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V The Impact of CAP Reform on the Distribution of Support and Income

The impact of SPS implementation options on the distribution of support

Dr. Werner Kleinhanss1

This chapter uses the example of France and Germany and data from the EU FADN to project the distributional effects of the Single Payment Scheme (SPS) based on historical or regional references. For Germany, the principles of the hybrid and regional models are described and their effects on the distribution of direct payments, production and income by region, farm and farm size are estimated. The period 2004-13 is characterised by significant transfers of entitlements, from intensive beef fattening and dairy farms to extensive, grazing cattle farms, as well as a moderate regional redistribution in favour of regions with natural handicaps. Differences occur depending on farm size. The analysis of income developments over 2004-09 suggests some influence of SPS developments on income up to 2007, but as of 2008 changes in income levels are mainly driven by price developments, with larger farms appearing to adjust better to price decreases than smaller ones. Finally, a brief outline is given about the effects of possible alternative options of direct payments at the European Union level.

The Mid-Term Review and the Health Check reforms of the European Union’s Common Agricultural Policy (CAP) include numerous options for national implementation of the Single Payment Scheme (SPS). After the far-reaching decoupling of Direct Payments, further reforms and changes of support measures are necessary with respect to the financial guidelines to be established for the period after 2013.

In this paper, the characteristics and distributional effects of the SPS based on historical or regional references are briefly described. Referring to Germany, the principles of the hybrid and regional models and their effects on the distribution of direct payments, production and income are shown. Finally, a brief outline is given about the effects of possible alternative options of direct payments at the European Union level.

 
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