Proposals to cap direct payments at €60,000 means the “average farmer” with 40ha or less should not be affected by cuts to the Common Agricultural Policy (CAP) budget, according to EU Commissioner for Agriculture and Rural Development Phil Hogan.

Speaking at a press conference following an announcement from the EU Commission that the CAP is to be reduced by 5% under the EU’s proposed multi-annual financial framework (MFF) budget 2021-2027, the commissioner explained how member states can move to protect small to medium-sized farms.

A commission source also reiterated to AgriLand that “with capping at €60,000 there should be no cut to the average farmer in Ireland who has 40ha or less”.

The commission also proposed that direct payments are to be reduced by no more than 4%; and that payments will be capped at €60,000 per farmer.

Hogan told reporters that he regards the overall cut to the CAP budget as a fair outcome for farmers – particularly given the challenging backdrop of the EU budget deficit due to Brexit and the refocusing of EU funds towards security, migration and defence.

“Over the last three years I’ve listened to people very carefully about the importance of direct income support and today’s proposal prioritises the protection of direct payments.

As a result, direct payments will not fall by more than 3.9% in any member state. In fact, the proportion in the present budget of direct payments will be higher than it was in the last one.

Funding for direct payments under the current CAP budget 2014-2020 accounted for 70%; in the CAP budget post-2020, the direct payment share will account for 72.5%.

“In terms of individual farmer payments, when you take into account capping and the redistributed payment system that we are going to introduce, well then the impact of these cuts will be lower to small and medium-sized farmers.

“We have brought in convergence in order to move further along the road to meet the gap between some countries payments per hectare and the 90% average of the total EU payments for farmers – this means that 16 member states will see their direct payment envelops fall by approximately 3.9%.

“A further six will see reductions of less than that; and five member states will see their direct payments increase,” he said.

‘Redistribution options’

In terms of payment per hectare, the commissioner said Estonia, Latvia, and Lithuania will see increases of 13.6%, 13.2% and 12.3%, respectively.

He also said there are no reductions in direct payments for countries like Romania, Slovakia and Portugal – and that there will be a very slight reduction of less than 1% in direct payments for Bulgaria.

“In respect of the communication that we published on the CAP last November, the commission proposed to promote a more balanced distribution of support through this mandatory capping mechanism; but it will also take into account the labour costs, including the family farm labour.

So the savings from capping will remain available to the member states for redistribution towards the other farmers, and particularly focused on the small to medium-sized farmers.

“If member states use this possibility well, it will mean that all family farms will have this 3.9% cut in the 16 member states mentioned reduced substantially.

In fact, I would say that the average farmer in each member state will have no cut in their payments if this is managed well.

Areas of natural constraint

Meanwhile, Hogan also highlighted proposals to reduce the co-financing support in the rural development programme by 10 points.

“So, if you are on 53% co-financing you will go to 43%; or if you are on 80% it goes to 70%. Depending on what level you are at, it will go down 10 points.

“This will mean member states will have to fill the gap. If they do decide to the fill the gap, it means there will be no cut in rural development – which means farmers that are farming in areas of natural constraint will have no cut in their payment,” he said.

As outlined today, the EU’s proposed multi-annual financial framework (MFF) budget for 2021 to 2017 is set at €1.279 trillion. This translates into 1.11% of the EU27’s Gross National Income (GNI).