Report on the National Declaration 2019
Our conclusions
In our opinion, the National Declaration 2019 gives a true and fair view of the functioning of the management and control systems in place for EU funds spent in the Netherlands. The Declaration also gives a true and fair view of the reliability of the accounts the Netherlands submitted to the European Commission and of the regularity of net expenditure down to the level of beneficiaries.
In our opinion, the Declaration was prepared in a sound manner. The National Declaration 2019 therefore gives a good picture of the management and regularity of EU funds and of the accountability rendered for them. That picture, in summary, is as follows: the management and control systems for EU funds functioned adequately and the funds were spent regularly and accounted for correctly.
In the European agricultural funds, two points for improvement call for attention.
1. In the European Agricultural Fund for Rural Development (EAFRD) checks of the reasonableness of certain costs declared by recipients were inadequate. The costs concerned were:
- the cost of weather insurance taken out by farmers (€5.5 million disclosed in the National Declaration 2019);
- the cost of farmers’ participating in a quality scheme for the veal calf sector (€5.3 million disclosed in the National Declaration 2019); and
- the costs reimbursed under provincial grant schemes for rural development (€8.8 million disclosed in the National Declaration 2019).
The lack of adequate checks of these costs can lead to the irregular expenditure of EU (and Dutch) funds (see section 3.3 of the National Declaration 2019, EAFRD point for improvement: checks of reasonableness of costs).
2. In the European Agricultural Guarantee Fund (EAGF) a risk arose in 2018 owing to the availability of open data on land parcels. By claiming income support for land parcels that were not claimed by other farmers, applicants could receive more income support than they were entitled to. An audit found that an estimated €0.3 million in support had been claimed and paid out in 2017 in respect of land that was not actually at the applicants’ disposal. The audit findings for 2018 are not yet known (see also section 3.3 of the National Declaration 2019, EAGF point for improvement: new risk arising from the use of open data).
We recommend that the Minister of Agriculture, Nature and Food Quality (LNV) have the paying agency (the Netherlands Enterprise Agency) carry out further checks. In its response, the government undertook to follow up this recommendation. We also refer in the report to the importance of keeping good records of the results and impact of EU funding. In chapter 5 of the National Declaration 2019, we consider the effectiveness of the farm income support awarded by the European Commission from the EAGF. We analysed existing data on both the gross and net incomes, including EU farm income support, of a large group of farmers.
The group received €426 million in EU income support in 2014. In our opinion, the information available on farm income and EU income support is sufficient for policy makers to draw conclusions on the effectiveness of EU income support. It provides an insight into which groups of farmers receive farm income support, how much that group’s disposable income is and what part of that income consists of income support.
The information provides an insight into the living standards of farmers in the Netherlands. We found indications that income support is partially effective to provide farmers with a reasonable standard of living. Our analysis found that without income support slightly more than half the farmers in our analysis would earn less than the statutory minimum wage; with EU income support, however, the proportion falls to just over a third. These are only indications of effectiveness because neither the European Commission not the member states have defined a reasonable standard of living.
Our analysis found, however, that in 2014 more than a third of the EU income support was received by farmers with a gross income of at least twice the modal income. We concluded from the information on net household income that the gross farm income of 13% of all the farmers in our analysis who received income support in 2014 was less than the statutory minimum but their net household income was higher than the median income of the working population of the Netherlands.
As part of our analysis we simulated the effect for the various groups of farmers of switching from income support based on volume of farm production to income support based on farm size. We found that income support as a proportion of farm income would decline mainly in the starch potato and veal calf sectors. Questions that arose from our analysis include:
What is a ‘reasonable’ standard of living? Should standard of living be defined in terms of gross farm income or net household income?
Is EU income support efficient if some farmers earn at least twice the amount of the modal income in the Netherlands?
Is EU income support effective if a third of the farmers who receive it still earn less than the statutory minimum?
These questions are relevant to policy makers in the light of the negotiations to reform the common agricultural policy for the period 2021-2027. The Netherlands’ position in the negotiations is to replace direct income support with support for innovation, greening and the achievement of societal goals.
The Minister of LNV said in her response to our report that the government would seek to strengthen the position of farmers and make more efficient use of funds awarded under the common agricultural policy. Farm income is determined by many factors other than EU income support. The minister noted that many farmers had a limited income but were nonetheless expected to work more sustainably. The minister referred to measures to strengthen farmers’ earnings model and to cap the amount of income support received per farm.