Pillar II: A real improvement of the CAP

In their chapter, ‘Pillar II: a real improvement of the CAP?’, Koester and Senior Nello note that the creation of the second pillar of the CAP (rural development policy) in 2000 appeared a rational choice and an improvement of theCAP, but in fact it involved the introduction of a wide range of measures, some of which were not very efficient or targeted. While the first pillar of the CAP covers market measures such as the single farm payment, at least in theory, measures under the second pillar should support agriculture as a provider of public goods. Rural development policy is centred on three central thematic axes: raising the competitiveness of the agricultural and forestry sectors; improving the environment and the countryside; and increasing the quality of life in rural areas and encouraging diversification of the rural economy. In terms of expenditure from the EU budget the second pillar is not yet as important as the first pillar, though the aim is to achieve a better balance 27 between the two pillars. Koester and Senior Nello concentrate on two aspects of the second pillar of the CAP: investment support and agri-environmental measures, also taking into consideration the question of ‘governance’. They maintain that present and future waste under the second pillar could exceed that of the first pillar. With regard to EU investment support, they conclude that measures are not effective as they result in an increase in agricultural investment, but by much less than suggested by the level of support. In addition, overall investment in the economy declines as the tax burden for non- agricultural sectors increases. They maintain that the investment support is likely to lead to an increase in financial but not necessarily economic efficiency. The latter would require correction of market failure, and EU investment support is not focused on the main market failures in rural areas: those in the labour market and the inadequate supply of public goods. There may also be problems of governance as a result of distortions in incentives and failure to respect the principle of subsidiarity. In short, weaknesses in implementation and lack of genuine control cast doubts about whether farm investment support should be left as a responsibility of the EU. Turning to agri-environmental measures, the authors maintain that these are not efficient, as financial outlays are not based on an inventory of agri-environmental requirements, but mainly on the farm income objective and past expenditure on agriculture. Moreover agri- environmental measures encounter problems of governance on a number of counts. The principle of subsidiarity is not observed since most problems are located in regions or countries. Frequently the impact of policies cannot be measured (a problem indicated also by the European Court of Auditors), and this difficulty is exacerbated by the fact that at times the effects of different measures overlap. Also in this case the authors conclude that implementation problems and the absence of adequate monitoring and controls could lead to substantial waste of EU money.