The Commission’s CAP budget proposal in the next MFF

Please note that I have updated and revised some of the commentary in this post in a later one here. This later post gives a a more optimistic view of the likely size of the CAP budget though still with caveats. I would urge readers to also read this later post in conjunction with this one. I have left this post online for the record.

The publication of the Commission’s MFF proposals and related legislative proposals on Wednesday 16 July was chaotic, in part it seems because negotiations within the Commission went down to the wire right up to the afternoon of the day of publication. Publication of the key texts was delayed, and indeed the NPRF Regulation (see below) only became available on the EU Register of Commission Documents early morning Friday 18 July.

As far as concerns the CAP proposal in the MFF, this chaotic delivery led to a bit of a communications disaster. Commissioner Hansen went immediately to address the COMAGRI in the European Parliament and met with a very hostile reaction. While pushback from that Committee was always to be expected, it was also clear that many of the criticisms were based on insufficient information and understanding of what the new proposals might actually mean.

The criticisms focused on two main concerns – that the MFF proposals represented a significant reduction in the CAP budget, and that eliminating the EAGF and EAFRD and folding the CAP into the so-called Single Fund proposal would change the CAP into the UAP (Uncommon Agricultural Policy) as the Irish MEP Luke Flanagan called it in his intervention in the debate.

There are many other issues to be addressed in these proposals – the implications of the shift from compliance to incentives in the case of agri-environment-climate actions for the level of ambition in these areas; the refinement of the delivery model including implementation and monitoring; the allocation of powers between the Commission, Member States and regions in the strategic planning process; the targeting of direct payments; the significance of the generational renewal package, and so on. I plan to tease out some of these issues in later blog posts.

In this post, I take up the issue of the CAP budget and what that might mean for payments to individual farmers. This has to be a very tentative evaluation at this stage because, as we will see, crucial pieces of information are still missing. Indeed, the full picture will not be known in any case until the 28 National and Regional Partnership Plans are finally approved by the Council presumably some time in 2027. Only then will we finally see how much Member States have allocated to their farmers. But in this post, I attempt to establish the parameters which will guide the Member State decisions.

The budgetary and legislative context

The budgetary context is set out in the proposed MFF Regulation (COM(2025) 571) and the accompanying Commission Communication A dynamic EU Budget for the priorities of the future – The Multiannual Financial Framework 2028-2034 (COM(2025) 570). This Regulation establishes the overall expenditure envisaged over the 2028-2034 period by heading.

The Commission is proposing for the MFF 2028-2034 a ceiling for commitments of €1,763.1 billion in constant 2025 prices equal to 1.26 % of EU GNI and a corresponding payment ceiling of €1,761 billion in constant 2025 prices equal to 1.26% of EU GNI. In current prices using a 2% deflator, these figures amount to €1,985 billion and €1,980 billion, respectively. This compares to the MFF totals (following the mid-term review in 2024) of €1,221 billion for commitments (1.02% of EU GNI) and €1,203 billion for payments (1.01% of EU GNI) in current prices (COM(2024) 120).

Apart from the amounts, which are set out in the all-important Annex to the MFF proposal, there are three novelties in the MFF proposal: (a) a significant reduction in the number of headings, (b) a simplification of the flexibility toolbox, and (c) a change in the manner of making technical adjustments to account for inflation.

The adjustment is needed to convert the amounts of the expenditure ceilings set out in the MFF from constant 2025 prices to current prices. The Commission proposes a new method to address difficulties related to a volatile inflation environment. The annual adjustment remains based on a fixed but adjustable deflator. In practical terms, the annual price adjustment will be equal to 2% whenever EU inflation is between 1% and 3%, and equal to the actual inflation forecast rate whenever the actual inflation forecast is lower than 1% or higher than 3%, where the inflation rate of reference will be the EU-27 GDP deflator.

