|What Does the Mid-term Review Mean for us?|
The proposals in the Mid-term Review (MTR) of the CAP have the potential to bring about far-ranging changes in agriculture. They come hot on the heels of the UK Government's Strategy on Sustainable Farming and Food (SSFF), so will they harm or help that strategy?
Firstly, it has to be said that there are no guarantees that the MTR will actually be passed by the EU farm ministers. The Greek Presidency is looking at a decision by the end of June. The next meeting of farm ministers is on the 14th April - currently the votes don't stack up in favour. Estimates suggest Denmark, Germany, Holland, Finland, Sweden and the UK will vote for the proposals; Italy and Austria are wavering; and the rest are against. Each country has votes according to their size and so the intentions of France and Spain are important and could outweigh the effect of the other five countries voting against.
There may be compromises. One such is partial decoupling i.e. decouple arable aid, but postpone the decoupling of aid to livestock. Another would be to scale back degression (the bite taken out of the single decoupled payment) but this would also need the scaling back of the radical reforms proposed for the dairy regime - there wouldn't be the money available for the reforms.
The quick answer to the question above is that the change in modulation represented in the proposals could directly affect the SSFF and its proposals for introduction of a new entry-level agri-environment scheme. Originally, the level of modulation under the Rural Development regulation (RDR) was left to individual member states, but with a ceiling of 20%. The MTR proposals take away the individual member states rights to set modulation rates, turning them instead into an enforced dynamic modulation that increases each year, but setting the top at 6% (or an additional 6% - not sure) which is significantly less than the original 20% ceiling. As a complication, the modulated funds are to be put into a single pool and then handed back on a different basis than on the total amount of subsidy a member state received (it is to be done on a formula that encompasses agricultural area, agricultural employment and adjusted by the ratio of GDP to EU average - got that!). Calculations within DEFRA have already shown that this will lead to a shortfall in the funds needed for the UK Rural Development Programs - and thus for the new entry-level agri-environment scheme.
The EU Commission are aware of this and thus for the need for some transitional arrangements. It will be necessary for agreement on this transitional funding so that the planned level of expenditure in the UK can be continued, and for the UK to argue for a fairer share of the existing EU RDR funds.
As to other effects of the MTR proposals. The removal of a link between subsidy and production - decoupling - should mean that a farmers decision to produce something is based on the costs of production and the market price for the product. This breaks the cycle of farmers producing unprofitable crops purely because they have attracted a production subsidy (i.e. maximise subsidy receipts). Thus farms will be used more efficiently and farmers will be encouraged to respond much more closely to the market. It has the potential to raise quality - farmers will have to produce a quality product to get a good price, whereas subsidy took away a potential driver for quality. This may also remove over-production, leading to extensification and benefits to farm landscapes. Remember also that the MTR proposals indicate that single decoupled payments will be conditional on compliance with statutory environmental, food safety and animal health and welfare standards.
At the moment, the CAP has both positive and negative effects on the UK farmscape. An estimate for DEFRA of the economic value of these range from £1 billion to £1.5 billion for negative impacts; and just under £1 billion per year for positive impacts with the value of carbon sequestration included. While that may seem a near balance, the positive and negative environmental effects are not mutually exclusive. A study for DEFRA has suggested that overall the MTR proposals should have environmental benefits. There is likely to be a significant increase in land left fallow i.e. ploughed but then not cropped. This may have benefits for biodiversity, but it depends on how much the farmer ploughs the land and whether a weed cover develops. Same for set aside. The hoped for reductions in numbers of cattle and sheep should bring major environmental benefits across the country and particularly in the Least Favoured Areas (LFAs - mostly upland hill farms). The semi natural vegetation degraded by over grazing may return along with its associated vertebrate and invertebrate species, improvements in soil condition and a decrease in water pollution and gas emissions. However, improvement gains are not straight forward. An expected shift from beef towards sheep could provide benefits in terms of soil, water and air quality, but the change in grazing could have a negative impact on biodiversity and landscape. Also while extensification may occur in some areas, and to be accompanied probably by participation in agri-environment schemes, there may be areas where intensification of production occurs. Such is the mix when people are free to choose in the market place.
Mark Fisher, 4 April 2003