Mr. Brendan Gleeson:

Last November, we had a discussion on the likely shape of the Common Agricultural Policy, CAP, after 2020. At that time, a reflection paper on the matter had been leaked from the Commission and I indicated that we would need to see the legislative proposals before taking a view. Matters have moved on since then. On 1 June last, the Commission published proposals for three Council regulations covering the essential elements of the CAP in the period 2021-27. Now we have something concrete to work with. Even so, we are just at the beginning of a negotiation on these proposals. There was one discussion at the Council of Agriculture Ministers in Luxembourg last week, and through July, officials will engage on a detailed, article-by-article discussion at working group level. Ireland is still evaluating the proposals in detail, and this is a work in progress. The draft regulations are long and detailed and, therefore, what I present here will necessarily be summarised to a significant extent. I will try to touch on some of the main points and then we can have a discussion

There are three published regulations. The first is a document referenced COM (2018) 392 final. This preserves the basic structure of the CAP, in particular the division between Pillar 1, direct payments, and Pillar 2, rural development. It includes the main provisions on member state strategic plans, the Pillar 1 direct payments schemes and the rural development schemes under Pillar 2. It consolidates regulations on direct payments and rural development, which are separate under the current configuration. The previous regulations are repealed. This regulation will be of most interests to members and I will come back to it.

The second proposal is referenced COM (2018) 393 final. This includes technical provisions for member states. It defines paying agencies and other bodies required to administer the payments systems. It also establishes rules relating to finance, control and accounting. This repeals the previous regulation.The proposal also modifies the current crisis reserve provisions at EU level. The proposal here is to establish a crisis reserve of €400 million annually, the unspent balance of which will be rolled over to the following year. Currently, these unspent balances are returned to farmers the following year.

The third proposal is referenced COM (2018) 394 final. It deals with the Common Market organisation. This is the instrument that lays down provisions for market supports such as intervention and aids to private storage, APS, protections for geographical indications, marketing standards and other provisions regulating the market. This is an amendment to previous regulations.It does not repeal them, which is significant. When I was before the committee last November we had a significant discussion on the importance of existing market support arrangements such as intervention and APS as a safety net in times of market crisis. These provisions have not been changed at all in the current proposals; they remain intact.

Turning to the main draft regulation, we spoke last November about issues such as a shift from compliance to performance based analysis, greater environmental ambition, inter-generational change and the distribution of direct payments. We also spoke about the relationship between Pillar 1 and Pillar 2 funding, about overall funding for the CAP and about the definition of genuine farmer. This proposal touches on all of these matters.

I will briefly outline what is provided for in the national plan. Member states will be required to submit a national plan covering both Pillar 1 and Pillar 2 interventions no later than 1 January 2020. This is essentially an extension to Pillar 1 of the type of planning arrangements previously applicable to Pillar 2 only. The plan must be approved by the Commission. The plan must include a SWOT - strengths, weaknesses, opportunities, threats - analysis, an assessment of needs, an intervention strategy, an ex anteevaluation and a strategic environmental analysis. It must also include output and results targets against which performance will be measured as implementation proceeds. Member state interventions will not be defined at the same level of detail as currently, leaving some room for discretion, and eligibility conditions will be defined at member state level.

Turning to direct payments, there are a number of significant modifications in the direct payments provisions. These touch principally on environmental commitments, support for young farmers and the distribution of payments. The new regulations provide for mandatory basic payment as well as mandatory redistributive and young farmer schemes. At least 2% of the direct payments envelope must be provided for the young farmer scheme. Beneficiaries will be required to ensure their land complies with good agricultural and environmental conditions and statutory management requirements, and some of these will replace the current greening requirements. We are examining this conditionality carefully. Member states will also, for the first time, be required to establish a specific scheme for climate and the environment in Pillar 1. This will be available to farmers who are willing, on a voluntary basis, to go beyond baseline statutory requirements. It will also be possible for member states, on a voluntary basis, to couple payments, but only for vulnerable sectors and up to a maximum of 10% of the Pillar 1 envelope, with some exceptions. There will also be an option for a small farmer payment instead of the basic payment.

