CAP in the EU budget
The EU’s multiannual financial framework (MFF) for 2021-27, adopted on 17 December 2020, amounts to €1.21 trillion (in current prices) with an additional €808 billion from the next generation EU recovery instrument. The total allocation for the common agricultural policy (CAP) amounts to €386.6 billion, divided between two funds (often referred to as the “two pillars” of the CAP):
European agricultural guarantee fund (EAGF)
The EAGF (the “first pillar” of the CAP) has an allocation of €291.1 billion. Up to €270 billion will be provided for income support schemes, with the remainder dedicated to supporting agricultural markets.
European agricultural fund for rural development (EAFRD)
For the EAFRD (the CAP’s “second pillar”), the total allocation amounts to €95.5 billion. This includes €8.1 billion from the next generation EU recovery instrument to help address the challenges posed by the COVID-19 pandemic. Around 30% of the recovery funds will become available in 2021, with the remaining 70% to be released in 2022.
During the first two years of the 2021-27 MFF, the existing 2014-20 CAP regulations will continue to apply, as set out in the transitional regulation adopted on 23 December 2020. The regulation is in place to ensure a smooth transition to the future framework of the CAP strategic plans.
CAP strategic plans are due to be implemented from 1 January 2023. The strategic plans will allow for a greater degree of flexibility between the two funds and will include the ambitions of the European Green Deal, in particular the Farm to Fork Strategy. Overall, 40% of total CAP expenditure will be dedicated to climate action.
European agricultural guarantee fund
The EAGF primarily finances income support for farmers and market measures. In 2019, spending in these areas amounted to €43.81 billion.
The EAGF supports EU farmers through different payment schemes, including a basic payment scheme, a payment for sustainable farming methods (“green direct payments”) and a payment for young farmers. All payments are subject to compliance with EU rules on food safety, environmental protection, and animal welfare.
The EAGF also funds measures to support and stabilise agricultural markets, including intervention buying, private storage aid, sector-specific supports (wine; fruit & vegetables; olive oil; hops), exceptional market disturbance measures, and the EU school fruit, vegetables and milk scheme. These market measures operate as part of the common market organisation (CMO), which sets out the parameters for intervening in agricultural markets. In addition, the EAGF finances agricultural information and promotion actions, as well as support to the outermost regions (POSEI) and smaller Aegean islands.
European agricultural fund for rural development
The European agricultural fund for rural development (EAFRD) finances the CAP’s contribution to the EU’s rural development objectives:
- improving the competitiveness of agriculture,
- encouraging sustainable management of natural resources and climate action,
- achieving a balanced territorial development of rural economies and communities.
These objectives are realised through national and regional rural development programmes (RDPs), which are co-financed by the EAFRD and the national budgets of EU countries. During the 2014 to 2020 programming period, the EAFRD contributed €100 billion to RDPs.
The EAFRD can also provide investment support for rural enterprises and projects through financial instruments, such as loans, guarantees, or equity. Details about financial instruments available under the EAFRD are provided on the online advisory platform Fi-Compass.
The EAFRD is one of five funds included under the framework of the European structural investment funds (ESIF), which target cohesive investment towards sustainable economic development in the EU. The EAFRD will remain under the ESIF framework in 2021 and 2022, after which it will fall fully under the framework of the CAP strategic plans.
Management of CAP funds
While the Commission bears overall responsibility for the financial management of the CAP, it normally does not make payments to beneficiaries. Most of the CAP budget is implemented under so-called “shared management” between the Commission and EU countries, with the remainder falling under “direct management”.
99.1% of the CAP budget – including allocations for income support, market measures, and rural development – is implemented under the principle of shared management between the Commission and EU countries.
Role of EU countries
Under shared management, EU countries are responsible for setting up a management and control system for payments that complies with EU regulations. They must ensure that this system functions effectively and is capable of preventing, detecting, and correcting irregularities.
Role of the European Commission
The Commission plays a supervisory role, ensuring that the arrangements governing the management and control system are compliant. It does so by verifying the effective functioning of this system and making financial corrections, where necessary.
EU countries execute payments to CAP beneficiaries through officially designated bodies known as paying agencies. Paying agencies are accredited according to detailed criteria laid down by the Commission; they must ensure the eligibility of all fund applications and the correct execution of payments to farmers and other CAP beneficiaries.
All expenditure is recorded in the paying agencies’ annual accounts and is subject to further levels of control, checks and audit under the financial assurance process.
Roughly 0.8% of the CAP budget is managed directly by the Commission (including allocations to EU delegations and EU executive agencies). This funding provides for:
- administrative and technical support activities required to implement the CAP, including surveys and monitoring, audit and inspection measures, and the maintenance of agricultural accounting IT systems;
- promotion activities for EU agricultural products by international organisations, executive agencies, and the Commission itself.
The Commission also provides grants for information measures relating to the CAP and issues contracts for third party services, such as evaluations and studies, technical assistance and training, consultancy, conferences, and publicity. Contracts for services are concluded following calls for tender.
EU regulation 1306/2013 – on the financing, management and monitoring of the common agricultural policy
EU regulation 1307/2013 – on income support for farmers under schemes within the framework of the CAP
EU regulation 1308/2013 – on establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007
EU regulation 1305/2013 – support for rural development by the European agricultural fund for rural development (EAFRD)
Transitional regulation for 2021-22
EU regulation 2020/2220 – sets out the conditional extension of CAP regulations until the implementation of the future CAP reform