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The EU’s Common Agricultural Policy remains in need of fundamental reform in order to deliver benefits for taxpayers, the wider economy and the environment. It should be substantially cut down and re-focussed towards environmental objectives.
27 February 2012
Despite a series of reforms, the main ‘benefit’ of the EU’s Common Agricultural Policy (CAP) is that, on the whole, it is less damaging than it used to be. Owing to its arbitrary design and contradictory aims, the CAP fails to meet its own objectives of delivering bio-diversity, boosting farmers’ competitiveness and promoting rural jobs and economic development. It is also irrational in how money is raised and spent with no clear link between the wealth of a country and how much it receives from the CAP.
At the same time, by providing income support irrespective of whether any meaningful economic activity takes place on a farm, direct CAP subsidies often act as an outright disincentive for farmers to modernise, in turn locking in unviable business models and hurting Europe’s competitiveness.
The cost of the EU’s farm subsidies and tariffs to consumers and taxpayers in the EU now stands at €86.9bn, of which €52.5bn stems directly from CAP subsidies.
The UK remains a big loser from the CAP. Between 2007 and 2013, the UK will contribute £33.7bn to the CAP and get back £26.6bn; a net contribution of £7.1bn. Per hectare, the UK receives £188, compared to for example France, Germany and the Netherlands, which receive £236, £251 and £346 respectively.
The share of the CAP spent on explicit environmental aims in the UK is only 13.6%, and could be even lower in the EU as a whole. By failing to differentiate between different types of land, direct CAP subsidies actively channel public resources away from where they could create the biggest environmental gain.
Full liberalisation of the CAP would be economically viable but politically difficult to achieve, given the widely held belief that that there is still a role for the state to play in delivering objectives such as bio-diversity and land management.
Instead, we propose a pragmatic mix: a new, radically revamped EU farm policy, which would allow for resources to be effectively allocated to generate production and environment benefits, while better targeting jobs and growth. The centrepiece of the reform package would be the replacement of the current CAP subsidies by a system of agri-environmental allowances which could be allocated according to environmental criteria, such as biodiversity, and which could be transferred between farmers depending on where the environmental gain is the greatest.
By simultaneously streamlining the CAP budget, such a system would reduce overall spending by around €122bn over seven years. This sum could either be invested back into the EU budget, in areas such as R&D, or returned to member states.
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