1. The Common Agricultural Policy 2014-2020: proposals from the European Commission David Barnes/Drew Sloan Dec 2011 - Jan 2012

2. Purpose of these meetings To inform you about the European proposals for the future CAP So that you can begin to think about preparing for it To set out Scottish Governments views at this stage To hear your informal views and comments And to enable you to give us well-informed formal feedback via our consultation exercises.

3. Caveats Some things still need clarification from the Commission. Everything in the proposals is subject to change in the negotiations. The consultation exercise is designed to inform SGs final position, so what we set out tonight is just an interim position. How the new CAP will be implemented in Scotland will be the subject of a separate consultation process nearer the time.

4. What tonight will cover Introduction/background: –Procedure –Budget –Timetable The content of the European proposals: –Pillar 1 –Pillar 2 –Issues common to both pillars Next steps Q&A

5. Introduction The EU is negotiating its budget and policies for 2014-2020. Three EU institutions are involved: –European Commission –Council of Ministers –European Parliament Only the European Commission can table a proposal: focus tonight is on the Commissions proposals for the CAP. Council of Ministers and European Parliament then negotiate and decide.

6. CAP Budget and CAP rules will be decided separately CAP budget will be considered alongside the rest of EU budget, by Finance Ministers and Heads of Government. CAP rules will be negotiated and decided by Agriculture Ministers and the European Parliament.

7. CAP budget Commission proposal is roughly a flat cash budget for CAP 2014-2020, which means a decline in value in real terms (no uplift for inflation). Commission proposes redistribution of the budget, to boost Pillar 1 payments in new Member States and to make Pillar 2 fairer.

8. Pillar 1 Direct Payments budget Commission proposal for convergence to help new Member States: those below 90% of EU average /ha get an uplift. Proposed UK Direct Payments ceiling is slightly down. Within-UK allocations not yet known. Scotlands average /ha is as low as some new Member States.

9. Pillar 2 Rural Development budget Commission proposes to use more objective criteria than in the past to allocate Member State shares. UK allocation not yet known. Criteria should lead to bigger percentage shares of the EU RD budget for UK and Scotland. Total RD budget in Scotland 2014-2020 will also depend on how big the EU RD budget is, and how much national co-financing money is available.

10. CAP rules Whats happened so far: 2009-2010 gathering ideas - Commission consultation exercise, Council discussions, Lyon report. Pack Inquiry into future farm support. Nov 2010 Commission options paper. Council discussions, Dess report. Oct 2011 Commission issues formal proposals designed to meet its objectives.

11. Two Pillars, four regulations Pillar 1 Direct Payments Market measures (Single CMO) Pillar 2 Rural Development (RDR) Financing and monitoring (Horizontal regulation) EU implementing rules (Delegated Acts)

12. Commissions ideal timetable CAP proposals issue 12 October 2011. EU and CAP budgets decided summer 2012. CAP regulations finalised end 2012 or early 2013. EU-level and Member State-level implementing rules and legislation adopted during 2013. New regime 1 Jan 2014.

13. If the timetable slips Pillar 1 Direct Payments and Market Measures – status quo could essentially continue until the new system begins, Eg on 1 Jan 2015. Pillar 2 Rural Development Programmes – risk of a gap between current programmes and new ones unless bridging arrangements are agreed.

14. Content of the EU proposals Pillar 1 Direct Payments Next slides from the Commissions own presentation:

16. Who would have entitlements under the proposals ? All current entitlements would expire. Entitlements under the new system would be allocated to: –farmers who are actively farming in 2014 and submit a claim, and who activated at least one SFP entitlement in 2011. –and people eligible for the National Reserve.

17. National Reserve Funded by one-off deduction of up to 3% of Scotlands total Direct Payments. Priority given to farmers under 40 who started farming in the last 5 years. If necessary to meet this demand, the 3% can be increased.

18. Who is an active farmer ? Direct Payments must be at least 5% of non- agricultural income (unless Direct Payments <5,000). Must grow crops/keep livestock; or keep the land in condition suitable for grazing or cultivation. Member States/regions can impose minimum activity on land which remains in good condition even without management. Minimum claim size and hectarage.

19. 1. Basic Payment Whats left after the various deductions have been made. Can be regionalised, on objective criteria. In 2014, 40% of the Basic Payment ceiling is area-based. Remainder shared out according to historic SFP. By 2019, must be 100% area-based and all entitlements within a region must be equal. Transition profile fixed in advance, in 2013.

20. 2. Greening If >3ha of cropping, minimum 3 crops each covering >5% and <70%. Permanent grassland (>5yrs) must be maintained as declared in 2014. Each holding must have Ecological Focus Area (buffer strips, landscape features, fallow etc) equal to 7% of arable and temporary grass area. Organic farming qualifies automatically.

