Direct Payments: the Basic Payment Scheme from Convergence of the value of payment entitlements ('Internal Convergence')

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1 Direct Payments: the Basic Payment Scheme frm Cnvergence f the value f payment entitlements ('Internal Cnvergence') The fiche presents the cncept f 'internal cnvergence' in the 2013 CAP refrm and the implementatin f this prvisin by Member States. It reflects the cntent f their ntificatins available t the Cmmissin services t date. It is made available withut prejudice t any finding in respect f their cmpliance with the regulatry framewrk. It is prvided n the understanding that in the event f a dispute invlving Unin law it is, under the Treaty n the Functining f the Eurpean Unin, ultimately fr the Eurpean Curt f Justice t prvide a definitive interpretatin f the applicable Unin law. December 1. Intrductin The internal cnvergence mechanism is ne f the cre elements f the plitical agreement reached in June 2013 in respect f the refrm f direct supprt. In accrdance with the crrespnding rules, the value f the payment entitlements allcated under the Basic Payment Scheme (BPS), within a Member State, must mve twards a mre unifrm level. It had becme indeed increasingly difficult t justify the significant individual differences in the level f supprt per hectare. The bjective is t ensure a mre equitable distributin f direct supprt between farmers. T achieve this, Member States culd chse frm different ptins (the three main mdels f internal cnvergence): The basic mdel is the flat rate frm (all payment entitlements have the same unit value frm ),

2 frm which Member States may dergate by differentiating the values f payment entitlements (PEs) n the basis f farmers' direct supprt fr 2014 (with different ptins) 1 : If the Member State still decides t reach a unifrm value by the end f the perid f cnvergence (-2019), it applies the s-called flat rate by 2019 (at the latest) 2 ; If the Member State decides t apply a lnger transitin, it applies a partial cnvergence ("tunnel mdel"), which can take several frms as framed by the EU legislatin. These mdels are applicable at natinal r at reginal level if the Member State applies the ptin f reginalising the BPS 3. The reginalisatin f BPS can be based n agrnmic r sci-ecnmic characteristics, the agricultural ptential r the institutinal r administrative structure. In additin, it shuld be nted that the greening payment can be paid as a flat rate payment r as a percentage f the BPS f the individual farmer (% f the value f his/her activated PEs). In this secnd mdel, cnvergence thus applies als t the amunt f greening payment each farmer will be granted. 2. The three main mdels f internal cnvergence 2.1. Flat rate frm In this mdel, the value f PEs is calculated by dividing a fixed percentage f the natinal ceiling available fr granting direct payments (Annex II t Regulatin 1307/2013, hereafter referred t as the 'natinal ceiling') fr each year by the ttal number f PEs allcated in (except the nes allcated frm the reserve) 4. This fixed percentage crrespnds t the share f the BPS ceiling excluding the reserve in the natinal ceiling in (als called the "theretical BPS ceiling excluding the reserve" hereafter). It means that the value f all PEs will have the same value (yearly average) in a Member State r in a regin frm nwards. It can be illustrated by the fllwing graph. The blue bars represent the "theretical BPS ceiling excluding the reserve" (fixed percentage f the natinal ceiling every year) which fllws the steps f external cnvergence. The ttal value f PE allcated in first allcatin must fit this "theretical BPS ceiling excluding the reserve" each year. The green line represents the unit values f PEs thrughut the perid. They fllw the average Article 26 f Regulatin 1307/2013 Article 25(3), 25(8) and 25(9) f Regulatin 1307/2013 Article 23 f Regulatin 1307/2013 Article 25(1) f Regulatin 1307/2013 2

3 Flat rate frm EUR/PE Scale fr unit values f PEs Fixed percentage f Annex II (external cnvergence) "theretical BPS ceiling excluding the reserve" EUR Scale fr the fixed percentage f Annex II Natinal r reginal average Value f all PE Reginal r natinal flat rate It shuld be nted that any change f the BPS ceiling frm ne year t the ther due t a review f Member States decisin (fr transfers between direct payments and rural develpment, financial allcatin t ther schemes) shuld be handled via linear increase r decrease f the values f all PEs 5 and are thus nt dealt with within the internal cnvergence calculatins Flat rate by 2019 In this mdel the bjective is t reach a unifrm amunt per hectare in maximum 5 steps. Member States differentiate initially the values f PEs which cnverge prgressively until reaching a unifrm value by The starting pint is the Initial Unit Value (IUV) calculated n the basis f the direct supprt the farmer was entitled t in 2014 adjusted t the prprtin f BPS in and t the natinal ceiling as amended by the Multiannual Financial Framewrk The IUV shall be calculated differently depending n: Whether the Member State applied the Single Payment Scheme (SPS) r the Single Area Payment Scheme (SAPS) in 2014; Whether the Member State keeps the existing payment entitlements r nt 7. In additin Member States having applied the SPS in 2014 had t chse between tw ptins: t calculate the IUV n the basis f the payments the farmer was entitled t fr 2014 (i.e. including payments fr PEs leased-in by the farmer); Or t base it n the ttal value f the PEs wned by the farmer in 2014 (i.e. including the value f PEs leased-ut, and excluding the value f PEs leased-in) Article 22(5) f Regulatin 1307/2013 Article 25(3) f Regulatin 1307/2013 Article 21(3) f Regulatin 1307/2013 3

