22nd November, 2012

Multiannual Financial Framework (MFF) 2014-2020
and CAP Reform

 

 

Priorities

• Irish priorities are sustainable intensification
  of production, environmental stewardship and the maintenance of a vibrant rural
  economy.

 

Process

• Ireland is prepared to put a major effort into
  securing a deal on CAP reform during the Irish EU Presidency. However, to do
  this, three things need to happen:
  • there must be progress on the MFF by the end of
    the year,
  • there must be substantial progress during the
    Cypriot presidency on technical issues,
  • all three institutions – the European
    Parliament, the Council and the Commission – need to engage actively in the
    negotiating process.
  • Draft EP reports from COMAGRI Rapporteurs in
    respect of each of the main CAP reform legislative proposals have been
    published, and amendments (nearly 8,000) have been submitted by MEPs.
  • However, a COMAGRI vote on the amendments, which
    had been due to take place at the end of November, will not now happen until
    late January 2013. This significantly narrows the available window for the
    conclusion of a deal on CAP reform under the Irish Presidency.

 

MULTIANNUAL
FINANCIAL FRAMEWORK:

• The EU budget is divided into five
  headings.  Heading 2 covers Sustainable
  Growth: Natural Resources. The vast bulk of funding under this heading is
  allocated to the Common Agricultural Policy (CAP).
• Of the €975 billion in the current EU Financial
  Framework (2007-2013), expenditure on the CAP accounts for over €410
  billion.  This represents about 40% of
  the EU budget or some 0.48% of EU GNI.  Over 85% of Ireland’s
  funding, comes from the CAP, including €1.255 billion per annum in Direct
  Payments to farmers in pillar 1 of the CAP and €346 million per annum in rural
  development funds in pillar 2.
• Negotiations on the next EU financial framework, covering the period from 2014 to 2020, are currently taking place in parallel to negotiations on the reform of the CAP. Indeed, a number of the sectoral reform proposals are being addressed in the MFF negotiations.
• Under Heading 2, the Negotiating Box deals with
  the size of the CAP budget, the mechanisms for distribution of funds between
  Member States, and co-financing rates. It also deals with some non-financial
  issues such as the two-pillar structure of the CAP, the degree of flexibility
  within these pillars, capping of payments and greening of Pillar 1 (direct
  payments).
• The key issues for Ireland in a MFF context are
  the size of the CAP budget, the mechanism for distribution of funds between
  Member States and the proposals for greening of the CAP:

 

COMMISSION MFF
PROPOSALS

Overall Funding:

• The
  Commission proposal is to maintain agriculture funding at 2013 levels in
  nominal terms. (More recent proposals re the overall Budget are outlined
  further below)
• This represents a decline in real terms over the
  lifetime of the next Financial Framework.
  It also falls slightly short (by 1.4%) of the amount needed to fund the full
  cost of phasing in direct payments in Bulgaria and Romania in the period after
  2013, and means that direct farm payments across the EU will suffer a small
  reduction.
• Nevertheless, Ireland’s view is that the
  Commission proposal represents a reasonable starting point for the negotiations.
• However, we have pointed out that agriculture is the
  expenditure heading showing the most restraint, and that the amount proposed is
  the minimum required. Ongoing pressure from some Member States for further cuts
  in the overall budget, and in the proposed CAP allocations (see below), will
  therefore continue to be resisted.

 

Allocation of funds
between Member States

• The key priority for Ireland is to retain our
  levels of funding for both direct payments (pillar 1) and for rural development
  (pillar 2).
• Commission proposals for redistributing direct
  payments between Member States (where a Member State’s average payment per
  hectare is less than 90% of the EU average, one-third of the gap between that
  Member State’s payment per hectare and 90% of the EU average will be closed, and
  paid for proportionately by those Member States above the EU average) are
  broadly satisfactory from an Irish viewpoint.
• The Commission has yet to table a specific
  proposal in respect of rural development funding, but we have concerns that the
  proposed criteria for Pillar 2 will reduce our allocation.
• Ireland is also pressing for Pillar 1 and Pillar
  2 funds to be considered together, and for the pragmatic approach being
  employed for direct payments to be used for rural development too. The latter
  would be consistent with the complementary nature of the two pillars within one
  common agricultural policy.
• In any event, it is imperative that we see
  proposals soon from the Commission on Pillar 2 distribution.  It is unrealistic to expect Member States to
  sign up to proposals for the allocation of Pillar 1 funds without knowing the
  Commission’s intentions on the second pillar.

Greening

• In a MFF context, the main focus is on the
  proportion of direct payments to be used for greening measures. The Commission
  has proposed that 30% of the annual national ceiling should be used. Ireland
  considers that this rate would represent an unacceptable hastening of the move
  to flat rates of payment, unless it is applied at individual farmer level, i.e.
  each farmer is paid the same percentage of their overall payment rather than a
  flat-rate in return for greening measures.
  

