RETHINKING EU BUDGET

SPENDING ON AGRICULTURE IN

THE NEXT MFF

Presentation to the session ‘More efficient use of scarce financial resources – An efficient Common Agriculture Policy and focussed structural Funds’

EPSC High Level Conference ‘Shaping our Future: Designing the next Multiannual Financial Framework’

8-9 January 2018, Brussels

Alan Matthews

Professor Emeritus of European Agricultural Policy

alan.matthews@tcd.ie

Key figures

• Shares in MFF commitments 2014-2020

• CAP 38%

• Economic, social and territorial cohesion 34%

• Shares in CAP expenditure (following Pillar transfers)

• Direct payments 71% (share in EU budget 28%)

• Rural development 24%

• Single CMO market management 4%

• Payments over €50,000 (2104 claim year)

• Number of beneficiaries 131,300

• Amount paid to these beneficiaries €13.8 billion

• Share of direct payments to these beneficiaries 33%

• Share of total EU budget to these beneficiaries 10%

2

The value added of direct payments

• Direct payments make up an important share of farm

income on many farms…

• … but they are not well-designed or well-targeted for

these purposes.

• Much of the benefit is capitalised into land values

• (see next slide)

• There is no European value added in making income

support payments to farms that are already well-

structured and enjoy significant economies of scale…

• … although capping is very much a second best solution

3

4

Source: Eurostat

Land rents up 4 times

Land prices up 5 times

In last 10 years

Two-thirds land rented

Accession

5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Den

mark

UnitedK

ingd

om

Neth

erland

s

Belg

ium

Fra

nce

Germ

any

Spain

Ire

lan

d

Gre

ece

EU

-28

CzechR

ep

ublic

Sw

ed

en

Cypru

s

Hun

gary

Italy

Lu

xe

mb

ou

rg

Bulg

aria

Lithuan

ia

Pola

nd

Latv

ia

Fin

land

Rom

ania

Slo

va

kia

Esto

nia

Austr

ia

Slo

ve

nia

Port

ugal

Cro

atia

Ma

lta

Relative importance of direct payments and rural development funding by Member State, 2015-2020

Pillar 1 Pillar 2Source: Own calculations based on DG AGRI data

Note: Figures prior to transfers between Pillars

Co-financing Pillar 1 payments

• Co-financing would bring benefits in terms of a more

efficient use of EU funds.

• Give Member States an incentive to maximise the value

of spending

• Remove the anomaly between Pillar 1 and Pillar 2

spending

• Allow the EU to use its budget to drive Member State

expenditure in the direction of priorities with higher

European value added

• Release funds in the general EU budget which could be

used for other EU priorities.

6

CAP net balance structure after Brexit

(% of GNI, 2016 figures)

7

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

NL MT BE LU SE DE IT FR DK AT CY FI ES HR SI SK CZ PT IE PL EE LV HU RO EL LT BG

CAP net balance CAP PI net balance CAP P2 net balance

Source: Own calculations. 2016 CAP spending from DG BUDGET Operating Balances

workbook, GNI figures from Commission Amending budget No. 4 2016

Excludes market-related expenditure

A budget for results

• Structuring the MFF to encourage a high level of

ambition in setting CAP targets

• The current incentive structure, with pre-allocated funds

which Member States see as ‘their’ money, is all wrong.

• Member States should be incentivised to achieve better

results with EU money in various ways:

• Target co-financing on measures with high European

value added

• Use of performance reserve

• Competitive funding

• Ex ante conditionalities

8

Conclusions

• Ways in which the next MFF could support a more efficient CAP

• No longer a policy rationale to maintain the two-Pillar structure.

• Limit payments to larger beneficiaries allowing national top-ups if desired

• Introduce co-financing for Pillar 1 payments

• Require that the greening payment be used to finance an environmentally-meaningful menu of options chosen by Member States

• Some proportion of CAP funds should not be pre-allocated but distributed in a way that incentivises ambitious programmes

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