Thursday, August 26, 2010

Budget DG warns of big CAP cuts

A spokesman for the Budget DG has warned of big cuts in the CAP budget given the financial situation of the EU: Cuts

The CAP share of the EU budget is already expected to decline from 45 per cent to 39 per cent by 2013, but it may need to be cut back even further.

Of course, such declarations of intent by the Budget DG are always heard ahead of new financial negotiations. In practice, the politics of interrelationships between member states often prevails so that the cuts are less extensive than anticipated.

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Friday, August 06, 2010

Ideas from the NFU

After a long delay, I am returning to the NFU paper on 'The CAP after 2013', this time looking at some of their policy ideas. What guides their thinking is something I would agree with, the need 'to facilitate the creation of fairer and better functioning agricultural markets so that ultimately farmers can become less reliant on public support'.

There is no doubt that power has moved down the food chain to retailers to an extent that there is an imbalance in the market. The NFU note that 'most supply contracts are one-sided, conferring significant and undue power to purchasers.' The challenge is how to tackle this monopsony and the NFU suggests a legally enforceable code of conduct that would prevent abusive practices such as slotting fees. This is fine in principle, but the devil is in the detail given the complex distribution of responsibility between the EU and member states.

The NFU also suggests that more work should be undertaken on agricultural futures markets, including the prospects for their extension to a wider range of agricultural sectors. As they point out 'their availability is sparse in many sectors, which inhibits long-term price discovery.'

The NFU also draws attention to the need for more spending on applied science so that the sector can produce more but do so sustainably so that there is les impact on the environment. They suggest that the CAP could play a complementary role in supporting research and development, perhaps through a third pillar. The research infrastucture is an area where government has a legitimate and important role and it has been sadly neglected in recent years.

What is more open to question is the suggestion that Second Pillar programmes should be redefined to focus on agricultural rather than rural development. They are correct in arguing that 'There is a danger in seeing Pillar Two as a dumping ground for policy aspirations in different areas without providing the necessary funding'. However, the future of rural economies should be diversified and not overly dependent on agriculture.

Taken as a whole, the paper is a balanced contribution to the debate which has a number of constructive suggestions to make, although there is too great an emphasis on subsidies and protection for my taste.

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