Cabinet Secretary for Environment and Rural Issues Richard Lochhead
Future of Farming
at the NFU AGM 2009
February 20, 2009 in Aviemore
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Mr President, ladies and gentlemen it's a great pleasure to be here again.
Congratulations, Jim, on being re-elected unopposed. I only wish I could stand in elections like that - I'm guaranteed to have at least four opponents every time I stand.
I thoroughly enjoyed the fine Aberdeenshire produce last night arranged by the North East NFU - given my past experiences at these dinners I usually associate the North East delegates with drink rather than food but let's not go there.
It was also the first dinner I have attended where I was served whisky with a stick of rhubarb and where I was joined at dinner by a very large tractor!
Can I say it's a privilege to be Cabinet Secretary for Rural Affairs and Environment in the Scottish Government as we approach the half way point of the current parliamentary term.
My role gives me the chance to travel the length and breadth of the nation, meeting face-to-face the people who work our greatest asset - our land. Primarily, they work the land to produce food - that has always been farming's primary purpose and must always will be. But our farmers are also doing much more, whether it's managing our world-renowned landscapes or sustaining our unique biodiversity. And of course they provide the glue that binds many of our rural communities together.
In my travels, I've been hugely impressed by the energy and drive among farmers across the land. Men and women who are forward-looking and innovative, like the beef farmers I met recently when I opened the SAC's new state-of-the-art research facility at Easter Howgate Farm, backed by £1 million of Scottish government money. And like Keith and Neil Thomson whose Monitor Farm I visited in the Borders a few weeks ago, when I launched a report showing that every pound of government money in the Monitor Farm programme delivers £6.50 of benefit to the industry.
Every since I was elected to Parliament, I have become increasingly aware that farming in Scotland has distinct characteristics and distinct needs, and that it is therefore essential we have a distinct agriculture policy. That's what this government has endeavoured to put in place with a view to maintaining this industry's huge contribution to the economy.
Economic backdrop
Of course, in 2009, the government is having to take action to help all parts of the economy. The economic backdrop to your conference is the most severe we've faced for many years, and the Government is doing everything we can to promote recovery across the board.
Farming is not immune to the effects of the financial crisis. For farmers, 2009 comes on the back of the roller-coaster turbulence of the previous year. Some are finding it more difficult to get credit - although the banks tell me this industry is the exception, as most farmers have a strong enough asset base to get them a credit rating but I will be keeping a watchful eye on that and will be meeting the banks again soon.
And we are beginning to see consumer behaviour affected by wider economic conditions. Some consumers are switching between cuts of meat, and are eating more meals at home instead of eating out. Following that through into precise impacts on the sector is quite complex, so there's work to do there, for QMS and others.
However, it is encouraging that the demand for local produce is holding up well which is a vote of confidence in Scotland's larder and our primary producers.
Land-based sectors are well placed to buck the trend of this recession. We've seen this reflected in the farming press over the last few weeks, in headlines like "Best prospects for a decade". According to the latest figures for the third quarter of 2008, agriculture, forestry and fishing grew by 0.4% while the economy as a whole shrunk by 0.8%.
Cattle prices in 2008 were 16% higher than the year before. Lamb prices in the markets were nearly 40% up by the end of the year. The weak pound, which brought a welcome boost to the Single Farm Payment, also gives us the opportunity to recapture export markets.
And with the ever hungry world's population increasing by the equivalent of Scotland's population every three weeks, demand for food is going to remain strong for the foreseeable future. Food production is the right business to be in.
And in these times, farming's role in Scotland's economy is more important than ever. As I look at the government's programme and the key sectors we've identified for Scotland's success, I see at least three that depend on farming and related activities: food and drink, tourism, and renewable energy.
Maybe it's because you work the land, the most tangible asset there is, but farming has always been a force for continuity. As the nation emerges from the downturn, your sector can help lead the recovery, thanks to the strong demand for your products and your long-term perspective.
If we get things right, it will be a stronger and more confident Scotland that emerges, and it will have much to thank its farmers for.
We know however that the period in front of us will be full of challenges as well as opportunities. Costs will remain high and, believe me, governments are unlikely to have any additional resources to make up the difference. But I know from my travels that Scotland's farmers have plenty of imaginative ideas about how to reduce their costs and improve their incomes. When prospects look good, that's the time to put those projects into action and we want to help you do that.
