Special Report No 5/2011 ‘Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management’
Date: 2011-07-01
Institutions: European Court of Auditors
Subjects: auditing, financial management, single payment scheme

EUROPEAN
COURT OF AUDITORS

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SINGLE PAYMENT SCHEME (SPS):

ISSUES TO BE ADDRESSED TO IMPROVE

ITS SOUND FINANCIAL MANAGEMENT

EN

 
 
 
 
Special Report No 5 

 2011

SINGLE PAYMENT SCHEME 
(SPS): ISSUES TO BE 
ADDRESSED TO IMPROVE 
ITS SOUND FINANCIAL 
MANAGEMENT

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
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1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-1
Fax +352 4398-46410
E-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 5 

 2011

A great deal of additional information on the European Union is available on the Internet. 

It can be accessed through the Europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Publications Office of the European Union, 2011

ISBN 978-92-9237-135-7

doi:10.2865/14982

© European Union, 2011

Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

CONTENTS

3

PARAGRAPH

ABBREVIATIONS

GLOSSARY

I–XII	

SUMMARY

1–16	

INTRODUCTION

1–3	

4–7	

BACKGROUND

THE	2003	REFORM	OF	THE	CAP	INTRODUCED	THE	SINGLE	PAYMENT	SCHEME

8–14	

KEY	ELEMENTS	OF	THE	SPS	AND	MODELS	OF	IMPLEMENTATION	

15–16	

MODIFICATIONS	INTRODUCED	BY	THE	2008	‘HEALTH	CHECK’	OF	THE	COMMON	
AGRICULTURAL	POLICY	

17–19	

AUDIT	SCOPE,OBJECTIVES	AND	APPROACH

20–83	

OBSERVATIONS

20–31	

THE	BENEFICIARIES	OF	THE	POLICY,	THE	CONDITIONS	OF	ACCESS	TO	SINGLE	PAYMENTS	
AND	THE	SETTING	UP	OF	KEY	ELEMENTS	OF	THE	SCHEME

21–26 

 DEFINITIONS OF ‘HOLDING’, ‘AGRICULTURAL ACTIVITY’ AND ‘LAND AT THE FARMER’S DISPOSAL’

27–28 

PAYMENT TO RETIRED FARMERS FOR MEETING MINIMAL GAEC OBLIGATIONS 

29–31 

NEW BENEFICIARIES 

32–41	

MEMBER	STATES	SET	UP	IN	VERY	DIFFERENT	WAYS	KEY	ELEMENTS	OF	THE	SPS	SCHEME

33–35 

36–37 

 ACCESS OF NEW ENTRANTS TO THE SPS IS LARGELY DEPENDENT ON MEMBER STATES’ IMPLEMENTATION 
POLICIES 

ELIGIBLE LAND AND MINIMUM AGRICULTURAL ACTIVITIES REQUIRED HAVE NOT ALWAYS BEEN  
CLEARLY DEFINED  

38 

TEMPORARY USE OF LAND FOR NON-AGRICULTURAL ACTIVITIES

39–41  

ADVERSE EFFECTS OF THE CONSOLIDATION OF PAYMENT ENTITLEMENTS

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

	
	
	
	
 
4

42–53	

42–44 

A	HIGH	PROPORTION	OF	SPS	AID	GOES	TO	LARGER	FARMS	AND	THE	SCHEME’S	
CONTRIBUTION	TO	ENVIRONMENTALLY	FRIENDLY	AGRICULTURE	IS	LIMITED

SPS AID REPRESENTS AN IMPORTANT SHARE OF FARMERS’ INCOME BUT NO DISTINCTION IS  
MADE BET WEEN LOW AND HIGH-INCOME FARMERS  

45–48 

ANALYSIS OF DISTRIBUTION: THE SPS PRIMARILY BENEFITS FEW BUT LARGE BENEFICIARIES 

49–53 

54–79	

THE SPS SUPPORT REFLECTS NEITHER THE COSTS OF MAINTENANCE OF LAND NOR THE POSITIVE  
PUBLIC EXTERNALITIES

SPECIFIC	EFFECTS	ARISING	FROM	THE	DESIGN	OF	THE	SCHEME	AND	MEMBER	STATES’	
IMPLEMENTATION	POLICIES		

54–58 

A PATCHWORK OF MODELS, VARIANTS AND IMPLEMENTATION POLICIES ACROSS MEMBER STATES  

59–73 

OVER TIME, THE HISTORIC MODEL HAS BECOME DIVORCED FROM PRODUCTION …

74–79 

… BUT THE REGIONAL MODEL GENERATES OTHER ADVERSE EFFECTS

80–83	

THE	INTRODUCTION	OF	THE	SPS	REQUIRED	COMPLICATED	CALCULATIONS	AND	RESULTED	
IN	CASES	OF	ERRORS			

84–97	

CONCLUSIONS	AND	RECOMMENDATIONS

85–89	

BENEFICIARIES,	ELIGIBLE	LAND	AND	AGRICULTURAL	ACTIVITIES

90–92	

ENVIRONMENTAL	IMPACT

93–94	

DISTRIBUTION	OF	SPS	AID

95–97	

SPECIFIC	EFFECTS	OF	IMPLEMENTATION	MODELS

ANNEX	I	 —		IMPLEMENTATION	OF	SINGLE	PAYMENT	MODELS,	FUTURE	INTEGRATION	OF	

COUPLED	SUPPORT	AND	SPECIFIC	AID	

ANNEX	II	 —		PAYMENTS	UNDER	THE	SINGLE	PAYMENT	SCHEME	(APPLICATION	YEARS	2006	TO	

2008	—	FINANCIAL	YEARS	2007	TO	2009)	

ANNEX	III	 —	DISTRIBUTION	OF	INCOME	SUPPORT	UNDER	THE	SPS	(APPLICATION	YEAR	2008)	

REPLY	OF	THE	COMMISSION

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

	
 
 
	
	
	
	
	
	
	
ABBREVIATIONS

55

CAP: common agricultural policy

CATS: Clearance Audit Trail System (database collecting information related to European agricultural 
funds payments)

EAGF: European Agricultural Guarantee Fund

EAFRD: European Agricultural Fund for Rural Development

Eurostat: statistical office of the European Union

GAEC: good agricultural and environmental condition

LFA: less-favoured area

LSU: livestock units

SMR: statutory management requirements

SAPS: Single Area Payment Scheme

SPS: Single Payment Scheme

URAA: Uruguay Round Agreement on Agriculture

WTO: World Trade Organisation (Geneva) 

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

GLOSSARY

6

1992	reform: The first major reform of the CAP (‘MacSharry reform’) in which intervention prices in the 
arable and the beef sectors were reduced. As a compensation for expected losses of income the reform 
introduced direct payments to arable crop producers and for land to be taken out of production (set-
aside).

WTO	Agreement	on	Agriculture: Result of negotiations in the 1986–94 Uruguay Round where WTO 
member countries agreed to improve market access and reduce trade-distorting subsidies in agriculture.

Agenda	2000: This reform put the CAP on two main pillars which the Community budget finances 
through two European agricultural funds. The first pillar (European Agricultural Guarantee Fund (EAGF)) 
provides for market measures and income support in the form of direct payments. The second pillar 
(European Agricultural Fund for Rural Development (EAFRD)) co-finances rural development measures 
in areas such as agri-environment, the promotion of food quality, higher technical standards and animal 
welfare.

2003	reform: CAP reform (‘Mid-Term Review’) which aimed to reduce price support and compensate for 
this reduction by direct income aid continuing a process that had begun in 1992 (MacSharry reform), 
and confirmed in 1999 (Agenda 2000 reform). The 2003 reform introduced the decoupling of aid and 
cross-compliance while reinforcing rural development assistance 

Health	Check: 2008 review of the 2003 CAP reform. Adoption of Commission proposals for further 
decoupling of direct aids and additional flexibility for the SPS, higher transfers of expenditure to rural 
development measures, modifications to the intervention system, increase of milk quotas and other 
sector-specific measures. 

Agricultural	factor	income: Indicates the net value added of agricultural activities (as well as insep-
arable non-agricultural, secondary activities) at factor cost. It is calculated by subtracting the value of 
intermediate consumption, the consumption of fixed capital and production taxes from the value of 
agricultural output at basic prices and adding the value of (other) subsidies on production. Households 
often receive income from other sources (non-agricultural activities, salaries, social benefits, income 
from property) so that agricultural income is not necessarily identical with the actual income of agricul-
tural households. 

Agricultural	entrepreneurial	income: Income generated by farming activities which is used to reward 
own production factors (work and/or enterprise, own capital and owned land). It corresponds to factor 
income minus costs linked to borrowing capital and hiring labour. 

Decoupling: Process of separation of direct aid payments from the actual agricultural production. 

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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77

EXECUTIVE 
SUMMARY

I.
Th e   S i n g l e   Pay m e n t   S c h e m e   ( S P S )   i s   a   k e y 
f e a t u r e   o f   t h e   2 0 0 3   r e f o r m   o f   t h e   c o m -
m o n   a g r i c u l t u r a l   p o l i c y.   I t s   o b j e c t i ve s   a re 
t o   e n c o u r a g e   f a r m e r s   t o   b e t t e r   r e s p o n d 
t o   m a r k e t   d e m a n d   a n d   t o   s u p p o r t   t h e i r 
i n co m e.  Th e   S P S   i s   c u r re n t l y   a p p l i e d   i n   1 7 
o f   t h e   2 7   E U   M e m b e r   S t a t e s   a n d   e x p e n d i -
t u r e   o n   t h e   s c h e m e   a m o u n t e d   t o   s o m e 
2 8,8  billion euro in  200 9 .

II.
The Cour t ’s audit of the implementation of 
th e S PS  focused on t he followin g : 

 Ū t h e   b e n e f i c i a r i e s   o f   t h e   p o l i c y,   t h e   a c -
cess  to sin gle payments  and t he  de fi ni-
tion  of eligible land;

 Ū t h e   c o n t r i b u t i o n   o f   t h e   s c h e m e   t o   t h e 
o b j e c t i v e s   o f   s u p p o r t i n g   f a r m e r s ’  i n -
c o m e   a n d   m a i n t a i n i n g   l a n d   i n   g o o d 
a g r i c u l t u r a l   a n d   e n v i r o n m e n t a l   c o n d i -
tion ;

 Ū t h e   s p e c i f i c   e f f e c t s   a r i s i n g   f r o m   t h e 
v a r i o u s   i m p l e m e n t i n g   m o d e l s   o f   t h e 
sc he me.

III.
T h e   b e n e f i c i a r i e s   o f   t h e   S P S   a r e  ‘ f a r m e r s’ 
e n g a g e d   i n   a n  ‘a g r i c u l t u r a l   a c t i v i t y ’  a n d 
h a v i n g   ‘e l i g i b l e   l a n d ’  a t   t h e i r   ‘d i s p o s a l ’. 
H o w e v e r,   a   l a c k   o f   p r e c i s i o n   i n   t h e   d e f i -
n i t i o n   o f   t h e s e   t e r m s   a n d   t h e   m a n n e r   i n 
w h i c h   t h e   r e l a t e d   p r o v i s i o n s   w e r e   s u b -
s e q u e n t l y   a p p l i e d   p e r m i t t e d   p e r s o n s   o r 
e n t i t i e s   h a v i n g   n o   o r   o n l y   m a r g i n a l   a g r i -
c u l t u r a l   a c t i v i t y   t o   b e n e f i t   f r o m   S P S   p a y -
ments. 

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
8

EXECUTIVE
SUMMARY

IV.
I n   2 0 0 8 ,   t h e   C o m m i s s i o n   a n d   t h e   C o u n -
c i l   u n d e r t o o k   a   r e v i e w   o f   t h e   C A P,   k n o w n 
a s   t h e   ‘ H e a l t h   C h e c k ’,   w h i c h   l e d   t o   t h e 
a c k n o w l e d g e m e n t   t h a t   S P S   a i d   s h o u l d 
n o t   g o   t o  ‘n a t u r a l   o r   l e g a l   p e r s o n s   w h o s e 
a g r i c u l t u r a l   a c t i v i t i e s   fo r m   o n l y   a n   i n s i g -
n i f i c a n t   p a r t   o f   t h e i r   o v e r a l l   e c o n o m i c 
a c t i v i t i e s   o r   w h o s e   p r i n c i p a l   b u s i n e s s   o r 
c o m p a n y   o b j e c t s   d o   n o t   c o n s i s t   o f   e x e r -
c i s i n g   a n   a g r i c u l t u r a l   a c t i v i t y ’.   H o w e v e r, 
n o   M e m b e r   S t ate   h a s   ye t   m a d e   u s e   o f   t h i s 
option to better target the beneficiar ies of 
SPS a id. 

V.
A c c e s s   o f   n e w   e n t r a n t s   t o   t h e   S P S   w a s 
s o m e t i m e s   l i m i t e d .   Fu r t h e r m o r e ,   t h e   c r i -
t e r i a   fo r   e l i g i b i l i t y   o f   l a n d   w e r e   n o t   c l e a r 
e n o u g h   a n d   t h e   re q u i re d   m i n i m a l   a gr i c u l -
tural ac tivit y was sometimes reduced to no 
ac t ivit y at al l.

V I.
D i r e c t   p a y m e n t s ,   c o m p r i s i n g   S P S   a n d 
 co u     p     l e d   a i d,   re p re s e nt   a n   i m p o r t a nt   s h a re 
o f   f a r m   i n c o m e . T h e   m a j o r   p a r t   o f   t h e   a i d 
g o e s   t o   a   s m a l l   n u m b e r   o f   l a r g e   b e n e f i c i -
a r i e s   w h i l e   t h e   l a rg e   m a j o r i t y   o f   b e n e f i c i -
a r i e s   e a c h   re c e i ve   o n l y   a   s m a l l   a m o u n t   o f 
aid. 

V II.
Th e   re ce i p t   o f   S P S   a i d   i s   co n d i t i o n a l   u p o n 
r e s p e c t i n g   c r o s s - c o m p l i a n c e   o b l i g a t i o n s . 
H owe ve r,   t h e   Co u r t   n o te d   t h a t   t h e re   i s   n o 
d i re c t   l i n k   b e t we e n   S P S   a i d   a n d   t h e   c o s t s 
i n c u r r e d   b y   f a r m e r s   f o r   c o m p l y i n g   w i t h 
s u c h   o b l i g a t i o n s .   S i m i l a r l y,   i t   i s   n o t   p o s -
sible to establish a direc t link bet ween SPS 
a i d   a n d   t h e   p o s i t i v e   p u b l i c   e x t e r n a l i t i e s 
th at agr icu lt ural  ac tivities gene rate. 

VIII.
S e v e r a l   o p t i o n s   ( ‘ m o d e l s ’ )   w e r e   m a d e 
av a i l a b l e   to   M e m b e r   S t a te s   fo r   t h e   i m p l e -
m e nt at i o n   o f   t h e   S P S .  Th e   c h o i ce   b e t we e n 
t h e   a v a i l a b l e   m o d e l s   s i g n i f i c a n t l y   i n f l u -
e n ce d   t h e   d i s t r i b u t i o n   o f   a i d   w i t h i n   M e m -
b e r   S t a t e s   ( a m o n g   f a r m e r s ) .   T h i s   m e a n s 
that, currently, the SPS is a poorly targeted 
met hod to suppor t  f ar m ers’  income. 

IX.
M ost M ember States that have so far intro -
d u c e d   t h e   S P S   h a v e   r e t a i n e d   t h e   h i s t o r i c 
model where the amounts of aid are essen-
t i a l l y   b a s e d   o n   p a r a m e t e r s   s e t   i n   2 0 0 0   t o 
2 0 0 2   w h i c h   n o   l o n g e r   c o r r e s p o n d   t o   c u r -
r e n t   a c t i v i t y.   W h e r e   t h e   M e m b e r   S t a t e s 
a u t h o r i t i e s   h ave   n o t   s e t   u p   p ro p e r   re s t r i c -
t i o n s ,   t h i s   m o d e l   c a n   a l s o   b e   a s s o c i a t e d 
w i t h   s p e c u l a t i v e   t r a n s fe r s   a n d   a c c u m u l a -
t i o n   o f   p ay m e nt   e nt i t l e m e nt s   by   b e n e f i c i-
ar ie s.

X.
T h e   r e g i o n a l   m o d e l   f a v o u r s   a   m o r e   e q u a l 
d i s t r i b u t i o n   o f   a i d .   H o w e v e r,   i t   h a s   b e e n 
s h o w n   t h a t   i t   a g g r a v a t e s   t h e  ‘c a p i t a l i s a -
t i o n ’  o f   t h e   a i d   i n   l a n d   p r i c e s   a n d   l a n d 
l e a s e s .   S u c h   c a p i t a l i s a t i o n   e x i s t s   i n   a l l 
a i d   s y s t e m s   b a s e d   o n   t h e   s u r f a c e   o f   l a n d 
f a r m e d ,   b u t   m o r e   s o   i n   t h e   r e g i o n a l   fo r m 
of implementation  of the S P S. 

XI.
O v e r a l l ,   w h i l e   t h e   S P S   h a s   c o n t r i b u t e d 
t o   t h e   o b j e c t i v e s   o f   t h e   C A P,   n o t a b l y   b y 
e n c o u r a g i n g   f a r m e r s   t o   b e t t e r   r e s p o n d 
t o   m a r k e t   d e m a n d   a n d   b y   s u p p o r t i n g   t h e 
i n c o m e   o f   t h e   a g r i c u l t u r a l   s e c t o r   a s   a 
w h o l e ,   t h e   C o u r t   i n v i t e s   t h e   C o m m i s s i o n 
t o   c o n s i d e r   w h e t h e r   s u c h   fe a t u re s   s h o u l d 
b e   re v i e we d   a l o n g   t h e   l i n e s   s e t   o u t   i n   t h e 
recommen dation s below.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
9

EXECUTIVE
SUMMARY

X II.
The Cour t  reco mmends t hat;

 Ū t h e   p r e s e n t   l e g i s l a t i o n   s h o u l d   b e 
a m e n d e d   t o   e n s u re   t h a t   S P S   a i d   i s   d i r -
ec ted to ac tive farmers, in par ticular by 
exclud ing  benef iciar ies w ho  have n o o r 
only insignificant agricultural ac tivities;

 Ū eligibl e  l and  a nd  agr icul tu ral   ac ti vit ie s 
s h o u l d   b e   m o r e   c l e a r l y   d e f i n e d   w i t h   a 
v i e w   t o   e x c l u d i n g   f r o m   t h e   b e n e f i t   o f 
S P S   a i d   n o n - a g r i c u l t u r a l   p a r c e l s   a n d 
a c t i v i t i e s   t h a t   d o   n o t   c o n t r i b u t e   t o   i n-
c re a s i n g   a gr i c u l t u ra l   p ro d u c t i v i t y   (Ar t -
icle  3 9  of   th e Treat y,   see  foo tno te  5)   o r 
ac tively maintaining the environmental 
va lue  of  the lan d;

 Ū t h e   c a l c u l a t i o n   o f   S P S   a i d   s h o u l d   b e 
m o d i f i e d   t o   b e t t e r   r e f l e c t   t h e   c o s t   o f 
enviro nment a l a nd ot her ex ter nal i ti es ; 

 Ū GAEC standards should require concrete 
and  re g ular  ac tivities  to  b e   c ar r ie d  o ut 
b y   f a r m e r s   fo r   t h e m   t o   re c e i ve   t h e   f u l l 
amou nt   o f  t he  aid.   Payment   red uc t ion s 
fo r   f a i l u re   to   re s p e c t   c ro s s - co m p l i a n ce 
o b l i g a t i o n s   s h o u l d   b e   m a d e   m o r e   d i s -
suasive;

 Ū a   m o r e   b a l a n c e d   d i s t r i b u t i o n   o f   a i d 
b e t w e e n   f a r m e r s   s h o u l d   b e   s o u g h t   e i -
ther by fur ther modulation of payments, 
o r   b y   c a p p i n g   h i g h e r   i n d i v i d u a l   p a y -
m e n t s,   o r   b y   t a k i n g   i n to   c o n s i d e r a t i o n 
th e sp ecific c ircums tances o f far ms ; 

 Ū t h e   c a l c u l a t i o n   o f   e n t i t l e m e n t s   s h o u l d 
be based on current farming conditions 
in t he d iffe re nt  regions.   

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

INTRODUCTION

10

1.	

2.	

B AC KG R O U N D

Until its reform in 1992, the CAP relied on a price suppor t sys-
te m   i n   m o s t   a gr i c u l t u ra l   s e c to r s   co m b i n e d   w i t h   p u b l i c   i nte r-
ve ntio n  in  agr icul t ural   mar ket s  as  wel l  as   borde r   prote c ti on 1. 
Pr i ce   s u p p o r t   c a m e   to   g e n e rate   a l m o s t   p e r m a n e nt   s u r p l u s e s 
of the major farm commodities and market stabilisation could 
only be achieved, at a high budgetar y cost, through measures 
s u c h   a s   p r i vate   s to ra g e,   d i s p o s a l   m e a s u re s,   e x p o r t   s u b s i d i e s 
or even destruc tion of agricultural produc ts. In addition, price 
suppor t had been systematically criticised in multilateral trade 
ne g ot iatio ns.

T h e   1 9 9 2   r e fo r m   o f   t h e   C A P   r e d u c e d   i n t e r v e n t i o n   p r i c e s   fo r 
ce real s  and be ef and o b l ig ed larg e r  fa r ms  to s e t as ide  par t  of 
t h e i r   l a n d.   I n   p a r a l l e l ,   t h e   re fo r m   i n t r o d u c e d   a c c o m p a ny i n g 
meas ure s  for  t he   p ro tec t ion   of  t he   envi ron me nt,   e ar ly  ret ire -
ment for farmers and afforestation measures. In compensation 
for the  expe c ted inco me l o sses th at  foll owe d th e de cre ase  of 
c e r e a l   a n d   b e e f   p r i c e s ,   p r o d u c e r s   r e c e i v e d   d i r e c t   p a y m e n t s 
w h i c h   w e r e   c o u p l e d   t o   a r e a s   s o w n   o r   a n i m a l   n u m b e r s .   T h e 
overall amounts of these payments were restr ic ted by sec tor-
sp ecif ic regional  or nat ion al  cei lin g s.

1 In some agricultural sectors 
direct aid payments had been 

introduced to improve producer 

incomes. An example is Council 

Regulation No 136/66/EEC of 

22 September 1966 on the 

establishment of a common 

organisation of the market in 

oils and fat (OJ 172, 30.9.1966, 

p. 3 025–66) that introduced 

an aid to the production of 

olive oil and table olives. In the 

case of cotton, producers were 

supported, indirectly, via an aid 

to the ginners. 

B O X 	 1

FA R M 	 I N CO M E 	 S U P P O R T 	 A N D 	T H E 	 E U R O P E A N 	 U N I O N ’S 	 I N T E R N AT I O N A L	
CO M M I T M E N T S

In 1994, the European Union and the member countries of the World Trade Organisation signed the 
Uruguay Round Agreement on Agriculture (URAA). This agreement classifies the various forms of 
farm support according to their impact on the distortion of international trade. Direct price support 
is considered as particularly distorting and the WTO member countries committed themselves to 
reduce this form of support. Direct payments ‘decoupled’ from production are considered not to 
distort trade and are therefore permitted2.

2  The Agreement on Agriculture (OJ L 336, 23.12.1994, p. 22) allows public farm support under specific conditions. According to 
Annex 2 to the agreement the eligibility for income support payments must be determined on the basis of criteria such as income 

level, status as a producer or landowner, factor use or production level in a reference period. The amount of such payments in any 

given year shall not be related to the type or volume of production (including livestock) after the reference period nor to the prices of 

any such production. Also, payments must not be based on the factors of production employed in any year after the reference period 

nor should farmers be obliged to produce in order to be entitled to the support.  

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3.	

4.	

5.	

I n   1 9 9 9 ,   t h e   E u r o p e a n   C o u n c i l   i n   B e r l i n   a g r e e d   u p o n   a   f u r -
the r  refor m  o f  t he  C A P.   S uppor t  to  agr i culture   was   org an is e d 
around t wo main ‘pillars’ that the Communit y budget finances 
t h r o u g h   t w o   f u n d s .   T h e   E u r o p e a n   A g r i c u l t u r a l   G u a r a n t e e 
Fund  (EAGF ) co ntinu es to  p rovide  for  th e fi n an c in g  of mar ke t 
m e a s u re s   a n d   i n c l u d e s   i n c o m e   s u p p o r t   i n   t h e   fo r m   o f   d i re c t 
p ay m e n t s   c o u p l e d   t o   p ro d u c t i o n .  Th e   Eu ro p e a n   Ag r i c u l t u r a l 
Fund   fo r  R ural   D evel o p ment  ( EAFR D)   co -f in an ce s   r ural  de vel-
op me nt  m easu res su c h as p rote c ti on of  th e  e nvi ron me nt  an d 
sus tainable agriculture, promotion of food qualit y, and higher 
techn ical an d animal  wel fare st an dards. 

T H E 	2003	 R E F O R M 	 O F 	T H E 	 C A P 	 I N T R O D U C E D	
T H E 	 S I N G L E 	 PAYM E N T 	 S C H E M E

I mplementation of the UR AA and changing political pr ior ities 
l e d   to   t h e   2 0 0 3   re fo r m   o f   t h e   C A P.  Th i s   re fo r m   w a s   d e s i gn e d 
t o   e n c o u r a g e   f a r m e r s   t o   r e s p o n d   t o   m a r k e t   d e m a n d   a n d   t o 
promote agr icultural prac tices considered to be protec tive of 
the  environment.

3 Direct payments were reduced 
by 3 % in 2005, 4 % in 2006 

and 5 % from 2007 onwards. As 

from 2009, annual reductions 

for modulation will be further 

increased from 7 % in 2009 to 

10 % in 2012. The Agenda 2000 

reform had already introduced 

a voluntary modulation 

mechanism allowing Member 

States to modulate up to 20 % 

of the total amount of direct 

payments. Only the United 

Kingdom, France, Germany and 

Spain had chosen to apply these 

voluntary modulation measures. 

Under the 2003 CAP reform 

Member States may apply 

such a voluntary modulation 

mechanism in addition to 

the mandatory modulation. 

Currently, this is the case in the 

United Kingdom and in Portugal.

A s   r e g a r d s   t h e   f i r s t   p i l l a r   o f   t h e   C A P   ( E AG F )   w h i c h   f i n a n c e s 
market and direc t aids, the 2003 reform was based on four key 
ele me nt s: 

 Ū  I n t r o d u c t i o n   o f   t h e   S i n g l e   P a y m e n t   S c h e m e   ( S P S ) .   T h i s 
sc hem e repl ace s mos t exis ting d irec t  aid pay me nts. U nd er 
t he SP S, aid is ‘decou p l ed ’ f rom a ny  obli g at ion  to produce. 

 Ū Fu ll   p ayment  o f  direc t  aid  is  su bjec t  to  th e   con d it ion   th at 
f a r m e r s   k e e p   a l l   t h e i r   l a n d   i n   g o o d   a g r i c u l t u r a l   a n d   e nv i -
ronmental condition (GAEC ) and respec t statutor y manage -
ment requirements (SMRs). This is called ‘cross- compliance’. 
G A E C   a n d   S M R s   p re s c r i b e   o r   p ro h i b i t   p r a c t i c e s   re l a t e d   t o 
t h e   p ro te c t i o n   o f   t h e   p ro d u c t i ve   p o te n t i a l   o f   a gr i c u l t u r a l 
l a n d,   t h e   e nv i ro n m e n t ,   a n i m a l   h e a l t h   a n d   we l f a re,   p l a n t s 
and  fo o d safe t y. 

 Ū I nt rod uc t io n  o f  a  com pul s or y   m ec h a nis m  to  red uce   al l  di -
rec t payments exceeding 5 000 euro per calendar year by a 
fixed p erce nt age (‘mo du l ation’) 3. Th e fun ds resulting  from 
t he mo du l at io n are t ran sfer red to t he  E AFR D.

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 Ū A financial discipline mechanism to ensure that the amounts 
agreed upon for the financing of Pillar I of the C AP are not 
excee ded in a ny year 4.  Th is m ech anism c ame into e ffe c t in 
200 7 bu t  h as no t so  far b een  tr ig ge re d.

4 Article 12 of Council Regulation 
(EC) No 1290/2005 of 21 June 

2005 on the financing of the 

common agricultural policy 

(OJ L 209, 11.8.2005, p. 1).

6.	

7.	

The SPS is designed to be consistent with the overall objectives 
of the common agricultural polic y aiming to ‘increase agricul-
t u r a l   p ro d u c t i v i t y ’  a n d  ‘ t h u s   e n s u r e   a   f a i r   s t a n d a r d   o f    l i v i n g 
for the agricultural communit y, in par ticular by increasing the 
individual earnings of persons engaged in agriculture’ 5. Hence, 
t h e   i n c o m e   o f   f a r m e r s,   w h i c h   h a d   b e e n   o n e   o f   t h e   p r i n c i p a l 
con ce r ns   of  the   C AP  since  its  introd uc t ion ,   rem ain e d  a  m aj or 
pol ic y  conce r n.

Fo r   t h e   a p p l i c a t i o n   y e a r   2 0 0 8   ( f i n a n c i a l   y e a r   2 0 0 9 ) ,   t h e   n a -
tional ceilings available for distributing payment entitlements 
i n   t h e   1 7   M e m b e r   St ate s   t h at   h ave   i nt ro d u ce d   t h e   S P S   s o   f a r 
a m o u n t e d   t o   a   t o t a l   o f   3 1 , 5   b i l l i o n   e u r o 6.   I n   t h e   2 0 0 9   b u d -
g e t   t h e   S P S   a c c o u n t e d   f o r   7 2 , 1   %   o f   t h e   E U   d i r e c t   s u p p o r t 
p ay m e nt s   a n d   4 9 , 8   %   o f   t h e   b u d g e t   fo r   a gr i c u l t u re   a n d   r u ra l 
deve lo p ment.

5 Article 39 of the Treaty on the functioning of the European Union (Treaty of Lisbon):

‘1. The objectives of the common agricultural policy shall be:

(a)   to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production 

and the optimum utilisation of the factors of production, in particular labour;

(b)  thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged 

in agriculture;

(c) to stabilise markets;

(d) to assure the availability of supplies;

(e) to ensure that supplies reach consumers at reasonable prices. 

  2. In working out the common agricultural policy and the special methods for its application, account shall be taken of:

(a)  the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities 

between the various agricultural regions;

(b) the need to effect the appropriate adjustments by degrees;

(c) the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole.’

 6 Article 41 and Annex VIII to Council Regulation (EC) No 1782/2003 (until 31.12.2008) (OJ L 270, 21.10.2003, p. 1) and Annex VIII to Council 
Regulation (EC) No 73/2009 (as from 1.1.2009) (OJ L 30, 31.1.2009, p. 16). Amounts in Annex VIII are calculated on the basis of a full decoupling of all 

direct payments. If a Member State opted for partial decoupling only, the ceiling for SPS is reduced and the ceiling for the appropriations available 

for coupled payment is increased accordingly (see for example Annex III to Commission Regulation (EC) No 674/2008 (OJ L 189, 17.7.2008, p. 5) 

modifying Annex VIII to Council Regulation (EC) No 1782/2003 and establishing budgetary ceilings for the partial or optional implementation).

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TA B L E 	 1

A N N UA L 	 B U D G E TA R Y 	 C E I L I N G S 	 F O R 	T H E 	 S I N G L E 	 PAYM E N T 	 S C H E M E

Member State

Belgium 

Denmark

Germany

Ireland

Greece

Spain

France

Italy 

Luxembourg 

Malta 

Netherlands 

Austria 

Portugal 

Slovenia 

Finland 

Sweden

United Kingdom 

Total

2006

Application year

2007

2008

475 641

981 539

5 644 898

1 335 311

2 041 887

3 529 453

6 060 555

3 593 132

36 602

325 103

540 440

365 645

519 628

630 000

3 914 945

29 994 779

488 660

987 356

5 693 330

1 337 919

2 069 049

3 542 583

6 107 448

3 612 988

37 051

1 668

730 632

643 956

413 774

50 454

521 285

714 201

3 931 186

30 883 540

(1 000 euro)

502 200

993 338

5 741 963

1 340 752

2 234 039

3 600 357

6 159 613

3 827 342

37 051

3 017

743 163

649 473

434 232

62 902

523 362

719 414

3 947 375

31 519 593

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8.	

9.	

K E Y 	 E L E M E N T S 	 O F 	T H E 	 S P S 	 A N D 	 M O D E L S 	 O F	
I M P L E M E N TAT I O N	 	

As   indic ated  ab ove,   t he  SPS   was  th e   cor n e r ston e  of   th e  2 0 0 3 
refo r m  o f  t he  C AP   and  rep l aced   mos t  exi st in g   di re c t  ai d  pay-
ments 7. Only far mers are eligible for SPS. A far mer is a person 
who carries out an agricultural activity. An agricultural activity 
is de fined  as  the pro du c tio n of plants,  th e  re ar i n g  of an i mals 
or th e mainte nan ce of l and in  good  agr ic ultural an d e nvi ron -
menta l  conditio n (G AEC ) 8.

