Agricultural Support

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The Common Agricultural Policy

Agriculture  in many developed countries is financially supported by  national governments, although the levels of assistance vary depending on the type of farming and the policy of each government. A common system of support, the Common Agricultural Policy (CAP) was devised by the six original members of the European Union (EU) to support their farming industries and communities and to facilitate trade between member states. British agricultural policy has been integrated with the EU  (then EEC) since Britain joined the community in 1973.

Pause for thought................. Can large amounts of taxpayers money be justifiably allocated to an industry that employs 1.7% of the population and contributes less than 9% to Britain's Gross Domestic Product (including merchants, wholesalers, manufacturers and food processors)?  

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 Fifty years of production policies in Europe 

Adapted from The Living Land: Jules N Pretty (1998)

The principal goal of agricultural policy throughout Europe in the 20th Century has been increased productivity. Financial support from the state, and later the European Community and then the European Union, has been tied to output and markets for produce that have been guaranteed (see Agriculture in Post war Britain). Intensification was actively sought. The 1952 Agriculture (Ploughing Grants) Act set two rates for ploughing up grassland, the higher rate of 30/ha (430/ha, today's equivalent) for removal of at least 12 year old, grassland. Rates of uptake were the greatest in the eastern and south-western counties where grassland was rapidly converted to cereal production (Bowler, 1979). The 1957 Farm Improvement Grant further favoured the development of capital intensive cereal and dairy farming, since land drainage and hedgerow removal qualified for subsidy as well as buildings and machinery. These grants and subsidies continued through the 1960's, with new provisions to encourage the amalgamation of small farms into larger units and the early retirement of farmers. It was not until after Britain entered the European Union that many of these direct grants and subsidies were discontinued, i.e. those for fertilizer and lime in 1974. Nonetheless, the Common Agricultural Policy (CAP) continued to support agricultural prices, protect markets and provide for export subsidies. 

Historically, agricultural support favoured production

The policy climate began to change in the 1980's. Food commodities were beginning to accumulate at an alarming rate in the EU, producing the first food mountains. It was becoming increasingly apparent that something must be wrong with an agricultural support system that produces too much food and which, therefore necessitates great expenditure on storage and subsidising exports to other parts of the world.  In 1988, set-aside was introduced  to control over production.  At first it was a voluntary measure, however as part of the MacSharry reforms of the CAP it became compulsory in 1992.

See more information about the description and development of set-aside.

By the early 1990's, these surpluses were absorbing 20% of the CAP budget, just in storage costs, a further 28% was expended on export subsidies. By 1997, the total CAP budget had grown to 41 billion ECU's (European Currency Units), of which about half was for direct payments to farmers (EC 1995). In the UK the total expenditure under the CAP and on national grants was 3.03 billion during 1995 and 1996, the equivalent of 52 per citizen in the UK.

In the UK these direct payments (subsidies) are not necessarily supporting those farmers they are aimed at with the largest farmers capturing the greatest payments.  In England, seven farms received area aid payments in excess of 500 000 in the mid 1990's. The largest 651 arable farmers (1.3% of total) received 15% of all support, whereas the smallest 30 000 farmers (58% of total) received 33.3% of all support. No farmer in Wales received more than 100 000. 

Pause for thought... List 2 other mechanisms which could  possibly be used to allocate support to farmers which would provide a distribution of monies more in line with the aims of the EU.

The Way forward for Policy.

In Mid 2001 the old Ministry of Agriculture Fisheries and Food was merged with parts of other Government Departments to become the Department for Environment, Food and Rural Affairs.  Documents relating to the objectives of this merger and the strategic developments in this area can be found on the DEFRA website.

Examples of several of the key documents related to  agriculture have been published by DEFRA and can be found by following the links below:

The Government's policy on Bovine TB and badger control in England

Foot and Mouth Disease Control Strategy for Great Britain

The Single Payment Scheme

Pause for thought: What do you consider the impact of the replacement of MAFF with a new overarching Ministry (DEFRA) has been in the farming community. Do you think the removal of "farming" from the Ministry title is significant?

Agri- environment payments

Are the rewards worth it to the farmer?

The annual cost of the CAP was about 58bn in 2010, of which about 4bn goes on market price support, 40bn on direct payments and 14bn on rural development and agri-environment schemes. In addition to budget costs, CAP imposes a cost on EU consumers through higher food costs. This varies according to movements in world prices. The UK receives some 7 per cent of available CAP funds (some 4bn in 2010), but we are a significant net contributor to the policy.

Under the Common Agricultural Policy all EU Member States have had to design a Rural Development Programme to deliver the Rural Development Regulation (RDR) which underpins the legal framework for the activities that can be funded under the Rural Development Programme for England (RDPE)(Pillar 2 of the CAP). The RDR essentially requires Member States to draw up seven year Rural Development Plans which draw on measures in the RDR to provide rural development and agri-environment support to address identified needs. Follow this link for information about the current England Rural Development Programme (2007-2013).

Changes to CAP after 2013 and the Single Payment Scheme are having a major impact on the support for farming and are likely to seriously influence the way some people farm in the future.

Pause for thought......should agriculture be supported at all? What is the difference between a family farm and a family owned shop that has to compete with the supermarkets?

 

CAP Reform

 

The CAP has been adapted to respond to changing needs since it was first created. Recent significant reforms include the mid-term review in June 2003 and the CAP Health check in 2008, to modernise the sector and make it more market-oriented. Mid-term review changes included de-coupling subsidies from production, allowing farmers to be free to produce to market and consumer demands. The de-coupling of subsidies with production was also designed to have an environmental benefit, as subsidies have been linked to compliance with environmental standards along with food safety and animal health and welfare standards. The 2008 Health check was designed to modernise, simplify and streamline the CAP, removing restrictions on farmers so they could respond better to market demands. Included in this were phasing out milk quotas by 2015, moving most of the remaining coupled payments into the Single Payment Scheme, increasing investment aid for young farmers, abolishing the requirement to have set-aside land and simplifying cross-compliance requirements.

SPS payments in England are based on entitlements, which were allocated to farmers in 2005. From 2012 the value of all entitlements will be based on a flat rate, with a single value being established for all entitlements in each of the three English areas, with each region receiving a different flat rate.Farmers applying to the scheme will receive an entitlement for each hectare of eligible land. The three regions are divided into:

bulletThe English Moorland within the upland Severely Disadvantaged Areas (SDA).
bulletOther English upland SDA
bulletEngland outside the upland SDA.

Cross Compliance

Cross compliance is a series of standards that farmers need to meet in order to receive full payment of their subsidies. There are two main elements:

1) Statutory Management Requirements (SMR),

2) Maintenance of land in Good Agricultural and Environmental Condition (GAEC).

A third condition, not currently a cross compliance requirement for individual farmers, but which may become one in future years, is the requirement to maintain a level of permanent pasture, not included in the crop rotation for five years or more. EU legislation requires Member States to make sure the ratio of permanent pasture to total agricultural area is maintained at the levels from 2003, and if a decline approaches 10%, may have to take action, requiring farmers who have recently converted pasture to agricultural land to return some land to permanent pasture.

SMRs cover the environment, food safety, animal welfare and animal & plant health. The GAEC measures are defined by each member state and include the protection of soil, habitats and landscape features.  Inspection of a number of sample farms on a yearly systematic basis ensures that the standards are being met. They are conducted by the Rural Payments Agency (RPA), and the Animal Health and Veterinary Laboratories Agency, each responsible for inspecting different cross compliance areas.

 

 

 

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