Indeed, right now, agriculture may seem a more attractive option than some of the other sectors that have commanded the attention of our younger people in recent decades. You and I know that farming needs new blood to have a bright future.
As I have learnt since taking office, the obstacles facing new entrants are complex. But we need to work together to break them down. That's why the government introduced a new entrant measure into the SRDP that provides assistance towards loan interest.
The CAP Health Check might enable us to improve on the current scheme, but in the meantime, I'm pleased to announce today a modest expansion: after successful talks with the European Commission, we can now support investments in livestock by new entrants as well as their other investments. The lack of support for purchasing livestock was one obstacle that had been conveyed to us.
One important factor, when it comes to attracting new blood, is the availability of land to rent. On coming to office, I asked the Tenant Farming Forum to consider what needed to be done to reduce the barriers to new entrants. In response to the Forum's recommendations, I made an unequivocal statement ruling out any further extension of the right to buy - a decision I am told that you overwhelmingly endorsed yesterday.
At the same time, I asked the Forum to come forward with proposals for more flexible tenancy arrangements as the present system is clearly not working. I appreciate it is not easy to reach consensus. But there are bigger issues at stake here. In the national interest, we need more land to come forward. Some of the people who lobby me about attracting new blood are the very landowners who are not letting out their land. So I say to them - Government has delivered, the ball is now in your court.
To succeed in attracting young people and to help those committed to the industry, we must also address the red tape that you tell me is a big burden.
Regulation is necessary, but we need to understand the burdens it creates for farmers. I commissioned a study on all the regulations that apply to Scottish agriculture, of which there are over 100. Today, as we publish the results of that study, I can tell you today that the next stage involves a pilot of an improved method for evaluating the burdens caused by regulation, in the areas covered by SEARS.
I launched the SEARS project last summer, bringing together nine delivery-focused bodies to provide more joined-up services to rural land managers. There's more streamlining in the pipeline, but already since its launch:
SEARS has reduced duplication in the way farmers engage with the 9 organisations.
It's improved access to services, thanks to a 24/7 contact centre.
It's reduced the number of on-farm inspections. As a first stage, I promised a reduction of 2,000 visits by October 2009, and I am delighted to report that by the end of 2008, around 1,200 had already been saved.
And SEARS has saved the sheep sector £150,000 in charges, as SEPA waived the second instalment of annual groundwater licence charge for 2008-09.
I'm also looking at the burden imposed by our statistical surveys. This year, land use data for over 30,000 holdings will be derived from the Single Application Form, leading to a reduction of about 70 questions on the June census form for many holdings.When it comes to red tape, I know that one of your biggest concerns is electronic ID in sheep. I share those concerns, which is why we committed £3m to the current pilot study involving three processors, six abattoirs and 300 farms, and why, along with the NFU, we recently had the European Commission over to see this project for themselves.
The fact is that traceability matters, especially for Scotland as we traditionally have more complex animal movements than many other countries. Traceability is critical to a quick and effective response to disease outbreaks. And it helps us get trade barriers lifted quickly after an outbreak. But we have to get the balance right. The government is working closely with the Commission, and the NFU, and we will leave no stone unturned, not only to make EID less burdensome, but to convert it into something that actually supports our agenda for animal health rather than damages the viability of sheep farming in Scotland.
Finally on the subject of rules and regulations, farmers told me that the appeals procedure for agricultural subsidies wasn't working. You asked me for a new more independent system, which needed to be quicker. I'm pleased to confirm today how we intend to deliver just that.
With thanks to John Kinnaird and his team for the thorough review they carried out, I can announce that the Scottish Land Court has agreed to take on responsibility for a new, streamlined appeals procedure. In future the government and the appellant will be on an equal footing, just as you asked.
The new process will indeed be independent and quicker. And as far as EU regulations allow us, we will do our best to change the culture so that administrative errors are not treated as serious crime.
On the government's side, our work on the appeals procedure has been led by my chief agricultural officer, Andy Robb. Andy retires very shortly and given his contribution to farming in Scotland over a long career, I'm sure that like me you would want to wish him well, and thank him for his service to Scottish farming.