To  b ene fit  fro m SP S aid,  a far me r  mus t h old ‘paym ent e nt it le -
ments’ and have eligible agricultural land at his disposal. Ever y 
p a y m e n t   e n t i t l e m e n t   d e c l a re d   t o g e t h e r   w i t h   o n e   h e c t a re   o f 
eligib l e  l and  gives   r ight  to  an  SP S   pay me nt   eq ua l  to  t h e  un it 
v a l u e   o f   t h e   p a y m e n t   e n t i t l e m e n t   d e c l a r e d 9.   Pa y m e n t   e n t i t -
l e m e nt s   a re,   i n   e s s e n ce,   a   co n d i t i o n a l   r i g ht   to   b e i n g   p a i d   E U 
income suppor t, i.e. an asset. They may be separated from land 
an d t ra ded  indep en dentl y.

10.	 Payment entitlements are granted by the national authorities. 
Th e   n at i o n a l   ce i l i n g s   co r re s p o n d   to   t h e   va l u e   o f   a l l   p ay m e nt 
ent it l ements avail ab l e t hat  far m er s  ca n ac t ivate wit h e ligi ble 
land within the territor y of the same Member State. This value 
i s   h i g h e r   t h a n   t h e   a m o u n t s   a c t u a l l y   p a i d,   b e c a u s e   a l l   d i r e c t 
payments to farmers, including SPS payments, are reduced as a 
result of modulation (for example 5 % in 2008), Member States 
h a ve   n o t   f u l l y   a l l o c a t e d   a l l   a v a i l a b l e   a m o u n t s,   f a r m e r s   h a ve 
not   us ed  (‘ac t ivated ’)   al l   p ayme nt   e ntit le me nt s  ( for   exampl e, 
b e c a u s e   i n   a   g i v e n   y e a r   t h e y   f a r m   f e w e r   h e c t a r e s   t h a n   t h e 
n u m b e r   o f   e n t i t l e m e n t s   t h e y   p o s s e s s )   o r   p a y m e n t s   we r e   r e -
d u ce d   a s   a   re s u l t   o f   a d m i n i s t rat i ve   s a n c t i o n s   ( fo r   ex a m p l e   i n 
the case of late presentation of the aid application). Thus, total 
p a y m e n t s   m a d e   u n d e r   t h e   s c h e m e   a m o u n t e d   t o   2 8 , 8   b i l l i o n 
euro  in  financial  year 20 09 10. 

7 For details on the support 
schemes integrated into the SPS 

see Annex VI to Regulation 

(EC) No 1782/2003.

8 See Article 1 and Article 2 (a) 
and (c) of Council Regulation 

(EC) No 1782/2003. 

9 Exceptions apply only for 
certain producers of beef, milk 

and sheep and goat without 

land. These producers receive 

income support under the 

condition that they maintain a 

minimum level of their historical 

animal production. Arable 

crop farmers received specific 

entitlements for their set-aside 

obligations.

10 For details on income support 
payments effectively made 

under the SPS see Annex II.

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11 Article 122 of Regulation 
(EC) No 73/2009.

12 Article 43 of Council 
Regulation (EC) No 1782/2003.

13 Specific provisions applied 
in the sector of olive oil where 

the reference period comprised 

the marketing years 1999/2000, 

2000/01, 2001/02 and 2002/03.

11.	 B e l g i u m ,   D e n m a r k ,   G e r m a n y,   I r e l a n d ,   I t a l y,   L u x e m b o u r g , 
 Austria, Por tugal, Sweden and the United K ingdom introduced 
t h e   S P S   i n   2 0 0 5 .   S p a i n ,   Fra n ce,   t h e   N e t h e r l a n d s,   Fi n l a n d   a n d 
Greece used a transitional per iod and introduced the SPS one 
ye ar l ater, in 2006 . 

12.	 S p e c i f i c   r u l e s   a p p l y   f o r   t h e   n e w   M e m b e r   S t a t e s   t h a t   j o i n e d 
t h e   E U   i n   2 0 0 4   o r   2 0 0 7 .   T h e y   c o u l d ,   i n   p r i n c i p l e ,   i n t r o d u c e 
t h e   S P S   l i k e   o t h e r   M e m b e r   S t a t e s   b u t   s o   f a r   o n l y   M a l t a   a n d 
Slovenia  have   do ne  so   in  2 00 7.   B ul ga r i a,  th e  C ze ch   R epubli c, 
E s to n i a ,   Cy p r u s,   L at v i a ,   L i t h u a n i a ,   H u n g a r y,   R o m a n i a ,   Po l a n d 
and Slovak ia availed themselves of an option that allows them 
t o   p o s t p o n e   t h e   i n t r o d u c t i o n   o f   t h e   S P S   u n t i l   2 0 1 3 .   I n   t h e 
meantime, they apply a simplified area-based suppor t scheme 
(S AP S) 11.  SAP S was no t in clu ded within  th e s cope o f  th e audi t 
rep or ted  in  t he p res ent  repor t.

13.	 S e v e r a l   i m p l e m e n t i n g   o p t i o n s   w e r e   o p e n e d   a s   r e g a r d s   t h e 
cal cu l at ion  and  al l o cation  o f  pay ment   enti tl em ents,   th us   de -
fining a number of ‘models’ among which Member States could 
choose: the historic model; the regional (flat-rate) model; and 
mixed  mo del s, w hich are a combi nat ion  of  bot h: 

(a ) T h e   h i s t o r i c   m o d e l 1 2:   E a c h   f a r m e r   i s   g r a n t e d   p ay m e n t   e n -
titlements which are as a rule based on the average amount 
o f   a i d   p a y m e n t s   r e c e i v e d   d u r i n g   t h e   t h r e e - y e a r   ( 2 0 0 0 , 
2 0 0 1   a n d   2 0 0 2 )   re fe re n ce   p e r i o d   ( t h e   h i s to r i c a l   re fe re n ce 
amo u nt )  and  the  averag e  n umb er   o f  h e c t are s  f ar med   dur -
i n g   t h a t   p e r i o d   u n d e r   a ny   o f   t h e   fo r m e r   c o u p l e d   s u p p o r t 
 schemes (the reference area) 13. Thus the unit value of a pay-
ment entitlement is equal to the reference amount divided 
b y   t h e   n u m b e r   o f   e n t i t l e m e n t s .  T h i s   m o d e   o f   c a l c u l a t i o n 
re s u l t s   i n   s i gn i f i c a n t   d i f fe re n c e s   i n   t h e   u n i t   v a l u e   o f   p ay -
me nt  e nt itl ements that ar ise  from  th e  dis par i t y  of  suppor t 
to specific agricultural sec tors during the reference period.

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(b) The regional (flat-rate) model 14: Under the regional model, 
all payment entitlements allocated to the farmers of a defi-
ned region/sub -region have the same value (‘flat-rate’) and 
e a c h   f a r m e r   i s   a l l o c a t e d   a   p ay m e n t   e n t i t l e m e n t   fo r   e ve r y 
eligible hec tare declared in the first year of application or, 
a l te r n a t i ve l y,   i n   t h e   l a s t   ye a r   p re ce d i n g   t h e   ye a r   o f   i n t ro -
du c t ion  of  t he SPS. 

(c) M i xe d   ( ‘ hy b r i d ’ )   m o d e l s :  Th e s e   m o d e l s   co m b i n e   e l e m e n t s 
o f   t h e   h i s t o r i c   a n d   t h e   r e g i o n a l   m o d e l s .   Fa r m e r s   r e c e i v e 
a   b a s i c   f l a t   r a t e   a m o u n t   p e r   e l i g i b l e   h e c t a r e   p l u s   a   f i xe d 
p e rce nt a g e   o f   t h e   a i d   p ay m e nt s   t h at   t h e y   h a d   re ce i ve d   i n 
t h e   re fe re n c e   p e r i o d.   H y b r i d   m o d e l s   m a y   b e   s t a t i c   o r   d y -
nam ic,   i. e.   t he  co mbination   of  h istor ic  and   f lat  rate  va lue s 
may remain unchanged or it may var y over time and evolve 
towards a full regional, flat-rate, model. The models chosen 
by the 17 M ember States that apply SPS for the calculation 
a n d   a l l o c a t i o n   o f   p ay m e n t   e n t i t l e m e n t s   a re   s h ow n   i n   A n -
nex  I.

14 Articles 58 and 59 of 
Regulation (EC) No 1782/2003.

15 Member States which, 
since 2005, had only partially 

introduced the SPS were 

however authorised to keep 

premiums for suckler cows and 

sheep and goat coupled to 

production.

14.	 M e m b e r   S t a t e s   w e r e   e n t i t l e d   t o   a l l o c a t e   p a r t   o f   t h e   h i s t o r-
i c a l   p a y m e n t s   t o   a   n a t i o n a l   r e s e r v e   w h i c h   c o u l d   b e   u s e d   t o 
gra nt   p ay m e nt   e nt i t l e m e nt s   to   n e w   f a r m e r s   w h o   h a d   s t a r te d 
t h e i r   a c t i v i t i e s   a f te r   t h e   re fe re n ce   p e r i o d,   f a r m e r s   i n   s p e c i a l 
situations or farmers affected by restructuring or development 
pro gram mes.

M O D I F I C AT I O N S 	 I N T R O D U C E D 	 BY 	T H E	
2008	‘ H E A LT H 	 C H E C K ’	 O F 	T H E 	 CO M M O N	
AG R I C U LT U R A L 	 P O L I C Y	

15.	

I n  2008,  th e  Co mmissio n  an d  t he  Cou nc il  un de r took   a   re v i ew 
of the C AP k nown as the ‘Health Check ’. The Council accepted 
the Commission proposals to fur ther decouple direc t suppor t 
s c h e m e s   t h a t   w e r e   s t i l l   c o u p l e d   t o   p r o d u c t i o n 1 5.   R e m a i n i n g 
co u p l e d   a i d   s c h e m e s   fo r   d r i e d   fo d d e r,   s t a rc h ,   f l a x   a n d   h e m p 
will also be decoupled and incorporated into the SPS by 2013. 
Al s o,   t h e   H e a l t h   C h e c k   f u r t h e r   s i m p l i f i e d   t h e   r u l e s   a n d   a b o l -
i s h e d   t h e   o b l i g a t i o n   f o r   f a r m e r s   t o   k e e p   p a r t   o f   t h e i r   l a n d 
fal low  (co mp uls or y set-as ide) .

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16.	 The Council also authorised M ember States to revise their ori-
ginal decision to opt for a par ticular model of implementation 
of the SPS. M ember States that had chosen the histor ic model 
may eit he r de cide to  nar row  th e g ap be t wee n t he  un it  val ue s 
of payment entitlements or to change over to a (full or hybrid) 
regional model. M ember States which had already introduced 
a   hy b r i d   re gi o n a l   m o d e l   m ay   d e c i d e   to   re d u ce   t h e   h i s to r i c a l 
component of the value of the payment entitlements and thus 
ad ju st  the m  c l oser  to  th e  region al  value.   M e mbe r   States   may 
als o  re vise  t he   comp o sitio n  of  t he   re gion s 16.  Fin ally,   M ember 
States were also authorised to use up to 10 % of their ‘national 
ce il ing s’ for  s up p or t ing s p ecific  is s ue s 17.

16 Articles 45 to 48 of Regulation 
(EC) No 73/2009.

17 Article 68 of Council 
Regulation (EC) No 73/2009. For 

further analysis of these issues 

see Annex I.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 AUDIT SCOPE, OBJECTIVES 
AND APPROACH .

18

17.	 The Cou r t  has al ready au dited th e  i mple me nt ati on  of  t he  SP S 
in  th e 17 M e mb er States ap ply in g t he  s ystem  si n ce 2 0 0 6 .  The 
results of these audits were repor ted in the respec tive Annual 
R ep o r ts. 

18.	 The Cour t also decided to carr y out supplementar y audit work 
i n   2 0 0 9   a n d   2 0 1 0   fo r   t h e   p u r p o s e   o f   t h e   p re s e nt   re p o r t .  Th i s 
included fur ther audit visits to the European Commission and 
three Member States (France, United Kingdom, I taly) as well as 
doc u mentar y anal ys is  and review  of  st ud ie s  an d e va luat ion s.

19.	 This  re po r t fo cu ses  on  t he followi ng : 

 Ū the definition of the beneficiar ies of the polic y, the condi-
t i o n s   o f   a c c e s s   t o   s i n g l e   p a y m e n t s   a n d   t h e   d e f i n i t i o n   o f 
el igib l e l and;

 Ū the contribution of the scheme to the objectives of suppor t-
i n g   f a r m e r s’  i n c o m e   a n d   m a i n t a i n i n g   a g r i c u l t u r a l   l a n d   i n 
g oo d  agr icu lt ural  and  env ironm e nt al  con dit io n;

 Ū t he sp ec if ic  e ffec t s  ar ising from  th e  var i ous im pleme nti n g 

mo de ls  o f t he sc heme; 

 Ū t he  e r ro rs  l ink ed  to   t he  com plicated   c alc ul ati on s   re quired 

for t he  est ab lishment o f th e paym e nt  enti tl em e nt s. 

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

OBSERVATIONS

19

T H E 	 B E N E F I C I A R I E S 	 O F 	T H E 	 P O L I C Y, 	T H E	
CO N D I T I O N S 	 O F 	 ACC E S S 	TO 	 S I N G L E 	 PAYM E N T S	
A N D 	T H E 	 S E T T I N G 	 U P 	 O F 	 K E Y 	 E L E M E N T S 	 O F	
T H E 	 S C H E M E	 	

20.	 The audit identified a lack of precision in the definition of the 
beneficiaries of the SPS, of eligible ac tivities and eligible land 
a s   we l l   a s   s i gn i f i c a nt   d i s c re t i o n   i n   t h e   s e t t i n g   u p   a n d   i m p l e -
mentatio n of  k ey  el ements  of  t h e s ch em e  by  M e mbe r  St ates.

18 Article 2 of Regulation (EC) 
No 1782/2003 and Article 2 

of Commission Regulation 

(EC) No 795/2004 (OJ L 141, 

30.4.2004, p. 1).

D E F I N I T I O N S 	 O F 	‘ H O L D I N G’,	‘AG R I C U LT U R A L 	 AC T I V I T Y ’	
A N D 	‘ L A N D 	 AT 	T H E 	 FA R M E R ’S 	 D I S P O S A L’	

21.	 The b en eficiar ies of t he SP S are  ‘f ar me r s’ en g ag ed  i n an  ‘a gr i-
c u l t u ra l   a c t i v i t y ’  a n d   h av i n g  ‘e l i gi b l e   l a n d ’  at   t h e i r  ‘d i s p o s a l ’. 
H owe ve r,   t h e   l a c k   o f   p re c i s i o n   i n   t h e   d e f i n i t i o n   o f   t h e s e   e l e -
m e n t s   ( f a r m e r,   a g r i c u l t u r a l   a c t i v i t y   e t c . )   a n d   t h e   m a n n e r   i n 
w h i c h   t h e y   we re   s u b s e q u e n t l y   a p p l i e d   p e r m i t te d   p e r s o n s   o r 
e n t i t i e s   h a v i n g   n o   o r   o n l y   m a r g i n a l   a g r i c u l t u r a l   a c t i v i t y   t o 
be nefit  f rom t he S PS  p ay ments. 

22.	 Leg al   provisio ns 18  de fine   a  holdin g  as  t he   totalit y  of   th e  pro -
d u c t i o n   u n i t s   w h i c h   t h e   f a r m e r   m a n a g e s   w i t h i n   t h e   te r r i to r  y 
of the same M ember State. A produc tion unit is a plot of agr i -
cu lt ural   l and  ( inc l ud ing  forage  are as)   or   an   an im al  whi c h   h as 
given right to direct payments in the reference period. Agricul-
tural ac tivit y is the produc tion, rear ing or growing of agr icul -
tural products including har vesting, milk ing, breeding animals 
and keeping animals for far ming pur poses or maintaining the 
la n d in  GAEC .

23.	 The legal framewor k therefore does not require  beneficiar ies: 

(a ) to own land or any other means of agricultural  produc tion,

(b) to  b e a  pro duce r o f agr ic ult ural  go ods ;  an d 

(c) t o   e a r n   o n e’s   i n c o m e   f r o m   t h e   s e l l i n g   o f   t h e   p r o d u c t   o f 

o ne’s  agr icul tu ral ac t ivit y  on a  m ar k e t. 

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20

19 Article 44(3) of Regulation 
(EC) No 1782/2003.

20 Article 1(3) of Council 
Regulation (EC) No 146/2008 

(OJ L 46, 21.2.2008, p. 1). Except 

in case of force majeure or 

exceptional circumstances, the 

parcels shall be at the farmer’s 

disposal on the date fixed by the 

Member State which shall be no 

later than the date fixed in that 

Member State for amending the 

application for single payment.

21 The Court had already 
reported on this practice in its 

Annual Report for the financial 

year 2006, paragraph 5.21.

24.	 With respec t to the availabilit y of land, the initial legal frame -
wo r k fo r t he SPS requ ired applic ants  to h ave  h ad  at  t he ir  d is-
p o s a l,   fo r   a   p e r i o d   o f   a t   l e a s t   1 0   m o n t h s 1 9,   e l i gi b l e   l a n d   c o r -
resp o nding  to   t he  numb er   of   pay me nt  ent it lem ents   th ey   h ad 
i n   t h e i r   p o s s e s s i o n .  T h e   p r o v i s i o n ,   w h i c h   w a s   c o n s i d e r e d   t o 
be too restric tive, was replaced in 2008 by the obligation that 
l a n d   b e   a t   t h e   f a r m e r ’s   d i s p o s a l   o n   a   f i xe d   d a t e 2 0.   H o w e v e r, 
t h e   l e g a l   p r o v i s i o n s   d o   n o t   d e f i n e   t h e   t e r m  ‘a t   t h e   f a r m e r ’s 
disposal ’ or ‘management of produc tion units’. As a result, the 
decl are d  la nd  may   b e  at  t he  dispos al  of   a ny   ot he r   per s on   for 
any p er iod o f t ime outs ide  of  th is  f i xed  date  d ur in g  t he  s am e 
c a l e n d a r   ye a r,   w i t h o u t   t h i s   a f fe c t i n g   t h e   q u a l i f i c at i o n   o f   t h e 
cla imant as  a ‘ far mer ’.

25.	 Cer tain M ember States have endeavoured to target SPS aid to 
specific categories of farmers. As an example, Luxembourg re -
quires applicants to have the necessar y agricultural machiner y 
or equipment. In France, the authorities consider that a farmer 
is the person who bears the economic risks of the agricultural 
a c t i v i t i e s   w h i c h   h e   c o n d u c t s   o n   t h e   l a n d   d e c l a r e d   f o r   S P S . 
This  is  t he   p ers on  w ho   t akes  th e  e con omic  d ec i si on s  i. e.   w ho 
a c q u i re s   i n p u t   f a c t o r s   ( s u c h   a s   l a n d,   m a c h i n e r y,   s e e d s,   e t c. ) 
an d de r ive s his inco me fro m selli ng  t he  produce  of  th e f ar m. 

26.	 A beneficiar y who carries out the agricultural ac tivit y required 
through salaried workers is considered to be a farmer. However, 
w h e n   t h e   l a n d   i s   l e a s e d   a n d   t h e   t e n a n t   b e a r s   t h e   e c o n o m i c 
r i s k   o f   t h e   a g r i c u l t u r a l   a c t i v i t y,   h e   d o e s   n o t   r e c e i v e   t h e   S P S 
a i d   i f   t h e   p ro v i s i o n s   o f   t h e   l e a s e   a g re e m e n t   s p e c i f y   t h a t   t h e 
l a n d o w n e r   r e m a i n s   t h e   e c o n o m i c   b e n e f i c i a r y   o f   t h e   a c t i v i t y 
carried out. The audit revealed a number of cases of this k ind 21. 
In such cases, SPS aid was paid to landowners on condition that 
the tenants maintain the land in GAEC on their behalf.

	 B O X 	 2

B E N E F I C I A R I E S 	 O F 	 S P S 	 A I D 	W H O 	 D O 	 N OT 	 B E A R 	T H E 	 E CO N O M I C 	 R I S K 	 O F	
FA R M I N G

The Court’s audit revealed a number of cases where a tenant farmer had been paid under a support 
scheme for less-favoured areas but where the single payment attached to this same parcel was paid 
to another beneficiary (the landowner). Such cases were frequent under the regional (hybrid) model 
because, in the year of introduction of the scheme, payment entitlements were allocated to every 
person who declared eligible land, regardless of whether he was or had been an agricultural producer. 

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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PAYM E N T 	TO 	 R E T I R E D 	 FA R M E R S 	 F O R 	 M E E T I N G 	 M I N I M A L	
G A E C 	 O B L I G AT I O N S	

27.	 P r i o r   t o   t h e   S P S ,   i . e .   u n d e r   t h e   f o r m e r   c o u p l e d   p a y m e n t 
 sch emes,  w hen  a  far mer  re tired,   he   was   n o  lon g er   e nt it led   to 
direc t   aid   as   he  h ad   ceas ed   agr icultural  prod uc t ion .  Wit h   t h e 
int rod uc t io n o f S PS , far mers who h ad  di spos ed  of t h ei r  or i gi -
n a l   h o l d i n g   co u l d   k e e p   t h e i r   e nt i t l e m e nt s   a n d   a c t i vate   t h e m 
on rented land on which they had no ac tivit y by enter ing into 
complex construc ts designed to meet the requirements of the 
re g u l a t i o n s.   I n   s u c h   c a s e s,   t h o s e   w h o   t o o k   o ve r   t h e   o r i g i n a l 
hol d ing  co uld receive new  entit lem ent s f rom th e n at ion al re -
ser ve.

28.	 Acco rding  to  a st udy  cont rac ted by  t he  Com mi ss ion 22, t he in-
t r o d u c t i o n   o f   t h e   S P S   d e l a y e d   a c t u a l   r e t i r e m e n t   o f   f a r m e r s , 
b e c a u s e   t h e   s c h e m e   a l l o w s   t h e m   t o   k e e p   t h e i r   p a y m e n t   e n -
tit l ement s and hol din gs ( w hic h may  onl y  con s is t of  l ow  value 
rented land with minimal GAEC obligations). However, the na-
tional authorities could not provide the Cour t with reliable in-
for mation about the scale of such cases. The Cour t found that 
i n   o n e   M e m b e r   S t a t e   ( Fr a n c e ) ,   i n   o r d e r   t o   a v o i d   s u c h   c a s e s , 
t h e   l e g i s l a t i o n   p r o v i d e s   t h a t   a c c e s s   t o   t h e   n a t i o n a l   f a r m e r 
pe nsio n  sche me  is  o nl y   p er mitted   i f   far me r s  t ran sfe r   all  t he ir 
payment entitlements and land, with the possible exception of 
a  s u b sis te nce  p arcel.  I n   genera l,  h oweve r,   t he re   is   a  r is k   t h at 
delayed exit from farming, encouraged by the introduc tion of 
t h e   S P S ,   n e g at i ve l y   i m p a c t s   o n   t h e   re s t r u c t u r i n g   o f   t h e   a gr i-
cu lt ural  se c tor. 

22 Swinnen, J., Ciaian, P. and 
Kancs, D., ‘Study on the 

functioning of land markets in 

the EU Member States under the 

influence of measures applied 

under the common agricultural 

policy’, Brussels 2008, pp. 

149–150. Evidence from several 

country studies (e.g. Belgium, 

Finland, Ireland, Sweden, United 

Kingdom) indicates that the 

SPS may constrain farm exit. 

In the United Kingdom many 

farmers’ exit decisions appear to 

have been delayed until 2012 

as they know the SPS will run 

at least until then. The study 

also suggests that this effect of 

the SPS works in combination 

with imperfect tradability of 

entitlements.

B O X 	 3

B E N E F I C I A R I E S 	 O F 	 S P S 	W H O 	 D I S P O S E D 	 O F 	T H E I R 	 O R I G I N A L 	 H O L D I N G S	

In Italy, the Court found former producers of cereals and tobacco holding high-value payment entitle-
ments who had transferred all their land to other farmers and rented at low cost poor pasture land 
in mountain regions considerably distant from their original holdings as well as from their residence. 
In practice, local farmers were allowed to graze their animals on that land free of charge which was 
considered adequate to maintain it in GAEC. In another case, a retired farmer had transferred his 
holding to family members and declared public land for the sole purpose of activating his entitle-
ments without having any right of use of the declared land23. 

23 See paragraph 3.21 of the Annual Report concerning financial year 2009.

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N E W 	 B E N E F I C I A R I E S

29.	 Following the introduc tion of the SPS, the Cour t has identified 
a   n u m b e r   o f   n e w   b e n e f i c i a r i e s   w h o s e   a g r i c u l t u r a l   a c t i v i t i e s 
form only an insignificant par t of their overall economic activi-
ties or whose principal business does not consist of exercising 
a n   a g r i c u l t u r a l   a c t i v i t y.   C a s e s   i n   p o i n t   i n c l u d e   r e c r e a t i o n a l 
and spor ts clubs, railway companies, nature reser ves, airpor ts 
a n d   c i t y   co u n c i l s,   h u nt i n g   a n d   s p o r t i n g   e s t ate s,   g ove r n m e nt 
bodies, s cho ol s and  c amp ing  s ites.

24 Article 28(2) of Regulation 
(EC) No 73/2009. 

30.	 A m o n g   t h e s e   n e w   b e n e f i c i a r i e s ,   t h e   a u d i t   i d e n t i f i e d   i n v e s -
tors who purchased payment entitlements (sometimes of high 
v a l u e )   w h i c h   t h e y   a c t i v a t e d   o n   l o w - v a l u e   l a n d,   t h u s   m a k i n g 
ve r y   at t ra c t i ve   g u a ra nte e d   re t u r n s   o n   t h e i r   i nve s t m e nt s   ( s e e 
paragrap hs 66 and 6 7) .

31.	 During the Health Check , it was ack nowledged that agricultu -
ral income suppor t should not be allocated to ‘natural or legal 
persons whose agricultural activities form only an insignificant 
p a r t   o f   t h e i r   o v e r a l l   e c o n o m i c   a c t i v i t i e s   o r   w h o s e   p r i n c i p a l 
b u s i n e s s   o r   co m p a ny   o b j e c t s   d o   n o t   co n s i s t   o f   e xe rc i s i n g   a n 
a g r i c u l t u r a l   a c t i v i t y ’ 2 4.   H owe ve r,   t h e   re g u l a t i o n   l e f t   i t   t o   t h e 
M e m b e r   St ate s   to   exc l u d e   s u c h   b e n e f i c i a r i e s   t h ro u g h   a p p ro -
p r i a t e   l e g a l   p r o v i s i o n s .   N o   M e m b e r   S t a t e   h a s   y e t   m a d e   u s e 
o f   t h i s   o p t i o n   a n d   S P S   a i d   i s   s t i l l   p a i d   to   t h e s e   b e n e f i c i a r i e s. 
N e i t h e r   t h e   M e m b e r   S t a te s   v i s i te d   n o r   t h e   Co m m i s s i o n   h ave 
pre cise   info r mat io n  on  th e  num ber   of   suc h   ben ef i ciar ie s  an d 
the   amo unt  o f  S PS   aid  they  recei ved.  G ive n   th at   th e  n at ion al 
c e i l i n g s   a re   f i xe d,   t h e   a c c e p t a n c e   o f   s u c h   n e w   b e n e f i c i a r i e s 
re d u c e s   t h e   a m o u n t   o f   a i d   a v a i l a b l e   fo r   t h e   p r i n c i p a l   t a r g e t 
benefic iar ies o f S PS aid.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

25 Article 41(2) of Regulation 
(EC) No 73/2009 and Article 

2(I) of Commission Regulation 

(EC) No 1120/2009 of 29 October 

2009 laying down detailed 

rules for the implementation 

of the single payment scheme 

provided for in Title III of Council 

Regulation (EC) No 73/2009 

(OJ L 316, 2.12.2009, p. 1).

26 Eurostat pocketbooks — 
Agricultural statistics — Main 

results 2007–2008 (2009 edition). 

23

M E M B E R 	 S TAT E S 	 S E T 	 U P 	 I N 	V E R Y 	 D I F F E R E N T	
WAYS 	 K E Y 	 E L E M E N T S 	 O F 	T H E 	 S P S 	 S C H E M E	 	

32.	 The  d et ailed   imp l ementatio n  of   a  n um ber   of  k ey   ele me nt s  of 
t h e   S P S   i s   l e f t   t o   t h e   M e m b e r   S t a t e s .   C a s e s   i n   p o i n t   i n c l u d e 
t h e   a c c e s s   o f   n e w   e n t r a n t s ,   t h e   d e f i n i t i o n   o f   t h e   m i n i m u m 
agr ic u lt ural ac t ivit ies th at h ave to be c ar r i ed  out  on t he  lan d 
decl are d o r t he conditio ns  for be ne f it in g  f rom  t he  con soli da-
tio n o f p ayment entitl ements.

ACC E S S 	 O F 	 N E W 	 E N T R A N T S 	TO 	T H E 	 S P S 	 I S 	 L A R G E LY	
D E P E N D E N T 	 O N 	 M E M B E R 	 S TAT E S’	 I M P L E M E N TAT I O N	
P O L I C I E S	

33.	 Pe r s o n s   w h o   w i s h   to   t a k e   u p   f a r m i n g   a c t i v i t i e s   h ave   i n   p r i n-
ciple no right to aid under the SPS, unless they acquire an eli-
gible agricultural holding together with the attached payment 
entitlements, or buy such entitlements on the market. Member 
S t a t e s   a r e   a l s o   a u t h o r i s e d   t o   u s e   t h e i r   n a t i o n a l   r e s e r v e s   t o 
g r a n t   p a y m e n t   e n t i t l e m e n t s   t o   n e w   f a r m e r s   w h o   c o m m e n c e 
t h e i r   a g r i c u l t u r a l   a c t i v i t y.  T h i s   i s   u n d e r   c o n d i t i o n   t h a t   t h e y 
had no agricultural activities in their own name or at their own 
r i s k   i n   t h e   f i ve   ye a r s   p re ce d i n g   t h e   s t a r t   o f   t h e i r   a gr i c u l t u ra l 
ac tiv it y 25. 

34.	 T h e   a u d i t   fo u n d   t h a t   s o m e   M e m b e r   S t a t e s   u s e d   t h e   r e s e r v e 
as   a  p o lic y   inst rument  to   promote  e nt r y   into  t he   agr i cult ural 
sec to r by prov id ing new far mer s  wi th  pay me nt e nti tle me nt s.  

35.	

I n   o t h e r   M e m b e r   S t a t e s ,   h o w e v e r,   i n   s p i t e   o f   a   d e m a n d   f o r 
p a y m e n t   e n t i t l e m e n t s   b y   n e w   f a r m e r s ,   t h e r e   i s   n o   s p e c i f i c 
p o l i c y   a n d   t h e r e   a r e   n o   a p p r o p r i a t i o n s   a v a i l a b l e   i n   t h e   n a -
tio nal   re se r ve.   Hence,   new  entrants   h ave  to  acquire   pay me nt 
e n t i t l e m e n t s   w h i c h   m a y   e n t a i l   s u b s t a n t i a l   i n v e s t m e n t s   a n d 
p l a ce   s i gn i f i c a nt   b a r r i e r s   to   e n t r y.  Wi t h   t h e   p a s s a g e   o f   t i m e, 
mo re   and  mo re  new   f ar mers  m ay  expe r i en ce   di ff i cult y   in   ob -
t a i n i n g   p ay m e nt   e nt i t l e m e nt s.   M e a nw h i l e,   5 7 , 5   %   o f   f a r m e r s 
i n   t h e   E u ro p e a n   U n i o n   a re   o ve r   5 5   ye a r s   a n d   o n e   i n   t h re e   i s 
over 65 years old 26. I t is therefore in the interest of a dynamic 
an d in novat ive far min g s ec tor to faci li tate  th e e st abli sh me nt 
of  new  ac t ive far mers.

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E L I G I B L E 	 L A N D 	 A N D 	 M I N I M U M 	 AG R I C U LT U R A L	
AC T I V I T I E S 	 R E Q U I R E D 	 H AV E 	 N OT 	 A LWAYS 	 B E E N 	 C L E A R LY	
D E F I N E D

36.	 Th e re   a re   t h re e   t y p e s   o f   e l i gi b l e   l a n d   —   a ra b l e   l a n d,   p e r m a -
n e n t   p a s t u re s   a n d   p e r m a n e n t   c ro p s 2 7.   H owe ve r,   t h e   d e t a i l e d 
s p e c i f i c a t i o n s   a s   t o   w h a t   c o n s t i t u t e s   a n   e l i g i b l e   p a r c e l   a r e 
l e f t   to   M e m b e r   St ate s.   I n   s o m e   M e m b e r   St ate s   m a rgi n a l   l a n d 
a n d   w o o d e d   a r e a s   t r a d i t i o n a l l y   u s e d   f o r   o c c a s i o n a l   g r a z i n g 
are accep ted as b eing el igib le whi le,  i n ot he r  M em ber  St ates, 
s u c h   l a n d   i s   e xc l u d e d   f r o m   S P S   a i d .   S u c h   m a r g i n a l   l a n d   c a n 
quic k ly  b eco me   overgrown  with   sh r ubs  an d  fore st,   ma k in g   it 
uns uit ab le  for  a gr ic u l tural  p ur pos es. 

