EU support to young farmers should be better targeted to foster effective generational renewal

Executive summary

I

The overall number of farmers in the EU-27 has fallen rapidly in the last decade, dropping from 14.5 million farmers in 2005 to 10.7 million farmers in 2013. The number of young farmers (up to 44 years old) fell from 3.3 million in 2005 to 2.3 million in 2013. As the number of farmers decreased across all age groups, the percentage of young farmers in the farming population remained relatively stable, at just above 20 %. However, significant differences exist between Member States.

II

In 2007-2020 the EU allocated 9.6 billion euro in specific aid to young farmers to enhance the competitiveness of agricultural holdings and generational renewal in agriculture. Including co-financing from Member States of Pillar 2 setting-up measure, total public support amounts to 18.3 billion euro. Almost 200 000 young farmers received EU aid for setting up in the 2007-2013 period. More than 70 % of the EU funding was provided under the Pillar 2 (EAFRD) measure for the setting up of young farmers, while the remaining 30 % is provided, in 2014-2020, under the Pillar 1 (EAGF) direct payment to young farmers.

III

Against this backdrop, we examined the role of the EU in supporting young farmers and fostering generational renewal. The audit was carried out at the Commission and in the four Member States with most spending for young farmers: France, Spain, Poland and Italy. The audit aimed to answer the following question: ‘Is the EU support to young farmers well designed to contribute effectively towards improved generational renewal?’

IV

The overall conclusion is that EU support for young farmers is based on a poorly-defined intervention logic, with no expected result and impact specified. It should be better targeted to foster effective generational renewal. However, we found significant differences between the Pillar 1 payment to young farmers and the Pillar 2 setting-up measure.

V

For Pillar 1 payment to young farmers we found that:

• the aid is not based on a sound needs assessment and its objective does not reflect the general objective of encouraging generational renewal. The Member States did not coordinate Pillar 1 payment with the Pillar 2 setting-up measure or national measures;
• in the absence of a needs assessment the aid is provided in a standardized form (annual payment per hectare), in an amount and in a timing where it is unclear which specific needs other than additional income are addressed;
• the common monitoring and evaluation framework did not provide useful indicators for assessing the effectiveness of this payment, as there are no results indicators for this payment and data on the income and viability of the supported holdings are not collected.

VI

For Pillar 2 measure for setting up of young farmers we found that:

• although it is generally based on a vague needs assessment, its objectives are partially specific, measurable, achievable, relevant and timed and reflect the general objective of encouraging generational renewal. There is some effective coordination with the Pillar 2 investment measure;
• the aid is provided in a form (lump sum subject to the accomplishment of a business plan and, in some cases, also an interest subsidy on a loan) addressing more directly the young farmers’ needs of access to land, capital and knowledge. The amount of aid is generally linked to the needs and modulated to prompt specific actions (e.g. introducing organic farming, water- or energy-saving initiatives);
• the aid is directed to more qualified farmers, who commit to implement a business plan guiding them in developing viable holdings and who are often encouraged through the project selection process to set up in less favoured areas. However, the business plans were of variable quality and managing authorities in some cases did not apply selection procedures to prioritise best projects. Selection criteria were introduced late in the 2007-2013 period, minimum thresholds were either too low or non-existent and the seven-year budget for the measure was used up in some Member States to fund nearly all applications submitted at the start of the programming period, thus preventing young farmers who set up later from receiving funding;
• we found little evidence about whether the EU measures facilitated the setting-up of young farmers and improved generational renewal and the viability of the supported holdings, mainly because of the low quality of indicators set by the common monitoring system.

VII

We recommend that Commission and the Member States:

1. improve the intervention logic by reinforcing needs assessment and defining SMART objectives, which will reflect the overall objective of fostering the generational renewal;
2. improve the targeting of the measures through better project selection systems and use of business plans;
3. improve the monitoring and evaluation framework by drawing on best practices developed by Member States in their monitoring systems and evaluation reports.

Introduction

A decreasing farming population

01

EU agriculture is facing a decreasing farming population. The overall number of farmers in the EU-27⁵ has rapidly decreased in the last decade, falling from 14.5 million in 2005 to 10.7 million in 2013, i.e. a reduction of one fourth in less than a decade. All age groups of farmers were affected (see Figure 1). It is not possible to know the number of farmers up to 40 years old as Eurostat data does not split the age group 35-44 years old into further sub-groups⁶.

02

The number of young farmers (up to 44 years old) decreased from 3.3 million in 2005 to 2.3 million in 2013, i.e. a reduction of one third in less than a decade. However, the percentage of young farmers in the farming population remained relatively stable, at just above 20 % (see Figure 2).

03

Significant differences exist between Member States: for example, in Poland the share of young farmers in the farming population increased from 34 % in 2007 to 36 % in 2013, while in Spain it decreased from 21 % in 2007 to 16 % in 2013. Annex I provides an overview of the number of farmers in individual Member States and of the variation between 2007 and 2013, while Annex II indicates the evolution of the distribution of farmers by age.

Generational renewal is high on the political agenda

04

In 2008 the European Parliament considered that ‘generational change is necessary to preserve a high level of food quality and food safety within the EU as well as EU’s self-sufficiency in the future’ and that ‘the CAP must seek to remove the barriers currently facing young people wishing to set up in farming, by making generational change one of its priorities’⁸. In 2011 it noted that ‘the measures for young farmers contained in the second pillar have proved to be insufficient to stop a rapid ageing of the agricultural sector’ and that ‘support schemes in the second pillar should be extended’⁹. Also the Council in 2014 pointed out¹⁰ that young farmers and generational renewal in agriculture are fundamental for the sustainability and long term competitiveness of European agriculture.

05

In 2015 the Commission argued¹¹ that supporting young farmers is a priority. According to Commissioner Phil Hogan¹²: ‘… generational renewal is an issue that goes far beyond a reduction in the average age of farmers in the EU. It is also about empowering a new generation of highly-qualified young farmers to bring the full benefits of technology to support sustainable farming practices in Europe’. He stated that there are ‘barriers which hinder young people from taking up agricultural activity’ naming access to land, finance and knowledge as the most significant.

EU support for young farmers

06

The total EU budget allocated specifically for the support to young farmers over the 2007-2020 period is 9.6 billion euro. It doubled from 3.2 billion euro in the 2007-2013 period, provided under the Pillar 2 setting-up measure, to 6.4 billion euro in the 2014-2020 period, mainly due to the introduction of an additional direct payment to young farmers under Pillar 1 (see Figure 3). Total public expenditure, including national co-financing by Member States of Pillar 2 setting-up measure, is 18.3 billion euro.

07

Support for young farmers was introduced back in the 1980s¹³. Since 2000, most support has been provided under the Pillar 2 measure for the setting-up of young farmers¹⁴. This measure was followed by the ‘Farm and business development’ measure in the 2014-2020 period. The measure is implemented in 92 out of the 118 Rural Development Programmes (RDPs) across 24 out of the 28 Member States.

08

Additional support for young farmers was introduced in the 2014-2020 period under Pillar 1¹⁵ in the form of an additional payment of 25 % for young farmers on top of direct payments.

09

Figure 4 provides an overview of the EU instruments targeting – directly or indirectly – young farmers in the 2007-2020 period. As Figure 4 indicates, the audit focused on the measures supporting directly young farmers: the Pillar 2 setting-up measure and the Pillar 1 additional payment for young farmers.

10

Table 1 below compares the main features of Pillar 1 and Pillar 2 support for young farmers in the 2014-2020 period.

