Two major flaws in European Agriculture policy are that the agricultural budget is too big and that it is skewed in the wrong directions. It provides aid and support to those who do not need it and fails to concentrate on those problems which do lie in the sphere of government responsibility. In the run-up to setting the Community’s post- 2013 financial perspectives, plans should be made to eliminate all direct support to farmers in non-economically disadvantaged areas of the EU 27 and thus liberate EU financing to focus on fundamentals.

This approach would cut approximately three quarters off the current annual €40 billion expenditure on direct payments to farmers and food traders (single farm payment and direct commodity support – Pillar 1 budget). The remaining €10 billion, plus the current €10+ billion expenditure on rural development, environmental protection and animal welfare programmes should instead be concentrated on rural development in the economically and socially disadvantaged areas of the EU 27. Taxpayer support of farming in these areas should only be continued if it is essential to maintaining social and environmental structures and habitats which cannot be sustained by the market.

The so-called ‘non-marketable’ services, such as habitat preservation, a clean environment, the protection of biodiversity need better recognition and should be addressed by new and specifically targeted policies. Direct payment for environmental and other ‘non production services’ which society expects farmers to provide can only be justified where they are not automatically delivered by normal profitable good husbandry. The single farm payment is certainly not the means of achieving this objective efficiently. Its linked ‘cross compliance’ obligation has not achieved and is not likely to achieve environmental objectives by default.

In the longer term, certainly in the post-2103 financing period, the Pillar 1 budget needs to be wound down and eventually eliminated, and a separate fund established focused purely on achieving social and environmental objectives.

Franz Fischler and the architects of the 2003 CAP reform always presented the Single Farm Payment as a short term transitional measure – a move which had direct appeal to the then minority of CAP reformers. As the EU prepares its long term budgetary plans it is imperative to ensure that the SFP is accepted by policymakers to have been transitional. The current profit levels of mainstream lowland arable and livestock farming in most of Europe – independent of SFP receipts – indicate that there is every justification for phasing out direct support after 2013.

European policymakers need to recognise that while a decoupled income payment to farmers may not distort the market in the same way as one designed to maintain production of a given commodity, it is still a major factor in sustaining inappropriate levels of production. If the EU continues to pay out in excess of €38 billion a year for the single farm payment beyond the 2007-2013 Financial Perspectives period, the domestic and international markets for agricultural commodities will remain distorted.

A rigorous review of the objectives of rural development policy (Pillar 2 of the current farm budget) is now clearly needed in order to clarify what that policy is trying to achieve. Certainly, the emphasis in any new budget structure needs to be on wider rural development with agricultural production levels and patterns largely ordered by the market on the same basis as any other industry. A much reduced rural policy budget should concentrate its resources on the most disadvantaged regions in all Member States. The restructuring of rural areas is of paramount importance particularly in the new Member States and in those countries likely to join the EU during the next ten to fifteen years.

The economic regeneration of rural areas in the New Member States and the need to modernise their agricultural sectors should be provided for out of a single rural development fund completely separate from any other agricultural objectives. The more prosperous Member States should be allowed to fund their own rural development programmes, but on the same basis and using the same criteria as used for state intervention in any other industry or in urban restructuring.

The budgetary burden of the rural sector should be substantially diminished, allowing a higher level of spending on those environmental issues which have grown increasingly important to European citizens.

It is impossible to conclude that there any ‘overriding issues of transnational, or European interest’ that justify the continued operation of a common agricultural policy financed by a common budget. It is clear that the public interest, however defined, will be advanced by a more liberal market-based approach to agriculture. This will ensure that supplies of food are secure, varied and in tune with consumer demand. The budgetary burden of the rural sector should be substantially diminished, allowing a higher level of spending on those environmental issues which have grown increasingly important to European citizens. Such a pared down approach should guarantee the delivery of those social and environmental public goods which people have come to expect from rural Europe at the lowest possible budgetary cost.