Allegations range from payment below the minimum wage, employment of illegal migrants, intimidation and, in the most recent case, murder. The UK’s Guardian newspaper’s special correspondent Felicity Lawrence wrote a startling report into labour abuses in €2 billion a year hothouse industry. She found:

Migrant workers from Africa living in shacks made of old boxes and plastic sheeting, without sanitation or access to drinking water.

Wages that are routinely less than half the legal minimum wage.

Workers without papers being told they will be reported to the police if they complain.

Allegations of segregation enforced by police harassment when African workers stray outside the hothouse areas into tourist areas.

Charities working with illegal workers claim the abuses meet the UN’s official definition of modern-day slavery and that the Spanish economic downturn is making matters worse, as workers are laid off in the construction industry and seek work in agriculture, thus swelling the pool of labour. It’s not just Spain. Again, Felicity Lawrence has reported on abuses of farm workers in the UK:

“Twelve agricultural workers living in a caravan with no water, sanitation, lighting, heating or cooking facilities. Thirty workers living in a two-bedroom house that was structurally dangerous, threatened by men wielding baseball bats if they complained. A worker who lost a leg when the illegal minivan transporting him was involved in an accident. A bonded worker doing 12 hours hard labour six days a week from 3.30am milking cows and breaking rocks on a dairy farm. These are a tiny number of the cases of extreme exploitation found by the Gangmasters Licensing Authority (GLA) during its recent inspections. Last year it uncovered 845 cases of workers being exploited in the food processing and farming business in the UK.”

I have no doubt that the picture is similar in other member states.

The Common Agricultural Policy aims to ensure that recipients of EU farm subsidies observe EU minimum standards on protection of the environment and care of animals. The CAP does not play a large role in supporting the horticulture sector through direct subsidies but it does provide other aid to producer groups and it is not by any means clear that the problem of worker abuse is confined to the less subsidised parts of the agricultural economy.

Should the CAP’s cross compliance rules be extended to cover treatment of agricultural workers? Should farms where labour abuse takes place be disqualified from receiving subsidies?

This post is written by Jack Thurston

For the environmental basic payment, it suggests that eligibility would be conditional on farmers turning over at least 10% of their area to environmentally-friendly husbandry with a view to maintaining a high level of biodiversity in the agricultural landscape throughout the EU.

The Council explicitly argues against the idea that farmers should be remunerated for fulfilling their statutory obligations with respect to the environment, animal welfare and food safety (cross compliance). It also justifies full EU financing of most of the payments “so long as these are directed to fulfilling EU objectives”, thus apparently advocating that some of the existing co-financed agri-environmental payments in Pillar 2 might be moved to Pillar 1 at least as far as financing modalities are concerned.

The report provides an excellent summary of the state of the debate on the environmental implications of agricultural policy (in German only, at least for the moment).

Read it here. Google Translate renders a passable English version of the press release for non-German speakers here.

The Ministry of agriculture seems sympathetic with this position, even though Nicolas Sarkozy has recently positioned himself as greener than his predecessors, with initiatives under a framework law called the “Grenelle of the environment” and a carbon tax (it turns out that farmers should be exempted from paying this tax, eventually). The French minister Bruno Le Maire apparently said a few days after that, indeed, a revision of the agri-environmental measures (AEM) was necessary and that it should start with an inventory of the provisions adopted throughout the Union according to the newspaper Le Figaro. On January 13 Le Maire unveiled a proposal for a new agricultural law to be discussed by the Parliament with little apparent concern for the protection of the environment.

The idea of suspending agri-environmental measures is bizarre, given that they are voluntary measures that are highly appreciated by farmers in some regions, providing often a third or more of the farm incomes in mountainous regions for example. So what did the FNSEA president actually mean? After some inquiry, it seems that he actually used the term “agri-environmental measures” for CAP jargon ignorant journalists. He was not in fact targeting the AEMs, i.e. second pillar measures, but rather the GAECs (Good Agri-Environmental Conditions, i.e. a set of technical constraints that farmers needed to respect in order to receive the Single Farm Payments, under Pillar 1, part of what is sometimes known as cross-compliance), as well as “any element of regulation that imposes environmental constraints such as the Nitrate Directive, or national measures under the new Grenelle law framewok” (FNSEA sources). Le Metayer argued in the interview that because of low prices and low incomes, farmers could not afford the ever growing stream of environmental regulations.

