Current position on CAP reform and CAP spending and the UK rebate

CAP spending

Since 1992, the EU has been reforming its Common  Agricultural Policy. From a time in the 1970's when around 80% of the EEC budget was spent on the CAP, we now spend 49bn euros (£33bn, $58bn), or 46%, of the EU's 106.3bn budget (2005).

In 2003 we finally broke the link between how much farmers produce and how much income support they receive from the EU. This was intended to reconnect farmers to market signals and to make our agricultural support more compatible with WTO rules on non-trade distorting subsidies.

Income support payments were made conditional on farmers observing good environmental and animal welfare practices (cross compliance). And since 1999, there has been a gradual increase in the rural development budgets. However, although it has fundamentally changed the structure of European farm support policies, there has been little or no reduction in the overall amount of subsidies provided to EU farmers.

The EU budget involves significant transfers of money between member states. With net contributor countries like Germany, the Netherlands, the United Kingdom, Denmark, and Sweden interested in limiting overall EU expenditure, the CAP is an important potential target for budget savings. However, France receives around 25% of CAP payments.

Transparency of CAP payments

The increasing transparency of income support payments has prompted new questions about the fairness of CAP expenditure, given that 80 percent of the money is distributed to 20 percent of the EU's farms  and large agri-business.  Most EU agri-money is not being spent on supporting the small farmer. 

The UK rebate and CAP spending 

In June of this year the Luxembourg presidency proposed freezing and eventually phasing out the UK's 5bn euro (£3.5bn) rebate. However Tony Blair said that this would only be possible if there was a guarantee of major cuts in the agricultural budget. The UK has come under fire for failing to move forward the budget negotiations during the first half of its presidency, and we were criticized again recently for failing to present a new compromise proposal with figures. .

A 'modern' budget

 In return we have emphasized the need to "modernize" the budget and to agree on the timing and scope of a planned review of agricultural spending. Apparently a modern budget is one that spends "more on enterprise, less on French farmers".

A review of agricultural spending is due in 2008, but most Member States argue that the 2002 agreement rules out cuts in farm spending before 2013.  The negotiations are ongoing and controversial.

Terry Wynn, 17.11.05