Opinion on young farmers and the problem of succession in agriculture (94/C 195/20)

On 27 January 1994 the Economic and Social Committee, acting under the fourth paragraph of Article 20 of its Rules of Procedure, decided to draw up an Opinion on young farmers and the problem of succession in agriculture.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 4 April 1994. The Rapporteur was Mr Morize.

At its 315th Plenary Session (meeting of 27 April 1994) the Economic and Social Committee adopted the following Opinion by a large majority, with 18 votes against and 8 abstentions.

1. Introduction

1.1. The EU Council of Agricultural Ministers, acting on a proposal from the Greek presidency, has decided to make a comprehensive assessment of the 'problem of succession in agriculture'.

1.2. The ageing workforce, the fall in farm incomes and the growing problems facing new entrants as a result of production constraints have undermined the agricultural community and make it more difficult for young people to start up in farming.

1.3. Matters are made worse by two important social factors - the negative image of farming in society at large, and the desertification which makes life unattractive in certain rural areas.

1.4. It is therefore necessary for the Union to adopt a comprehensive, dynamic policy which will restore the confidence of young farmers and offer them real prospects.

1.5. The Committee realizes that an evaluation of EU agriculture must take account of the fundamental structural disparities between EU regions.

1.6. The Committee considers that EU policy must seek to minimize these disparities.

2. General comments

2.1. The Committee welcomes the decision of the Agricultural Ministers to address at long last the problem of succession in agriculture. The difficulties encountered by the agricultural community call for an evaluation of how agriculture's future can be restored in Europe.

2.1.1. The Committee considers that this evaluation must cover all farmworkers. Improving the social situation of everybody who works in agriculture is one of the objectives of the agricultural provisions of the Rome Treaty.

2.1.2. The deficiencies of the legal provisions in this area have already been highlighted in the Committee's Own-initiative Opinion on the repercussions of the CAP on the social situation of farmworkers in the EEC. The Opinion points out that the prime objective of a revision of the CAP must be to create production structures and farm units which are viable in the long term and which offer secure employment and acceptable working conditions to farmworkers and wage-earners working in the initial processing stage.

2.1.2.1. The Committee proposed establishing a coherent system of social information designed to improve knowledge of agricultural working conditions and if possible reduce differences. The Committee also proposed Community programmes of social back-up measures and programmes for the expansion of non-seasonal employment.

2.1.2.2. These recommendations have lost none of their relevance and should be taken into account in the assessment to be made by the Agricultural Ministers.

2.2. The Committee stresses the key role of agriculture and its ancillary economic activities in safeguarding and creating jobs in the countryside, in the present context of urbanization, of increasing unemployment, and of changes in lifestyles and leisure activities.

2.3. Above all, European farmers must become competitive and have access to the markets. The CAP reform has brought about radical changes in production conditions and in the balance between sub-sectors; it has also introduced administrative constraints, and made farming more vulnerable. The policies to be implemented must take account of these aspects and seek to restore the confidence of an entire sector.

2.4. It is already clear that the generation which will leave farming between now and the end of the century is not certain to be replaced.

2.4.1. A number of points emerge from the latest EUROSTAT survey of farm structures (1987):

- there are some 8.6 million farms in the EU and 115 million hectares or so are devoted to agriculture. The size of the average farm varies considerably (from 4 to 65 hectares) and so do farm incomes;

- some 55 % of farmers are 55 or older (30.6 % aged between 55 and 65, 23.7 % older than 65). Many do not know if anybody will take over their farm when they retire. The situation is made worse by the substantial drop in the birth rate in the agricultural community;

- one in three farmers is a part-timer.

2.4.1.1. In the years ahead, the ageing of the farming community and the great variety of farm sizes are going to cause major upheavals.

