European Commission reduces spending on farm support
The so-called financial discipline proposal is made each year and reduces spending under the common agricultural policy – specifically direct payments that are funded by the European Agricultural Guarantee Fund (EAGF) – in order to set aside €400m (in 2011 prices) to cover potential crises in agricultural markets.
The proposal for 2018 aims to reduce CAP direct payments in excess of €2,000 by 1.388149%, with the exception of direct payments for farmers in Croatia as they are still being phased into the scheme following their country's accession to the EU. The money saved as a result will be used to ensure that a crisis reserve of €459.5 million (in current prices) is available in the 2018 budget. The rate is slightly higher than the 1.353905% applied in 2017 (for a reserve of €450.5 million).
According to EU budget rules, the Commission is obliged to table a proposal on financial discipline before the end of March each year. The Council and European Parliament now have until 30 June 2017 to fix the rate of financial discipline. In the absence of an agreement by 30 June, the Commission will set the rate.
In addition to creating the crisis reserve each year, the financial discipline mechanism can also be used to ensure that EAGF expenditure stays within the annual limits agreed as part of the overall seven-year EU financial framework (the so-called MFF). However, current estimates for direct payments and market related expenditure for 2018 suggest that they will be within the agreed limit and therefore the present financial discipline proposal does not foresee any reduction for that purpose.
According to CAP legislation, amounts generated by financial discipline which remain available in the EAGF budget at the end of the financial year, including those of the crisis reserve, have to be reimbursed to farmers. Since the establishment of the crisis reserve in 2014, it has never had to be used, and the money set aside each year has been made available again to farmers.