EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT Directorate R. Management of resources R.1. Budget management Ref. Ares(2017)5032408-16/10/2017 Brussels, AGRI R.1/AS/aj Ares (2017) 5630772 1.13.2018 POLICY AREA 05 IN HEADING 2: Justification of the appropriations requested in the Amending Letter No 1 compared to the Draft Budget 2018 1. INTRODUCTION The Commission adopted the Draft Budget (DB) 2018 on 30 May 2017 1. With the Amending Letter No 1 (hereafter AL) adopted on 16 October 2017, for the Policy Area 05 Agriculture and Rural Development, the Commission amends the estimated needs in the DB taking into account the most recent developments in agricultural markets, recent forecasts of Member States on the execution of the 2017 budget and legislative changes since the DB was drawn up. 1.1. The Draft Budget In the DB, the appropriation needs for agricultural measures of Policy Area 05 which are covered by Heading 2 of the multiannual financial framework were estimated on the basis of the legislation in force at that time. The requested commitment appropriations for operational and support expenditure amounted to EUR 58 459 million. Of this amount, EUR 57 892 million were to be financed under Heading 2, for interventions in agricultural markets, direct payments and rural development, with the remainder financed under Headings 1, 4 and 5. The net balance available for the EAGF (net ceiling) in 2018, after the technical adjustment of the MFF encompassing amounts transferred to rural development resulting from the application of the flexibility between the CAP pillars and reduction of direct payments, amounts to EUR 44 162.4 million. The EAGF needs for DB 2018, after applying the financial discipline mechanism to establish the crisis reserve in the agricultural sector, were estimated at EUR 44 522.3 million. Taking account of the estimated amount of assigned revenue to be available in 2018 (EUR 754 million) and to be carried over from 2017 (EUR 250 million), appropriations at EUR 43 518.3 million were requested in DB to finance the EAGF measures in 2018. This was EUR 644 million below the net ceiling and hence no financial discipline had to be applied to respect this ceiling. 1 SEC(2017)250
1.2. Council's position on the Draft Budget On 4 September 2017 the Council adopted its position on the DB 2018. For agriculture, the Council cut is EUR 303.3 million in commitments and EUR 274.0 million in payments, including for EAGF a cut of EUR 269.4 million in commitments and EUR 265.4 million in payments. The Council made a reduction in the requested commitment and payment appropriations for Support expenditure under chapter 05 01 (EUR 0.24 million), Interventions in Agricultural markets under chapter 05 02 (EUR 41 million), Direct payments under chapter 05 03 (EUR 208 million), and for Audit of agricultural expenditure under chapter 05 07 (EUR 16 million in commitments and EUR 14 million in payments) and Policy strategy and coordination under chapter 05 08 (EUR 4.1 million in commitments and EUR 2.1 million in payments). Moreover the Council made a reduction for rural development under chapter 05 04 (EUR 0.6 million in commitments and payment appropriations), with further cuts for administrative expenditure (05 01), IPARD (05 05) and research (05 09). 1.3. European Parliament's position on the Draft Budget The European Parliament is foreseen to adopt its position on the DB, at its plenary meeting on 25 October 2017. The EP BUDG committee voted on 26-27 September 2017 amendments and on 10 October 2017 a motion for a resolution on the Council position on the Draft Budget 2018. For agriculture, the Draft Budget cut by the Council was restored (with some lines increased over the DB amounts, in particular for Horizon 2020 (05 09 03 01). 2. THE AMENDING LETTER 2.1. Introduction Under Article 314 of the Lisbon Treaty, the Commission may amend the DB during the procedure until such time as the Conciliation Committee is convened. The AL adopted by the Commission on 16 October 2017 provides for this updating of the initial estimates in the DB, taking into account the most recent developments in agricultural markets, recent forecasts of Member States on the execution of the 2017 budget and legislative changes since the DB was drawn up. For clarification and transparency purposes, some budgetary comments have also been updated. In the AL, the estimates for chapter 05 04 Rural Development remain at unchanged level, as in the DB. In the AL, the EAGF needs for agricultural expenditure, after applying financial discipline to establish the crisis reserve, are estimated at EUR 44 710.4 million, compared to EUR 44 522.3 million in the DB. This increase is primarily the result of higher needs in chapter 05 02 relating to specific exceptional measures following outbreaks of African swine fever and avian influenza and in chapter 05 07 for the estimated costs of interest payments resulting from the ruling on the court case on the former sugar levies 2. The needs for chapter 05 03 remain virtually unchanged. 2 C-585/15 2