SRDP
If the economic downturn makes us look at red tape, then it also requires us to look at our policies, to see how they can help the recovery. In the case of the SRDP, I announced a first-stage review, for three reasons: as a response to the downturn; to see whether our priorities and objectives are still appropriate; and to build on the experience of the first few months. I aim to take final decisions in May, with a view to putting our changes to Brussels in June.
The SRDP has massive potential to improve farming businesses throughout Scotland. In the forthcoming February round of Project Assessment Committees, we will be considering over 1,600 projects under the Rural Priorities scheme, to a value of over £100 million. That's more than in the previous three rounds combined. In fact since last summer, we will have squeezed a whole year's worth of rounds into just 6 months.
Elsewhere in the programme, we've paid out £115 million so far for LFASS 2007 and 2008, with the final 2008 payments going out now, and we've approved £25 million on other projects including £13 million for food processing, marketing and collaboration.
Nonetheless this is the right time to review the programme. To bring an outside perspective I asked Peter Cook to assist with the review. I impressed upon Peter the importance of getting views from stakeholders. I know that at this very conference you are setting out your views on the SRDP, and I can promise you that your input will be a major contribution.
Food Production
I mentioned earlier that Scotland's food and drink sector, underpinned by Scottish agriculture, is well placed for the recovery. Whatever else is happening in the world, everybody needs to eat, every day; perhaps that's why farming has proved itself so resilient over the years.
In these times of uncertainty, people are looking for government to help deliver security - financial security, energy security and I believe food security as well.
I know you take your role in delivering this seriously. I also hear you ask how this can be reconciled, for instance, with our afforestation target. To answer these kind of questions is exactly why I launched a major Land Use Study last autumn to identify how our land can best deliver the outcomes we want to see as a nation. I'm looking forward to discussing the results at our Land Use Summit later this year.
As well as being a key sector of our economy, food and drink is part of our national identity and our international reputation. Only last month, the Bocuse Dd'Or competition in France, where the top chefs in the world gather and compete, used exclusively Scotch beef - well done QMS for that. 2009 is Homecoming year, so we have even more opportunity this year to exploit our global reputation.
We have made supporting Scottish Food and Drink a central theme of my first two years in office and we can see benefits already. Examples include ASDA expanding its locally-sourced range of Scottish produce to 70 lines in April, rising to 100 later, and is featuring Scotch Beef in its in-store butchers. Sainsbury's is working with Scotland Food and Drink on a government-funded programme, to help 12 companies get into the major retail market.
Just last week I launched a £1.85 million export drive with Scotland Food and Drink, aimed at delivering £60 million in sales. Our National Food and Drink Policy is vital for this country and I will keep it high on my agenda.
Our Contract
Food production and agriculture go hand in hand - they are mutually dependent and the Scottish Government recognizes this - that is why, for instance, I am now reorganizing my staffing so that the government's food unit sits inside our Rural Directorate alongside agriculture.
And that is why if we're to have a national food policy, we need a clear vision for farming too . A month ago at the Oxford Farming Conference I set out my vision, based on the concept of Natural Resource Productivity.
That means simply optimising the sustainable use of our natural resources, to deliver the maximum economic and public benefit.
Scotland is blessed with fantastic natural assets: A large amount of land for the size of our population. Abundant clean water. Huge potential for energy production: 25% of Europe's wind energy resource for instance as well as massive marine energy potential.
We also have a wide range of soils, including high carbon soils that are important for climate change - over 50% of the UK's soil carbon is in Scotland.
To deliver our vision, we need what is essentially a new updated contract between farming and society. One that explains clearly to everyone what financial support is offered, and what is expected in return.
I have said before that I was disappointed during the CAP Healthcheck in Brussels that it was difficult to detect any policy context or vision to form a backdrop to the European negotiations. That was great pity but we can ensure that here in Scotland we provide a vision for Scottish agriculture.
A number of things about our vision make it distinctly Scottish. It's based on extracting maximum benefits from unique assets and resources. It acknowledges that given our geographical diversity and climatic conditions farming will continue to need direct financial support in the future - a fact which is at odds with the Treasury driven DEFRA vision south of the border.
