Farmers will lose out under a flat-rate cap

Neil Brady

A leading agriculture economist has warned of the risks of a uniform, land-based direct payment system as proposed by the European Commission, arguing that the money will become capitalised in land values and land rental prices with benefits accruing to land owners and not active farmers.

Speaking in the European Parliament, Dr Thia Hennessy, head of Agricultural Economics in Teagasc, outlined the risks of leakage of payments to land owners under a system of land-based payments.

"There are downsides to a uniform land-based payment: such payments do not target support to farmers who need it most and do not support food security," Dr Hennessy said.

"In addition, support is still skewed to those farmers who have the larger farms.

"However, it is also equally clear that finding a workable practical alternative to the land-based system is not that easy," she admitted.

Ireland East MEP Mairead McGuinness said this was a crucial issue and it must be taken into account in on-going CAP refrom discussions.

"If our objective is to support agricultural production and active farmers, then we must take account of the leakage of money towards land owners," Ms McGuinness said.

"Equally, we must be able to give member states flexibility in deciding what system to choose under the new reforms.

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"As was pointed out in the hearing in the European Parliament, there are vastly different starting points between member states and moving to a one-sized CAP to fit all member states by 2019 is not practical or desirable in the short-term," she said.

However, the Ireland East MEP pointed out that the European Parliament had voted for a "fairer" distribution of payments between member states and between farmers, and it was inevitable that those farmers with very high value entitlements would see a reduction.

Meanwhile, it is understood that Ireland has secured agreement with Portugal, Spain and Italy on a paper that outlines their position on the thorny issue of moving payments between farmers.

Under the Commission's proposal, member states would be obliged to move to a flat rate per hectare payment by 2019.

In the paper, a copy of which has been seen by the Farming Independent, the four member states accept that direct income support must be more equitably distributed between farmers by reducing the link to historical references.

However, they question the proposed approach based on a national or regional "flat rate" and argue that the diversity and complexity of agriculture across the EU requires greater flexibility for member states in an almost fully decoupled system of direct payments.

The paper states that, given the economic and financial situation, together with the resulting budget constraints, "the highest prudence" should be taken in moving support between farmers.

It states that the objective of maintaining agricultural activity throughout the EU is still present in the CAP towards 2020 and that income support should take into account different situations among farmers, regions, and agricultural sectors within the limit of World Trade Organisation commitments.

The member states argue that the system of direct payments should allow member states to limit losses to farmers by partially, rather than fully, converging payments, in the same manner as proposed for convergence between member states.

Controversially, they propose that all elements of the proposed system of direct payments should be addressed by this internal convergence model, and not only the basic payment.

This would allow all member states, on a voluntary basis, to apply the greening component as a percentage of the basic payment established at individual level, instead of a national or regional "flat rate".

The four countries are also pushing for the flexibility to establish a reference year for eligible area in the first allocation of direct payment entitlements prior to 2014, within a period starting in 2009.

The levels of direct support per hectare should be progressively adjusted. Farmers with direct payments below the average reference level nationally, or regionally, should close part of the gap, in the same manner as proposed for overall convergence among member states. This convergence should be financed proportionally by all farmers with direct payments over the national or regional average.

To avoid disruption in the income levels of individual holdings, convergence towards this value should take place gradually during the transition period until 2019 in linear steps.

The new system of payments should also avoid administrative burdens and costs for farmers and administrations, they argue.MEETING OF MINDS: Pictured at the public hearing organised by the EPP political grouping were Dr Thia Hennessy, EU Commissioner Dacian Ciolos and Mairead McGuinness

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