What is CAP?

The common agricultural policy, better known as the CAP, is a system of subsidies paid to the European Union farmers. Its main purposes are to guarantee minimum levels of production, so that Europeans have enough food to eat, and to ensure a fair standard of living for those dependent on agriculture.

How much does it cost?

During the first years of the EU’s existence the CAP represented a significant proportion of budget expenditure, over two thirds on occasions. CAP accounts for 40% of the EU budget. It is estimated at €53 billion which is approximately £42.2 billion per year.

What is SPS?

The Single Payment Scheme (SPS) is the principal agricultural subsidy scheme in the European Union. Under the scheme farmers have greater freedom to farm to the demands of the market as subsidies are no longer linked to production, and environmentally friendly farming practices (known as cross compliance) are better acknowledged and rewarded. Under SPS, there is no obligation to allocate land to any particular crop or agricultural activity to receive the subsidy.

What is decoupling?

Decoupling is removing the link between production and subsidy payments. The European Commission’s Mid Term Review of the Common Agricultural Policy in 2003 proposed that direct payments for arable crops, grain legumes, starch potatoes, beef and sheep should be decoupled from production.

Consequently, direct payments for an agricultural business were brought into a single payment determined on the basis of historical references.

What is cross compliance?

Cross compliance requirements apply to anyone who receives direct payments under Common Agricultural Policy (CAP) support schemes or receives payments under certain Rural Development schemes.

There are three types of cross compliance requirements:

  • specific European legal requirements, known as Statutory Management Requirements (SMRs)
  • domestic legal requirements stipulating that land be kept in Good Agricultural and Environmental Condition (GAEC)
  • requirements to maintain a level of permanent pasture not included in the crop rotation for five years or more – this is not currently a cross compliance requirement for individual farmers, but may become one in future years.

What is modulation?

Modulation is the transfer of subsidy funds from CAP’s Pillar 1, the guaranteed expenditure including the single farm payments to Pillar 2, the rural development and agri-environmental schemes.