Farming Accountants


CAP reform – more changes ahead?

farmers fieldThe Department for Environment, Food and Rural Affairs (DEFRA) has recently opted to transfer 12% of their funds from direct payments to rural development schemes as part of the Common Agricultural Policy (CAP) reform.

Speaking on behalf of the organisation, the DEFRA secretary, The Rt Hon Mr Owen Paterson, is quoted as saying “England’s £15 billion Common Agricultural Policy must deliver real benefits to farming, rural businesses, the countryside and the taxpayer…and this decision will see £3.5 billion invested in the environment and rural development schemes over the next seven years”.

He went on to acknowledge that “this is a significant change in the way we allocate CAP money and even with a smaller overall CAP budget, the Government will be spending a bigger share of the budget on the environment than before.” In this statement, Mr Paterson, makes it clear that industry lobbying appears to have paid off and that the authorities are finally listening.

CAP is the agricultural policy of the European Union, responsible for the implementation of agricultural subsidies and important agricultural programmes. Introduced in 1962, these CAP reviews and changes in 2014 have come about following European Commission and working group studies, consultations and agreements. Some of the CAP reforms taking place now were first mooted mid-year 2013, and many discussions and debates are still ongoing.

While the detail is not yet crystal clear, there are several areas under the microscope that are worth looking at. As a farmer, it’s essential that you stay abreast of what these potential changes could mean for your business in order to stay ahead of the game. In a nutshell, here’s what we believe to be the key points to be aware of:

Active Farming

The whole area of active farming is under scrutiny and it is suspected, but not yet confirmed, that “Agricultural Activity” is likely to be defined as either “rearing or growing of agricultural products; OR maintaining the land in an condition that makes it possible to either graze or cultivate OR the carrying out of a minimum activity (which will be defined by each member state)”. It has been suggested that payments shouldn’t be made to members whose CAP activities make up less than 5% of receipts from non-agricultural activities or where their land does not meet the conditions mentioned.

Basic and Greening Payments

It is proposed that the scheme will make two payments instead of the current Single Payment (SP). These will be made up 70:30 of a Basic payment and a Green payment top-up. To qualify for the payment, an SP application had to be made in 2011 and farmers must be deemed to be “active” (see note above). The basic payment is expected to be progressive and capped at €300,000. The Greening element is mandatory and likely to be based on a combination of 3 different criteria concerned with: maintaining permanent pasture land; crop diversification and the maintenance of an Ecological Focus Area. Furthermore it is expected that significant penalties will fall on farmers not meeting the greening requirement.

Young Farmer top-ups

Young farmers (under age 40) and new entrants who operate on up to 54ha of land can expect a payment in addition to the basic and greening funds. The payment for these farmers will operate over a 5 year period, but will be reduced depending on the year their business was set up. For example, a business set up in 2013, will receive 2 years of additional funding.

Transferring between Pillars

It is suggested that up to a tenth of funds will be transferrable from Pillar 1 to Pillar 2. At this moment in time, Pillar 2 has 6 priority areas instead of the current 3. They focus on: knowledge transfer and innovation; competitiveness; promotion and risk management; retention and development of eco-systems and resource efficiency and reduced carbon emission as well as social inclusion, reduction of poverty and economic development in rural areas. What this means is that member states will be able to transfer funds to formulate their own rural development programmes based on these guidelines.

Other factors to bear in mind:

1. The possibility of a change of Government, in the not too distant future, therefore the possibility of yet another change of approach.
2. The general economic state of the overall community could force unforeseen changes.

Our recommended course of action at this stage is to sit tight, adhere by the rules and seek advice where and when you need to. And don’t forget, we have our finger firmly on the CAP pulse and are here if you need us.

If you are worried about the implications of CAP changes, feel free to get in touch.

Posted in: Common Agricultural Policy, EU regulations, Farmers

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