2.4.1.2. Replacement ratios (i.e. the ratio between start-ups and cessations of activity) vary markedly from one EU region to another. When the Committee's Section for Agriculture and Fisheries heard oral evidence from young farmers from the twelve Member States, it transpired that start-up conditions were generally poor everywhere. The difficulties, which vary from one Member State to another, concern the size of holdings, the burden of death duties and other taxes and dues on transfer of ownership, financing, high interest rates and the difficulty of acquiring rights to premiums and quotas.

2.4.1.3. These factors rule out a laisser-faire policy, which would accelerate the exodus from and abandonment of certain disadvantaged areas. What is required are measures and conditions which will encourage young people to set up farms.

2.4.2. The policies to be established for helping the next generation to take over must, of course, focus in particular on the problems of setting up in farming. From the outset, the key aim of the common structural and start-up policies has been to establish viable farms. This aim has lost none of its importance.

2.4.3. However, it is necessary to adopt a regional approach to the demographic problems. In some areas newcomers have to be taken from other areas, but elsewhere they can be found within the region or area itself. It is necessary to encourage geographical and also social mobility, i.e. to enable young people from non-farming backgrounds to enter the sector.

2.4.4. The Committee has noted that there are major differences in the way the Member States apply policies on setting up in farming, due to the fact that these measures are optional. The Committee considers that start-up conditions should differ less.

2.4.5. The decision to become a farmer is risky in all regions because, in particular, of the financial commitments it entails. The financial risk varies according to the type of farm, the markets and the ability of the young farmer. But neither is the human risk the same everywhere. It is a function of the environment (infrastructure, population density, economic fabric).

2.4.5.1. Hence the urgent need for a policy which takes greater account of the differing regional situations in the European Union.

2.4.6. Apart from this, the Committee stresses that Community and national rules and regulations are sometimes too stringent. As a result, many young people are excluded from start-up support.

2.5. The Committee particularly stresses the need for the status of farmers, their spouses and family partners to be recognized, and for account to be taken of their specific difficulties (family constraints, difficulty of doing training, age when they set up, unequal social security, etc.).

2.6. The Committee stresses the need to ensure a livable environment for individuals who set up in farming, i.e. to provide the necessary amenities (transport, services, schools, etc.).

2.7. The trends affecting the agricultural population pose a threat to farming but the policies to be formulated should use them as an opportunity to speed up the restructuring of farms into viable units and to bolster start-ups throughout the EU, and thus stop European agriculture from being undermined.

3. Instruments to be strengthened in the framework of a more coherent policy

3.1. The Committee considers that the Community should concentrate on adapting measures in four areas and ensuring that they are mutually consistent. These areas are training, start-ups, transfer of ownership and restructuring.

3.1.1. With respect to start-ups, the Committee feels that aid to young farmers should be granted throughout the EU. To this end, a procedure should be set up for evaluating start-up policies in each Member State.

3.1.2. The Committee considers that geographical and occupational mobility aid could be granted to farmers and farmworkers who set up as farmers outside their home region.

3.1.3. Apart from this, the present policies on start-up aids should be adjusted to the new context which has been charted for agriculture. It will doubtless be necessary to review and tone down certain conditions governing eligibility for these aids, though not the overriding requirement that farms must be viable: the age limit should be reviewed and greater allowance should be made for part-time farming.

3.2. The Committee considers that there should be a closer link between start-ups and training.

3.2.1. The work performed by farmers in a changing environment requires a high level of training and adaptability to change. Training should focus less on increasing production and more on cutting costs and boosting farmers' efficiency. For instance, it should encourage young people to become entrepreneurs and to find new sources of income in new fields of economic activity, such as agritourism and services.

3.2.2. Training must therefore be encouraged and equivalence ensured throughout the European Union. In addition, special arrangements must be made to ensure that courses can be attended by would-be farmers who have not had any previous training in agriculture.

3.2.3. The Committee stresses the importance of young trainees having practical experience in the sector of activity they have chosen. The European Union should encourage work-experience placements, which give trainees an opportunity to work out their plans in the light of differing realities and to gain experience outside their home regions or countries. The EU should provide financial support here. The training of farmworkers should also be promoted.

