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How much is enough?

The CAP has to respond to new challenges, and thus it needs more funding. At the very least, and more realistically, the current budget must be preserved. That is a common line of reasoning. It is also a surprisingly simple rule-of-thumb considering the eye-watering annual budget of EUR 55 billion.

Any project in the business world worth EUR 55 thousand comes with a detailed cost estimate. A commercial project of EUR 55 million will be underpinned by a study examining and justifying all expenses. But EUR 55 billion of public money can apparently be claimed on the basis of a shared gut feeling that this is about right.

A study by two consultancies, ADAS and SAC, has gone through the hassle of spelling out the budgetary needs involved in meeting environmental and landscaping objectives in the UK. They derive the number of required units to be covered by agri-environmental schemes (e.g. hectares of grassland and woodland, or lengths of field margins and stone walls) from policy target indicators, and take into account overlaps where one area is subject to similar or incompatible agri-environmental schemes. The cost per agri-environmental scheme per unit is assumed to be somewhere close to the middle of current cost ranges.

The study finds that the total costs for the UK would amount to £2 billion. Costs per hectare run between £56 (Scotland) and £96 (England). The highest cost by far (£1 billion) is for biodiversity protection.

That is little. Member states will have to co-finance a share of the costs. Based on the estimates of this study and assuming a co-financing rate of 50%, EU payments of about EUR 50 per hectare would be sufficient in the UK. Some of the policy objectives (especially those related to landscaping, historic sites and public access to land) covered in the study arguably fall within national responsibilities, and others may be better achieved through regulation or taxes than through subsidies. Justifiable EU payments for land management may thus be even lower than estimated in the study.

But one may add some funds for training and advisory services on sustainable farming, and possibly be more ambitious on climate change. Nevertheless, the results of this study indicate a significant potential for EU-wide subsidy reductions, considering that the EU currently spends roughly EUR 300 per hectare on average (dividing EUR 55 billion by 173 million ha; however, some of the money is used for non-agricultural land or for programs unrelated to land use). What is needed is a serious, EU-wide estimate of the costs of different CAP policy options ahead of the negotiations for a new long-term budget.

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One Reply to “How much is enough?”

  1. I think the idea that other large programmes in the public or private sector are not characterised by incremental budgeting is a bit naive. When the UK is deciding how much to spend on the National Health Service or the Army next year, or when Apple is deciding how much to spend on R&D for it’s next super-gadget, it’s certain that this year’s spending is a big factor in deciding next year’s spending.

    In assessing the funding needs of the CAP you omit the elephant in the room which is the income support component of the CAP, which is derived from the EU Treaties and, whether you like it or not, is strongly endorsed by a large majority of CAP decision-makers, from Ministers to MEPs to Commission officials. Whether current policies are achieving the aims of underpinning farm incomes is certainly a subject for debate, but it’s clear that for at least the forseeable future, the political necessity is for some kind of income support / income stabilisation policy and this will require financing. What’s your view on that? That it should be entirely devolved for Member States? This is a reasonable position intellectually but it is unrealistic because of the political realities and the inherent ‘path dependency’ of public policies.

    The period 2014-2020 may well be a transitionary era for the CAP and the CAP in 2020 may look very different from how it does now. The nature of such a transition is that it is gradual and incremental. We live in an imperfect world, and public policy is rarely decided on a blank sheet, from first principles. For the CAP, the destination is perhaps more important than the speed of the journey.

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