EU farm subsidies face chop due to Brexit budget hole

Farm subsidies face being chopped as Brexit hammers the EU coffers, with the Government being asked to find extra funds to make up the shortfall.

Budget commissioner Günther Oettinger has warned that spending cuts are coming across the board to deal with the Brexit black hole.

This will include reductions to the common agricultural policy (CAP), which eats up 40pc of the bloc's budget.

He said the EU also needed to "shift expenditure" away from traditional policies to pay for migration and defence, and that governments needed to consider paying in "fresh money" if they wanted the EU to stay relevant.

Among the options are less generous payments to farmers or a tax on financial transactions. Applying common energy or environmental taxes to imports were also considered in a paper on reforming the EU budget.

"We believe that cuts - if we compare to the current approach - are going to be necessary over the next decade," Mr Oettinger said. "But it is clear that with cuts alone, it is not going to be possible to plug the Brexit gap."

While Mr Oettinger said he was not in favour of "sweeping cuts" to the CAP, regional policy chief Corina Cretu said governments would have to consider topping up direct payments to farmers.

"We put all the ideas on the table," Ms Cretu told reporters in Brussels.

"National co-financing could be considered an option for direct payments, and it will be discussed."

She said farmers don't mind whether CAP money comes from Brussels or national coffers: "I am sure farmers will be very glad to receive the money, and that will happen - they don't care if it's 95pc from European Union and 5pc from member states."

But Irish Farmers' Association chief Joe Healy said an "increased CAP budget is required" to deliver on the EU's economic, social and environmental goals.

"Cuts to the CAP budget have undermined the effectiveness of this common policy and its ability to provide a fair standard of living for producers," he told the Irish Independent.

Agriculture chief Phil Hogan defended the CAP at the Commission's weekly meeting, and according to one insider, was told he "had a lot of friends in the room".

The EU is just starting to plan its future seven-year budget, its first without the UK. Britain contributes €10bn-12bn more per year than it gets out, meaning its departure from the EU will leave a gaping hole. The current budget ends in 2020, with the UK slated to leave in 2019.

European Parliament President Antonio Tajani was recently forced to deny reports that he was planning a major budget overhaul that would shift resources away from agriculture.

But the leader of Mr Tajani's political group in parliament, Manfred Weber, told this newspaper last week that the bloc needed to "check the current headings, agriculture and so on" in the EU budget, and said there was a need for a specific budget line for defence.

The EU shells out around €41bn, or 70pc of its total farm budget, in direct payments to farmers, with the other 30pc co-funded by governments for "rural development" and climate-friendly measures.

While no concrete proposals have been made to cut direct payments, the EU said that "hard choices will need to be made" post-2020. One of the five scenarios is for a "radical redesign" of EU spending, including "reduced direct payments".

A spokesman for the Department of Agriculture here said it was "simply a reflection paper" to start a debate on the EU's future budget.

"Ireland continues to regard the maintenance of a strong, effective and well financed CAP that contributes to public good as a priority into the future," the spokesman said.