Farm Ireland
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Thursday 15 November 2018

Economist says €60k cap on farm payments ‘will not happen’ due to loopholes

The Future Growth Loan Scheme which it hopes will be in operation in early 2019 makes up to €300m of loans available with a term of 8-10 years. (stock photo)
The Future Growth Loan Scheme which it hopes will be in operation in early 2019 makes up to €300m of loans available with a term of 8-10 years. (stock photo)
Ciaran Moran

Ciaran Moran

In proposals, announced last month on reform of the Common Agricultural Policy (CAP) which need to be approved by member states, EU countries will have to cap subsidies for large farms — with the Commission suggesting a limit of €60,000.

Agriculture and Rural Development Commissioner Phil Hogan said that the savings generated from this capping can be redistributed to smaller farmers.

This, he said should serve to further mitigate the impact of a proposed 5pc cut to the CAP budget on the incomes of the small and medium-sized Irish farms.

However, leading Agricultural Economist and a Professor at Trinity College Alan Matthews has slammed such statements as misleading and disingenuous, because they ignore what is likely to be the fine-print in the Commission proposal.

In a paper on the issue, Matthews said that this proposal is unlikely to achieve its intended objective.

He said a leaked draft of the Commission’s legislative proposals requires Member States to first deduct the value of salaries paid from the direct payments received before the cap is applied.

Indeed, he says the leaked draft further proposes to extend this loophole to also include the imputed value of own family labour engaged on the farm.

“The effect of these loopholes makes capping meaningless.

If capping is to be effective, this loophole must be removed, preferably before the publication of the Commission legislative proposals,” he claimed.

Matthews said that it was his view that there is no particular merit in focusing support on small farms just because they are small.

“The folly of doing this is only exceeded by the greater folly of focusing support on large farms simply because they large, which is what happens at the moment when payments are linked to area.

“Payments should be linked to helping farmers to transition to more sustainable modes of production and to the production of public goods, regardless of the size of farm,” he said.

In it's proposals for the EU's next seven-year budget the European Commission proposed to reduce farm subsidies and leave more latitude to member states under the CAP.

The CAP proposal comes as part of a bigger, new, multi-year EU budget set to trigger battles among member states over how to fill the funding gap left by Britain’s exit next year.

In an effort to cut costs and promote other policies, farmers will see aid shrink in the 2021-2027 period to €365 billion, down 5pc from the current CAP, the Commission said.

This would represent a share of less than 30pc of the total budget of 1.28 trillion euros in inflation-adjusted prices, down from more than 45pc 20 years earlier.


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