Rural Affairs Secretary Richard Lochhead
Statement to the Scottish Parliament
Support For Scottish Agriculture
June 10, 2009
Our countryside is special as are the farmers and crofters that care for it and work the land to produce a range of public benefits. In the last few months alone, I've spoken to hill farmers on Mull and in Speyside, crofters on Lewis and farmers in Fife and the Borders, just to give a few examples. These people are the lifeblood of our nation.
The government's purpose, of sustainable economic growth, is vitally important for our rural areas, especially in these difficult economic times.
Today, I am announcing the Government's position on three inter-related issues of agriculture policy.
The Less Favoured Area Support Scheme (LFASS) aims to deliver economic, social and environmental benefits that depend on active land management in the hills. LFASS expires in December. We have to decide on successor arrangements.
We have the report now of the independent review of the Scotland Rural Development Programme (SRDP) by Peter Cook as well. The SRDP delivers support for a range of activities, from capital investment for businesses, to environmental and community projects. Today, the Government is publishing Peter Cook's report, and our position on his recommendations. I take this opportunity to thank Peter for doing a tremendous job in a short timescale.
Finally, the recent Health Check of the Common Agricultural Policy. Some parts of the Health Check are closely linked to LFASS and the SRDP. We agreed with stakeholders that we would consider these issues at the same time.
The government's vision for agriculture is based on optimising the use of Scotland's natural assets: to produce food; other goods and services; and public benefits, for which it's right that society should pay. These assets include not just the land, but our world-renowned landscape, our rich biodiversity, and our wealth in soil carbon and renewable energy resources.
The principles, on which today's package is based, are therefore:
Optimising the use of natural resources in Scotland.
Providing public support for public goods, in particular social and environmental.
Using public money as effectively as possible to deliver the desired outcomes for our nation.
But relying on farmers and crofters to produce for the market.
And preparing Scotland for the longer term. Most observers agree that the Common Agricultural Policy after 2013 will in all likelihood look very different from today.
Short term: Immediate extra support for the hills
The first part of today's package concerns the future of livestock farming in the hills. Many have highlighted the serious situation faced by beef and sheep farming on our hills. Livestock numbers are falling and in some areas land abandonment is a reality.
This is, of course, a complex set of issues. For instance, Peter Cook says that hill farming matters more for community and environmental reasons than for food production: he says the fall in lamb production in the North and West since 2004 could be replaced by only a 3% increase in production elsewhere in Scotland. And farmers tell me that a reduction in flock size is not necessarily always a bad thing, if performance improves.
But hill farming faces unique challenges, and this is recognised across this chamber. One Mull farmer told me how he expresses his stocking rate not in sheep per hectare, but in hectares per sheep! And the costs of transport to and from Islands and remote areas can't be ignored.
In addressing this difficult issue, we need to strike a balance: helping businesses through the short-term, while still offering investment support for the longer term. Both elements are vital to get farm businesses onto a solid footing for the future.
As we are all aware, there has been lively debate among stakeholders on support for the hills, and how it should be funded. In our consultation on the Health Check, we received 50 responses and dozens of different suggestions. The only consensus perhaps among stakeholders is that there's no easy answer to this difficult challenge.
In taking our decision, the Government has paid attention to two key factors: our ability to target the different measures; and the speed with which they can make a difference. For instance, some suggested new support for the hills through the Land Managers' Options (LMOs) part of SRDP. But because of European rules, new LMOs could not benefit farmers' bank accounts until mid 2011 at the earliest. The government wishes to act sooner.
We have therefore decided on a staged approach, subject to approval by Europe.
We will make an immediate increase in LFASS payments for 2009, for the fragile and very fragile land categories. This increase of 19% will mean for example an extra £1,300 for the average sheep producer in the Highlands, or £1,600 for a beef producer in, for instance, Orkney.
Then from next year onwards, the current LFASS will be replaced by a revised version: LFASS 2010. The main changes to that will be:
A further increase in payment rates in the fragile and very fragile areas, giving a total of 38% compared with 2008. The main beneficiaries will be sheep producers in the most vulnerable areas.
A strengthening of the link between payment levels and hill farming activity will also be introduced, by updating the statistics on which payments are based.