3.2.4. Steps should be taken to launch a EU-wide vocational guidance and counselling programme for young farmers which will keep them better informed about their situation in farming and about funding facilities and rural development schemes.

3.2.5. Much remains to be done on the provision of information to farmers. The EU should encourage the promotion of rural and agricultural trades. It could, for instance, part-finance a public opinion campaign to rehabilitate the image of rural trades.

3.3. As a direct adjunct of the policy on start-ups, the transfer of farm ownership should be facilitated. The Committee considers that, when the occupier dies, this could be achieved by facilitating purchase by young farmers and by substantially reducing death duties on farms inherited by young people who wish to carry on the farm.

3.3.1. Transfer of ownership is a crucial stage in succession in agriculture, since it may lead to viable units disappearing or being broken up.

3.3.2. The fact that most young farmers cannot accumulate the necessary fixed and working capital makes it essential to find pragmatic economic, legal and tax-related solutions to the problem of financing fixed assets. In particular, the law should be amended to reduce the cost of ownership transfers.

3.3.3. Similarly, in the first years after they set up, young farmers should be eligible for a tax exemption or a development grant which will help them to develop their farms and ensure that ownership-transfer costs do not impose too heavy a burden. The financial position of young farmers who have just started up should be strengthened. The taxes levied on transfers of ownership are often disproportionate to the investment capital involved.

3.3.4. Incentives should be provided for the letting of land. This means eliminating the numerous constraints on the letting of land in the EU Member States.

3.4. The Committee also calls for progressive harmonization of the tax and social policies of the Member States.

3.4.1. The tax system should encourage early transfers of ownership to young farmers. For instance, there should be no tax on transfers by farmers aged sixty but thereafter the tax charged should increase with the age of the transferor.

3.4.2. The Committee notes that phased transfer of ownership can help to make such transfers a success and, for instance, facilitates establishment in the legal form of a company. Establishment of a company makes it possible to transfer capital over several years and to give the future owner a proper business status. Companies are also an excellent target for family capital.

3.4.3. The Committee would point to the advantage of amalgamations and establishment in the legal form of a company as a means of rationalizing investment and costs and improving work organization. Establishment in the legal form of a company can be an appropriate response to the increasing difficulties encountered by farmers.

3.4.4. However, at the moment most Community decisions pursuant to the CAP reform pay insufficient attention to the possibility of establishing companies and hamper the expansion of this type of farming.

3.5. Restructuring is a major component of policy on succession in agriculture. Its aim must be to prevent rural desertification without boosting production.

3.5.1. But restructuring schemes take five to ten years to put into effect and - in order to take account of the population trends in farming, economic realities and the new expectations of society at large - involve planning a whole range of actions to adapt agriculture to the new context.

3.5.2. Restructuring projects will thus have to be backed up by measures at Community, national and local level.

3.5.3. The Committee considers restructuring should be the main objective of early retirement schemes. It is therefore essential to ensure a link between the eligibility of farmers for early retirement and the transfer of their holdings.

3.5.4. In order to help start-ups in poor farming areas, early retirement could, for instance, be granted to occupiers who stop farming and transfer their holding to a person who does not already possess a farm, without requiring him to enlarge the holding (unless the holding is too small to be viable).

3.5.5. It is also necessary to coordinate all measures on cessation of farming or of a particular type of production (grants for grubbing up vines, milk premiums, etc.) and the requirements governing eligibility for early retirement, in order to ensure that they further structural changes rather than impede them.

3.6. The Committee has considered the problem of the allocation of quotas and rights to premiums as it affects young farmers. It thinks that the economic viability of farms taken over by young people should not be threatened by inadequate access to the market or by financial speculation on that access which leaves them worse off than other farmers. EU rules and regulations should provide that at least some of the quotas freed by market forces or released from national reserves should go to young farmers.

