March 5, 2013
It seems inevitable that the current drive to reform European agriculture policy as part of the 2014-20 budget re-vamp is likely to be a great opportunity missed. The deliberations of the Commission, Parliament and Council are leading on to a massive over-complication of the policy. The potpourri of social, environmental and production supporting measures is going to lead to a new pattern of conflict between agriculture policy and environmental and development policies. The opportunities for fraud and misapplication are going to proliferate on a scale yet to be seen. And yet the policy could be more efficiently focussed on the challenges of rural decline, environmental stress and international trade conflicts merely by simplification.
The CAP as it is currently evolving has two main objectives: supporting farm incomes and protecting the environment from harm – with the emphasis still very much on the first of these objectives. But instead of erecting the current jungle of subsidies in order to cover the many aspects of protecting incomes, shielding the environment and stimulating rural economic development, the EU merely needs to divide the policy into two clear parts. The first part should be aimed at protecting rural incomes, where necessary, and the second to paying land holders to provide ‘public goods’. These are activities which, while giving the farmer little profit, benefit society as a whole.
Instead, we have a policy which aims to provide public goods through a massive direct subsidy system which only provides environmental services as a bolt-on to what is still basically an agricultural producer support system.
This highly inefficient and increasingly inappropriate structure is being politically reinforced on an almost daily basis. The recent heads of government European Council agreement on the multi-annual budget, while making a mere token reduction in the farm budget blandly agreed to make 30 per cent of the massive €40 billion a year direct subsidy budget (Pillar One (P1) conditional upon performance of new ‘greening‘ measures. Defining how far or how satisfactorily this condition will be met will of course be left to the Council of Agriculture Ministers.
The European Parliament’s agriculture committee – well stacked with representatives of the agriculture industry – were meanwhile voting to water down the linked environmental conditions and to extend the list of exemptions. The basic flaw in the CAP is of course the so-called ‘single farm payment’ which pays every farmer in the EU27 €300 plus from the public purse for every hectare he holds before he even gets out of bed in the morning. Ever since the introduction of direct subsidies in the early 1990s, the Commission has sought to cap this largesse by ensuring that it would be paid only to the most needy rather than the fattest cats in the industry – but with a singular lack of success. Eighty per cent of the annual €40 billion direct subsidy hand-out still goes to the 18 per cent of farms holding over 100 hectares.
The latest attempt by the Commission to moderate this inequity is to cap the maximum subsidy payment to any one farmer to €300,000. The Parliament’s agriculture committee (ComAgri) has at least added one enlightened amendment which might move the policy in the right direction: to allow member state governments to allocate an additional annual payment to farmers holding up to 50 hectares.
But what is still seriously wrong with the reform package is that the green subsidies for compliance with environmental protection criteria remains a bolt-on to the basic totally protected income payment. Non-compliance would mean farmers only forfeiting the additional green payment itself rather any part of the basic payment. Greening measures thus become optional rather than obligatory. In addition there exist, and there will be even more so under the new ‘greener’ CAP, a whole panoply of get-outs for national administrations to operate their own environmental schemes (with benefit of European taxpayers’ money, of course).
There is however a simple solution to the whole muddle. As I detail in a recent book: remove all income subsidies to farms larger than 50 hectares and double the income payments to farmers in this smallholder class. On a trend of rising farm and food prices larger farms are quite capable of thriving on the market without subsidies. This would cut the direct subsidy bill by some 80 per cent. Part of this saving could then be used to finance better focused, specific environmental schemes (such as Natura 2000). This is probably the only way to transform what is still a common agricultural policy into a common rural policy. <05/03/2013>