The legislative context for the next CAP, based on the Commission proposals, consists of five Regulations:

• A Regulation establishing the conditions for the implementation of the Union support to the Common Agriculture Policy for the period from 2028 to 2034 (COM(2025) 560) [CAP Regulation].
• A Regulation establishing the European Fund for economic, social and territorial cohesion, agriculture and rural, fisheries and maritime, prosperity and security for the period 2028-2034 and amending Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (COM(2025) 565). [I will refer to this as the NRPF (National and Regional Partnership Fund) Regulation in this post].
• A Regulation establishing a budget expenditure tracking and performance framework and other horizontal rules for the Union programmes and activities (COM(2025) 545). [Performance Regulation].
• A Regulation amending the Common Market Organisation Regulation (EU) 1308/2013 as regards the school fruit, vegetables and milk scheme (‘EU school scheme’), sectoral interventions, the creation of a protein sector, requirements for hemp, the possibility for marketing standards for cheese, protein crops and meat, application of additional import duties, rules on the availability of supplies in time of emergencies and severe crisis and securities (COM(2025) 553). [CMO Amendment Regulation].
• A Regulation amending Regulation (EU) No 1370/2013 as regards the aid scheme for the supply of fruit and vegetables, bananas and milk in educational establishments (‘EU school scheme’) (COM(2025) 554). [School Scheme Regulation].

The first two draft Regulations are particularly important because they are intended to work together. The NRPF Regulation sets out the tasks, priority objectives, and organisation of the various shared management programmes (including the CAP) under the Fund, as well as setting out the financial rules and financial resources made available. The CAP Regulation is a policy-specific Regulation which is subordinate to the NRPF Regulation.

According to Commissioner Hansen, the existence of a stand-alone CAP Regulation was not originally envisaged and had to be fought for. Although the NRPF Regulation makes references to the CAP Regulation so was drafted once that decision was made, there is still a very odd division of Articles between the two Regulations. Many Articles in the NRPF Regulation under Title V referring to the CAP or Article 66 establishing European and national CAP networks could easily have been included in the CAP Regulation. The specifications for the new Farm Stewardship System are included in the CAP Regulation, but the controls and penalties for non-compliance are included in the NRPF Regulation. There is clear duplication, as where the NRPF Regulation sets out the CAP types of support in Article 35 and the CAP Regulation does exactly the same in Article 5, creating a risk in the legislative process that different amendments to these Articles (they will be managed by different Committees in the European Parliament) could lead to divergent texts in the final outcomes (there is already divergence in that crisis measures for farmers have been added as a CAP intervention in the CAP Regulation but not in the NRPF Regulation as well as small textual differences). There is clearly scope for tidying up in the subsequent legislative work.

The NRPF Regulation includes the provision for ring-fencing CAP income support payments and Common Fisheries Policy interventions to a minimum of €295.7 billion (Article 10). This will be paid in roughly equal annual amounts (in nominal terms) over the seven years (see Section 3.2.1.1 of the proposal). The Regulation also allocates a sum of €900 million annually for the Unity Safety Net designed to contribute to the stabilisation of agricultural markets faced with market shocks, for a total of €6.3 billion over the MFF period. It has been a long-standing demand of COMAGRI that the agricultural crisis reserve should be funded outside the CAP and this has been implemented in the current proposal.

The overall CAP budget and comparisons with the present CAP

The headline numbers that were the focus in the COMAGRI debate on Wednesday 16 July and in subsequent commentary have compared the minimum amount ring-fenced for CAP income support measures and fisheries of €295.7 billion in current prices over the seven years 2028-2034 with the €387.8 billion made available for the CAP in current prices in the period 2021-2027. At face value, this is a reduction in nominal amounts of 24%. In real terms, of course, the reduction would be even greater.

Commissioner Hansen, in responding to questions on this issue in the COMAGRI debate, insisted that the reduction would not lead to a reduction in the money received directly by farmers. He argued it reflected the fact that non-farm rural development spending and other CAP spending not received directly by farmers would now be financed outside the ring-fenced CAP income support amount.

