agriregionieuropa The CAP and the EU budget Do ex-ante data tell the true? Franco Sotte Università Politecnica delle Marche – Ancona (Italy) 122 nd European Association of Agricultural Economists Seminar Evidence-Based Agricultural and Rural Policy Making Methodological and Empirical Challenges of Policy Evaluation February 17 th – 18 th, 2011, Ancona (Italy) associazioneAlessandroBartola studi e ricerche di economia e di politica agraria Centro Studi Sulle Politiche Economiche, Rurali e Ambientali Università Politecnica delle Marche

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Summary  Overview on the CAP budget data on which the political debate on CAP reform relies  How different is the CAP passing from – its ex-ante image (MFP, appropriations for commitments) – to its ex-post one (actual payments, Financial Reports)  Implications  Conclusive remarks

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The budget : an opportunity for policy analysis  Expenditure is quantifiable – It is expressed in monetary terms – This facilitates analysis comparison in terms of time and space – It is possible to calculate simple and intuitive indicators draw graphs and maps  It is easy to understand and interpret even for non experts – politicians (voters)

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Risks with expenditure analysis  considering expenditure as the objective of the policy while it is only an instrument  neglecting differences btw ex-ante allocations and ex-post payments – attention concentrated on promises not on real results  under-valuing the interplay btw policies  paying insufficient attention to indirect costs of a policy – over-compensation, payments for costs never incurred, deadweight effect, administrative costs, private connected costs, delays in payments

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Multiannual financial framework at current prices (2009) Appropriations for commitments Financial years Total Sustainable growth Competitiveness for growth and employment Cohesion for growth and employment Preservation and management of natural resources Market related expenditure and direct payments Citizenship, freedom, security and justice Freedom, security and justice Citizenship EU as a global player Administration Compensation Total

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Breakdown of the EU MFP budget Source: Administrative costs should not be included: DG AGRI has 970 employees

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The EU budget by financial framework headings (billion euro) Budget 2008Budget 2009 Appr CommAppr PayAppr CommAppr Pay CAP 1st Pillar CAP 2nd Pillar CAP total Other natural res Sustainable growth Administration Total

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP expenditure according to the DG AGRI web site

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Appropriations for Payments 2009 Net of administrative costs = 47,1 per cent 44,0%

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP payments (Financial Report 2009) Pillar1Pillar 2Total CAP Net Total UE Expenditure (- Admin) M€ EU North Centre South EU EU Out MS Total EU

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP payments (Financial Report 2009) Pillar1 / Total CAP Pillar2 / Total CAP Pillar1 / Net total Pillar2 / Net total Total CAP/ Net total EU %%% EU-1587,512,551,37,458,6 North-1585,814,255,59,264,6 Centre-1587,312,754,47,962,4 South-1588,411,646,56,152,5 EU-1256,143,918,014,132,1 EU-2782,417,642,79,151,8 Out MS100,00,034,60,034,6 Total EU84,115,941,67,949,5

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP on the overall EU payments (net of administrative costs) Financial Report – 2009 EU-27 -Total CAP Pillar 1 Pillar 2

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Reasons for the discrepancy btw appropriations and payments  Before the Commitment – ability of MSs and regions to co-finance – ability of beneficiaries to enter into commitments – Late approval of programs by MSs / Regions  Withdrawal of the beneficiary and cancellation of commitments – Bank refusal to grant credit – Change in business plan – Discover of better funding opportunities in competing policies – Death of the beneficiary or change in family decisions  Inflationary effect when payment is delayed

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) EU-12 EU-15 EU-27 South North Centre (net from administrative costs) The CAP on the overall EU payments by groups of MSs

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP on the Total EU payments per MS Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP payments per pillar per MS Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP expenditure per unit CAP / AWUCAP / UAACAP Ag Val add euro index EU=100euro index EU=100euro index EU=100 EU ,4182,5348,4121,835,2101,2 North ,4292,6299,5104,758,7168,7 Centre ,5244,2368,4128,835,9103,1 South ,1123,0354,7124,028,882,9 EU ,825,4132,446,332,493,0 EU ,4100,0286,0100,034,8100,0 Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments per AWU - EU=100 Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments per UAA - EU=100 Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments /Agric Value added % Weighted average percentage - years

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP payments in Italy Payments € CAP expenditureCAP beneficiaries Average payment Absolute value in M€ % Absolute value in 000 % Euro per beneficiary Less than > <= > <= > <= > <= > <= More than Total ,7% 50,8% 85,1%20,0%

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Comment  There are good reasons for a radical change – probably, for the few richest farms, the CAP payments represent just an additional rent – while for the plethora of small farms, which in Italy have generally a subsidiary role in the family interests and income, it has a minimal incidence

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Concentration of CAP payments in Italy in quintiles a) sorted by CAP payments / UAAb) sorted by CAP payments / AWU Po Valley

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Comment  Such strong concentration of the CAP expenditure in terms both of recipients and localization significantly reduces any alleged link between the present CAP expenditure and the provision of public goods through agriculture

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Conclusions  The ex-ante image of the CAP is significantly and systematically distorted in comparison with its ex- post image – The relative weight of the CAP on the EU budget changes, as well as the ratio between pillars 1 and 2.  Recognising this gap between image and reality – brings the discussion on the CAP and its reform process to a more objective ground – suggests making more of an effort to rationalize implementation and administrative procedures attributing more importance to evaluation and monitoring

agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Thank you