 

MFF – Other Issues

• Capping:
  Not an issue for Ireland, as very few Irish farms are affected.  We have no objection to the concept but
  understand the difficulties it poses for some Member States.
• Financial
  discipline:  Our preference is to
  retain the current system of financial discipline without the €300 million
  margin (as per the latest Negotiating Box text).
• Flexibility
  between pillars: This poses no particular difficulty for Ireland and we
  would support the suggestion to exempt funds transferred from Pillar 1 to Pillar
  2 from co-funding.
• Co-financing
  rates: We welcome the possibility of higher general co-financing rates
  (55%) and the higher rates (75%) mooted for environmental and climate change
  measures.
• Increased
  co-financing for programme countries: This is an important issue in the
  context of exchequer co-funding on rural development.  We favour the proposed 10% increase in EU
  funding, although it should be noted that this represents a substantial
  reduction on the current arrangement of 85%.
• Food for deprived
  people: If this is to be placed in Heading 2, the necessary funds should be
  transferred with it, although the latest text suggests it will be placed in
  Heading 1b.
  • Macro-economic
    conditionality and performance reserve: We have serious concerns about the
    practical effects of suspension of EU funding for rural development programmes
    in the event that we are deemed not to meet macro-economic targets.  We also have issues with the administrative
    burden posed by the performance reserve proposals.

 

MFF NEGOTIATING BOX
OF 13 NOVEMBER 2012

• The European Council is meeting on 22/23 November to
  discuss the MFF.
• The most recent version of the MFF Negotiating Box
  outlines an overall budget cut of €75 billion, with a further cut of €25.5
  billion for the CAP.
• Pillar 1 (direct payments and market supports) is cut
  by €13 billion, while funding for rural development is cut by €8.3 billion.
• In addition, an earlier provision for a €3.5 billion
  reserve for crises in the agriculture sector, which was to remain outside the
  MFF, has been removed. A reserve of €2.8 billion is now included within the
  heading, to be deducted from direct payments each year and reimbursed if not
  drawn down. In the event that these funds are used, the result would be a
  further cut of about 1% in the EU direct payments budget annually.
• The Minister has again made the point that the
  defence of our CAP funding remains at the core of the Irish Government’s stance in the budget
  negotiations.
• Protection of CAP funding is a crucial national issue, given its
  importance to our national agri-food development strategy and the importance of
  the sector to our economic recovery.
• The Government is determined to protect the CAP to the maximum
  extent possible, and to defend Ireland’s share of it.

 

CAP REFORM

• Ireland’s key concerns arise in the context of
  proposed revisions to the system of direct payments.
• The main issue is the potential redistributive
  effect of the Commission’s proposal to move to flat national or regional rates
  of payment by 2019.
• The second relates to the principle of greening
  and to the difficulties associated with its implementation.
• There are also a number of other points to
  consider under the proposals relating to rural development and the operation of
  the single CMO.

 

 

Direct Payments – Allocation
of funds within Member States

• This is a key issue for Ireland. The priority is
  to obtain as much flexibility as possible for Member States with regard to
  payment models and transitional arrangements.
• Ireland currently operates a “historic” model of
  payments whereby payments to farmers are related to their average annual
  receipts over the period 2000 to 2002.
  Ireland is concerned that the Commission proposal to move to flat
  national or regional rates will cause large transfers from the more productive
  farms to more marginal and less productive land, and that much of this movement
  is proposed to be front-loaded.
• The Department’s
  analysis indicates that, under a national flat rate, around 74,000 Irish
  farmers would gain an average of 85% on their current payments, while around 56,000
  would lose an average of 33%. These are average percentages, and many of the individual
  gains and losses would be far more significant than this.
• Ireland therefore contends that Member States
  should be allowed to determine the payment model best suited to their
  conditions and to the development of their farming systems. If there are to be
  any changes, a lengthy transitional period will also be required.
• We would like to have
  the possibility of putting a limit on the amount any farmer could lose in any
  redistribution. This would be consistent with the Commission’s desire to
  achieve a more level playing field, but would avoid a disruptive level or pace
  of change.
• The ‘approximation’
  approach, by which all payments could gradually move towards, but not fully to,
  the average, is one alternative that we believe should be considered in this
  regard.
• In our discussions
  with Member States who are in a similar position to ourselves by virtue of
  their use of the historic model, we have been focussing in particular on the
  application of the Commission’s external convergence methodology (used to
  calculate the redistribution of direct payments between Member States) to the
  internal redistribution of payments within Member States. We have agreed a set
  of common conclusions with Spain, Portugal, Italy, Luxembourg and Denmark in
  this regard, and have expanded these detailed discussions to other Member
  States with a view to building on this alliance.

 

• The farm bodies have
  supported this kind of approach and the IFA recently participated with the
  Minister in a range of meetings around the country on CAP reform, discussing
  proposals with farmers.