37.	 A s   r e g a r d s   t h e   d e f i n i t i o n   o f   t h e   c o n c r e t e   a c t i v i t i e s   f a r m e r s 
h a v e   t o   c a r r y   o u t   t o   m a i n t a i n   t h e i r   l a n d   i n   G A E C ,   t h e   E U   l e -
gisl at io n s ets o ut  onl y general obje c ti ves  wit h re s pec t to s oi l 
e ro s i o n ,   s o i l   o rg a n i c   m at te r,   s o i l   s t r u c t u re   a n d   t h e   m i n i m u m 
l e ve l   o f   m a i n t e n a n c e   re q u i re d.  T h i s   l a t t e r   a s p e c t   i s   o f   p a r t i-
c u l a r   i m p o r t a n ce   fo r   l a n d   t h a t   i s   n o   l o n g e r   u s e d   fo r   p ro d u c-
t i o n   p u r p o s e s .   T h e   d e f i n i t i o n   o f   t h e   m i n i m u m   s t a n d a r d s   t o 
be  o b se r ved is l ef t  to  t he d iscre ti on of M em ber  St ate s,  wh i c h 
a d a p t   t h e m   t o   t h e   s p e c i f i c   c h a r a c t e r i s t i c s   o f   t h e   re g i o n s.   A s 
a consequence far mers may receive annual payments without 
having   to  c ar r y  ou t  any  sp ec ific  m ainte nan ce   ac t iv it y   or   onl y 
minimal infrequent ac tivit y, such as combating encroachment 
o f   u nwa nte d   ve g e t at i o n   o r   c u t t i n g   gra s s   o n ce   e ve r y   t h re e   o r 
five  years. Where  far mer s  fail  to  do  e ven   t he   mi n im um  st ipu-
lated,  t he y  r isk  a  moderate  reduc t ion   of   SP S   pay me nt s  un de r 
the  cro ss- co mp liance ru l es 28. 

27 Article 2(h) of Regulation 
(EC) No 73/2009.

28 The Court has already 
observed that the sanction 

system for cross-compliance 

is weak both in its conception 

and its application: Special 

Report No 8/2008: ‘Is cross-

compliance an effective policy?’ 

(http://eca.europa.eu/portal/

page/portal/publications/

auditreportsandopinions/

specialreports).

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B O X 	 4

B R O A D 	 D E F I N I T I O N 	 O F 	 E L I G I B L E 	 L A N D 	 A N D 	 M I N I M U M 	 AG R I C U LT U R A L	
AC T I V I T I E S

The provisions concerning GAEC have a considerable impact in the United Kingdom (Scotland), 
where the major part of agricultural land is rough grazing land, nearly half of which is declared 
under the SPS29. Most of this land is situated in less-favoured areas. The applicable national rules 
for less-favoured areas require that the land be actively farmed. In contrast, under the SPS the same 
land is eligible on the sole condi-
tion that claimants commit them-
selves  not  to  carr y  out  specific 
activities  that  would  change  the 
natural state of the land e.g. drain-
age works or ploughing. The Court 
identified individual beneficiaries 
in receipt of between several hun-
dred  thousand  and  up  to  more 
than 1 million euro per year in SPS 
aid without having any agricultural 
activity on such land, including a 
nature reserve which for decades 
has not been used for farming. It is 
estimated that SPS aid is currently 
paid in relation to approximately 
150 000 hectares of such parcels.

Source: European Court of Auditors.

I n  Spain,  par tially  wooded  and 
rocky mountain grazing land was 
considered  eligible  even  though 
farmers were not required to carry 
out  any  par ticular  maintenance. 
Stocking density requirements to 
ensure the maintenance of perma-
nent  pastures  at  an  appropriate 
level were only optional.

Source: European Court of Auditors.

29 In 2008, some 2,375 million ha of the 4,557 million ha of agricultural land declared under the SPS were rough grazing land. This 
land  — of which, according to statistical information, there are some 4,027 million ha — can be found on mountains, hills, moors and 

heaths. Rough grazing land is for the most part covered with heather and bracken and relatively unproductive. Traditional farmers use 

it usually only for extensive grazing of sheep. 

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B O X 	 4

In Italy, permanent pasture has to be mowed or grazed by animals. This obligation applies also to 
wooded or mountain areas used for grazing. The national authorities introduced a system of reduction 
coefficients to identify ineligible areas devoid of grass vegetation. As the Court has already pointed 
out in its Annual Report for the financial year 2007, the reduction coefficients underestimated such 
areas.

Source: European Court of Auditors.

The Court also found that, in Italy, beneficiaries are still paid on the basis of incorrect land use in-
formation, although the parcels declared have reverted to their natural state and can no longer be 
used for grazing farm animals.

In France, the national rules oblige 
farmers to maintain land in GAEC 
through the grazing of animals or 
annual  mowing  of  the  land,  but 
specific standards can be adopted 
at local level. This has resulted in a 
situation where, in certain regions, 
full payment of the SPS aid can be 
obtained for parcels that contain 
up to 30 % of ineligible areas, such 
as rocks, bushes and trees.

Source: European Court of Auditors.

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T E M P O R A R Y 	 U S E 	 O F 	 L A N D 	 F O R 	 N O N - AG R I C U LT U R A L	
AC T I V I T I E S	

38.	 W h e n   t h e   S P S   w a s   i n t r o d u c e d ,   t h e   l e g i s l a t i o n   d i d   n o t   a l l o w 
t h e   p ay m e n t   o f   a i d   w h e n   p a rc e l s   we re   u s e d   fo r   n o n - a g r i c u l-
tu ral  ac t ivit ie s. As  a res ul t  of th e  He alt h  Ch ec k 30, s uc h  land is 
now considered as eligible as long as the agr icultural ac tivit y 
can be exercised without being significantly hampered by the 
inte nsit y, nat u re,  d uration  an d t im in g  of  th e n on -agr ic ultural 
a c t i v i t y 3 1.   H o we ve r,   t h e   p re c i s e   d e f i n i t i o n   o f   s u c h   s i t u a t i o n s 
i s   l e f t   t o   t h e   M e m b e r   S t a t e s .   T h e   C o u r t   f o u n d   c a s e s   w h e r e 
t h e   n at i o n a l   a u t h o r i t i e s   h a d   a l l o c ate d   p ay m e nt   e nt i t l e m e nt s 
w h i c h   w e r e   a c t i v a t e d   f o r   p a r c e l s   o f   l a n d   u s e d   p r i m a r i l y   f o r 
recreat ional  ac tivities.

A D V E R S E 	 E F F E C T S 	 O F 	T H E 	 CO N S O L I D AT I O N 	 O F 	 PAYM E N T	
E N T I T L E M E N T S	

39.	 T h e   p a y m e n t   o f   S P S   a i d   i s   a s s o c i a t e d   w i t h   t h e   o b j e c t i v e   o f 
a v o i d i n g   t h e   a b a n d o n m e n t   o f   a g r i c u l t u r a l   l a n d 3 2.   U n d e r   t h e 
historical model, to obtain the full theoretical amount of pay -
m e n t s ,   f a r m e r s   m u s t   c o n t i n u e   t o   f a r m   t h e   s a m e   n u m b e r   o f 
hec tares which they farmed during the reference period 33. The 
legisl atio n 34 p rovid es fo r exceptions for  far m e r s wh o we re  af-
fe c t e d   b y   r e s t r u c t u r i n g   a n d   d e v e l o p m e n t   p r o g r a m m e s .   Fa r -
m e r s   a f f e c t e d   b y   s u c h   m e a s u r e s   c o u l d   h a v e   t h e i r   h i s t o r i c a l 
paym ent  ent itl ements exc han ged for  a sm alle r  number  of  en-
t i t l e m e n t s   w i t h   a   h i g h e r   u n i t   v a l u e.  T h i s   p ro c e d u re   i s   c a l l e d 
‘co n s o l i d a t i o n’.   Fa r m e r s   n e e d   l e s s   l a n d   to   a c t i v a te   t h e i r   p ay-
ment entitlements while they maintain their historical level of 
aid. Cas es  in po int in cl u de agr icult ural  lan d th at was  affores -
ted  u nder   a   p ub lic   p ro gramme  or   f ar m er s   w ho  ha d  l os t  som e 
of  the ir parcel s due to t he reorg ani s ati on of  a gr i cul tural  l an d 
in  th e framewor k of  re - p arcellin g.

30 Article 34(2)(a) of Regulation 
(EC) No 73/2009.

31 Article 9 of Regulation 
(EC) No 1120/2009.

32 See recitals 2 and 3 of 
the preamble to Regulation 

(EC) No 1782/2003.

33 These were as a general rule 
the average number of hectares 

on which they had cultivated 

subsidised crops or the forage 

areas that had been available 

throughout the year for the 

animals that had been subject to 

premium payments.

34 Article 42(5) of Regulation 
(EC) No 1782/2003. This measure 

is continued for the direct aids 

that are still (partly) coupled 

to production and that will be 

integrated into the SPS by 2012.

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40.  

 Th e   Co u r t   fo u n d   t h at   co n s o l i d at i o n   o f   p ay m e nt   e nt i t l e m e nt s 
o c c u r re d   i n   c i rc u m s t a n c e s   o t h e r   t h a n   t h o s e   fo re s e e n   b y   t h e 
legisl atio n.

41.	 As   f a r m e r s   w h o   b e n e f i te d   f ro m   s u c h   co n s o l i d at i o n   n e e d   l e s s 
l a n d   t o   r e c e i v e   t h e   s a m e   a m o u n t   o f   a i d ,   t h e   r e m a i n i n g   l a n d 
can be taken up by any other farmer who can ac tivate his own 
p ay m e nt   e nt i t l e m e nt s   o n   i t   o r   by   a   n e w   f a r m e r   w h o   re ce i ve s 
p ay m e nt   e nt i t l e m e nt s   f ro m   t h e   n at i o n a l   re s e r ve.   As   a   re s u l t, 
m o r e   a i d   i s   p a i d   i n   r e l a t i o n   t o   t h e   s a m e   a r e a .   A l t e r n a t i v e l y, 
there is a risk that the excess land is abandoned and no longer 
maint a ined  in  G AEC.

B O X 	 5

CO N S O L I D AT I O N 	 I N 	 C I R C U M S TA N C E S 	 N OT 	 P R O V I D E D 	 F O R 	 BY 	T H E	
R E G U L AT I O N S

In France, the Court found that the authorities did not take into account the totality of agricultural 
land which certain milk producers had in their possession when the dairy premium was decoupled 
in 2006 and apportioned the amount of this premium to a much smaller surface of land. In one case 
the farmer who had previously used 70 ha had his entitlements apportioned to only 2 ha. By the 
same token, common pasture land which beneficiaries of extensification payments had used in the 
reference period as forage areas was also not taken into account. This effectively allowed beneficiar-
ies to consolidate their payment entitlements on smaller land areas in circumstances not provided 
for by the regulations.

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A 	 H I G H 	 P R O P O R T I O N 	 O F 	 S P S 	 A I D 	 G O E S	
TO 	 L A R G E R 	 FA R M S 	 A N D 	T H E 	 S C H E M E ’S	
CO N T R I B U T I O N 	TO 	 E N V I R O N M E N TA L LY	
F R I E N D LY 	 AG R I C U LT U R E 	 I S 	 L I M I T E D	 	

S P S 	 A I D 	 R E P R E S E N T S 	 A N 	 I M P O R TA N T 	 S H A R E 	 O F	
FA R M E R S’	 I N CO M E 	 B U T 	 N O 	 D I S T I N C T I O N 	 I S 	 M A D E	
B E T W E E N 	 LO W 	 A N D 	 H I G H - I N CO M E 	 FA R M E R S	

42.	

I n 2008, there were 4,49 million beneficiar ies of SPS aid while 
t o t a l   p a y m e n t s   u n d e r   t h e   s c h e m e   a m o u n t e d   t o   2 8 , 7   b i l l i o n 
euro  fo r a pp l icat ion  year 2 00 8 35. Howeve r th e level of income 
s u p p o r t   v a r i e s   s i g n i f i c a n t l y   b e t w e e n   M e m b e r   S t a t e s   a n d 
b e t w e e n   f a r m e r s .   T h e   d i s t r i b u t i o n   o f   S P S   b e t w e e n   M e m b e r 
States largely depends on their size and on the impor tance of 
their agr icultural sec tors as reflec ted in the national ceilings. 
The distribution bet ween individual beneficiaries depends on 
t h e   i m p l e m e nt at i o n   m o d e l   c h o s e n   by   t h e   M e m b e r   S t ate,   t h e 
s u r f a ce   o f   t h e   a gr i c u l t u r a l   l a n d   f a r m e d   d u r i n g   t h e   re fe re n ce 
per iod, the level of subsidy in the sec tor in which the far mers 
were engaged in the reference period and the number of hec -
tare s t hey cu r re nt l y far m.

35 For details on payments made 
under the SPS see Annex II.

G R A P H 	 1

D I R E C T 	 PAYM E N T S 	 P E R 	 H O L D I N G 	 I N 	2008	

25 000

20 000

15 000

)
o
r
u
e
(

10 000

5 000

0

AT

BE

DE

DK

ES

FI

FR

GB

GR

IE

IT

LU MT

NL

PT

SE

SI

Single Payment
Direct payments coupled to production
Additional amount Art. 12 Reg. (EC) No 1782/2003

Source: European Court of Auditors on the basis of payment data from the European Commission.

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43.	 D i re c t   p ay m e nt s,   co m p r i s i n g   S P S   a n d   co u p l e d   a i d,   re p re s e nt 
an impor tant share of farm income 36, which indicates the high 
dependenc y of the far m sec tor as a whole on EU suppor t. The 
C o u r t   n o t e s ,   h o w e v e r,   t h a t   a c r o s s   t h e   E U   7 4 , 4   %   o f   f a r m e r s 
w o r k   p a r t - t i m e   i . e .   t h e y   d o   n o t   e a r n   t h e i r   f u l l   i n c o m e   f r o m 
agr ic u lt ure 37.

44.	 W h i l e   t h e   S P S   a p p e a r s   t o   m e e t   i t s   o b j e c t i v e   o f   c o n t r i b u t i n g 
signif icant l y to  f ar mers’ income, th e  d is tr ibuti on of  s ubs idi e s 
to individual farmers remains essentially based on the sur face 
of land farmed and thus a high propor tion of SPS aid still goes 
t o   l a r g e   f a r m s ,   a s   w a s   t h e   c a s e   u n d e r   t h e   p r e v i o u s   s y s t e m . 
Th e re   i s   a   co nt ra d i c t i o n   i n   t h e   d e s i gn   o f   t h e   S P S   w h i c h   i s   o n 
the  on e hand inten ded as a suppor t  to i n di vi dual i ncom e an d 
the fac t that its distribution takes little account of the specific 
circu ms tance s of t he rec ipient. 

A N A LYS I S 	 O F 	 D I S T R I B U T I O N :	T H E 	 S P S 	 P R I M A R I LY	
B E N E F I T S 	 F E W 	 B U T 	 L A R G E 	 B E N E F I C I A R I E S	

45.	 T h e   2 0 0 3   C A P   re fo r m   re t a i n e d   t h e   c o n c e p t   o f   c o m p e n s a t i o n 
payments, meaning that the new SPS should result in maintain -
in g  ap p roximate ly  the  amo u nt   o f  s ubsi di es   a  f ar mer   for me r ly 
received und er t he p reviou s d irec t  ai d sch e me.  I n  all  m ode ls, 
la rg e  far ms have a higher l evel of  i ncome  suppor t 38. 

36 According to Eurostat, 
between 2005 and 2008 in 

the EU-15 the share of direct 

payments represented 30 % 

of the factor incomes and 

between 52 and 56 % of the 

entrepreneurial income. The 

agricultural factor income is the 

net value added at factor cost 

and is calculated by subtracting 

from the value of agricultural 

output at basic prices 

[= producer price + product 

related subsidies – product 

related taxes] the value of 

intermediate consumption, 

the consumption of fixed 

capital and production taxes, 

and adding the value of other 

subsidies on production. The 

agricultural entrepreneurial 

income represents the share of 

the income generated by the 

farming activities which is used 

to reward its own production 

factors (work and/or enterprise, 

own capital and owned land).

37 According to Eurostat, in 2007, 
the share of part-time farmers 

varied from 33 % in Belgium to 

90 % in Malta.

38 Thus, in the historical model farms with a historically high level of direct payments still receive a high level of income support, provided they 
farm a similar number of hectares. In the hybrid and the regional models entitlements were allocated in the first year on a strict per hectare basis. 

Even though this has led to certain redistribution effects between farmers in various sectors (for example there could be income support losses for 

intensive dairy farms and income support gains for farms with extensive cattle and sheep production), the close association of entitlements with 

agricultural land resulted again in significant payments being made to the larger farms.

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39 The Commission analysed 
the distribution of payment 

entitlements in context of 

the 2008 Health Check of 

the CAP. See Annex I, Figure 

3 of ‘Health Check — Impact 

Assessment Note No 1’ dated 

20.5.2008, document D (2008) 

AH/15325CAP. 

46.	 At   f a r m e r   l e ve l,   t h e   h i s to r i c   a n d,   to   a   ce r t a i n   e x te n t ,   t h e   hy -
brid models conser ve the significant sec tor-specific individual 
difference s  o f  p ast  su p por t  levels.  The   Commi ss i on’s   an alysi s 
of  th e d istr ibu tio n o f p ayment enti tle me nts  i n  ter ms  of  value 
p e r   h e c t a re   s h ows   t h a t   t h i s   h a s   re s u l te d   i n   s i gn i f i c a n t   d i f fe -
rences between Member States having opted for the historical 
m o d e l   a n d   t h o s e   w h i c h   i n t r o d u c e d   a   hy b r i d   m o d e l 3 9.  T h i s   i s 
par ticular ly evident in M ember States with sec tors that bene -
f i t e d   f r o m   h i g h   s u p p o r t   l e v e l s   p e r   h e c t a r e   s u c h   a s   o l i v e   o i l , 
cot to n o r raw to b acco, even th oug h th e s ize of  t he  in di vi dual 
hol d ing s  co ul d  b e  rel ativel y  s mall.  I n   M e mbe r   St ate s   wit h   i n-
te n s i ve   a n i m a l   p ro d u c t i o n ,   s u c h   a s   t h e   N e t h e r l a n d s,   S P S   a i d 
p e r   h e c t a re   c a n   a l s o   b e   h i g h   w h e re   f a r m s   h ave   l i t t l e   l a n d   i n 
re l a t i o n   t o   t h e i r   a n i m a l   p ro d u c t i o n   a c t i v i t i e s   w h i l e,   i n   a re a s 
with ex tensive farming, payments per hec tare can be ver y low. 
Only in Denmark , Germany and the United K ingdom (England) 
is this situation going to gradually disappear by 2013, because 
t h e s e   M e m b e r   S t a t e s   h a v e   d e c i d e d   t o   r e d u c e   t h e   h i s t o r i c a l 
com po ne nt   in  favour   of  a  u nifor m  value  of   each   pay me nt   en -
tit l ement.

B O X 	 6

D I F F E R E N C E S 	 I N 	 U N I T 	VA LU E S 	 O F 	 E N T I T L E M E N T S 	 U N D E R 	T H E 	 H I S TO R I C	
M O D E L

Depending on the intensity of production, in the olive oil sector, aid to production varied between 
several hundred and several thousand euro per hectare. In the tobacco sector, aid amounted to sev-
eral thousand euro per hectare. In the cotton sector, coupled aid included in the reference amount 
was between 966 euro per hectare in Greece and 1 202 euro per hectare in Portugal. Payment entitle -
ments for animal premiums can have unit values per hectare of up to 5 000 euro in cases of intensive 
production. On the other hand the unit value of payment entitlements in areas with extensive farming 
of sheep and goats can have negligible value. 

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47.	 The analysis of the distribution of SPS aid among beneficiaries 
highlights the concentration of suppor t on a small number of 
farmers. I n 2009 (for the application year 2008), 84 % of bene -
ficiar ies   re ceived   l es s  than  10   0 0 0   euro,   re pre se nt in g   2 5   %  of 
the total value of payments. Conversely, 0,41 % of beneficiar-
i e s   re c e i ve d   o ve r   1 0 0   0 0 0   e u ro,   r e p r e s e n t i n g   1 2 , 7 8   %   o f   t h e 
t o t a l   v a l u e   o f   p a y m e n t s 4 0.   T h i s   i s   i l l u s t r a t e d   b y   Ta b l e   2   a n d 
Gra ph  2. 

40 For more details see Annex III.

41 Article 7(2) of Regulation 
(EC) No 73/2009.

48.	

I n the framework of the Health Check of the CAP, the Commis -
sio n co nside red c ap p ing direc t  pay me nts  to in di v idual ben e -
f i c i a r i e s.  Th e   Co u n c i l   f i n a l l y   d e c i d e d 4 1  to   m a rgi n a l l y   i n c re a s e 
the compulsor y modulation for ver y large beneficiaries and to 
s u b j e c t   p ay m e n t s   i n   e xce s s   o f   3 0 0   0 0 0   e u ro   to   a n   a d d i t i o n a l 
m o d u l at i o n   o f   4   % .  Th i s   a d d i t i o n a l   a d j u s t m e nt   w h i c h   a f fe c t s 
a  ver y  limited  n umb er  o f  b enefi cia r i es   (approxi mate ly  2   5 0 0 ) 
d o e s   n o t   s i g n i f i c a n t l y   i m p a c t   t h e   o ve r a l l   d i s t r i b u t i o n   o f   t h e 
aid.

TA B L E 	 2

D I S T R I B U T I O N 	 O F 	 S P S 	 PAYM E N T S 	 ( A P P L I C AT I O N 	Y E A R 	2008 )

Annual payment of SPS 
support (euro)

< 500                    

≥ 500 and <5 000         

≥ 5 000 and <10 000     

≥10 000 and < 50 000    

≥ 50 000 and < 100 000   

≥ 100 000 and < 300 000  

≥ 300 000 and < 500 000  

≥ 500 000 and < 1 000 000

≥ 1 000 000              

Grand total

Number of beneficiaries

% out of total beneficiaries

% of amount received out of 
total payments

1 395 721

1 912 824

458 464

642 954

62 210

15 927

1 500

783

144

4 490 527

31,08 %

42,60 %

10,21 %

14,32 %

1,39 %

0,35 %

0,03 %

0,02 %

0,00 %

1,18 %

12,48 %

11,43 %

47,67 %

14,46 %

8,30 %

1,99 %

1,81 %

0,68 %

Source: European Court of Auditors based on European Commission payment data (CATS).

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T H E 	 S P S 	 S U P P O R T 	 R E F L E C T S 	 N E I T H E R 	T H E 	 CO S T S 	 O F	
M A I N T E N A N C E 	 O F 	 L A N D 	 N O R 	T H E 	 P O S I T I V E 	 P U B L I C	
E X T E R N A L I T I E S

49.	 T h e   2 0 0 3   r e f o r m   m a d e   f u l l   p a y m e n t   o f   S P S   a i d   t o   f a r m e r s 
conditional upon complying with environmental and sustain -
abl e  far m in g  ob l igat ions   ( so - calle d  cros s- compli an ce  obl ig a-
tions) introduced by that refor m. Cross- compliance has, thus, 
become an impor tant argument in justifying payments to far -
m e r s.  Th e s e   s t a n d a rd s,   m o s t   o f   w h i c h   a l re a d y   e x i s te d   b e fo re 
the 2003 reform, are considered to ‘entail … an increase in the 
co s t s   o f   p ro d u c t i o n   fo r   a gr i c u l t u r a l   h o l d i n g s   i n   t h e   Co m m u -
ni t y ’ 42.

42 Recital 24 of Regulation 
(EC) No 1782/2003.

50.	 Maintenance of land in GAEC is of public interest, because the 
p r o d u c t i o n   p o t e n t i a l   o f   t h e   l a n d   i s   c o n s e r v e d   a n d   b e c a u s e 
o f   o t h e r   p o s i t i v e   e f f e c t s   t h a t   c a n   r e s u l t   f r o m   r e g u l a r   m a i n -
t e n a n c e,   fo r   e x a m p l e   p r o t e c t i o n   o f   w a t e r   a g a i n s t   p o l l u t i o n , 
p re ve n t i o n   o f   f i re   o r   p re s e r v a t i o n   o f   l a n d s c a p e   fe a t u re s   a n d 
ha b itat s.

G R A P H 	 2

D I S T R I B U T I O N 	 O F 	 S P S 	 I N CO M E 	 S U P P O R T 	 I N 	2008	 ( E U R O 	 P E R 	Y E A R )	

< 500                    

≥ 500 and < 5 000         

≥ 5 000 and < 10 000     

≥ 10 000 and < 50 000    

≥ 50 000 and < 100 000   

≥ 100 000

0 % 

10 %

20 %

30 %

40 %

50 %

In % of total beneficiaries, EU-17

Source: European Court of Auditors based on European Commission payment data (CATS).

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51.	 There is no direc t link bet ween SPS aid and the costs incur red 
by   f a r m e r s   fo r   co m p l y i n g   w i t h   co m p u l s o r y   s t a n d a rd s   fo r   f a r-
m i n g   p r a c t i c e s   u n d e r   c r o s s - c o m p l i a n c e   n o r   h a v e   s u c h   c o s t s 
b e e n   q u a n t i f i e d .   I t   i s   t h e r e fo r e   p o s s i b l e   t h a t   f a r m s   i n   h i g h - 
y i e l d   a r e a s   r e c e i v e   a   h i g h   l e v e l   o f   a i d   w i t h o u t   p a r t i c u l a r l y 
exac ting GAEC obligations while, on the other hand, a far m in 
a low-yield area with heav y GAEC obligations will receive only 
a low  le vel  of  aid.

43 Special Report No 8/2008 ‘Is 
cross-compliance an effective 

policy?’ 

52.	 Failure to comply with cross- compliance obligations, as a rule, 
only results in a reduc tion of the full amount of SPS and other 
aid paid to the non- compliant farmer. The Cour t has noted that 
in  p rac t ice suc h redu c tio n is n eg li gible  for  t he  most  par t an d 
sel do m  ap pl ied  (if  o nl y   b ecause   it   of te n  g oe s  und etec te d,   as 
the number of farmers annually checked for cross- compliance 
is ver y l ow) 43 .

53.	

I t   i s   a l s o   n o t   p o s s i b l e ,   a t   p r e s e n t ,   t o   e s t a b l i s h   a   d i r e c t   l i n k 
between SPS aid and the positive public externalities resulting 
f ro m   a g r i c u l t u r a l   a c t i v i t i e s,   i . e.   t h e   s e r v i c e s   b e n e f i c i a r i e s   o f 
S P S   a i d   r e n d e r   t o   t h e   p u b l i c   a t   l a r g e   i n   r e s p e c t i n g   e nv i r o n -
m e n t a l   r e q u i r e m e n t s   i n   t h e   o p e r a t i o n   o f   t h e i r   f a r m   a n d   i n 
maint a ining  agr icu l tu ral  lan d in  GAE C.

S P E C I F I C 	 E F F E C T S 	 A R I S I N G 	 F R O M 	T H E 	 D E S I G N	
O F 	T H E 	 S C H E M E 	 A N D 	 M E M B E R 	 S TAT E S’	
I M P L E M E N TAT I O N 	 P O L I C I E S	 	 	 	

A 	 PATC H W O R K 	 O F 	 M O D E L S ,	VA R I A N T S 	 A N D	
I M P L E M E N TAT I O N 	 P O L I C I E S 	 AC R O S S 	 M E M B E R 	 S TAT E S	

54.	 A s   m e n t i o n e d   a b o v e ,   n u m e r o u s   i m p l e m e n t i n g   o p t i o n s   a r e 
op en ed to M emb er States, each  mode l invol vi ng  compl ic ate d 
cal cu l at ions o f ind ividu al  entitle me nt s to a id.

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55.	 Most Member States of the EU-17 opted for the historic model. 
O n l y   M a l t a   a n d   S l ove n i a   o p te d   fo r   i m m e d i a te   t ra n s i t i o n   to   a 
regional flat-rate model. I n Denmark , Germany and one region 
of the United K ingdom (England), af ter a transitor y per iod for 
farmers to adjust to new conditions, the dynamic hybrid model 
will result in a full regional model so that far mers in the same 
regio n wil l ho ld  p ay ment e ntit le me nts  of a  un ifor m value pe r 
he c t are. 

44 Article 69 of Regulation 
(EC) No 1782/2003.

45 See Annex I.

56.	 Fo r   s p e c i f i c   s e c to r s,   M e m b e r   St ate s   co u l d   o p t   fo r   e i t h e r   p a r-
tial or full decoupling. They could also introduce new specific 
a i d s   t h a t   w e r e   l i n k e d   t o   q u a l i t y   p r o d u c t i o n   i n   s p e c i f i c   f a r m 
sec to rs 44.

57.	 As   a   co n s e q u e n ce   o f   t h e   w i d e   g a m u t   o f   o p t i o n s,   e a c h   o f   t h e 
17 Member States has implemented the scheme in its own way. 
Cur re nt ly,  20  different   mod els   an d  var i ants   are   a pplie d 45.This 
s i t u a t i o n   h a s   n o t   a l l o w e d   fo r   t h e   i n t e n d e d   s i m p l i f i c a t i o n   o f 
the  inco me su ppo r t  system  to prod uce i ts  f ul l e ffe c t, par ti c u-
larly in M ember States where par t of direc t payments remains 
 c o u p l e d   t o   p ro d u c t i o n .  T h e   n e w   o p t i o n s   o p e n e d   t o   M e m b e r 
States within the framework of the Health Check, whereby they 
cou l d  move  towards   a ‘fl atter ’  rate   sys te m,   h ave  n ot   s ubst an -
tial l y c ha nged t he situ atio n. 

58.	 The wide gamut of implementing options has impor tant conse-
quences on the distribution of SPS among farmers across Mem -
b e r   S t a te s.  Th i s   d i s t r i b u t i o n   va r i e s   d e p e n d i n g   l a rg e l y   o n   t h e 
mo del   ado pted. Th is  means   t hat   th e  S P S  i s  cur rent ly   a  poor ly 
targ ete d meth od  to  p rovide income  s uppor t.

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O V E R 	T I M E , 	T H E 	 H I S TO R I C 	 M O D E L 	 H A S 	 B E CO M E	
D I V O R C E D 	 F R O M 	 P R O D U C T I O N 	 …

SP S  a i d  i S  n o t  b a S e d  o n  c u r r e n t   a c t i v i t y 

59.	

I n the historic model, the level of SPS aid depends on whether 
t h e   f a r m e r ’s   a c t i v i t y   b e n e f i t e d   f r o m   d i r e c t   a i d   i n   t h e   r e f e r -
e n ce   p e r i o d   ( a s   a   r u l e   ye a r s   2 0 0 0 ,   2 0 0 1   a n d   2 0 0 2 ) .   S i m i l a r l y, 
in  th e hy br id mo del,  t he his tor ical com pone nt of  th e value of 
the   p ayme nt   e nt it l ement  s till  re fl ec t s  t he   le vel  of   th e   s e c tor- 
specific aid received by each farmer. As mentioned earlier, the 
concept of ‘compensation’ in the contex t of reducing inter ven-
t i o n   p r i ce s   wa s   t h e   g u i d i n g   p r i n c i p l e.   H owe ve r,   t h e re   i s   o n l y 
a   te n u o u s   l i n k   b e t we e n   h i s to r i c a l   s u p p o r t   l e ve l s   a n d   c u r re nt 
market demand, the agricultural potential of the land farmed, 
far m st ru c tu res and  environ ment al  c r i te r i a.

60.	 Farmers who did not receive payment entitlements, because in 
the   re fe re nce  p er io d  their   ac t ivi t y   was  n ot   e li gibl e  for   di rec t 
a i d   t o   p ro d u c t i o n ,   d o   n o t   b e n e f i t   f r o m   S P S   a i d,   e v e n   i f   t h e y 
have in the meantime changed produc tion. I n order to benefit 
f ro m   s u c h   a i d,   t h e y   m u s t   p u rc h a s e   p ay m e n t   e nt i t l e m e n t s   o n 
the  mar ket. 

61.	 T h i s   c a n   l e a d   t o   s i t u a t i o n s   w h e r e b y   t w o   f a r m e r s ,   c u r r e n t l y 
g r o w i n g   t h e   s a m e   c r o p   o n   s u r f a c e s   o f   t h e   s a m e   s i z e   i n   t h e 
s a m e   re gi o n ,   a re   t re ate d   ve r y   d i f fe re nt l y   d e p e n d i n g   o n   w h at 
t h e y   p r o d u c e d   i n   t h e   r e fe r e n c e   p e r i o d   a n d   o n   w h e t h e r   a s   a 
con sequ ence th ey received  paym ent  ent it lem ents. 

