The European Commission’s proposals for the post-2020 CAP contain significant changes to the Direct Payments system. Perhaps the most substantial proposed change is in the form of a graduated reduction of payments over €60,000 per annum. A 100% reduction is to be applied to the amount of the payment exceeding €100,000, at least 75% to payments between €90,000 and €100,000, at least 50% to payments between €75,000 and €90,000, and at least 25% to payments between €60,000 and €75,000.
The proposals state that Member States shall first subtract the salaries of the farmer including taxes and social contributions, before applying capping. The cost of regular and unpaid labour should also be taken into account. It is intended that the funding released from capping is to be used for the mandatory redistributive income support i.e. moving support from large to small/medium farms.
Under the new proposals, reductions will apply to all Pillar 1 payments. This includes the complementary income support for young farmers, eco-schemes for the environment and coupled support.
Under the current rules, Member States must reduce direct payments to farmers in excess of €150,000 by a minimum of 5%. Ireland applied a 100% reduction to such payments. This means that no farmer can receive more than €150,000 under the Basic Payment Scheme. However, capping applies to the Basic Payment only; payments for greening and the young farmer are additional to this.
As regards the capping of direct payments post 2020, I have already said that Ireland is in principle open to the further capping of direct payments, and, similarly, to proposals to redistribute payments to smaller and medium sized farms within Member States. However, I believe the proposal to deduct salaries and labour costs is unnecessarily complex and would be a significant administrative burden for Member States to implement.