Member states will be required to progressively reduce payments in excess of €60,000 and there will be a mandatory reduction of 100% in payments in excess of €100,000. That is effectively a cap of €100,000 on direct payments. By 2026, member states will also be required to apply a maximum payment per hectare. However, member states are required to deduct the cost of salaries and the value of unpaid labour from a farmer's direct payments before these reductions are applied. There will also be mandatory internal convergence. By 2020, all farmers in Ireland will have a payment per hectare equal to at least 60% of the average payment under the current dispensation. By 2026, these proposals would bring this up to at least 75% of the average payment per hectare.

Pillar 2 is rural development payments. This provides for EU co-funded aid for measures under a variety of headings. These are broadly similar to the current headings. They relate to environmental, climate and other management commitments, natural or other area specific constraints, investments, measures for young farmers and new business start-ups, risk management tools, co-operation and knowledge and exchange of information. Member states have some latitude in defining measures under these general headings. There are significant changes to the rural development provisions. For example, member states are now required to include measures for risk management in their national strategic plans. They were voluntary up to now. They can include, but are not confined to, support for insurance premiums or for the establishment of mutual funds. There is also more of an emphasis on the environment. At least 30% of the Pillar 2 budget, excluding areas of natural constraint, ANCs, must be reserved for environment and climate change measures, and the competent authority for the environment and climate change must be involved in drawing up the national plan.

The maximum rate of EU financial assistance for environmental and climate action has been increased to 80% of total support. The provisions on financial instruments are more comprehensive than heretofore. These can now extend to investment and working capital, and can be used to complement grants.

I now turn to the funding elements. On 2 May 2018, Commissioner Oettinger published proposals for a multi-annual financial framework for the period 2021 to 2027. These proposals came against the background of budgetary pressures arising from the departure of one of the EU’s largest net contributors, and new policy imperatives, including migration and defence. These proposals referred to an overall cut of approximately 5% in the CAP budget compared to the current envelopes for 27 member states. Against this background, the CAP proposals outline the member state envelopes for Pillar 1 and Pillar 2. For Ireland, the annual Pillar 1 allocation is approximately €1.164 billion. This amounts to €8.148 billion over the period. It compares to a final year envelope for Pillar 1 in the current period of €1,.211 billion. That is a loss of just over €47 million per annum in direct payment receipts. The annual Pillar 2 allocation is €264,670,951. This amounts to almost €1.853 billion over the period. The annual allocation compares to a final year allocation of €312,485,314 in the current period. That is also an annual loss of just over €47 million in Pillar 2 receipts. For Pillars 1 and 2 together, we are talking about a reduction in receipts of approximately €94 million per annum.

Ireland is part of a coalition of member states calling for the restoration of these cuts, but not all member states agree. This will ultimately be decided by Finance Ministers, by the European Council and by the European Parliament. On budgetary matters, it is also noteworthy that member states have the flexibility to transfer up to 15% of the direct payments allocation to rural development, and vice versa. An amount transferred to Pillar 2 may be increased by up to 15% provided it is being used for environmental and climate change objectives.

I want to conclude on the same point we concluded on last November. The Chairman asked then about the definition of "active farmer" and I predicted that discussions would be as difficult this time around as they were in 2013. The new proposals coin a new phrase - the "genuine farmer". They provide that, "genuine farmers shall be defined in a way to ensure that no support is granted to those whose agricultural activity forms only an insignificant part of their overall economic activities, or whose principal business activity is not agricultural , while not precluding from support pluri active farmers." The definition allows for income tests and labour input measurements. It is certainly the case that the Commission has worked hard on this definition, but I fear that from an Irish perspective it is not satisfactory. Frankly, the prospect of applying income or labour input tests prior to making direct payments is unrealistic, and so, we must continue in our quest for an appropriate definition.

The Minister has announced a public consultation on the new regulations to take place on 4 July. The committee will be represented and it will provide an opportunity for a further reflection on the proposals. We are just at the beginning of negotiations on a complex set of proposals, and our thinking on many of these issues will evolve as we penetrate the detail of the regulations through the working group process. In the meantime, this is a good opportunity to consider some of the issues arising. I look forward to addressing any questions the members may have.