Our vision recognizes that farming in Scotland produces a whole range of public benefits which society values and is prepared to invest in.
Benefits such as sustaining Scotland's biodiversity and landscape. Just this month the West Highland Line was voted the world's greatest rail journey. It is our land managers, farmers and crofters that provide that magnificent landscape.
And the government's vision recognises other public benefits from farming. Maintaining economic activity and flourishing communities in remote areas, is one. Another is helping maintain Scotland's capacity to produce food, to support our food security. No sensible nation in the 21st century would want to over expose itself to unpredictable events internationally when it is capable of producing food on its own doorstep.
All these things matter to the Scottish people, and all must figure in our vision.
2009, as I've already said on many occasions, is a crucial year for the delivery of our vision. I've mentioned the SRDP review. We also need to decide what form LFASS should take after the end of this year when the current scheme runs out. And we need decisions on the future of the Beef Calf Scheme, and on other parts of the CAP Health Check.
We'll need to consider whether the new Article 68 should be pursued. On one hand, the Health Check offers new flexibility. On the other hand, the Beef Calf Scheme itself uses up a lot of our margin for manoeuvre, plus any money would have to be top-sliced off somebody's Single Farm Payment, either within the same sector or across the board.
We're actively engaging with you on these issues right now, with a view to taking decisions in the summer alongside the SRDP. Already we can see what the key issues and constraints are.
First, the biggest constraint is the lack of new resources. The Scottish Government relies on a block grant from the UK and as you know we are currently working within the tightest financial settlement ever provided to Holyrood. And if the UK Government gets its way, matters are set to get worse with a £500 million cut in our budget just around the corner.
If there's no new money available then how we use the considerable resources already available is crucial.
Second, there's no one-size-fits-all solution, we need to tailor policy to specific needs in specific areas. Thirdly, I want to move forward in a way that makes change manageable; if any farm would be subject to excessive differences from one year to the next, I would want to avoid that by phasing changes in, if we do indeed decide that change is required.
Finally, it's clear that we need to strengthen the link between payments and farming activity. None of us want armchair farmers receiving payments. This is an area where there's overwhelming consensus.
We are looking for ways of tightening up. The NFUS' input, which we've already had, is a vital contribution.
Another issue on which there's consensus is that the historic model of SFP cannot last. Thanks to the Health Check, we now have the opportunity to revisit how we deliver SFP in Scotland.
If we were to decide in favour of change, we could in theory implement it from 2010, 11 or 12. We are not obliged to do anything now. But it seems certain that we will be forced to change during the next phase of the CAP, 2014-2020, if we haven't already done so of our own accord.
Something as big as changing the SFP is a huge challenge - just look at what happened in England. But it also represents a great opportunity. Let me repeat - we don't have to change now, but if we don't, we may be forced to later.
Hill Farming
Another important issue we need to look at together is the future of hill farming.
Last autumn a series of reports - by the SAC and the Royal Society of Edinburgh as well as NFUS' own Manifesto for the Hills - demonstrated the seriousness of the situation facing our hill farming sector. I've heard the difficulties at first hand, not least when I attended a meeting of your LFA Committee in December, the first serving agriculture minister to do so. I expect to hear and learn more when I visit Mull shortly.
It was always expected that livestock numbers would fall as a result of decoupling. And reducing breeding stock numbers doesn't necessarily mean reducing your output in kilos of beef or lamb, as farmers themselves have demonstrated to me. But the speed and scale of decline is a matter of deep concern.
One thing is very clear - there is no easy answer. Your own manifesto for the hills recognised that there will be no new money available. Nor is there consensus about how to deploy the funding that is available. This week I published the responses we received to our consultation exercise on LFASS: you'll see that while some think it's vital we redistribute money towards the more fragile areas, others say it's absolutely vital we don't.
In deciding on the future of LFASS we will apply the principles I've already set out in the government's vision. Principles like tailoring support to specific needs, and making support dependent on farming activity. Because it's farming activity, in return for support, that delivers environmental and social benefits in the LFA.
There has to be change. Our hill farmers need appropriate support, and how we deliver that will be at the heart of our thinking as we take forward some of the big issues I have been discussing.
