Where next for the Common Agricultural Policy?

The Common Agricultural Policy, or CAP, is a subject which raises great emotion both within the agricultural industry and among taxpayers. It dates back over 50 years and there are big changes proposed for January 2015.

What is CAP and why was it introduced?

  • The CAP was created in 1962 with the main aim of producing affordable food for consumers and a fair standard of living for farmers. As food rationing had only ended in 1954, producing more food was then a key aim of all governments.
  • The policy was so successful that by the 1970’s there was a surplus of food which led to the infamous “grain mountains” and “wine lakes” as surplus production was put into storage.
  • Since 1992 the emphasis changed to “producer support” but payments to farmers conditional on meeting environmental, animal health and other standards have continued.

Is it just paid to farmers?

  • Since 2000 the scope of CAP has been broadened to include rural development rather than just farming. This is a controversial topic as part of the money used to fund environmental schemes and rural development comes from reducing direct payments to farmers – known as modulation.
  • The size of the EU has continued to increase – between 2004 and 2007 the number of farmers doubled when 12 new members joined.
  • Further reform has been under discussion and is to be introduced from 2015.

Do all recipients get an equal payment?

  • No. Whilst CAP is decided at a European level, implementation is at a national level and a considerable level of discretion is allowed which results in vast differences between member states and even different parts of the UK, for example between England and Scotland.

What will the proposed 2015 changes mean?

  • A major criticism of the CAP is of the amounts paid to large landowners and corporations. The reforms recently announced are attempting to address this by restricting payments to active farmers rather than to landowners, and also by scaling back payments over 150,000 Euros (approximately £125,000) by 5%.
  • At the other end of the scale a minimum claim size of five hectares (just over 12 acres) is being introduced which will significantly reduce the number of claimants.

Do we still need it?

  • Whilst the cost of food has increased significantly in the last few years, so has the cost of producing it. This means that profitability in many sectors is still very low and they would not be viable without continuing support from CAP. For example the average upland beef producer made a loss of £182 per cow without subsidies in 2012/13 and lowland sheep farmers a loss of £12 per ewe – figures from EBLEX. As a result, whatever your views on CAP it looks as if the system is going to be with us for a while longer.

Keith Johnston, Tax Director

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