Oral - Political Agreement on CAP Health Check

On 20 November, Ministers of the Agriculture and Fisheries Council of the European Union came to a political agreement to bring the common agricultural policy audit health check process to an end. I was present as a member of the negotiating team of Ministers from the United Kingdom. My purpose this afternoon is to outline the main approach of the agreement that will apply to the operation and administration of the common agricultural policy until 2013.

At the outset, I need to make it clear that the health check was never intended to deliver significant reform. Rather, the European Commission, following a review of the CAP reform packages for 2003, was asked to report in 2008 on proposals to simplify the operation of the CAP.

The health check started some 12 months ago. In that time, my officials and I have been fully engaged in developing the UK negotiation positions as well as attending meetings of the council. We have been taking part in the EU internal scrutiny processes that examined the health check proposals.

I have consulted stakeholders in Wales to help inform the Assembly Government’s overall approach to the health check. I have also discussed certain key issues with Mariann Fischer Boel, the EU Commissioner for Agriculture and Rural Development.

I also need to let Members know that, although there is political agreement on the CAP health check, it has not yet a formal and final legislative text. This legislation will be formally agreed within the next few weeks.

I now want to outline some of the key decisions taken.

First, Wales can retain the historic basis for the single payment scheme until 2013 at least. However, for the period between 2014 and 2020, it is apparent that payments will not be made under the system based on production that was used between 2000 and 2002. Therefore, I have instructed my officials to engage with farming and countryside interests to examine the options available in moving towards an area-based payment single payment scheme. When I met the commissioner in April this year, she confirmed that there would need to be transitional arrangements but we should not expect that period to be longer than two or three years.

In modulation, the current EU compulsory regime at 5 per cent will increase to 10 per cent by 2012 through stepped increases at 2 per cent in 2009 and 1 per cent for each of the years 2010, 2011 and 2012. The receipts from the increase in compulsory modulation transfer for use under rural development plans to support activities that address issues relating to climate change, water management, biodiversity and renewable energy, innovation and the dairy industry.

The commission’s proposals for higher compulsory rates where the single payment receipt was at €100,000 or more were rejected, and the proposal now is for an additional 4 per cent rate will apply to payments above €300,000. Some six farmers in Wales will be affected by this higher rate. For Wales, and the rest of the UK, the increase in the compulsory rate will require a comparable reduction in the rate of voluntary modulation. What this means in practice is that the Welsh farming community will see no increase in the overall rate of modulation applied to their single payment, except for those above the €300,000 threshold.

The existing modulation funding streams and EU support for the rural development plan are safeguarded. The commission has confirmed that we can continue to use the 'new’ compulsory modulation to support existing activities, particularly the land management schemes under axis 2 of the rural development plan.

The council also agreed a clear timetable on decoupling payments. By 2013, the only sectors where coupled aid will remain payable are suckler cows and for sheep and goats. The EU energy crop scheme will be abolished in 2010.

On the dairy sector, the agreement paves the way for the quota regime to be abolished in 2015. The commission’s proposals for a 1 per cent annual increase in quota levels from 2009 over five years has been agreed.
A more contentious element of the agreement relates to the expansion of the national envelope provisions, introduced under the 2003 reform package. Within the UK, only Scotland has used the envelope to deliver a beef calf support scheme.

The more flexible national envelope provisions allow for a deduction of up to 10 per cent in the national financial ceiling or, in the case of Wales, the regional financial ceiling. This would be to fund actions addressing environmental disadvantage or in the livestock sector, as well as for setting up crop insurance schemes and mutual funds to address animal and plant disease. A limit of 3.5 per cent has been agreed where use of the envelope involves payment related to production. In addition, and within specified limits, unused funds within the single payment national ceiling can be redirected for use under the national envelope or directed to the rural development plan, and, for the single payment scheme, a new minimum threshold of €100 or 1 ha has been agreed. At the current time, 0.3 ha is the level that applies in Wales.

There is much detail to be digested on the common agricultural policy health check that I will want to share with Members and the farming community. I believe, however, that the outcome within the political agreement can be shaped positively to the benefit of Wales and Welsh farming.