In fact, making a like-for-like comparison is not straightforward. At least the following issues need to be considered:

• The difference it makes when we consider that the ring-fenced amount only covers income support payments (as these are defined in the NRPF Regulation) and thus is not equivalent to the CAP budget provided in the current MFF (the Hansen argument).
• The fact that spending on certain Common Fisheries Policy interventions (as defined in Article 35(11)) is included within the ring-fenced amount. Under the 2021-2027 European Maritime, Fisheries and Aquaculture Fund, the EMFAF budget was €6.1 billion in current prices of which €5.3 billion was under shared management. However, of the four priorities for the EMFAF budget, only elements of Priority 1 appear to be included in Article 35(1). From initial versions of the documentation accompanying the MFF proposal, it appeared that €2 billion euro was included for fisheries support in the ring-fenced amount, though this has been removed in corrected versions of the documentation that were subsequently published (see discussion in the comments). In fact, it will be up to Member States in their NRP Plans to decide how much to allocate to the Article 35(1) interventions, and whether they will then include these as part of the ring-fenced €295.7 billion or count them as additional. It does not seem productive to speculate on how Member States will respond, so we simply acknowledge this in the following calculations.
• There is a potentially important technical issue in deciding on the methodology to make comparisons of spending between MFF periods. The criticism of the reduced budget available for the CAP cited above makes a comparison between the total envelope available for the CAP in each of the two MFF periods. An alternative approach is to take spending in the final year of the current MFF, multiply it by 7, and compare the resulting total with the expenditure proposed in the coming MFF. This latter approach is apparently part of the basis for the Commission’s argument that it is not asking Member States to pay more into the common EU budget than they currently do. In practice, because the CAP budget is roughly constant in each year of each MFF, both approaches should give similar answers for the CAP.
• The fact that public support for agriculture in the EU comes through three, if not four, channels. In addition to EU support, there is national co-financing by Member States, there is additional national financing by Member States, and there can be additional national State aid in response to crises. It is of course relevant to focus on the change in EU support but the broader picture also needs to be kept in context.
• The fact that the ring-fenced €296 billion in the proposed MFF is a minimum amount. It will be up to Member States to decide if they wish to allocate a higher proportion of their NRPF funds to CAP objectives. We will not be able to observe this until the Partnership Plans are approved presumably in 2027.

Definition of income support

We begin by identifying how CAP income support (which is the amount ring-fenced) is defined in the proposed NRPF Regulation. Until now, we generally refer to interventions financed by CAP Pillar 1 as income support and CAP Pillar 2 as rural development. In the proposed new CAP, payments made directly to farmers previously financed in Pillar 2 such as investment aids, AECM payments and payments to compensate for farming in areas of natural constraints are now considered income support payments in the new CAP.

The CAP Regulation (Article 5) specifies the following CAP interventions:

(a) degressive area-based income support;

(b) coupled income support;

(c) crop specific payment for cotton;

(d) payment for natural and other area specific constraints;

(e) support for disadvantages resulting from certain mandatory requirements;

(f) agri-environmental and climate actions;

(g) payment for small farmers;

(h) support for risk management tools;

(i) support for investments for farmers and forest holders;

(j) support for setting-up of young farmers, new farmers, rural business and startups and development of small farms;

(k) support for farm relief services;

(l) LEADER;

(m) support for knowledge sharing and innovation in agriculture, forestry and rural areas;

(n) territorial and local cooperation initiatives;

(o) interventions in outermost regions;

(p) interventions in smaller Aegean islands;

(q) EU school scheme referred to in Title I, Part II, Chapter IIa, of Regulation (EU) No 1308/2013 of the European Parliament and of the Council;

(r) interventions in certain sectors referred to in Title I, Part II, Chapter IIa, of Regulation (EU) No 1308/2013;

(s) crisis payments for farmers.

The NRPF Regulation specifies that interventions (a) through (k) and (r) will be deemed CAP income support measures for the purpose of ring-fencing.

Comparison of CAP budget 2021-2027 with 2028-2034 MFF

We first present a breakdown of the CAP budget 2021-2027 in current prices as the basis for comparison (Figure 1).