62.	 As   a   re s u l t   o f   t h e   H e a l t h   C h e c k ,   t h e   Co u n c i l   re co gn i s e d   t h at, 
w i t h   t h e   p a s s a g e   o f   t i m e,   i t   wa s   b e co m i n g   i n c re a s i n g l y   d i f f i-
cult to justify significant individual differences in suppor t le -
vels which were only based on past ac tivities. I n this regard, it 
was the Commission’s intention to introduce a ‘flatter ’ system, 
i.e.   le vell ing   o u t  t he  w ide  diverg en ce s  i n   in di vi dual  pay me nt 
e n t i t l e m e n t s.   H o we ve r,   n o   M e m b e r   S t a t e   h a s   ye t   d e c i d e d   t o 
a p p l y   a ny   o f   t h e   o p t i o n s   m a d e   a v a i l a b l e   t o   t h e m   u n d e r   t h e 
He al th C hec k re for ms  and to revi s e t h e m ode l ch ose n .

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u n d e r  t h e  h i S t o r i c  m o d e l,  t r a d i n g  o f  P a y m e n t  e n t i t l e m e n t S 
a l l o w e d  S P e c u l a t i v e 46  t r a n S f e r S  a n d  a c c u m u l a t i o n  o f  P a y m e n t 
e n t i t l e m e n t S   t o  o c c u r 

63.	 With the introduc tion of the SPS, entitlement to payment was 
separated from the land: payment entitlements may be traded 
in dep ende nt ly of  t he transfer of  th e  la nd  on  wh i c h th ey  we re 
ge nerate d and  t hey c an b e ac tivate d on  wh ate ve r  t y pe  of e li -
g i b l e   l a n d,   w h a t e ve r   t h e   a g r i c u l t u r a l   a c t i v i t y   c a r r i e d   o u t   o n 
t h i s   l a n d .  T h i s   p a v e d   t h e   w a y   fo r   t h e   e m e r g e n c e   o f   m a r k e t s 
for payment entitlements which are traded in and outside the 
regio ns o f t he ir  estab l ishm ent.

64.	 A   m a r k e t   f o r   p a y m e n t   e n t i t l e m e n t s   w a s   c o n s i d e r e d   a s   a 
m e a n s   o f   i n c r e a s i n g   t h e   e f f i c i e n c y   o f   t h e   s u p p o r t   s c h e m e . 
The econom ic reasoning behind this assumption is that, once 
p ay m e nt   e nt i t l e m e nt s   h ave   b e e n   a l l o c ate d,   f a r m e r s   c a n   o n l y 
i n c r e a s e   t h e i r   l e v e l   o f   a i d   b y   a c q u i r i n g   a d d i t i o n a l   p a y m e n t 
ent it l ements from other ho l ders,  ei th e r  wit h  or  wit h out  lan d. 
I t is anticipated that, in an open and transparent market, pay-
m e n t s   e n t i t l e m e n t s   w i l l   g o   to   t h o s e   f a r m e r s   w h o   a re   w i l l i n g 
t o   p a y   t h e   m o s t   fo r   t h e m ,   w h i c h   c o n t r i b u t e s   t o   a n   e f f i c i e n t 
allo catio n o f su p p o r t. 

65.	 EU legislation provides for several options regarding the trans-
fer o f p ayme nt entitl ements 47. Cer t ain M e mbe r St ates res tr ic -
ted the trading of payment entitlements without land by limit -
i n g   t h e   a c t i vat i o n   o f   s u c h   e nt i t l e m e nt s   to   t h e   re gi o n s   w h e re 
they had been generated (France, United K ingdom (England)) 
or by applying ‘retentions’ to cer tain transfers of entitlements 
with or without land (e.g. France). I n this latter case, the  value 
of   e ach   p ayment   entitl ement  tran s fer re d  i s  re duce d  by   a  cer-
t a i n   p e rc e n t a g e.   O t h e r   M e m b e r   S t a t e s   d i d   n o t   c o n s i d e r   r e s-
tric ting transfers of entitlements (United K ingdom (Scotland)) 
or even ab ol is hed t he ap p lication  of  re tent ion s to e n coura ge 
t r a d i n g 4 8.  T h e   l a t t e r   c h o i c e   w a s   m o t i v a t e d   b y   c o n c e r n s   t h a t 
far mers wishing to sell payment entitlements were hesitating 
to  do   s o,  bec au se  t he  retention s  would  have   s ign i fi cant ly   re -
duced the value of the future payments and therefore the sale 
pr ice o f  e ach p ay ment  ent it lem ent.

46 Speculative is used in 
this section in the sense of 

‘transfer and accumulation of 

payment entitlements without 

a corresponding agricultural 

basis’. Recital 28 of Regulation 

(EC) No 73/2009 and recital 30 

of Regulation (EC) No 1782/2003 

refer.

47Article 46 of Regulation 
(EC) No 1782/2003; Article 43 of 

Regulation (EC) No 73/2009. 

48 Since 2005 , Italy had applied 
‘retentions’ of up to 50 % on the 

value of payment entitlements 

sold without land (as permitted 

by Article 9 of Regulation 

(EC) No 795/2004). In 2007, these 

restrictions were abolished. 

As a consequence, the value 

of payment entitlements 

transferred without land 

increased from 1,3 million euro 

in 2006 to 65,2 million euro in 

2009. 

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66.	 The Cour t found that the absence of regulation of such trans-
fers   a nd  t he  heterog eneo us   agr i c ultural  pote nt ial   of  la nd   re -
sulted in adverse effec ts: the possibility to lease marginal land 
with low oppor tunit y costs and for which beneficiaries do not 
have to respec t par ticularly exac ting GAEC obligations helped 
p ave   t h e   way   fo r   s p e c u l at i ve   a cq u i s i t i o n s   a n d   t h e   a cc u m u l a -
t i o n   o f   p ay m e nt   e nt i t l e m e nt s   w i t h o u t   l a n d   by   i nve s to r s   w h o 
a c t i v a t e   t h e s e   e n t i t l e m e n t s   o n   p a rc e l s   o f   l a n d   n o t   re q u i r i n g 
any ‘real ’ agr icu l tu ral  ac t ivit y. 

67.	 T h e   C o u r t ’s   a u d i t   c o n f i r m e d   c a s e s   o f   i n v e s t o r s   w h o   h a d   a c -
quired   hig h-val ue  p ay ment  enti tle me nts   wh ich   h ad  be en   g e -
ne rate d in fer til e regio ns  and  in  inten s ive  produc ti on se c tor s 
b u t   w h i c h   t h e   i n v e s t o r   a c t i v a t e d   o n   m a r g i n a l   l a n d   o f   l i t t l e 
market value, distant from their own holding or residence and 
r e q u i r i n g   n o   o r   m i n i m a l   a g r i c u l t u r a l   a c t i v i t y.   A s   u n d e r l i n e d 
above,   this  ha s  al ready   res ulted  i n   th e  creat ion   of   a  categ or y 
of beneficiaries complying with minimal GAEC obligations but 
receiving  sub st antial  gu aranteed  in come.

B O X 	 7

E X A M P L E S 	 O F 	 I N V E S T M E N T 	 C A S E S

In its Annual Report concerning the financial year 2008, the Court reported cases of claimants in the 
United Kingdom (Scotland) who purchased high-value payment entitlements and rented at very low 
rates large tracts of land requiring only minimal or even no maintenance activity. In 2007 and 2008 
40 % of the payment entitlements transferred without land had been activated on rough grazing 
land. Almost all the additional land that has been declared in Scotland for SPS since 2007 (ca. 58 000 
ha) was rough grazing land (ca. 50 000 ha), even though the number of sheep in Scotland has been 
declining for a number of years. 

In Italy, where the GAEC standards require that the land be mowed or grazed, the Court identified 
beneficiaries who had acquired payment entitlements and leased pasture land in marginal areas. 
For example, one beneficiary acquired payment entitlements without land in 2008 at almost their 
face value of ca. 197 000 euro. After modulation, the payment entitlements under current conditions 
would provide the beneficiary, until 2013, total income support of ca. 1 088 000 euro. The benefici-
ary activated almost all of these payment entitlements on 45 ha of leased poor pasture land located 
400 km away from his permanent residence. The annual lease price for the land was 7 650 euro. The 
beneficiary does not carry out any agricultural activity on this land while grazing rights are assigned 
to a local farmer, free of charge, to respect the GAEC obligations of the beneficiary. 

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49 See recital 30 of Regulation 
(EC) No 1782/2003 and recital 28 

of Regulation (EC) No 73/2009.

50 Article 42(9) of Regulation (EC) 
No 1782/2003 and Article 10 of 

Regulation (EC) No 795/2004.

51 Annual Report concerning the 
financial year 2006, paragraphs 

5.33 and 5.34.

39

68.	 The EU legislation opened to Member States the possibilit y to 
adopt appropriate rules to avoid speculative transfers leading 
to the accumulation of payment entitlements by beneficiaries 
w i t h o u t   a   c o r r e s p o n d i n g   a g r i c u l t u r a l   b a s i s 4 9.   H o we ve r,   s u c h 
provisio ns are o p tional.

i n e f f e c t i v e  c o r r e c t i o n  m e c h a n i S m S  t o  d e a l  w i t h  w i n d f a l l  P r o f i t S 

69.	 Under the histor ic and regional (hybr id) models, far mers who 
had ceased or reduced their ac tivity af ter the reference period 
co u l d   b e   s u b j e c te d   to   t h e  ‘ w i n d f a l l   p ro f i t   c l a u s e’ 5 0.  Th i s   p ro -
vided for their entitlements based on their ac tivit y during the 
re fe re n ce   p e r i o d   t o   b e   re d u ce d   by   u p   to   9 0   % .  Th e   p ro ce e d s 
o f   t h e s e   re d u c t i o n s   a re   c re d i te d   to   t h e   n at i o n a l   re s e r ve.  Th e 
w i n d f a l l   p ro f i t   c l a u s e   h owe ve r   o n l y   a p p l i e d   to   t ra n s fe r s   t h at 
occ ur red u p to  15 M ay 2 00 4. 

70.	 B e l g i u m ,   Fr a n c e ,   D e n m a r k ,   I t a l y,   L u x e m b o u r g ,   G r e e c e   a n d 
 S w e d e n   c h o s e   t o   a p p l y   t h i s   c l a u s e ,   a l t h o u g h   l i m i t i n g   i t   t o 
farmers in cer tain sec tors. In the other Member States, farmers 
we re al l owed  to  keep  al l  o f thei r  h is tor ica l e nt it le me nts. 

71.	

I n  I t al y  and   France,  the  Co ur t  fo un d   c as e s  wh ere  f ar me r s   h ad 
t r a n s f e r r e d   t o b a c c o   p r e m i u m   r i g h t s   a f t e r   1 5   M a y   2 0 0 4   a n d 
t h u s   re ce i ve d   t h e   h i g h -va l u e   p ay m e n t   e n t i t l e m e n t s   d e r i v i n g 
from their for mer produc tion of tobacco without the author i -
ties   b eing   entit led  to ‘c l aw   bac k ’  a  par t   of  t h e  cor re spon di ng 
am o unts. 

72.	 A n o t h e r   c a s e   w a s   d i s c l o s e d   i n   t h e   C o u r t ’s   2 0 0 6   A n n u a l 
 Repor t 51: ‘Payment entitlements from the national reser ve may 
be  all o cated  to  far mers  w ho  mad e inve st me nt s in  prod uc ti on 
c a p a c i t y   o r   p u r c h a s e d   l a n d .   I n   t h e   U n i t e d   K i n g d o m   a   1 0   % 
i n c re a s e   i n   i n co m e   w a s   co n s i d e re d   s u f f i c i e n t   e v i d e n ce   o f   a n 
inves tm ent.  Paradoxical l y   by   in crea si ng   t he   n umbe r   of   c at tl e 
sla ughtered du r ing  2002 (i.e. des tock i ng ) far mer s could me et 
t h i s   i nve s t m e n t   c r i t e r i o n .   Co n s e q u e n t l y   t h e re   w a s   a   g e n e r a l 
run on cattle premiums’. As a result, far mers who slaughtered 
all cattle on the holding before the end of the reference period 
we re  ent itl ed  to   keep   al l  th eir   h i stor i c   re fere n ce   a mount s  for 
the  du ratio n o f the S PS . 

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

52 Article 41(6) of Regulation 
(EC) No 73/2009 as amended 

by Regulation (EC) 

No 1250/2009 (OJ L 338, 

19.12.2009, p. 1).

53 Annual Report concerning 
the financial year 2006, 

paragraph 5.28.

54 ‘CAP Health Check — Impact 
Assessment — Impact of a 

change towards flatter rates 

of direct payments’, European 

Commission, December 2007.

40

73.	

I n   2 0 0 9 ,   t h e   C o u n c i l   a d o p t e d   t h e   C o m m i s s i o n’s   p r o p o s a l   t o 
 mo dify t he w in dfal l  pro fit rules an d open  an  opt ion  for  M em-
be r St ate s to  c l aw b ac k u p  to 1 0 0  %  of  th e  refe re n ce  am ount s 
o n   w i n d f a l l   p r o f i t s   t h a t   f a r m e r s   m a y   r e a l i s e   i n   t h e   s e c t o r s 
whe re  th e  remaining  co up l ed  s uppor t  w ill  be   integrate d  into 
the   SPS  by   20 12 52.   H owever,  suc h  provision s  are   o pti on al  a n d 
d o   n o t   c o r r e c t   a ny   o f   t h e   o l d   c a s e s   i n   w h i c h   t h e   c l a u s e   h a d 
not  b een ap pl ied. 

… 	 B U T 	T H E 	 R E G I O N A L 	 M O D E L 	 G E N E R AT E S 	 OT H E R	
A D V E R S E 	 E F F E C T S	

a l t h o u g h  r e g i o n a l i S a t i o n  l e a d S   t o  a  m o r e   e q u a l  d i S t r i b u t i o n  o f 
a i d,  i t  S t i l l  f a v o u r S  l a r g e r  f a r m S

74.	 The  re gio nal   mo del   is  ass oc iate d  wi th   un ifor m  uni t  valu e s  of 
paym ent  entit l ement s across  th e  re gion  con ce r n e d,  ir re spe c -
tive  of  the t yp e of agr ic ul tural a c ti vi t y  ca r r ie d out  be fore  t he 
introduc tion of the SPS. I n the dynamic hybr id version, where 
t h e   r e g i o n a l   m o d e l   i s   g r a d u a l l y   i n t r o d u c e d   a n d   t h a t   i s   c u r -
rent l y ap p lied  in D enmar k ,  G er ma ny an d  t h e Un ite d K in g dom 
( E n g l a n d ) ,   t h e   h i s t o r i c a l   c o m p o n e n t   i s   b e i n g   g r a d u a l l y   r e -
d u c e d   a n d   r e d i s t r i b u t e d   a c r o s s   a l l   p a y m e n t   e n t i t l e m e n t s   i n 
t h e   r e g i o n .   T h e   C o u r t   a l r e a d y   h i g h l i g h t e d   i n   i t s   A n n u a l   R e -
p o r t   2 0 0 6   t h a t  ‘ t h e r e   w i l l   b e   a   s i g n i f i c a n t   r e d i s t r i b u t i o n   e f -
f e c t   o n   E U   d i r e c t   a i d   a w a y   f r o m   t h o s e   a c t u a l l y   f a r m i n g   a n d 
t o w a rd s   l a n d o w n e r s,   w h o   w i l l   s e e   t h e   v a l u e   o f   t h e i r   e n t i t l e -
ments multiplied by four in Denmark and Germany and tenfold 
in    Eng l and ’ 53.  This   ap p lies,   in  par t icular,  to  n e w  be ne f ic ia r i es 
who did not receive direct payments under the former coupled 
sch eme. 

75.	 N o t w i t h s t a n d i n g   t h i s   s p e c i f i c   re d i s t r i b u t i o n   e f fe c t ,   p ay m e n t 
e n t i t l e m e n t s   u n d e r   t h e   re g i o n a l   o r   hy b r i d   m o d e l   a re   a l l o c a-
ted in the first year o n a str ic t pe r  h ec t are  bas is  so t hat  larg e 
far ms remain the main beneficiar ies of the aid. Consequently, 
far mers using a smaller sur face of land, for example intensive 
bovine farmers, see their income suppor t reduced compared to 
the ir  histo r ical   level   o f  cou p led  pay me nts.  M oreove r,   accord-
i n g   to   t h e   Co m m i s s i o n ,   s e c to r s   t h at   c u r re nt l y   f a ce   e co n o m i c 
difficulties, such as milk produc tion, would suffer losses in the 
amount of aid they receive if the Member States in which they 
o p e r a t e   we re   m o v i n g   t o w a rd s   re g i o n a l i s a t i o n ,   b e c a u s e   t h e y 
f a r m   o n   ave r a g e   l e s s   a g r i c u l t u r a l   l a n d   t h a n   f a r m e r s   i n   o t h e r 
sec to rs 54.   

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r e g i o n a l i S a t i o n  a n d  P o S S i b l e  c a P i t a l i S a t i o n   o f  S u P P o r t  i n  l a n d 
P r i c e S 

76.	 U n d e r   t h e   re gi o n a l   ( a n d   hy b r i d )   m o d e l s,   t h e   n u m b e r   o f   p ay -
m e n t   e n t i t l e m e n t s   i s   v e r y   c l o s e   t o   t h e   o v e r a l l   n u m b e r   o f 
h e c t a re s   o f   e l i gi b l e   a gr i c u l t u ra l   l a n d 5 5.  Th i s   s i t u at i o n   h a d   a n 
i m p o r t a n t   e f fe c t   o n   l a n d   p r i c e s,   b e c a u s e   f a r m e r s   w i t h   m o r e 
payment entitlements than land were prompted to lease land 
for the purpose of ac tivating the largest par t possible of their 
payment entitlements. This pushes up the overall demand for 
lea sed  l and and resu l ts in h ighe r  lan d  lea se  pr i ce s. 

77.	 W h i l e  ‘c a p i t a l i s a t i o n’  o f   t h e   a i d   i n   l a n d   p r i c e s   c o u l d   b e   o b -
s e r v e d   u n d e r   t h e   f o r m e r   a r e a - r e l a t e d   a i d   s c h e m e s ,   s e v e r a l 
s t u d i e s   c o n c l u d e d ,   i n d e p e n d e n t l y   f r o m   o n e   a n o t h e r,   t h a t 
t h e   i n t ro d u c t i o n   o f   t h e   S P S   h a s   n o t   re d u c e d   a n d   s o m e t i m e s 
 aggravated this effec t, par ticular ly in M ember States that op -
ted fo r t he  re gio nal  mo del  and w he re  th e re  is  a h ig h  de pen d-
e n ce   o n   l e a s e d   a gr i c u l t u ra l   l a n d.  Th i s   re d u ce s   t h e   e f f i c i e n c y 
o f   t h e   s u p p o r t   p ay m e n t s,   b e c a u s e   f a r m e r s   h ave   to   p ay   m o re 
f o r   a g r i c u l t u r a l   l a n d   t h a n   b e f o r e   t h e   r e f o r m .   T h e   i m p a c t   o f 
S P S   o n   l a n d   re n t s   i s   c o n s i d e re d   t o   b e   s t ro n g e r   t h a n   o n   l a n d 
sale prices and the ‘capitalisation’ depends on the percentage 
o f   l e a se d   f a r m l a n d   ava i l a b l e.  Th e  Co u r t   s e e s  i n   t h i s   s i t uat i o n 
a   r i s k   t h a t   t h e   e x te n s i o n   o f   re gi o n a l i s a t i o n   to   o t h e r   M e m b e r 
S t a t e s ,   a s   e n v i s a g e d   i n   t h e   f r a m e w o r k   o f   t h e   H e a l t h   C h e c k , 
cou l d signif ic antl y affec t th e profi tabi li t y  of  fa r ms 56. 

a d j u S t m e n t  t o  r e g i o n a l  d i v i S i o n  a n d  r e v i S i o n  o f  u n i t  v a l u e S   o f 
e n t i t l e m e n t S   a r e   o P t i o n a l 

78.	 When the SPS was introduced, Member States which preferred 
a regional form of implementation had to define the perimeter 
of the regions on the basis of objec tive criteria. They justified 
t h e i r   d e c i s i o n s   o n   t h i s   m a t t e r   o n   t h e   b a s i s   o f   t h e i r   a d m i n i s -
t r a t i v e   s t r u c t u r e 5 7,   t h e   a g r i c u l t u r a l   p o t e n t i a l   o f   t h e   r e g i o n s 
defin ed 58 o r sp ec ific far ming patter ns 59.    

55 This is due to the fact that the 
regional and the hybrid model 

included nearly all eligible land 

into the SPS, whereas in the 

historical model only the land 

farmed under a coupled aid 

scheme and forage areas were 

included into the number of 

payment entitlements.

56 Swinnen, J., Ciaian, P., 
and Kancs, D., ‘Study on the 

functioning of land markets in 

the EU Member States under 

the influence of measures 

applied under the common 

agricultural policy’, Brussels 

2008, pp. 141–145; Salhofer, K., 

Röder, N., Kilian, S., Henter, S. 

and Zirnbauer, M., ‘Märkte für 

Zahlungsansprüche’, Endbericht 

zum Forschungsauftrag 05HS041 

des Bundesministeriums für 

Ernährung, Landwirtschaft und 

Verbraucherschutz, Bonn, 2009; 

von Witzke, H., Noleppa, S. and 

Kennedy, P. L., ‘Effects of the EU 

common agricultural policy and 

US  farm policy on agricultural 

land markets’, Washington DC, 

2007.

57 Germany, United Kingdom.

58 In Sweden and Finland the design of regions was based on reference yields. In the United Kingdom (England) the decision for a regional form 
of implementation was primarily motivated by national strategies for sustainable farming. Support levels in England were however differentiated 

between severely disadvantaged areas (e.g. moorland) and normal land which indirectly takes account of the agricultural potential of the land. 

59 United Kingdom (Northern Ireland). In Denmark, a regional implementation was chosen that initially entailed the lowest redistribution among 
aid recipients.

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79.	 As   a   re s u l t   o f   t h e   H e a l t h   C h e c k ,   t h e   Co u n c i l   a d o p te d   a   Co m-
miss ion  p ro p os al   w hich  al l owed   M e mbe r   State s  a pplyi n g  th e 
h i s t o r i c   m o d e l   t o   b r i n g   t h e   u n i t   v a l u e s   o f   p a y m e n t   e n t i t l e -
m e n t s   c l o s e r   t o   o n e   a n o t h e r   o r   t o   c h a n g e   o v e r   t o   a   ( f u l l   o r 
hy b r i d )   re g i o n a l   m o d e l.   M e m b e r   S t a t e s   t h a t   h a d   o p t e d   fo r   a 
regional model may review their decisions, revise the design of 
the regions and bring the value of the entitlements across re -
gions closer to one another. These decisions have to be taken 
‘o n   t h e   b a s i s   o f   t h e   o b j e c t i ve s   l a i d   d ow n   i n   A r t i c l e   3 3   o f   t h e 
Treaty ’ (now Ar ticle 39) and on the basis of objec tive and non-
d i s c r i m i n ato r y   c r i te r i a   s u c h   a s   t h e   a gr i c u l t u ra l   p o te nt i a l   a n d 
e nv i ro n m e n t a l   c o n s i d e r a t i o n s.  Th e s e   m e a s u re s   a re   i n t e n d e d 
to give M ember States an increased flexibilit y to target direc t 
s u p p o r t .  To   d a t e,   n o   M e m b e r   S t a t e   h a s   d e c i d e d   t o   re v i s e   i t s 
mo del.

T H E 	 I N T R O D U C T I O N 	 O F 	T H E 	 S P S 	 R E Q U I R E D	
CO M P L I C AT E D 	 C A LC U L AT I O N S 	 A N D 	 R E S U LT E D	
I N 	 C A S E S 	 O F 	 E R R O R S	 		 	 	

80.	 T h e   C o u r t ’s   a u d i t   e s t a b l i s h e d   t h a t ,   i n   g e n e r a l ,   n a t i o n a l   a u -
tho r itie s  cal cul ated  t he  val ue  of  pay m ent  e nt it le me nt s  i n  ac -
cord ance w it h t he EU l egisl ation . H owe ver, e r ror s were  note d 
a s   a   re s u l t   o f   e r ro n e o u s   o r   m i s s i n g   h i s to r i c a l   re fe re n ce   d at a , 
o f   f a i l u re   t o   u p d a t e   s u c h   d a t a   w h e re   c h a n g e s   i n   h o l d i n g s   o r 
status had occurred, of defec tive treatment of applications for 
payment entitlements from the national reser ve. To date such 
er ro rs  have not  yet  been co mpletely  cor re c ted. 

81.	

I n it s Annual  R ep o r ts  fo r fin an c ial ye ar s 2 0 0 6 , 2 0 0 7  an d 2 0 0 8 , 
the Cour t repor ted shor tcomings in the calculation of payment 
e n t i t l e m e n t s   a n d   i n   t h e   a p p l i c a t i o n   o f   r u l e s   g o v e r n i n g   t h e 
op erat ion s of  nat io nal res er ves 60.

60 In France, the authorities 
had adopted several ineligible 

programmes under which 

farmers had received payment 

entitlements, had accepted 

short-term rented equipment as 

investments and had failed to 

systematically apply mandatory 

provisions to new farmers who 

commenced farming during 

the reference period. The 

undue allocations of payment 

entitlements materialised 

since 2006 in annual payments 

amounting to some 60 million 

euro (Annual Report concerning 

the financial year 2007, 

paragraphs 5.21 to 5.25).

In Italy, irregular allocations of 

entitlements for new olive oil 

trees planted after the stipulated 

deadline and not covered by 

a specific programme and 

the generous recognition of 

hardship cases and for ineligible 

areas have not been corrected 

at the time of the audit (Annual 

Report concerning the financial 

year 2007, paragraph 5.14).

In the United Kingdom 

(England), the authorities were 

still working, at the end of 2009, 

on the correction of entitlements 

that had been wrongly allocated 

in 2005 (Annual Report 

concerning the financial year 

2006).

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82.	 Th e   Co u r t   re v i e we d   t h e   fo l l ow- u p   wo r k   t h at   t h e   Co m m i s s i o n 
ha d c ar r ied  o ut  on  the er ror s th at occ ur re d d ur in g  th e  im ple -
m e n t a t i o n   o f   t h e   S P S .   A t   t h e   t i m e   o f   t h e   a u d i t ,   p r o c e d u r e s 
were still under way and only one formal conformity clearance 
decis ion  had b een t aken an d publ is he d 61. 

83.	 Th e   Co u r t   n o t e s   t h a t   t h e   Co u n c i l   d e c i d e d 6 2  t h a t   a l l   p ay m e n t 
entitlements allocated before 1 Januar y 2009 be deemed legal 
a n d   re g u l a r   a s   f ro m   1   J a n u a r y   2 0 1 0   u n l e s s   t h e y   h a d   b e e n   a l-
located on the basis of fac tually incor rec t applications. While 
t h i s   g i v e s   l e g a l   c e r t a i n t y   t o   f a r m e r s ,   i t   m e a n s   t h a t   f i n a n c i a l 
correc tions decided pursuant to the conformity clearance pro-
c e d u r e   w i l l   n o t   a p p l y   t o   p a y m e n t s   p o s t e r i o r   t o   2 0 0 9 6 3.   A s   a 
re s u l t   o f   t h i s   d e c i s i o n ,   e r ro n e o u s   p ay m e n t   e n t i t l e m e n t s   w i l l 
be ‘legalised’ and rendered definitive, resulting in annual pay-
ments  b eing  ma de on  su ch bases  i n  fut ure year s.

61 Commission Decision 
2009/721/EC of 24 September 

2009 excluding from Community 

financing certain expenditure 

incurred by the Member States 

under the Guarantee Section 

of the European Agricultural 

Guidance and Guarantee Fund 

(EAGGF), under the European 

Agricultural Guarantee Fund 

(EAGF) and under the European 

Agricultural Fund for Rural 

Development (EAFRD) (OJ L 257, 

24.9.2009, p. 28). 

62 Article 137 of Regulation 
(EC) No 73/2009.

63 See Article 137(3) of 
Regulation (EC) No 73/2009.

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CONCLUSIONS AND  
RECOMMENDATIONS

44

84.	 The  S PS  has  co ntr ib uted  to  the  ach i eve me nt   of   t wo  mai n   ob -
j e c t i ve s   o f   t h e   co m m o n   a gr i c u l t u ra l   p o l i c y :   e n co u ra gi n g   f a r-
mers to better respond to market demand and suppor ting the 
i n c o m e   o f   t h e   a g r i c u l t u r a l   s e c t o r   a s   a   w h o l e .   H o w e v e r,   t h e 
o v e r a l l   c o n c l u s i o n   o f   t h e   p r e s e n t   r e p o r t   i s   t h a t   t h e   i m p l e -
m e n t a t i o n   o f   t h e   s c h e m e   r e s u l t e d   i n   a   n u m b e r   o f   q u e s t i o n -
abl e feat ure s rel ating  to  the defi ni ti on  of t h e be n ef ici ar i es  of 
t h e   p o l i c y,   t h e   n a t u r e   o f   e l i g i b l e   p a r c e l s   a n d   a c t i v i t i e s ,   t h e 
e nv i ro n m e n t a l   i m p a c t   o f   t h e   s c h e m e,   t h e   d i s t r i b u t i o n   o f   a i d 
a c ro s s   a n d   w i t h i n   M e m b e r   S t a t e s   a n d   t h e   s p e c i f i c   e f fe c t s   o f 
the  h isto r ic and  regio nal  mo dels. The re fore,  th e  Cour t i nv ites 
t h e   C o m m i s s i o n   t o   c o n s i d e r   w h e t h e r   s u c h   f e a t u r e s   s h o u l d 
b e   re v i e we d   a l o n g   t h e   l i n e s   s e t   o u t   i n   t h e   re co m m e n d at i o n s 
be low. 

B E N E F I C I A R I E S ,	 E L I G I B L E 	 L A N D 	 A N D	
AG R I C U LT U R A L 	 AC T I V I T I E S

85.	 The  d efinit io n  o f  the  b enefic iar ie s  of   t h e  s c he me   was  for mu -
lated, and subsequently applied, in a way that per mitted per -
sons or entities not or only marginally engaged in an agr icul -
tu ral  ac t ivit y  to b enef it  from S P S pay m ents.

86.	 Th e   Co u r t   p re v i o u s l y   re p o r te d   o n   t h i s   s i t u at i o n   i n   i t s   a n n u a l 
r e p o r t s   a n d   t h i s   w a s   r e c o g n i s e d   d u r i n g   t h e  ‘ H e a l t h   C h e c k ’ 
ex a m i n at i o n   o f   t h e   C A P,   i n   2 0 0 8 .  Th e   l e gi s l ato r   t h e n   a l l owe d 
M e m b e r   S t a t e s   t o   e x c l u d e   s u c h   b e n e f i c i a r i e s   f r o m   S P S   a i d . 
However, at the time of the audit, no M ember State had made 
use of this option and the situation descr ibed above persists.

87.	 W h e re   M e m b e r   S t a t e s   f a i l e d   t o   p u t   u p   e f fe c t i ve   re s t r i c t i o n s, 
t h e   c o m p l e t e   s e p a r a t i o n   o f   p a y m e n t   e n t i t l e m e n t s   f r o m   t h e 
la n d on w hic h t hey were or igina lly  g en e rate d e n courag e d i n-
ve st m ent s by op erator s w h o h ave  li tt le  i nte re st  i n fa r mi ng  as 
a n   a c t i v i t y   b u t   w h o   e x p l o i t   t h e   g u a r a n t e e d   re t u r n s   t h a t   S P S 
provide s.

88.	 T h e   e n t r a n c e   o f   n e w   f a r m e r s   i n t o   t h e   a g r i c u l t u r a l   s e c t o r   i s 
o f te n   h a m p e re d   by   p re s e n t   co n d i t i o n s   o f   a cce s s   to   p ay m e n t 
ent it l ements.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

45

89.	 The specifications as to what makes a parcel of land eligible for 
S P S   a i d   a n d   w h at   co n s t i t u te s   a n   e l i gi b l e   a gr i c u l t u ra l   a c t i v i t y 
are loosely defined and do not contribute to focusing such aid 
on ac tivities and land that ‘increase agricultural produc tivit y ’.

64 See footnote 5.

R E C O M M E N D AT I O N 	 1

T h e   p re s e nt   l e g isl ati o n  an d  i t s  im p l e m e ntin g  r ul e s  sh o ul d 
b e   a m e n d e d   t o   e n s u r e   t h a t   S P S   a i d   i s   d i r e c t e d   t o   a c t i v e 
f a r m e r s   a n d   e x c l u d e s   b e n e f i c i a r i e s   w h o   h a v e   n o   o r   o n l y 
insi g ni f i c ant  a g r i cul tur al  a c ti v i ti e s .

R E C O M M E N D AT I O N 	 2

E l i g i b l e   l a n d   a n d   a g r i c u l t u r a l   a c t i v i t i e s   n e e d   t o   b e   m o r e 
clearly def ined with a view to e xcluding from the b enef it of 
SPS  ai d   n o n - a g r i cu l tu r al   p arce ls  an d  a c ti v i ti e s  th at   d o  n ot 
c o n t r i b u t e   t o   i n c r e a s i n g   a g r i c u l t u r a l   p r o d u c t i v i t y 6 4  o r   t o 
a c ti ve l y m aint ainin g  th e e nv iro nm e nt al v alu e o f  th e lan d .   

