The European Union provides farmers with income support or ‘direct payments’ to function as a safety net and make farming more profitable, guarantee food security in Europe, assist them in the production of safe, healthy and affordable food and reward farmers for delivering public goods not normally paid for by markets. They are managed jointly by the Commission and the Member States through a number of schemes.

Legal basis

The legal basis for the common agricultural policy (CAP) is established in the Treaty on the Functioning of the European Union (Articles 38 to 44) (3.2.1).

Regulation (EU) 2021/2115 of the European Parliament and of the Council of 2 December 2021 establishes rules on support for strategic plans to be drawn up by Member States under the common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repeals Regulations (EU) No 1305/2013 and (EU) No 1307/2013.

Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the CAP and repealing Regulation (EU) 1306/2013.

Introduction

The CAP supports farmers through a range of policy measures:

  • Financed by the EAGF, direct payments are a safety net for farmers facing lower than average incomes compared to the rest of the economy, as well as uncertain markets, weather extremes, pests and diseases, or weak bargaining power in the food chain. At about EUR 270 billion for the 2021-2027 period (multiannual financial framework, current prices), direct payments account for 72% of EU CAP funds (EUR 378.5 billion) (3.2.2). EU legislation sets financial allocations for each Member State;
  • Market measures, also financed by the EAGF, aim to support and stabilise agricultural markets. Some support EU farmers directly, for example by facilitating their participation in producer groups or quality schemes, thus strengthening their role in the supply chain. The common market organisation (CMO) is covered by Regulation (EU) 2021/2117 of the European Parliament and of the Council of 2 December 2021 amending Regulations (EU) 1308/2013 on the common organisation of the agricultural markets; Regulation (EU) No 1151/2012 on quality schemes for agricultural products; Regulation (EU) No 251/2014 on geographical indications for aromatised wine products; and Regulation (EU) No 228/2013 laying down measures for agriculture in the outermost regions of the EU. Since sectoral interventions are now part of the Member States’ CAP strategic plans, the respective provisions have been moved from the CMO Regulation to the CAP Strategic Plans Regulation;
  • Rural development measures, financed by the EAFRD and by national funds, aim to contribute to the economic, social and environmental performance of rural areas. They also include support measures for farmers, such as agri-environment measures, the financing of farm investments, risk management tools and financial instruments (3.2.8).

Overview

Direct payment schemes are governed by Articles 20 to 41 of Regulation (EU) 2021/2115 (CAP Strategic Plans Regulation). Some schemes are compulsory, others can be included in the CAP strategic plans on a voluntary basis.

  • Basic income support for sustainability (Articles 21-28 of Regulation (EU) 2021/2115) is an annual payment per hectare to which half of the direct payment budget is devoted. Member States may decide to pay a uniform amount per hectare, to differentiate the payment in line with different socio-economic or agronomic conditions, or to pay an amount based on the payment entitlements applied under the previous CAP. When using payment entitlements, Member States must gradually reduce the gap between their values in the coming years, a process known as ‘convergence’. A payment for small farmers not exceeding EUR 1 250 per year can be granted as a lump sum or on a per hectare basis. Such payments, which are optional for farmers, replace all other forms of direct payment;
  • Complementary redistributive income support for sustainability (Article 29 of Regulation (EU) 2021/2115) is an annual extra payment for the first hectares of farmland for farmers who are entitled to basic income support. The amount per hectare and the number of hectares per farmer for which the redistributive income support is available are defined by Member States. This scheme aims to redistribute direct payments from larger to smaller or medium-sized farms. To support small farms, at least 10% of each Member State’s direct payments budget must go towards this scheme, unless redistribution is achieved through other means;
  • Complementary income support for young farmers (Article 30 of Regulation (EU) 2021/2115) is an annual extra payment for new farmers who are entitled to basic income support. A lump sum payment or an amount per hectare and the number of hectares per farmer for which the support is available are defined by the Member States. They also set the upper age limit – between 35 and 40 years – and the training and skills required of potential beneficiaries;
  • Schemes for the climate, the environment and animal welfare (eco-schemes) (Article 31 of Regulation (EU) 2021/2115) help farmers who commit to agricultural practices that are beneficial to the climate, the environment and animal welfare or in combating antimicrobial resistance. Such practices, which need to go beyond legislative requirements, are listed in the CAP strategic plans. The annual payment per hectare granted for eco-schemes can be a payment in addition to basic income support or a payment to offset costs incurred or income foregone as a result of the commitments made. At least 25% of the national direct payment budget must go towards this scheme, which is voluntary for farmers;
  • Coupled income support (Articles 32-35 of Regulation (EU) 2021/2115) while in the past, CAP income support was linked (or coupled) to specific products, successive reforms have gradually removed this link, which is nowadays limited to a small share of direct payments. Coupled support aims to address difficulties in sectors, types of production or specific types of farming that are important for socio-economic or environmental reasons. Support consists of an annual payment per hectare or animal, with the objective of improving competitiveness, sustainability or quality. Among the sectors that CAP strategic plans can target, protein crops can be counted without any specific justification, as this would contribute to reducing the EU’s dependency on imports in the sector and the use of nitrogen fertilisers;
  • Crop-specific payment for cotton (Articles 36-41 of Regulation (EU) 2021/2115) is a coupled direct payment scheme that grants payments per hectare of cotton located in areas authorised for cotton production in Bulgaria, Greece, Spain and Portugal.

