CAP cut in austerity EU budget

AFTER 25 hours of non-stop negotiations, Europe’s 27 leaders agreed to the first austerity budget in the EU’s 56-year history last week. It was a long, historic night in Brussels. 

It has been hailed as a triumph by Prime Minister David Cameron who, along with close allies Germany, Sweden, Denmark and the Netherlands, managed to settle on a new budget ceiling of £812 billion for 2014-2020, or a 3.3 per cent reduction from the previous 7-year budget. The deal also came despite “le snub” where mid-way through the talks French president Francois Hollande failed to attend a meeting to discuss a deal with Europe’s two largest benefactors, Germany and the UK.

One of Mr Hollande’s chief grumbles, as leader of the country that benefits most from agricultural payments, was the cut to the Common Agricultural Policy (CAP). The CAP budget has been set at £315bn, which was slightly higher than the figure on the negotiating table at the start of the summit, but represents a significant cut on the current level of CAP spending.

The direct payments pot for 2014-2020 has been cut to £234bn which represents a £22bn cut on the current 7-year budget. Rural development funding has also been cut. 

The cuts haven’t been welcomed by farmers across Europe, far from it. In fact the UFU led a delegation to Brussels in the run up to the heads of state meeting calling for leaders to push for “a strong budget for a good CAP”. But by the same token budget reductions will come as little surprise, given that most national governments have also been forced to reduce spending in the face of growing national debt and poor economic growth. 

Arguably more important than the headline budget figure is the fine detail that will determine how that money will be spent. It was worrying therefore that the heads of state agreed on flexibility for member states to sweep 15 per cent of pillar one payments (direct support) into pillar two (rural development) coffers, without any obligation for national treasuries to match-fund the cash. The danger is that the UK government will make up for having the EU’s lowest share of rural development funds by making full use of this flexibility. Meanwhile other member states will take advantage of the flexibility to move money in the other direction to bolster their farmers’ direct payments. This will create huge distortions in payments and move UK agriculture further from the level playing field we are all craving. 

Another big part of last week’s budget deal was the obligation for all farmers to fulfill certain “green” measures in order to unlock 30 per cent of their direct payment. 

Perhaps the most significant factor of last week’s deal was that it unblocked the path towards CAP reform - a new policy could now be in place on January 1 2015. Between now and June, with the budget figures firmly in place, the European Parliament’s 754 MEPs and the Agriculture Council’s 27 agriculture ministers must work on crucial issues such as what exactly it means to be a “green” farmer, how to define an “active farmer” and at what rate member states should move from “historic” to “area-based” payments. It will be a crucial time for the farm lobby in Brussels, and at home, to make a final mark on the policy makers to shape a CAP that is fair for farmers and will enable European agriculture to thrive in spite of the budget cuts.