E N V I R O N M E N TA L 	 I M PAC T

90.	 Wi t h   t h e   i nt ro d u c t i o n   o f   c ro s s - co m p l i a n ce,   at   t h e   s a m e   t i m e 
as the SPS, the full payment of aid was made conditional upon 
c r i te r i a   b a s e d   o n   e nv i ro n m e nt a l   a n d   o t h e r   g o o d   a gr i c u l t u ra l 
practices. Cross- compliance thus became a key justification for 
t h e   S P S   p ay m e nt s.   H owe ve r,   S P S   a i d   i s   o n l y   i n d i re c t l y   l i n k e d 
to  enviro nme nt al  ob l igation s.

91.	 Fi r s t l y,   t h e   Co u r t   n o t e d   t h a t   t h e r e   i s   n o   d i r e c t   l i n k   b e t we e n 
the level of SPS aid and the costs incurred by farmers to main-
t a i n   l a n d   i n   G A E C   o r   t o   c o m p l y   w i t h   t h e   s p e c i f i c   s t a t u t o r y 
m a n a g e m e nt   re q u i re m e nt s   ( S M R )   a p p l i c a b l e.   N e i t h e r   d o e s   i t 
reflec t the value of the positive ex ter nalities that agr icultural 
ac tiv ities g e nerate. 

92.	 S e c o n d l y,   o f t e n   t h e   m a i n t e n a n c e   o f   l a n d   i n   G A E C   d o e s   n o t 

requ ire any o r o nl y sp o rad ic ac t ion s.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

46

R E C O M M E N D AT I O N 	 3

T h e   c a l c u l a t i o n   o f   S P S   a i d   s h o u l d   b e   m o d i f i e d   t o   b e t t e r 
re f l e c t  th e  cos t  o f e nv iro nm e nt al  an d  oth e r  e x te r n ali ti e s . 

R E C O M M E N D AT I O N 	 4

G A EC   s t a n d a r ds   s h o u l d   r e q u i r e   co n c r e te   a n d   r e g u l a r   a c t i -
v i ti e s  to   b e   c ar r i e d  o u t  by  f ar m e r s   f o r   th e m   to  re ce i ve   th e 
f u l l   a m o u n t   o f   t h e   a i d .   P a y m e n t   r e d u c t i o n s   f o r   f a i l u r e   t o 
resp e c t cross- compliance obligations should b e made more 
dissu asi ve. 

D I S T R I B U T I O N 	 O F 	 S P S 	 A I D

93.	 The  d eter mination  o f  SPS   p ay ments   to  i nd iv id ual  fa r me r s  re -
mains b ase d (a) o n th e nu mber of  he c ta res  fa r me d an d ( b),  in 
t h e   h i s to r i c a l   m o d e l,   o n   t h e   a m o u nt s   p a i d   i n   t h e   p a s t   ( re fe r -
e n ce   ye a r s   f ro m   2 0 0 0   to   2 0 0 2 ) .   I t   fo l l ows   t h a t   t h i s   a i d   co n t i-
nue s to  be nefit p r imar ily  l arger f ar ms.

94.	 The distribution of SPS aid is charac terised by the fac t that the 
major par t goes to a small number of large beneficiaries while 
the large major it y of beneficiar ies each receive only a limited 
a m o u n t   o f   a i d.  T h e   m o d u l a t i o n   m e c h a n i s m   t h a t   re d u c e s   t h e 
a m o u n t   p a i d   t o   t h e   l a r g e s t   f a r m e r s   c o n c e r n s   a   v e r y   l i m i t e d 
n u m b e r   o f   re c i p i e nt s.   Fu r t h e r m o re,   i t   d o e s   n o t   co nt r i b u te   to 
cor rec t ing  t he pres ent distr ibuti on  as its  pr ima r y  obj ec t ive is 
to  s hif t   f unds  fro m  direc t  aid  to   t h e  r ural  de velopm ent  pil lar 
of  the  C A P.

R E C O M M E N D AT I O N 	 5

A   m o re   b a l a n c e d   d i s t r i b u t i o n   o f   S P S   a i d   b e t we e n   f a r m e r s 
should be sought either by fur ther modulation of payments, 
or by capping higher individual payments, or by tak ing into 
co nsid eratio n t he s p ecific  c ircum st ance s  of  f ar ms. 

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

47

S P E C I F I C 	 E F F E C T S 	 O F 	 I M P L E M E N TAT I O N	
M O D E L S

95.	 Cur rently some 20 different var iants of SPS are applied across 
the EU. This situation explains in large par t the wide dispar it y 
i n   t h e   l e ve l s   o f   a i d   p e r   h e c t a re   a c ro s s   M e m b e r   St ate s   a s   we l l 
as  in t he dist r ib ut ion  p atter ns wi th i n  a M e mbe r  State. 

96.	 Tw o   m a i n   m o d e l s   a r e   i m p l e m e n t e d .   O n   t h e   o n e   h a n d ,   t h e 
hi sto r ic  mo del  h as,   over  time,   be come   di vorce d  f rom  pre se nt 
con ditio ns o f p ro du c tio n. 

97.	 On the other hand, the regional model is associated with uni-
fo r m   u n i t   v a l u e s   o f   p a y m e n t   e n t i t l e m e n t s   a c r o s s   t h e   r e g i o n 
co n ce r n e d.   H owe ve r,   t h e   t ra n s i t i o n   to   t h i s   l at te r   m o d e l   m ay, 
in cer tain regions, negatively affec t cer tain sec tors of agricul-
t u ra l   p ro d u c t i o n   a n d   m ay   re s u l t   i n   a n   i n c re a s e   i n   t h e   m a r k e t 
pr ice of agr icultural land and land leases which would reduce 
the  effec tive ne ss  of the aid. 

R E C O M M E N D AT I O N 	 6

T he calculation of entitlement s should b e b ase d on current 
f ar min g co n di ti o ns in th e di f f e re nt re g i o ns . H oweve r, su ch 
a   t r a n s i t i o n   s h o u l d   e n s u r e   t h a t   u n d e s i r a b l e   e f f e c t s ,   s u c h 
as  an in cre as e  in th e p r i ce o f l e as e s an d lan d , are  lim i te d . 

T h i s   r e p o r t   w a s   a d o p t e d   b y   C h a m b e r   I ,   h e a d e d   b y   M r   O l a v i 
ALA-NISSILÄ, Member of the Cour t of Auditors, in Luxembourg 
at  its  me eting  o f 6 Ap r il  20 11 .

For t he  Cour t o f  Auditors

Vítor M anuel da  S I LVA   C A L D E I R A
Presi den t

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
48

A N N E X 	 I

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
 
 
 
 
                                                                                                                                         
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                                                                          
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                                                                  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                                       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51

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52

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54

A N N E X 	 I I I

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5555

REPLY OF THE  
COMMISSION

EXECUTIVE	SUMMARY

I I.	S econ d	 ind ent
T h e   o b j e c t i v e   o f   t h e   S i n g l e   P a y m e n t 
S cheme (SPS) is to grant basic income sup -
p o r t   a n d   c o n t r i b u t e   t o   t h e   p r o v i s i o n   o f 
b a s i c   p u b l i c   g o o d s   w h i l e   e n co u ra gi n g   f a r -
mer s to  bet ter  respon d to  mar ke t d em and.

I II .– IV.
The  S PS   is  a  decoupled  sc heme,  and   he n ce 
there is no produc tion requirement. I n this 
c o n t e x t ,   a   f a r m e r   s h o u l d   n o t   b e   c o n s i d -
ered  having no agr icultural ac ti v it y  s im ply 
b e c a u s e   h e   d o e s   n o t   m a i n t a i n   a   c e r t a i n 
produc tion level. 

A n y   f a r m e r   r e c e i v i n g   s u p p o r t   m u s t   h o w -
e v e r   p e r f o r m   a n   a g r i c u l t u r a l   a c t i v i t y . 
F o l l o w i n g   C o u n c i l   R e g u l a t i o n   ( E C )   N o 
7 3 / 2 0 0 9 ,   t h i s   i m p l i e s   t h a t   h e   s h o u l d   a t 
least maintain his land in good agricultural 
an d environm ental condit ion  (GAE C ) . 

Th e   Co m m i s s i o n   i s   c o m m i t t e d   t o   e x a m i n e 
h ow   t o   f u r t h e r   s t re n g t h e n   t h a t   s u p p o r t   i s 
gra nte d   o n l y   to   a c t i ve   f a r m e r s   a s   s t ate d   i n 
t h e   c o m m u n i c a t i o n   f r o m   t h e   Co m m i s s i o n 
t o   t h e   C o u n c i l ,   t h e   E u r o p e a n   Pa r l i a m e n t , 
t h e   E u r o p e a n   E c o n o m i c   a n d   S o c i a l   C o m -
m i t t e e   a n d   t h e   Co m m i t t e e   o f   t h e   R e g i o n s 
‘ Th e   C A P   towa rd s   2 0 2 0 :   m e e t i n g   t h e   fo o d, 
n a t u r a l   r e s o u r c e s   a n d   t e r r i t o r i a l   c h a l -
lenges of the future’ 1, hereaf ter refer red to 
as t he 'communication on t he fut ure  C AP '.

1 COM(2010) 672 final, adopted on 18 November 2010.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

56

REPLY OF THE  
COMMISSION

V II .
T h e r e   i s   n o   q u a n t i f i e d   l i n k   b e t w e e n   S P S 
s u p p o r t   a n d   c o s t s   i n c u r r e d   i n   r e s p e c -
t i n g   g o o d   a g r i c u l t u r a l   a n d   e nv i ro n m e n t a l 
cond itions. H istor ical  reference s  have  t hus 
b e e n   u s e d   t o   d e t e r m i n e   t h e   l e v e l   o f   a i d . 
S P S   i s   a n   a re a - b a s e d   p ay m e nt   w h o s e   m a i n 
o b j e c t i v e   i s   t o   p r o v i d e   b a s i c   i n c o m e   s u p -
p o r t .  Th ro u g h   t h e   o b l i g a t i o n   to   k e e p   l a n d 
i n   G A E C ,   S P S   c o n t r i b u t e s   t o   t h e   p r o t e c -
t i o n   o f   n a t u r a l   r e s o u r c e s ,   t h u s   p r o v i d i n g 
t h e   b a s i s   fo r   t h e   d e l i ve r y   o f   p u b l i c   g o o d s 
t h r o u g h   a g r i c u l t u r e .   T h i s   h a s   b e e n   n o t e d 
i n   p a r t i c u l a r   i n   t h e   s t u d y   o n   p u b l i c   g o o d s 
o f   t h e   I n s t i t u te   fo r   Eu ro p e a n   E nv i ro n m e n-
tal Polic y ( IE E P) 3. 

T h e   i s s u e   o f   c o s t s   f o r   f a r m e r s   o f   c o m -
p l i a n c e   w i t h   l e g i s l a t i o n   o n   e n v i r o n m e n t , 
f o o d   s a f e t y   a n d   a n i m a l   w e l f a r e   i s   o f t e n 
 r a i s e d ,   a n d   a   s t u d y   a s s e s s i n g   t h e s e   c o s t s 
h a s   b e e n   r e q u e s t e d   b y   t h e   E u r o p e a n   Pa r-
l i a m e n t   a n d   i s   u n d e r   w a y.   H o w e v e r,   t h e 
l e ve l   o f   S P S   i s   i n d e p e n d e n t   o f   t h e s e   co s t s 
a s   i t   s h o u l d   n o t   c o m p e n s a t e   f a r m e r s   f o r 
re s p e c t i n g   t h e   l aw   a n d   m u s t   re m a i n  ‘gre e n 
box ’ compatible. 

The communication on the future C AP out -
l i n e s   t h e   i n t e n t i o n   o f   t h e   C o m m i s s i o n   t o 
a s s e s s   p o s s i b i l i t i e s   fo r   a   f u r t h e r  ‘gre e n i n g’ 
of th e fir st pillar.

3 Cooper, T., Hart, K. and Baldock, D., ‘The provision of public 
goods through agriculture in the European Union’, Report for 

the Agriculture and Rural Development DG, Contract No 30-CE-

0233091/00-28, Institute for European Environmental Policy, 

London, 2009. 

V.	
A c c e s s   o f   n e w   f a r m e r s   t o   s u p p o r t   u n d e r 
the SPS is not the same as the oppor tunit y 
to star t ou t as a new  f ar mer.

T w e l v e   o u t   o f   1 7   M e m b e r   S t a t e s   g r a n t 
p a y m e n t   e n t i t l e m e n t s   f r o m   t h e   n a t i o n a l 
r e s e r v e   t o   c o m m e n c i n g   f a r m e r s .   I n   o t h e r 
M e m b e r   S t a t e s   f a r m e r s   c a n   b u y   o r   l e a s e 
p a y m e n t   e n t i t l e m e n t s   i n   t h e   f r e e   m a r k e t 
,which func t ion s wel l.

A n   i n - d e p t h   e x a m i n a t i o n   b y   t h e   C o m m i s -
s i o n   a n d   t h e   M e m b e r   S t a t e s   s h o w e d   t h a t 
i n   t h e   v a s t   m a j o r i t y   o f   c a s e s ,   t h e   a s s e s s -
m e n t   o f   t h e   e l i g i b i l i t y   o f   t h e   a r e a   i s 
b e y o n d   d o u b t .   T h e   C o m m i s s i o n   i n t e n d s 
n e ve r t h e l e s s   to   ex a m i n e   t h e   p o s s i b i l i t y   o f 
f u r t h e r   r e f i n i n g   t h e   d e f i n i t i o n   o f   e l i g i b l e 
l a n d   i n   o rd e r   to   b e t te r   t a rg e t   t h e   a i d,   a s   i t 
i s   a d v a n c e d   i n   t h e   c o m m u n i c a t i o n   o n   t h e 
future C AP. 

However, a decoupled suppor t like the SPS 
cannot be linked to the per formance of the 
b e n e f i c i a r y   o r   o f   t h e   l a n d ,   fo r   w h i c h   p a y -
m e nt   e nt i t l e m e nt s   h ave   b e e n   a c t i vate d,   i n 
t e r m s   o f   p r o d u c t i o n .   S u c h   a   r e q u i r e m e n t 
w o u l d   n o t   c o m p l y   w i t h   p a r a g r a p h s   1   a n d 
6 ( e )   o f   A n n e x   2   to   t h e  W TO   Agre e m e n t   o n 
Agr icu lture 2.

VI.	
T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
i n c l u d e s   t h e   p o s s i b l e   i n t r o d u c t i o n   o f   a n 
e l e m e n t   o f   c a p p i n g   w h i c h   w o u l d   a l l o w   a 
limitation of the payments made. The num-
b e r   o f   h e c t a re s   a n d   t h e   n u m b e r   o f   e nt i t l e -
m e n t s   w o u l d   h o w e v e r   c o n t i n u e   t o   r e f l e c t 
t h e   s i z e   o f   f a r m s   a n d   t o   a   c e r t a i n   e x t e n t 
t h e i r   co nt r i b u t i o n   to   t h e   o b j e c t i ve s   o f   t h e 
common agr ic ult ural  p olic y (C A P ).

2 http://www.wto.org/english/docs_e/legal_e/14-ag_01_e.htm

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

VIII.
T h e   C o m m i s s i o n   d o e s   n o t   a g r e e   t h a t   S P S 
i s   a   p o o r l y   t a r g e t e d   m e t h o d   t o   p r o v i d e 
i n c o m e   s u p p o r t .  T h e   i s s u e   o f   t a r g e t i n g   i s 
n o t   l i n k e d   t o   t h e   d i f f e r e n t   i m p l e m e n t i n g 
options.

Th e   l e ve l   o f   d e co u p l e d   d i re c t   s u p p o r t   t h at 
f a r m e r s   r e c e i v e   i s   b a s e d   o n   p r o d u c t i o n 
a n d   s u p p o r t   l e ve l s   d u r i n g   a   h i s to r i c   re fe r -
e n ce   p e r i o d   o r,   i n   t h e   c a s e   o f   t h e   re gi o n a l 
m o d e l ,   o n   t h e   a r e a s   o n   a   h i s t o r i c a l   r e fe r -
e n c e   d a t e .   H e n c e ,   t h e   c u r r e n t   d i s t r i b u -
t i o n   o f   d i r e c t   p a y m e n t s   b e t w e e n   f a r m s   i s 
s i m p l y   a   r e f l e c t i o n   o f   t h e   f a c t   t h a t   a g r i -
c u l t u r a l   l a n d   a n d   a g r i c u l t u r a l   p r o d u c t i o n 
a r e   n o t   s h a r e d   e q u a l l y   a m o n g   t h e   f a r m s 
i n   t h e   E U.  T h i s   s i t u a t i o n   d o e s   n o t   c h a n g e 
the fac t that the SPS has already proven its 
effec tiveness as a method to provide basic 
income sup p or t to f ar mers. 

N e v e r t h e l e s s ,   t h e   i s s u e   o f   r e d i s t r i b u t i o n 
o f   s u p p o r t   b e t w e e n   f a r m e r s   a n d   M e m b e r 
St ate s   i s   co n s i d e re d   i n   t h e   co m m u n i c at i o n 
o n   t h e   f u t u re   C A P,   a n d   s h o u l d   a l s o   l e a d   to 
improved  t arg etin g of t he SPS a i d. 

IX.	
I n   a   d e co u p l e d   s u p p o r t   s ys te m   t h e re   i s   n o 
p o s s i b i l i t y   t o   a d j u s t   t h e   s u p p o r t   l e v e l   t o 
c u r re nt   p ro d u c t i o n   l e ve l s.   S u c h   a n   a d j u s t-
m e n t   w o u l d   n o t   o n l y   b e   n o n - c o m p l i a n t 
with the W TO ‘green box ’ rules but also run 
co u nte r   to   t h e   o b j e c t i ve   o f   i n c re a s i n g   t h e 
mar ket or ient atio n o f far mers.

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However, the communication on the future 
C A P   a c k n o w l e d g e d   t h a t   t h e   j u s t i f i c a t i o n 
o f   t h e   d i f f e r e n t   s u p p o r t   l e v e l s   i s   g e t t i n g 
w e a k  e r   a s   t h e   r e f e r e n c e   p e r i o d s   a r e   g e t -
t i n g   m o r e   d i s t a n t .   T h e   r e d i s t r i b u t i o n   o f 
s u p p o r t   b e t w e e n   M e m b e r   S t a t e s   a n d 
f a r m e r s   i s   t h e r e f o r e   a   c o r e   i s s u e   f o r   t h e 
f u t u r e   o f   t h e   C A P   a n d   r e f l e c t i o n s   r e g a r -
d i n g   r e l e v a n t   a n d   f e a s i b l e   c r i t e r i a   f o r 
s u c h   re a l l o c a t i o n   a re   o n g o i n g.   A n   i m p a c t 
a s s e s s m e n t   i s   c u r re n t l y   b e i n g   c a r r i e d   o u t 
on  thes e issues. 

U n d e r   t h e   c u r r e n t   r u l e s   a s   w e l l   a s   i n   t h e 
f u t u r e,   i t   i s   a   c l e a r   r e q u i r e m e n t   t h a t   p a y -
m e n t   e n t i t l e m e n t s   o n l y   b e   a c t i v a t e d   w i t h 
the declaration of a cor responding number 
of eligible  hec t ares. 

X.	
T h e   h i s t o r i c a l   m o d e l   w a s   f i r s t l y   p ro p o s e d 
by   t h e   Co m m i s s i o n   i n   2 0 0 3   w i t h   a   v i e w   to 
f a c i l i t a t i n g   a   s m o o t h   t r a n s i t i o n   t o w a r d s 
decoupling. The regional model was added 
a t   t h e   re q u e s t   o f   M e m b e r   S t a te s   to   m a tc h 
s o m e   p a r t i c u l a r   n a t i o n a l   o b j e c t i v e s   f o r 
d i r e c t   s u p p o r t .  T h e   c a p i t a l i s a t i o n   o f   s u p -
p o r t   i n   a   r e g i o n a l   m o d e l   m a y   b e   h i g h e r 
t h a n   i n   a   h i s t o r i c   m o d e l .   N e v e r t h e l e s s , 
among fac tors influencing land pr ices, C AP 
s u b s i d i e s   h ave   a   ra t h e r   m o d e s t   i m p a c t .   I n 
a d d i t i o n   i t   d o e s   n o t   n e c e s s a r i l y   m e a n   a n 
i n c r e a s e   i n   c a p i t a l i s a t i o n   a s   c o m p a r e d   t o 
for mer  coupled  for ms of suppor t. 

T h e   i m p a c t   o f   t h e   r e g i o n a l   m o d e l   i s   c u r -
r e n t l y   b e i n g   a s s e s s e d   t o g e t h e r   w i t h   a l l 
s o c i a l ,   e c o n o m i c   a n d   e n v i r o n m e n t a l 
effec ts, in the impac t assessment following 
th e communication on  t he future C AP.

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XII .	 t hird 	ind ent
A s   s e t   o u t   i n   t h e   c o m m u n i c a t i o n   o n   t h e 
future CAP, the environmental per formance 
of far mers as a counter par t for suppor t will 
be fur t her  conside red by th e Co m mi s si on

XII .	 fo ur t h	ind ent
T h e   Co m m i s s i o n   h a s   p ro p o s e d   i n   i t s   c o m-
m u n i c a t i o n   o n   t h e   f u t u r e   C A P   t o   a s s e s s 
h ow   c ro s s - co m p l i a n ce   r u l e s   co u l d   b e   s i m -
p l e r   a n d   m o r e   c o m p r e h e n s i v e   a n d ,   f o r 
G A E C ,   t o   a n a l y s e   h o w   c e r t a i n   o f   i t s   e l e -
ments  could be enh anced.

Th e   E U   f ra m e wo r k   fo r   p ay m e nt   re d u c t i o n s 
unde r c ross- complian ce is diss uasi ve s i nce 
t h e   r e d u c t i o n   c a n   b e   a s   h i g h   a s   1 0 0   %   o f 
C A P   p a y m e n t s   r e c e i v e d   b y   t h e   f a r m e r. 
W h e re   we a k n e s s e s   i n   t h e   i m p l e m e n t a t i o n 
by   M e m b e r   St ate s   o f   t h e   c ro s s - co m p l i a n ce 
s y s t e m   a r e   o b s e r v e d ,   t h e s e   a r e   f o l l o w e d 
u p   u n d e r   t h e   c l e a r a n c e   o f   a c c o u n t s   p r o -
cedure.

XII .	 fif t h	 ind ent
T h e   r e d i s t r i b u t i o n   o f   a i d ,   t h e   c a p p i n g   o f 
p a y m e n t s   a n d   t h e   s u p p o r t   t o   f a r m e r s   i n 
a re a s   w i t h   s p e c i f i c   n a t u ra l   co n s t ra i n t s   a re 
e l e m e n t s   i n c l u d e d   i n   t h e   c o m m u n i c a t i o n 
on  the  future  C AP.

XII .	 six t h	ind ent
T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
f o r e s e e s   a   n e w   d e s i g n   f o r   d i r e c t   p a y -
m e nt s.   S e ve ra l   o p t i o n s   a re   c u r re nt l y   b e i n g 
a s s e s s e d   i n   a n   i m p a c t   a s s e s s m e n t ,   a m o n g 
t h e m   o n e   w h i c h   wo u l d   i m p l y   a   b a s i c   s u p -
por t rate complemented with payments for 
f a r m e r s   i n   a r e a s   w i t h   n a t u r a l   c o n s t r a i n t s , 
as well as a gree ning  com pone nt.

XI.	
T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
includes a number of issues relating to the 
d i re c t   p ay m e nt s   w h i c h   a re   c u r re nt l y   b e i n g 
e x a m i n e d   a n d   r e v i e w e d   b y   t h e   C o m m i s -
sion.

XII.	fi rst	 ind ent
I n   o rd e r   to   i n c re a s e   t h e   e f fe c t i ve n e s s   a n d 
e f f i c i e n c y   o f   t h e   s u p p o r t ,   o n e   o f   t h e   e l e -
m e n t s   m e n t i o n e d   i n   t h e   c o m m u n i c a t i o n 
o n   t h e   f u t u r e   C A P   i s   t o   b e t t e r   t a r g e t   t h e 
s u p p o r t   t o   a c t i v e   f a r m e r s .   H o w e v e r   a n y 
s u c h   t a r g e t i n g   wo u l d   h a ve   t o   re s p e c t   t h e 
decoupled  n atu re o f the SPS p ay m e nts. 

XII.	seco nd	inde nt
N o n - a g r i c u l t u r a l   p a r c e l s   a r e   a l r e a d y 
e x c l u d e d   f r o m   t h e   S P S   s u p p o r t .   F a r -
m e r s   c a n   o n l y  ‘a c t i v a t e’  a n   e n t i t l e m e n t   t o 
receive suppor t with eligible land and they 
h a v e   t o   r e s p e c t   t h e   r u l e s   a n d   c o n d i t i o n s 
set  by exis ting  l egis l atio n. 

A   d e c o u p l e d   s u p p o r t   l i k e   t h e   S P S   c a n n o t 
h o w e v e r   b e   l i n k e d   t o   t h e   p e r f o r m a n c e 
o f   t h e   b e n e f i c i a r y   o r   o f   t h e   l a n d   i n   t e r m s 
o f   i n c r e a s i n g   a g r i c u l t u r a l   p r o d u c t i v i t y. 
Exclud ing ac tivities that do not contr ibute 
t o   i n c r e a s i n g   a g r i c u l t u r a l   p r o d u c t i v i t y 
f ro m   t h e   b e n e f i t   o f   S P S   wo u l d   e s t a b l i s h   a 
link to cur rent produc tion and, as a conse -
q u e n ce,   t h e   co n d i t i o n s   o f   t h e  W TO   Agre e -
ment on Agriculture (‘green box ’) would no 
longer be met.

A s   r e g a r d s   t h e   a c t i v e   m a i n t e n a n c e   o f   t h e 
‘e nv i ro n m e nt a l   va l u e   o f   a gr i c u l t u ra l   a re a s’ 
m e n t i o n e d   b y   t h e   C o u r t ,   t h e   C o m m i s s i o n 
c o m m i t t e d   i t s e l f   i n   i t s   c o m m u n i c a t i o n   o n 
t h e   f u t u r e   C A P   t o   a s s e s s   w a y s   o f   e n h a n -
c i n g   e n v i r o n m e n t a l   p e r f o r m a n c e   o f   t h e 
C A P.   T h i s   c o u l d   b e   d o n e   b y   s u p p o r t i n g 
s i m p l e ,   g e n e r a l i s e d ,   n o n   c o n t r a c t u a l   a n d 
a n n u a l   e n v i r o n m e n t a l   a c t i o n s   w i t h i n   t h e 
d i re c t   p ay m e n t   s c h e m e   a n d / o r   e n h a n c i n g 
cer t ain eleme nt s  of G AEC  st and a rd s.

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I n   t h i s   c o n t e x t ,   s i t u a t i o n s   o f   f a r m e r s 
w h o   j u s t   f u l f i l   t h e   G A E C   t h u s   h a v i n g   o n l y 
l i m i t e d   a gr i c u l t u ra l   a c t i v i t y   c a n   a r i s e.  Th i s 
i s s u e   h a s   b e e n   r a i s e d   i n   t h e   c o m m u n i c a -
t i o n   o n   t h e   f u t u re   C A P   a n d   t h e   p o s s i b i l i t y 
o f   f u r t h e r   t a rg e t i n g   o f   t h e   s u p p o r t   s h o u l d 
be exa min ed.

2 2.
T h e   d e f i n i t i o n   o f   a g r i c u l t u r a l   a c t i v i t y 
r e f l e c t s   t h e   o b j e c t i v e   o f   p r o m o t i n g   f a r -
m e r s '   m a r k e t   o r i e n t a t i o n   w h i l e   e n s u r i n g 
compliance  with  W TO  ‘green  box ’ r ule s.

I n   t h i s   c o n t e x t   t h e   o p t i o n   f o r   f a r m e r s   t o 
d e c i d e   t o   ‘ m a i n t a i n   t h e   l a n d   i n   G A E C ’, 
i n  s t e a d   o f   p r o d u c i n g   a   g i v e n   a g r i c u l t u r a l 
p r o d u c t ,   r e f l e c t s   t h e   f a c t   t h a t   t h e   a i d   i s 
decoupled.

2 3.
T h e   S P S   i s   d e c o u p l e d   f ro m   p ro d u c t i o n .   I n 
order  to be com pliant with  the  W TO ‘gre e n 
b ox ’  r u l e s,   p ro d u c t i o n   o b l i g at i o n s   o r   l i n k s 
to   p ro d u c t i o n   f a c to r s   m ay   n o t   b e   i m p o s e d 
a s   e l i g i b i l i t y   c r i t e r i a .   F u r t h e r m o r e ,   t h e 
issue of ownership of land is not a decisive 
c r i te r i o n   fo r   e xe rc i s i n g   f a r m i n g   a c t i v i t i e s, 
a s   t h i s ,   f o r   i n s t a n c e ,   c a n   a l s o   b e   d o n e   b y 
tenant s of lan d.

S ee  also Com mis sion reply  to  po int  2 1 .

AUDIT	SCOPE,	OBJECTIVES	AND		
APPROACH

19.	S econd 	inde nt
T h e   m a i n   o b j e c t i v e   o f   t h e   S P S   i s   t o   g r a n t 
a   b a s i c   i n c o m e   s u p p o r t   t o   f a r m e r s   w h i l e 
c o n t r i b u t i n g   t o   t h e   p r o v i s i o n   o f   b a s i c 
public go o ds.

OBSERVATIONS

20.
Concerning the lack of precision of the defi-
nition, see Commission reply to point 21. 

T h e   m a r g i n   o f   d i s c r e t i o n   l e f t   t o   M e m b e r 
St ate s   i s   re l ate d   to   t h e   ex i s te n ce   o f   d i f fe r-
e n ce s   b e t we e n   t h e   M e m b e r   St ate s   s u c h   a s 
in t he  a gr icul tu ral s truc tu res. 

21.
The definition of farmers under the current 
r u l e s   i s   c l e a r   a n d   o n l y   f a r m e r s   w i t h i n   t h e 
d e f i n i t i o n   l a i d   d ow n   i n   Co u n c i l   R e g u l at i o n 
( E C )   N o   7 3 / 2 0 0 9   q u a l i f y   fo r   s u p p o r t 4.  T h e 
d e f i n i t i o n   r e f l e c t s   t h e   d e c o u p l e d   n a t u r e 
o f   t h e   s c h e m e   a n d   t h e   o b j e c t i v e   o f   p r o -
m o t i n g   f a r m e r s '   m a r k e t   o r i e n t a t i o n   w h i l e 
e n s u r i n g   co m p l i a n ce   w i t h  W TO  ‘gre e n   b ox ’ 
r u l e s .   P r o d u c t i o n   o b l i g a t i o n s   o r   l i n k s   t o 
p ro d u c t i o n   f a c to r s   m ay   n o t   b e   i m p o s e d   a s 
eligibilit y cr iter ia.

4 See Article 2(a) of Regulation 73/2009: 'farmer' means a natural or 
legal person, or a group of natural or legal persons, whatever legal 

status is granted to the group and it members by national law, 

whose holding is situated within Community territory, as defined 

in Article 299 of the Treaty, and who exercises an agricultural 

activity. The latter is defined in Article 2(c) of the same regulation 

as production, rearing or growing of agricultural products 

including harvesting, milking, breeding animals and keeping 

animals for farming purposes, or maintaining the land in good 

agricultural and environmental condition.

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B ox	 2
T h e   c u r r e n t   l e g i s l a t i o n   f o r   t h e   f i r s t   p i l l a r 
d i r e c t   s u p p o r t   s c h e m e s   d o e s   n o t   e xc l u d e 
t h at   a   p a rce l   c a n   b e   c l a i m e d   fo r   a i d   u n d e r 
different sch emes  by  more  t han  on e  s i ng l e 
f a r m e r,   a s   l o n g   a s   t h e   e l i g i b i l i t y   c r i t e r i a 
f o r   e a c h   s c h e m e   c o n c e r n e d   a r e   f u l f i l l e d 
th roug hout th e year.

G e n e r a l l y ,   w h e n   f i r s t   p i l l a r   a n d   l e s s -
favour ed areas (LFA) payments are claimed 
by t wo different beneficiar ies for the same 
a r e a ,   t h e   b e n e f i c i a r y   s h o u l d   b e   t h e   o n e 
exercisin g the  a gr ic ult ural ac tiv it y.

S p e c i a l   c a s e s,   w h e n   f i r s t   p i l l a r   a n d   s p e c i -
f i c   a g r i - e nv i r o n m e n t   m e a s u r e s   ( A E M )   l i k e 
stonewalls,  he dgerows,  lan dsc ape   fe at ure s 
o r   c atc h m e nt   a re a s   a n d   p o n d s   a re   c l a i m e d 
b y   t w o   d i f f e r e n t   b e n e f i c i a r i e s ,   s h o u l d   b e 
h andle d on  an individual basis.

