Rachael Porter looks at the argument for cutting the CAP budget

French president Jacques Chirac is not the only one fuming at prime minister Tony Blair’s attempt to use Common Agricultural Policy reform as a bargaining chip in the battle to keep the UK’s £3bn EU rebate. The prospect of yet more changes to the CAP has disappointed many UK farmers as well.
The very idea is “sheer lunacy”, says leading agricultural economist Sean Rickard from Cranfield University. “The last round began in 1992 and we finally saw the changes being implemented in January - the whole process took more than 10 years.
“Now the EU has opened up and any further reform would require 25 member states reaching an agreement - that could take a very, very long time,” he says.
But is further reform on the cards?
Rickard believes there is an element of truth in the idea that farmers are being used as pawns in Blair’s pursuit of securing the UK’s EU rebate. “But I don’t think he can honestly believe the EU will agree to reform CAP again - it’s too soon. Reform will come, but it will be bit by bit. And certainly not during Blair’s six-month presidency,” he says.
Rickard supports CAP reform. He argues that the CAP has been instrumental in prolonging the life of inefficient farm businesses across the UK and the EU. “If CAP was reformed - which I think we can assume will mean its abolition - then efficient farmers would welcome it. The government takes the view that if we’re not efficient at producing food, then we should and will import it.”
Rickard says the recently introduced Single Farm Payment subsidy no longer fully compensates producers for the shortfall in farm prices. These payments will be reduced as the CAP budget is cut.
Policy director for the NFU, Martin Haworth, agrees that there is no choice but to reduce the CAP budget over the next few years. He says the prime minister is not looking for any imminent changes, but he does want to review the CAP budget.
The budget for 2007-2013 was agreed by member states in 2002 and Blair wants to look at reducing it. Haworth says: “Blair made it very clear in his speech to the EU parliament that he wants to review the CAP budget - not reform policy.”
He also believes Blair will work hard to cut the CAP budget during his EU presidency and that his words were not merely a shot across French bows after the result of the French referendum and the subsequent row over the UK’s EU rebate. “There has been considerable political fallout since the French ‘no’ vote. It was embarrassing for the UK as well as for Jacques Chirac,” Haworth says. “He raised the issue of the UK’s EU rebate to deflect attention from the result and Blair simply said ‘yes, we’ll consider reducing the UK’s rebate provided we also look at cutting spending on the CAP’.”
He adds that even if there is no further agreement to cut the CAP budget, factors such as EU enlargement already mean it is inevitable that spending will have to be cut by between 10 and 20% by 2013.
“Blair is proposing that this be brought forward to possibly 2010. He will try to get the EU parliament to reach an agreement and set a total EU budget for 2007-2013, spurred on by pressure from new EU member states,” says Haworth.
“These states have insisted that Blair sets the budget during the next six months, but with so much political wrangling, I doubt an agreement will be reached on the total EU budget, let alone any revised CAP spending.”
And what if Blair gets his way and CAP budgets are cut significantly before 2013?
“The impact for farmers won’t be immediate. They already know that CAP subsidies will be cut in the long term, so they should already be preparing for that.”