21. 3. Young farmer top-up Compulsory for Member States. 25% top- up per hectare, up to a limit on hectares. Limit must be set between 25ha and average holding size in UK (54ha). Under 40, and max. 5 years after establishment. Up to 2% of Scotlands total Direct Payments.

22. 4. Coupled support Voluntary for Member States/regions. Replaces Article 68 and pre-SFP schemes (SCPS, SAPS etc) which some member States are still using. Limited to fixed no. animals and to payment rates necessary to maintain current production. Up to 5% of total Direct Payments, except for Member States currently using >5%.

23. 5. Area of Natural Constraint (ANC) top-up ANC = new designation for LFA Top-up voluntary for Member States/regions. Up to 5% of total Direct Payments. Payable on all or part of ANC, according to objective criteria. Must be deducted from Pillar 2 ANC support (LFASS).

24. Progressive reductions/capping Payments reduced by: 20% from 150,000 to 200,000 40% from 200,000 to 250,000 70% from 250,000 to 300,000 100% above 300,000 Salaries/employment costs are deducted. Greening payments are exempt. Proceeds used in Pillar 2 for innovation.

25. Small farmer scheme Compulsory for Member States, optional for the farmer (one-off decision in 2014). Up to 10% of total Direct Payments. Fixed payment, between 500 and 1,000. Replaces other payments inc. coupled payments. Minimum no. hectares. Exempt from greening and from cross- compliance penalties.

26. Pillar 1 Market measures EU has moved from permanent intervention in the market to safety-net only. Provision for emergency measures in the event of extreme market disruption. Milk quotas already being phased out, sugar quotas proposed to be phased out.

27. Pillar 2 Rural Development: current rules 7-year programmes approved by Commission. Co-financed by EU and domestic money. Axis 1 farm business development (capital, skills). Axis 2 agri-environment (capital and annual), LFA, woodlands, animal welfare. Axis 3 diversification and community projects. LEADER.

28. Pillar 2 Rural Development: proposals for 2014-2020 Evolution not revolution. Common Strategic Framework – joined-up approach between RD, EU Structural Funds and EU Fisheries Fund. No Axes, no minimum percentages except 25% of EU funds on environment (inc. organic and LFA). Possibility for sub-programmes within RDPs.

29. Less Favoured Areas Re-titled Areas of Natural Constraint (ANC). Defined as: Mountain areas, or Other areas meeting biophysical criteria (now defined by EU not Member State), or Other areas facing specific constraints (eg islands), up to 10% of total area. No special budget for each category, but different maximum rates.

30. Other areas biophysical criteria Temperature, soil quality, slope, wetness or dryness. Close to criteria used already to define LFA in Scotland, but less fine-grained: applies to whole ward or parish if 66% of area meets the criteria.

31. ANC payments Costs incurred or income foregone as a result of natural constraints, compared with non-constrained areas. Take account of Pillar 1 ANC top-up. Minimum 25/ha, maximum 250/ha (300/ha for Mountain), degressive above a threshold. Transition arrangements for farmers excluded by the new criteria.

32. Common rules to Pillars 1 and 2 Cross-compliance Rules to be followed by Member States (inspections, audit, financial reporting etc): not covered tonight.

33. Cross-compliance As at present, two elements: Statutory Management Requirements (SMRs) and Good Agricultural and Environmental Condition (GAEC).

34. Statutory Management Requirements (SMRs) EU legislation on environment, animal and plant health, public health, animal welfare, which farmers should be complying with anyway. Down from 18 to 13 (15 when Water Framework Directive and Sustainable Use of Pesticides Directive have been implemented). Some animal health SMRs removed.

35. Good Agricultural and Environmental Condition (GAEC) 8 requirements (previously 8 compulsory + 6 optional). Retention of permanent pasture removed from GAEC: moved to greening. Minimum stocking density removed from GAEC: moved to agricultural activity definition. New GAEC: Protection of wetland and carbon rich soils including a ban on first ploughing

36. Cross-compliance penalties Take account of severity, extent and timescale. As at present: Penalty can be waived if minor non- compliance (but not if risk to public or animal health). Negligence: up to 5%, or 15% if repeated. Intentional: 20% to 100%. Detailed rules set by Commission.

37. Next steps: Scotland Already consulted widely on CAP for Pack Inquiry, and we need rapid information on stakeholder views. Questionnaire on SG website, with hard copy alternative (February to April). Consultation is to inform the negotiating position. Separate exercises later to decide how to implement.

38. Commission proposal Parliament 1st reading Council 1st reading Parliament 2nd reading Council 2nd reading Conciliation procedure NEXT STEPS: EU By end-2012 or early 2013 ??!

39. Then: EU implementing rules Local implementation decisions. Local implementation.

40. Questions