Th e   Co m m i s s i o n   h a s   a l s o   fo u n d   c a s e s   s u c h 
a s   t h o s e   r e f e r r e d   t o   b y   t h e   C o u r t   d u r i n g 
i t s   a u d i t s   a n d   t h e s e   a re   fo l l owe d   u p   i n   t h e 
contex t of th e cle aran ce  of  account s.

I n   t h e   r e g i o n a l   m o d e l ,   f o l l o w i n g   t h e 
Co u n c i l   re g u l at i o n ,   i t   wa s   t h e   e l i gi b l e   a re a 
d e c l a r e d   a n d   t h e   h i s t o r i c   s u p p o r t   l e v e l 
w h i c h   d e t e r m i n e d   t h e   n u m b e r   a n d   v a l u e 
of the entitlement. I t remains however that 
t h e   r u l e s   p rov i d e   t h at   s u p p o r t   s h o u l d   o n l y 
be granted to far mers disposing of eligible 
areas. 

24.
T h e   C o m m i s s i o n   u n d e r l i n e s   t h a t   t h e   a r e a 
d e c l a r e d   h a s   t o   b e   e l i g i b l e   t h r o u g h o u t 
t h e   c a l e n d a r   ye a r   a n d   d o u b l e   d e c l a rat i o n s 
from several far mers are nor mally detec ted 
i n   t h e   a d m i n i s t rat i ve   c h e c k s.  Th e   r u l e   p ro -
viding th at  are as  sh ou l d b e at th e  f a r m e r s' 
d i s p o s a l   at   a   gi ve n   d ay   s e r ve s   t h e   p u r p o s e 
o f   a v o i d i n g   d o u b l e   p a y m e n t   o f   t h e   s a m e 
area.

I n   a d d i t i o n ,   t h e   r e p l a c e m e n t   o f   t h e 
1 0 - m o nt h   p e r i o d   w i t h   a   s i n g l e   d ate   w h i c h 
may be deter mined by the M ember State is 
l i n k e d   t o   t h e   s i m p l i f i c a t i o n   e f fo r t s   o f   t h e 
c o m m o n   a g r i c u l t u r a l   p o l i c y.   Fa r m e r s   g a i n 
g r e a t e r   f l e x i b i l i t y   i n   t h e i r   f a r m   m a n a g e -
m e n t   a n d   i n   r e s p o n d i n g   t o   m a r k e t   d e v e l -
opments.

T h e   a b o l i t i o n   o f   t h e   1 0 - m o n t h   p e r i o d 
r e d u c e s   t h e   t i m e   s p e n t   b y   f a r m e r s   o n 
r e t r i e v i n g   r e l e v a n t   i n f o r m a t i o n   f o r   t h e 
s i n g l e   p ay m e nt   a p p l i c at i o n .   I t   i s   ex p e c t e d 
t o   l e a d   t o   a   r e d u c t i o n   i n   a d m i n i s t r a t i v e 
b u r d e n   f o r   f a r m s   w h i c h   i s   e s t i m a t e d   a t 
around 21,5  millio n eu ro 5.

26.
A c c o r d i n g   t o   t h e   r u l e s   f o r   a c t i v a t i o n   o f 
e n t i t l e m e n t s ,   M e m b e r   S t a t e s   h a v e   t o 
d e c i d e   w h o   w a s   f a r m i n g   t h e   l a n d   b e a r -
i n g   t h e   m a n a g e m e n t   r i s k .   T h i s   i s s u e   h a s 
a n d   w i l l   co nt i n u e   to   b e   fo l l owe d   u p   i n   t h e 
contex t of t he cl earance of  acco unts.

T h e   e c o n o m i c   c o n d i t i o n s   o f   t h e   c o n t r a c -
t u a l   a r r a n g e m e n t s   re f l e c t   t h e   d i ve r s i t y   o f 
t h e   s i t u at i o n s   i n   t h e   f i e l d.   H owe ve r,   i n   a ny 
c a s e,   t h e   te r m s   n e g o t i ate d   i n   t h e   co nt ra c t 
b e t w e e n   l a n d o w n e r s   a n d   t e n a n t s   a r e 
ex p e c te d   to   re f l e c t   t h e   e co n o m i c   i nte re s t s 
of both  pa r ties.

5 See Commission Communication COM (2009) 544.

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27.
As   ex p l a i n e d   u n d e r   p o i nt   2 1 ,   o n l y   f a r m e r s 
f u l f i l l i n g   t h e   l e g a l   d e f i n i t i o n   a n d   a t   l e a s t 
m a i n t a i n i n g   t h e   a r e a s   i n   G A E C   a r e   e l i -
g i b l e   fo r   s u p p o r t .  T h e   e l i g i b i l i t y   d o e s   n o t 
depend o n the  age of t he far m e r. 

I n   M e m b e r   S t a t e s   w h e r e   e a r l y   r e t i r e m e n t 
s c h e m e s   a re   a p p l i e d   u n d e r   r u r a l   d e ve l o p -
m e nt,   f a r m e r s   a re   n o t   a l l owe d   to   co nt i n u e 
receiving  SP S p ayments.

S ee a lso rep l y to  point 28.

B ox 	3
Th e   a c t i v a t i o n   o f   h i g h - v a l u e   e n t i t l e m e n t s 
o n   l o w - v a l u e   a r e a s   i s   a l l o w e d   b y   C o u n c i l 
R egulat ion  (EC )  No  73 /2 00 9.

M e m b e r   S t a t e s   d o   h o w e v e r   h a v e   t h e 
o p t i o n   to   s e t   r u l e s   at   n at i o n a l   l e ve l   w h i c h 
c o u l d ,   f o r   e x a m p l e ,   l i m i t   t h e   t r a n s f e r   o f 
payment  ent itl ements b et ween  re gi on s. 

O n e   o f   t h e   i s s u e s   t a k e n   u p   i n   t h e   co m m u -
n i c a t i o n   o n   t h e   f u t u re   C A P   i s   t h e   re d i s t r i -
b u t i o n   a n d   t a r g e t i n g   o f   s u p p o r t   a n d   t h e 
p o s s i b l e   m o v e   t o w a r d s   a   m o r e   u n i f o r m 
level of basic  sup p or t. 

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2 8.
T h e   s t u d y   m e n t i o n e d   b y   t h e   C o u r t   o n 
t h e   f u n c t i o n i n g   o f   l a n d   m a r k e t s   i n   t h e 
E U   M e m b e r   S t a t e s   u n d e r   t h e   i n f l u e n c e   o f 
m e a s u r e s   a p p l i e d   u n d e r   t h e   C A P 6  s t a t e s 
t h a t ,   a s   f o r   a l l   p u b l i c   s u p p o r t ,   t h e r e   a r e 
a l s o   o t h e r   co ntex t u a l   f a c to r s   t h a n   t h e   S P S 
w h i c h   i n f l u e n c e   t h e   d e c i s i o n s   o f   f a r m e r s 
i n   t e r m s   o f   s t a y i n g   i n   f a r m i n g   o r   re t i r i n g, 
t h e   c a p i t a l i s a t i o n   o f   s u p p o r t   i n   t h e   l e v e l 
o f   l a n d   p r i ce s   a n d   m o re   g e n e ra l l y   t h e   re s -
truc tur ing of the agr icultural sec tor. Those 
f a c t o r s   a re   i n   p a r t i c u l a r   o u t p u t   a n d   i n p u t 
pr ices, the institutional contex t at national 
a n d   r e g i o n a l   l e v e l s ,   n a t i o n a l   o r   r e g i o n a l 
l a n d   p o l i c y,   s o c i a l   a n d   c u l t u ra l   h a b i t s,   e tc. 
Co m p a re d   t o   t h o s e   f a c t o r s   a n d   c o m p a re d 
to   o t h e r   t y p e s   o f   p u b l i c   s u p p o r t   ( co u p l e d 
a i d   t o   p r o d u c t i o n   q u a n t i t y,   c o u p l e d   a i d 
t o   l i v e s t o c k   o r   c r o p,   i n t e r v e n t i o n   p r i c e s ) , 
d e c o u p l e d   p a y m e n t s   h a v e   a   m u c h   l o w e r 
impac t.

T h e   m a i n   o b j e c t i v e   o f   d e c o u p l i n g   i s   m a r -
k e t   o r i e n t a t i o n   a n d ,   i n   g e n e r a l ,   f a r m e r s , 
a s   e n t r e p r e n e u r s ,   a r e   a c t i v e l y   f a r m i n g   i n 
o rd e r   to   g e n e rate   a n   i n co m e   f ro m   t h e   s e l -
l i n g   o f   t h e i r   p r o d u c t s   a n d   p o s s i b l y   o t h e r 
ac tiv ities.

Th e   we i g h t   o f   d e co u p l e d   p ay m e n t s   i n   t h e 
p ro d u c t i o n   c h o i ce s   o f   f a r m e r s   i s   s u c h   t h at 
f a r m e r s   w i l l   p ro d u ce   a s   l o n g   a s   i t   i s   p ro f i -
table. The decision not to produce is also a 
m a r k e t- o r i e nte d   b e h av i o u r   i f   va r i a b l e   p ro -
duc tion  costs are n ot  covered.

6 Swinnen, J., Ciaian, P.  and Kancs, D., ‘Study on the functioning 
of land markets in the EU Member States under the influence of 

measures applied under the common agricultural policy’, Brussels, 

2008.

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3 1.
I t   i s   w i t h i n   t h e   p r i n c i p l e s   o f   t h e   S P S   t h a t 
t h e   b e n e f i c i a r i e s   e x e r c i s e   a n   a g r i c u l t u r a l 
a c t i v i t y   w h i c h   m e a n s   a t   l e a s t   k e e p i n g   t h e 
l a n d   i n   G A E C ,   a s   i t   i s   d e f i n e d   i n   t h e   re g u -
l a t i o n s .   T h e r e   i s   n o   m e a s u r e m e n t   o f   t h e 
degree or intensit y of such ac tivit y as long 
as t he G AE C have  bee n respec ted. 

H o we ve r,   w h e n   d i s c u s s i n g   f u r t h e r   t a r g e t -
i n g   d u r i n g   t h e   H e a l t h   C h e c k ,   t h e   C o u n c i l 
co n s i d e re d   t h at   f l ex i b i l i t y   s h o u l d   b e   gi ve n 
t o   M e m b e r   S t a t e s   t o   c o n s i d e r,   i n   a c c o r d -
a n c e   w i t h   t h e   p r i n c i p l e   o f   s u b s i d i a r i t y 
a n d   a c c o r d i n g   t o   t h e i r   s p e c i f i c   e c o n o m i c 
realities, which are the r ight parameters to 
b e   t a k e n   i n t o   a c c o u n t   fo r   t h e   a p p l i c a t i o n 
o f   t h i s   p o s s i b i l i t y   ( t o   e xc l u d e   f r o m   d i r e c t 
p a y m e n t s  ‘n a t u r a l   o r   l e g a l   p e r s o n s   w h o s e 
agr icultural ac tivities for m only an insigni -
f i c a nt   p a r t   o f   t h e i r   ove ra l l   e co n o m i c   a c t i v -
i t i e s   o r   w h o s e   p r i n c i p a l   b u s i n e s s   o r   c o m -
p a ny   o b j e c t s   d o   n o t   c o n s i s t   o f   e xe r c i s i n g 
an  agr icultural  ac t ivit y ’).

M e m b e r   S t a t e s   d i d   n o t   m a k e   u s e   o f   t h e 
o p t i o n   t o   e x c l u d e   b e n e f i c i a r i e s   p r o v i d e d 
f o r   b y   A r t i c l e   2 8 . 2   o f   C o u n c i l   R e g u l a t i o n 
( EC ) N o 73 /2 0 09. 

The question of effec tive targeting is taken 
u p   i n   t h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e 
C A P,   w h e r e   t h e   C o m m i s s i o n   i s   s e e k i n g   a 
s o l u t i o n   i n   c l o s e   d i a l o g u e   w i t h   t h e   M e m -
b e r   S t a t e s .   P o s s i b l e   c r i t e r i a   a r e   b e i n g 
a s s e s s e d   w i t h   a   v i e w   t o   a c h i e v i n g   t h e 
t a r g e t i n g   i n t e n d e d   w h i l e   r e s p e c t i n g   t h e 
objec tive of t he aid scheme.

29.
T h e   s p i r i t   o f   t h e   r e f o r m   w a s   t o   d e c o u p l e 
a i d s   f r o m   p r o d u c t i o n .   B e n e f i c i a r i e s   h a v e 
the r ight for payment of their entitlements 
as lon g as t he land  is at l eas t ke p t i n GAE C 
and  not b ased o n p rodu c tion o b l i g ati on s. 

I f   t h e   l a n d   i s   p re d o m i n a nt l y   u s e d   fo r   n o n -
a g r i c u l t u r a l   a c t i v i t i e s ,   i t   i s ,   h o w e v e r,   n o t 
eligible and cannot be used for the ac tiva-
tion of payme nt  entitl ements.

Ca s e s   o f   s u p p o r t   to   l a n d   w h e re   t h e   p re d o -
m i n a n t   a c t i v i t y   w a s   n o n - a gr i c u l t u ra l   h ave 
been  su bj ec t  to  finan cial  co r rec t i o n .

A s   m e n t i o n e d   i n   t h e   c o m m u n i c a t i o n   o n 
t h e   f u t u r e   C A P,   t h e   d e f i n i t i o n   o f   e l i g i b l e 
f a r m e r s   i s   c u r r e n t l y   u n d e r   s c r u t i n y   t o 
ach ieve a  b et ter target ing of  S PS  aid.

30.
G enerally, the tradabilit y of entitlements is 
a n   i m p o r t a n t   fe a t u r e   o f   t h e   S P S   a n d   w i t h 
r e g a r d   t o   a c t i v a t i o n   n o   l i n k   i s   i m p o s e d 
b e t we e n   t h e   va l u e   o f   t h e   p ay m e nt   e nt i t l e -
m e nt s   a n d   t h e   va l u e   o f   t h e   l a n d.   H ow e ve r, 
M e m b e r   S t a t e s   h a v e   t h e   p o s s i b i l i t y   t o 
l i m i t   t h e   t ra n s fe r   o f   e nt i t l e m e nt s   b e t we e n 
regions where t hey  see it as  nece s s ar y. 

I n   a d d i t i o n ,   w h e r e a s   t h e   d i f f e r e n t   v a l u e s 
of entitlements under the histor ical model 
a re   l i n k e d   to   t h e   a i d   p a i d   i n   t h e   re fe re n ce 
p e r i o d ,   t h e   t r a n s a c t i o n s   t h a t   t a k e   p l a c e 
will nor mally reflec t the economic value of 
th e land an d the entitl eme nts.

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32.
T h e   E U   t e r r i t o r y   c o v e r s   a   w i d e   r a n g e   o f 
d i f fe re nt   a gr i c u l t u ra l   s t r u c t u re s   a n d   d i f fe -
re nt   co n d i t i o n s   fo r   f a r m i n g.   I n   t h e   l i g ht   o f 
t h i s,   M e m b e r   S t a t e s   i n s i s t e d   o n   r e t a i n i n g 
a   c e r t a i n   d i s c r e t i o n a l   m a r g i n   a s   r e g a r d s 
t h e   i m p l e m e nt at i o n   o f   t h e   S P S   i n   o rd e r   to 
take measures which can mitigate possible 
adverse e ffe c t s fro m the d ecou p l i ng.

M o r e o v e r,   t h e   v a r i o u s   o p t i o n s   p r o v i d e d 
allow M ember States to adapt to their own 
specificities.

35.
T h o u g h   a l l   M e m b e r   S t a t e s   w i t h   S P S   s h a l l 
o p e r a t e   a   n a t i o n a l   r e s e r v e ,   t h e   a m o u n t 
availa ble  ( wit hin   l imits )  and   the  u s e   o f  t he 
national reser ve for new farmers are, in the 
spir it of subsidiar it y, better decided at the 
level of the M em ber States.

3 6.
T h e   i m p l e m e n t i n g   r u l e s   f o r   t h e   S P S   p r o -
v i d e   d e t a i l e d   a n d   p r e c i s e   d e f i n i t i o n s   o f 
a r a b l e   l a n d,   p e r m a n e n t   p a s t u re s   a n d   p e r-
m a n e n t   c r o p s   w h i c h   m u s t   b e   r e s p e c t e d . 
T h e r e   a r e   a l s o   l e g a l   p r o v i s i o n s   l a y i n g 
d o w n   r u l e s   a s   r e g a r d s   a r e a s   w i t h   t r e e s   o r 
w i t h   l a n d s c a p e   fe at u re s.   Fu r t h e r m o re,   t h e 
C o m m i s s i o n   s e r v i c e s   h a v e   i s s u e d   g u i d e -
l i n e s   fo r   e a c h   c l a i m   y e a r   ( Wi k i C a p )   w h i c h 
c a n   h e l p   M e m b e r   S t a t e s   d e f i n i n g   c l e a r 
a n d   u n d e r  s t a n d a b l e   m e t h o d s   to   d e a l   w i t h 
a re a s   w h i c h   a re   m o re   m a rgi n a l   i n   o rd e r   to 
e n s u r e   t h a t   p a y m e n t s   a r e   o n l y   m a d e   f o r 
t h e   e l i g i b l e   p a r t   a n d   n o t   f o r   a r e a s   w i t h 
forest.

M o re ove r,   f a r m e r s   c l a i m i n g   fo r   d i re c t   p ay -
ments  are always obliged to res pe c t  c ro ss-
c o m p l i a n c e   a n d   t h e   G A E C   o n   t h e   e n t i r e 
h oldin g. 

Eve n   i f   i t   i s   a n   o p t i o n ,   t h e   f a c t   t h at   1 2   o u t 
o f   t h e   1 7   M e m b e r   S t ate s   a p p l y i n g   t h e   S P S 
have made use of the provisions regarding 
t h e   u s e   o f   t h e   n a t i o n a l   r e s e r v e   i n   f a v o u r 
o f   n e wco m e r s   s h ows   t h at   t h e   o b j e c t i ve   to 
i nte grate   n e w   f a r m e r s   i nto   t h e   s ys te m   wa s 
s u cce s s f u l l y   i m p l e m e nte d.  Th i s   i s   a   l o gi c a l 
c o n s e q u e n c e   o f   M e m b e r   S t a t e s '   i n t e n t i o n 
o f   a s s u r i n g   t h e   r e l a y   o f   n e w   g e n e r a t i o n s 
into their agr ic ult ural  sec tors.

3 7.
T h e   r e s p o n s i b i l i t y   f o r   d e f i n i n g   t h e   s t a n -
d a r d s   f o r   G A E C   r e s t s   w i t h   t h e   M e m b e r 
S t a t e   s i n c e   t h e   s p e c i f i c   c h a r a c t e r i s t i c s   o f 
t h e   a re a s   co n ce r n e d   n e e d   to   b e   t a k e n   i nto 
a c c o u n t .   C o n s e q u e n t l y,   w h e t h e r   t h e   l a n d 
i s   i n   G A E C   o r   n o t   d e p e n d s   o f   t h e   d e f i n i -
t i o n   s e t   u p   by   t h e   M e m b e r   St ate   a n d   d o e s 
n o t   n e ce s s a r i l y   e nt a i l   a n   i nte n s i ve   a c t i v i t y 
from t he far mer.

The other option for new far mers who wish 
to   re ce i ve   S P S   p ay m e nt s   i s   to   b u y   o r   l e a s e 
p a y m e n t   e n t i t l e m e n t s ,   w i t h   o r   w i t h o u t 
l a n d .   Tr a n s f e r   o f   e n t i t l e m e n t s   i s   a   b a s i c 
pr inciple o f the  f unc tio ning o f t h e  SP S . 

Acce s s   to   t h e   m a r k e t   fo r   p ay m e n t   e n t i t l e -
m e n t s   i s   i n   g e n e r a l   g o o d .   A   t r a n s p a r e n t 
m a r k e t   fo r   p a y m e n t   e n t i t l e m e n t s   e n s u re s 
a n   e f f i c i e n t   a l l o c a t i o n   o f   e n t i t l e m e n t s 
among f ar me rs.

When far mers are not respec ting the rules, 
f o r   e x a m p l e   n o t   c a r r y i n g   o u t   t h e   m i n i -
m u m   a c t i v i t y   r e q u i r e d ,   t h e   e l i g i b i l i t y   f o r 
a n   S P S   p a y m e n t   o n   t h e   c o n c e r n e d   p a r c e l 
is question ed and where appropr iate M em-
b e r   St ate s   m u s t   a p p l y   re d u c t i o n s   o r   exc l u -
s i o n   o n   t h i s   p a r c e l .   M o r e o v e r   t h e   b r e a c h 
o f   G A E C   r u l e s   e n t a i l s,   w h e r e   a p p r o p r i a t e, 
re d u c t i o n s   a n d   e xc l u s i o n s   o f   a l l   C A P   p a y -
m e n t s   r e c e i v e d   b y   t h e   f a r m e r   s u b j e c t   t o 
c r o s s - c o m p l i a n c e .  T h e   r i s k   f o r   t h e   f a r m e r 
is t herefore n ot  mode rate but signif i cant. 

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3 8.
Cer t ain  ac tivities  falling  outside   t h e  dire c t 
s c o p e   o f  ‘a g r i c u l t u r a l   a c t i v i t i e s ’  a r e   f u l l y 
c o m p a t i b l e   w i t h   a g r i c u l t u r e   a n d   s h o u l d 
n o t   l e a d   t o   t h e   i n e l i g i b i l i t y   o f   t h e   a r e a . 
This concer ns for instance temporar y spor -
t i n g   a c t i v i t i e s.  T h e   i m p l e m e n t i n g   r u l e s   i n 
A r t i c l e   9   o f   C o m m i s s i o n   R e g u l a t i o n   ( E C ) 
No 1120/2009 set clear objec tives and give 
g u i d a n ce   to   t h e   M e m b e r   S t ate s   o n   h ow   to 
def ine t he de tailed cr iter ia for  t h i s  r ule.

3 9.
T h e   p r i n c i p l e   o f   c o n s o l i d a t i o n ,   a s 
d e  s c r i b e d   i n   A r t i c l e   7   a n d   r e c i t a l   6   o f 
Co m m i s s i o n   R e g u l a t i o n   ( E C )   N o   7 9 5 / 2 0 0 4 
a n d   c u r re nt l y   i n   Ar t i c l e   1 8   a n d   re c i t a l   8   o f 
Commission R egulation (EC ) No 1120/2009, 
s t a t e s   t h a t   w h e n   a   f a r m e r   h a s   f e w e r   h e c -
t a r e s   t h a n   e n t i t l e m e n t s   h e   c a n   a p p l y , 
u n d e r   c e r t a i n   c o n d i t i o n s ,   f o r   c o n s o l i d a -
t i o n .   I n   t h a t   c a s e   h e   h a s   t o   r e t u r n   a l l   h i s 
e n t i t l e m e n t s   t o   t h e   n a t i o n a l   r e s e r v e   a n d 
w i l l   g e t   i n   r e t u r n   e n t i t l e m e n t s   f r o m   t h e 
n a t i o n a l   r e s e r v e   t h a t   c o r r e s p o n d   t o   t h e 
t o t a l   v a l u e .   T h e   f a r m e r   h a s   t o   d e c l a r e   a l l 
h e c t a re s   at   t h e   t i m e   o f   t h e   re q u e s t,   w h i c h 
h e will h ave to  keep in GAE C.

Th e   c a s e s   m e nt i o n e d   by   t h e   Co u r t   s u i t   t h e 
o b j e c t i v e s   o f   c o n s o l i d a t i o n   f o r   t h o s e   f a r -
m e r s   u n d e r g o i n g   t h e   e f fe c t s   o f   a ny   i n t e r -
v e n t i o n ,   n a m e l y   t o   p r o t e c t   t h e i r   i n c o m e 
level.

4 0.
T h e   C o m m i s s i o n   h a s   o n l y   a c c e p t e d   c a s e s 
o f   c o n s o l i d a t i o n   c o v e r e d   b y   t h e   l e g i s l a -
tion. This issue is pursued in the contex t of 
th e clearance  of accounts.

B ox 	4
B o t h   o b j e c t i v e s   o f   a g r i c u l t u r a l   c o n d i t i o n 
a n d   e nv i ro n m e nt a l   co n d i t i o n   u n d e r l i e   t h e 
G A E C   c o n c e p t .   T h e r e f o r e ,   t h e   d e f i n i t i o n 
o f   n a t i o n a l   s t a n d a r d s   b y   M e m b e r   S t a t e s 
does not necessar ily entail that an ac tivit y 
a i m i n g   a t   m a i n t a i n i n g   o r   i n c r e a s i n g   t h e 
a g r i c u l t u r a l   p r o d u c t i o n   i s   e x p e c t e d   f r o m 
t h e   f a r m e r.   N a t i o n a l   G A E C   s t a n d a r d s   m a y 
solely foresee prohibitions of cer tain prac -
t i c e s   d e t r i m e n t a l   f o r   t h e   p u r p o s e   o f   t h e 
GAEC.

T h e   C o u r t   l i n k s   a l s o   t h e   q u e s t i o n   o f   e l i -
g i b l e   a r e a s   t o   t h e   q u e s t i o n   o f  ‘a c t i v e   f a r-
mer ’. I n the discussion on the future of the 
C A P   i t   i s   c o n s i d e r e d   t o   d e f i n e   t h e   a c t i v e 
f a r m e r   w i t h   a   v i e w   to   a c h i e ve   a   b e t te r   t a r-
get ing of t he aid.

B ox 	4	—	 S pan ish	exa m ple
Questions concerning eligibilit y of wood ed 
a n d   ro c k y   m o u n t a i n   gr a z i n g   l a n d   a re   p u r -
s u e d   i n   t h e   c o n t e x t   o f   t h e   c l e a r a n c e   o f 
account s.

Joint	reply 	to	the 	t wo	I ta lia n	exa mp les
T h e   I t a l i a n   a u t h o r i t i e s   h a v e   u n d e r  t a k e n 
t o   u p d a t e   t h e i r   L P I S   a n d   t o   r e v i e w   t h e 
p r o - r a t a   d i s t r i b u t i o n .   Fu r t h e r m o r e ,   i t   i s 
f o r e s e e n   t h a t   u n d u e   p a y m e n t s   w i l l   b e 
re  cove re d   i n   a cco rd a n ce   w i t h   Ar t i c l e   8 0   o f 
Commission R egulation (EC ) No 1122/2009. 
S i m i l a r   c a s e s   h ave   b e e n   i d e n t i f i e d   d u r i n g 
Co m m i s s i o n   a u d i t s   a n d   a re   fo l l owe d   u p   i n 
th e contex t o f the cl earance o f accou nt s.

B ox 	4	—	 Fre nc h	exa m ple
T h e   e l i g i b i l i t y   i s s u e s   r e f e r r e d   t o   b y   t h e 
C o u r t   a r e   p u r s u e d   i n   t h e   c o n t e x t   o f   t h e 
clearance  of  accounts.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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4 2.
T h e   i n d i v i d u a l   l e v e l   o f   d e c o u p l e d   d i r e c t 
s u p p o r t   t h a t   f a r m e r s   r e c e i v e   i n   t h e   E U   i s 
b a s e d   o n   p r o d u c t i o n   a n d   s u p p o r t   l e v e l s 
d u r i n g   a   h i s to r i c   re fe re n ce   p e r i o d.   H e n ce, 
the cur rent distr ibution of direc t payments 
b e t w e e n   f a r m s   i s   a   r e f l e c t i o n   o f   t h e   f a c t 
that agr icultural land and agr icultural pro -
d u c t i o n   a re   n o t   s h a re d   e q u a l l y   a m o n g   t h e 
far ms in t he E U.

H o w e v e r,   a s   t h e   r e fe r e n c e   p e r i o d   fo r   c u r -
r e n t   s u p p o r t   i s   g e t t i n g   m o r e   d i s t a n t ,   i t 
b e c o m e s   m o r e   d i f f i c u l t   t o   j u s t i f y   a n d   a 
r e d i s t r i b u t i o n   o f   s u p p o r t   b e t w e e n   M e m -
b e r   St ate s   a n d   b e t we e n   f a r m e r s   s h o u l d   b e 
c o n s i d e r e d .   T h i s   h a s   b e e n   a c k n o w l e d g e d 
i n   t h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
a n d   w i l l   b e   f u r t h e r   e x a m i n e d ,   a s   w e l l   a s 
t h e   p o s s i b i l i t y   o f   i n t r o d u c i n g   a   s p e c i f i c 
sch eme for small far mers.

4 3.
O n e   o f   t h e   a i m s   o f   d i r e c t   p a y m e n t s   i s   t o 
p r o v i d e   a   b a s i c   i n c o m e   s u p p o r t   t o   f a r m s 
( S P S   r e p r e s e n t s   a b o u t   4 5   %   o f   f a r m e r s ' 
a gr i c u l t u ra l   i n co m e )   a n d   t h u s   to   k e e p   s u s-
t a i n a b l e   f a r m i n g   i n   p l a c e   t h r o u g h o u t   t h e 
E U .   I n d e e d   t h e   e n t r e p r e n e u r i a l   i n c o m e 
p e r   wo r k e r   e m p l oye d   i n   a gr i c u l t u re   i n   t h e 
E U - 2 7   wa s   e s t i m ate d   to   b e   a ro u n d   5 8   %   o f 
th e E U average wage in  200 8 .

T h e   C o u r t   n o t e s   t h a t   S P S   i s   p a i d   t o   p a r t -
t i m e   f a r m e r s ,   p a r t   o f   w h o s e   i n c o m e   d o e s 
n o t   co m e   f ro m   f a r m i n g   a c t i v i t y.   M o re   p re -
cisely, the SPS is linked to far ming and not 
to   t h e   l e ve l   o f   h o u s e h o l d   i n co m e.   D i ve r s i -
f i c a t i o n   o f   a c t i v i t i e s   i s   a   v a l u a b l e   a l te r n a -
tive to limited growth oppor tunities within 
t h e   f a r m   s e c t o r   a n d   c o n t r i b u t e s   t o   m a i n -
t a i n i n g   f a r m i n g   i n   a re a s   w h e re   a gr i c u l t u re 
is socially an d environ mentally  valuabl e.

B ox 	5
S ee Commissio n rep ly  to  p oint  4 0 .

41.
I n   g e n e r a l   t h e   c o n s o l i d a t i o n   p r o v i s i o n s 
a re   a p p l i c a b l e   to   s i t u at i o n s   w h e re   t h e   f a r -
m e r   h a s   l o s t   l a n d   d u e   t o   v a r i o u s   j u s t i f i e d 
re a s o n s   ( a   re s t r u c t u r i n g   o r   a   d e ve l o p m e nt 
programme) and which would in case of no 
c o n s o l i d a t i o n   a f f e c t   h i s   i n c o m e   s u p p o r t 
n e g a t i v e l y.  T h e   t o o l   t o   m a i n t a i n   t h e   s u p -
p o r t   l e v e l   o f   t h e   f a r m e r   i s   t h e   c o n s o l i d a -
tion of the payment entitlements since the 
s u p p o r t   i s   p a i d   i n   re s p e c t   o f   t h e   p ay m e n t 
entitleme nt s and not  fo r the are a a s  su c h. 

T h e   c o n s o l i d a t i o n   s h o u l d   n o t   a f f e c t   t h e 
p o s s i b i l i t y   o f   n e i g h b o u r i n g   f a r m e r s   t o 
r e c e i v e   a n d   a c t i v a t e   e n t i t l e m e n t s   f o l -
l o w i n g   t h e   r u l e s   a p p l i c a b l e   i n   a   g i v e n 
M ember St ate.

I t   r e m a i n s   h o w e v e r   t h e   r e s p o n s i b i l i t y   o f 
t h e   M e m b e r   S t a t e s   t o   e n s u r e   t h e   r i g h t 
applicatio n of  the r ul es.

F o r   h o l d i n g s   r e c e i v i n g   C A P   p a y m e n t s , 
t h e   a r e a   w h i c h   i s   n o t   u s e d   f o r   a c t i v a t i n g 
p a y m e n t   e n t i t l e m e n t s   i s   a l s o   i n   a n y   c a s e 
c o v e r  e d   b y   G A E C   o b l i g a t i o n s ,   t h e r e f o r e 
prevent ing l and ab andonment.