4 Mrever a Member State culd decide t include the sectr supprt granted fr 2014 in the basis fr calculating the IUV, prvided it als decided nt t supprt the same sectr under the VCS 8. The ending pint is the average value in the target year in which the flat rate shuld be reached: it is at the latest The average value shuld als be calculated n the basis f the "theretical BPS ceiling excluding the reserve" (see sectin 2.1) (as any change f the BPS ceiling frm ne year t the ther due t a review f Member States' decisins shuld be handled via linear increase r decrease f the values f all PEs, and nt via the calculatin f internal cnvergence). Flat rate by 2019 at the latest EUR/PE Scale fr unit values f IUVl PEs Fixed percentage f Annex II (external cnvergence) "theretical BPS ceiling excluding the reserve" EUR Scale fr the fixed percentage f Annex II IUVk adapted steps Natinal r reginal average IUVj IUVi equal steps IUV IUV: Initial Unit Value, calculated n the basis f 2014 DP adjusted by the prprtin f BPS and new ceiling in The transitin between the starting pint and the ending pint shall be made in equal steps 9. Hwever the adjustment t respect the annual "theretical BPS ceilings excluding the reserve" shuld be applied nly t PEs abve average, thus the steps f PEs abve average are als influenced by the steps f the "theretical BPS ceiling" 10. This is illustrated by the graph where the lines fr PEs abve average are nt straight but curved t absrb als the steps f the theretical BPS ceiling. NB: Member States having defined already natinal steps in the 2003 Refrm 11 dergate frm the "equal steps" rule. may Member States als have a margin f discretin t define their "flat rate by 2019": The target year fr the flat rate (at the latest 2019); A partial apprach is als pssible in accrdance with the secnd subparagraph f Article 26(6). Article 25(8) f Regulatin 2013/2013 The steps f the theretical BPS ceilings crrespnd t the steps f the natinal ceiling in Annex II t Regulatin 1307/2013, i.e. generally the steps f external cnvergence (r phasing-in, and flexibility between pillars). Article 63(3) f Regulatin 1782/2003 4

5 The number f equal steps (r natinal steps defined in the 2003 Refrm fr Member States cncerned) Partial cnvergence ("tunnel" mdel) In the partial cnvergence (r "tunnel") mdel, the rules fr the starting pint and the transitin between the starting and the ending pints are the same as in the 'flat rate by 2019' mdel. What differs is the definitin f the ending pint. First f all the target value is a percentage f the 2019 average which can be set by the Member States between 90% and 100% f the 2019 average. The 2019 average is als calculated n the basis f the "theretical BPS ceiling excluding the reserve" (see sectin 2.1) 12. Three grups f PEs shuld be distinguished: PEs whse IUV is belw the target value shuld clse at least ne third f the gap between the IUV and the target by 2019 at the latest. In additin each payment entitlement shuld as a general rule reach a minimum value f 60% f the 2019 average by The nly pssible exceptin t the minimum 60% is when Member States apply the ptinal "maximum 30% lss" (see next bullet). Fr PEs whse IUV is abve the 2019 average, the difference between their value and the average shuld be decreased t finance the increase in the value f the PEs with a value belw the target value 14. Als, their value shuld be adjusted t ensure the respect f the "theretical BPS ceiling excluding the reserve" (see sectin 2.1) 15. Member States define bjective and nn-discriminatry criteria t decrease the value f PEs abve average. It can be fr example a "linear" decrease (same % f reductin fr all PEs abve average), r a decrease "prprtinal t the distance t the average" (different % f reductin accrding t the distance t the average). In additin, Member States may decide t limit the lss t 30% cmpared t the IUV. In this case, if all PEs abve average have reached the maximum 30% lss, the minimum f 60% is adjusted dwnwards t respect the maximum 30% lss. The value f PEs between the target value (between 90% and 100% f the 2019 average) and the 2019 average des nt change. This mdel can be illustrated by the fllwing graph (in that case the target value is 90% f the 2019 average): Article 25(5) and 25(6) f Regulatin 1307/2013 f Regulatin 1307/2013 Article 25(7) f Regulatin 1307/2013 Secnd subparagraph f Article 25(8) f Regulatin 1307/2013 5