To FNSEA’s defense, some of the constraints imposed in 2009 turned out to be ill-designed in some regions. For example, farmers had to plant intermediate crops between harvests so as to keep soil covered and reduce nitrate leaching. In some areas, the lack of rain when these crops were planted resulted in extra costs without any environmental benefit. However, the FNSEA position sends an awkward signal regarding farmers’ image in the public opinion, while water pollution with nitrates makes headlines every summer. More worryingly, Le Metayer’s demand shows how much the the anti-environmental stance is widespread among the mainstream French farm lobby (another farmer’s union, the Coordination Rurale runs perhaps an even more anti-environmental program than the FNSEA). The FNSEA is highly representative and about to win again a majority in one of the main instances that co-manage the agricultural sector with the government in France. Only a minority of farmers belonging to the left wing Conféderation Paysanne seems in favour of a greener CAP, but their position regarding market regulation makes them hardly credible in the European debate (they favour a system of generalized quotas and a complex set of coupled payments restricted to small farms). A fringe of enlightened entrepreneurial farmers, the Société des Agriculteurs de France is open to produce public goods as much as wheat if the CAP pays them for that, but this is more a think tank than a powerful union.

It is hard to make predictions regarding the future behaviour of France as far as the coming debate on the CAP is concerned. With France becoming a net contributor to the CAP, the unholy alliance between the ministry and agriculture and the ministry of finance to defend large CAP budget is about to end. The former minister, Michel Barnier, used Health Check flexibility to reallocate 1.4 billion euro of Single Farm Payments towards the extensive grass-fed livestock sector. This has turned the powerful cereal producers against the government. Given that farm incomes have decreased much more than the EU average in 2009, the Ministry of agriculture can hardly afford more radicalization of the farmers, and his apparent scorn for environmental causes is perhaps tactic. However the historical aversion of the FNSEA for the environment has been particularly effective in the past. France will certainly resist any greening of the CAP in the future.

1. A TRANSITION WITHOUT END. The SPS is the direct descendent of the compensatory payments introduced in the 1990s while the EU was reducing the high price guarantees that had led to overproduction and the notorious butter mountains and wine lakes. The compensatory payments were meant to help farmers adapt to the realities of market prices. But almost two decades later, they’re still with us, and by 2012 the cost will have risen to 40 billion euros a year. Worse, recent rises in global food prices mean that for some commodities market prices are now higher than the prices guaranteed under the old CAP. Yet farmers continue to receive their transitionary compensation payments. It’s heads farmers win, tails taxpayers lose.

2. TO THOSE THAT HAVE, SO SHALL IT BE GIVEN: 85 per cent of the SPS goes to the biggest 17 per cent of recipients – the richest farmers with biggest farms and the best land. The Queen of England receives more than half a million pounds, Prince Hans Adam II of Liechtenstein gets close to a million euros – and he’s not even an EU citizen. Small farmers barely get a look-in and the EU is now eliminating entitlements of less than 250 euros while doing little to reduce payments at the top of the scale. One of the objectives of the CAP is to maintain farm incomes, but it it a perverse policy that focuses resources on maintaining the incomes of the richest, not the poorest farmers.

3. ENRICHES LANDOWNERS, NOT WORKING FARMERS: It is becoming increasingly common for non-farming landowners to scoop up the benefits of the SPS, not the working farmer. This can be done in two ways: by renting out land while retaining the SPS payments or by incorporating the value of SPS payments into the rent charged to a tenant farmer. Around half of EU land is tenanted and land ownership is concentrated in the hands of a relatively small number of large landowners.

