1. CAP Reform: early observations from the negotiations Martin Nesbit Director, EU and International Agriculture Edinburgh stakeholder meeting 25 January 2012 1

2. 2 Commission’s proposed new architecture of direct payments Cross compliance Streamlined – Climate change OR Basic Payment Scheme New entitlements in 2014 Definition of agricultural activity Definition of active farmer National or regional flat rate per eligible hectare Regions and criteria to be chosen by MS ‘Green’ Payment Crop diversification Permanent grassland Ecological focus area 30% of the DP envelope Young Farmer Scheme Up to 2% of DP envelope < 40 years For 5 years Commencing activity Small Farmer Scheme Simplification of claims and controls Lump sum payment to be determined by MS under conditions Entrance in 2014 Up to 10% of the DP envelope Coupled support Wide range of sectors Up to 5% or 10% of DP envelope, to be decided by MS Natural constraint support For areas with natural constraints Up to 5% of the DP envelope

3. Initial UK response to proposals Significant disappointment... “Greening” component does not deliver significant environmental benefits But it does cause significant burdens on business and government Limited focus on competitiveness; risks of reversal in the trend of reform “Small farm good, big farm bad” approach e.g. capping, compulsory small farmer scheme: risk significant complexity, and send counter-productive signals... but capable of improvement. Some of the rhetoric is along the right lines: Challenges of global food security Need for improved environmental performance and sustainability Commitment to simplification We need to work on the legislation to help it match the rhetoric. 3

4. What will emerge from the negotiations? Jim Paice : “saying we [farm ministers] don't like these proposals doesn't demonstrate there is any particular communion of thought about what we want instead.” But: Significant level of interest in Council in Member State flexibility All ministers clear that proposals fail to deliver on simplification Difficult to see how “greening” can be removed once it’s on the table. What member states can and can’t live with on greening, and on redistribution of funding will depend on overall Budget decisions European Parliament role will be key; but unpredictable. View on capping and active farmers may not be conditioned by deliverability Likely to be split down the middle on “greening” Initial signs of interest in whether 30% is the right level of greening payment Will want to know what happens on overall budget levels before deciding. 4

5. European Parliament Rapporteurs identified: Dantin (France, PPE) – Single CMO regulation Capoulas Santos (Portugal, S&D) – direct payments and rural development La Via (Italy, PPE) – Finance and controls. Draft reports likely to be published before the summer, allowing amendments to be tabled up to September. Committee debate and vote before the end of the year. 2 options for Plenary adoption: (i) wait until European Council resolves the Budget (ii) adopt a report now, but make it clear that Parliament bases it on CAP budget proposed by Commission. Opportunity for UK stakeholders: ensure UK and other MEPs understand the importance of key issues, and any areas where the legislation needs to better accommodate local realities. 5

6. Council Works in parallel to the EP, but waits for EP opinion before adopting its Common Position. Danish Presidency (Jan-June 2012): Detailed consideration in official level working groups Aim to agree compromise text on technical issues Identify key political issues and ideas for compromise End product: report identifying the big political questions and describing the position of Member States and possible indicating avenues for further negotiation. Cypriot Presidency (July – December 2012): Plans not yet clear – but don’t underestimate their capacity Likely to be more willing than most to be guided by the Commission May take forward some key issues pending budget agreement – e.g. Greening Irish presidency (Jan – June 2013): Where the Council deal is likely to be done Will they be able to reach agreement with the EP?

7. Negotiation Timetable and Process

8. Martin Nesbit martin.nesbit@defra.gsi.gov.uk http://www.defra.gov.uk/food-farm/farm- manage/cap-reform/ martin.nesbit@defra.gsi.gov.uk 8