There is no more disaggregated table for the whole MFF period that would allow us to directly identify the commitments for CAP income support interventions to make a comparison with the ring-fenced amount in the proposed CAP. Virtually all the direct payments line is clearly relevant, apart from direct payments to POSEI and the smaller Aegean islands (thus also including the agricultural crisis reserve). Based on budgetary commitments in the annual EU budget, we assume 99% of the direct payments line can be considered as CAP income support for comparison with the Commission proposal. We also consider the bulk of market-related expenditure as CAP income support as it mostly finances sectoral interventions, although it also includes expenditure on POSEI and smaller Aegean islands, promotion, and the school schemes.  We assign approximately 75% of this expenditure line to sectoral interventions which are included as CAP income support. Finally, we allocate 85% of the EAFRD expenditure to CAP income support interventions (based on deducting the share of EAFRD expenditure going to the Cooperation and Knowledge Exchange headings in planned EAFRD expenditure under the CAP Strategic Plans, see Commission, 2023, Figure 3).

This allows us to construct the like-for-like comparison shown in Table 1 for EU CAP income support. For the 2021-2027 total, we apply the percentage shares to the numbers shown in Figure 1. For the 2028-2034 total, we take account of the separate expenditure line for the Unity Safety Net which is intended to assist farmers to take account of market-related shocks and which replaces the agricultural reserve. This like-for-like comparison shows that the reduction in the nominal CAP income support budget is less than the headline reduction, estimated here at about 15%. The data at first sight do not appear to support Commissioner Hansen’s claim that there will be no reduction in the money in farmers’ pockets, even in nominal terms.

National co-financing and total public support

There may be scepticism whether Member States will want to transfer funds from other headings in the NRPF Fund such as cohesion, defence and social spending to top up spending on the CAP. However, national co-financing is different as this is obligatory spending which Member States must undertake if they want to draw down EU funding. There are some changes in the national co-financing requirements which can influence the total public transfer to farmers in the proposed new CAP.

Let us remind ourselves first what the rules on co-financing are for the current CAP.  The CAP Strategic Plan Regulation sets out the rules in terms of EAFRD contribution rates (the converse of the national co-financing rate). The basic rates are graduated according to the level of a region’s development. Maximum rates can be 85% of eligible public expenditure in less developed regions (i.e, minimum of 15% national co-financing required); 60 % of eligible public expenditure in transition regions (minimum of 40% national co-financing); and 43 % of the eligible public expenditure in the other regions (minimum of 57% national co-financing). However, higher EAFRD contribution rates were set for specific EAFRD interventions: 65% of the eligible public expenditure for payments for natural or other area-specific constraints and 80% for AECM payments and payments to compensate for disadvantages from mandatory requirements. The minimum contribution rate was set at 20%.

The proposed national contribution rates in the new CAP will be a minimum of 15% for less developed regions, a minimum of 40% for transition regions and a minimum of 60% for more developed regions, thus not that different from at present. There will be full EU financing of interventions (a), (b), (c) and (g) in the list above (thus, the degressive area-based income support, coupled payments, the cotton payment, and the small farmer payment) again as at present. Article 35 of the NRPF Regulation states that the minimum national contribution to interventions (d) through (k) will be 30%, subject to compliance with the regional minimums (it is hard to understand why this point is necessary if it means that the minimum in less developed regions will still be 15% and in more developed regions will be 60%).

Note that eco-schemes (annual voluntary measures in favour of the environment, climate and animal welfare) are now merged with AECMs in the new CAP and will require national co-financing. Whether that will result in a higher level of co-financing finance overall will depend on how Member States distribute their CAP income support ceiling between area-based degressivity payments and coupled payments, on the one hand (where co-financing is zero) and AECMs and eco-schemes (now relabelled as agri-environment-climate actions AECAs, and other measures and where co-financing is required), on the other hand. In the absence of ring-fencing, one can be fearful that the need for co-financing will make agri-environment-climate actions much less attractive to cash-strapped governments, but that will be the topic for another post.

My conclusion at the moment on additional funding for farmers from national co-financing is therefore ambiguous. National co-financing rates are broadly in line with the current CAP, but they are higher for aids for farmers in areas of natural constraints apart from less developed regions (for example, minimum national co-financing rates go from 35% to 60% in more developed regions) and even more so for agri-environment-climate actions (where minimum co-financing rates go from 20% to 60%).  On the one hand, this could mean a larger contribution from national exchequers, adding to the public finance available for farmer support. On the other hand, without ring-fencing and where there is a relatively free choice between financing degressive area-based and coupled payments without any co-financing, and financing AECAs and ANC payments with higher co-financing than at present, there will be a great temptation for many Member States to shift their funding to schemes that do not require any co-financing at all. There are limits to the extent to which this can happen as there are maximum ceilings on the amounts that can be used for both degressive area-based income support and coupled payments. Still, the bottom line is that we could even see less national co-financing than is currently the case.

