EU says CAP reform to raise incomes

Controversial proposals to reform the Common Agriculture Policy will increase farmer incomes by between 22 per cent and 34 per…

Controversial proposals to reform the Common Agriculture Policy will increase farmer incomes by between 22 per cent and 34 per cent in real terms by 2006 on 1992-1996 levels, the European Commission claimed yesterday.

The figures are based on two independent models of the agricultural economy commissioned by the Farm Commissioner, Mr Franz Fischler, who said that they proved "incontrovertibly" that the proposals in Agenda 2000 on farm reform are good not only for the farmers but the economy of the Union. The surveys contradict the gloomy prognostications of the European farm lobby. And although they do not contain an assessment of the effect of the reforms on each member-state, a Commission spokesman, Mr Gerry Kiely, said that Ireland's heavier-than-average dependence on beef production should not significantly affect the outcome.

The summary report says that consumers should also benefit from the farm reforms which are based on cuts in guaranteed prices in the main producer sectors to bring prices closer to world market levels and payment of compensation to farmers through direct income aid. The full implementation of the price cuts should be worth some £10.5 billion a year to consumers. The Commission acknowledges, however, a failure of retailers and middle men to pass on farm gate price cuts to the consumer. Mr Fischler promised that the Commission would investigate the issue.

The survey also suggests that the whole economy of the Union would benefit with an increase in GDP of between 0.2 per cent and 0.4 per cent. Production and internal demand for cereals are predicted to rise some 6 per cent, while beef production would remain stable, demand rising some 2 per cent.

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The figures for the average income of individual farmers assume an annual decline of between 2.2 per cent and 3.7 per cent in the farm labour force. For the last two years it has declined by 3.5 per cent. Assuming a slower rate of decline of 2.5 per cent, the outlook is for a more moderate increase in real incomes of between 10 per cent and 25 per cent.

Although the studies show that farm incomes would rise even higher on the basis of an unchanged policy scenario, Mr Fischler warned that the status quo was simply not an option as it would result in unacceptable grain mountains. The CAP reforms are set to cost an extra £2.5 billion to £3.5 billion to the EU budget, depending on world markets.

Patrick Smyth

Patrick Smyth

Patrick Smyth is former Europe editor of The Irish Times