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Written Statement - Common Agricultural Policy – The EU Agriculture Council Meeting Of 18-19 March 2013

Alun Davies AM, Minister for Natural Resources and Food

The EU Council of Agriculture Ministers met last month (18-19 March) to discuss next steps in the reform of the Common Agricultural Policy (CAP).  With the focus and energy of the Irish Presidency, and under the leadership of Minister Simon Coveney, the Council made significant progress.  I am pleased to report that late on the evening of 19th March agreement was reached ‘in principle’ on all of the main points of the reform package.  I am optimistic that this opens the way for full agreement between the Council, the European Parliament and the European Commission this June.  From that point, and taking account of feedback from our current CAP consultation process, I will be in a position to take detailed decisions about CAP reform for Wales.  

The CAP reform package endorsed by the Council reflects Welsh priorities in a number of respects.  

I am pleased that the Council has recognised that CAP reform should take account of the different constitutional arrangements within Member States.  I have been pressing this case strongly at UK and EU level to ensure decisions on future CAP arrangements for Wales could be taken within Wales, and not left at UK (Member State) level.  The Council’s proposals for the new regulations are designed to give Member States (and ‘regions’ within them, like Wales) the flexibility to set policy that suits their circumstances within a broad CAP reform framework.  This is welcome and important because it means that the Welsh Government can decide the policy for key aspects of the CAP; such as the pace of the transition to area-based payments and how greening is managed.  The proposed provision secures the Welsh Government’s right to make decisions for Wales in these areas without the involvement of the UK Government.  I am grateful to the Secretary of State for the Environment, Owen Paterson MP, for his clear support in this matter.

I have been concerned about the Commission’s original proposal for a sharp and rapid transition from historic to area-based payments.  The farming industry must recognise and respond to the likelihood that CAP Pillar 1 direct payments will decline and perhaps eventually end.  Nevertheless, the pace and nature of change must take account of the capacity of farm businesses to adapt.  It was clearly not in Wales’ interest that farms could have been bankrupted by the implementation of CAP reform.  In this context, the Commission’s initial proposal for a 40% shift to area-based payments in the first year of reform was too much and I am pleased with the Council proposal that this could be as low as 10%.  If the Council proposal is accepted by the Commission and the European Parliament it will give the Welsh Government the necessary latitude to design and implement a manageable transition with a timescale and steps that suit Wales, following the current ‘conversation’ with stakeholders.  

It is essential that Wales’ farms safeguard the natural environment by operating sustainably.  I have supported the Commission’s general desire to address this through its ‘greening’ proposals but I have been concerned by their rigidity and ‘one size fits all’ approach, with much attendant complexity.  Europe has a diverse range of environments and climatic conditions which have great bearing on farming practice.  I welcome the Council’s stance which maintains the possibility that nearly all Welsh farms would qualify for greening by virtue of being mostly permanent grassland.  The Council has also expanded the greening concept by introducing the possibility for Member States, or their regions, to use ‘certification schemes’; in other words schemes judged to provide environmental benefits at least equivalent to the greening criteria.  

The Council has also taken a tough stance with greening penalties, proposing that they go beyond loss of the mandatory 30% greening element of farmers’ direct payments and would be up to 37.5% of direct payments.  Disappointingly, despite strong UK-led pressure, the Council has not yet addressed the possibility that farmers might be paid twice for the same environmental activity (under both Pillar 1 and Pillar 2 – the rural development plan). Given the European Parliament’s opposition to this concept, however, I am confident that this will not form part of the final regulations.  

It is too early to comment on what these changes to greening mean for Wales, and in particular for our Glastir schemes.  However I believe the regulations will now have the scope for me to design and implement good solutions that benefit our natural environment and recognise and fit with good farming practice and the environmental services the land provides.  

The Council has supported a permissive approach to such issues as limited ‘coupled’ financial support, areas of natural constraint, and young entrants.  I am content with the broad direction of travel because there is the means, but not the obligation, to introduce specific support for these matters under Pillar 1 or to address them using Pillar 2.  There are arguments for either approach and I am interested in the arguments that stakeholders may put forward through the current ’conversation’.   Similarly the modest flexibility to move funds between Pillars 1 and 2 is helpful for Wales.  

It is still uncertain when CAP reform will commence.  There is every indication that Pillar 1, direct farm payments, will now start in 2015.  Pillar 2 may still be introduced in 2014, which would pose significant challenges to ensure that both pillars complement each other.  I hope to have clarity on these points soon.  

Under the new EU institutional arrangements, the Council’s proposals now form the basis for further intensive negotiations – the so-called ‘trilogues’ between the Council, the Commission and the European Parliament, beginning on 11 April and continuing until late June.  I will take great interest in how matters progress and will continue to work with the Commission and the Presidency, and to continue my dialogue with MEPs.  I will also work closely with the UK’s Devolved Administrations and the UK Government as part of the UK team; my goal is to ensure that Welsh interests are both advanced and safeguarded.  There remains much detail to work out at an official level and my Department will be closely engaged with its UK counterparts and with the Commission.

I published papers about the Rural Development Plan and Direct Payments on 31 January and 6 February respectively, setting out the issues for Wales, describing payment modelling and the contextual work done to date, and inviting responses.   These are the latest parts of my ‘conversation’ with the farming industry and stakeholders about how Wales should implement CAP reform.  I look forward to feedback in late April and May.  In conjunction, I have held three large meetings with stakeholders about the Rural Development Plan and European Structural and Investment Funds and I have had three of six planned evening meetings with farmers and stakeholders about direct payments.  All meetings have been well attended and I have been impressed by the level of engagement and interest across Wales.  

This week’s Council outcome represents a significant step towards deciding the shape of the future CAP.  Assembly Members and stakeholders will be eager to know what decisions the Welsh Government will take.  The final form of the regulations has become clearer but the trilogues, and finalising the budget at both EU and UK level, will be challenging.  I am committed to the dialogue I have begun with stakeholders and wish to weigh up responses carefully before taking decisions.  The responses to my ’conversation’ and the meetings I am holding will help inform my decisions about CAP reform.  

Assuming this week’s progress is maintained I hope to be able to make decisions about CAP reform in the summer.  I would like to take this opportunity to thank Welsh Government officials who have worked hard to ensure that Welsh interests have been pitched during this process. I will update Assembly Members when there are further developments.

This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Assembly returns I would be happy to do so.