How to allocate direct payments more fairly  

 
 

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Distribution within member states

The Commission's original plans for reallocating payments between farmers within the same member state have been changed as part of the deal, in order to limit the most extreme effects of the potential redistribution.

While the system of allocation based on historic references is to be phased out, alternative options are available to manage this process. The default Commission proposal envisages that, as of 2019, payments received by all farmers in any given member state are to be based on a uniform unit value (determined on a national or regional basis).

As an alternative, the deal includes another option whereby the entitlements of farmers receiving less than 90% of the national/regional average, will by 2019 be increased by at least one third of the difference between their payments in 2014 and 90% of the national/regional average.

MEPs ensured that by 2019 every farmer will receive at least 60% of the national/regional average. However, in order to avoid sudden sharp falls in levels of support that could jeopardise the viability of some farms, Parliament insisted that member states could guarantee that no farmer would lose more than 30% of his/her level of direct payments, when compared to the first year of implementation.

Closing the payments gap between member states

Parliament insisted the need for measures to reduce differences between the levels of payments received by farmers in different member states as much as possible in coming years. Under the new rules, this difference in member states getting less than 90% of the EU average should be cut by at least one third by 2020. This means that by 2020 farmers from different member states will receive at least 72% of the EU average per hectare payment.

Large versus small farmers

To channel money to small and young farmers, rather than big beneficiaries whose greater ability to adapt makes it easier for them to operate with lower payments, MEPs fought from the start of negotiations with member states for a mechanism to reduce payments above certain level and even set a ceiling for direct payments a single beneficiary may receive.

As a compromise, Parliament and EU agriculture ministers agreed in the negotiations that member states will reduce the amounts of direct payments exceeding €150,000 by at least 5% above that level. However, to encourage farmers to employ more workers on their holdings, member states will be allowed to deduct salaries of their employees, including taxes and social contributions related to employment, from the total amount of direct payments to be granted to a farmer.

No advantage will be given to farmers who artificially create the conditions to avoid the deduction.

The amounts gained by such reductions will remain in the member state or in the region where they were deducted and it will be moved to the regional development budget. No co-financing rates will apply for this amount.

Alternatively, member states might decide to apply an across the board reduction of direct payments to all farmers and then grant a top-up payment of a maximum of a 65% of the national or regional average payment per hectare for a maximum of 30 hectares or to the number of hectares corresponding to the average farm size on their territory. If they do grant this so-called "redistributive payment" and use more than 5% of their annual national ceiling for it, they will not be obliged to apply 5% reduction to the payments over €150,000.