Variations in needs and appropriations (after financial discipline) rounded in million EUR DB AL Difference 05 02 Interventions in agricultural markets 2 676 2 758 + 82 05 03 Direct payments (including crisis reserve) 41 747 41 745-3 Other 99 208 + 109 Total EAGF needs 44 522 44 710 + 188 Assigned revenue - 1 004-1 246-242 Total EAGF appropriations 43 518 43 464-54 On assigned revenue, the AL increases the amount assumed in the DB (EUR 1 004 million) to EUR 1 246 million. This is partly due to an increase in the estimated assigned revenue originating from clearance of accounts (+EUR 105 million) and an increase in the assigned revenue expected to be carried over from 2017 to 2018 (+EUR 150 million). As a result of these updates, appropriations of EUR 43 464 million are requested to cover EAGF needs for 2018, including an amount of EUR 459.5 million for the crisis reserve. As for the DB, this overall amount remains within the EAGF net ceiling of EUR 44 162.4 million, leaving a margin of EUR 698 million below the net ceiling and hence no financial discipline has to be applied to respect this ceiling. 2.1. Application of financial discipline The rate of financial discipline is established in Commission Implementing Regulation (EU) 2017/1236 of 7 July 2017 fixing the adjustment rate provided for in Regulation (EU) No 1306/2013 for direct payments in respect of the calendar year 2017 and amounts to 1.388149 %. The need for financial discipline in the 2018 AL remains unchanged since the DB limited only to the establishment of the crisis reserve of EUR 459.5 million. As the impact of the new amounts allocated in the AL to the different direct payments' schemes is negligible, the Commission does not intend to modify the rate of financial discipline. 3
2.2. Variation in needs by sector 05 02 Interventions in agricultural markets (appropriations + EUR 82 million) needs in Draft Budget: estimated assigned revenue available in 2018 in Draft Budget: appropriations requested in Draft Budget: needs after Amending Letter: estimated assigned revenue available in 2018 after Amending Letter: appropriations requested after Amending Letter: EUR 2 676 million EUR 2 276 million EUR 2 758 million EUR 2 358 million The main changes in this AL relate to the increase in needs stemming from the measures taken in the fruit and vegetables, in view of the recent amendment of the exceptional withdrawal measures for peaches and nectarines 3 and concerning the pigmeat and poultry sectors relating to specific exceptional measures to farmers following outbreaks of African swine fever and avian influenza. 05 02 08 Fruit and vegetables (appropriations + EUR 13 million) needs in Draft Budget: estimated assigned revenue available in Draft Budget: appropriations requested in Draft Budget: needs after Amending Letter: estimated assigned revenue available after Amending Letter: appropriations requested after Amending Letter: EUR 919 million EUR 519 million EUR 932 million EUR 532 million Appropriations for this budget article are increased by EUR 13 million following the amendment to the exceptional withdrawal measures for peaches and nectarines, taking into account an estimated uptake of this measure by beneficiaries that are members and non-members of producer organisations. The other needs for the sector remain stable. 05 02 09 Wine (appropriations + EUR 7 million) EUR 1 051 million EUR 1 058 million Appropriations for the wine sector on budget item 05 02 09 08 financing the national support programmes are proposed to be increased by EUR 7 million, reflecting the most recent implementation figures. 3 Commission Delegated Regulation (EU) 2017/1533 of 8 September 2017 amending Delegated Regulation (EU) 2017/1165 as regards the temporary exceptional support measures for producers of peaches and nectarines in Greece, Spain and Italy. 4
05 02 12 Milk and milk products 4 (appropriations + EUR 2 million) EUR 32 million EUR 34 million Appropriations for the dairy sector (budget item 05 02 12 02) increase by EUR 2 million due to updated estimates for storage costs due to larger than initially estimated quantities of skimmed milk powder in public intervention stocks. 05 02 15 Pigmeat, eggs and poultry (appropriations + EUR 60 million) EUR 35 million EUR 95 million An increase in the appropitations for the budget item 05 02 15 99 by EUR 60 million is requested in order to finance specific exceptional measures following outbreaks of African swine fever 5 and avian influenza. 4 5 Not including 05 02 12 09 Dairy products distribution as urgent response to humanitarian crises Commission Implementing Regulation (EU) 2017/1536 of 11 September 2017 on an emergency measure in the form of aid to holdings with no more than 50 animals of the porcine species located in certain areas of Poland when ceasing pigmeat production due to new requirements in relation to African swine fever. 5
