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COMAGRI draft report on rural development

As noted in a previous post, the draft reports by the COMAGRI rapporteurs on the four main CAP regulations were published last week. They include the reports on the future of direct payments and support for rural development by Mr Luis Manuel Capoulas Santos, the report on the single common market organisation by Mr Michel Dantin, and the report on the common provisions for financing, management and monitoring of the CAP by Mr Giovanni La Via. This post summarises the main changes proposed in the Capoulas Santos draft report on support for rural development after 2013.
Investments in physical assets. The draft report advocates that the provision in the current regulation providing for support for complying with new Community standards in the fields of environmental protection, public health, animal and plant health, animal welfare and occupational safety should be maintained, but limited to support of specific investments undertaken by farmers.
Early retirement scheme. The Capoulos Santos report proposes that the current early retirement scheme should be maintained and not restricted to small farmers only, but with simplified arrangements. Under his proposal, a one-off payment not exceeding 50% of the start-up aid granted to a young farmer could be made to farmers over 65 who transfer their holding and the related payment entitlements to other farmers. Support for small farmers transferring their holding should be paid as a one-off payment rather than an annual payment over a number of years as proposed by the Commission.
Additional support for young farmers. In addition to the proposed flat rate payments supporting the business start-up of young farmers, Member States should be encouraged to facilitate access to land for these farmers. Support taking the form of a bank guarantee for land lease contracts and support for interest rates to facilitate land leasing for young farmers is proposed. The report argues that providing for bank guarantees through the rural development funds can give young farmers access to longterm lease contracts (and advance payments), while being cost effective for public expenditure.
Agri-environment-climate payments. All agri-environmental measures included in Member States’ future rural development programmes should, in terms of environmental value, go beyond the Pillar I ‘greening’ measures in order to bring the two CAP pillars into a complementary relationship.
Risk management. Insurance premiums as well as mutual funds should be eligible for financial assistance to help farmers stabilise their incomes, and adverse climate events as well as a disease outbreak, an environmental incidence or a severe income drop should be included as a legitimate objective of protection. The report also calls for a mid-term review of the effectiveness of this measure.
Irrigation investments. The Commission had proposed that only investments which led to an improvement in water use efficiency of more than 25% should be eligible for support, with a derogation for new member states. The Capoulas Santos draft report would allow all irrigation investments to be funded, subject to minimum standards for water use efficiency and environmental performance of irrigation equipment.
Performance reserve. The performance reserve (included as part of the Structural Funds regulation) is deleted.
Co-financing rates. As many Member States currently make use of the increased cofinancing rate for Axis 2, the draft report proposes increased community support for agri-environment-climate measures also in the new regulation. It would eliminate a cofinancing requirement for funds transferred voluntarily from the first to the second pillar under the flexibility provision in the regulation on direct payments, as well as for unspent greening funds transferred to the EAFRD, which would have to be used exclusively for support of agrienvironment- climate measures. To avoid loss of EAFRD funds due to inability to provide the national co-financing, Member States should be allowed to replace their financial contribution by private funds (e.g. from foundations or private contributions from the beneficiary).
Minimum spending constraints. The mandatory minimum percentage for agro-environment-climate measures included in the recital to the Commission proposal is incorporated as part of the corresponding article. Given the proposed transfer of unused Pillar 1 greening funds to AEM, the Commission proposal to require at least 25% of Pillar 2 funds devoted to “Axis 2” measures should be increased to 30%. Funding for organic farming and payments related to the Natura 2000 network and the Water Framework Directive would be included in this amount, but support for LFAs would be excluded, on the grounds that it is a compensation for natural disadvantages, which is not linked to any additional (environmental) requirements.
National financial envelopes. Given that the Commission has not submitted any quantified proposal specifying how the rural development budget is to be shared out among the Member States in the period from 2014 to 2020, the report submits a proposal based on the budget proposal for the 2014-2020 Multiannual Financial Framework but on the distribution scale used in the preceding period, on the grounds that the premises on which that distribution key was established have not significantly altered.
Areas with natural and specific constraints. The Commission has had a proposal on the table to revise the designation of less favoured areas (LFAs) in accordance with uniform and objective bio-physical criteria for some years but little progress has been made. This proposal is included in its revised rural development regulation. A transitional arrangement would be put in place over the 2014-17 period for farmers who would lose their eligibility for LFA payments under the revised designation.
This has proved a controversial element in the Council of Ministers and the Capoulas Santos draft report would kick the issue down the road. It proposes that the Commission would present a separate legislative proposal on mandatory biophysical criteria for the delimitation of areas with significant natural constraints by December 2015, once all data necessary for the impact assessment for such criteria and appropriate thresholds are available. In the meantime, Member States can continue to use their existing delimitation criteria.
Where this would leave the Commission proposal that a proportion of Pillar 1 direct payments could be used to top up payments to farmers in areas of specific natural handicaps is unclear. Some argue this option was included as a way of compensating farmers who might lose out as a result of the new LFA criteria.
More precise and inclusive definitions of goals and priorities. These relate particularly to human resources, forests, innovation, with particular reference to the competitiveness of rural areas and agricultural holdings, animal welfare, polluting gases, and carbon.
Summary. The Commission’s draft rural development regulation is less controversial than its direct payments regulation and contains fewer novel elements. The rapporteur’s draft report accepts the broad lines of the Commission’s proposal – greater coordination with other structural funds, abolition of the axes, more encouragement for innovation, inclusion of support for risk management – and concentrates on fine tuning some of its specific elements. The report puts somewhat greater emphasis on agri-environment and climate measures by formally requiring a minimum spend of 30% of a country’s Pillar 2 envelope on these objectives. Postponing a decision on LFA designation may simply recognise the political realities in the Council on this issue.
The proposal to maintain the existing distribution key for Pillar 2 funding is novel, but here COMAGRI and the European Parliament have limited power as this decision will be taken by the Council of Ministers as part of the budget negotiations. A final issue is achieving complementarity between Pillar 1 and Pillar 2 spending particularly where greening is concerned. Although the draft report seeks to avoid paying farmers double for the same practices in both Pillar 1 and Pillar 2, it is hard to see how this can be avoided under the rapporteur’s (and Commission’s) proposals.

Photo credit FriendsofEurope

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