Climate Change
These are the big policy challenges, but we face big environmental challenges as well. The biggest is climate change. Tackling climate change is a debt we owe to our children and our children's children.
That is why the Scottish Government is determined to give a lead, and why we committed ourselves, from the outset, to a reduction of 80% in Greenhouse gas emissions by 2050. This is an overall target for Scotland, not a rigid requirement for each sector of the economy.
Farming is in the front line in several ways. It will need to play its part in reducing emissions, like every sector. And it will have to adapt to new weather conditions, disease challenges and so on. But farming also has a big positive role to play, managing carbon sinks in the form of soil, crops and timber. Farming is very much part of the climate change solution.
And government is there to help. Building on the work of the Agriculture and Climate Change Stakeholder Group, which included the NFUS, I will shortly be launching 5 areas for climate change action, each with "farmer centred solutions":
- optimising the use of fertilisers and manures,
- optimising livestock management and storage of waste,
- locking carbon into the soil,
- using energy and fuels efficiently, and
- developing renewable energy
This is designed to be a practical programme, with real-world solutions that farmers can implement. Solutions designed not just to tackle climate change, but also to cut your costs and offer new business opportunities. Government will back the programme up with a new programme of advice through the Scottish Agricultural College and an easy to access web-site.
As part of this, I want to make sure that farmers benefit as much as possible from the opportunities in renewable energy.
We've already approved over £2 million worth of renewable energy projects under the SRDP, but I want more. The limit on the size of renewable energy projects we can support is too low, so we are looking urgently at how to increase it.
Better Return from Markets
We may have a number of policy and environmental challenges to address this year but we must never forget that for all parts of Scottish agriculture, producing for the market is what matters, to maximise returns and improve farm incomes.
For many of you this is second nature - that's why Scotland is successful in world markets where we cannot compete on price, only on quality. Other farmers have to still make this connection and pay scant attention to what happens beyond the farm gate. Never asking which market their produce ends up in - retail or catering, domestic or export. Never wondering how their products look on shelves, are packaged or labelled.
Many of you have made the connection between farming and consumers already. For those who haven't, I urge you to do so before others take the market opportunities away from you.
Supermarkets/Ombudsman
One place where farming and consumers cross paths is in our major retailers. I know you have big concerns in this area, and the government is making progress. At our supermarket summit last year hosted by the First Minister Alex Salmond, I reiterated my call for a fair deal for Scotland's food producers. The supermarkets agreed to work with us, and we set up a retailer's forum which will meet for the first time next month.
These are positive developments. But it's obvious to me, as I talk to farmers, fishermen and food processors across the country, that many people feel they are not getting a fair deal.
That is why we support the introduction of a supermarket ombudsman, to get a fair deal for those working with supermarkets and to ensure that standards are enforced. Unfortunately for all of us here today, that power does not rest with the Scottish Government but in London. I see, Jim, that your English counterpart, in his speech to his members earlier this week, mentioned the need for appropriate regulation for the major retailers. I see that my counterpart failed to address the issue at all in his speech.
That's not good enough. The UK government thought it was regulating the banking sector properly and look what happened there. We need to learn from that experience when we think about food retailing. The fate of the nation's food producers and many firms are in the hands of a few boardrooms. I will continue to press Hilary Benn relentlessly to ensure that action is taken in this vital area.
Labelling
One thing the UK minister did talk about was food labelling. On the positive side, clear and accurate labelling is a means of communicating to the consumer the quality of our food, so we can get higher returns from the market.
But clear and accurate labelling can be elusive. Just last week a group of dairy producers expressed to me their concerns over misleading labelling. The legislation is a mess. Scottish dairy products can be exported, processed and packaged, and then sold as Scottish even though they carry a non-Scottish processor mark. At the same time meat from other countries can be imported into Scotland, processed, and then passed off as if it was from animals born, reared and slaughtered here.
If producers who are paying close attention to these issues can find labelling confusing, then what chance does the consumer stand?
What we need is a common sense approach. The consumer needs labelling that's accurate. That would be in everyone's interests - consumer, processor and local food producer.
Following my meeting with the dairy farmers I have asked the Food Standards Agency to write on my behalf to all local authority trading standards offices, to ensure that they take action when informed about potentially inaccurate origin labelling on food.
