EU to reform its farm subsidies

By Dominic Laurie
Europe business reporter, BBC News, Brussels

Farming subsidies are a controversial part of EU policy

The EU Commission has proposed reforms to the Common Agricultural Policy (CAP), which eats up 40% of its 106bn euro ($157bn; £76bn) annual budget.

Agriculture Commissioner Mariann Fischer Boel says the changes will make it fit for an enlarged 27-state EU.

The biggest change would be to reduce subsides above 100,000 euros by 10%, above 200,000 euros by 20% and above 300,000 euros by 45%.

The amount of land a farmer has to own to be eligible for aid would also rise.

At the moment, that stands at 0.3 hectares, less than the size of a football field.

The commission says the administrative cost of dealing with the smallest properties is often more than the subsidy itself.

Rural development

Member states currently have to divert 5% of farmers' payments into a rural development fund.

This pot of money helps to protect rural areas against extreme weather and climate change and also aims to help farms diversify into other business areas.

Under the new proposals, the proportion of farm payments going into that fund would increase to 13%.

The plan is also supposed to get rid of the compulsory practice of "set-aside", whereby farmers have to leave 10% of their land idle at any given time.

This was introduced in 1988 to deal with gross over-supply of the market, a problem that no longer exists in most agricultural sectors.

Guaranteed prices

The commission also says it no longer wants to step in to buy surplus production of certain commodities at a guaranteed price.

It says the market is in good enough shape to do away with the policy.

"We need to look at whether we need to adjust the CAP for an EU of 27 (countries) and a rapidly changing world," Ms Fischer Boel said.

"The changes I propose will make a real difference for farmers, consumers and taxpayers."

The most recent big reform of the CAP was in 2003, when the principle of linking subsidies to looking after, rather than to farming, land was introduced.

The new proposals will now be consulted on, with the commission's final plans set to be set out in May next year.