3.7. Succession in agriculture requires effective tools within the framework of global policies. The Committee stresses the vital need to avoid clashes between the policies pursued and between the various levels of intervention (Community, national, local).

4. Proposed adaptation of Community policies offering farmers a future

4.1. There is a consensus that agriculture has two major functions:

- an economic function, namely to supply food and non-food products and to provide services for the rest of society;

- protection of the environment and safeguarding the countryside.

4.1.1. The two functions are perceived in different ways in the European Union, depending on the region and the type of farming. But it is universally agreed that the two functions are complementary.

4.2. Agricultural policy must focus on improving the competitiveness of European farming.

The reform of support arrangements and production control make market access the key to the evolution of agriculture.

4.2.1. The rules for the allocation of support must therefore avoid the risk of the relocation of production. It must be possible for specific products to maintain their links with specific areas; location should not be dictated solely by the economic logic of the production and marketing chains which are competitive at a particular moment.

4.2.2. But this linking of products to certain areas should not rigidify or freeze production patterns in individual holdings.

4.2.3. Finally, start-up projects must have adequate access to the market.

4.2.4. The importance attached to agriculture's function of safeguarding the countryside is being boosted by the contraction of the farm workforce and rising general concern about the environment. Increasing urbanization and unemployment make it essential to manage the land better and inject fresh vigour into rural society.

4.2.5. It is certainly true that schemes for management of the environment, upkeep of agricultural land and afforestation can be funded from the agri-environmental programme of the CAP reform. New measures must be taken under this programme, and its funding appropriation must be increased.

4.2.6. The Committee considers that Community action can be stepped up, in particular, through:

- supporting concerted, collective schemes for the agri-environmental management of the countryside;

- giving preference to local contractual agreements, which are the only way to cater properly for the diversity of local situations.

4.2.7. Socio-economic organizations have a role to play in publicizing, promoting and coordinating such schemes.

4.2.8. Finally, the European Union should do more to foster service activities.

4.2.9. The Committee has looked at a number of these new tasks for agriculture. It is aware of the difficulty at the present juncture of gauging all the various needs and possibilities. The European Union should focus on making better use of natural resources, upgrading the countryside, supporting diversification, and developing rural tourism and environmental occupations.

4.3. The Committee has also considered the question of part-time farming. An increasing number of EU farmers are part-timers with a second gainful occupation. The expansion of part-time farming bears witness to the creativity and flexibility of the agricultural community but is increasingly taking its members away from agriculture in the strict sense.

4.3.1. It is therefore necessary, as a first step, to establish a legal framework for 'diversified rural enterprises' pursuing related activities.

4.3.2. Tax and social obstacles and other rules and regulations which hamper part-time farming must be abolished. Our EU and national legal systems are ill-suited to the real rural world, where the 'frontiers' between the various types of economic activity are showing a tendency to fade away.

5. Conclusions

5.1. The Committee is convinced that there is an urgent need for a comprehensive assessment of the future of agriculture, and in particular of the problem of succession. The policies to be established should focus above all on promoting start-ups in farming.

5.1.1. It is essential to face up to the demographic problem at a time when the balance of the countryside is under threat in many EU regions. A laisser-faire policy will lead to a dramatic concentration of farming activities and dramatically undermine the rural world.

5.2. The Committee considers that Community policies must take account of the radical changes in agriculture, the new profiles of would-be farmers, the steady rise in farm sizes and investment capital, the development of new farm-based economic activities and the need for a new approach to part-time farming.

5.3. The Committee is convinced that agriculture can play a major role in rural employment, since a decision to take over a farm or establish a new farm has a knock-on effect both upstream and downstream of the sector. It is consequently necessary, given the low population density in the countryside and changes in the lifestyles and aspirations of countrymen and women, to consider ways of improving services and creating the infrastructure needed by rural dwellers.

Done at Brussels, 27 April 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN