MVH, Hungarian Paying Agency Possible costs of the CAP reform regarding Paying Agencies Mr. Miklós Drajkó, Vice-president 13th September 2012.

Cyprus Presidency of the Council of the EU Content Basis for assumptions BPS Active farmer Control of eligibility criteria Greening CC SFS Horizontal Issues Conclusions

Cyprus Presidency of the Council of the EU Basis for assumptions Questionnaire sent to all MS (PA), through LN Answers from 12 countries, 14 PAs Examples from SPS and SAPS countries Different LPIS types (physical block, agricultural parcel, topographical block, farmer block, farmers islet, cadastral system) Number of applications: 6000 (MT) – (EL) Total agricultural area: 7311 ha (MT) – 6,21 M ha (Scotland, UK)

Cyprus Presidency of the Council of the EU Basic Payment Scheme (BPS) Probably the most cost consuming exercise to switch PA’s systems (especially in SAPS countries), while many PAs report: no extra money allocated. Tasks: determination of possible entrants & communication to potential applicants, revision of complicated cases, allocation of entitlements, application process, (applications also to national reserve), verification of active farmers, administrative cross-checks, determination of 2014’s eligible ha, calculation and allocation of BPS entitlements & communication to farmers, assuring the continuous management of transfers

Cyprus Presidency of the Council of the EU Basic Payment Scheme (BPS) II. SPS countries oMoving from historical SPS to area based BPS + changes in application process and administrative checks. oAdvantage compared to SAPS countries: experience and know-how, able to recycle administrative procedures from previous period (project management docs, application forms, etc). However, IT development inevitable, cannot be recycled, need to re- build it. Allocation of entitlements need to be done again National regulations to change Extra costs: informing farmers When obtaining data extra security issues may arise (cross- checks for capping) (Wales)

Cyprus Presidency of the Council of the EU Basic Payment Scheme (BPS) III. SAPS countries oWhole system development without previous experience - more time needed for implementation. (2 years) oNew software to be built continuation with SAPS: EUR switch to BPS: 3 million EUR as reported from EE.

Cyprus Presidency of the Council of the EU Basic Payment Scheme (BPS) IV. oCosts estimated to be EUR – 25 million EUR oWhen legal proposals (implementing acts) accepted PAs need 1 year for implementation. In case of SAPS countries 2 years! Suggestions: PAs from SAPS countries suggested transition period (2015 to operate BPS safely) Crucial to have sight of implementing acts ASAP!

Cyprus Presidency of the Council of the EU Active farmer Each PA reported some kind of problem concerning control of income requirement. Problems:  Difficulty in accessing information on income (even tax authorities do not necessary have it)  Impossible to ascertain total receipts from non-agricultural activities for all applicants (e.g. not all farmers are included in databases)  Doubts that farmers would become more active, rather ask for more DP  Only by checking accounting documents would give assurance, which control is not workable (too many beneficiaries)  Development of new horizontal mechanism to control all DP per farmer from previous years can cause complications (difficult cases) Possibility: only statement required from farmer in SAF, then X% is checked yearly – but still complicated to check.

Cyprus Presidency of the Council of the EU Active farmer II. Solution:  Active farmer should be checked by minimum activity on land (land in good condition, min. stocking density, etc.) specified by MS.  More flexibility to MS when defining active farmer or give a menu (green box compatible) to choose from.  PAs forsee that the definition changes!  Other proposals  Cost to modify/develop OTSC procedures, equipment to check eligibility criteria – modification of PDA software, OTSC report forms, evaluation system in IACS, new administrative controllers: EUR – EUR

Cyprus Presidency of the Council of the EU Control of eligibility criteria oDifficult to assume cost of reviewing the current eligible areas in LPIS as a result of new minimum activity requirement, new eligibility rules coming from greening and eligibility changes in SAPS countries. oProbably there will be a LPIS review needed everywhere, time and cost is not certain yet (too much uncertainties), but presumed to be high (e.g. 5 million EUR, 2 years – EL) oIf MS has a freedom in establishing minimum land mng. requirement, LPIS systems will hopefully not change too much. oMust consider that building in additional complexity will add the ongoing maintenance burden for LPIS QA! oSAPS countries need complete review (abolishment of 30 June 2003 rule)

