Restructuring large farm businesses could help land owners avoid having their direct payments capped under draft proposals to reform the Common Agricultural Policy.
According to leaked plans to reform the direct support element of the CAP, farmers and landowners who claim more than €150,000 will see their payments capped.
Proposals for the future of Pillar 1 support say farmers who claim between €150,000 and €200,000 will see a 20% reduction in their payments.
The figure moves to 40% for amounts from €200,000-250 000 and 70% for €250,000-300,000. A 100% limit will be placed on payments of more than €300,000.
The document says capping would taking into account “salaried labour intensity” so bigger farms with large workforces were not disproportionately hit.
The reductions would not apply to the so-called “greening” element of Pillar 1 payments so that farmers were not put off from taking green measures on their land, the commission added.
In order to qualify for the greening payment – which would account for 30% of potential support – farmers would have to set 5% of their land aside for environmental measures, diversify their crops and maintain permanent grassland.
According to the draft proposals the commission will crack down on farmers attempting to circumvent the new rules by ensuring, through new legislation if necessary, that no payments were made to large beneficiaries that split up holdings or transfer payments to relations.
But Richard King, head of business research at agri-business consultants Andersons, said while business could lose payments if they attempted to restructure, the cut-off for making changes to businesses appeared to be October, when the proposals will be formally published.
“This gives larger businesses a period of grace to make changes,” he said. “However, they would still need to pass the current tests for separating businesses and be convinced that the effort is worthwhile.
“If people are restructuring anyway they could have this in the back of their mind, but whether it’s quite the thing to go out and start messing around with their farm structure remains to be seen. Of course, capping may be negotiated away and so this becomes a non-issue.”
An NFU Brussels office spokesman said the union remained opposed to capping and would lobby hard to defeat the proposal.
“We believe that a cap on the largest single farm payments will have a disproportionate effect on UK farmers and contradicts calls for a modern, efficient farming sector,” he said.
“Likewise, we believe any greening of the CAP must be delivered through simple measures that do not hamper productivity and farm competiveness.
“Overall we need a CAP that is simple and helps farmers provide affordable and good quality food in a competitive and fair market.”
NFU Scotland policy director, Scott Walker, said capping payments would see farms in Scotland – which are amongst the largest in the EU – unfairly penalised.
“We believe we would see farms splitting up in order to qualify for payments,” he said. “This would effectively be a ‘tax’ on the economies of scale brought about by greater efficiency.”