I s s u e s   o f   c o n s o l i d a t i o n   ( o t h e r   t h a n   t h e 
o n e   re fe r re d   to   i n   Ar t i c l e   7   o f   Co m m i s s i o n 
R egulation (EC ) No 795/2004 and cur rently 
i n   A r t i c l e   1 8   o f   C o m m i s s i o n   R e g u l a t i o n 
( E C )   N o   1 1 2 0 / 2 0 0 9 )   d u r i n g   t h e   a l l o c a -
t i o n   o f   p a y m e n t   e n t i t l e m e n t s   h a v e   b e e n 
a u d i t  e d   a n d   a r e   fo l l o w e d   u p   i n   t h e   c l e a r -
a n ce   o f   a cco u nt s   p ro ce d u re.   Fi n a n c i a l   co r -
rec tion s are p ro p o sed.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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4 5.
T h e   i n d i v i d u a l   l e v e l   o f   d e c o u p l e d   d i r e c t 
s u p p o r t   t h a t   f a r m e r s   r e c e i v e   i n   t h e   E U   i s 
b a s e d   o n   p r o d u c t i o n   a n d   s u p p o r t   l e v e l s 
dur ing a histor ic reference per iod. This was 
c r u c i a l   f o r   b e i n g   a b l e   t o   m o v e   t o   a l m o s t 
f u l l   d e c o u p l i n g   o f   d i r e c t   s u p p o r t   w i t h i n 
o n l y   a   fe w   ye a r s.   H e n ce,   t h e   c u r re nt   d i s t r i -
b u t i o n   o f   d i re c t   p a y m e n t s   b e t we e n   f a r m s 
i s   a   re f l e c t i o n   o f   t h e   f a c t   t h a t   a gr i c u l t u ra l 
l a n d   a n d   a g r i c u l t u r a l   p r o d u c t i o n   a r e   n o t 
sh ared equally amon g t he far ms  i n  th e  E U.

T h e   i s s u e   o f   r e d i s t r i b u t i o n   o f   d i r e c t   s u p -
p o r t   b e t we e n   f a r m e r s   a n d   M e m b e r   S t a t e s 
—   a c c o r d i n g   t o   i t s   o b j e c t i v e s   o f   b a s i c 
i n co m e   s u p p o r t   a n d   b a s i c   s u p p o r t   to   p ro -
vision of public goods — will be addressed 
i n   t h e   c o n s i d e r a t i o n s   o n   t h e   f u t u r e   C A P. 
Th i s   i m p l i e s   a l s o   re f l e c t i o n s   o n   a   p o s s i b l e 
c a p p i n g   o f   h i g h   s u p p o r t   a m o u n t s   a s   w e l l 
a s   t h e   p o s s i b i l i t y   o f   g r a n t i n g   a   s p e c i f i c 
suppor t to small f ar m ers. 

4 6.
The current distribution of direc t payments 
a m o n g   f a r m s   i s   s i m p l y   a   r e f l e c t i o n   o f   t h e 
f a c t   t h at   a gr i c u l t u ra l   l a n d   a n d   a gr i c u l t u ra l 
p ro d u c t i o n   a re   n o t   s h a re d   e q u a l l y   a m o n g 
t h e   f a r m s   i n   t h e   E U .   T h i s   f a c t   o b v i o u s l y 
does not change with the introduc tion of a 
f l at- rate   p e r   h e c t a re   m o d e l   w h i c h ,   i n   a d d i -
t i o n ,   d o e s   n o t   m i r r o r   t h e   f a c t   t h a t   f a r m s 
f a c e   v e r y   d i f f e r e n t   e c o n o m i c   a n d   n a t u r a l 
cond itions ac ross th e EU.

T h e   o n l y   w a y   t o   h a v e   a n   e q u a l   s h a r e   o f 
d i re c t   p ay m e nt s   a m o n g   f a r m s   wo u l d   b e   to 
give the same direc t payment to each far m 
( i n   t h i s   c a s e   a   f a r m   o f   2   h e c t a r e s   w o u l d 
receive  th e  same  pay ment   as   a  f ar m   of   4 0 0 
hec tares whatever the labour, t ypes of pro-
duc tion , far m  in come, etc.) . 

44.
T h e   n e e d   f o r   b a s i c   i n c o m e   s u p p o r t   o f 
‘ l a r g e   f a r m s ’  s h o u l d   n o t   b e   c o n s i d e r e d 
t o   b e   s y s t e m a t i c a l l y   l o w e r   t h a n   t h o s e   o f 
o t h e r   f a r m s   a s   i n co m e   i n   g e n e ra l   d e p e n d s 
strongly on t ypes of produc tion, input and 
ou tput  co st s,  far m l ab o ur,  etc. 

I n   a d d i t i o n ,   S P S   i s   p a i d   o n   t h e   b a s i s   o f 
e nt i t l e m e nt s   a s s o c i a te d   w i t h   t h e   e q u i v a -
l e n t   n u m b e r   o f   e l i g i b l e   h e c t a r e s .   T h e i r 
v a l u e   a n d   n u m b e r   w e r e   c a l c u l a t e d ,   u s i n g 
h i s t o r i c a l   r e f e r e n c e s   o f   p r o d u c t i o n   a n d 
s u r f a c e s   ( f o r   t h e   l a t t e r   i n   t h e   h i s t o r i c 
model only) so as to ensure a smooth tran -
sition  towards  decou p l ing. 

N e v e r t h e l e s s ,   t h e   i s s u e   o f   d i s t r i b u t i o n 
b e t w e e n   l a r g e s t   a n d   s m a l l e s t   f a r m s   h a s 
b e e n   r a i s e d   s e v e r a l   t i m e s   a n d   i t   w a s 
assessed dur ing the Health Check in 2008 7. 
T h e   C o m m i s s i o n   p r o p o s e d   a   p r o g r e s s i v e 
m o d u l a t i o n   o f   d i r e c t   p a y m e n t s   w h i c h 
w o u l d   h a v e   r e d u c e d   p a y m e n t s   b e l o w 
1 0 0   0 0 0   e u r o   b y   8   % ,   p a y m e n t s   b e l o w 
2 0 0   0 0 0   e u r o   b y   1 1 % ,   p a y m e n t s   b e l o w 
300 0 00 euro  by  13 % and p ay me nt s  above 
3 0 0   0 0 0   e u r o   b y   1 7   %   ( f i g u r e s   f o r   2 0 1 2 ) . 
T h e   C o u n c i l   f i n a l l y   o p t e d   f o r   a   r e d u c t i o n 
o f   1 0   %   i n   a l l   p ay m e n t s   a n d   a n   a d d i t i o n  a l 
r e d u c t i o n   o f   4   %   f o r   s u p p o r t   a b o v e 
3 0 0   0 0 0   e u r o .   I n   t h e   c o m m u n i c a t i o n   o n 
the future C AP the Commission announced 
t h a t   i t   w i l l   a s s e s s   t h e   p o s s i b i l i t y   o f   i n t ro -
ducing  a  sp ecific   sc heme  for  s ma l l   f ar me r s 
a n d   t h e   c a p p i n g   o f   p a y m e n t s   o f   l a r g e s t 
beneficiar ies. 

7 Communication from the Commission to the European 
Parliament and the Council ‘Preparing for the ‘Health Check’ of 

the CAP reform’ of 20.11.2007, COM(2007) 722 final, p. 5: ‘(…) if a 

solution is to be found, it would be in a model where the support 

level is gradually reduced as overall payments to the individual 

farmer increase, while retaining some support even at high overall 

payment levels (by way of example: payments above 100 000 euro 

reduced by 10 %, above 200 000 euro reduced by 25 %, and above 

300 000 by 45 %)’.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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T h e   i s s u e   o f   c o s t s   f o r   f a r m e r s   o f   c o m -
p l i a n c e   w i t h   l e g i s l a t i o n   o n   e n v i r o n m e n t , 
f o o d   s a f e t y   a n d   a n i m a l   w e l f a r e   i s   o f t e n 
 r a i s e d ,   a n d   a   s t u d y   a s s e s s i n g   t h e s e   c o s t s 
h a s   b e e n   r e q u e s t e d   b y   t h e   E u r o p e a n   Pa r -
l i a m e n t   a n d   i s   u n d e r   w a y.   H o w e v e r,   t h e 
l e v e l   o f   t h e   S P S   i s   i n d e p e n d e n t   o f   t h e s e 
co s t s   a s   i t   s h o u l d   n o t   co m p e n s ate   f a r m e r s 
f o r   r e s p e c t i n g   t h e   l a w   a n d   m u s t   r e m a i n 
‘green  box ’  com patible. 

The communication on the future C AP out-
l i n e s   t h e   i n t e n t i o n   o f   t h e   C o m m i s s i o n   t o 
a s s e s s   p o s s i b i l i t i e s   fo r   a   f u r t h e r  ‘gre e n i n g’ 
of th e fir st pillar.

5 2.
The reduc tions laid down in the EU legisla-
tion for the cross- compliance system range 
i n   p r i n c i p l e   f r o m   1 %   t o   1 0 0 % ,   w h i c h   i s 
n o t   n e g l i g i b l e.  T h e   f a r m s   a re   s e l e c t e d   fo r 
c h e c k i n g   o n   a   r i s k   b a s i s ,   w h i c h   i n c r e a s e s 
t h e   e f f i c i e n c y   o f   t h e   s a m p l i n g .   T h e   C o m -
m i s s i o n   a u d i t s   t h e   i m p l e m e n t a t i o n   o f   t h e 
c r o s s - c o m p l i a n c e   s y s t e m   b y   t h e   M e m b e r 
S t a t e s   a n d   f o l l o w s   u p   w e a k n e s s e s   f o u n d , 
s u c h   a s   i n c o r r e c t   a p p l i c a t i o n   o f   r e d u c -
tions, under the clearance of accounts pro -
cedure.

5 3.
T h e   l i n k   b e t w e e n   d i r e c t   p a y m e n t s   a n d 
c r o s s - c o m p l i a n c e   c o n d i t i o n s   c o n t r i b u t e s 
t o   t h e   p r o v i s i o n   o f   b a s i c   p u b l i c   g o o d s 
b y   a g r i c u l t u r e .   S P S   i n c o m e   s u p p o r t   a l s o 
c o n t r i b u t e s   t o   t h e   m a i n t e n a n c e   o f   a 
v i b ra nt   a gr i c u l t u ra l   s e c to r   t h ro u g h o u t   t h e 
EU. I ndeed this is par ticular ly shown in the 
study  on public goods of th e  IEE P 9.

9 See footnote 3.

I t   i s   h o w e v e r   a c k n o w l e d g e d   t h a t ,   a s 
adjustments of all sec tors have taken place 
and as 12 more M ember States have joined 
t h e   E u r o p e a n   U n i o n   w i t h   a   s u b s t a n t i a l l y 
d i f fe re n t   p ro d u c t i o n   a n d   s u p p o r t   h i s t o r y, 
t h e   d i f f e r e n c e s   i n   s u p p o r t   l e v e l s   c a n n o t 
be justified in the long ter m. This is one of 
the reasons why the issue of redistr ibution 
is a core issu e fo r the fu tu re of  th e   C AP. 

B ox 	6	
S e e   C o m m i s s i o n   r e p l i e s   t o   p o i n t s   4 5   a n d 
46.

47. –48.
T h e   C o u r t   n o t e s   t h a t   t h e r e   i s   a   c o n c e n -
t r a t i o n   o f   s u p p o r t   o n   a   s m a l l   n u m b e r 
o f   f a r m e r s .   A s   a l r e a d y   m e n t i o n e d   i n   t h e 
C o m m i s s i o n   r e p l y   t o   p o i n t   4 4 ,   t h i s   i s s u e 
w a s   a s s e s s e d   d u r i n g   t h e   H e a l t h   C h e c k   i n 
2 0 0 8 .   T h e   C o m m i s s i o n   h a s   a n n o u n c e d   i n 
th e  commu nicat ion  o n  th e  fut ure   C AP   t hat 
i t   w i l l   a s s e s s   o n c e   a g a i n   t h e   c a p p i n g   o f 
p ay m e n t s   o f   l a rg e s t   b e n e f i c i a r i e s   a n d   t h e 
introduc tion of a specific scheme for small 
far mers.

51.
T h e r e   i s   n o   q u a n t i f i e d   l i n k   b e t w e e n   S P S 
s u p p o r t   a n d   c o s t s   i n c u r r e d   i n   r e s p e c -
t i n g   g o o d   a g r i c u l t u r a l   a n d   e nv i ro n m e n t a l 
conditions. H istor ical references have thus 
b e e n   u s e d   t o   d e t e r m i n e   t h e   l e v e l   o f   a i d . 
T h e   S P S   i s   a n   a r e a - b a s e d   p a y m e n t   w h o s e 
m a i n   o b j e c t i ve   i s   to   p rov i d e   b a s i c   i n co m e 
s u p p o r t .   T h r o u g h   t h e   o b l i g a t i o n   t o   k e e p 
l a n d   i n   G A E C ,   t h e   S P S   c o n t r i b u t e s   t o   t h e 
p r o t e c t i o n   o f   n a t u r a l   r e s o u r c e s   t h u s   p r o -
v i d i n g   t h e   b a s i s   fo r   t h e   d e l i ve r y   o f   p u b l i c 
g o o d s   t h r o u g h   a g r i c u l t u r e.  T h i s   h a s   b e e n 
n o t e d   i n   p a r t i c u l a r   i n   t h e   s t u d y   o n   p u b l i c 
g o o d s   o f   t h e   I n s t i t u te   fo r   Eu ro p e a n   E nv i r -
on ment al Po lic y (IE EP) 8. 

8 See footnote 3.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

54.
The basic pr inciple of all SPS models is the 
s a m e :   d e c o u p l i n g.  T h e   l e v e l   o f   d i s c r e t i o n 
g i v e n   t o   M e m b e r   S t a t e s   a s   r e g a r d s   t h e 
a l l o c a t i o n   o f   e n t i t l e m e n t s   i s   j u s t i f i e d   b y 
t h e   d i v e r s i t y   o f   n a t i o n a l   o r   r e g i o n a l   s p e -
c i f i c i t i e s   a n d   b y   t h e   n e c e s s i t y   t o   f a c i l i -
t ate   t h e   w ay   fo r w a rd   tow a rd s   d e co u p l i n g. 
M e m b e r   S t a te s   h ave   a s s e s s e d   t h e   s p e c i f i c 
s i t u a t i o n   i n   t h e i r   a g r i c u l t u r a l   s e c t o r   a n d 
s e l e c te d   t h e   S P S   m o d e l   t h e y   d e e m   a p p ro -
p r i a t e   t o   b e t t e r   i m p l e m e n t   d e c o u p l i n g   i n 
view of  a  viab le  agr icul tu re.

T h i s   b e i n g   s a i d ,   t h e   n u m b e r   o f   m o d e l s 
i s   a c t u a l l y   l i m i t e d .   A s   a   r e s u l t   o f   c h o i c e s 
m a d e   i n   t h e   C o u n c i l   b y   M e m b e r   S t a t e s 
w h i c h   w a n t e d   t o   h a v e   a   l a r g e   c h o i c e 
o f   o p t i o n s   a n d   e x c e p t i o n s   i n   p a r t i c u -
l a r   a s   r e g a r d s   d e g r e e   o f   d e c o u p l i n g , 
t h e r e   i s   a   v a r i e t y   i n   i m p l e m e n t a t i o n ,   b u t 
t h i s   c o n c e r n s   v a r i a t i o n s   a n d   n o t   d i f f e -
r e n t   m o d e l s .   C o u n c i l   R e g u l a t i o n   ( E C )   N o 
7 3 / 2 0 0 9   c o n c e r n i n g   t h e   H e a l t h   C h e c k   h a s 
i n t ro d u c e d   f u r t h e r   d e c o u p l i n g   o f   p r a c t i c -
a l l y   a l l   s c h e m e s   a n d   h a s   g i v e n   t h e   p o s s i -
b i l i t y   t o   M e m b e r   S t a t e s   t o   s t e e r   t o w a r d s 
f l a t t e r   r a t e s   a n d   a   m o r e   r e g i o n a l i s e d   s y s-
t e m .   T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e 
C A P   a n n o u n c e d   t h a t   t h e   C o m m i s s i o n   w i l l 
a s s e s s   f u r t h e r   c h a n g e s   t o w a r d s   a   f l a t t e r 
rate  of payme nt.

57.
The choice of implementing model and the 
s c o p e   f o r   p a r t i a l   d e c o u p l i n g   a r e   t w o   d i f -
fe re n t   i s s u e s.  Th e   c h o i ce   o f   i m p l e m e n t i n g 
m o d e l   i s   l e s s   s i gn i f i c a nt   fo r   s i m p l i f i c at i o n 
th an t he rate o f decoup l ing. 

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COMMISSION

T h e   d i s c r e t i o n   w i t h   r e g a r d   t o   i m p l e m e n -
t a t i o n   g i v e n   t o   t h e   M e m b e r   S t a t e s   b y   t h e 
C o u n c i l   r e g u l a t i o n   d o e s   n o t   c o m p l i c a t e 
t h e   i m p l e m e n t a t i o n   i n   a   g i v e n   M e m b e r 
St ate   b u t   o n   t h e   co nt ra r y   gi ve s   t h at   M e m -
ber State the flexibilit y to choose the most 
appropr iate model. 

S i m p l i f i c a t i o n   o b t a i n e d   b y   d e c o u p l i n g 
s h o u l d   b e   c o m p a r e d   a g a i n s t   t h e   s i t u a -
t i o n   w h i c h   ex i s te d   b e fo re   t h e   i nt ro d u c t i o n 
o f   t h e   S P S .   T h e   f a c t   t h a t   m o s t   s c h e m e s 
we re   d e co u p l e d   a n d   m e rg e d   i n to   t h e   S P S , 
m e a n i n g   c l a i m s   a r e   n o w   m a d e   i n   a   s i n g l e 
application,  is  in  itself a simplif ic at ion .

Fu r t h e r   d e c o u p l i n g   a n d   o t h e r   e l e m e n t s 
o f   s i m p l i f i c a t i o n   h a v e   b e e n   p u r s u e d   w i t h 
t h e   H e a l t h   C h e c k   a n d   t h e   p r o c e s s   o f   s i m -
p l i f y i n g   t h e   C A P   w i l l   b e   c o n t i n u e d   i n   t h e 
f r a m e w o r k   o f   t h e   d i s c u s s i o n   o n   t h e   C A P 
post-2 01 3.

5 8.
T h e   C o m m i s s i o n   d o e s   n o t   a g r e e   t h a t   S P S 
i s   a   p o o r l y   t a r g e t e d   m e t h o d   t o   p r o v i d e 
i n c o m e   s u p p o r t .  T h e   i s s u e   o f   t a r g e t i n g   i s 
n o t   l i n k e d   t o   t h e   d i f f e r e n t   i m p l e m e n t i n g 
options.

Th e   l e ve l   o f   d e co u p l e d   d i re c t   s u p p o r t   t h at 
f a r m e r s   re ce i ve   i n   t h e   E U   i s   b a s e d   o n   p ro -
d u c t i o n   a n d   s u p p o r t   l e v e l s   d u r i n g   a   h i s -
to r i c   re fe re n ce   p e r i o d   o r   i n   t h e   c a s e   o f   t h e 
regional model on the areas on a histor ical 
r e f e r e n c e   d a t e .   H e n c e ,   t h e   c u r r e n t   d i s t r i -
b u t i o n   o f   d i re c t   p a y m e n t s   b e t we e n   f a r m s 
i s   s i m p l y   a   re f l e c t i o n   o f   t h e   f a c t   t h at   a gr i-
c u l t u r a l   l a n d   a n d   a g r i c u l t u r a l   p r o d u c t i o n 
a r e   n o t   s h a r e d   e q u a l l y   a m o n g   t h e   f a r m s 
i n   t h e   E U.  T h i s   s i t u a t i o n   d o e s   n o t   c h a n g e 
the fac t that the SPS has already proven its 
effec t iven ess as a me th od to provid e basic 
in com e suppor t. 

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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REPLY OF THE 
COMMISSION

6 3.
Tr a d a b i l i t y   o f   e n t i t l e m e n t s   i s   a   k e y   e l e -
m e n t   o f   t h e   S P S .   Fu r t h e r m o r e ,   t o   r e f l e c t 
t h e   d e c o u p l e d   c h a r a c t e r   o f   t h e   s c h e m e , 
there is no requirement to link the entitle -
ments to cer tain areas. Regional restric tion 
of  th e  trans fer   of  entitlements  is  th erefore 
n o t   a   c o m p u l s o r y   p r o v i s i o n   e v e n   i f   M e m -
ber States have the possibilit y to make use 
of it.

6 4.
Fa r m e r s   c a n   a c q u i r e   a d d i t i o n a l   p a y m e n t 
entit lements from ot her far me rs. Howe ve r, 
t o   i n c r e a s e   t h e i r   l e v e l   o f   a i d ,   t h e y   m u s t 
h a v e   a d d i t i o n a l   p a r c e l s   o f   e l i g i b l e   a g r i -
c u l t u ra l   a re a s   i n   o rd e r   to   g e t   t h e   p ay m e nt 
from t he add itional ent itle me nt s.

6 6.
S e e   C o m m i s s i o n   r e p l i e s   t o   p o i n t s   6 3   a n d 
6 4.

P a y m e n t   e n t i t l e m e n t s   c a n   o n l y   b e   a c t i -
vate d   o n   e l i gi b l e   h e c t a re s.  Th i s   i m p l i e s   a s 
a   m i n i m u m   t h a t   t h e   f a r m e r   a c t i v a t i n g   t h e 
e n t i t l e m e n t s   m a i n t a i n   t h e   a r e a   i n   G A E C . 
T h e   d e c i s i o n   o f   t h e   f a r m e r   o n   w h e t h e r   t o 
c o n t i n u e   a g r i c u l t u r a l   p r o d u c t i o n   o n   t h e 
e l i g i b l e   h e c t a r e s   o r   s i m p l y   m a i n t a i n   t h e 
a r e a   i n   G A E C   s h o u l d   b e   a   r e s u l t   o f   t h e 
c o n d i t i o n s   o f   t h e   m a r k e t   a n d   n o t   o f   t h e 
suppor t.

For decoupling to be W TO ‘green box ’ com-
patible  s uppor t   m ust   not  be  link ed   to  pro -
duc tion  fac tors. 

Never theless, as regards the issue of redis-
t r i b u t i o n   o f   s u p p o r t   b e t we e n   f a r m e r s   a n d 
M e m b e r   S t a t e s ,   i t   i s   c o n s i d e r e d   t h a t   a n 
i m p rove d   d i s t r i b u t i o n   s h o u l d   b e   a c h i e ve d 
i n   t h e   f u t u re   C A P,   t h u s   a l s o   i m p rov i n g   t h e 
ta rgeting.

59. –62.	
I t is the pr inciple of the SPS that payments 
a re   b a s e d   o n   h i s t o r i c   re fe re n c e s.  Th i s   w a s 
a   c r u c i a l   e l e m e n t   f o r   b e i n g   a b l e   t o   m o v e 
to almost full decoupling of direc t suppor t 
w i t h i n   o n l y   a   fe w   ye a r s.  T h e   b a s i c   i n c o m e 
suppor t in a decoupled system contr ibutes 
t o   s t a b i l i s e   t h e   f a r m e r s '   i n c o m e   w h i l e 
a l l o w i n g   t h e m   t o   m a k e   p r o d u c t i o n   d e c i -
s i o n s   o n   t h e   b a s i s   o f   t h e   m a r k e t   d e m a n d. 
T h i s   m a r k e t   o r i e n t a t i o n   m e a n s   t h a t   p r o -
d u c t i o n   c h o i c e s   r e p l y   t o   t h e   d e m a n d   o f 
th e consu mers.

To   m a i nt a i n   t h e   m a r k e t   o r i e nt at i o n   o f   f a r-
m e r s   i t   i s   n o t   p o s s i b l e   t o   g o   b a c k   t o   p r e -
v i o u s   s u p p o r t   s c h e m e s   b a s e d   o n   m a r k e t 
and  produ c t io n  su pp or t. 

T h e   E U   M e m b e r   S t a t e s   a n d   t h e   C o m m i s -
s i o n   c o m m i t t e d   t h e m s e l v e s   d u r i n g   t h e 
adoption of the Health Check to review the 
allocat ion and l evel s  of s up p o r t.

Th i s   h a s   b e e n   t a k e n   u p   i n   t h e   co m m u n i c a-
t i o n   o n   t h e   f u t u re   C A P:   i t   i s   a c k n ow l e d g e d 
t h at   t h e   j u s t i f i c at i o n   fo r   t h e   d i f fe re nt   s u p -
p o r t   l e ve l s   i s   g e t t i n g   we a k e r   a s   t h e   re fe r -
ence per iods are getting more distant. The 
redistr ibution of suppor t bet ween M ember 
States and far mers is therefore a core issue 
f o r   t h e   f u t u r e   o f   t h e   C A P   a n d   r e f l e c t i o n s 
re g a rd i n g   re l e va nt   c r i te r i a   fo r   s u c h   re a l l o -
c at i o n   a re   o n g o i n g.   An   i m p a c t   a s s e s s m e nt 
i s   c u r r e n t l y   b e i n g   c a r r i e d   o u t   o n   t h e s e 
issues.

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Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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REPLY OF THE  
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67.
A s   m e n t i o n e d   a b o v e   i t   i s   n o t   p o s s i b l e   i n 
a   d e co u p l e d   s ys te m   to   l i n k   t h e   s u p p o r t   to 
produc tio n fac tors. 

T h e   e l i g i b i l i t y   r u l e s   o f   S P S   s h o u l d   i n   a n y 
e v e n t   b e   r e s p e c t e d   ( i n   p a r t i c u l a r   t h o s e 
refer red to GA EC ). 

6 8.
T h e   C o u n c i l   c o n s i d e r e d   t h a t   f l e x i b i l i t y 
s h o u l d   b e   g i v e n   t o   M e m b e r   S t a t e s   t o 
co n s i d e r,   i n   a cco rd a n ce   w i t h   t h e   p r i n c i p l e 
of  subsidiar it y   an d  th eir  s pec ific  e con om ic 
realities, which are the r ight parameters to 
b e   t a k e n   i n t o   a c c o u n t   fo r   t h e   a p p l i c a t i o n 
of th e possibilit y refer red to by  th e Cou r t. 

B ox 	7
R o u g h   g r a z i n g   c o n s t i t u t e s   a   c o n s i d e r a b l e 
par t of the total area in S cotland. However, 
t h e   d e s c r i b e d   s i t u at i o n   i n   S co t l a n d   i s   to   a 
l a rg e   ex te nt   t h e   re s u l t   o f   t h e   c h o i ce   m a d e 
by   t h e   S co t t i s h   a u t h o r i t i e s   n o t   to   l i m i t   t h e 
transfer of  e nt itl ements b et wee n  regio ns.

Fu r t h e r m o r e ,   t h e   n u m b e r   o f   s h e e p   d o e s 
n o t   a f fe c t   s u p p o r t   a n d   i s   a l s o   n o t   a n   e l i gi -
b i l i t y   c r i t e r i o n   fo r   t h e   a re a s.   I t   c o u l d   s i m-
p l y   a f f e c t   d e n s i t y   o f   a n i m a l s   o n   t h e   p a s -
t u re s   u s e d   fo r   t h e s e   a n i m a l s   a n d   t h u s   t h e 
maintena nce  o f l and  in GA EC.

I n   g e n e r a l ,   t h e   c o n d i t i o n s   s e t   o u t   i n   t h e 
t r a n s f e r / l e a s e   c o n t r a c t s   f o r   b o t h   a r e a s 
a n d   p a y m e n t   e n t i t l e m e n t s   a r e   e x p e c t e d 
t o   r e f l e c t   t h e   e c o n o m i c   v a l u e   o f   t h e   l a n d 
a n d   t h e   e nt i t l e m e nt s   a n d   h e n ce   t h e   i nte r-
e s t s   o f   t h e   p e r s o n s   i n v o l v e d   i n   t h e   t r a n -
sac tions. 

A s   r e g a r d s   t h e   d e f i n i t i o n   o f   n a t i o n a l 
s t a n d a r d s   f o r   G A E C   t h e s e   s h o u l d   r e f l e c t 
t h e   l o c a l   c h a r a c t e r i s t i c s   ( s e e   r e p l y   t o 
point  37).

Th e   Co m m i s s i o n   i s   l o o k i n g   i nto   t h i s   s i t u a-
tion in  th e co ntex t  of the fu ture  C AP.

A s   r e g a r d s   t h e   I t a l i a n   e x a m p l e ,   t h e   C o m -
m i s s i o n   c o n s i d e r s   t h a t   t h e   c a l c u l a t i o n 
i s   b a s e d   o n   a s s u m p t i o n s   w h i c h   m a y   n o t 
o c c u r.   Fu r t h e r m o r e   t h e   b e n e f i c i a r y   w i l l 
h a v e   t o   m e e t   t h e   p a y m e n t   r e q u i r e m e n t s 
on  a year ly b asis.

U n d e r   t h e   c u r r e n t   r u l e s   i t   i s   a   c l e a r   r e  -
q u i re  m e nt   t h at   p ay m e nt   e nt i t l e m e nt s   o n l y 
b e   a c t i vate d   w i t h   t h e   d e c l a rat i o n   o f   a   co r -
respon ding n um ber of eligible h e c t are s. 

6 9.
T h e   s o - c a l l e d   w i n d f a l l   p r o f i t   c l a u s e   t a r -
g e t e d   t h e   s p e c i f i c   s i t u a t i o n   w h e re   s a l e   o r 
lease took place af ter  th e re fere nce  per i od 
w h e n   t h e   re fo r m   w a s   s t i l l   n o t   k n o w n ,   a n d 
where a seller of a holding could therefore 
p o t e n t i a l l y   b e n e f i t   f r o m   s e l l i n g   p r o d u c -
t i o n   u n i t s   at   a   p r i ce   s e t   w i t h o u t   t h e   b u ye r 
b e i n g   awa re   o f   t h e   d e co u p l i n g   o f   t h e   s u p -
por t. 

O n c e   t h e   d e c o u p l i n g   w a s   k n o w n ,   t h e 
c o n d i t i o n s   a n d   p r i c e s   c o u l d   b e   a d a p t e d 
according ly.

O f t e n   f a r m e r s   d e a l t   w i t h   t h i s   s i t u a t i o n 
d i r e c t l y   t h r o u g h   t h e   p r i v a t e   c o n t r a c t 
c l a u s e ,   t h u s   a v o i d i n g   a d m i n i s t r a t i v e   b u r -
d e n .   S e l l e r s / l e s s o r s   c o u l d   n o t   u s e   t h e 
e n t i t l e m e n t s   w i t h o u t   l a n d   a n d   h a d   h e n c e 
an  incentive fo r such  contrac ts.

7 1.
There is no legal basis to withdraw entitle -
m e n t s   f r o m   f a r m e r s   w h o   r e d u c e d   t h e i r 
a c t i v i t y   a f t e r   1 5   M ay   2 0 0 4 .   Af t e r   t h i s   d a t e 
i t   h a s   b e e n   c o n s i d e r e d   t h a t   t h e   p a r t i e s 
c o u l d   h a v e   a l r e a d y   k n o w n   t h e   c o n d i t i o n s 
o f   t h e   n e w   s ys te m   a n d   c o u l d   t h e re fo re   b e 
e x p e c t e d   t o   re f l e c t   t h e   d e c o u p l i n g   i n   t h e 
mar ket.

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72.
T h e   s i t u a t i o n   r e f e r r e d   t o   b y   t h e   C o u r t 
re s u l t s   f ro m   t h e   i m p l e m e n t i n g   co n d i t i o n s 
s e t   u p   a t   n a t i o n a l   l e v e l   l i n k e d   w i t h   M e m -
ber States' sp ec ificities. 

H o w e v e r   t h e   c o n d i t i o n s   o f   t h e   n e w   S P S 
we re   n o t   k n ow n   i n   2 0 0 2   a n d   t h u s   f a r m e r s’ 
d e c i s i o n s   at   t h at   t i m e   we re   n o t   i n f l u e n ce d 
by  the int ro duc tion of t he new SP S.

A   C o m m i s s i o n   a u d i t   e n q u i r y   h a s   a l r e a d y 
r e s u l t e d   i n   f i n a n c i a l   c o r r e c t i o n s   a d d r e s -
s i n g   t h e   i s s u e   o f   w e a k n e s s e s   r e l a t e d   t o 
nat iona l rese r ve al l o cat ion s 10.

73.
S ee Commissio n rep ly  to  p oint  6 9 . 

Th e   i nte nt i o n   o f   t h e   w i n d f a l l   p ro f i t   c l a u s e 
i s   n o t   t o   u p d a t e   t h e   s u p p o r t   t o   c u r r e n t 
p r o d u c t i o n   l e v e l s .   I f   s u c h   a n   u p d a t e   w a s 
m a d e   p o s s i b l e   t h e   s u p p o r t   s c h e m e   wo u l d 
not be  decoup l ed.

74.
I n   a   d e c o u p l e d   s u p p o r t   s c h e m e ,   t h e   s u p -
p o r t   l e v e l   c a n n o t   b e   l i n k e d   t o   s p e c i f i c 
s e c t o r s   o r   s p e c i f i c   c u r r e n t   p r o d u c t i o n 
l e ve l s.  T h i s   wo u l d   n o t   b e  W TO  ‘g re e n   b ox ’ 
c o m p l i a n t   a n d   i t   w o u l d   r e d u c e   t h e   e f fe c -
t i ve n e s s   o f   t h e   s c h e m e   a s   a n   i n c o m e   s u p -
p o r t   m e c h a n i s m .   T h i s   a l s o   a p p l i e s   t o   t h e 
regional mo de l. 

10 Commission Decision 2010/399/EC of 15 July 2010 excluding 
from European Union financing certain expenditure incurred by 

the Member States under the Guarantee Section of the European 

Agricultural Guidance and Guarantee Fund (EAGGF), under the 

European Agricultural Guarantee Fund (EAGF) and under the 

European Agricultural Fund for Rural Development (EAFRD)  

(OJ L 184, 17.7.2010, p. 6).