Table 1

Main features of Pillar 1 and Pillar 2 support for young farmers in the 2014-2020 period

	Pillar 1 – European Agricultural Guarantee Fund (EAGF) Payment to young farmers	Pillar 2 – European Agricultural Fund for Rural Development (EAFRD) Measure 6.1 – Farm and business development for young farmers
Legal basis	Article 50 of Regulation (EU) No 1307/2013	Article 19 of Regulation (EU) No 1305/2013
Form of support	Additional payment to young farmers entitled to a payment under the basic payment scheme or the single area payment scheme.	Business start-up aid of maximum 70 000 euro granted on the basis of a business plan (final payment is conditional upon the correct implementation of the business plan).
Support duration	Paid yearly for a maximum of 5 years (from the year of setting up).	Paid once per holding / per farmer in at least 2 instalments.
Implementation	Compulsory for all Member States, which can only set few parameters: budget, calculation method, limit of hectares, requirements for skills and joint control over legal holdings (see paragraph 40).	Voluntary for Member States/regions, which define priorities and objectives in RDPs, set eligibility and selection criteria, select projects and report to the Commission on the implementation of the measures.
Objective	‘To facilitate the initial establishment of young farmers and the structural adjustment of their holdings after the initial setting up’1, and contribute to the general CAP objective of viable food production by enhancing farm viability2 and encouraging generational renewal3
Eligible beneficiaries	Farmers under 40 years old. Farmers setting up as head of a farm for the first time or who set up in the last 5 years prior to 2015 direct payment applications. Natural and legal persons, including those where a young farmer exercises joint control over the holding.	Farmers under 40 years old. Farmers setting up as head of a farm for the first time. Legal persons, including those where a young farmer exercises joint control over the holding.
Number of beneficiaries	279 071 (in 2015).	193 828 in 2007-2013 period. No target at EU level for 2014-2020 period.
Average amount of aid per beneficiary	1 135 euro (in 2015).	20 000 euro (in 2007-2013).

1 Preamble (47) of Regulation (EU) No 1307/2013 and Preamble (17) of Regulation (EU) No 1305/2013.

2 See Article 5 of Regulation (EU) No 1305/2013.

3 For Pillar 1 see Commission’s Memo ‘CAP Reform – an explanation of the main elements’ of 26 June 2013: ‘In order to encourage generational renewal, the Basic Payment awarded to new entrant Young Farmers (those under 40) should be topped up by an additional 25 % for the first 5 years of installation.’ and the European Parliament factsheet ‘First pillar of the Common Agricultural Policy (CAP): Direct payments to farmers’: ‘To encourage generational renewal, the basic payment awarded to young farmers (under 40 years of age), newcomers or farms set up in the previous five years is increased by 25 % for the first five years.’

For Pillar 2 see Article 5 of Regulation (EU) No 1305/2013, referring to the specific priority of ‘facilitating the entry of adequately skilled farmers into the agricultural sector and, in particular, generational renewal’.

Source: ECA based on Commission’s data.

Audit scope and approach

11

The audit aimed to answer the following question:

Is the EU support to young farmers well designed to contribute effectively towards improved generational renewal?

12

In order to answer this question we focused on the measures supporting directly young farmers in the 2007-2020 period (see Figure 4), namely the 2007-2013 Pillar 2 measure 112 for setting-up of young farmers and its corresponding measure 6.1 in 2014-2020, and the 2014-2020 Pillar 1 payment to young farmers. We assessed the intervention logic (Part I of the report), the targeting in the implementation of the measures (Part II), and their results (Part III).

13

The audit was carried out between April and October 2016 and covered four Member States that spent the highest amount on young farmers: France, Spain, Poland and Italy (see Figure 5). These four Member States represent 56 % of the total EU budget corresponding to the measures supporting directly young farmers in the 2007-2020 period (see Figure 4). Annex III provides an overview of the EU budget allocated specifically to young farmers by Member State.

14

In these four Member States we examined the national frameworks, that set the intervention logic and the main features of the measures, and the extent of coordination between such measures and national policies favouring generational renewal. To assess the implementation and results of the measures, we focused on seven regions that are among the ones which spent the most under the measures supporting directly young farmers:

• France (Pays de la Loire and Midi-Pyrénées);
• Spain (Andalucía);
• Poland (Warminsko-Mazurskie and Dolnoslaskie);
• Italy (Emilia-Romagna and Puglia).

15

The audit approach combined an audit of the control systems, mainly at Commission and Member State level, with an examination of a sample of 57 projects at final beneficiary level to verify the implementation and the result of the measures. We also analysed relevant statistics and studies provided by Eurostat (e.g. Farm Structure Surveys), national parliaments and statistical offices, universities and young farmers’ organisations at EU, national and regional level.

16

These studies indicated that there are general factors other than EU measures influencing generational renewal (e.g. the economic and social situation, the propensity of banks to provide loans, the employment possibilities in sectors other than agriculture, and the high concentration of agricultural land in relatively low number of farms¹⁶). National policies favouring the exit of old farmers can also play an important role, as indicated by Germany, one of the Member States which, like Denmark, Ireland, the Netherlands and UK-Northern Ireland, chose not to implement the setting up measure under 2014-2020 Pillar 2. In fact, the 2007-2013 mid-term evaluation for Germany (Rhineland-Palatinate) showed that the measure 112 for the setting up of young farmers failed to adequately address the problem of farms lacking a suitable successor and that it was not possible to identify what impact such support had had on farmers’ age structure. In addition, Germany considered that its ‘Hofabgabeklausel’ social security scheme, which requires farmers to relinquish their farm in order to receive their old-age pension, plays a major role in successful generational renewal in the farming sector.

Observations

Part I – Intervention logic

17

The Commission and the Member States should adequately design policy interventions. For this purpose we examined whether the Commission and the Member States were:

• carrying out sound ex-ante needs assessments in the specific areas of intervention;
• deciding which funds are best matching the young farmers’ needs;
• defining specific, measurable, achievable, relevant and timed (SMART) objectives;
• defining arrangements to ensure an effective, efficient and coordinated use of the various funds.

Young farmers’ needs identified at general level …

18

According to Commission’s studies, interviews with the audited managing authorities and young farmers’ associations, barriers hindering young people to become farmers can be classified as relating to:

1. access to land: around 60 % of young farmers in the 28 EU Member States reported problems in buying or renting land¹⁷. According to several studies¹⁸, the problem lies in the high price of land and the reluctance of older farmers to retire;
2. access to capital: around 35 % of young farmers in the 28 EU Member States reported problems in accessing subsidies and credits¹⁹. According to studies²⁰ and interviewed young farmers’ associations, in France, Italy and Spain the problem is due to the complexity and length of the public support procedures rather than to the insufficiency of the subsidies;
3. access to knowledge: around 20 % of young farmers in the 28 EU Member States reported problems in accessing knowledge²¹. In 2010, only 14 % of farmers up to 35 years old in the 27 EU Member States had a full agricultural training²², although this varied significantly across the EU. For example, in France (Pays-Loire) 84 % of farmers up to 35 years old had a full agricultural training, in Italy (Emilia-Romagna) 27 %, in Poland 26 % and in Spain (Andalucía) only 3 %;
4. access to a sufficient and stable income: some Member States and young farmers’ associations indicated such a need, although in the four audited Member States there are no statistically representative data on the income of young farmers (up to 40 years old) or data showing whether the income in the first years of farming activity is generally insufficient or unstable, or more so than in later years;
5. access to basic infrastructure and services in rural areas, equivalent to those available to young people who do not live in rural areas, such as broadband, nurseries, schools, transport and postal services, healthcare and replacement services.

… but general needs were not further investigated

19

In most audited Member States/regions our examination showed that it is not known if the extent of such barriers is common to all young farmers setting up in a given region or only to some of them, for example those in specific geographical areas, agricultural sectors or financial situations (e.g. those who have not inherited sufficient land or capital). Nor is it known at which moment during the setting-up process which of these obstacles appear to be more serious.

Pillar 1

20

The Pillar 1 additional payment for young farmers is based on the assumption that young farmers starting an agricultural activity face financial challenges²³. Although this assumption may be true, the Commission’s impact assessment²⁴ did not provide data supporting it or an estimation of the expected impact of this additional payment on the young farmers’ income, on the viability of their holdings or on generational renewal rates, but focused only on the budgetary implications of the different methods proposed for calculating this payment. It is not clear what young farmers’ needs this payment should address, other than additional income, and what should be its added value.

21

Also at Member State level there were no documents, studies or data explaining why this additional payment was needed or supporting the assumption that young farmers starting an agricultural activity face financial challenges. In Italy we found some non-representative data at national level showing that the Farm Net Added Value²⁵ was slightly higher (80 000 euro on average) in 2010 for holdings held by farmers under 40 compared to older farmers (73 000 euro). Nor are there any data showing whether income in the first years of farming activity is generally insufficient or unstable, or more so than in later years.

