Pillar I measures under the Common Agricultural Policy (CAP) can “limit land availability by keeping older farmers in business”, according to the European Commission.
Recently, the commission published its ‘Evaluation on the impact of the CAP on generational renewal, local development and jobs in rural areas‘.
Key findings of the report include that the CAP’s impact on generational renewal is “mostly positive, but remains limited notably in regions lacking basic infrastructure and services”.
The evaluation is supported by an external study and examines the effectiveness, efficiency, relevance, coherence and EU added value of the policy measures of the two pillars of the CAP implemented between 2014 and 2020.
Case studies conducted as part of the evaluation showed that decoupled payments in Pillar I “have a positive impact on the overall development of the agricultural sector”.
However, these case studies also showed that at a regional or sub-regional level, decoupled payments provide some disincentives to generational renewal, slowing intergenerational farm transfer.
“Some older farmers use the payments as income support beyond what would be a usual retirement age to compensate for low pensions,” the commission noted.
“Older farmers may be disincentivised to transfer their farms to younger people if their access to income and a reasonable quality of life depends on continuing to receive CAP support under Pillar I.
“These payments can therefore make it more difficult for Pillar II measures to be implemented to the greatest effect, particularly for new entrants in agriculture that do not inherit land.”
The commission also said in the report that older farmers “may retain land as security even though their earnings are low, because they have few alternatives”.
Specific needs and concerns of older farmers
The commission said that some EU member states used institutional mechanisms and fiscal incentives to encourage changes in land ownership and to ease the process of intergenerational transfer for older, as well as younger, generations.
Examples of these mechanisms and incentives include: creating farm partnerships; incentivising share farming and other collective business models; providing help with retirement income planning and tax breaks for the gradual transfer of assets; and using land banks or creating new non-profit organisations to consolidate and re-let landholdings to new entrants.
Some case study evidence from Ireland and France included in the report showed that “the former CAP early retirement measure had not been appropriately designed to fit the specific needs and concerns of older farmers”.
“This was because it required the older farmer to completely cease farming activities and involvement in the farm,” the commission added.