6 Partial cnvergence EUR/PE Scale fr unit values f IUVl PEs IUVk Fixed percentage f Annex II (external cnvergence) "theretical BPS ceiling excluding the reserve" adapted steps Decrease t finance the increases f thers and t fit the fixed percentage f Annex II Natinal r reginal average EUR Scale fr the fixed percentage f Annex II ptinal maximum decrease f 30% f IUV clse 1/3 f the gap IUVj IUVi 90% f the 2019 average equal steps minimum 60% f the 2019 average IUV IUV: Initial Unit Value, calculated n the basis f 2014 DP adjusted by the prprtin f BPS and new ceiling in T sum up, Member States have a margin f discretin t define their "tunnel", ntably: The target date by which the partial cnvergence shuld be achieved: at the earliest in and by 2019 at the latest, which determined als the number f steps, The target value: between 90% and 100% f the 2019 average, The extent t which the gap between the IUV and the target value shuld be clsed: at least ne third f the gap, The criteria t decrease PEs abve average: fr example between linear r prprtinal reductin, The applicatin r nt f the maximum 30% lss cmpared t the IUV. 3. Implementatin by Member States 3.1. Main mdels chsen Amngst the 18 Member States implementing the BPS, 6 have pted fr reginalising the BPS 16 : DE (by Länder), EL (3 regins accrding t histrical land use: arable land, grassland, permanent crps), ES (50 regins based n histrical land use and cmarcas), FR (2 regins: Crsica and cntinental France), FI (2 regins), UK 17 (reginal mdel applied within Sctland and England). The fllwing map illustrates the mdel f internal cnvergence chsen by each Member State Article 23 f Regulatin 1307/2013 The 4 regins apply different cnvergence mdels; in additin, tw f the UK regins (Sctland and England) have defined "sub-regins" with different target values. 6

7 DE, MT, FR-Crsica and UK-England apply the flat rate frm (4): Fr DE and UK-England, it is applied at reginal level; In additin DE will adapt prgressively the reginal BPS ceilings between 2017 and 2019 in rder t reach a unifrm unit value at natinal level in NL, AT, FI, UK-Sctland and UK-Wales will apply a flat rate in 2019 (5). Fr FI and UK-Sctland, it is applied at reginal level. BE-Flanders, BE-Wallnia, DK, IE, EL, ES, cntinental FR, HR, IT, LU, PT, SI, SE and UK-Nrthern Ireland will apply a partial cnvergence by 2019 (14). EL, ES and FI will apply it at reginal level. SE will clse 5/6 f the gap t 100% f 2019 average by 2019 and has already planned t mve twards a flat rate frm The ther Member States keep applying SAPS which is a flat rate area payment Details fr the flat rate by 2019 The table belw shws the details f the decisins taken by Member States in implementing the flat rate by They have all chsen the target date f 2019 and the majrity apply 7

8 five equal steps. Only FI applies the dergatin freseen in Article 25(9) f Regulatin 1307/2013 using the steps decided natinally in the cntext f the 2003 refrm. Member States applying the BPS reginalisatin are highlighted in the table. Member State / Regin Flat rate reached by Article 25(2) Steps Article 25(8) r 25(9) Austria 2019 Finland 2019 Applies art. 25 (9) dergatin - steps decided natinally (cf. art. 63(3) f Regulatin 1782/2003) Netherlands 2019 United Kingdm Sctland United Kingdm Wales Details f the partial cnvergence mdels The table belw presents the details f the decisins taken by Member States implementing the "tunnel" mdel. All have chsen 2019 as target date (except SE: 2020). Amng the 14 MS/regins implementing a tunnel, 10 have chsen 90% f the 2019 average as target value while the thers chse 100%. 11 apply the "basic tunnel" reducing by 1/3 the distance t the target value. FR, UK-Nrthern Ireland and SE will reduce the gap by 70%, 71.4% and 5/6 ths respectively. 8 Member States reduce the value f PEs abve average linearly while the thers reduce it prprtinally t the distance t the average. 8 Member States apply the maximum 30% lss. All apply (except SE which will apply a 6 th step t reach the flat rate in 2020). Member States applying the BPS reginalisatin are highlighted in the table. Member State / Regin Belgium Flanders Belgium Wallnia Target date t (7) Target value f PE (in % f average) secnd sub % % Cratia % Criteria t increase PE t target value first sub 1/3 f the 1/3 f the 1/3 f the Criteria t decrease PE abve average Article 25(7) Prprtinal t the distance t Prprtinal t the distance t Prprtinal t the distance t (t be cnfirmed) Maximum decrease Article 25(7) Yes 30% Yes 30% N Steps Article 25(8) and (9) Denmark % 1/3 f the Linear N reductin *** France % Prprtinal t 70% f the the distance t Yes 30% gap Greece % 1/3 f the Linear Yes 30% reductin *** Ireland % 1/3 f the Linear N reductin *** Italy % Prprtinal t 1/3 f the the distance t Yes 30% Luxemburg % 1/3 f the Linear N 8