22

Regulation (EU) 1307/2013 delegates to Member States some implementation choices, such as fixing a certain budget for the payment or a certain limit on the number of hectares on the basis of which it should be calculated (see also paragraphs 39 to 41). However, there were no documents, studies or data providing sound justification for such choices.

Pillar 2

23

The general needs and the decrease in the number of young farmers were mentioned in most of the audited Member States’ programming documents (ex-ante assessments, rural development programmes) relating to the Pillar 2 measure for the setting-up of young farmers. However, the underlying reasons why young people face barriers in terms of accessing land, capital, knowledge, income or services were not sufficiently investigated and were generally not supported by quantifiable evidence.

Partial mismatch between needs and form of support

Pillar 1

24

In the absence of a needs assessment it is unclear which specific needs other than additional income are addressed by the Pillar 1 payment to young farmers. However, concerning income we could not determine if the need for a higher and more stable income, which should normally be addressed directly by this payment, was dealt with. The audited Member States could not provide statistically representative data on young farmers’ incomes or data showing whether their income in the first years of farming is generally insufficient or unstable, or more so than in later years. Concerning the other needs:

1. the need to improve access to land is not directly addressed by this payment, which is only provided to young farmers who already have land;
2. the need for better access to capital is not evident since it is not known if beneficiaries of this payment lack sufficient capital to run a viable holding and/or sufficient access to credit to subsidise investments likely to increase their viability;
3. the need for better access to knowledge is not specifically addressed by this payment, which is provided without requiring a minimum level of agricultural education in most Member States.

Pillar 2

25

Under Pillar 2 measure for setting up young farmers the aid is provided in the form of a lump sum (subject to the accomplishment of the business plan), an interest subsidy or a combination of the two. It therefore addresses more directly the specific needs of young farmers, in particular:

1. the need to improve access to land is partially addressed, as farmers could use the lump sum to buy land or could subsidise credit for land purchases;
2. the need for better access to capital is generally addressed, as the farmers can use it for investments likely to increase the viability of their holdings and, in some cases, also to get a subsidised loan;
3. the need for better access to knowledge is generally addressed by this measure, as beneficiaries must have or acquire a minimum level of agricultural education;
4. the need for sufficient and more stable incomes is indirectly addressed by supporting the actions and investments likely to lead to the development of viable holdings.

Objectives set at general level …

26

The common general objective of the support to young farmers under Pillars 1 and 2 at EU level is to facilitate the initial establishment of young farmers and the structural adjustment of their holdings after the initial setting up, with the ultimate aim of increasing viability and favouring generational renewal (see Table 1).

… but the general objective of encouraging generational renewal was not reflected in the objective of Pillar 1 payment to young farmers

27

Annex IV shows the intervention logic of Pillar 1: the payment to young farmers should contribute to improving agricultural competitiveness and enhancing farm income and, more generally, to achieving the CAP objective of viable food production. However, the general objective of encouraging generational renewal was not reflected in the objective of this payment.

28

In the absence of a needs assessment, the objective of the Pillar 1 payment for young farmers remains:

1. not sufficiently specific as there is no description of the expected outcome (e.g. expressed as rate, number, percentage or frequency) or indication of the targeted population of young farmers to support (e.g. in specific geographical areas or financial situations);
2. only partially measurable since it is not known what percentage of the income of young farmers this payment should represent, nor are there any quantifiable targets in terms of the results this payment should generate;
3. not known if the objective is achievable or to what extent is achievable, as it is not sufficiently specific and measurable;
4. not clear to which extent the objective is relevant, as it is not known what young farmers’ needs this payment should address, other than additional income, and how widespread is such need among young farmers starting an agricultural activity (see paragraphs 19 to 22);
5. not timed as it is not defined by when the objective should be achieved.

The general objective of encouraging generational renewal was reflected in the objective of Pillar 2 setting-up measure

29

At EU level, the objective of the Pillar 2 measure for the setting up of young farmers is to ‘favour the setting up of adequately skilled farmers in agriculture and, in particular, generational renewal’ and contribute to the general CAP objective of viable food production by enhancing farm viability (see Table 1). In addition to this EU-wide objective, the Member States defined in their 2007-2013 RDPs more specific objectives for this measure, such as promoting employment, retaining population in rural areas, improving the competitiveness of the farms, increasing their profitability and using new technologies and improving human capital.

30

We found that the objectives of the Pillar 2 measure for the setting up of young farmers in the four audited Member States were partially SMART, as they were:

1. reasonably specific, as the aim was to support adequately-skilled young farmers and they were often accompanied by a description of an expected result (e.g. ‘to create added value through diversification and job creation’ or ‘to increase the profitability of farms’);
2. partially measurable, as there was a target indicator in terms of output (absolute number of young farmers to be supported and, in relative terms, percentage of the total number of holdings in a region), but no quantifiable target in terms of expected results, such as the generational renewal rate needed to achieve the objectives (see paragraph 71);
3. partially achievable, since they were achievable in terms of output (number of young farmers to be supported), but it is not known if they were achievable in terms of results and impact on generational renewal;
4. partially relevant, since they were relevant to the general need to support generational renewal. However, it was often not known to what extent they were relevant to the needs of access to land, capital, knowledge, income or services (see paragraphs 19 and 23);
5. partially timed as there is no deadline by which, for example, a certain rate of young/older farmers should be achieved.

Limited coordination between support measures, though some good practices were identified

Little coordination between EU and national measures supporting young farmers

31

In the four audited Member States we observed limited coordination between the EU and national support measures. More specifically:

• In France there is a wide range of national aids in favour of young farmers, such as tax advantages, exemptions from social security contributions, priority access for purchasing agricultural land, and aid for training courses. There are information centres to inform potential beneficiaries about the various aids. There are also coordination bodies to ensure complementarity between the various aids but no specific coordination mechanisms between the EU and national measures;
• In Italy there is some coordination of the scope of the intervention with the national measure providing young farmers an interest subsidy for the purchase of land (an issue only partially addressed by the EU measures) and mechanisms in place to avoid accumulation of this aid with the EU Pillar 2 setting-up measure; there are also tax advantages for which there are no coordination mechanisms with EU measures;
• In Poland there are loans with favourable conditions but no coordination mechanisms with EU measures;
• In Spain there are loans with favourable conditions and tax advantages having a direct impact on the young farmers’ income, like the Pillar 1 payment to young farmers. However, there is no coordination mechanism between these aids, which can be cumulated.

32

In none of the four audited Member States the authorities have an overview of the different EU and national aids provided to the beneficiaries. There is a risk that some young farmers are over-supported in comparison to their actual needs (e.g. benefitting from the EU Pillar 1 payment to young farmers, Pillar 2 setting-up measures, investments, diversification, training and the various national aids), while others are under-supported.

No coordination between Pillar 1 payment to young farmers and Pillar 2 setting-up measure

33

Although the Commission indicated that the 2013 CAP reform was aimed at ‘increasing the links between the two Pillars, this offering more holistic and integrated approach to policy support’²⁶, in the four audited Member States we did not observe any coordination between the national authorities managing Pillar 1 payment to young farmers and Pillar 2 setting-up measure. The two measures are managed by different authorities, according to different rules (see Table 1). In particular, the fact of having received aid from the Pillar 2 setting-up measure has no influence on the possibility of receiving the Pillar 1 payment to young farmers.

Good synergy in Pillar 2 between the setting up and the investments measure

34

In the four audited Member States we observed different levels of coordination between the Pillar 2 setting-up measure and the investment measure, which generated some synergistic effects.

35

In Italy, where the aid to young farmers was provided in the form of an aid package, as recommended by the National Strategic Plan (see Box 1), the combination of the setting up and investment measures proved successful.

36

Also in Spain (Andalucía) in 2007-2013 joint calls were organised between the setting-up and the investment measure, allowing young farmers to receive support under both measures. However, in 2014-2020 the aid package approach was discontinued and separate calls were organised for the two measures, which were assessed at different times against different selection criteria.