Cyprus Presidency of the Council of the EU Control of eligibility criteria oMin. 100 EUR payment as a limit for animal husbandry with no land means harmonisation of all DPs (+ existance of algoritm of checking the limit). oPayments can be paid after all controls taken place. Problems:  Assessing whether min. payment threshold is reached if the SPS is broken up into multiple payments.  In MS where currently 1 ha min. is used instead of 100 EUR, new algorithm needs to be developed.  Harmonization of all payments could be an issue everywhere, if the controls for e.g. greening cannot be finished on time – prolonged payments to farmers – politically unacceptable.  Risk of unused entitlements going to national reserve causing unused amounts. Idea: the number of separate payment schemes should be kept to a minimum.

Cyprus Presidency of the Council of the EU Greening - EFA It’s difficult to presume the work and resources needed for EFA control by PA since: exact definition is not known yet; administrative and control requirements will be seen in implementing acts; control possibilities are depending also on definition of holding Challenges:  Most PAs reported, that it won’t be possible to create an EFA layer, especially not by 2014!  Expect very high costs, millions of EUR (millions of LF) !  Difficulties in communicating to farmers their EFA requirement (great work to set up a database, which farmers access and get the info on their land type classification*)

Cyprus Presidency of the Council of the EU Greening EFA II. Further challenges:  Currently even landscape features are not always digitised (e.g. may only have ones under current AEM contract, or nothing at all)  LF can be all on PP.  LF are irregular in shape or disjointed → ground survey is required (here measurement by orthophoto is not possible)  Even if farmers are able to declare LF, PA needs to validate. This validation needs to be comprehensive.  Ongoing costs of dynamic population (maintaining large number of additional parcels), actualisation of data  Some PA states that digitalisation would require resources that they will never have and claim that this shouldn’t be in the CAP framework, otherwise COM should co-finance the exercise.*  Even with available resources, some PA reported that many years needed for EFA layer creation.

Cyprus Presidency of the Council of the EU Greening - EFA III. Solutions, ideas: Standardisation of elements, (easier declaration and OTSC*) Don’t force the use of remote sensing (as a basis: check data - not necessary digitised - declared by farmer OTSC) LF could stay in GAEC(CC) and not listed in EFA** Restrict EFA to land based measures, where they really provide an environmental benefit*** Features existing at regional level could decrease the farmer level obligation in the region. The regional level estimates agreed with COM beforehand to avoid future audit difficulties! Minimise the focus group who is concerned with EFA. A threshold of EFA could be introduced otherwise many farmers should manage very small EFAs (less then 0,1 ha)

Cyprus Presidency of the Council of the EU Greening - PG oFinal definition is uncertain. As for now: seems, simply look at 2014 data is not enough. oMost PA reported that they would give preliminary indication to farmers before 2014 application process on the land classification – where to apply possibly PG. Some PA would make a reference layer on 2011 application data. Challenges:  Difficulty with split and merged parcels, parcels where no land use history is available  If „5 years out of rotation” definition stays → cross-check needed with crop codes for each parcel (?)  Where land use data is incomplete or disputed → communicating info to farmers  Where PP is stable at regional level can’t see the point in farm level control → only increase of bureaucracy and administrative costs.  Maintenance of the control system (PG layer) could be even more costly

Cyprus Presidency of the Council of the EU Greening – PG II. Further challenges if too high decrease of rate in 2014:  Old orthopohotos should be digitised to compare and detect differences → enormous and unreasonable costs – million(s) of EUR. This should be avoided !  System development could be necessary  Additional manual work needed to deal with cross-checks  Additional communication with farmers  Farmers’ obligations that are not in the system anymore should be divided between other farmers in the system, which is not fair! In this case: MS should have the possibility to choose the date (year) on which basis the reconversion exercise is done. (In order to use previous 1-2 years data, not older ones.)

Cyprus Presidency of the Council of the EU Greening – PG III. Solutions, suggestions: Maintain the current requirements Don’t ask for PG layer in LPIS, check should be done by farmers’ declared areas controlled OTS When a PA has 100% electronic application, 2014 declarations could be accepted as a basis for controls data stored as PG reference in GIS module not in LPIS and use it later on for cross- checks. Develop cross-checks in IACS that control PG numeric data maintenance on every RP. (no need for manual check) COM working document on PG similarly to other greening elements would be most welcomed!