 

• Fianna Fáil’s Eamon O’Cuiv has taken the
  opposite view and is supportive of the Commission’s proposal to move to a flat
  rate system. FF is now engaging in a number of meetings around the country to
  build support for this approach. This position is proving divisive, and has the
  potential to split farmers across the country. The FF position is broadly aimed
  at building support amongst farmers in the West.

 

• In reality, there is much greater variation within
  regions than expected – it is not a case of East v West. There are many productive
  farmers in the West that would lose significantly if Eamon O’Cuiv’s approach
  was implemented. The overall approach is to try and do what is in the best
  interests of the country broadly and of ALL farmers and to negotiate a CAP that
  will allow us to deliver on the aims of Food Harvest 2020.

 

 

Direct Payments – Greening

• Ireland supports the idea of encouraging
  sustainable forms of agriculture, which is at the heart of the Food Harvest
  2020 strategy, and can support the Commission in its desire to further enhance
  the green credentials of direct payments.
• However, it is preferable to do so in a way that
  avoids adding excessive bureaucracy.
• There are concerns that the proposed structure
  of the greening payment, i.e. a flattening of 30% of the direct payment, would
  hasten the movement towards uniform national or regional payment rates.  We would wish to see the 30% greening
  component calculated as a percentage of each individual farmer’s payment (as
  opposed to a flat 30% of the national average payment, which in Ireland is
  equivalent to €80/ha).
• In
  addition, there are practical difficulties with the three greening criteria
  proposed that need to      be resolved:
  • on retention
    of permanent grassland (with a 5%
    tolerance), Ireland has difficulties with the definition of permanent
    grassland  proposed by the Commission,
    and would prefer that this measure continue to be controlled at regional or
    national level rather than at the level of the individual holding as proposed
    by the Commission,
  • on crop diversification (3 different
    crops, minimum coverage of 5% and maximum coverage of 70%), Ireland would
    prefer the threshold for the application of this provision to be raised from 3
    to 15 hectares, that the number of alternative crops be reduced to two and that
    the maximum percentage for the main crop be increased from 70% to 85%,
  • on EFAs (ecological focus areas – 7% of
    land, excluding permanent pasture, devoted to ecological purposes), Ireland
    would like to see a  reduction in the percentage
    of land to be assigned as EFA or an expansion in the kinds of activities that
    would qualify as EFA. We would also like to see farmers with less than 15
    hectares of tillage excluded from the requirement. With a pre-dominance of
    grassland, the continuance of arable production is positive for bio-diversity.
  • Ireland’s preferred option was to enhance
    current cross compliance and GAEC (Good Agricultural and Environmental
    Condition) provisions by adding (adjusted) greening measures, but we now accept
    that this will not deliver the visibility sought by the Commission for its
    greening initiative. As an alternative, we would wish to see the adjustments to
    the three greening criteria as outlined above together with an expansion of the
    “green by definition” category to include measures that have equivalent or
    better environmental impacts to what the Commission is proposing, e.g. for
    Ireland, membership of a sustainability scheme such as those run by Bord Bia.

 

Direct Payments – other issues

Definition of Active Farmer

• On the definition of an active farmer, Ireland’s priority is to
  ensure the avoidance of payments to non-farmers in a way that does not create
  additional bureaucracy. Ireland supports recent efforts by the
  Presidency to focus on agricultural activity, and on a negative list.

 

Young Farmers

• On young farmers, Ireland’s main concern is that Member States
  should be allowed to identify objective criteria – for example a minimum
  standard of agricultural education – in order to ensure that the scheme can be
  targeted at genuine young farmers.

 

Small Farmers

• Ireland would prefer that this scheme is
  optional for Member States, given the significant administrative burden
  involved.

 

Rural Development

• On rural development, Ireland’s priority is to
  maintain support for on-farm investment and to assist the structural adjustment
  necessary to improve competitiveness as we implement the Food Harvest 2020
  strategy.
• Ireland has concerns about how rural development
  funding can fit strategically within the Common Strategic Framework model, as
  proposed by the Commission.
• We are also concerned about issues such as the
  restriction of investment to farms of a certain size, the absence of a forestry
  premium for loss of income, the designation of areas of natural constraint and
  the potential effects of Pillar 1 greening payments on agri-environment
  payments.

 

Market Support
Measures

• Ireland welcomes the proposed retention of key
  market supports, including export refunds, together with the use of exceptional
  measures and a crisis reserve for emergency situations.
• On exceptional measures and the crisis reserve,
  the key requirement is that funding is available to deal with whatever
  emergency situations might arise.
• We have concerns in relation to the effects of
  increased recognition of producer organisations and inter-branch organisations
  on the functioning of the single market.
• Ireland strongly supports the proposal to
  abolish sugar quotas from 30 September 2015.

 

Conclusion

• We are entering a crucial stage of what will be
  a protracted negotiation process,
• Many details remain to be thrashed out and the
  nature of many of the proposals may change considerably as the process evolves.