The Common Agricultural Policy
Thursday 27th October 2011
THE COMMON AGRICULTURAL POLICY TOWARDS 2020 A NEW PARTNERSHIP BETWEEN EUROPE AND FARMERS?
2005 saw a major change in the method of delivery of Government support for agriculture with the introduction of Single Farm Payment Entitlements. Over the last 6 years landowners, farmers and their advisors have become adjusted to the new regime. However, the system is about to change again. On 12 October 2011 the European Commission published draft proposals for CAP reform post 2013.
The proposals were launched as a greener CAP to meet the challenges of food security while protecting the environment. The following is an overview based upon the draft regulations – please note that the final regulations may change.
The New Scheme
When the new scheme commences the Single Payment Scheme (SPS) ends and all existing entitlements are extinguished. From 1st January 2014 a new multi-layered payment is to be introduced with a completely new allocation of entitlements. Unlike 2005 there will be only one type of entitlement. These will only be allocated to those who successfully claimed on at least one hectare of entitlement in 2011. The number of entitlements allocated will be based on the number of eligible hectares that the ‘active farmer’ declares as being ‘at his disposal’ on the first claim date.
The multi-layer payment comprises the following : -
Basic Payment
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The underlying income support payment. To be able to claim you must :
Greening
Young Farmers Scheme
Small Farmers Scheme
Areas of Specific Natural Constraints
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ARE YOU AN ACTIVE FARMER? This is a new requirement designed to exclude claimants who are not actively involved in farming. To receive the allocation of new entitlements and to claim the direct payments, two tests must be met : -
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GOING GREEN
All farmers who are entitled to the Basic Payment Scheme must meet the greening element (organic and small farmers are exempted) and will receive an additional annual payment.
This requires the claimant to follow all 3 of the following requirements : -
1. Crop Diversification - (applicable if you have more than 3 ha. of arable land and that land is not entirely down to grass, left fallow or entirely cultivated with crops largely under water!) Must have 3 different crops (of which the main one doesn’t exceed 70% of the arable area and none are less than 5% of the arable area). 2. Permanent Grassland – the area of permanent grassland on your holding declared in the first year of the scheme (2014) must not be reduced by more than 5%. 3. Ecological Focus Areas (EFA) – at least 7% of the eligible land (excluding permanent grassland) must be kept as an EFA. Examples include fallow land, buffer strips, landscape features etc.
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PRIVATE CONTRACT TRANSFERS
The regulations provide for the benefit of being a 2011 claimant to be transferred to one other farmer by a ‘private contract’ on sale or lease of the 2011 claimant’s holding (or part of it). This could enable a new farmer to secure an allocation of entitlements in 2014.
THE PAYMENT
In England it is likely that the default value for the entitlements will be an average payment value set at the start of the scheme. (Other areas which had retained ‘historic’ payment values will be subject to phasing.)
Capping will be introduced for payments of between 150,000 Euros and 300,000 Euros.
The amount to be capped excludes the ‘greening’ payment and is calculated after deduction of salaries effectively paid and declared by the farmer.
RURAL DEVELOPMENT PROGRAMME
The current RDP will be replaced. The declared objectives of the replacement programme are to contribute to : -
- The competitiveness of agriculture.
- The sustainable management of natural resources and climate action.
- A balanced territorial development of rural areas.
Potential measures include agri-environment climate schemes but these cannot be used to pay for cross compliance or ‘greening’ for example.
New Environmental Stewardship agreements commencing on 1st January 2012 or later are likely to include a revision clause to allow them to be amended to reflect any changes to the RDP.
TIMING
The Commission is proposing that the new system will be introduced on 1st January 2014 but it is widely expected that there will be slippage (as there was in 2004/5) and perhaps 2015 is a more likely implementation date.
The proposals are in a draft form and there will be changes and additional detail before we have the final form of the new system.
FACTORS TO CONSIDER
Although the current draft proposals will be subject to change, the following are points to bear in mind : -
- Will you meet the definition of an active farmer?
If not, are you able to plan for alternative arrangements and how will these impact on your tax treatment
- Cropping
Will your current farming system meet the crop diversification requirement?
- Permanent Grassing
Be aware of the proposed change to a reference area on a holding basis.
- Do you let out land?
Consider how you will obtain the new entitlements in 2014 and review current letting arrangements
- Are you acquiring land in order to become a new farmer?
Ensure that the 2011 claimant status is transferred to you.
For specialist advice on rural property matters contact the rural team at Andrew Granger & Co. LLP.
Richard Gadd BSc (Hons) Richard.gadd@andrewgranger.co.uk
Elizabeth Lewin BA (Hons) PG DIP Surv MRICS Elizabeth.lewin@andrewgranger.co.uk
Hannah Hatton BSc (Hons) MRICS Hannah.hatton@andrewgranger.co.uk
Rupert Harrison Dip.Surv., Dip CPA, FRICS, FAAV, FICBA Rupert.harrison@andrewgranger.co.uk