05 03 Direct payments (after financial discipline) (appropriations - EUR 245 million) needs in Draft Budget: estimated assigned revenue available in Draft Budget: amount of financial discipline in Draft Budget: EUR 41 747 million EUR 604 million EUR 41 143 million EUR 459.5 million needs after Amending Letter: estimated assigned revenue available after Amending Letter: amount of financial discipline in Amending Letter: EUR 41 745 million EUR 846 million EUR 40 899 million EUR 459.5 million Compared to the DB, appropriations requested for chapter 05 03 are revised downwards by EUR 245 million with the AL. This change is almost exclusively due to the increase in the estimated amount of assigned revenue (+ EUR 242 million). Overall, based on the most recent data on implementation, only a minor change of needs for direct payments is proposed (-EUR 3 million). Inside the chapter there are some variations based on the experience of the second year of the implementation of the reformed direct payments' schemes and most specifically the application and financing of the Small farmers scheme (SFS). Member States have also revised some of their implementation choices. The most important changes concern the 'greening' payment (+EUR 95 million on item 05 03 01 11), the Payment for young farmers (+EUR 34 million on item 05 03 01 13), the Redistributive payment (+EUR 14 million on item 05 03 01 07) and the SFS (-EUR 110 million on item 05 03 02 61). 05 07 Audit of agricultural expenditure (appropriations + EUR 109 million) appropriations requested in Draft Budget: appropriations requested after Amending Letter: EUR 51 million EUR 160 million Appropriations for budget chapter 05 07 (Audit of agricultural expenditure) are revised upwards by EUR 109 million. Appropriations for Financial corrections in favour of Member States for budget items 05 07 01 06 and 05 07 01 07 need to be increased by EUR 7 million in total reflecting amendments of the financial corrections for previous years. Appropriations for budget article 05 07 02 Settlement of disputes need to be increased by EUR 102.2 million as a consequence of a further Court of Justice ruling on the former sugar production levies. The amount relates to the estimated cost of interest payments resulting from the ruling on the Tirlemontoise case (C-585/15) concerning the sugar levies for marketing years 1999/2000 and 2000/2001. Further details on the calculation of this amount will be provided in the financial statement accompanying the upcoming Commission proposal for a Regulation of the Council correcting the sugar levies. 6
Commitments - mio euro Needs Assigned Revenue Appropriations Needs Assigned Revenue Appropriations Needs Assigned Revenue Appropriations Interventions in agricultural markets (1) of which a 2 676,3 400,0 2 276,3 2 758,1 400,0 2 358,1 81,8 0,0 81,8 Operational funds for producer organisations 860,0 400,0 460,0 872,0 400,0 472,0 12,0 0,0 12,0 Direct payments of which b 41 747,1 604,0 41 143,1 41 744,6 846,0 40 898,6-2,5 242,0-244,5 BPS 17 435,0 604,0 16 831,0 17 402,0 846,0 16 556,0-33,0 242,0-275,0 EAGF Other measures c 98,9 98,9 207,7 207,7 108,8 108,8 TOTAL EAGF d=a+b+c 44 522,3 1 004,0 43 518,3 44 710,4 1 246,0 43 464,4 188,1 242,0-53,9 Revenue to be assigned 1 004,0 1 246,0 242,0 Assigned Revenue from previous year 250,0 400,1 150,1 - estimated 250,0 400,1 150,1 - real AL 1/2018 compared to the DB 2018 (AFTER applying financial discipline) DB 2018 AL 2018 Diff. AL 2018 - DB 2018 Assigned Revenue from current year 754,0 845,9 91,9 6701 - clearance of accounts EAGF 609,0 713,9 104,9 6702 - Irregularities EAGF 145,0 132,0-13,0 6703 - Superlevy milk producers 0,0 0,0 0,0 Total amount available for EAGF expenditure e 44 162,4 44 162,4 44 162,4 44 162,4 0,0 Total estimates EAGF - incl the crises reserve and after applying FD to finance the crises reserve 43 518,3 43 464,4-53,9 Margin after assigned revenue 644,0 697,9 53,9 Rural Development g 14 374,2 14 374,2 14 374,2 14 374,2 0,0 0,0 Other h 0,0 0,0 0,0 0,0 0,0 0,0 TOTAL POLICY AREA 5 under FP HEADING 2 i = d + g + h 58 896,5 1 004,0 57 892,5 59 084,6 1 246,0 57 838,6 188,1-53,9 (1) excl. 05 02 12 09 Electronically signed on 16/10/2017 10:42 (UTC+02) in accordance with article 4.2 (Validity of electronic documents) of Commission Decision 2004/563