4. UNEQUAL TREATMENT. As well as discriminating in favour of the largest farms on the most productive land, the SPS discriminates against certain types of farm. Poultry and pig farmers and horticulture growers never received farm subsidies and don’t qualify for the SPS. Yet there are plenty of cases of non-farmers receiving SPS: railways, water utilities, golf clubs and pony clubs, according to farmsubsidy.org which pushes for more transparency in the system.

5. MONEY FOR NOTHING: The SPS is sometimes justified as payment for the ‘environmental services’ provided by farmers as land managers. But there is only a tenuous connection between how much subsidy a farmer receives and the value of the environmental services provided. The farmers that the get the biggest subsidy per hectare are sometimes the ones providing the least in the way of environmental services, since the most heavily subsidised farms are often the most intensively managed farms, with greater application of fertilizers and pesticides. In a report on ‘cross compliance’ (the requirement farmers must meet to qualify for SPS) the European Court of Auditors concluded that

“the objectives of this policy have not been defined in a specific, measurable, relevant, and realistic way, and that at farm level many obligations are still only for form’s sake and therefore have little chance of leading to the expected changes, whether reducing the size of payments or modifying farming practices.”

Check back tomorrow for five more reasons why the SPS is not politically sustainable.

Speaking in 2005, Agriculture Commissioner Mariann Fischer Boel explained how she sees cross compliance in relation nearly 40 billion euros of public expenditure on payments to farmers:

“I would emphasise that decoupled payments are not “money for nothing”. To get the cheque in the post, a farmer has to respect a demanding range of standards related to the environment and animal welfare. We call this system “cross-compliance”.”

Today’s report by the Court shows that such a view is at best wishful thinking and at worst deliberately deceitful. Cross compliance does not represent a ‘demanding range of standards’ at all.

It should be stressed that this study is the biggest and most comprehensive to date. The Court says that it “carried out an audit in 2008 of the cross-compliance policy at the Commission and in seven Member States representing the diversity of agriculture across Europe”.

The top line conclusion pulls no punches:

“the objectives of this policy have not been defined in a specific, measurable, relevant, and realistic way, and that at farm level many obligations are still only for form’s sake and therefore have little chance of leading to the expected changes, whether reducing the size of payments or modifying farming practices.”

Senior officials at the Court are reported to be fuming at the suppression of the report until after the CAP health check was concluded. They should rest assured that their work has not been in vain: this report will play a big part in the discussions of the future of the CAP as part of the EU budget review.

Read the press release and the full report (60+ pages).

For those who don’t know, cross compliance is the EU jargon for the strings attached to the €36 billion of direct payments to farmers handed out each year. The idea is that if farmers break the law by pouring slurry into nearby rivers, mistreating their livestock or fail to guard against animal diseases like BSE and foot and mouth, they get their subsidies cut. To say that cross compliance is applied with a featherlight touch in most member states is an understatement. Farmers hate it, so do most of the people responsible for enforcing it. Moreover, the requirements of cross compliance in most cases go no further than what is already required by national law. So farmers are being paid €36 billion not to break the law. Nice! Rather like paying drivers not to break the speed limit.

I have it on reliable evidence that the Court of Auditors report takes a dim view of cross compliance and makes uncomfortable reading, particularly for those (like Agriculture Commissioner Mariann Fischer Boel and most of Europe’s farm ministers) who want to further reduce the ‘burdens’ of cross compliance.

But back to the cover-up. I’m told the Commission used a simple but effective bureaucratic tactic to ensure that the report was not published in advance of this week’s plenary session in the Parliament and Council meeting: it delayed the translation of its responses to the Court’s findings. Under EU law the Court is required to publish alongside its own report the responses of the Commission to its findings. The law sets down a time limit for the Commission to produce its response, and the time limit was adhered to.

