Budget at the heart of debate

In June 2011, the European Commission tabled a proposal for the EU's 2014-2020 budget which largely leaves current farm funding untouched, although slight cuts will be introduced gradually.

While the Commission proposal maintains CAP spending at its 2013 level, overall, farm policy should have a slightly smaller share of the total EU budget.

The Commission proposes to allocate 36.2% (€371.72 billion) of the proposed EU budget to the CAP, compared with 39.4% in the current budget. This funding will be complemented by a further €15.2 billion for research and innovation, food support for needy people, a new reserve for crises in the agricultural sector, and other projects. 

Of the €371.72 billion allocated to the CAP, €281.8 billion is earmarked for direct payments and market measures in support of farmers (Pillar 1) – down from €289 billion in the current budget. Over the years, these will gradually decrease – by €42.2 billion in 2014 and by €38 billion in 2020.

The rest of the CAP budget (€89.9 billion) is earmarked for rural development (Pillar 2) – a decrease from the current €96 billion. It is also proposed that annual Pillar 2 budget will fall in stages from €13.6 billion in 2014 to €12 billion in 2020.

The overall size of the farm budget will ultimately be decided in separate talks between EU governments on the bloc's next long-term budget for 2014-20.

Direct payments to farmers slowly shifting Eastwards

The Commission presented its legal proposal to reform the CAP post 2013 in October.

The reform proposal includes a system of "convergence" to reduce income disparities between farmers in Western and Eastern Europe.

The national envelopes for direct payments will be adjusted so that “all member states with direct payments below 90% of the EU-27 average will, over the period, close one-third of the gap between their current level and 90% of the EU average direct payments."

For those countries that currently receive more than average, the minimum contribution for balancing the level of payments between the EU-27 is 1%, “and for countries with the highest levels of payments, the maximum decrease will be around 7%," EU farm Commissioner Dacian Cioloş, told EurActiv.

In order to move away from the different systems of the Single Payments Scheme in the EU-15 (which allows for historical references, or a payment per hectare, or a "hybrid" combination of the two) and the Single Area Payments Scheme (SAPS) in most of the EU-12, a new “Basic Payment Scheme” will apply after 2013.

To reduce the discrepancies between the levels of payments between farmers, between regions within member states and between member states, all the EU-27 will be obliged to move towards a uniform payment per hectare by the start of 2019.

The payments will, as at present, be subject to “cross compliance,” which requires farmers to respect certain environmental and animal welfare rules, while various simplifications are being proposed.

Co-funding between the EU and member states

The Commission is proposing to allow those member states that get less than 90% of the EU average for direct payments to channel up to 5% of their Rural Development funds to their 1st Pillar national envelope, which provides direct income support to farmers. Meanwhile, all member states could transfer up to 10% of their national allowance under Pillar 1 to their Rural Development envelope (Pillar 2).

Normally, the first pillar direct payments for income support are 100% financed by the EU while Pillar 2 is co-funded by member states and aimed at pre-defined rural development and environmental measures.

Distribution of payments to farmers

The Commission also intends to cap direct income support for the largest agricultural holdings, which it said "receive a disproportionate share of direct income support from the CAP." The idea is to progressively cap payments starting from €150,000 - with maximum amount of support for any individual farm limited to €300,000 per year. But this only after a part of the salary and social security costs have been deducted from the total.

CAP support is also proposed to be given only to active farmers, and not to those with no tangible agricultural activity. The EU executive’s definition of an active farmer is however rather broad and support would still be given to farmers whose revenue from non-agricultural activity represents 95% of their annual income.

A special Small Farmers’ Scheme is also being proposed and could represent up to 10% of the national envelope. And special support for new farmers under the age of 40 could represent up to 2% of the national envelope.

Greening

The EU executive also proposes making 30% of the CAP’s direct payments conditional on three "greening" measures:

  • Maintaining permanent pasture.
  • Diversifying cultivation with farmers obliged to grow at least three crops on their arable land, two of which must represent at least 5% of the land each and the third not more than 70%.
  • Maintaining an "ecological focus area" of at least 7% of farmland - excluding permanent grassland - through field margins, hedges, trees, fallow land, landscape features, biotopes, buffer strips, and forested area.

Market management

With milk quotas and wine planting rights already set to expire, the Commission is looking to end the last remaining quota regime - for sugar. The bloc's current system limiting national sugar production and setting minimum prices should end by 30 September 2015, accompanied by reductions in import tariffs.  

The existing systems of public intervention and private storage aid – used as safety nets to help producers in times of market difficulty – will be revised “to be more responsive and more efficient.” A new safeguard clause is also to be introduced to enable the Commission to take emergency measures in response to market disturbances, such as the one caused by the e-coli crisis in May-July 2011.

In order to improve farmers' negotiating position in the food chain, the Commission is proposing to support and develop producer and inter-professional organisations, as well as direct sales between producers and consumers.

Rural development

Instead of three axes linked to economic, environmental and social issues with minimum spending requirements for each area, a new programming period is proposed following 6 priorities:

  • Fostering knowledge transfer and innovation;
  • Enhancing competitiveness;
  • Promoting food chain organisation & risk management;
  • Restoring, preserving and enhancing ecosystems;
  • Promoting resource efficiency and transition to a low-carbon economy;
  • Promoting social inclusion, poverty reduction and economic development in rural areas.

Member states are required to maintain 25% of their Rural Development envelope on issues related to land management and climate change mitigation and adaptation.