How do direct payments work in practice?

Every year, more than 6 million beneficiaries receive direct payments. These are granted to active farmers, either individuals or companies, who are engaged in at least a minimum level of agricultural activity (i.e. agricultural production or keeping an agricultural area in a state suitable for farming). CAP strategic plans define active farmers via objective and non-discriminatory criteria, including through a negative list ruling out certain entities from being considered as active farmers.

The support through the CAP strategic plans is mostly provided in the form of payments based on area. For some schemes, it is based on the number of animals supported. The definitions related to eligibility for farmers and areas eligible for CAP support are set at EU level to ensure the commonality of the policy. Compared to the previous CAP period, these definitions are not so detailed in the EU legislation and allow Member States the flexibility to further specify the rules at national level so that they can be tailored to their needs and to better target the support.

All Member States set minimum requirements for receiving direct payments, with most of them setting both an area and a financial threshold of between 0.3 and 4 hectares and between EUR 100 and 500, respectively. Most Member States have kept their minimum requirement thresholds unchanged compared to the previous period.

Farmers who want to claim direct payments need to apply every year and comply with a number of rules. In addition to the statutory management requirements that are compulsory for exercising farming activities, farmers receiving CAP payments are subject to conditionality, i.e. they must maintain land in good agricultural and environmental conditions. The 2023-2027 CAP involves enhanced conditionality with ‘greener’ requirements. It also introduces social conditionality for the first time, linking direct payments to certain fundamental social and labour-related principles.

The Commission and national authorities operate the direct payments through shared management. Under the Commission’s supervision, national paying agencies are in charge of administering direct payments and dealing with tasks such as processing aid applications, executing payments and performing certain checks.

Key financial information

The basic income support for sustainability (BISS), an annual area-based decoupled payment financed solely by the EU budget, continues to be the most important CAP tool to support EU farmers’ income. On average, the planned expenditure within the CAP strategic plans for this tool accounts for 51% of the total EAGF budget, or 31% of total CAP public expenditure.

Distribution of the total public planned expenditure for direct payments underpinning the implementation of all 28 CAP strategic plans (2023-2027)

Type of intervention EU contribution (EUR billion) % as a share of total direct payments
BISS – Basic income for sustainability (Articles 21-28) 96.69 51.12%
CIS – Coupled income support (Articles 32-35) 23.03 12.18%
CIS-YF – Complementary income support for young farmers (Article 30) 3.4 1.80%
CRISS – Complementary redistributive income support for sustainability (Article 29) 20.09 10.62%
Eco-scheme – Schemes for the climate, the environment and animal welfare (Article 31) 44.71 23.64%
Cotton – Crop specific payment for cotton (Article 36-41) 1.23 0.65%
Total direct payments EAGF 189.15 100%

Source: European Commission, Approved 28 CAP Strategic Plans (2023-2027)

Summary overview, June 2023

Role of the European Parliament

On 1 June 2018, the Commission published its proposals establishing rules on support for strategic plans under the CAP. In Parliament, the file was assigned to the Committee on Agriculture and Rural Development (AGRI). The Committee on the Environment, Public Health and Food Safety (ENVI) obtained the status of associated committee under Rule 54 of the Rules of Procedure. Following the 2019 European elections, Peter Jahr (EPP, Germany) was appointed as AGRI rapporteur, while Christophe Hansen (EPP, Luxembourg) was appointed as ENVI rapporteur. On 23 October 2020, Parliament adopted its first reading position on the Commission’s legislative proposals for the new CAP.

The adopted text constituted the basis for the subsequent negotiations with the Council, which began for all three CAP files on 10 November 2020 and continued through a series of ‘trilogue’ meetings. In late June 2021, negotiators reached an agreement on the three proposals of the CAP reform package. This agreement was endorsed by the EU agriculture ministers on 28 June 2021 and by AGRI members on 9 September 2021. The agreement on the CAP Strategic Plans Regulation was approved by AGRI members with 38 votes in favour to 8 against, and 2 abstentions. Parliament voted on the three proposals of the CAP reform package during its November II plenary session and the CAP Strategic Plans Regulation, now Regulation (EU) 2021/2115 of 2 December 2021, was published in the Official Journal L 435 of 6 December 2021.

During the negotiations, Parliament sought to play a broad role, covering the full spectrum of issues on the table during the CAP reform process. A study commissioned by Parliament on the reform process of the CAP post 2020 seen from an interinstitutional angle points out that by adopting the role of guardian of EU principles and the CAP budget, Parliament sought to maintain the EU character and commonality of different parts of the proposed legislation to avoid a ‘renationalisation’ of the CAP. Moreover, in some instances, it took the lead as policy initiator, as illustrated by its efforts to ring-fence a high share of the direct payments budget for the new eco-schemes or by successfully introducing social conditionality into the new CAP Strategic Plans Regulation.

 

François Nègre