Cyprus Presidency of the Council of the EU Greening CD Control by RS is not possible in all cases → cannot be used on general terms. Complex system, algorithm needed to be developed to establish cross-check process Some PA claims that setting up control system would be extremely costly (millions of EUR), for others it’s expected to be low cost (only setting up the algorithm) Further idea for implementing greening: oLand declared each year to activate entitlement could be used to calculate greening requirement (to avoid measuring greening requirements from total land of the holding and the unclear status of land used by more than one farmer per year).

Cyprus Presidency of the Council of the EU Cross-Compliance New CC element: GAEC 7 oIdentification of wetlands and carbon rich soils: most PA can’t predict how much would it cost. Potentially significant cost! oSome PA thinks it would be simplification to include GAEC 7 in EFA, some don’t. oThe definitions needs to be clarified by the COM! New CC element GAEC 3 oUnclear why to replace SMR 2 with GAEC 3? oFor some PA it could be high cost (laboratory analysis needed) Integration of directives on water framework and sustainable pesticide use into CC oPA will have very short time for implementation from the point when implementing acts are finished oIncreased level of complexity of inspections expected as many require additional integration with other authorities → should only be operational in CC when requirement for farmers are exactly defined and cost of control estimated!

Cyprus Presidency of the Council of the EU SFS oSome countries don’t want to use this scheme oAll PA who answered agreed on it, there are problems with SFS implementation oBiggest problem: timeframe! - Allocate entitlements after SAF received, manage controls, inform SF about possibilities, collect declarations, reallocate entitlements again = administration of first year’s of applications (entitlements allocation) twice in less then 5 months! (15th May -15th October) - impossible. oCould have an impact on advance payments and possibly on all applicants oEntitlement allocation should be done till September – unrealistic oHuge administrative burden for PAs! No resources for that.

Cyprus Presidency of the Council of the EU SFS II. Possibility: ? Could do the allocation of entitlements in one go (SFS decided in first round?) → Not a real alternative! Only estimations could be given to farmer. Not fair to farmer to give short time, with less info. Still some PA would opt for it as the only workable solution with current proposal! Suggestions:  SAF procedure deadline could be brought forward ?  Farmers could get adequate info before 15th May → only if we postpone SFS implementation to 2015!  Make SFS optional for MS

Cyprus Presidency of the Council of the EU Horizontal issues Storing data as from 2000  Sometimes not storage is the issue, but IT-tools: using historical data in other versions, new applications – interaction with old system/data can cause problem, also risks + additional costs  Need storage space, implement filing system to allow recovery data in short time  NMS have no data evidently before their accession to the EU  Alternative: COM could store data instead of MS ? Mandatory ortho-imagery of at least 1:5000  Where a PA doesn’t comply it can cost EUR and 3 years! Widening monitoring & evaluation system (DP+SCMO)  Many questions still, hard to predict consequences to PA  IT system modification, additional costs could be cca EUR Cost of CB’s validation work  E.g. 3,75 million EUR/UK, EUR/NL, EUR/DK. – Even if decrease of OTSC happens, we doubt to save money by that!

Cyprus Presidency of the Council of the EU Conclusions oTotal cost of implementing only greening measures would reach millions of EUR per PA! oSome parts of the proposals does not count with timeframe for implementation (LPIS implementation issues, SFS contra allocation of entitlements and finishing controls) oPAs struggling serious money restrictions, while estimations predict huge costs on CAP implementation as it seems today – additional cost per PA can reach 32 Million EUR ! oPA need detailed information on implementation issues ASAP

Cyprus Presidency of the Council of the EU Conclusions II. oStart reform in 2014 only with SAFE elements! - COM should consider to postpone some elements and introduce them step by step – problematic schemes like SFS and elements where we need more time to set up our systems. Otherwise serious modification needed in current proposals. oEven with safe elements we need min. 12 months (for SAPS countries actually 24 months) to start implementation from the time the implementing acts are issued oIt should be considered to co-finance the implementation by the Commission!

Thank you for your attention! Any questions?