37

In France and Poland the setting-up and investment measures worked separately, but young farmers applying for the investment measure benefitted from an extra 10 % in aid to co-finance the investments, while in France, they were also awarded additional points in the project selection system.

Part II – Targeting of the measures

38

The Member States should apply selection methods that prioritise the most cost-effective interventions, for example by:

• targeting the aid towards more qualified young farmers and less favoured areas (e.g. facing highest insufficiency of generational renewal);
• applying selection procedures (e.g. competitive calls for proposals based on clear and relevant selection criteria) and tools (e.g. business plans) to prioritise beneficiaries likely to increase the viability of their holdings thanks to the aid;
• providing an amount of aid linked to improving their viability;
• providing the aid within a reasonable time frame, when needed to facilitate the initial establishment of young farmers and the structural adjustments of their holding.

Pillar 1 payment to young farmers: an over-standardized aid

Pillar 1 legal framework limits the scope for targeting …

39

The Pillar 1 payment to young farmers is provided yearly for a maximum period of five years to any applicants no older than 40 in the year of their first application, setting up for the first time in an agricultural holding as head of the holding, or who have already set up such a holding during the five years preceding the first application for the scheme.

40

Pillar 1 does provide additional income to young farmers. However, the Pillar 1 legal framework does not allow Member States to sufficiently target young farmers who are most likely to need an additional payment to be viable. In fact, Member States can only:

1. fix the percentage of the national ceiling to be used to finance payments to young farmers²⁹ (up to 2 % of the direct payment budget);
2. choose between three calculation methods³⁰ (most Member States, including France and Poland, calculated it as 25 % of the national average direct payment per hectare);
3. set a limit (between 25 and 90 hectares) for the number of hectares on the basis of which this payment is calculated (most Member States set it at 90 hectares);
4. opt to require additional skills and/or training (10 Member States and one region added such requirements³¹);
5. choose whether to accept joint control of young/non-young farmers over the legal entities applying for the payment or to limit access to legal entities controlled solely by young farmers³².

41

Furthermore, the implementation of the payment for young farmers is compulsory for all Member States, including those which chose not to implement the setting up measure under Pillar 2 (see paragraph 16). Table 2 provides an overview of the audited Members States’ choices in implementing the Pillar 1 payment to young farmers, while Annex V provides an overview for all 28 EU Member States.

Table 2

Audited Members States’ choices in implementing the Pillar 1 payment for young farmers

	France	Italy	Poland	Spain
% of the annual national ceiling	1 %	1 %	1 %	2 %
Calculation method:	25 % of the national average payment per hectare	Average value of entitlements held by a farmer	25 % of the national average payment per hectare	Average value of entitlements held by a farmer
Maximum limit of hectares on the basis of which the payment is calculated	34 ha	90 ha	50 ha	90 ha
Additional skills and/or training requirements	Yes	No	Yes	No
Allow joint control of young and non-young farmers over legal persons	Yes	Yes	Yes	Yes

Source: ECA based on Commission’s data.

… resulting in an over-standardized aid

42

Therefore, this payment is provided regardless of:

1. applicants’ skills and/or training requirements (in most Member States³³): young farmers without any agricultural training are also supported;
2. the location of the beneficiaries: young farmers located in less favoured areas, who generally face greater viability challenges, are not favoured in comparison with those located in other areas;
3. the viability of the holdings: holdings that are already profitable and do not need this additional payment to be viable are also supported (see examples in Box 2).

Payment also provided to holdings in which young farmers have a minor role

43

In case of joint control of a legal holding with other non-young farmers, this payment is provided under the same conditions regardless of the role of the young farmer in terms of decision-making power. In such situation, even a small share of a legal holding held by a young person not exercising an agricultural activity and, as an individual, not qualifying as an active farmer³⁵ can make the entire holding eligible for this payment (see example in Box 3).

44

There is a risk that this payment is being provided across the EU to numerous holdings in which the young beneficiary has a minor role in the holding and limited decision-making power and, as an individual, would not qualify as an active farmer, as in the example reported above. Out of the 279 071 applicants³⁷ for this payment in the EU in 2015, 61 742 (around 20 % of the total) exercise joint control over the holding. Nearly half of them (i.e. 26 925, around 10 % of the total) exercise control over the holding jointly with non-young farmers.

45

Out of the four Member States audited, this risk is higher in France and Italy (Emilia-Romagna), where respectively 64 % and 42 % of beneficiaries set up in legal holdings. We could not obtain data in either Member State on the average share of the legal holdings held by young beneficiaries or other information to assess their actual role (e.g. whether the young farmers have a decisive influence on management decisions regarding the holdings, whether (s)he, as an individual, would qualify as an active farmer, whether (s)he is registered as a farmer with the social security).

46

More generally, there is a risk that this payment is provided across the EU to holdings in which the young farmer is not involved in daily management. Additionally, as the aid is delivered under the same conditions as for direct payments, there are no checks on the legal title to use the land declared by the young farmer to receive this payment.

Not known if amount of aid is linked to needs

47

Table 3 provides an overview of the amount of aid in the four audited Member States.

Table 3

Overview of the amount of aid provided yearly under Pillar 1 payment to young farmers in the four audited Member States in 2015.

Amount of aid (euro)	France1	Italy	Spain (Andalucía)	Poland
Average	Not known	1 143	2 182	1 040
Minimum	Not known	15	16	25
Maximum	Not known	25 887	15 342	3 000

1 As of February 2017, the French authorities could not provide a database with the list of beneficiaries of this payment in 2015 indicating the amount received from this payment and the other Pillar 1 direct payments, the date of setting-up and application, the number of hectares and the share of the holding held by the young farmer (in case of joint control of the holding).

Source: ECA based on Member States’ data.

48

At EU level, the average amount of aid provided by the payment for young farmers was 1 200 euro per holding in 2015. This amount represents around 4 % of the average income of a holding (30 000 euro) in the EU³⁸ and even less in some Member States. For example, in Italy the average amount of aid was 1 143 euro, representing less than 2 % of the average income of a holding run by a young farmer (64 328 euro)³⁹.

49

This amount is not linked to the viability or other characteristics of the holdings (see paragraph 42) and it is not known if it is proportional to young farmers’ needs, as these were not assessed (see paragraphs 19 to 22). Audited beneficiaries indicated that this amount was mainly used to cover current expenditure and to make up for shortfalls in their revenue resulting from the fluctuation of agricultural prices, which is a situation that all farmers – not only those up to 40 – have to face. It is therefore unlikely that the amount of aid currently provided by this payment would have a substantial impact on the viability of the holdings and on the young farmers’ setting-up decisions.

50

Italy and Spain opted for calculating the amount of aid as 25 % of the average value of entitlements held by each young farmer. This value is linked to the historical value of the entitlements held by each young farmer, who acquired or rented them from other farmers (e.g. parents or older farmers). Since the objective of this payment is to facilitate the initial establishment of young farmers it is not clear why the amount of aid is linked to the history of the holdings and consequently penalises young farmers who are not inheriting or obtaining high-value entitlements previously held by other farmers.

Timing of aid not facilitating the initial setting-up of young farmers

51

The aid was often paid to beneficiaries who had been established for several years and, in some cases (see examples in Box 2), had already achieved a sufficient and stable income. This means that the timing of the aid was generally not consistent with its claimed objectives, as it was often paid too late to facilitate the initial establishment of young farmers or to contribute to any structural adjustment of their holdings. Nor did it act as incentive, as most of young farmers audited had set up before knowing that they would receive the aid.

Pillar 2 project selection system allows good targeting, although best projects were sometimes not prioritised

Eligibility and selection criteria allowed targeting the aid towards more qualified farmers and less favoured areas …

52

All four audited Member States directed the aid towards more qualified farmers, by requiring either to have a sufficient level of agricultural education or to acquire it within 36 months from application. The aid has generally increased the professional competence of young farmers and their capacity to introduce innovations. For example, in Italy (Emilia-Romagna) 31 % of supported young farmers hold an agricultural degree, while only 25 % of all young farmers existing in the region hold such a degree. In Spain (Andalucía) 84 % of supported young farmers have some agricultural training, compared to only 26 % of all young farmers existing in the region and 12 % of supported young farmers apply organic farming methods, compared to only 4 % of all young farmers existing in the region.

