EU Commission Floats Post-2020 Financing Scenarios, Sparks Farm Policy Debate

6 July 2017

The European Commission has set out five scenarios for the bloc’s financial future, including on agriculture, sparking reactions from farmers, environmental groups, and other stakeholders.

The scenarios, which the EU’s executive arm presented in a “reflection paper” on 28 June, could significantly affect the overall amount and type of government-funded support to the bloc’s farm sector, among other areas.

The options are meant to facilitate the ongoing discussions over the future direction of EU integration, including the financial implications of the withdrawal of the UK from the bloc, which is currently planned for March 2019.

“Any reflection about the future of the EU budget should therefore start with the most basic question of all – what should the EU budget be for? European value-added must be at the core of that discussion,” the paper says.

Moreover, this reflection would also feed directly into the legally-mandated process of crafting the “multiannual financial framework” for the remaining 27 EU member states, which would apply from 2020 for at least five more years. These financial frameworks determine how the EU can allocate funds towards different priority areas, along with what ceilings apply for each.

"If Europe is to tackle new challenges, the money must come from somewhere,” saidGünther Oettinger, the EU Commissioner for Budget and Human Resources, in a press statement coinciding with the release of the paper.“We can either spend less or find new revenues.'' 

EU Regional Policy Commissioner Corina Creţu said that the bloc’s budget should be simpler and more flexible, and “leave no one behind in this globalised economy.”

The EU’s executive branch is due to release a proposed “multi-annual financial framework” next year, which must then make its way through the bloc’s legislative processes. (See Bridges Weekly, 9 March 2017)

“Economic strength, sustainability, solidarity, and security must be the focal points for the EU finances of the future. And while we know that the EU budget cannot do everything on its own, a well-designed budget focused squarely on supporting those priorities can make a real difference to people’s lives and help restore trust in the EU’s added-value,” the paper says.

CAP reform

Along with being part of the multi-annual financial framework preparations, the outcome of these budget deliberations is also expected to shape the contours of the ongoing debate over the bloc’s next phase of its Common Agricultural Policy.

The Common Agricultural Policy, otherwise known as the CAP, governs the funding for the bloc’s agri-workers, with the support going towards rural development schemes, farmer incomes, or market interventions. This state aid also comes with various conditions, some of which are linked to sustainability objectives.

Funding under the current CAP amounts to approximately €59 billion per year, with the current version of the scheme due to end in 2020. The discussion on post-2020 CAP reform is currently in the early stages, as the EU institutions prepare for the famously complex process of negotiating the next phase of the scheme.

The Commission’s reflections paper refers to this upcoming process, including some of the ideas that have already been raised in the early stages of debate, such as how to restructure or refinance direct payments for farmers. It also calls for additional ways to spur farmers towards undertaking greater environmental and climate-focused responsibilities, and raises the concern that many in the EU’s rural communities “feel left behind.”

“Among the debated options is the suggestion to target direct payments more effectively to ensure income to all farmers across the EU, particularly for marginal areas and the poorest farms. Such an option could reduce direct payments for large farms,” the paper says.

Another option for consideration would involve asking member states to take on greater contributions in supporting direct payments, alongside the EU’s own financing, while noting the need for having the necessary tools to address “crises.”

“Any changes would need to preserve one of the key assets of the policy: the protection of a well-functioning internal market ensuring a level playing field for all producers across the EU,” the document continues.

On environmental incentives, the paper suggests that farmers should “be encouraged to invest in new technologies” and other related measures.

The Commission is wrapping up a public consultation on upgrading the CAP, with Agriculture Commissioner Phil Hogan due to present the outcomes publicly this month. Policy proposals from the EU executive on CAP reform are expected by year’s end.

Five possible pathways

The European Commission’s five proposed budget scenarios reflect different levels of ambition and are each accompanied by specific proposals for expenditure and revenue. These scenarios build around a “White Paper” outlining different approaches to the EU’s overall future, released by the same institution in early March.

A status quo option, which is dubbed “carrying on” by the Commission, would reflect the current reform agenda of the EU’s 27 remaining member states – excluding the UK. In agriculture, this would involve better targeted support for farmers facing “special constraints,” such as those working in remote or mountainous regions. It would continue to include rural development support, such as “agri-environmental measures.”

The Commission also refers to options that would either scale back or ramp up support and cooperation, referring to these as “doing less together” and “doing much more together,” respectively.

“Doing less together” would involve a significantly reduced collaboration on shared EU spending priorities. In agriculture, support would only be available for farmers facing special constraints, while all farms would have access to risk management tools.

In contrast, “doing much more together” would involve a significant increase in revenue and expenditure. The Commission’s paper says that this would involve a “higher amount” for agriculture, without specifying the objectives of the spending or the instruments used to pursue them.

Two other scenarios represent hybrid approaches. The “some do more” option would see sub-sets of EU members work together on shared objectives, financing these collectively as needed. In agriculture, the priorities and instruments pursued would be similar to those currently in place.

The other hybrid scenario is dubbed “radical redesign.” Spending and revenue collection would be lower under this option, with the EU focusing on supporting priorities in which the bloc considers it can add the most value. In agriculture, direct payments to producers would fall, focusing on farmers facing special constraints. Environmental and climate actions and risk management tools would apply to all farms. 

In remarks to Bridges, Professor Alan Matthews of Trinity College Dublin observed that the focus on farmers facing “special constraints” was unsurprising in light of the EU’s goal of pursuing territorial cohesion. Matthews is an expert on European agricultural policy and economics, including on CAP reform.

Farm groups, civil society reactions

The proposed financing scenarios have led to reactions from farm groups, environmentalists, and others, who have weighed in on what these options could mean for their constituencies.

Copa Cogeca, an association of European farm groups and cooperatives, released a statement calling for EU agricultural spending to be maintained, arguing that this is essential for meeting the bloc’s environmental and economic objectives.

“Difficult decisions lie ahead but the relevant role of the farming sector as the first producer of safe, nutritious and quality food must be recognised and duly funded,” said Copa Cogeca Secretary-General Pekka Pesonen. 

Meanwhile, over 250 civil society organisations released a joint statement calling for “scenario 6: sustainable Europe for its citizens.” The groups said that the EU needed to become “a driver of sustainability in Europe and beyond.”

Separately, a blog post by Wyn Grant, Professor of Politics at the University of Warwick,criticised the continued focus of the European Commission on direct payments, arguing that these are a “highly inefficient and poorly targeted means of delivering income support.” Grant, whose work has also addressed environmental and trade policy, argued that policies such as improving broadband access might be more effective in stimulating economic activity in rural areas.

ICTSD reporting.

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