However, according to Mr Casaca, the Commission delayed the translation of its response into other languages, and there is no legal time limit on the translations. This is how the Commission delayed the publication of the report and I agree with Mr Casaca that it is a bona fide scandal. No doubt Sir Humphrey (pictured, right) would be proud of his EU protégés. Though it leaves the rest of us feeling a bit cheated.

Strangely absent from the Court’s report was an evaluation of cross compliance – the environmental and animal health and welfare conditions that are required of all recipients of CAP direct payments: public expenditure which totals some 36 billion euros a year (28 billion euros of which is spent under the Single Payment Scheme). Could this be because the Court has just adopted a separate special report on this very subject? But that the report is being held back until the health check is concluded?

On 17 October 2008, a senior official from the Court told a rural development conference held in Limassol, Cyprus that the Court its report on cross compliance and that publication was imminent. The official hinted that the report took a fairly dim view of cross compliance as a way of delivering value for money. Such a conclusion would be very embarrassing for the Commission. Commissioner Fischer Boel is fond saying that cross compliance embodies the principle of ‘public money for public goods’. The evidence is generally to the contrary. As the Institute for European Environmental Policy found, most cross compliance requirements are actually no higher than what is required by existing EU and national laws, so cross compliance does not require anything more than is already required by law. Moreover, the inspection regime is distinctly light touch and it is exceptionally rare for farmers to actually have much of their payments reduced for failing to meet the requirements.

An adverse opinion from the Court will be doubly difficult for the Commission at this moment, just as it seeks to secure a final deal on the health check: the package of mini reforms to the CAP that includes, you’ve guessed it, a ‘simplification’ of cross compliance. Simplification is of course the traditional euphemism for reducing still further the requirements on farmers and scaling back the inspection regime that tries to check that the requirements are being met.

The health check is being debated in the European Parliament in Strasbourg on Tuesday next week. I am sure there are MEPs who would value the contribution of the Court’s report to their considerations of cross compliance and the health check more general.

The Court adopted its report on cross compliance on 4 November. Why has it not been published? Is it far fetched to imagine that someone in the Commission is applying pressure on the Court to sit on a controversial report until the health check is done and dusted?

In the executive summary they state that

“the support measures of the Common Agricultural Policy score badly in terms of EU value added due to a lack of efficient targeting and ensuing excessive opportunity costs. The reason is simple: the direct payment system is based on parameters that have no link to the cost of achieving the objectives. Actual needs are largely dissociated from the financial interventions.”

They then explain why:

“Direct payments are still linked to yields per hectare in the years 1989 to 1991 or the average of three years originating from the last five years with available data before accession for the new member states, as far as national allocation of funds is concerned. As a consequence, regardless of whether they are used as income support, environmental actions, or any action of potentially high EU value, the payments do not relate well with the issues being addressed. This would be a violation of the principles of efficient public intervention and can be considered a violation of interpersonal equity principles of EU support.”

Taking in turn the various justifications for CAP direct payments, the authors first take issue with the concept of income support:

“One recurrent argument offered for granting direct payments to farmers in the EU is the need to provide farmers with income support. Otherwise, so goes the argument, many farmers would abandon agriculture altogether with large negative consequences for the environment, landscape and rural communities. It is common to have public interventions to support the income of individuals or households in financial difficulty. Income support is granted based on means testing, to ensure that support goes to those who need it. The CAP direct payments are not based on any analysis of the individual needs of farms and as such fail in targeting low- incomes farmers.”

And there’s more:

“Given the large inefficiencies of the policy in targeting low-income farmers, direct payments cannot be considered rational as an income support. With the low level of support granted through direct payments to poorer farm households, it is questionable if it is really very influential in reducing the flow of farmers out of agriculture, or rebalancing income differentials between the agricultural and non-agricultural sectors. In fact, the CAP may be exacerbating income disparities in general and especially within the agricultural sector.”

Turning next to the idea of direct payments as ‘green payments’, the authors are equally scathing:

“The size of direct payments is weakly related to the costs of cross-compliance obligations, linked as they are still to past yields at least in the overall amounts. The difference of past yields between countries and regions means that from the point of view of the practices required, farms are paid very different levels of support for similar costs. Some farms may be over-compensated, some under-compensated.”