I am also concerned by the pressures facing the dairy sector more generally and I am hoping to bring together the dairy supply chain soon to discuss some of the more immediate issues facing the sector.
Labelling of pigmeat has been a particularly contentious area, and I'm today publishing the results of a major government-funded research project on the subject. As a result of this research:
I have asked the Food Standards Agency to produce guidance on country of origin labelling for the Scottish supply chain, for all foods, not just for pork.
We are also developing a toolkit for the food service sector, to help them source ingredients locally and inform consumers about where food comes from.
And this successful project will be followed up with independent research on labelling across all sectors.
Finally, the Scottish Government has persuaded the UK Government to negotiate in Brussels for the option to introduce mandatory origin labelling. We have to get this right, and I will fight until we do.
Two years into SNP Government and 10 years into Devolution
I mentioned earlier that 2009 is two years into the SNP government. This year is also the 10th anniversary of the rebirth of our national parliament.
Undoubtedly devolution is good for Scottish agriculture.
Allowing us to take the lead on some issues and protect ourselves from forces outwith Scotland. We have been able to use what powers we do have to tailor agriculture policy to Scotland's needs.
And it's helped that in Scotland, government and stakeholders work closely and effectively together. Channels of communication are short. We can usually all get around a table, and look for consensus solutions in the best interests of the whole country.
Last year saw an excellent example, on bluetongue vaccination. Together we decided that mass vaccination was the right policy. Government contributed to the costs and industry responded very well. This is real responsibility and cost sharing: not an excuse for reducing government spending, but genuine collaboration on a shared agenda. Some of you still have to vaccinate, and I'm sure you're aware of the 30 April deadline and of the benefits to your own stock and to Scotland. But I'm proud of our joint achievement, and I hope you are too.
Animal health and welfare is one of many areas where devolution needs fixed and we are continuing to negotiate the devolution of animal health budgets. This should hopefully be settled by April 2010. And in terms of the wider cost and responsibility sharing agenda, it appears that the UK have slowed down their plans perhaps providing us with the opportunity to align our policy making with the EU's rather than DEFRA's.
At this point I'd like to mention another member of my staff who's well known to you. Charles Milne, my chief veterinary officer, was behind the vaccination programme and many other animal health and welfare initiatives. Charles will be a hard act to follow as CVO, but I'm delighted that he'll still be supporting Ministers and the sector in his new role as Director of the Food Standards Agency in Scotland. So devolution can work well, but it doesn't go far enough. Day after day the government finds that it cannot take the action it wants to, on rural issues, because the powers still rest in London. One example is that EU legislation permits member states to reduce fuel duty in remote and island communities, but Scotland can't take advantage - all we can do is continue lobbying London.
There are many more examples of how devolution stops short of delivering what Scotland really needs. The National Conversation about Scotland's future is happening now and I therefore hope you'll contribute to it.
Perhaps most importantly of all for agriculture, we need to be able to negotiate in our own right in the EU. We do a good job under the current arrangements to punch above our weight. In a few weeks, Mariann Fischer Boel will be visiting Scotland again, and next week I'm hosting the European Parliament's agriculture committee when it visits Edinburgh. We got a good result for Scotland in the Health Check. But let us not forget that the UK government's vision for the future of the CAP is wildly different from ours. And often the UK feels able to ignore our views and negotiate based entirely on its own approach.
This can't be good for Scotland. I cannot wait for the day when a Scottish Minister can represent this country as a full partner in EU business.
Conclusion
As I urge you to think about Scotland's future, I commit myself to working with Scotland's farmers on your future. I've set out my vision for a successful farm sector based on natural resource productivity. A vision that reflects our unique characteristics and needs. A vision that we can deliver by continuing to work together.
You role in society, your contribution to Scotland, will achieve new heights in the times ahead.
This year is the 250th anniversary of the birth of our national bard, Robert Burns, a poet and a farmer! What better time to celebrate and recognise the role of farming in Scotland.
In this Homecoming year, as Burns himself said:
'O Scotia, my dear, my native soil!
For whom my warmest wish to heaven is sent
Long may thy hardy sons of rustic toil
Be blest with health and peace and sweet content.'