Transition Strategies for the SFP

Farmers’ legitimate expectations about policy stability could in principle justify an incrementalist approach to phasing out the SFP. However, two reasons speak in favor of a rapid removal.

The SFP does not trigger specific investments

The SFP is not designed to change farmers’ business behavior – such as their investments into farm buildings and machinery or more generally that decision about whether to stay in farming – in order to attain societal objectives. The SFP cannot be compared to a policy commitment such as that of the creation of an EU carbon emission market that triggers massive specific investments. In the case of the SFP, there are no policy-induced long-term investments that would have to be protected.

The end of the SFP is predictable

Besides, when farmers were granted the SFP in 2003, they had to know that this subsidy would not last forever. The preceding two decades had seen repeated reform attempts, which had regularly fallen short of the reformers’ ambitions, and the next CAP reform had already been scheduled for 2008. Both in 2003 and 2008, the Commission tried to shift far more money from the SFP to rural development and environmental payments than the finally agreed amount. More generally, compensation payments necessary to facilitate reform at one point in time usually have a deadline. The fact that this deadline was not specified in the 2003 and 2008/09 reforms should not give reason to believe that they would go on forever. The budget review discussions are sending a clear message that farmers need to prepare for times of no, or much lower, income support. In this sense, the transition period started in 2008 at the latest.

A targeted transition payment

Rather than simply cutting existing entitlements, a targeted transition payment should be introduced to avoid hardship among farmers. This payment could be based

• on Single Farm Payment entitlements (with a strongly degressive formula, paying less for every additional hectare),
• on households’ income and assets levels (paying less to relatively well-off households) and
• on households’ dependence on farming (paying less to households with significant non-farm income).

Beyond a certain threshold of eligible area, income and assets levels, and non-farm income shares, no payments would be effectuated.