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U n d e r   t h e   S P S   a n d   i n   p a r t i c u l a r   i n   t h e   h i s -
t o r i c   m o d e l ,   t h e   i n d i v i d u a l   s u p p o r t   l e v e l 
i s   b a s e d   o n   p a s t   p r o d u c t i o n   a n d   s u p p o r t 
levels and this is also par tly the case in the 
hy br id model. 

A s   r e g a r d s   t h e   r e d i s t r i b u t i o n   e f fe c t   m e n -
t i o n e d   b y   t h e   C o u r t  ‘ f r o m   t h o s e   a c t u a l l y 
far ming   and  towards   lan downe rs’,  it   h as   to 
be stressed again that landowners without 
a g r i c u l t u r a l   a c t i v i t y   a n d   n o n - f a r m e r s   a r e 
n ot  eligible to receive th e paym e nt s.

I t   i s   h o w e v e r   r e c o g n i s e d   t h a t   j u s t i f i c a -
t i o n   o f   t h e   c u r re n t   d i s t r i b u t i o n   i s   g e t t i n g 
we a k  e r   a s   t h e   re fe re n c e   p e r i o d   g e t s   m o re 
d i s t a nt.  Th e re fo re,   t h e   d i s t r i b u t i o n   s h o u l d 
b e   re v i e we d   a s   p ro p o s e d   i n   t h e   co m m u n i -
cation  on th e future  C AP. 

7 5.
S ee  Com mis sio n reply to points  4 4  an d  7 4.

T h e   e x a m p l e   u s e d   b y   t h e   C o u r t   o f   i n t e n -
s i v e   b o v i n e   f a r m e r s   w h o   w o u l d   r e c e i v e   a 
r e d u c e d   s u p p o r t   c o m p a r e d   t o   p r e v i o u s 
c o u p l e d   p a y m e n t s   h a s   t o   b e   b a l a n c e d 
a g a i n s t   t h e   f a c t   t h a t   w i t h i n   t h e   s a m e 
region more ex tensive livestock far ms with 
a   l a r g e   s h a re   o f   g r a s s l a n d   b e n e f i t e d   f ro m 
t h e   r e g i o n a l   m o d e l .   T h o s e   t w o   t y p e s   o f 
f a r m s   c o n t r i b u t e   t o   a   d i f f e r e n t   e x t e n t   t o 
th e C AP  obj ec tives. 

H o w e v e r   a m o n g   E U - 1 5   M e m b e r   S t a t e s 
h a v i n g   c h o s e n   t h e   r e g i o n a l   m o d e l ,   a l l   o f 
t h e m   a p p l i e d   s o m e   p a r t   o f   h i s to r i c a l   i n d i -
vidual references for the calculation of the 
value of entit lem ents.

R e g i o n a l   a n d   h i s t o r i c   m o d e l s   h a d   d i f f e -
r e n t   i m p l i c a t i o n s   f o r   e a c h   k i n d   o f   f a r m s . 
H o w  e v e r   t h i s   s u b s i d i a r i t y   e l e m e n t   i n   t h e 
c h o i c e   o f   t h e   i m p l e m e n t i n g   m o d e l s   w a s 
d e e m e d   n e c e s s a r y   f o r   b e i n g   a b l e   t o   p a s s 
w i t h i n   a   s h o r t   t i m e - l a p s e   f ro m   co u p l e d   to 
decoupled paym ents.

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8 2.
Enquir ies were instigated in all 17 M ember 
States applying the SPS in 2007. S o far, t wo 
M e m b e r   St ate s   h ave   b e e n   s u b j e c t   to   a   fo r-
m a l   co n fo r m i t y   c l e a ra n ce   d e c i s i o n 1 2,   w h i l e 
the enquir ies concer ning three others have 
b e e n   c l o s e d   w i t h o u t   c o r r e c t i o n .   I n   t h e 
o t h e r   1 2   M e m b e r   S t a te s   t h e   n o r m a l   c l e a r-
an ce of accounts proce dure s are  on g oi n g.

8 3.
O n e   o f   t h e   m a i n   p u r p o s e s   o f   t h e   a r t i c l e 
i n   q u e s t i o n   ( A r t i c l e   1 3 7   o f   C o u n c i l   R e g u -
l a t i o n   ( E C )   N o   7 3 / 2 0 0 9 )   i s   t o   r e d u c e   t h e 
l o n g -  s t a n d i n g   b u rd e n   fo r   a d m i n i s t r a t i o n s 
a n d   f a r m e r s ,   a s   w e l l   a s   p r o v i d i n g   l e g a l 
c e r t a i n t y   f o r   f a r m e r s ,   a s   t h e   C o u r t   n o t e s . 
H o w e v e r,   p a r a g r a p h   2   o f   t h e   s a m e   a r t i c l e 
s e t s   l i m i t s   to   t h e   a p p l i c at i o n   o f   t h i s   p rov i -
sion . I n  addit ion,  paragraph  3 en sures  t h at 
n o n - c o n f o r m i t i e s   f o r   t h e   p e r i o d   b e f o r e 
2009 may still lead to financial cor rec tions.

12 Commission Decision 2009/721/EC of 24 September 2009 
excluding from Community financing certain expenditure 

incurred by the Member States under the Guarantee Section of 

the European Agricultural Guidance and Guarantee Fund (EAGGF), 

under the European Agricultural Guarantee Fund (EAGF) and under 

the European Agricultural Fund for Rural Development (EAFRD) 

(OJ L 257, 24.9.2009, p. 28); and Commission Decision 2010/399/EC 

of 15 July 2010 excluding from European Union financing certain 

expenditure incurred by the Member States under the Guarantee 

Section of the European Agricultural Guidance and Guarantee 

Fund (EAGGF), under the European Agricultural Guarantee Fund 

(EAGF) and under the European Agricultural Fund for Rural 

Development (EAFRD) (OJ L 184, 17.7.2010, p. 6).

76. –77.
S ee Commissio n rep ly  to  p oint  2 8 .

Th e   s t u d y   o n   t h e   f u n c t i o n i n g   o f   l a n d   m a r-
k e t s   i n   t h e   E U   M e m b e r   S t a t e s   u n d e r   t h e 
i n f l u e n c e   o f   m e a s u r e s   a p p l i e d   u n d e r   t h e 
C A P 1 1  i n d i c a t e s   t h a t   i n   t h e o r y   f u l l   c a p i t a -
l i s a t i o n   o f   s u p p o r t   i n t o   l a n d   p r i c e s   i s   t o 
b e   e x p e c t e d   i n   t h e   S P S   m o d e l   ( h i g h e r   i n 
t h e   re gi o n a l   m o d e l,   l owe r   i n   t h e   h i s to r  i c a l 
m o d e l ,   e s p e c i a l l y   i f   t h e r e   i s   a   l o t   o f   e l i -
gi b l e   l a n d   w i t h o u t   co r re s p o n d e n t   e n t i t l e -
m e n t s ) .   T h e   s a m e   s t u d y   i n d i c a t e s   a s   w e l l 
that among fac tors influencing land prices, 
C A P   s u b s i d i e s   h ave   a   m o re   m o d e s t   i m p a c t 
th an othe r f ac to rs.

T h i s   d o e s   n o t   n e c e s s a r i l y   m e a n   t h a t   t h e 
i n c r e a s e   i n   c a p i t a l i s a t i o n   i s   h i g h e r   t h a n 
under  for me r co u p led  fo r ms  of  s up po r t.

As   re g a rd s   t h e   l i k e l y   i m p a c t s   o n   p ro f i t a b i -
l i t y   o f   f a r m s   o f  ‘e x t e n s i o n   o f   r e g i o n a l i s a -
t i o n   to   o t h e r   M e m b e r   St ate s’,   t h e y   h ave   to 
b e   a s s e s s e d   t o g e t h e r   w i t h   a l l   s o c i a l ,   e c o -
nomic and environmental impac ts. This has 
b e e n   s t a r t e d   i n   t h e   H e a l t h   C h e c k   i m p a c t 
a s s e s s m e n t   a n d   w i l l   b e   c o n t i n u e d   i n   t h e 
i m p a c t   a s s e s s m e n t   fo l l o w i n g   t h e   c o m m u-
nication o n the  fut ure C A P.

80. –81.
T h e   a l l o c a t i o n   o f   p a y m e n t   e n t i t l e m e n t s 
h a s   b e e n   s u b j e c t   t o   C o m m i s s i o n   a u d i t s 
a n d   s h o r t c o m i n g s   a r e   p u r s u e d   i n   t h e 
contex t of t he cl earance o f acco unts.

11 Swinnen, J., Ciaian, P. and Kancs, D., ‘Study on the functioning 
of land markets in the EU Member States under the influence of 

measures applied under the common agricultural policy’, Brussels, 

2008.

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CONCLUSIONS	AND		
RECOMMENDATIONS

84.
T h e   S P S   h a s   p ro ve n   t o   b e   a   ve r y   e f fe c t i ve 
t o o l   t o   g r a n t   b a s i c   i n c o m e   s u p p o r t   w h i l e 
a l l o w i n g   t h e   f a r m e r   t o   m a k e   p r o d u c t i o n 
d e c i s i o n s   o n   t h e   b a s i s   o f   m a r k e t   s i g n a l s . 
T h i s   i s   b e c a u s e   p a y m e n t s   a r e   d e c o u p l e d 
f ro m   p ro d u c t i o n   a n d   d o   n o t   i nte r fe re   w i t h 
p r o d u c t i o n   d e c i s i o n s .   To   b e   e l i g i b l e   f o r 
p ay m e n t s,   b e n e f i c i a r i e s,   p a rc e l s   a n d   a c t i -
v i t i e s   m u s t   m a t c h   c l e a r   c o n d i t i o n s   s e t   u p 
i n   Co u n c i l   re g u l at i o n s   t h at   a re   co m p at i b l e 
w i t h   W TO   r u l e s ,   i . e .   n o t   l i n k e d   w i t h   p r o -
duc tion f ac tors.

S u b s i d i a r i t y   i n   c h o o s i n g   i m p l e m e n t i n g 
m o d e l s   a s   w e l l   a s   t h e   u s e   t o   a   c e r t a i n 
ex tent of histor ic distr ibution of payments 
wa s  deeme d  n ecessar y   for  b ette r   a dapt in g 
t h e   s c h e m e   t o   n a t i o n a l / r e g i o n a l   c o n d i -
t i o n s   a n d   t o   b e   a b l e   t o   p a s s   w i t h i n   a   f e w 
years from co up l ed to decou p l e d  s uppor t. 

T h e   S P S   a l s o   c o n t r i b u t e s   t o   t h e   p r o v i s i o n 
o f   b a s i c   p u b l i c   g o o d s .   A s   r e g a r d s   e n v i -
ro n m e nt a l   p u b l i c   g o o d s,   t h e   l i n k   b e t we e n 
t h e   S P S   a n d   c ro s s - co m p l i a n ce   i s   o f   c r u c i a l 
i m p o r t a n c e .   E v e n   i f   t h e   S P S   a n d   c r o s s -
compliance do not replace existing EU and 
n a t i o n a l   e nv i r o n m e n t a l   l e g i s l a t i o n   w h i c h 
applies to farmers, it is clear that they help 
f a r m e r s   to   b e t te r   i nte grate   e nv i ro n m e nt a l 
concer ns in t heir ever yd ay manag e m ent.

T h e   C o m m i s s i o n   i n t e n d s   t o   r e v i e w   a n d 
i m p r o v e   c e r t a i n   e l e m e n t s   o f   t h e   s u p p o r t 
s c h e m e   t o   a d d   v a l u e   a n d   q u a l i t y   i n   s p e n -
d i n g   a s   h i g h l i g hte d   i n   t h e   co m m u n i c at i o n 
o n   t h e   f u t u r e   C A P   w h i c h   c o v e r s   s o m e   o f 
t h e   i s s u e s   m e n t i o n e d   b y   t h e   Co u r t :   re d i s -
t r i b u t i o n   o f   f u n d s   b e t w e e n   a n d   w i t h i n 
M e m b e r   S t a t e s ,   r e d e s i g n   ( e . g .   b y   e n h a n -
cing the environmental per formance of the 
C AP)  and be t ter targetin g of s up p o r t.

8 5.
The  S PS   is  a  decoupled  sc heme,  and   h en ce 
t h e r e   i s   n o   p r o d u c t i o n   r e q u i r e m e n t . 
C o n s e q u e n t l y ,   a   f a r m e r   s h o u l d   n o t   b e 
considered as having no agr icultural ac tiv -
i t y   s i m p l y   b e c a u s e   h e   d o e s   n o t   m a i nt a i n   a 
cer tain  produc t ion  level. 

8 6.
T h e   d e f i n i t i o n   o f   e l i g i b l e   f a r m e r s   i s   c u r -
re nt l y   u n d e r   s c r u t i ny,   a s   m e nt i o n e d   i n   t h e 
commun icat ion  on  t he  future  C AP,   s o  as   to 
a c h i e ve   a   b e t te r   t a rg e t i n g   o f   t h e   S P S   s u p -
por t.

8 7.
Tr a d a b i l i t y   o f   e n t i t l e m e n t s   i s   a   k e y   e l e -
m e n t   o f   t h e   S P S .   Fu r t h e r m o r e ,   t o   r e f l e c t 
t h e   d e c o u p l e d   c h a r a c t e r   o f   t h e   s c h e m e , 
there is no requirement to link the entitle -
m e n t s   t o   c e r t a i n   a r e a s .   B e n e f i c i a r i e s 
s h o u l d   h o w e v e r   a l w a y s   r e s p e c t   t h e   e l i g i -
bilit y cr iter ia. 

8 8.
N e w   f a r m e r s   w h o   w i s h   to   re ce i ve   S P S   p ay-
m e n t s   c a n   e i t h e r   r e q u e s t   e n t i t l e m e n t s 
f r o m   t h e   n a t i o n a l   r e s e r v e   o r   b u y   o r   l e a s e 
p a y m e n t   e n t i t l e m e n t s ,   w i t h   o r   w i t h o u t 
lan d. 

Tr a n s f e r   o f   e n t i t l e m e n t s   i s   a   b a s i c   p r i n -
c i p l e   o f   t h e   f u n c t i o n i n g   o f   t h e   S P S .   Fa r -
m e r s   w h o   a r e   e n t e r i n g   t h e   a g r i c u l t u r a l 
s e c t o r   c a n   t h e r e f o r e   b u y   e n t i t l e m e n t s   i n 
th e free mar ke t. 

The mar ket for transfer of payment entitle -
m e n t s   i s   w e l l - f u n c t i o n i n g .   A   t r a n s p a r e n t 
m a r k e t   fo r   p a y m e n t   e n t i t l e m e n t s   e n s u re s 
a n   e f f i c i e n t   a l l o c a t i o n   o f   e n t i t l e m e n t s 
amon g far mers.

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9 0.
S ee  Com mis sio n reply to point 89 .

E n v i r o n m e n t a l   o b l i g a t i o n s   e x i s t   o n   t h e i r 
o w n   a n d   f a r m e r s   m u s t   i m p l e m e n t   t h e m 
i n d e p e n d e n t l y   f r o m   t h e   C A P   s u b s i d i e s . 
Fa r m e r s   a r e   n o t   r e m u n e r a t e d   f o r   i m p l e -
m e nt i n g   t h e   l aw.   H owe ve r,   w i t h i n   t h e   C A P, 
c r o s s - c o m p l i a n c e   c r e a t e s   a   l i n k   b e t w e e n 
t h o s e   o b l i g a t i o n s ,   t o   w h i c h   a r e   a d d e d 
o t h e r   r e q u i r e m e n t s   t o   m a i n t a i n   a l l   t h e 
l a n d s   o f   t h e   f a r m   i n   G A E C ,   a n d   t h e   f u l l 
p ay m e nt   o f   f i r s t   p i l l a r   ( a n d   ce r t a i n   s e co n d 
pillar)  subsidies.

The intention of the Commission to fur ther 
‘g re e n’  t h e   C A P   i s   o u t l i n e d   i n   t h e   c o m m u -
n i c at i o n   o n   t h e   f u t u re   C A P.   As   re g a rd s   t h e 
SPS, an enhancement of the environmental 
p e r fo r m a n c e s   c o u l d   b e   a c h i e v e d   t h r o u g h 
a   g r e e n i n g   c o m p o n e n t   o f   t h e   d i r e c t   p a y -
ments  and an  en hancement of  G AEC .

9 1.
T h e r e   i s   n o   q u a n t i f i e d   l i n k   b e t w e e n   S P S 
s u p p o r t   a n d   c o s t s   i n c u r r e d   i n   r e s p e c -
t i n g   g o o d   a g r i c u l t u r a l   a n d   e nv i ro n m e n t a l 
cond itions. H istor ical  reference s  have  t hus 
b e e n   u s e d   t o   d e t e r m i n e   t h e   l e v e l   o f   a i d . 
S P S   i s   a n   a re a - b a s e d   p ay m e nt   w h o s e   m a i n 
o b j e c t i v e   i s   t o   p r o v i d e   b a s i c   i n c o m e   s u p -
p o r t .  Th ro u g h   t h e   o b l i g a t i o n   to   k e e p   l a n d 
i n   G A E C ,   S P S   c o n t r i b u t e s   t o   t h e   p r o t e c -
t i o n   o f   n a t u r a l   r e s o u r c e s ,   t h u s   p r o v i d i n g 
t h e   b a s i s   fo r   t h e   d e l i ve r y   o f   p u b l i c   g o o d s 
t h r o u g h   a g r i c u l t u r e .   T h i s   h a s   b e e n   n o t e d 
i n   p a r t i c u l a r   i n   t h e   s t u d y   o n   p u b l i c   g o o d s 
o f   t h e   I n s t i t u te   fo r   Eu ro p e a n   E nv i ro n m e n-
tal Polic y ( IE E P) 14. 

14 See footnote 3 above.

89.
T h e   Co m m i s s i o n   i n t e n d s   t o   f u r t h e r   re f i n e 
t h e   d e f i n i t i o n   o f   e l i g i b l e   l a n d   i n   o r d e r   t o 
b e t te r   t a rg e t   t h e   a i d,   a s   i t   i s   s t a te d   i n   t h e 
communicatio n on  t he fu tu re C AP. 

I n   o rd e r   to   m a i nt a i n   t h e   S P S   a s   d e co u p l e d 
s u p p o r t   i n   t h e  W TO  ‘gre e n   b ox ’  a n d   t h e re -
fore not counting against the EU's suppor t 
re d u c t i o n   co m m i t m e nt,   t h e   S P S   c a n n o t   b e 
l i n k e d   t o   t h e   p e r f o r m a n c e   o f   t h e   b e n e f i -
c i a r y   o r   o f   t h e   l a n d ,   f o r   w h i c h   p a y m e n t 
entitlements have been ac tivated, in ter ms 
o f   p r o d u c t i o n .   S u c h   a   r e q u i r e m e n t   w o u l d 
n o t   c o m p l y   w i t h   p a r a g r a p h s   1   a n d   6 ( e )   o f 
A n n e x   2   t o   t h e   W TO   A g r e e m e n t   o n   A g r i -
culture 13. 

Recomme ndat ion	1
I n   o rd e r   to   i n c re a s e   t h e   e f fe c t i ve n e s s   a n d 
e f f i c i e n c y   o f   t h e   s u p p o r t ,   o n e   o f   t h e   e l e -
ments mentioned in the communication on 
t h e   f u t u re   C A P   i s   to   b e t te r   t a rg e t   t h e   s u p -
por t  to ac tive  f ar mers. 

Recomme ndat ion	2
N o n - a g r i c u l t u r a l   l a n d   i s   n o t   e l i g i b l e   a n d 
e l i gi b l e   f a r m i n g   a c t i v i t i e s   m ay   n o t   b e   t i e d 
t o   p r o d u c t i o n   o f   a g r i c u l t u r a l   c o m m o d i -
t i e s .   W T O   ‘g r e e n   b o x ’  r u l e s   m e a n   t h a t   a 
d e  co u p l e d   s u p p o r t   l i k e   t h e   S P S   c a n n o t   b e 
l i n k e d   t o   t h e   p e r f o r m a n c e   o f   t h e   b e n e f i -
c i a r y   o r   o f   t h e   l a n d   i n   te r m s   o f   p ro d u c t i o n 
levels or  pro duc t ivit y.

A s   r e g a r d s   t h e   a c t i v e   m a i n t e n a n c e   o f 
‘e nv i r o n m e nt a l   va l u e   o f   a gr i c u l t u ra l   a re a s’ 
m e n t i o n e d   b y   t h e   C o u r t ,   t h e   C o m m i s s i o n 
c o m m i t t e d   i t s e l f   i n   i t s   c o m m u n i c a t i o n   o n 
t h e   f u t u r e   C A P   t o   a s s e s s   w a y s   o f   e n h a n -
c i n g   e n v i r o n m e n t a l   p e r f o r m a n c e   o f   t h e 
C A P.   T h i s   c o u l d   b e   d o n e   b y   s u p p o r t i n g 
s i m p l e ,   g e n e r a l i s e d ,   n o n - c o n t r a c t u a l   a n d 
a n n u a l   e n v i r o n m e n t a l   a c t i o n s   w i t h i n   t h e 
d i re c t   p ay m e n t   s c h e m e   a n d / o r   e n h a n c i n g 
cer t ain eleme nt s  of G AEC  st and a rd s.

13 See footnote 2

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

7575

REPLY OF THE 
COMMISSION

T h e   i s s u e   o f   c o s t s   f o r   f a r m e r s   o f   c o m -
p l i a n c e   w i t h   l e g i s l a t i o n   o n   e n v i r o n m e n t , 
f o o d   s a f e t y   a n d   a n i m a l   w e l f a r e   i s   o f t e n 
 r a i s e d ,   a n d   a   s t u d y   a s s e s s i n g   t h e s e   c o s t s 
h a s   b e e n   r e q u e s t e d   b y   t h e   E u r o p e a n   Pa r -
l i a m e n t   a n d   i s   u n d e r   w a y.   H o w e v e r,   t h e 
l e ve l   o f   S P S   i s   i n d e p e n d e n t   o f   t h e s e   co s t s 
a s   i t   s h o u l d   n o t   c o m p e n s a t e   f a r m e r s   f o r 
res pec tin g t he l aw and mus t rem ai n  ‘gre e n 
box ’ comp at ibl e. 

The communication on the future C AP out-
l i n e s   t h e   i n t e n t i o n   o f   t h e   C o m m i s s i o n   t o 
a s s e s s   p o s s i b i l i t i e s   fo r   a   f u r t h e r  ‘gre e n i n g’ 
of t he firs t p il l ar.

Th e   E U   f ra m e wo r k   fo r   p ay m e nt   re d u c t i o n s 
under cross- compliance is dissuasive since 
t h e   r e d u c t i o n   c a n   b e   a s   h i g h   a s   1 0 0   %   o f 
C A P   p a y m e n t s   r e c e i v e d   b y   t h e   f a r m e r. 
W h e re   we a k n e s s e s   i n   t h e   i m p l e m e n t a t i o n 
by   M e m b e r   St ate s   o f   t h e   c ro s s - co m p l i a n ce 
s y s t e m   a r e   o b s e r v e d ,   t h e s e   a r e   f o l l o w e d 
u p   u n d e r   t h e   c l e a r a n c e   o f   a c c o u n t s   p r o -
cedure.

9 3.
Th e   v a r i a t i o n   i n   s u p p o r t   a m o n g s t   f a r m e r s 
r e f l e c t s   t h e   f a r m   s t r u c t u r e   a n d   t h u s   a l s o 
the fac t that there are big var iations in the 
sizes  of  far ms.

92.
A   m a rgi n   o f   a p p re c i at i o n   i s   gi ve n   to   M e m -
ber States to define the national standards 
for the GAEC so as to take into account the 
c h a r a c t e r i s t i c s   o f   t h e   a r e a .   T h i s   d o e s   n o t 
n e c e s s a r i l y   e n t a i l   t h a t   a   p r o d u c t i o n   a c t i -
v i t y   i s   e x p e c te d   f ro m   t h e   f a r m e r.   N at i o n a l 
G A E C   s t a n d a rd s   m ay   s o l e l y   fo re s e e   p ro h i -
bitions of cer tain prac tices detr imental for 
the agr icultural or environmental pur poses 
o f   t h e   G A E C   to o l   w h i l e   i n   o t h e r   c a s e s   ce r -
ta in ac t ivities are imp o sed  to  the  f a r me r. 

Recomme ndat ion	3
A s   s e t   o u t   i n   t h e   c o m m u n i c a t i o n   o n   t h e 
f u t u r e   C A P,   t h e   e n v i r o n m e n t a l   p e r f o r -
m a n c e   o f   f a r m e r s   a s   a   c o u n t e r p a r t   f o r 
s u p p o r t   w i l l   b e   f u r t h e r   c o n s i d e re d   b y   t h e 
Commission.

Recomme ndat ion	4
Th e   Co m m i s s i o n   h a s   p ro p o s e d   i n   i t s   c o m -
m u n i c a t i o n   o n   t h e   f u t u r e   C A P   t o   a s s e s s 
h ow   c ro s s - co m p l i a n ce   r u l e s   co u l d   b e   s i m -
p l e r   a n d   m o r e   c o m p r e h e n s i v e   a n d ,   f o r 
G A E C ,   t o   a n a l y s e   h o w   c e r t a i n   o f   i t s   e l e -
ment s  cou ld be  enhan ced.

I n   t h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
the Commission provides different options 
to   a d a p t   t h e   s ys te m   o f   d i re c t   p ay m e nt s,   i n 
p a r t i c u l a r   i n   v i e w   o f   a d d r e s s i n g   t h e   d i s -
t r i b u t i o n   o f   p a y m e n t s   a t   f a r m   l e v e l   a n d 
b e t w e e n   s m a l l e r   a n d   l a r g e r   f a r m s .   Wo r k 
i s   c u r r e n t l y   o n g o i n g   o n   t h i s   i s s u e   i n   t h e 
f r a m e  w o r k   o f   t h e   C o m m i s s i o n   i m p a c t 
ass essment. 

9 4.
T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
i n c l u d e s   t h e   p o s s i b l e   i n t r o d u c t i o n   o f   a n 
e l e m e n t   o f   c a p p i n g   w h i c h   w o u l d   a l l o w   a 
limitation of the payments made. The num-
b e r   o f   h e c t a re s   a n d   t h e   n u m b e r   o f   e nt i t l e -
m e n t s   w o u l d   h o w e v e r   c o n t i n u e   t o   r e f l e c t 
t h e   s i z e   o f   f a r m s   a n d   t o   a   c e r t a i n   e x t e n t 
t h e i r   co nt r i b u t i o n   to   t h e   o b j e c t i ve s   o f   t h e 
common  agr icultural polic y  (C AP ).

Recommendatio n	5
R e d i s t r i b u t i o n   o f   S P S   a i d   a s   w e l l   a s   c a p -
p i n g   o f   p a y m e n t s   a re   o p t i o n s   i n c l u d e d   i n 
th e communication on  t he future C AP.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

76

REPLY OF THE  
COMMISSION

9 7.
Th e   c a p i t a l i s at i o n   o f   s u p p o r t   i n   a   re gi o n a l 
m o d e l   m ay   i n d e e d   b e   h i g h e r   t h a n   i n   a   h i s-
t o r i c   m o d e l   b u t   a m o n g   f a c t o r s   i n f l u e n -
c i n g   l a n d   p r i c e s ,   C A P   s u b s i d i e s   h a v e   a 
m o r e   m o d e s t   i m p a c t   t h a n   o t h e r   f a c t o r s . 
I n   a d d i t i o n   i t   d o e s   n o t   n e c e s s a r i l y   m e a n 
a n   i n c re a s e   i n   c a p i t a l i s a t i o n   a s   c o m p a re d 
t o   f o r m e r    c o u p l e d   f o r m s   o f   s u p p o r t .   A s 
re g a rd s   t h e   l i k e l y   n e g a t i ve   i m p a c t s   o f   t h e 
r e g i o n a l   m o d e l ,   t h e y   h a v e   t o   b e   a s s e s s e d 
t o g e t h e r   w i t h   a l l   s o c i a l ,   e c o n o m i c   a n d 
e nv i r o n m e n t a l   i m p a c t s .  T h i s   w i l l   b e   d o n e 
i n   t h e   i m p a c t   a s s e s s m e n t   f o l l o w i n g   t h e 
commun icat ion on th e fut ure  C AP.

Recommendatio n	6
T h e   c o m m u n i c a t i o n   o n   t h e   f u t u r e   C A P 
foresees a new design for direc t payments. 
O n e   o f   t h e   o p t i o n s   c u r re n t l y   u n d e r   c o n s i -
d e rat i o n   wo u l d   i m p l y   a   b a s i c   s u p p o r t   rate 
co m p l e m e n te d   w i t h   p ay m e n t s   fo r   f a r m e r s 
i n   a re a s   w i t h   n at u ra l   co n s t ra i nt s   a s   we l l   a s 
a green ing compone nt.

95.
T h e   h i s t o r i c a l   m o d e l   w a s   f i r s t   p r o p o s e d 
by   t h e   Co m m i s s i o n   i n   2 0 0 3   w i t h   a   v i e w   to 
f a c i l i t a t i n g   a   s m o o t h   t r a n s i t i o n   t o w a r d s 
decoupling. The regional model was added 
a t   t h e   re q u e s t   o f   M e m b e r   S t a te s   to   m a tc h 
s o m e   p a r t i c u l a r   n a t i o n a l   o b j e c t i v e s   f o r 
direc t  sup po r t. 

D e s p i t e   t h e   d i f f e r e n t   i m p l e m e n t a t i o n ,   i t 
re m a i n s   t h at   t h e   l e ve l   o f   d e co u p l e d   d i re c t 
s u p p o r t   t h a t   f a r m e r s   r e c e i v e   i n   t h e   E U   i s 
b a s e d   o n   p r o d u c t i o n   a n d   s u p p o r t   l e v e l s 
dur ing a histor ic reference per iod or in the 
c a s e   o f   t h e   r e g i o n a l   m o d e l   o n   t h e   a r e a s 
o n   a   h i s t o r i c a l   re fe re n c e   d a t e.   H e n c e,   t h e 
c u r r e n t   d i s t r i b u t i o n   o f   d i r e c t   p a y m e n t s 
bet ween far ms is simply a reflec tion of the 
f a c t   t h at   a gr i c u l t u ra l   l a n d   a n d   a gr i c u l t u ra l 
p ro d u c t i o n   a re   n o t   s h a re d   e q u a l l y   a m o n g 
th e fa r ms  in  t he EU. 

96.
I t   i s   a c k n o w l e d g e d   t h a t   t h e   r e f e r e n c e 
p e r i o d   i s   g e t t i n g   m o r e   d i s t a n t ,   b u t   t h e 
d e c o u p l e d   c h a r a c t e r   o f   t h e   s c h e m e   d o e s 
not allow l ink ing  it  to  cur re nt p ro du c t io n.

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

 
 
 
77

European Court of Auditors

Special	Report	No	5/2011

Single	Payment	Scheme	(SPS):	issues	to	be	addressed	to	improve	its	sound	financial	management

Luxembourg: Publications Office of the European Union

2011 — 76 pp. — 21 × 29.7 cm

ISBN 978-92-9237-135-7

doi:10.2865/14982

Special Report No 5/2011 — Single Payment Scheme (SPS): issues to be addressed to improve its sound financial management

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Q
J
-
A
B
-
1
1
-
0
0
1
-
E
N

-
C

THE  SINGLE  PAYMENT  SCHEME  (SPS)  IS  A  KEY  FEATURE  OF  THE  2003 

REFORM  OF  THE  COMMON  AGRICULTURAL  POLICY.  ITS  OBJECTIVES  ARE 

TO ENCOURAGE FARMERS TO BETTER RESPOND TO MARKET DEMAND AND 

TO  SUPPORT THEIR  INCOME. THE  COURT  CONDUCTED  AN  AUDIT  OF THE 

IMPLEMENTATION OF THE SPS.

THE  COURT  OBSERVES  THAT  THE  LEGISLATION  PERMITTED  PERSONS  OR 

ENTITITIES  NOT  OR  ONLY  MARGINALLY  ENGAGED  IN  AGRICULTURE  TO 

BENEFIT  FROM  SPS  PAYMENTS.  IT  RECOMMENDS  THAT  THE  LEGISLATION 

BE AMENDED TO ENSURE THAT SPS AID IS DIRECTED TO ACTIVE FARMERS. 

THE  CALCULATION  OF  SPS  AID  SHOULD  BETTER  REFLECT THE  COSTS  FOR 

ENVIRONMENTAL  EXTERNALITIES  AND  SHOULD  BE  BASED  ON  CURRENT 

FARMING  CONDITIONS  IN  THE  DIFFERENT  REGIONS.  FINALLY,  A  MORE 

BALANCED  DISTRIBUTION  OF  SPS  AID  BETWEEN  FARMERS  SHOULD  BE 

SOUGHT.

EUROPEAN COURT OF AUDITORS