The European Union’s budget for the next seven years including the allocation for farm payments is almost across the line following agreement among EU heads of state.

The €1.8 trillion budget, known as the Multiannual Financial Framework (MFF) was thrashed out in the summer but hit a roadblock in recent weeks after Hungary and Poland opposed the package.

Failure to secure agreement would have seen EU budgets slashed in 2021 but the crisis was averted late last week.

The final text must still be signed off by the European Parliament, a process due to take place on Wednesday night, 16 December.

For Irish farmers, it means a CAP allocation of €10.5bn between 2021 and 2027 has been secured. Of this, 78% (€8.3bn) will go towards direct payments while the remaining 22% (€2.25bn) will fund rural development schemes.

The annual fund available to finance direct payments under the Basic Payment Scheme (BPS) has been reduced by 2% (€25m) from €1.21bn to €1.18bn

Despite an overall reduction in the CAP budget, Ireland managed to retain a similar allocation compared to the previous 2014 to 2020 budget.

Crucially, however, what the money can be used to fund has changed.

The annual fund available to finance direct payments under the Basic Payment Scheme (BPS) has been reduced by 2% (€25m) from €1.21bn to €1.18bn. As a result, all farmers are likely to face a 2% linear cut to their direct payment next year when the new budget takes effect.

This will see the average Irish direct payment reduced by €188 from €9,385 to €9,197.

Rural development

On the other hand, the EU’s contribution to the financing of Irish rural development schemes has been increased rising from €2.13bn to €2.25bn. This will be further bolstered by €196m from the NextGeneration (NextGenEU) recovery package, introduced in response to the COVID-19 pandemic.

These rural development funds will be released over the next seven years.