1. agriregionieuropa The CAP and the EU budget Do ex-ante data tell the true? Franco Sotte Università Politecnica delle Marche – Ancona (Italy) 122 nd European Association of Agricultural Economists Seminar Evidence-Based Agricultural and Rural Policy Making Methodological and Empirical Challenges of Policy Evaluation February 17 th – 18 th, 2011, Ancona (Italy) associazioneAlessandroBartola studi e ricerche di economia e di politica agraria Centro Studi Sulle Politiche Economiche, Rurali e Ambientali Università Politecnica delle Marche

2. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Summary  Overview on the CAP budget data on which the political debate on CAP reform relies  How different is the CAP passing from – its ex-ante image (MFP, appropriations for commitments) – to its ex-post one (actual payments, Financial Reports)  Implications  Conclusive remarks

3. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The budget : an opportunity for policy analysis  Expenditure is quantifiable – It is expressed in monetary terms – This facilitates analysis comparison in terms of time and space – It is possible to calculate simple and intuitive indicators draw graphs and maps  It is easy to understand and interpret even for non experts – politicians (voters)

4. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Risks with expenditure analysis  considering expenditure as the objective of the policy while it is only an instrument  neglecting differences btw ex-ante allocations and ex-post payments – attention concentrated on promises not on real results  under-valuing the interplay btw policies  paying insufficient attention to indirect costs of a policy – over-compensation, payments for costs never incurred, deadweight effect, administrative costs, private connected costs, delays in payments

5. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Multiannual financial framework at current prices (2009) Appropriations for commitments Financial years 2007200820092010201120122013 Total 2007-13 1. Sustainable growth53979576535970061782636386662869621433001 Competitiveness for growth and employment891810386112721238812987142031543385587 Cohesion for growth and employment45061472674842849394506515242554188347414 2. Preservation and management of natural resources55143591935963960113603386081061289416525 Market related expenditure and direct payments45759462174667947146476174809348574330085 3. Citizenship, freedom, security and justice127313621523169318892105237612221 Freedom, security and justice63774787210251206140616617554 Citizenship6366156516686836997154667 4. EU as a global player657870027440789384308997959555935 5. Administration703973807699800883348670909556225 6. Compensation445207210862 Total124457132797136211139489142629147210151976974769

6. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Breakdown of the EU MFP budget Source: http://ec.europa.eu/budget/library/publications/budget_in_fig/syntchif_2009_e.pdfhttp://ec.europa.eu/budget/library/publications/budget_in_fig/syntchif_2009_e.pdf Administrative costs should not be included: DG AGRI has 970 employees

7. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The EU budget by financial framework headings (billion euro) Budget 2008Budget 2009 Appr CommAppr PayAppr CommAppr Pay CAP 1st Pillar40.56240.56840.781 CAP 2nd Pillar13.30311.38313.65210.229 CAP total53.86551.95154.43351.010 Other natural res1.6941.2661.6891.556 Sustainable growth58.33845.73260.19646.000 Administration7.2797.2807.701 Total130.363115.565133.637115.887

8. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP expenditure according to the DG AGRI web site

9. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Appropriations for Payments 2009 Net of administrative costs = 47,1 per cent 44,0%

10. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP payments (Financial Report 2009) Pillar1Pillar 2Total CAP Net Total UE Expenditure (- Admin) M€ EU-153656352414180471295 North-1562951041733611348 Centre-151644723941884130207 South-151382118061562729740 EU-1244683498796624818 EU-274103187394977096113 Out MS50620506314633 Total EU46093874054833110746

11. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP payments (Financial Report 2009) Pillar1 / Total CAP Pillar2 / Total CAP Pillar1 / Net total Pillar2 / Net total Total CAP/ Net total EU %%% EU-1587,512,551,37,458,6 North-1585,814,255,59,264,6 Centre-1587,312,754,47,962,4 South-1588,411,646,56,152,5 EU-1256,143,918,014,132,1 EU-2782,417,642,79,151,8 Out MS100,00,034,60,034,6 Total EU84,115,941,67,949,5

12. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP on the overall EU payments (net of administrative costs) Financial Report – 2009 EU-27 -Total CAP Pillar 1 Pillar 2

13. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Reasons for the discrepancy btw appropriations and payments  Before the Commitment – ability of MSs and regions to co-finance – ability of beneficiaries to enter into commitments – Late approval of programs by MSs / Regions  Withdrawal of the beneficiary and cancellation of commitments – Bank refusal to grant credit – Change in business plan – Discover of better funding opportunities in competing policies – Death of the beneficiary or change in family decisions  Inflationary effect when payment is delayed

14. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) EU-12 EU-15 EU-27 South North Centre (net from administrative costs) The CAP on the overall EU payments by groups of MSs

15. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) The CAP on the Total EU payments per MS Weighted average percentage - years 2007-2008-2009

16. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP payments per pillar per MS Weighted average percentage - years 2007-2008-2009

17. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP expenditure per unit CAP / AWUCAP / UAACAP Ag Val add euro index EU=100euro index EU=100euro index EU=100 EU-157630,4182,5348,4121,835,2101,2 North-1512232,4292,6299,5104,758,7168,7 Centre-1510208,5244,2368,4128,835,9103,1 South-155140,1123,0354,7124,028,882,9 EU-121063,825,4132,446,332,493,0 EU-274180,4100,0286,0100,034,8100,0 Weighted average percentage - years 2007-2008-2009 57168

18. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments per AWU - EU=100 Weighted average percentage - years 2007-2008-2009

19. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments per UAA - EU=100 Weighted average percentage - years 2007-2008-2009

20. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Cap payments /Agric Value added % Weighted average percentage - years 2007-2008-2009

21. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) CAP payments in Italy Payments € CAP expenditureCAP beneficiaries Average payment Absolute value in M€ % Absolute value in 000 % Euro per beneficiary Less than 1.000301.85.5765.158.3394 >1 000. <=5 000791.414.5352.226.82247 >5 000. <=10 000622.911.491.97.06780 >10 000. <=25 000971.717.867.25.114456 >25 000. <=50 000674.112.321.21.631861 >50 000. <=100 000573.610.59.20.762350 More than 100 0001538.528.14.90.4314101 Total5473.9100.01311.6100.04173 2,7% 50,8% 85,1%20,0%

22. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Comment  There are good reasons for a radical change – probably, for the few richest farms, the CAP payments represent just an additional rent – while for the plethora of small farms, which in Italy have generally a subsidiary role in the family interests and income, it has a minimal incidence

23. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Concentration of CAP payments in Italy in quintiles a) sorted by CAP payments / UAAb) sorted by CAP payments / AWU Po Valley

24. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Comment  Such strong concentration of the CAP expenditure in terms both of recipients and localization significantly reduces any alleged link between the present CAP expenditure and the provision of public goods through agriculture

25. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Conclusions  The ex-ante image of the CAP is significantly and systematically distorted in comparison with its ex- post image – The relative weight of the CAP on the EU budget changes, as well as the ratio between pillars 1 and 2.  Recognising this gap between image and reality – brings the discussion on the CAP and its reform process to a more objective ground – suggests making more of an effort to rationalize implementation and administrative procedures attributing more importance to evaluation and monitoring

26. agriregionieuropa 122 nd EAAE Seminar, February 17 th – 18 th, 2011, Ancona (Italy) Thank you f.sotte@univpm.it