The pros and cons of the single
farm payment
49. Rather than pay EU farmers to produce agricultural
commodities within quotas, the single farm payment, the main feature
of the 2003 reforms, provides the means to sever the link between
subsidy and production—
so-called "decoupling". The Government believe[28]
this new payment will free farmers to produce in response to market
demand, rather than to maximise subsidy income. It is also designed
to improve the environmental impact of farming by making payment
conditional upon compliance with environmental standards ("cross-compliance").
50. However several witnesses stressed that they
could see no justification for the single farm payment as an environmental
measure. Mr Alastair Rutherford, Head of Agriculture at English
Nature, told us that cross-compliance[29]
was "a very inefficient tool" in delivering positive
environmental management and strongly believed the single farm
payment should be phased out. It was a "lowest common denominator"
set of requirements that did not take into account the differing
needs of different farming areas (Q 176). In Mr Rickard's view
cross-compliance requirements were only "minimal conditions"
for achievement of the EU's environmental objectives (Q 11).
51. At the same time, witnesses stressed the
need to compensate farmers for the non-production services which
they provide to the community. As Professor Allan Buckwell, Chief
Economist and Head of Research at the Country, Land and Business
Association described it, there is a whole "quantum of public
environmental services and landscape management services, resource
protection services, [which are] delivered by farmers and landowners"
(Q 69).
52. Dr Franz Fischler considered the payment
justifiable on the grounds that it allowed EU farmers to compete
on the world market whilst meeting stringent animal welfare and
environmental standards (Q 565). Ms Shelby Matthews, Director
of General Affairs of COPA-COGECA[30],
told us the single farm payment enabled "farmers to survive
with prices going down to world price levels, therefore it is
essential for [it] to be maintained" (Q 390).
53. We fully acknowledge that the non-marketable
services farmers provide should be recognised. Such activity justifies
payment for the environmental, animal welfare and other "non
production services" farmers are expected to provide to society.
We are not however convinced that the single farm payment will
achieve this objective in the most efficient manner.
54. In the long term we believe a separate fund
focussed purely on achieving environmental objectives could be
a more efficient way to pay farmers for their environmental contribution.
Such a payment scheme should be completely separate from agricultural
support and would be likely to be much reduced from the current
levels of the single farm payment. Such a payment should be considered
during the 2008 review, in order to be established during the
2014+ financial perspective.
55. We acknowledge, however, that there are benefits
to the continuation of the single farm payment in the short-term.
The decoupling of financial support of the agricultural sector
from agricultural production requires some transitional compensation
during the period when the industry is adjusting to a liberalised
market from which support is being withdrawn. The Committee believes
that the single farm payment can be justified only on these grounds.
56. It has to be acknowledged, however, that
agreement on the single farm payment was achieved only at great
political cost. It is natural that those responsible for its design
and for directing its difficult passage through the EU legislative
system are loath to see it modified or even discarded. For them,
phasing out or significant modification of the single farm payment
is not envisaged for the foreseeable future. We were told by Dr
Fischler that the single farm payment will be a reality for European
farmers for at least the next 15 years (Q 565). It is regarded
by all of the EU officials interviewed by the Committee, as Mr
Stefan Lehner of the European Commission's Budget Directorate-General
described it, as "a very positive, forward looking element
of the Common Agricultural Policy in the future" (Q 465).
57. The proponents of the single farm payment
therefore argue that it provides stability to Europe's farmers
and also acts as "an important step in…changing the
attitudes and mindsets of all concerned—farmers, managers
and the public—to this change in direction" towards
more environmentally conscious farming envisaged within Pillar
2 (Q 69). We share this view. The single farm payment has been
the vehicle for the most radical reforms of the CAP and we commend
the European Commission for this work.
58. While we accept this argument for a limited
transitional period, we recommend the continued use of the single
farm payment only for the 2007-2013 period as a transitional tool
to i) provide stability and ii) prepare farmers for the more market
oriented and environmentally focussed future of European agriculture.
59. We acknowledge that environmental payments
should continue in recognition of the contribution farmers make
to the environment. We draw a distinction between the income
subsidy element of the single farm payment, which we believe should
not continue indefinitely, and its separate important function
of rewarding farmers for the environmental and non-agricultural
services which they provide.
60. That said, we were alarmed at difficulties
farmers are currently facing when claiming the single farm payment.
Mr Mark Thomasin-Foster, President of the European
Landowners' Organisation, suggested to us that farmers face an
inordinate level of bureaucracy in order to claim their payments
(QQ 87-88). The Financial Secretary said it was inevitable that
a new system would create a certain level of bureaucracy but thought
this would "hopefully" decline (Q 132). Yet part
of the reason for introducing a consolidated single payment was
to reduce bureaucracy and simplify the system. It would be
extremely disappointing if the benefit to farmers of receiving
a consolidated single payment was negated by the time and paperwork
required in applying for it. Immediate thought must be given to
how this can be improved.
The future of Pillar 1
61. If payment for environmental benefit was
provided through a separate fund, it is difficult to see what
justification would remain for the long-term continuation of the
single farm payment. Following the decoupling of subsidy from
production, current levels of Pillar 1 expenditure, even following
reform, may not be necessary. It is clear that if the EU continues
to pay out in excess of €38 billion a year for the
single farm payment beyond the 2007-2013 Financial Perspective
period, there will still remain a major distortion in the domestic
and international markets for agricultural commodities.
62. We share the Financial Secretary's vision
of a European agriculture sector that is "internationally
competitive without reliance on subsidy…rewarded by the market
for what it produces and…. environmentally sensitive."
(Q 144). To this end the single farm payment must only be considered
a stepping stone towards this goal.
27 See Box 3 for an explanation of modulation. Back
28
See the statement CAP Reform (England) made by the Secretary
of State for Environment, Food and Rural Affairs (HC Deb 12 February
2004, cols 1585-87). Back
29
See Box 2 for an explanation of cross-compliance. Back
30
Committee of Professional Agricultural Organisations in the European
Union (COPA) and General Confederation of Agricultural Co-operatives
in the European Union (COGECA). Back