With regard to EU biofuels support policies, the authors say that both the energy security and the climate change arguments are weak:

“The present support to the first generation of agro-fuels is hard to justify. Promoting agro-fuels as a way to reach energy independence makes little sense. In the most optimistic scenarios, domestic agro-fuels could replace only 1% of imported petroleum products. The environmental balance of agro-fuels is questionable and their positive externality does not seem to justify the current public support.”

The report is somewhat less critical of the rural development ‘pillar’ of the CAP, although they do express serious reservations about Less Favoured Areas programmes, which remain the dominant element of rural development policy:

“The most problematic aspect of the LFA is the very high flexibility in the determination of beneficiary areas and the lack of appropriate justification and monitoring of the support. The Court of Auditors (2003) has criticised the LFA payments severely, exactly because it is not possible to understand the value added of such actions.”

This report is not just interesting because of its analysis and conclusions, it is interesting because it has been commissioned and published by the Budget Committee of the European Parliament. Several members and staff members of this committee have shown an increasing interest in the CAP over the past few years, and this should be seen as an encouraging development. In the past, the European Parliament has too often delegated agriculture policy matters to the Agriculture Committee, which is stuffed with farmers, ex-farmers and the paid and unpaid stooges of the farming industry. If this report is a sign that the Budgetary Committee is preparing to take on the CAP, that is very good news.

Next Tuesday I am attending a CAP ‘brain bang’ meeting of the European Parliament’s Land Use and Food Policy Inter-Group (LUFPIG) which is chaired by Thijs Berman MEP, a founding contributor to this blog and one of the three MEPs who commissioned the Núñez Ferrer-Kaditi report (the others are Helga Trüpel and Kyösti Virrankoski). Terry Wynn, former LUFPIG chairman and recently-retired MEP used to joke that LUFPIG sounds like a flying pig and that this was not wholly unintentional. If history is anything to go by, we’ll see pigs that can fly before we’ll see reform of the CAP. But then again, if reports like this one help to stir the European Parliament into action, Terry could be proved wrong. I am sure nothing would please him more.

Read the report in full.

Muddled Thinking on the Purpose of Direct Payments

The document takes a conservative view of direct payments, stressing that these are required as an income guarantee to compensate farmers for loss of income arising from market failure and to compensate farmers for compliance with the EU’s environmental and animal protection standards. This is a problematic argument, because (a) the value of the direct payment does not correspond to the cost of meeting standards, (b) the use of the direct payment to reward farmers for meeting baseline statutory requirements is unjustifiable and (c), the payment is still made if a market failure does not occur. The paper highlights some confusion as to the purposes of Pillar I and Pillar II and the rationale for public intervention in both agriculture and sustainable land management, as demonstrated by the next point.

Pillar II Funds Earmarked for Income Risk Management

One of the most striking proposals is to use financial resources earmarked for Pillar II to fund private sector risk insurance schemes. This would seem out of synch with the current set of EU strategic guidelines for rural development which call for ‘dynamic entrepreneurship’ and do not currently provide for a system of risk management. The proposal, if followed through, would also result in a potential duplication of public funding, given that the paper also views Pillar I direct payments as providing an income guarantee. Instead, private insurance schemes could provide an income guarantee, suggesting that public expenditure in this regard is inappropriate. Also, given that Pillar II is the preserve of funding for the rural environment, expenditure on agri-environment schemes or on supporting more vulnerable high nature value farming systems is likely to provide greater, more highly valued public goods than spending on risk management. The Parliament needs to demonstrate the rationale for using the relatively limited funding available in Pillar II to fund risk management rather than to invest more substantially in measures that support the environment.

