The EU’s Common Agricultural Policy (CAP) should be overhauled so that its primary focus is on delivering public goods, including food security, high animal welfare standards and better stewardship of the land.

Delivering a report on Monday which looks at boosting resilience in the face of the problems facing farming, such as volatile prices, the House of Lords’ EU Committee said a policy which carries greater public benefits would stimulate more positive outcomes.

On Monday the House of Lords’ EU Committee argued for a wider focus on the CAP, to deliver benefits for the public. The Lords argued that although the current income support payments to farmers under the CAP should continue to play a role in helping farmers to withstand periods of low prices, these payments can also prevent the entry of new farmers into the sector.

Commenting Baroness Scott of Needham Market, Chair of the Committee, said, ”Evidence we received suggested it is time for the Common Agricultural Policy to be reformed to more fully recognise the holistic service farmers provide for society by directing funding towards the provision of public goods, including environmental management, food security and stewardship of the land. We believe that income support for farmers in the UK and in the wider EU should continue as the conditions for agriculture are more challenging than in many other major producing countries. Nevertheless, public money should not be used to simply prop up inefficient farmers.”

The Lords Committee is far from alone in its assessment. During the last CAP reform process in Summer 2013, experts from the University of East Anglia who previously contributed to the government’s National Ecological Assessment (NEA) produced a report showing that a "refocusing" of farm payments would provide universal benefits. They concluded that current spending under the policy - worth about half the value of the entire UK agriculture sector - represents “poor value for society,” especially given the fact that taxpayers foot the bill.

In April this year, EU Auditors acknowledged that neither member states nor the EU Commission are collecting enough data to accurately measure whether direct payments to farmers are contributing towards meeting the goals of the Common Agricultural Policy. In March, 100 charities representing work on wildlife, environment and anti-poverty issues called on the Commission to carry out a ‘fitness check’ on the EU’s 53 billion Euro arming policy.

Farmers need support as cushion against low prices

In their report on Monday, the EU Committee said sustained periods of low prices have a greater effect on farms than volatile prices. They said “price volatility is a normal market risk to be managed by farmers, and that it is no greater now than in the past” and recommended that occasional public support is needed to protect farmers from unpredictable market disruption, such as the recent Russian ban on EU imports, or extreme weather events. In the long term, however, they want to see a policy focus on building farmers’ resilience and capacity to manage risks.

They argued against subsidised insurance schemes replacing the Direct Payments system.

Committee chair Baroness Scott added, "Direct Payments still have a role to play and we do not propose a move to a US style insurance based approach. However, there is a real risk with the pronounced focus on blanket income support, as opposed to more targeted subsidies, that innovation is stifled and new farmers are discouraged from entering the industry.

"Last year we saw catastrophic flooding in parts of the UK which caused real hardship for farmers in the affected areas. One-off support packages can help farmers through such episodes beyond their control, but a long-term policy should focus on building the sector’s resilience to withstand a wide range of risks including low prices. Our inquiry found that better business skills are key to competitive farm businesses.”

NFU response

Responding to the report, NFU president Meurig Raymond said the Lords Committee recognised the hardship being faced by farmers, with milk prices falling by more than 33%, pig meat by 30% and feed wheat by almost 40% over the last two years.

Mr Raymond said “The NFU supports the progress towards a more market-led agricultural sector, where it is done fairly across the EU and without executive bureaucracy. NFU is actively supporting the European Commission’s agri-market task force. The task force is seeking to help farmers manage risk with a range of financial instruments.

However, the union contested the Lords’ pronouncements on direct payments. The NFU president said that, were direct payments to be replaced, many farmers would struggle to remain in business in the current climate of low prices. He continued, “The NFU believes that the decoupled direct payments received by farmers by way of the Basic Payment Scheme (BPS) should remain at the core of the CAP and that the primary purpose should remain primarily an economic one. 

“The direct payments provide a degree of income stability which enables farmers to maintain productive capacity despite volatile agricultural markets and climatic shocks. They provide some compensation for farmers in the EU who meet higher production standards. They provide a security against which farmers can invest and leverage additional private investment from banks and they allow farmers to deliver a range of wider public benefits that flow from the management of agricultural land.”

Even so, with a number of reports from NGOs, influential think tanks, EU institutions and now government committees recommending greater scrutiny of the CAP regime, pressure is mounting on the Commission to demonstrate the positive impacts of its most expensive policy.