9 Member State / Regin Target date t (7) Target value f PE (in % f average) secnd sub Prtugal % Slvenia % Spain % Criteria t increase PE t target value first sub Criteria t decrease PE abve average Article 25(7) Maximum decrease Article 25(7) Steps Article 25(8) and (9) reductin *** 1/3 f the 1/3 f the 1/3 f the Sweden % 5/6 f the gap United Kingdm Nrthern Ireland % 71.40% f the gap Linear reductin *** Prprtinal t the distance t Linear reductin *** Linear reductin *** Linear reductin *** Yes 30% Yes 30% Yes 30% N N frm t 2019, with flat rate reached in * The ntificatin des nt require specifying thse details but Member States ften addressed the issue in their ntificatin. Fr the thers, it is assumed that the increase is the basic reductin f 1/3 f the gap between the IUV and the target value. ** "Prprtinal t the distance t the average" means that the percentage f reductin will increase with the difference between the unit value f PE and the 2019 average. *** "Linear reductin" means the same percentage f reductin f the part f the PE abve average Methd chsen fr the greening payment The table belw shws that amng the 18 MS/regins which had the pssibility t pay the greening payment as a percentage f the individual BPS 18, 16 actually chse it, with nly Luxemburg and UK-Sctland applying the unifrm greening payment per hectare. Hwever since UK-Sctland reginalises the greening payment, it will be unifrm per hectare inside each Scttish BPS regin. In these cases where the green payment is a percentage f the BPS payment, the green payment will fllw the same cnvergence path as the BPS. Amng the 8 MS/Regins which apply the BPS reginalisatin, 4 have chsen t als reginalise the greening ceiling: EL, FI, UK-England and UK-Sctland. The natinal greening ceiling is in these cases distributed between the BPS regins in the same way as the BPS reginal ceilings. The greening payment in FI, UK-England and UK-Sctland will be unifrm per hectare inside each BPS regin. In Greece, as the greening ceiling has been reginalised but greening is paid as a percentage f the individual BPS, a farmer with entitlements frm different regins will get different greening amunts fr each BPS regin in which he/she has activated PEs. Member State/Regin Decisin t apply the greening payment as a percentage f BPS Decisin t apply the greening payment at reginal level Belgium Flanders Yes N/A 18 Member States applying the flat rate by 2019 f the partial cnvergence. 9

10 Member State/Regin Decisin t apply the greening payment as a percentage f BPS Decisin t apply the greening payment at reginal level Belgium Wallnia Yes N/A Denmark Yes N/A Germany N/A N Ireland Yes N/A Greece Yes Yes Spain Yes N France Yes N Cratia Yes N/A Italy Yes N/A Luxemburg N N/A Malta N/A N/A Netherlands Yes N/A Austria Yes N/A Prtugal Yes N/A Slvenia Yes N/A Finland N/A Yes Sweden Yes N/A United Kingdm England N/A Yes United Kingdm Nrthern Ireland Yes N/A United Kingdm Sctland N Yes United Kingdm Wales Yes N 3.5. Cnclusin Amng the Member States implementing the BPS, 4 MS/regins (DE, MT, FR-Crsica and UK- England) apply the flat rate frm and 5 the flat rate by 2019 (NL, AT, FI, UK-Sctland and UK-Wales). Fr the 14 MS/regins applying the partial cnvergence, if the majrity f Member States applies the "basic tunnel" reducing 1/3 f the gap t 90% f the average with the maximum 30% lss, sme have defined mre "cnverging" tunnels by setting the target at 100% f the 2019 average and/r by reducing a larger share f the gap between the IUV and the average. The applicatin f the BPS reginalisatin and f the ptin t grant the greening payment as a percentage f BPS als plays an imprtant rle in the actual level f cnvergence finally achieved. 10