May – August 2014
The EU election – will it make a difference?
For UK farmers the answer to the headline question must be ‘No, but possibly helpful in the long run’. Membership of the EU Parliament has indeed changed, but the effect has been exaggerated by the media. The elected MEPs are still overwhelmingly centre right and centre left - 467 out of 751 - intent on using the increased influence given to them by the Lisbon Treaty to pursue the same ‘success stories’, ie growth and jobs, action on climate change, more powers over member states’ justice and home affairs, and expansion (despite Ukraine) of the External Action Service - ie diplomacy. Some 230 are thought to be Eurosceptics, an increase of around 80, but still less than a third of the total, and of those 125 are members of three different groups and 105 are not affiliated to any group - and so the chances of concerted action are remote.
The UK, which has 73 (8%) of the MEPs and no chance of making anything happen without support from those of other member states, has hardly helped itself by replacing 18 Conservative or Liberal Democrat MEPs who were at least committed to making the system work (albeit with varying degrees of enthusiasm for ‘more Europe’ or for reform) with additional UKIP MEPs whose avowed objective is not to participate. As there is no chance of the UK leaving the EU before the General Election in 2015 and after that only if the party or parties forming the next Government actually organise a referendum which the ‘No’ votes win, the UK may well find itself muttering on the sidelines in the European Council and the Parliament to little effect.
The result for farmers will not be bad. The status quo will remain. The reformed Common Agricultural Policy is not perfect - indeed some of the innovations such as the three crop rule and compulsory EID for sheep are positively unhelpful - but support for farmers will still be there and the Agriculture Commissioner may not change.
There will be a new Commission. The President will still be a federalist, with 28 Commissioners, one nominated by each member state, despite there not being 28 proper jobs to go round. Dacian Ciolos, the outgoing Romanian Agriculture Commissioner, has said that he would like to continue in the job, and the Romanian Government has said that it is willing to nominate him - provided that he is given the same or a similar job. If he is reappointed, further reform of the CAP will not be on his agenda because the new policy is to remain in place until 2020.
The question for farmers will be not be ‘Support for what?’ - that is now more or less settled, although crucial details remain to be announced in Edinburgh and Cardiff - but ‘How much?’ and that depends on the extent of deductions from the EU agriculture budget for ‘financial discipline’, ie priority for other EU extravagances.
Multi-cultural and green
To satisfy the conditions for Basic Payments under the reformed Common Agricultural Policy a farmer in England has to be ‘multi-cultural’ if he farms more than 10 hectares of arable land and ‘green’ if he farms more than 15. Why, and what do these conditions entail?
To be ‘multi-cultural’ a farmer has to grow two crops if the farm has no more than 30 arable hectares, or at least three if it has. The need for diversification was thought to be important in Eastern Europe where large tracts of arable land are usually sown to a single crop.
The UK tried unsuccessfully for a dispensation but the Agriculture Commissioner was adamant that all EU farmers should diversify, so administrative hoops have had to be constructed by DEFRA and the Rural Payments Agency to make sure that England complies.
What is a crop? A first list of types has been published. Winter and spring varieties of the same crop are to count as separate crops, but how will they be differentiated and what happens with varieties that are interchangeable? French beans, green beans, haricot beans and runner beans are all the same crop, but broad beans are not. There is no mention of brassicas; they are difficult and will appear on a further list - cauliflower, cabbage and broccoli are all the same genus - but are they the same crop?
To be ‘green’ a farmer has to maintain 5% of his arable land as an ’Ecological Focus Area’. What qualifies for an EFA? Buffer strips, fallow land, areas with catch crops or green cover and areas with nitrogen fixing crops will qualify, subject to weightings, and so will hedges.
The EU Commissioner has made it clear since the reform process began in 2011 that more landscape features, such as ponds, field margins and ditches, could be taken into account if a member state wished, but DEFRA has deemed those too difficult for the time being. The problem is that such qualifying features ought to appear on digital maps and none at present do.
Mapping is to become compulsory - but not until 2018. DEFRA would have preferred to see landscape features excluded entirely until then. Allowing hedges to count now - and by the way a hedge more than 10m wide is not a ‘hedge’ and, if a hedge is next to a road, is it a ‘hedge’ or just half a hedge? - will mean that a manual inspection of the Rural Land Register will have to be carried out in order to verify an application, hence the Secretary of State’s message that farmers who take up the option to include a hedge as part of their EFA should apply early and be prepared to be paid late.
Woodland margins, short rotation coppice and forested areas will not count. Not because they are not mapped; evidently they are not thought to provide enough environmental benefit.
The simpler CAP is not quite so simple after all.
