EconomyEnvironmentEuropePolitics

Reviewing CAP

spring born calves

Richard Halleron explains the forthcoming changes in funding and farmers’ reasons for concern.

The Common Agricultural Policy, or CAP, underpins the finances of farming in Northern Ireland and the rest of the European Union. Agriculture has been the one common policy area that has consistently been at the very heart of the European project, going right back to the foundation of the initial Common Market in 1957.

But the vehicle by which money is made available to the farming industry from Europe’s coffers has changed significantly over the years. Yes, in the early days the CAP was used to directly support and encourage food production throughout Europe. However in 2005, courtesy of the then European Farm Commissioner Franz Fischler’s mid-term review of the CAP, the link between food output and farm subsidies was decoupled. In place of the traditional headage and acreage payments, farmers became eligible for the single farm payment, or SFP, which they would receive whether or not they kept livestock or grew crops.

The SFP is not money for nothing. It is, in fact, a form of environmental stewardship payment, which obliges those farmers receiving it to maintain the countryside to a standard which meets the requirement of European taxpayers. Under the current regime, there is a comprehensive farm inspection system built in and those producers found to be non-compliant will incur significant financial penalties.

The SFP budget for Northern Ireland amounts to approximately £300 million annually. However, the CAP also takes account of payments to livestock producers in the less favoured areas, designed to compensate for the significant disadvantage faced by cattle and sheep farmers in our hill and mountain regions.

The other strand of the CAP is its role in encouraging rural development-related activities. Payments under this initiative are geared towards the encouragement of economic diversification in rural areas and can be accessed by all the various groups living and working in the countryside.

So much for the background. The current CAP measures will run their course at the end of March 2013. The new European Commission, under the presidency of José Manuel Barroso, was appointed at the beginning of this year and one of its core objectives moving forward is to review the current operation of the CAP. Under the current timetable formal proposals will be published by the policy strategists in Brussels in the expectation that Europe’s politicians will reach some form of agreement at some stage during 2012.

In the past the farming industry has, in the main, accepted the changes agreed to the CAP, safe in the knowledge that the overall budget for agriculture would increase in line with inflation. But this time around, there are grave concerns within the local farming industry that the recent downturn in the financial fortunes of many EU member states could lead to a significant reduction in the amount of money made available to fund the CAP.

Local agriculture has not had its economic worries to seek over the past few years. Successive downturns in the world’s food commodity markets, in tandem with the atrocious weather inflicted on Northern Ireland in 2007, has meant that farmers have been extremely reliant on their SFP to keep their heads above water. And given this reality, the prospect of measures being introduced that will reduce the overall CAP budget has gone down like a lead balloon with farmers right across Northern Ireland.

Fundamental change

The enormity of the challenge confronting local agriculture as it gears up to participate in the forthcoming review of the CAP has been brought into sharp focus by Norman Fulton, who heads up DARD’s Policy and Economics Division. The leading agri-economist has confirmed that securing a viable budget for agriculture will be the first hurdle to overcome.

“For the first time ever, the budget for agriculture will be agreed in tandem with the review negotiations,” he told agendaNi.

“There has never been a decrease in the budget made available to agriculture up to this point. However, all of the EU member states are currently under tremendous fiscal pressure. I have no doubt that, as a result of this, pressure will be exerted to cut the level of funding for the CAP moving forward and we may end up with a scenario in which keeping what we have already have could be regarded as a victory.”

But securing an acceptable budget is only part of the CAP challenge facing the local farming sector. Fulton then went on to point out that possible Commission proposals centred on the redistribution of the SFP could also be fraught with difficulties from a Northern Ireland perspective.

“Obviously, if the overall CAP budget is reduced then farmers across Europe will lose out,” he further explained. “However, assuming no reduction in the overall CAP budget, the option of moving forward on the basis of an EU flat rate SFP payment will result in Northern Ireland losing 28 per cent of its current SFP allocation.

“At the present time Northern Ireland has the highest SFP average in the UK, when assessed on an area basis. The figure is €360 per hectare. If we were to go down the route of introducing a UK-wide flat rate payment system, then Northern Ireland will again lose out significantly.

“If, however, a flat rate payment system is introduced for Northern Ireland, again on the assumption that the current budget is maintained, then there will be implications for the various farming sectors. Moving forward on this basis would result in significant cuts in the total SFP allocation received by the dairy and lowland livestock sectors. The big winners in relative terms within this scenario would be those landowners who are not actively farming.”

Key MEP role

The man in charge of the European Commission office in Northern Ireland has confirmed to agendaNi that the European Parliament will play a major role in determining the outcome of the next full review of the Common Agricultural Policy.

Maurice Maxwell added: “The Parliament now has the power of co-decision, where agriculture is concerned. This has already been the case for some time with regard to the setting of the EU budget and a range of other important EU policy areas.

“From a logistical point of view, the fact that the Parliament now has a say in the full determination of farm policy may increase the length of time it takes to reach a decision, leading up to the next review of the CAP. However, co-decision has worked in other policy areas, so I am pretty confident that the Commission, working in tandem with the Council of farm ministers and the European Parliament will be able to get the business that’s required sorted out within an acceptable time frame.”

The Commission in Brussels will publish its initial review proposals before the end of this year. It is anticipated that a small grouping within the Parliament, which will almost certainly include members of its Agriculture Committee, will take part in the final CAP review negotiations.

“The Commission kick starts the whole process by publishing the initial review proposals,” Maxwell further explained.

“Given that this is the first opportunity for the Parliament to have a full say in the determination of EU agricultural policy, I have no doubt that MEPs will take the opportunity of ‘flexing their muscles’ when it comes to getting down to the business of reaching a final agreement.”

Ulster Farmers’ Union President John Thompson told agendaNi that his organisation is committed to campaigning vigorously so as to get the best possible CAP reform package for local farmers.

“Sometimes political appointments in Brussels may seem far removed from family farming in Northern Ireland but the fact is that very important decisions will be made in Brussels in the coming years and the new EU Agriculture Commissioner Dacian Cioloş will have a significant influence on this and on the future well being of farms in Northern Ireland,” he added.

The union’s President confirmed that the new Commissioner has two particularly important issues to deal with: to secure a strong budget for the CAP, and to deliver a non-bureaucratic CAP “which continues to effectively support our farming families and deliver food and security and good environmental management.”

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