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Opening Statement on the CAP by Minister Simon Coveney, Dáil Eireann, 13 October 2011

CAP proposals

I welcome this opportunity to address the House and to set out my position in relation to the CAP reform proposals published by the Commission yesterday.

First off, I must make two general points:

  • These proposals are complex and detailed. We will need time to digest them in full and there are points of detail on which clarification will be required. Thus the reaction I will give you today is my initial reaction.
  • At this stage they are proposals only, not final texts. Negotiations will be taking place at political and technical level over the next year or more and it is highly likely that the current texts will be significantly altered before final agreement is reached.

I already gave you an outline of the Government's priorities in the CAP reform process when I addressed the House in September. I propose today to present our initial comments on the formal legal proposals and I will elaborate on any points raised in this debate during the question and answer session.

The texts to hand do not contain too many surprises and there are good points as well as difficulties in them.

First of all on overall funding: the parallel proposal on the multiannual financial framework for the next EU budget which was presented by the Commission last June maintains at least in nominal terms the current level of CAP funding. This is a good starting point in the negotiations and compares very favourably with the pressure for severe cuts to the CAP from certain elements of the Commission and a good number of Member States earlier this year.

As to the distribution of funds between Member States, I am pleased that the Commission has adopted the pragmatic approach to redistribution - at least in respect of direct income supports - that had been advocated by Ireland and a number of other Member States. We had strongly advocated that this issue should be examined on the basis of each member state's average payment per hectare of eligible area. I am pleased that the Commission has adopted that approach, which Ireland was initially alone in proposing. The net result, on current figures, is a relatively small reduction in our national ceiling for direct payments from €1.255 billion at present to €1.236 billion in 2017 and subsequently. The results would have been very negative for Ireland if another measurement, utilised agricultural area (UAA), had been used as the basis of the calculation as was the original intention. We will of course be subjecting the calculations to detailed scrutiny in the negotiations and will continue to seek to maximise our position.

I would have preferred if the Commission had adopted this approach for the distribution of pillar 1 and pillar 2 funds together. However the Commission proposals indicate that they will make a separate proposal on rural development (or Pillar 2) funding on the basis of objective criteria and past performance.  It is clear from the accompanying impact analysis that such a proposal could threaten our rural development funding depending on the precise criteria used, but I note that the Commission have said there will be a "small change in the distribution of Rural Development national envelopes". I am determined to seek to retain our rural development funding and this will to some extent be facilitated by the fact that the Commission have chosen to analyse the distribution of pillar 2 funds on the basis of funding per hectare of pillar 1 eligible area. Again this was something advocated by Ireland as it demonstrates that our allocation per hectare is below the EU average, and this gives us a useful argument to deploy in defence of our rural development funds, as does our good past performance in using these funds.

Moving on to the Single Payment Scheme, the Commission is proposing that the current scheme will be replaced by a new payment model made up of a number of different elements and moving eventually to a uniform national or regional rate of payment.

The proposals envisage that the individual historic reference will be replaced by a model based on regional or national averages. There is a target date of 2019 for achieving a uniform value of all basic payment entitlements in a Member State or region of a Member State.

I have to acknowledge that there is very little support among other Member States for the retention of the historic model as used by Ireland. In those circumstances, my priority will be to seek as much flexibility as possible for Member States to determine the payment models best suited to their conditions and to the development of their farming systems. I will also be looking for appropriate transitional arrangements, and I am not happy with the front loaded transition process in the Commission proposals. I discussed this issue recently with my French colleague, Bruno Le Marie and we agreed on the need for such flexibility for Member States in relation to both payment models and transition arrangements. I believe we can get good support at Council, and I hope in the European Parliament, for a reasonable level of flexibility for Member States, including a longer and slower transition than envisaged by the Commission. This will be a major focus of the negotiations over the next year or two.

