The European Parliament is seeking an outcome to the CAP Health Check that does not compromise the competitiveness of EU farming or diminish the value of farm subsidy receipts. This is the vision presented in a working document drafted by German MEP Lutz Goepel of the Parliament’s Committee on Agriculture and Rural Development. The paper acknowledges the need for some evolution of the CAP, but presents a sometimes inconsistent set of suggestions, a number of which are likely to run counter to arguments in favour of promoting a more environmentally sustainable CAP. The paper is examined in further detail below.
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.