53

All four audited Member States encouraged young farmers to set up in less favoured areas (e.g. areas with natural constraints, with higher unemployment):

• in France and Italy (Emilia-Romagna) this was done by providing significantly higher amount of aid (around 20 000 euro more) to applicants setting up in less favoured areas;
• Italy (Puglia) effectively favoured young farmers setting up in less favoured areas both by awarding more points in selection criteria and by granting an additional amount of 5 000 euro to young farmers setting up in such areas. As a result, a higher proportion of young farmers located in rural areas with overall development problems (12 %) and intermediate rural area areas (10.6 %) was supported than those in rural areas under specialised intensive farming (9.9 %) and urban hubs (8 %)⁴⁰;
• in Spain (Andalucía) this was done both by awarding more points in the selection criteria and by granting an additional amount (+10 %) to young farmers setting up in such areas;
• in Poland this was done through selection criteria by awarding additional points, in the 2007-2013 period, to applicants setting up in areas with higher unemployment.

… although generational renewal was rarely addressed in the selection criteria

54

Only in Spain (Andalucía) in the 2007-2013 period and in Poland in the 2014-2020 period was there a selection criterion directly encouraging generational renewal: in Spain (Andalucía) applicants setting up as a result of an early retirement received more points, while in Poland the higher the age difference between the transferor of the holding and the young farmer the more points were awarded to the project. However, in practice, such criteria almost never had a decisive impact on targeting the aid, mainly because minimum thresholds of points were too low or non-existent (see paragraph 55).

Weaknesses in selection systems often hindered prioritisation of best projects

55

The selection systems should enable the comparative assessment and ranking of the project proposals to prioritize the most cost-effective projects. However, the selection criteria often had a limited impact in terms of targeting aid towards the best projects, as they were either introduced late in the 2007-2013 period or hardly ever applied to exclude low-quality projects. This was due to minimum thresholds of points for projects to be selected being too low or non-existent, and to an unbalanced distribution of the seven-year budget for the measure.

56

For example, in Italy (Puglia), the whole 2007-2013 budget of the measure was used up, as almost all the applications submitted under the call for proposals organised in 2009 were funded. The threshold was so low that only eight projects out of 2 424 were rejected. Consequently, young farmers who set up in the following five years with potentially better projects could not be funded.

57

Similarly, in Spain (Andalucía), the whole 2014-2020 budget of the measure was used up in the first two calls for proposals (2015 and 2016) and the minimum points threshold was only one point out of 20. This means that for the rest of the programming period young farmers with potentially better projects will not have the opportunity to be funded, unless the budget for the measure is increased.

58

In Poland, the managing authority applied a ‘first come first served’ system with no selection criteria until 2011, when the budget was exhausted. Until 2014, when the budget for the measure was increased and selection criteria were introduced, no further call for proposals could be organised, preventing young farmers who set up in the intervening three-year period from being funded.

59

Only in France and Italy (Emilia-Romagna) was the budget equally spread out through the programming periods with sufficiently high minimum points thresholds (although in France only for Midi-Pyrénées in 2014-2020 period). This made it possible to select a constant number of applications of sufficient quality to be funded every year.

Little evidence of improved viability

60

The Pillar 2 measure for setting up of young farmers aims at enhancing farm viability by favouring the setting up of adequately skilled farmers in agriculture and generational renewal (see paragraph 29). Business plans are in principle useful tools to guide young farmers in developing viable holdings. They should also allow managing authorities to assess, at selection stage, the viability of the holdings and, later, monitor and evaluate the results.

61

In none of the audited Member States was the initial estimated income of the holdings (before the project) used in the selection process to assess their potential to self-finance the investments. Moreover, business plans are useful tools but we found little evidence of improved viability (see Box 4).

62

Only in Italy (Emilia-Romagna) we found evidence of improved viability of the supported holdings, as shown by the ex-post evaluation report (see Box 5).

Amount of aid linked to needs and modulated to trigger specific actions

63

The following Table 4 provides an overview of the possible amounts of aid in the audited Member States in the 2007-2013 and 2014-2020 programming periods.

Table 4

Overview of the amounts of aid under the Pillar 2 setting-up measure in the audited Member States in the 2007-2013 and 2014-2020 periods

2007-2013 programming period
Amount of aid (euro)	France	Italy (Emilia-Romagna)	Italy (Puglia)	Spain (Andalucía)	Poland1
Average	15 440	38 077	40 000	53 270	17 000
Minimum	8 000	15 000	40 000	24 000	12 000
Maximum	58 400	40 000	45 000	70 000	24 000
Examples of modulation	Minimum amount increased to 16 500 euro for setting up in mountain areas	Introducing organic farming, contracting a loan, making over 60 000 euro of investments	+5 000 in less favoured areas	+10 % in less favoured areas	None

2014-2020 programming period
Amount of aid (euro)	France	Italy (Emilia-Romagna)	Italy (Puglia)	Spain (Andalucía)	Poland
Average	20 282 in Midi-Pyrenees 12 747 in Pays-Loire	Not yet available	Not yet available	60 331	24 000
Minimum	8 000	30 000	40 000	30 000	24 000
Maximum	58 000	50 000	45 000	70 000	24 000
Examples of modulations	+30 % in Pays-Loire for setting up outside the family circle	+ 20 000 in less favoured areas	+5 000 in less favoured areas	+25 000 if standard output above 50 000 euro	None

1 As of 12.12.2014 it is 24 000 euro (PLN 100 000), while until 31.12.2011 it was 12 000 euro (PLN 50 000) and from 1.1.2012 to 12.12.2014 it was 17 000 euro (PLN 75 000).

Source: ECA based on Member States’ data.

64

In France, Italy and Spain the amount of aid was generally linked and modulated in function of the specific needs and characteristics of the holdings (e.g. location, standard output) as well as of the actions included in the business plans (e.g. innovations, loans, investments) in 2007-2013.

65

Modulations of the amount of aid proved to be a good tool to encourage young farmers to set up in more difficult conditions (e.g. in mountain areas, outside of the family circle, contracting a loan), introduce production quality systems like organic farming, water/energy saving technologies, undertake larger investments or run more productive holdings. However, for the 2014-2020 programming period the Commission required Member States not to link the amount of aid with the investments elements or their size.

66

Poland set a fixed amount of aid (currently 24 000 euro) for any young farmer setting up, regardless of the characteristics of the holdings and content of the actions and targets set out in the business plan (e.g. location, size, investments, etc). This standardized approach increases the risk that the amount of aid might not be proportional to the needs and efforts of the young farmer setting up and does not incentivise specific actions.

Timing of aid generally appropriate

67

In France, Italy and Poland the timing of the aid was generally appropriate since, in most cases, the young farmers received the aid within one year from setting-up, i.e. when it was needed to develop their holding. In fact, project applications were generally processed within a reasonable time frame (less than six months from the application date). Young farmers received the aid before implementing most of the actions set out in the business plan. So, the aid helped to mitigate the problem of access to capital and, sometimes, also to obtain a loan from banks.

68

Only in Spain (Andalucía) the administrative processing times were long in 2007-2013 and on average applicants had to wait 17 months for project approval (well beyond the six-month limit the managing authority set in the calls for projects). As a result, two of the eight audited beneficiaries had made some investments before knowing if their projects would be approved. Moreover, the aid was always paid on the basis of proof of expenditure, so after the beneficiaries had made all the investments. Thus, the aid was generally provided too late in relation to young farmers’ needs in the setting up process.

Part III – Monitoring and evaluation of the measures

69

To obtain performance information on the effectiveness and efficiency of EU spending:

• the Commission should establish a Common Monitoring and Evaluation Framework (CMEF) providing output, results and impact indicators allowing to assess the progress, effectiveness and efficiency of the policy against objectives (see Figure 6);
• the Member States should provide the Commission with all the information allowing the monitoring and evaluation of the measures, also by developing useful additional indicators. As far as possible, this information shall be based on established sources of data, such as the Farm Accountancy Data Network and Eurostat;
• performance evaluations should be carried out by independent contractors under the responsibility of the Commission (for Pillar 1 measures) and of the Member States (for Pillar 2 measures).