My Department is already engaged with stakeholders on this issue and will now intensify consultations on appropriate payment models for Ireland. We need to look at all possibilities in an open minded way in order to determine what is best  to support our ambitions for the sector as set out in our recent report Food Harvest 2020: Milestones for Success.

There has been much speculation in the media recently about the use of 2014 as a reference year for the establishment of entitlements. Under the proposal, new payment entitlements will be allocated in 2014 to active farmers who used at least one payment entitlement in 2011. Entitlements will be established for the farmer who declares the land in 2014 and will be based on the eligible area declared by the farmer for that year.

I am of course aware that there is concern that the proposals could lead to land market distortions and would not be in the best interests of productive farmers. I have conveyed these views to the Commission and will continue to press this point. Indeed the proposals already contain some changes from what was in earlier drafts as a result of our pressure. For the present, I would say the following. The provisions surrounding establishment of entitlements are very complex and will require a great deal of clarification. Moreover, it is highly likely that they will be altered significantly during the course of the negotiations. Against that background, I would strongly urge farmers not to prejudge the situation and not to rush into decisions now that they may later have cause to regret.

I mentioned in regard to the last point that the Commission proposal is to confine payments to active farmers. These are defined as farmers whose annual direct payments are greater than or equal to 5% of the total receipts obtained from all non-agricultural activities, OR, in the case of certain areas, who carry out a minimum level of agricultural activity as established by the Member State. I believe this proposed definition may give rise to unnecessary bureaucracy and I will be seeking in the negotiations to have some changes made. The key point in my view is to give Member States sufficient room to define an active farmer in a way suitable to their own conditions.

As expected, the Commission is proposing that 30% of the national ceiling be set aside for greening, that is, a new payment per hectare payable to farmers for following agricultural practices beneficial for the climate and the environment. The Government supports the idea of encouraging sustainable forms of agriculture which is at the heart of the food harvest 2020 strategy. However, I have considerable difficulty with the proposals as they stand.  The existence of a separate greening measure will complicate our existing Single Payment Scheme. It will also hasten the movement towards uniform national or regional payment rates. I am conscious that the CAP already delivers considerable greening. Thus, in order to avoid excessive bureaucracy, we should consider alternative approaches which achieve the same ends but with less red tape. I would also take issue with some aspects of the three greening criteria proposed but these are details that may be best left to another day and to the detailed negotiations. There are many issues here that need clarification in the first place and then detailed consideration by experts before final political decisions are made.

I welcome the proposal in relation to Young Farmers, which mandates Member States to use up to 2% of the national ceiling to make top-up payments to young farmers for a five year period. This is a proposal that Ireland was particularly active in pressing with the Commission. We are all aware that there is a need to improve the age structure of our agricultural work force, and to support well-educated young farmers who will be the platform for further innovation and growth in our agriculture industry. I think therefore that it is sensible to provide for support to young farmers in both Pillar 1 and Pillar 2 of the CAP.

There is also a proposed scheme for small scale farmers who, as an alternative to tiered direct payments, may opt for lump sum payments of between €500 and €1,000. At first sight this seems more geared to the subsistence type holdings found in some of the new Member States that to the size of holdings we would consider small in Irish terms. For that reason, I am not sure whether there is much of interest for us in this proposal but we will consider it in consultation with the farming organisations and other stakeholders.

There are further options for Member States to use part of their national ceilings to support areas of natural handicap and for coupled payments. Overall I believe there is merit in having a series of flexible and voluntary options available to Member States to gear their payments best to their own farming conditions.

One final word on the proposals for Direct Payments; progressive capping is foreseen in respect of payments over €150,000, with reductions ranging from 20% up to 100% for amounts in excess of €300,000. Capping would have very little impact in Ireland. Most of our farms are small family farms and would not come close to the capping threshold proposed.

Turning to rural development, and aside from the allocation of funding which I spoke about earlier, changes are proposed both to the process for approval of rural development plans and to the objectives and measures themselves. I will defer detailed comment on the processes proposed until another day. All I will say is that the process proposed for co-ordination of priorities and spending between the various EU funds is very cumbersome and I will be seeking in the negotiations for it to be streamlined and simplified.

