CAP reform proposals

The Common Agricultural Policy 2014-2020: proposals from the

European Commission

David Barnes/Drew Sloan

Dec 2011 - Jan 2012

Purpose of these meetings

• To inform you about the European proposals for the future CAP

• So that you can begin to think about preparing for it

• To set out Scottish Government’s views at this stage

• To hear your informal views and comments• And to enable you to give us well-informed

formal feedback via our consultation exercises.

Caveats

• Some things still need clarification from the Commission.

• Everything in the proposals is subject to change in the negotiations.

• The consultation exercise is designed to inform SG’s final position, so what we set out tonight is just an interim position.

• How the new CAP will be implemented in Scotland will be the subject of a separate consultation process nearer the time.

What tonight will cover

• Introduction/background:– Procedure– Budget– Timetable

• The content of the European proposals:– Pillar 1– Pillar 2– Issues common to both pillars

• Next steps• Q&A

Introduction

• The EU is negotiating its budget and policies for 2014-2020.

• Three EU institutions are involved: – European Commission– Council of Ministers– European Parliament

• Only the European Commission can table a proposal: focus tonight is on the Commission’s proposals for the CAP.

• Council of Ministers and European Parliament then negotiate and decide.

CAP Budget and CAP rules will be decided separately

• CAP budget will be considered alongside the rest of EU budget, by Finance Ministers and Heads of Government.

• CAP rules will be negotiated and decided by Agriculture Ministers and the European Parliament.

CAP budget

• Commission proposal is roughly a “flat cash” budget for CAP 2014-2020, which means a decline in value in real terms (no uplift for inflation).

• Commission proposes redistribution of the budget, to boost Pillar 1 payments in new Member States and to make Pillar 2 fairer.

Pillar 1 Direct Payments budget

• Commission proposal for “convergence” to help new Member States: those below 90% of EU average €/ha get an uplift.

• Proposed UK Direct Payments ceiling is slightly down.

• Within-UK allocations not yet known.

• Scotland’s average €/ha is as low as some new Member States.

Pillar 2 Rural Development budget

• Commission proposes to use more objective criteria than in the past to allocate Member State shares.

• UK allocation not yet known.• Criteria should lead to bigger percentage shares

of the EU RD budget for UK and Scotland.• Total RD budget in Scotland 2014-2020 will also

depend on how big the EU RD budget is, and how much national co-financing money is available.

CAP rules

• What’s happened so far:• 2009-2010 gathering ideas - Commission

consultation exercise, Council discussions, Lyon report.

• Pack Inquiry into future farm support.• Nov 2010 Commission options paper.

Council discussions, Dess report.• Oct 2011 Commission issues formal

proposals designed to meet its objectives.

Two Pillars, four regulations

Pillar 1• Direct Payments• Market measures

(“Single CMO”)

Pillar 2• Rural Development

(“RDR”)

Financing and monitoring

(“Horizontal” regulation)

EU implementing rules (“Delegated Acts”)

Commission’s ideal timetable

• CAP proposals issue 12 October 2011.• EU and CAP budgets decided summer

2012.• CAP regulations finalised end 2012 or

early 2013.• EU-level and Member State-level

implementing rules and legislation adopted during 2013.

• New regime 1 Jan 2014.

If the timetable slips

• Pillar 1 Direct Payments and Market Measures – status quo could essentially continue until the new system begins, Eg on 1 Jan 2015.

• Pillar 2 Rural Development Programmes – risk of a gap between current programmes and new ones unless “bridging” arrangements are agreed.

Content of the EU proposals

• Pillar 1 Direct Payments

• Next slides from the Commission’s own presentation:

Who would have entitlements under the proposals ?

• All current entitlements would expire.

• Entitlements under the new system would be allocated to:– farmers who are actively farming in 2014 and

submit a claim, and who activated at least one SFP entitlement in 2011.

– and people eligible for the National Reserve.

National Reserve

• Funded by one-off deduction of up to 3% of Scotland’s total Direct Payments.

• Priority given to farmers under 40 who started farming in the last 5 years. If necessary to meet this demand, the 3% can be increased.

Who is an active farmer ?

• Direct Payments must be at least 5% of non-agricultural income (unless Direct Payments <€5,000).

• Must grow crops/keep livestock; or keep the land in condition suitable for grazing or cultivation.

• Member States/regions can impose minimum activity on land which remains in good condition even without management.

• Minimum claim size and hectarage.

1. Basic Payment

• What’s left after the various deductions have been made.

• Can be regionalised, on objective criteria.• In 2014, 40% of the Basic Payment ceiling is

area-based. Remainder shared out according to historic SFP.

• By 2019, must be 100% area-based and all entitlements within a region must be equal.

• Transition profile fixed in advance, in 2013.

2. Greening

• If >3ha of cropping, minimum 3 crops each covering >5% and <70%.

• Permanent grassland (>5yrs) must be maintained as declared in 2014.

• Each holding must have Ecological Focus Area (buffer strips, landscape features, fallow etc) equal to 7% of arable and temporary grass area.

• Organic farming qualifies automatically.

