Co-financing remerges as crucial issue in last round of CAP negotiations

Negotiations on the reform of the CAP are entering their last stage. The European Parliament is challenging the Council deal concluded in June which settled the MFF (EU spending 2014-2020) but, controversially, included commitments on aspects of the CAP as well. The EP is challenging the legitimacy of this incursion into the CAP, potentially giving rise to a further round of negotiations with the Council which may or may not be prepared to concede changes to the June deal.

This debate raises important issues for the environment and rural development more broadly. Particularly key is the question of co-financing. Most immediately, should it be obligatory for Member States to co-finance funds which are switched from Pillar 1 (direct payments and commodity market support) to Pillar 2 (for rural development) under the Article 14 Flexibility between Pillars facility? Only a handful of Member States, such as Denmark, Sweden, Germany and the UK, are very likely to choose this route. However, for such countries, the way in which this matter is resolved could have a big impact on environmental land management for the next decade.

The Heads of State in their agreement on the Multiannual Financial Framework in February agreed that there was no necessity for national co-financing of funds switched from Pillar 1 to Pillar 2. This was welcomed by many because, although desirable in principle in that it would bring more funding into the rural development budget, the reality of the current financial situation is that such a requirement would act as a strong disincentive on Member States to use this facility. In practice, rural development funding would be very likely to shrink rather than grow. For this reason, the current call from some MEPs, principally from the EPP, to reinstate the requirement for co-financing such transfers is being backed strongly by farmers’ organisations. They see this as a way of stopping fund switching to Pillar 2.

One of the outcomes of the MFF debate was a disproportionate cut in the overall rural development budget, compared with Pillar 1, reflected in many countries’ individual budget allocations. For some countries, to maintain existing commitments to farmers under the rural development budget simply requires funds to be moved across from Pillar 1. But national budgets are squeezed and if national co-financing were to be required, with no additional public money for cofinancing, it is very possible that no CAP funds could be switched from Pillar 1 for the coming period. This would have serious ramifications for the funding of environmental land management and could undermine the steady growth of agri-environment-climate contracts and the positive actions that they fund farmers to carry out.

Combined with the watered down greening of Pillar 1, with its broad range of exceptions and allowances for existing ‘environmental’ features, such a cutback in Pillar 2 environment schemes could mean that environmental management could actually retreat for the rest of this decade in some countries.

It would be a significant step backwards if the European primary parliament chose to pursue co-financing as a primary issue in the course of an understandable challenge to the June deal. Member States need to be given every opportunity to maximize the benefits they can deliver from their rural development programmes. This includes creating conditions that enable fund transfers from Pillar 1 to rural development, not putting barriers in their way.

PUBLICATION DATE

10 Sep 2013

AUTHOR

IEEP