Lower Ambitions for Pillar II Funding
An alternative and substantially less ambitious proposal for compulsory modulation that fuses together an element of aid capping is proposed in the working document. Whilst the Commission recommended that compulsory modulation rises from the current five per cent rate to 13 per cent by 2013, the Parliament suggests a tapered cut in direct payments up to a maximum of four per cent for direct payments in excess of €300,000. This is a somewhat contradictory move, explained loosely in terms of the need to support the labour market and regional cohesion (and without any quantitative evidence that the proposal will provide for this if enacted), and at odds with calls in the same document to secure appropriate financing for Pillar II. The proposal would generate substantially less funding for Pillar II than the Commission’s suggestion.

Mixed Message for Cross Compliance

The document gives a confused message regarding the future of cross compliance. In the first instance it is argued that the framework for Good Agricultural and Environmental Condition could be adapted to include standards for both maintaining the environmental benefits that have been provided by set aside and tackling climate change. Elsewhere, it is stated that any broadening of the scope of cross compliance is rejected outright.

Some Positive Aspects

There are also a number of positive suggestions, albeit not concrete proposals, in the document. The role that Article 69 could play in safeguarding farming in areas threatened by declining agricultural activity is recognised. It is also suggested that the Commission produces a report explaining how livestock farming can be protected in the long term, through, for example, a premium for extensive grassland. The value of moving to an area based fully decoupled Single Payment is recognised, although this is contradicted by a request to maintain the possibility of coupling crop premiums. The Commission’s proposal to abolish the energy crop premium is supported, as is the abolition of the milk quota in 2015.

A Longer Term Vision that Isolates the Environment

In terms of a longer term vision for the CAP, it is requested that the Commission present a number of new formulations of the agricultural payments system for the post-2013 period. Crucially, the environment is excluded from this vision, with the paper stating:

‘any future system must focus more strongly on aspects of the territorial coherence/integrated development of rural areas, reinforcing key agricultural sectors, rewarding effort and compensating for extra burdens, and risk management; [the Parliament] considers that the relationship of the first to the second pillar must be entirely redefined for this purpose.’

If the European Parliament continues to advocate such a vision, the environmental lobby is likely to face a great challenge in pushing for a more sustainable CAP, especially if, as expected, the Reform Treaty is ratified and the Parliament assumes co-decision powers on agricultural matters.

The Commission’s recent Communication on the Health Check, however, calls into question the effectiveness of cross compliance in promoting sustainable agriculture. Indeed, some difficulties have been experienced by Member States in defining standards that are meaningful to farmers, and can be checked during a control visit. The scope and ambition of the standards, as implemented, also varies across the Member States. The recent evaluation of cross compliance for DG Agriculture provides evidence of Member States’ initial experiences with cross compliance.

The Commission is considering removing a number of the requirements from some of the SMRs. Whilst this may aid the cause of simplification – one of the mottos surrounding the Health Check – it may be of questionable benefit to the core aim of promoting sustainable agriculture, unless new or more meaningful standards are identified and introduced.

The core ability to promote, and perhaps no less achieve, sustainable agriculture lies in amending the GAEC framework, a possibility also touted in the Commission’s Communication. For example, GAEC may be a suitable home for a post-set aside environmental management option. Standards for climate change and water management may also be introduced. However, the standards, as defined by the Member State, need to be understood by farmers, be enforceable and be flexible enough to account for regional differences in order to be effective. In addition, the standards implemented by Member States should be held up to greater scrutiny in order to ensure cross compliance delivers more for the environment in the future.

The Health Check is an opportune moment to consider the future role of cross compliance if the budgetary relationship between the first and second Pillars shifts in favour of rural development in the future. A key advantage of cross compliance is the leverage it has over the vast majority of EU farmland and farmers. A smaller Pillar I budget could lead to the loss of this leverage over the most competitive farms, and undermine calls to strengthen the delivery of environmental performance through cross compliance. Questions about the ideal relationship between cross compliance, under Pillar I, and agri-environment payments, provided by Pillar II and for which farmers receive a payment for delivering above and beyond cross compliance SMRs and GAEC standards, also need to be answered.