And reinforced rules to determine active farming, so that payments are focussed on those who are genuinely active. We will consult stakeholders on precisely how to do this, which could include rules on stocking density and lambing rates.
Taking these steps together should deliver £15 million of extra support over two years for active farmers in the fragile and very fragile regions.
We will fund this partly from unspent money in LFASS, caused by the decline in applications; and partly by linking payments to active farming. The remainder will be funded from higher European funding, brought about by the weaker pound. We intend to deliver this extra support without reducing the budget elsewhere in the SRDP.
Let me be clear - from now on payments will be linked more closely to active farming. Everyone has told me this is the right thing to do.
In addition, we will maintain the £20 million Scottish Beef Calf Scheme, funded through top-slicing Single Farm Payments.
However, after much consideration, I have decided against any further top-slicing of SFP under Article 68. This is for a number of reasons:
Support can be delivered more quickly in the way I have described;
EU rules limit how we can spend Article 68 money, making it a bit more difficult to target;
And ultimately, the most we can do via Article 68 is to redistribute 10% of the SFP. But the whole SFP needs looking at: that is an issue I'll turn to later.
Medium term: Land Managers Options/Agri-environment support
The first steps I have described will deliver short-term assistance to hill farming faster than any other tool. But I am also announcing two further stages.
First, we will review the role played by the Land Managers Options within the SRDP.
LMOs provide easy-to-access support for small-scale activities, like small environmental schemes and minor investments. Peter Cook says that, whilst the overall balance of the SRDP is right, there is nonetheless a gap. That is the absence of an "entry level" agri-environment measure, through which farmers who haven't participated in environmental schemes, will now test the water.
The Government accepts this recommendation. With stakeholders, we will look at the agri-environment measures in the SRDP. We will look specifically at the role LMOs can play in supporting grazing in the hills. I am also open to the possibility of differential limits for LMOs on hill farms.
EU rules give the Commission up to 6 months to approve any changes. We will therefore submit changes to the Commission in time for implementation in 2011.
And following the abolition of set aside, we will also look at the role of LMOs in preserving environmental benefits, which might be lost as a result of that change.
Long-term: Review of Single Farm Payment
These short and medium term changes will deliver substantial extra support for our most vulnerable producers. They supplement the many other ways in which government supports the sector.
For instance, for the sheep sector alone: we fund monitor farms; we support QMS and its Sheep Strategy; we funded bluetongue vaccinations; we funded a £3m pilot project on electronic identification; and we are working hard to resist the current Sheep EID proposals.
But there is a longer term issue, which forms the final part of this livestock package.
Farmers in Scotland receive over £400 million each year through the Single Farm Payment (SFP). Payments are based on the support received in a reference period. This means any link between the size of payment and the farmer's economic need, or the public benefits he's delivering, is at best accidental, at worst non-existent.
A quick analysis illustrates the case for change:
At parish level, the highest payments in Scotland average £650 per hectare, the lowest £3 per hectare.
At individual field level, the highest payment in Scotland is £3,950 per hectare. The lowest is 6 pence. Not 6 pounds but 6 pence per hectare.
This situation is clearly unsustainable. Stakeholders agree. And as EU Commissioner Mariann Fischer Boel signalled last week, she thinks the same.
Until the Health Check, we had no choice but to keep our current system till 2013. The Health Check provides the chance to revisit our system, and make changes voluntarily, if we wish, before they are forced on us later.
So we must seize this opportunity. We must give serious scrutiny to how we use public money to support farming in Scotland, including the distribution between sectors, and between regions.
I have therefore asked a leading figure in Scotland's rural sector to chair an immediate inquiry, reviewing farm support in Scotland. This will look at how the public money we spend - over half a billion pounds a year - contributes to the national outcomes we've set for Scotland. And how it supports the Scottish government's vision for a new contract between society and our farmers and crofters, to support natural resource productivity with maximum impact and minimum bureaucracy.
The inquiry will look especially at the SFP, and make recommendations on whether we should use the option to revise our system. It will report by next spring, with an interim report this December.
I am delighted to announce that Brian Pack, formerly chief executive of ANM Group, who is present today, has agreed to carry out this vital task on behalf of the people of Scotland
I've said many times that there is no magic bullet for solving the problems of hill farming. These are complex issues. In helping a sector in genuine need, we must beware of inadvertently damaging other parts of the industry. And farming has its own side of the bargain to keep. It's not the government's job to tell farmers how many sheep and cattle to keep, or how to produce for the market.
