Assessing the Commission’s CAP proposal: presentation

I was pleased to make a presentation yesterday as part of the series of webinars organised by the European Association of Agricultural Economists for its members, examining the Commission’s proposal for the next CAP. The presentation focused on five topics, recognising that several important issues could not be covered due to time constraints.

The topics were:

•Reflections on the CAP budget in the 2028-2034 period

•Reflections on CAP governance under the Commission proposal

•The future of direct payments

•The future of the CAP’s green architecture

•The future of rural development

My argument on the budget is that it is possible that the overall CAP budget will match the current CAP budget in current prices, as the Commission has argued, but there will be an important redistribution between Member States. This will reflect both their political willingness to transfer additional amounts from their NRP Fund allocation to top up their CAP minimum amounts for income support, but also their structural ability to do so. This latter depends on the way the opportunities and constraints established by the rules in the NRPF Regulation play out for each Member State. In some countries, we will see an increased EU CAP budget but in others a smaller one. These projections assume that the MFF budget proposed by the Commission will be adopted by the European Council and receive the consent of the Parliament. If cuts are made to the Commission’s proposal, despite the Parliament calling for a much larger overall budget, the future size of the CAP budget becomes more uncertain.

Agricultural stakeholders have pushed back against the merging of the CAP into the NRP Fund because they feel it reduces the visibility of the CAP, leaves the CAP budgets vulnerable to intra- ministerial bargaining at national level, and risks the commonality of the CAP. The visibility of the CAP can be improved by consolidating the relevant legislative provisions into a single Regulation, as already proposed by the Commission and which could be expanded upon. I argue that the risk that the greater flexibility available to Member States will undermine the level playing field is overstated, but that the fear that Member States will use this flexibility to pursue their specific national objectives rather than European value added is a real concern. This can be addressed by reintroducing targeted ring-fencing, for example, for agri-environment-climate actions, or by strengthening the role of the Commission’s recommendations (the steering mechanism) in the approval of the CAP chapters of the national Plans.

Area-based direct payments will in future be grouped as part of the DABIS (Degressive Area-based Income Support) payment. The Commission’s proposal is that this payment should become more targeted, both through differentiating it on the basis of need and through applying degressivity and capping. My analysis shows that the proposal opens great scope for Member States to shift resources towards the DABIS payment, given there is no national contribution required and that it is the only CAP intervention that is ring-fenced. There is a real risk that we will see a reversion towards greater reliance on area-based and coupled payments under the Commission’s proposal. The degressivity and capping proposals are positive but will impact very differently on Member States. The big debate on this issue will be whether degressivity and capping will become mandatory, as proposed by the Commission, or remain voluntary as desired by most Member States.

There are positive and negative elements in the Commission’s proposal for the green architecture. Eco-schemes and agri-environment-climate measures will be merged into new agri-environment-climate actions (AECAs), which will simplify the administration of these schemes. A new transition payment is proposed, the rules around payment limits are relaxed which will please environmental NGOs (though I share the view that the existing rules are flexible enough and help to avoid the risk that they morph into income support payments), and there is greater emphasis on supporting extensive livestock production.

But these positive elements are outweighed by the replacement of the GAEC standards by less robust protective measures and by the removal of any ring-fencing for AECAs. The philosophy behind the Vision for Agriculture and Food is that regulation should be replaced by incentives and investment. But, in the absence of ring-fencing, the allocation to AECAs, which if financed from the minimum CAP income support budget requires a 30% national contribution, will be crowded out by increased spending on DABIS and coupled payments which do not require any such national co-financing.

I look finally at the future for rural development within the CAP. While Pillar 2 of the CAP is referred to the rural development pillar, non-agricultural spending for rural development has never amounted to very much (around 4% of the budget in the CAP Strategic Plans). All the existing instruments that can support non-agricultural investments in rural areas are continued and made mandatory, but must be financed by using NRPF resources outside the minimum CAP income support amount. The Commission proposal to introduce a 10% rural target to ensure spending dedicated to rural areas will encourage Member States to allocate funding to these instruments.

I hope that the presentation may stimulate EAAE members to take up some of these issues and contribute to the evidence base to inform the ongoing discussions and negotiations around the Commission’s proposal for the next CAP reform. The presentation itself can be downloaded here.

This post was written by Alan Matthews.

Photo credit: Downloaded from Geograph © Copyright MrC and licensed for reuse under this Creative Commons Licence.