CAP Health Check

-- Margarida Vasconcelos. Full text from The European Journal --

On 20 November, the European Commission adopted a Communication “Preparing for the ‘Health Check’ of the CAP reform.” The Health Check is proposed through several adjustments to the CAP, with the aim of strengthening the 2003 reforms and paving the way for the 2013 reform. The Commission proposes to simplify the Single Payment Scheme (SPS) and to make it more effective and efficient. The Commission has suggested increasing “the rate of decoupling in those countries which opted in a number of farm sectors to maintain the link between subsidy and production, although coupled support may still play a role in regions where production is small-scale but of particular economic or environmental importance.”

The Commission has proposed a case-by case analysis in order to identify the possible risks from a move into full decoupling and the probable alternatives. According to the Commission, the SPS has made the distribution of payments more evident than before its introduction and has raised calls for limiting the level of support received by large farmers. The Commission is considering the gradual reduction of the support level as overall payments to big farmers which might involve “a 10 per cent reduction in payments for all farms receiving more than €100,000.” This policy would have to distinguish between multiple-owner farms with many employees and single-owner farms. For smaller payments, the Commission suggests the introduction of a minimum level of annual payments or to increase the amount of land a farmer has to own before he qualifies for EU support from the present level of 0.3 hectares. According to the Commissioner for agriculture “Small claims from genuine farmers should still be paid. What we want to take out of the system are pseudo-farmers, for example, the claim made by a dentist who keeps a horse on a patch of grass behind his house.” According to the National Farmers’ Union of England and Wales (NFU) "the suggestion of scaling back larger single farm payments, however seductive, is … misguided … it would introduce more complexity instead of simplicity, especially as farmers would be bound to try to adjust their businesses in order to avoid its impact." According to the Commissioner for Agriculture “the health check should make market support instruments still more relevant in a globalised world by phasing out export refunds, limiting intervention buying of cereals to wheat, abolishing the "obsolete" set-aside system and preparing a "soft landing" for when dairy quotas expire in 2015.”

The Commission also put forward a variety of possible ways to deal with climate change, bio-energy and water management in the Health Check. Moreover, the Commission pointed out that the CAP budget is set until 2013 therefore the only way to strengthen Rural Development funds is through increased co-financed compulsory modulation. Hence, the Commission is proposing to increase the rate of “modulation” meaning the decrease of direct payments to all farms which are receiving more than €5,000 per year and the transfer of the money into the Rural Development budget. The Commission will develop during 2007 and 2008 its approach to the budgetary review 2008/2009, Mid-Term Review of the European Union’s Financial Perspectives and the Health Check represents a preparatory action within this framework. Obviously, farm subsidies and UK rebate will be central to that review.

In the spring of 2008, the Commission will put forward legislative proposals although this blueprint encloses a number of concrete suggestions. The Commission presented its Communication to the Agriculture and Fisheries Council on 26-27 November 2007. Some Member States have shown their support for measures to achieve the total decoupling of aid in order to increase competitiveness, while others favour retaining partial coupling, mainly for stock farming (suckler cows and sheep). In what concerns capping of payments, some Member States perceive it as a way of better distributing aid, by limiting the amount of aid for large holdings (but some Member States have shown their concern about such measure). According to the EU Observer, Peter Baco, a Slovak MEP, said "It is a totally unacceptable idea. In our region, it would be an attack against farmers who are the most effective and successful and it would lead to a move by most of them to split up into smaller farms so that they can apply for subsidies." The biggest EU farmers are concentrated in the UK and Germany therefore those countries are most likely to be affected by the Commission’s plans. Hence, the UK which has been in favour of CAP reform is against such plans. According to EU Business, a British diplomat said “Reducing subsidies to big farms, which often include aristocratic landowners in Britain, would only compel them to split up their businesses to get under the threshold …. Having encouraged farmers to be more market-oriented and efficient, it’s perverse to put in place a policy that would encourage them to do the opposite and split up." Some Member States are not sure about the need for the Commission suggestion of strengthening the second pillar (Rural Development) by gradually increasing compulsory modulation to reach 13 per cent in 2013 whereas others believed that the funds transferred in this way should continue to be earmarked for agriculture. According to the NFU, the “European Commission CAP Health Check doesn’t go far enough in streamlining and simplifying the policy.” CAP has consumed around 40 per cent of the EU’s budget, its system of farm subsidies have came at the expense of farmers in the developing world, and obviously much more must be done.