CMEF indicators do not allow assessing the performance of the measures in achieving their objectives

70

In order to demonstrate the performance of the EU measures supporting young farmers in achieving their objectives (see paragraphs 26 to 30), Member States should collect data on the outputs and results achieved. Under the CMEF, Member States must collect information for the following output and result indicators as a minimum (see Table 5).

Table 5

Overview of compulsory indicators under the CMEF for the Pillar 2 setting-up measure (measure 112 in 2007-2013, measure 6.1 in 2014-2020) and the Pillar 1 top-up payment for young farmers (in 2014-2020)

Type of indicator	2007-2013 Pillar 2 (measure 112 for setting up of young farmers)	2014-2020 Pillar 2 (measure 6.1 for setting up of young farmers)	2014-2020 Pillar 1 (payment to young farmers)
Total Public Expenditure (euro)	5 281 543 934	10 440 973 292	2 621 619 765
Output	Number of young farmers supported Total volume of investments	Number of agricultural holdings with RDP-supported business development plan/investments for young farmers	Number of young farmers Number of hectares
Result	Increase in gross value added in supported holdings	Percentage of agricultural holdings with RDP-supported business development plan/investments for young farmers (out of total holdings)	None
Impact1	Economic growth (net added value per annual work unit) Labour productivity (added value per annual work unit)	Agricultural entrepreneurial income Agricultural factor income Total factor productivity in agriculture EU commodity price variability

1 At RDP level in 2007-2013 and related to CAP objective of viable food production in 2014-2020.

71

As in previous ECA reports⁴³, we found that the performance information collected via the CMEF indicators does not allow assessing the effectiveness and efficiency of the measures in achieving their objectives. This is mainly due to the fact that:

• for the 2007-2013 period, in all audited Member States except Italy (Emilia-Romagna, see paragraph 35), the only result indicator in the CMEF (Increase in gross value added in supported holdings) was based on unverifiable estimates and not on actual data collected from the supported holdings;
• for the 2014-2020 period there are no result indicators in the CMEF allowing to assess the improvement in the viability of the holdings, which is the ultimate objective to which such measures should contribute. The only result indicator relating to the Pillar 2 measure for the setting up of young farmers (Percentage of agricultural holdings with RDP-supported business development plan/investments for young farmers (out of total holdings)) is not a proper result indicator but rather an output indicator, as it does not measure the effect of the support in relation to its objectives (e.g. viability of the holdings, generation renewal, job creation, increase in educational and innovation level of young farmers, etc.);
• actual data on the structural and financial characteristics of the supported holdings (e.g. revenue, income, number of employees) is not usually collected. Also the estimates of income from the Farm Accountancy Data Network are not representative for supported young farmers or for the young farmers’ population⁴⁴. It is therefore unknown for all audited Member States except Italy (Emilia-Romagna, see paragraph 75), whether the supported holdings are actually employing more people, becoming larger, more productive and more viable, and generating more income than non-supported holdings. It is also unknown whether holdings supported by the Pillar 1 payment for young farmers and the Pillar 2 setting-up measure are actually performing better in these respects than holdings supported only by one measure.

… however, some Member States developed useful indicators

72

In addition to the compulsory indicators under the CMEF, Member States may set additional specific indicators. Table 6 provides an overview of the additional voluntary indicators set by some audited Member States in relation to the Pillar 2 setting-up measure.

Table 6

Overview of additional indicators set by some audited Member States in relation to the Pillar 2 measure for the setting up of young farmers.

Type of indicator	Pillar 2 measure for the setting up of young farmers
Italy (Emilia-Romagna)
Result	Increase or maintaining of employment in supported holdings Number of supported young farmers introducing voluntary certification systems Number of supported young farmers integrating environmental and animals’ well-being aspects in the investments
Impact	Number of jobs created
Poland
Result	Average increase in the economic size (standard output) of supported holdings Average percentage increase in the economic size (standard output) of supported holdings Average size of supported holdings after implementation of the business plan
Impact	Number of jobs created
Spain (Andalucía)
Output	Number of young farmers who set up as a result of an early retirement Percentage of women among supported young farmers setting-up
Result	Number of jobs created

Source: ECA elaboration based on the audited RDPs.

73

These additional indicators set by Member States allow assessing the effectiveness of the measures in relation to specific objectives, such as job creation, gender balance, rejuvenation of farmers and innovation. For example, in Italy (Emilia-Romagna), thanks to the indicator ‘Number of supported young farmers introducing voluntary certification systems’ we know that 214 (13 %) out of the 1640 beneficiaries of the measure in 2007-2013 have introduced this type of innovation in their holdings. In Spain (Andalucía) thanks to the two additional output indicators, we know that the measure was less effective than expected in fostering rejuvenation of farmers (only 53 supported young farmers set up as a result of an early retirement, compared to a target of 92) and the setting-up of women (only 23 % of supported young famers were women, compared to a target of 45 % and a percentage of women under 44 years old in the farmers population in Andalucía of 32 %).

Evaluations do not generally provide valuable information on the performance of the measures, though one good practice was identified

74

In the four audited Member States the mid-term and ex-post evaluations of the 2007-2013 programming period provided very little or unreliable information on the performance of measure 112 for the setting up of young farmers, except for Italy (Emilia-Romagna). For example:

• France had not yet provided (at end of February 2017⁴⁵) the 2007-2013 RDP ex-post evaluation report, which was due by 31.12.2016;
• Italy (Puglia) 2007-2013 RDP ex-post evaluation indicated that the average turnover of supported holdings increased, on average, by 15 500 euro from setting-up and that 73 % of the supported holdings hired new staff. However, such results are based on a web survey to which only 16 beneficiaries replied and the underlying declarations on turnover were not checked against any evidence;
• Poland 2007-2013 RDP mid-term evaluation indicated that the ‘Gross value added of the supported holdings increased, on average, by 35 % by the end of 2009’, without indicating a base year of comparison. In addition, the evaluation report indicated that this increase was largely due to the increase in the amount of grants and subsidies rather than to an increase in the value of agricultural production;
• Spain 2007-2013 RDP ex-post evaluation indicated that the ‘Gross value added of the supported holdings increased, on average, by 23.5 %’ but did not explain the estimation methodology or the source of data.

75

Only in Italy (Emilia-Romagna) the 2007-2013 RDP ex-post evaluation provides valuable information on the performance of the measure for setting up of young farmers (see Box 5).

Limited evidence of facilitating young farmers’ setting-up

76

In the four audited Member States we found limited evidence that the EU measures had facilitated the setting-up of young farmers by helping to overcome the initial entry barriers, such as access to land, capital, knowledge and sufficient income.

77

The EU measures helped only to a little extent young farmers in accessing land. In fact, the Pillar 1 payment for young farmers was provided only to young farmers who already had land, while Pillar 2 was only to a little extent prompting young farmers to increase their farm size via eligibility and selection criteria (see paragraphs 60 to 61), although there was no evidence that it prompted an increase in farm viability. Only for Italy (Emilia-Romagna) was there some evidence that supported young farmers increased their farm size more than non-beneficiaries (see paragraph 75).

78

In general terms, the total number of hectares held by young farmers has remained stable in the 2005-2013 period (see Figure 7). The reduction in the number of holdings held by young farmers has been offset by an increase in the average farm size.

million hectares	2005	2007	2010	2013
Total number of hectares held by young farmers	57.7	54.8	55.2	51.9
Total number of hectares held by farmers of all ages	172.1	172.8	174.5	173.0

Source: ECA based on Eurostat, Farm Structure Survey 2005-2013.