Nothing novel and little good in new developments
With the important details of the rules for the reformed Common Agricultural Policy close to being settled for farmers in England, Scotland and Wales, there is a chance to reflect. With the UK economy improving, favourable weather, a new EU payment regime in place and, at least in England, a new and promising IT system, farmers might be expected to be optimistic, but each of these positives comes with a negative.
The upturn in the UK economy and the poor performance of that in many EU member states has led to a strong currency. The pound is 10% higher than last year and at a level not seen since 2008, which has two unfortunate consequences. Agricultural exports become uncompetitive, especially in a world in which there are already ample stocks of cereals, oilseeds, root crops, milk and beef. EU payments in euros are worth less when converted into pounds; the rate for the last set of Single Payments under the old regime is set in September,
and so those and the new Basic Payments may be worth less for some time to come.
These negative factors have been compounded by developments in the UK market, with Tesco under pressure to respond to the success of Aldi and Lidl, which may lead to hard times for Tesco suppliers if they are expected to bear the brunt of a price war, and by President Putin’s closure of the Russian markets to EU produce. The latter has added to the weakness in the price of lamb in UK markets, and produced dire consequences for Polish fruit growers - for whom the EU Agriculture Commissioner, Dacian Ciolos, is organising emergency aid.
Other familiar developments for UK farmers are the appointments of new ministers in London and Cardiff - particularly disappointing in the case of Owen Paterson at DEFRA as he was not only a knowledgeable champion of UK farming, but also fluent in French and German, able to secure respect, and positive action, in
Brussels – and problems with an EU Directive, on Markets in Financial Instruments.
The aim of the latter is to curb the power of financial speculators on futures markets, but it could to lead to restrictions on farmers using online platforms, and to trade in wheat in London moving elsewhere. Anything which might further weaken the price for cereals is bad news, with prices at barely break-even levels.
The Scottish Government has opted to return to old style support for sheep farmers in the roughest grazing areas. Taking advantage of the decisions in London, Cardiff and Belfast not to use any of the UK allocation of ‘coupled payments’ in the new EU regime, it has submitted plans for EU approval which will provide £20 per head for ewes on some 5m acres, something that might perhaps not be possible in future should Scotland opt for independence and not be admitted immediately to EU membership in its own right.
The New EU Agriculture Commissioner
August is the fallow month in European agri-politics, with the staff of the Commission taking the traditional month of holiday, and this year, with all the Commissioners losing office on 31 October when the Barroso Commission comes to the end of its five year term, it is especially fallow.
The new President of the Commission, Jean-Claude Juncker, has been allocating jobs to his new team of Commissioners. He does not choose them; each of the 28 member states nominates a prospective Commissioner. There should not be 28; there are not enough proper jobs to go round.
The problem of the jobs was addressed in the Lisbon Treaty, which provided that not all member states could have a Commissioner. One of those to lose out was Ireland. When the Irish voted against ratification of the Treaty and were ‘invited’ to try again, the provision was dropped as an inducement and the right of nomination restored to each member state.
This finagling has worked well for the UK. M Juncker has selected the Irish nominee, Phil Hogan, as Agriculture Commissioner. Had the Treaty remained unchanged, there would have been no Irish Commissioner. Mr Hogan, like his Irish predecessor as Agriculture Commissioner in the 1990’s, Ray MacSharry, can be expected to be sympathetic to UK farmers, and to stock farmers in particular.
The Commissioner cannot be sure that the nominees will take office. Each has to appear before the relevant committee of the European Parliament and not all survive their hearing. Three did not in 2009. M Juncker may find that some of his do not either. Mr Hogan can expect tough questions about his vision for the job and his record as a minister in Ireland.
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After the hearings M Juncker submits his new Commission to a plenary session of the European Parliament. It can approve or reject the Commission as a whole, but not individual nominees.
Assuming Mr Hogan satisfies the Agriculture Committee and M Juncker’s Commission is approved at the plenary session of the Parliament, Mr Hogan will take office on 1 November for five years at a salary of €250,000 (£204,000).
The Agriculture directorate disposes of 40% of the EU budget, and so Mr Hogan’s is a powerful appointment. In his in-tray he will find further pleas for help with the consequences of the Russian ban on food imports from the EU in retaliation for the economic sanctions imposed as a result of the intervention in Ukraine.
Mr Hogan’s predecessor as Commissioner, Dacian Ciolos, has already made €125m (£100m) available to help fruit and vegetable exporters. Now there is a call for help for dairy producers and with storage costs for butter and skimmed milk. All well and good, but the cost falls on those member states who contribute to the EU budget, including of course the UK. The sanctions have already affected the City, but there will be question of aid for London, so the UK in effect pays twice over.