3. Young farmer top-up

• Compulsory for Member States. 25% top-up per hectare, up to a limit on hectares.

• Limit must be set between 25ha and average holding size in UK (54ha).

• Under 40, and max. 5 years after establishment.

• Up to 2% of Scotland’s total Direct Payments.

4. Coupled support

• Voluntary for Member States/regions.• Replaces Article 68 and pre-SFP schemes

(SCPS, SAPS etc) which some member States are still using.

• Limited to fixed no. animals and to payment rates necessary to maintain current production.

• Up to 5% of total Direct Payments, except for Member States currently using >5%.

5. Area of Natural Constraint (ANC) top-up

• ANC = new designation for LFA• Top-up voluntary for Member States/regions.• Up to 5% of total Direct Payments.• Payable on all or part of ANC, according to

objective criteria.• Must be deducted from Pillar 2 ANC support

(LFASS).

Progressive reductions/capping

• Payments reduced by:• 20% from €150,000 to €200,000 • 40% from €200,000 to €250,000 • 70% from €250,000 to €300,000 • 100% above €300,000 • Salaries/employment costs are deducted.• Greening payments are exempt. • Proceeds used in Pillar 2 for innovation.

Small farmer scheme

• Compulsory for Member States, optional for the farmer (one-off decision in 2014).

• Up to 10% of total Direct Payments.• Fixed payment, between €500 and €1,000.• Replaces other payments inc. coupled

payments.• Minimum no. hectares.• Exempt from greening and from cross-

compliance penalties.

Pillar 1 Market measures

• EU has moved from permanent intervention in the market to safety-net only.

• Provision for emergency measures in the event of extreme market disruption.

• Milk quotas already being phased out, sugar quotas proposed to be phased out.

Pillar 2 Rural Development: current rules

• 7-year programmes approved by Commission.• Co-financed by EU and domestic money.• Axis 1 farm business development (capital,

skills).• Axis 2 agri-environment (capital and annual),

LFA, woodlands, animal welfare.• Axis 3 diversification and community projects.• LEADER.

Pillar 2 Rural Development: proposals for 2014-2020

• Evolution not revolution.• Common Strategic Framework – joined-up

approach between RD, EU Structural Funds and EU Fisheries Fund.

• No Axes, no minimum percentages except 25% of EU funds on environment (inc. organic and LFA).

• Possibility for sub-programmes within RDPs.

Less Favoured Areas

• Re-titled Areas of Natural Constraint (ANC). Defined as:

• Mountain areas, or• Other areas meeting biophysical criteria

(now defined by EU not Member State), or• Other areas facing specific constraints (eg

islands), up to 10% of total area.• No special budget for each category, but

different maximum rates.

“Other areas” biophysical criteria

• Temperature, soil quality, slope, wetness or dryness.

• Close to criteria used already to define LFA in Scotland, but less fine-grained: applies to whole ward or parish if 66% of area meets the criteria.

ANC payments

• Costs incurred or income foregone as a result of natural constraints, compared with non-constrained areas.

• Take account of Pillar 1 ANC top-up.• Minimum €25/ha, maximum €250/ha

(€300/ha for Mountain), degressive above a threshold.

• Transition arrangements for farmers excluded by the new criteria.

Common rules to Pillars 1 and 2

• Cross-compliance

• Rules to be followed by Member States (inspections, audit, financial reporting etc): not covered tonight.

Cross-compliance

• As at present, two elements:

• Statutory Management Requirements (SMRs) and

• Good Agricultural and Environmental Condition (GAEC).

Statutory Management Requirements (SMRs)

• EU legislation on environment, animal and plant health, public health, animal welfare, which farmers should be complying with anyway.

• Down from 18 to 13 (15 when Water Framework Directive and Sustainable Use of Pesticides Directive have been implemented). Some animal health SMRs removed.

Good Agricultural and Environmental Condition (GAEC)

• 8 requirements (previously 8 compulsory + 6 optional).

• Retention of permanent pasture removed from GAEC: moved to greening.

• Minimum stocking density removed from GAEC: moved to agricultural activity definition.

• New GAEC: “Protection of wetland and carbon rich soils including a ban on first ploughing”

Cross-compliance penalties

• Take account of severity, extent and timescale. As at present:

• Penalty can be waived if “minor” non-compliance (but not if risk to public or animal health).

• Negligence: up to 5%, or 15% if repeated.

• Intentional: 20% to 100%.

• Detailed rules set by Commission.

Next steps: Scotland

• Consultation on Pillar 1, Dec to Feb.• Already consulted widely on Direct Payments for

Pack Inquiry, and we need rapid information on stakeholder views. Questionnaire on SG website, with hard copy alternative.

• Pillar 2, separate approach, including links with Common Strategic Framework.

• These consultations are to inform the negotiating position. Separate exercises later to decide how to implement.

Commission proposal

Parliament1st readingCouncil

1st reading

Parliament2nd readingCouncil

2nd reading

Conciliationprocedure

NEXT STEPS: EU

By end-2012 or early 2013 ??!

• Then:

• EU implementing rules

• Local implementation decisions.

• Local implementation.

Questions