79

The EU measures directly helped young farmers access to capital, thanks to the provision of financial aid. However, there is no evidence – in case of the Pillar 1 payment to young farmers – and little evidence – in case of Pillar 2 measure for the setting up of young farmers – that EU aid has facilitated young farmers’ access to credit from commercial banks:

• In France and Italy (Puglia) the aid from Pillar 2 could also be provided also in the form of an interest-subsidy on a loan, however such form of aids had little success. In France many beneficiaries expressed their dissatisfaction with the fact that the loans they have obtained are non-negotiable and cannot be re-financed, obliging them to pay a fixed interest rate much higher than the current market interest rate. In Italy (Puglia), only 37 beneficiaries out of the 2 502 beneficiaries in the 2007-2013 period requested such aid, mainly because the managing authority required all investments included in the business plan to be completed before beneficiaries could request the interest subsidy;
• In Italy (Emilia-Romagna) and Poland the aid under the Pillar 2 setting-up measure was not provided in the form of an interest-subsidy on a loan, although in Italy (Emilia-Romagna) beneficiaries could receive a higher amount of aid when they obtained a loan for more than 30 000 euro (see Table 4);
• only in Spain (Andalucía), where the aid from Pillar 2 was also provided in the form of an interest-subsidy on a loan (to 567 beneficiaries out of the 738 beneficiaries in the 2007-2013 period) and the access to credit is particularly problematic for young farmers⁴⁶, commercial banks became more prone to provide loans, as shown for seven out of the eight audited beneficiaries.

80

The EU measures, especially the Pillar 2 measure for the setting-up of young farmers, generally had a positive impact on young farmers’ knowledge levels, thanks to eligibility criteria which favoured the entry of more qualified farmers in the agricultural sector. However, this positive impact on young farmers’ knowledge levels was not ensured in Italy and Poland by the Pillar 1 payment to young farmers, as these Member States did not require applicants to have or acquire any particular skills or training.

No clear relationship between EU aid and generational renewal

81

Generational renewal is a general issue that affects the entire population and labour force in the EU. As shown in Figure 8, the share of young people in the total population and in the labour force is decreasing more rapidly than in the farmers’ population.

82

It is generally not possible to establish a clear relationship between the EU aid provided and the evolution of the number of young farmers (see Figure 9). It is also difficult to know if and to what extent the EU aid has contributed to the increase in the average farm size (see paragraphs 77 and 78), or if this increase has led to a higher viability of the holdings.

83

This is due to various reasons:

• the EU aid is generally provided to a small percentage of young farmers: only 7 % of all young farmers existing in 27 EU Member States⁴⁷ received EU aid for setting up;
• there are several national policies supporting young farmers, which are rarely coordinated with the EU measures (see paragraphs 16 and 31 to 32).
• the monitoring and evaluation system does not produce adequate information on the achievement of the objectives, mainly because of the low quality of indicators provided by the common monitoring system (see paragraphs 70 to 71) and the limited or unreliable performance information provided by most evaluations (see paragraph 74);
• there are general factors other than EU measures influencing this relationship, such as the economic and social situation, the propensity of banks to provide loans, and the employment possibilities in sectors other than agriculture (see paragraph 16).

Conclusions and recommendations

84

EU agriculture is facing a decreasing farming population. The overall number of farmers in the EU-27 has rapidly decreased in the last decade, falling from 14.5 million farmers in 2005 to 10.7 million farmers in 2013. Young farmers (up to 44 years old) fell from 3.3 million in 2005 to 2.3 million in 2013. As the reduction affected all age groups, the percentage of young farmers in the farming population remained relatively stable, slightly above 20 %. However, significant differences exist between Member States (see Annex II).

85

In 2007-2020 the EU allocated 9.6 billion euro in specific support to young farmers to foster the competitiveness of agricultural holdings and generational renewal in agriculture. Together with Member States’ co-financing of Pillar 2 setting-up measure, the total public support amounts to 18.3 billion euro. Almost 200 000 young farmers received the EU aid for setting up in the 2007-2013 period. More than 70 % of the EU spending was provided under the Pillar 2 (EAFRD) measure for setting up of young farmers and the remaining 30 % is provided, in 2014-2020, under the Pillar 1 (EAGF) additional direct payment for young farmers.

86

Against this backdrop, we examined the role of the EU in supporting young farmers and fostering generational renewal. The audit sought to answer the following question:

Is the EU support to young farmers well designed to contribute effectively towards improved generational renewal?

87

The overall conclusion is that the EU support to young farmers is based on a poorly defined intervention logic, with no expected result and impact specified. It should be better targeted to foster effective generational renewal.

88

As regards the intervention logic:

For Pillar 1 payment for young farmers we found that:

• It is not based on a needs assessment, its objective does not reflect the general objective of encouraging generational renewal, and Member States did not coordinate it with Pillar 2 setting-up measure or national measures (see paragraphs 19 to 33);
• In the absence of a needs assessment the aid is provided in a standardized form (annual payment per hectare), in an amount and in a timing where it is unclear which specific needs other than additional income are addressed (see paragraphs 39 to 51).

For Pillar 2 measure for setting up of young farmers we found that:

• Although it is generally based on a vague needs assessment, its objectives are partially SMART and reflect the general objective of encouraging generational renewal. There is good coordination between the Pillar 2 measures for setting-up and investments. However, there is little coordination with national financial instruments, such as loans at favourable conditions to buy land (see paragraphs 19 to 37);
• The aid is provided in a form addressing directly the young farmers’ needs of access to land, capital and knowledge. The amount of aid is generally linked to the needs and modulated to trigger specific actions, like introducing organic farming, water or saving initiatives, setting up in less favoured areas (see paragraphs 25 and 52 to 53).

Recommendation 1 – Improve the intervention logic by reinforcing needs assessment and defining SMART objectives

For the post-2020 CAP, the Commission should indicate (or require Member States to indicate, in line with the shared management provisions) clear intervention logic for the policy instruments addressing generational renewal in agriculture. The intervention logic should include:

• a sound assessment of young farmers’ needs investigating the underlying reasons why young people willing to become farmers face barriers in their setting up process and the degree of diffusion of such barriers across geographical areas, agricultural sectors or other specific holdings’ characteristics;
• an assessment of which needs could be addressed by EU policy instruments and which needs can be or are already better addressed by Member States’ policies as well as an analysis of which forms of support (e.g. direct payments, lump sum, financial instruments) are best suited to match the identified needs;
• a definition of SMART objectives, making explicit and quantifiable the expected results of the policy instruments in terms of expected generational renewal rate and contribution to the viability of the supported holdings; in particular it should be clear if the policy instruments should aim at supporting as many young farmers as possible or target specific type of young farmers (e.g. the most educated, those setting up in less favoured areas, those introducing energy or water savings technologies in the holdings, those increasing the profitability or productivity of the holdings, those employing more people).

89

As regards the targeting of the measures:

For Pillar 1 payment to young farmers we found that:

• The aid is provided in a standardized form regardless of the viability of the holdings, their location and, in most Member States, the skills and/or educational levels of beneficiaries. In case of joint control of legal holdings with other non-young farmers, the aid is sometimes provided to holdings in which young farmers could have only a minor role – in terms of decision making power – (see paragraphs 39 to 46).

For Pillar 2 measure for setting up of young farmers we found that:

• The aid is directed to more qualified farmers, who commit to implement a business plan guiding them in developing viable holdings and who are often encouraged through the project selection process to set up in less favoured areas. However, business plans were of variable quality and managing authorities often did not apply selection procedures to prioritise best projects. Selection criteria were introduced late in the 2007-2013 period, minimum thresholds were either too low or non-existent and the 7-years budget of the measure was used up in some Member States to fund nearly all applications submitted at the start of the programming period, implying that young farmers who set up later could not be funded (see paragraphs 52 to 61).

Recommendation 2 – Improve the targeting of the measures

When implementing the post-2020 CAP measures, the Member States should improve the targeting of the measures by:

• applying criteria to ensure the selection of the most cost-effective projects, such as projects delivering the highest increase in productivity or viability of the supported holdings, or the highest increase in employment in the areas with highest unemployment or in less favoured areas with lowest generational renewal;
• applying clear criteria for assessing the role of young farmers to be supported in case of joint control of legal holdings (e.g. by defining what percentage of voting rights or shares the beneficiary should have, what minimum percentage of her/his revenues should come from his activity in the supported holding) to direct the aid towards young farmers making farming in the supported holdings their main activity;
• applying sufficiently high minimum thresholds of points that projects should reach and adequately split the budget of the measures to provide equal availability of funds to young farmers setting up during the entire duration of the programming period;
• improve the use of business plans as a tool to assess both the need for public funding by assessing – at application stage – the likely viability of the holdings without the aid and – at the end of the projects – the impact of the aid on the viability of the holding or on other clearly specified objectives (e.g. employment, introduction of energy or water savings technologies).