Against this difficult background, the package I have described combines the quickest short-term benefit for hill farms, with the most effective approach of using support in the longer term. We will now work urgently to discuss these issues with hill farmers.
Fine-tuning the SRDP
Aside from the issue of hill farming, Peter Cook concluded that the overall balance of the SRDP is correct. But he made recommendations to re-focus the Programme and make it more effective. I am therefore announcing further changes.
We will introduce extra support to attract new entrants. We were the first administration to introduce new entrant support, but as Peter Cook acknowledges, European rules and the economic climate have limited its impact. We will use new flexibility to introduce an establishment grant of up to 75% of the existing support for interest payments, bringing the maximum support for any new entrant to 70,000 Euros.
We will increase support for slurry-handling projects, from 40% to 50%, or more for young farmers. This support will be of benefit to the pig and dairy sectors, and to farmers in Nitrate Vulnerable Zones, in particular. It will be worth £5,000 on a £50,000 slurry-handling project.
Subject to the necessary approvals, we will increase the limit on renewable energy diversification projects, from 200,000 to 500,000 Euros. Along with higher support rates for forestry, which we have already submitted for approval, this will help towards our ambitious climate change targets.
Of course, the SRDP is not just for land managers but all our rural communities. We will increase support for community projects from 50% to 90% so that more communities benefit across Scotland.
Again, many of these changes are subject to approval from Europe. But they show that the government is listening to stakeholders and to Peter Cook. They will help the SRDP meet the needs of rural Scotland even more effectively in the future.
Improving the Rural Priorities processes
As well as re-focusing the content of the SRDP, we have taken a serious look at how it operates. Understandably, Peter Cook's review has concentrated on Rural Priorities.
Peter acknowledges that uptake of Rural Priorities has in fact been very high in its first year, compared with previous schemes. In four rounds we have approved nearly £125m for 1,800 projects across rural Scotland; in the same timescale, the previous Rural Stewardship Scheme approved only £18m for less than 500 cases. As Peter says:
"… the potential level of funding for individual projects greatly exceeds anything under previous schemes. Rural Priorities makes a very important point about the future of Pillar 2 support in delivering multiple benefits for the nation as well as individuals."
This week, David Green of Cairngorm National Park said in the press that the SRDP "has made a real difference to the national park including the viability of those businesses".
However, there have been problems. Because of delays in Europe, the implementation of this complex and ambitious programme was rushed. Some things should have been done differently and mistakes were made, and I do acknowledge that. Today, the crucial question is how we move forward.
Many of those interviewed by Peter Cook see the benefits of the computerised approach, and they are impressed by the breadth and range of options available.
We agree with him that the existing system should be improved rather than replaced.
Reducing Bureaucracy
We will reduce bureaucracy and streamline the system, by making the first stage of the two stage process optional. The first stage, the so-called Statement of Intent, was introduced because stakeholders asked for early feedback on their application. But the strong message now is that this should be optional, and we accept that.
We will make it easier for smaller applications as well, those under £10,000, by ensuring that they need only provide essential data, rather than the detailed outcome plan currently asked for.
As recommended by the earlier McRobbie report on the forestry sector, we will approve non-contentious forestry projects on an ongoing basis.
On-line applications
There will be better support for applicants for whom it is a problem that the approval process is on-line.
We will provide access to broadband through our regional offices, and where possible more locally. Help will be available in completing an application not just through better introductory guidance, but also by the support of a member of the Scottish Government staff or its partners.
The Customer Service Desk will be strengthened, and staff will be better trained to deal with queries and give advice.
And businesses who don't have broadband will be able to apply for a connection through LEADER.
Special scrutiny for large projects
I will wish to ensure that large projects, in excess of £250,000, are only approved if they deliver against National Outcomes.
The uptake of Rural Priorities shows that a massive amount has been achieved in a short space of time, to the benefit of rural Scotland. But improvements are needed, which these changes will deliver.
Conclusion
This is a substantial package which the Government is announcing today. It will shape farm support in Scotland in the years ahead, to deliver:
- Food production and food security
- A healthy environment, landscape and biodiversity
- And flourishing rural communities throughout the whole of our nation