Conclusion

There are many angles to be explored in the Commission’s CAP proposal, some deeply troubling and others highly promising. Yet inevitably the initial focus of reaction has been on the budgetary figures, and for understandable reasons. It is easier to propose change if there is a cushion there to ensure a soft landing.

My analysis suggests that on a like-for-like comparison, the minimum ring-fenced amount for CAP income supports (now to be interpreted more broadly than simply Pillar 1 direct payments) is around 15% smaller in current prices than what is available in the current CAP. To make a full comparison with the current €387 billion CAP budget, we would also need to know the allocations that Member States will make to the non-income support elements of the CAP, especially the Co-operation and Knowledge Exchange elements currently funded under Pillar 2. If expenditure on these elements is reduced by more than 15%, then the cut in the overall CAP budget would be greater, but also conversely.

It seems also unlikely that we will see an increase in national co-financing, given that Member States will have a reasonably free choice in allocating funds between degressive area-based income support and coupled payments without a co-financing obligation and all other measures that will require co-financing. On this evidence, it is hard to understand Commissioner Hansen’s argument that farmers will receive the same amount of money in their pockets (in current prices) as they currently receive. On the other hand, Member States will be free to allocate some of the other monies they receive from the NRPF Fund to top-up the minimum amounts they are required to allocate to the CAP. Ultimately, we cannot know the size of the CAP budget until the National and Regional Partnership Plans are approved by the Council sometime in 2027.

It is important for farmers to realise that this overall cut will not be a uniform, across the board cut in payments. First, a crucial appendix is still missing from the legislative package, in that there are as yet no figures in Annex XVIII of the NRPF Regulation showing how the minimum €296 billion ring-fenced amount for CAP income support and fisheries will be divided between the Member States. There is a formula to allocate the overall NRPF Fund between Member States which incorporates CAP direct payments. But we do not yet know how much of the minimum €296 billion each Member States will be required to spend. We do know that the planned average aid per hectare for degressive area-based income support should not be less than €130 and not more than €240 for each Member State but in addition the Commission proposes to introduce a sharp degressivity in these payments. How Member States design their CAP interventions and the willingness of farmers to enrol in some of the voluntary schemes that will be offered will determine whether individual farmers receive more or less money than under the current CAP.

A frequent complaint at the COMAGRI debate last Wednesday was that the CAP budget has been reduced in the context of a major proposed increase in the overall MFF. But whether that large MFF increase will eventually be agreed by Member States remains unclear. A smaller overall MFF would make it even more unlikely that additional CAP funds can be found in the EU budget. To the extent that it is Eurosceptic governments that tend to resist increases in the EU budget (though opposition is not limited to these governments), they also tend to proclaim their support for farmers more avidly. Thus they may well be willing to find the money nationally for farm support if they block the increase in the MFF sought by the Commission.

It is clear, for all the reasons mentioned in this post, there will be uncertainty around the CAP budget figures for at least the next two years.

This post was written by Alan Matthews.

Photo credit: Alan Matthews

If anyone notices errors in this post please point these out as understanding the legislative documents is not a straightforward matter.

Update 19 July 2025. I included a specific reference to Annex XVIII in the Conclusions. I corrected a typo in Table 1 where the ring-fenced amount for CAP income support is €295.7 billion and not €297.5 billion as originally stated which also required minor adjustments to other figures. Note added to Table 1 to clarify that only expenditure under shared management is relevant for the comparison.

Update 25 July 2025. I have corrected the text to reflect the comment received from Elsa Régnier below.

Update 5 August 2025. I clarified that certain elements of fisheries expenditure is included in the €296 billion ring-fenced amount.

Update 4 September 2025. Added the link at the top of the post to a later blog post which revises some of the commentary in this one.