90

As regards the results of the measures:

For Pillar 1 payment for young farmers we found that:

• The common monitoring and evaluation framework does not provide useful indicators to assess the effectiveness of this payment, as there is no result indicator for this payment and data on the income and viability of the supported holdings are not collected (see paragraph 70 to 71).

For Pillar 2 measure for setting up of young farmers we found that:

• There is little evidence that the measure has facilitated the setting up of young farmers and improved the generational renewal and the viability of the supported holdings, mainly because of the low quality of the indicators provided by the common monitoring and evaluation system. Only in Italy (Emilia-Romagna) we found evidence that beneficiaries of the setting up measure developed larger holdings, more productive, more profitable and employing more people than non-supported ones (see paragraphs 70 to 83).

Recommendation 3 – Improve the monitoring and evaluation system

When implementing the post-2020 CAP measures, the Commission and the Member States (in line with the shared management provisions) should improve the monitoring and evaluation system. In particular:

• the Commission should define output, result and impact indicators allowing to assess the progress, effectiveness and efficiency of the policy tools against objectives, by drawing on best practices, such as useful indicators developed by Member States in their monitoring systems (see paragraphs 72 and 73);
• the Member States should regularly collect actual data on the structural and financial characteristics of the supported holdings (e.g. revenues, income, number of employees, innovations introduced, farmers’ educational levels) allowing assessing the efficiency and effectiveness of the measures in achieving the desired policy objectives;
• the Commission and the Member States should require evaluations to provide useful information on the achievements of the projects and measures based on actual data on the evolution of the structural and financial characteristics of the supported holdings, by drawing on best practices (e.g. benchmarking, counter-factual analyses, surveys) such as those identified in this audit (see paragraph 75).

This Report was adopted by Chamber I, headed by Mr Phil WYNN OWEN, Member of the Court of Auditors, in Luxembourg at its meeting of 31 May 2017.

Glossary

Active farmer: The active farmer provision set in Article 9 of Regulation (EU) No 1307/2013¹ aims at preventing individuals and companies from receiving support from the CAP when their business is not agricultural or is only marginally so. The key element of the active farmer provision is a negative list of businesses/activities, which includes airports, waterworks, real estate services, railway services and permanent sport and recreational grounds. If Member States want to, they can apply a stricter definition of active farmer.

Agricultural holding: A single unit, in both technical and economic terms, operating under a single management, which undertakes agricultural activities within the economic territory of the European Union, either as its primary or secondary activity. Other supplementary (non-agricultural) products and services may also be provided by the holding.

CAP (Common Agricultural Policy): The set of legislation and practices adopted by the European Union to provide a common, unified policy on agriculture. The initial measures were introduced in 1962. Since then, the policy has been adapted and developed and has undergone a number of reforms.

CMEF (Common Monitoring and Evaluation Framework): EU-wide monitoring and evaluation framework for rural development in the 2007-2013 programming period. For the 2014-2020 programming period it covers both CAP pillars (EAFRD and EAGF).

Direct payments: Are granted directly to farmers to ensure them a safety net. They are mainly granted in the form of a basic income support, decoupled from production, stabilising their income stemming from sales on the markets, which are subject to volatility. They are provided by the European Agricultural Guarantee Fund, commonly referred to as ‘Pillar 1’ of the CAP.

EAFRD: European Agricultural Fund for Rural Development. It finances the EU’s contribution to rural development programmes and is commonly referred to as ‘Pillar 2’ of the CAP.

EAGF: European Agricultural Guarantee Fund. It primarily finances direct payments to farmers and measures regulating or supporting agricultural markets and is commonly referred to as ‘Pillar 1’ of the CAP.

Farm accountancy data network (FADN): An instrument for evaluating the income of commercial agricultural holdings and the impacts of the CAP. It is based on the accounting data of a sample of more than 80 000 agricultural holdings across all the EU Member States.

Farm structure survey (FSS): A survey carried out by all EU Member States. The FSS are conducted consistently throughout the EU using a common methodology and provide comparable and representative statistics across countries and time, at regional levels. The FSS is carried out every three or four years as a sample survey, and every ten years as a census.

Impact: Long-term changes in society that are, at least partly, attributable to the EU’s action.

Intervention logic: Sets out the relationship between the socio-economic needs to be addressed by the intervention and its objectives, inputs, processes, outputs, results and impacts.

Managing authority: The local, regional or national body appointed by the Member State to submit a Rural Development Programme to the Commission and then manage and implement it.

Output: The deliverables of the programme.

Paying Agency: The national or regional body responsible for assessing, calculating and paying out agricultural subsidies.

Payment entitlements: Introduced by the 2003 reform of the CAP to implement the single payment scheme. Payment entitlements were distributed to farmers based on historical data (at regional or individual farmer level). Following the 2003 reform, to qualify for a single payment, a farmer had to activate the payment entitlements that he or she held together with the same number of eligible agricultural hectares. The 2013 reform replaced these payment entitlements with newly-established payment entitlements under the basic payment scheme. By derogation, some Member States that fulfilled certain conditions may keep existing payment entitlements.

Pillar: The CAP consists of two funds, also referred to as ‘pillars’: ‘Pillar 1’ is used to refer to the EAGF, providing direct payments to farmers, while ‘Pillar 2’ is used to refer to EAFRD, financing rural development programmes.

Programming period: Multiannual framework planning and implementing EU policies such as the rural development policy. This audit concerns the 2007-2013 and 2014-2020 periods.

Result: The immediate effects of the programme on direct addresses or recipients.

Rural Development Programme (RDP): A programming document prepared by a Member State and approved by the Commission for planning and monitoring the implementation of the EU rural development policy at regional or national level.

Shared management: Method of implementing the EU budget whereby implementation tasks are delegated to the Member States², while the Commission retains final responsibility (supervisory duties).

SMART objectives: Specific, measurable, achievable, relevant and timed objectives³.

Young farmer: Under Pillar 1, a person who is under 40 years old at the moment of submitting the application and is setting up for the first time in an agricultural holding as head of the holding, or has already set up such holding in the last five years prior to application, as defined in Article 50(2) of Regulation (EU) 1307/2013. Under Pillar 2, a person who is under 40 years old at the moment of submitting the application and is setting up for the first time in an agricultural holding as head of the holding and possess adequate occupational skills and competence, as defined in Article 2(n) of Regulation (EU) No 1305/2013⁴. It is not possible to know the number of farmers up to 40 years old as Eurostat data does not split the age group 35-44 years into further sub-groups.

Audit team

The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks to performance or compliance, the level of income or spending involved, forthcoming developments and political and public interest.

This report was adopted by Audit Chamber I — headed by ECA Member Phil Wynn Owen — which specialises in sustainable use of natural resources. The audit was led by ECA Member Janusz Wojciechowski, supported by Kinga Wisniewska-Danek, head of private office; Katarzyna Radecka-Moroz, private office attaché; Helder Faria Viegas, principal manager; Lorenzo Pirelli, head of task, Malgorzata Frydel, deputy head of task. The audit team consisted of Antonio Caruda Ruiz, Anzela Poliulianaite, Carlos Sanchez Rivero, Frédéric Soblet, Matteo Tartaggia and Diana Voinea. Secreterial assistance was provided by Frederique Hussenet, Monika Schmidt and Terje Teppan-Niesen.

Contact

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

More information on the European Union is available on the internet (http://europa.eu).

EU support to young farmers should be better targeted to foster effective generational renewal
(pursuant to Article 287(4), second subparagraph, TFEU)

Luxembourg: Publications Office of the European Union, 2017

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© European Union, 2017

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