As to the proposed objectives, I welcome the fact that the three current objectives of competitiveness, sustainable management of natural resources and the wider rural economy are retained. I am also pleased that the requirement to maintain an axis balance between the three objectives has been abolished because it added unnecessary rigidity to the current regime. The axis balance system has been replaced by six priorities for rural development which are broad ranging and will allow us more flexibility in how we spend our funding.

As regards the menu of measures now proposed, I note that many of the measures available under the existing regulation have been retained although there are changes to the details. There are some interesting new options available that we will have to look at carefully. These include new measures for farm and business development that provide start up aid for young farmers, small farms and non-agricultural activities. The latter provide considerable scope as they are directed at farmers, farm households and SMEs and Micro Enterprises. The new options to facilitate cooperative projects and to address risk management may also be of interest.  Producer groups also feature in the menu of measures available. Support for LEADER activities will also be a part of our next programme. Of course, my priority for rural development is to maintain support for on-farm investment, including appropriate support for afforestation, to assist the restructuring that is necessary to improve competitiveness and help in delivering the Food Harvest 2020 strategy.

The draft Rural Development regulation also contains the Commission's latest proposals for the delineation of Less Favoured Areas or Disadvantaged Areas as we know them. In that respect, I am pleased that the Commission has finally accepted "soil moisture balance" as one of the bio-physical criteria to be used to determine inclusion in less favoured areas. This was a point pressed repeatedly by Ireland with a view to ensuring that proper account was taken of the cool damp climate in Ireland and its effect of trafficability of the soil.

An agri environment measure is of course also provided for and in this round the measure will be compulsory and includes a reference to climate. I have no difficulty with this as agri environment has always been an important part of our programmes over the years and considerable expenditure has been dedicated to this area under the current programme. Funding for Natura areas is also proposed under the draft Regulation.

A new stand alone organic measure for farmers who convert to or maintain organic farming practices is also of interest with rates of support similar to those proposed for agri environment.

Moving on to the draft regulation on market supports, the majority of the existing rules will continue unchanged and the proposal incorporates some dossiers already under discussion in the Council on quality policy, marketing standards, contractual relations in the milk sector and alignment of legislation with the Lisbon Treaty

It is proposed to abolish sugar quotas by 30 September 2015.  I support this objective. I believe it is the best approach from an Irish perspective and would allow commercial interests to look at the possibilities for sugar production in this country in the future. That said, I foresee that there will be a great deal of controversy about this proposal in the negotiations to come.

Some of the existing aid schemes in the milk sector are set to be abolished.  However, the reality is that the schemes in question have not been used in practice in many years. There are some useful proposals to do with addressing emergencies and serious disturbances of the market. The limitations of the existing regime were borne out during the recent eColi and Dioxin crises and the proposals now to hand aim to provide more flexibility for prompt action.

My priority in regard to market supports is to ensure we retain the possibility to intervene in the market when that is necessary to maintain prices at least at safety-net level. There will be more price volatility in the years to come, and we need to remember the lessons we learned in 2009 about the value of market supports in the dairy sector at that time. We must also ensure that there are adequate funds available and accessible for these measures.

There are many other changes proposed to the regulations but I do not have time to list them all here. There will be many other debates before this dossier is finalised and many more opportunities to discuss all of the detailed issues. I would refer Deputies and others to my Department's website where they will find some useful additional material on the proposals. It is my intention to keep a very open flow of information as the CAP negotiations proceed, so that we can have a fully informed debate in this country on this vital policy for the future of our agri-food sector.

I would like to make one final point about simplification. Attempts at simplification are very modest in these proposals and indeed in some important respects they would add to the complexity of the CAP. There are a couple of changes to the regime for cross compliance but no real streamlining that would impact at farm level. I am disappointed with this and I will be taking this matter up with the Commission, in association with like-minded Member States over the coming period.