as in the exemptions of small farmers from greening requirements and reduction in cross-compliance obligations, or reducing the list of products for which an import and(or an export licence is required).

Why simplification is not simple

It is a truism, repeated by the Commissioner, that simplification is anything but simple. This is the case for a number of reasons. One is that there are various stakeholders involved, and what may be a simplification for one can imply additional burdens for others. For example, it may make life simpler for the Commission if there is a single, uniform scheme across the 28 EU member states, without exceptions and without flexibilities. But this does not necessarily mean a lower administrative burden for national administrations or farmers – the initial proposal to abolish the SAPS scheme in 2014 is a case in point.

The Commissioner’s plan is, intriguingly, called a simplification and subsidiarity strategy (my italics), suggesting that he sees giving member states greater flexibility in implementing the CAP as a route to lower administrative burdens. Indeed, allowing member states and farmers flexibility to find the most appropriate way to achieve given targets and objectives can lead to simpler and less burdensome regulations, because they are not imposed from outside without regard to local needs and circumstances. But they may also make it more difficult for the Commission to monitor their effectiveness (as the hostile reaction from the environmental NGOs to the proposal that member states could substitute equivalent schemes for the three greening obligations seemed to suggest).

Good policies should be targeted policies. However, more targeted policies despite their better outcomes often have higher administrative costs as a result of implementing more complex policy designs. Armsworth and colleagues, in a 2012 paper entitled The cost of policy simplification in conservation incentive programs noted that the overall biodiversity benefits (in this paper, measured as the density and species richness of the bird population) of more complex policies were potentially so great that they could justify additional administrative costs of up to 70% of the payments that would otherwise be given to farmers. Does simplification make sense in that context?

The Commissioner’s agenda would seem to extend to policy simplification as well as technical simplification, particularly in the case of the new system of direct payments. Although he was careful to state that any changes should “not re-open the basic policy decisions of the 2013 reform in this area”, it seems inevitable that policy simplification will be associated with at least a perceived shift in policy focus. This is more likely given that sufficient time will not have elapsed to assemble enough evidence on what is working and what is not.

Depending on the ambition of the proposals when they see the light of day, we may well see a re-run of some of the battles started in the debate on the 2013 reform, particularly between those seeking to maximise the opportunities for production and those concerned with reinforcing the idea that direct payments should be directed to the production of public goods.

Overall, a careful reading of the commitments suggests that what we can expect by the end of this year is a new version of the DG AGRI rolling simplification action plan, with perhaps a few specific legislative initiatives where work is well advanced.

Update 12 January 2015: A letter from 6 Agriculture Ministers sent on 15 December last to Commissioner Hogan setting out a list of issues for simplification of CAP greening can be found here.

Cartoon credit: www.cartoonstock.com ID bven462 Licence purchased.

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