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Organic Action Plan

Support for organic farming

3.1 The Scottish Executive provides financial support for organic farming because of the public goods provided by organic farming. This helps deliver the Agriculture Strategy's commitment to an agriculture industry which plays a major role in sustainable rural development and is a leading player in the protection and enhancement of our environment. The Executive also aims to ensure that its support for organic farming is consistent with helping organic farm businesses to meet market demand.

3.2 Since 1994, the Scottish Office and Scottish Executive have operated an Organic Aid Scheme as part of the agri-environment programme, supporting the conversion of land to organic status. This scheme was introduced as a means of securing the environmental benefits of organic conversion, though in practice it has also been a significant factor in the balance between supply and demand for organic produce in Scotland. It offers support for organic farming additional to the support offered through mainstream Common Agricultural Policy measures. The contribution of the Organic Aid Scheme to the growth of organic farming in Scotland has accelerated sharply in recent years:

Year-on-year growth since 1995 in the number of participants, spending, and number of hectares in the Executive's Organic Aid Scheme.

3.3 Much of the recent growth in the area covered by the Organic Aid Scheme is accounted for by the growth of the area of upland rough grazing included in the scheme:

3.4 The continued operation of the Organic Aid Scheme on a non-discretionary basis (i.e. where all applications were automatically approved) became a matter of concern to the Scottish Ministers in 2002. Ministers were concerned that the rapid subsidised expansion of the area of rough grazing and unimproved grassland included in the scheme did not represent good value for money and was distorting the balance between supply and demand, since many of the hill lambs produced on land included in the Organic Aid Scheme were being sold on to non-organic finishers and were therefore not contributing to bringing Scottish organic production into line with demand for Scottish organic produce. Ministers were also concerned that, against the background of a necessarily limited agri-environment budget which also had to fund the Rural Stewardship Scheme, the continued operation of the Organic Aid Scheme on a non-discretionary basis would potentially displace other valuable environmental benefits which are purchased through the Rural Stewardship Scheme. In the light of these concerns, the Scottish Executive worked with organic sector partners to develop selection guidelines for Organic Aid Scheme applications, introduced in September 2002, to enable Scottish Ministers to manage the overall agri-environment budget and to concentrate Organic Aid Scheme investment on applications which would be of high environmental benefit and help meet market demand.

Scottish Executive Action

3.5 The development of Organic Aid Scheme selection guidelines was recognised at the time as being only one part of a wider series of possible changes to agri-environmental support for organic farming. Working with the Organics Stakeholder Group, the Scottish Executive has identified further reforms which will enhance its support for organic farming.

3.6 Our aim is to support accelerated growth of organic farming where this can make the best contribution to environmental sustainability. Within that aim, we particularly want to support expansion of the arable area and improved grassland area in organic conversion or production, with a view to these areas comprising 30% of Scotland's organic area by 2007, against a current 15%. We also want to see fruit and vegetable production expand substantially from its current low base.

3.7 The Executive will take the following action in support of organic farming in Scotland:

Continued discretionary support for organic conversion. Organic sector bodies would understandably prefer that all applications for subsidised organic conversion were automatically funded. However, within a necessarily limited agri-environment budget, agreed with the European Commission until 2006, the Organic Stakeholders Group recognised that the Organic Aid Scheme would have to continue to operate on the basis that if demand for conversion exceeded available resources, only the better quality applications which were of high environmental benefit and which helped meet market demand should be funded.

Revised payment rates for organic conversion. The current payment rates (detailed below) have been in force since 1999.

In the light of experience, it appears that the arable payment rate is, in certain circumstances, too low to offer a significant incentive for organic conversion, while the payment rate for conversion of rough grazing/ unimproved grassland is quite generous. There are likely to be greater environmental gains in the conversion of arable land and mixed farm land, and conversion of this land is also likely to do more to help Scottish agriculture meet demand for organic products. The Executive will therefore consult now on revised payment rates with a view to introducing rates which will be a fair reflection of the costs of organic conversion and provide a reasonable incentive.

Payments for fruit and vegetable enterprises. The Organic Aid Scheme currently does not specifically provide for conversion of land for fruit and vegetable production. These are areas where there is substantial demand for organic produce (principally supplied by imports) and where organic conversion may have a particular effect in reducing pesticide and herbicide usage. The Scottish Executive will consult on the introduction of payments for conversion of land for organic fruit and vegetable production.

Advisory support for organic converters. At present, farmers considering organic conversion, and farmers who have already converted, benefit from significant advisory help funded by the Scottish Executive and provided by the Scottish Agricultural College, including a telephone helpline, an Information Pack and other advisory publications, a website with technical and market advice, and farm walks and meetings associated with SAC's organic demonstration farms. In addition to this, the Scottish Executive will consult on offering funding of up to 300, or 50% of costs, for the costs of advisory help in producing an organic conversion plan.

Conditional approval of Organic Aid Scheme applications. The Scottish Executive recognise that applicants to the Organic Aid Scheme may incur significant costs to register with an organic sector body, and that these costs may be incurred without result if an application for Organic Aid Scheme assistance is unsuccessful. The Executive therefore propose to allow farmers to apply to the Organic Aid Scheme without prior registration with an organic sector body, provided that the farmer registers within a reasonable period after he or she has had an application for Organic Aid Scheme assistance accepted.

Expert appraisal of Organic Aid Scheme applications. The Scottish Executive recognises that the application of expert judgement is required when Organic Aid Scheme applications have to be evaluated to determine which applications will be funded, and is working with organic sector stakeholders to devise an appropriate means of engaging external expertise in the appraisal of future applications.

Capital costs associated with conversion. There can be considerable capital costs associated with conversion to organic status where this requires a major shift in farming system. The Agricultural Business Development Scheme in the Highlands and Islands can already help support the costs of investments in restructuring agricultural holdings in certain circumstances; farmers in the Highlands and Islands Special Transitional Programme (H&ISTP) area may be eligible to apply for support towards investment in holdings projects, provided that these are designed to assist with the restructuring and re-orientation of agricultural production on their unit and that they meet the other main aims of the scheme. The ABDS is a competitive, cash limited scheme, offers support on a competitive basis to all eligible farmers, and treats organic and non-organic projects equitably. Successful applications can be offered funding of up to 50% of the cost of capital investments, to a maximum of 40,000. While in the rest of Scotland there is no public support currently available for similar 'investments in holdings' projects, this issue is under review. The Scottish Executive will also consult on changes to the Organic Aid Scheme to enable it to support capital costs associated with the management of land in organic conversion, e.g. fencing, dyking or hedging costs when a farm is converting from non-organic arable farming to mixed arable and livestock farming.

Ongoing payments. A range of EU Member States make continuing payments to at least some organic producers after the initial conversion period, in recognition of environmental benefits provided by organic farming and of the potential for organic producers to revert to more productive but less environmentally-friendly methods. This potentially disadvantages producers in Member States where subsidy (over and above that available to all farmers, whether organic or not) ceases after the conversion period. In considering options for ongoing payments the Scottish Executive has to take account of these benefits of ongoing payments balanced against the overall budget constraints on the agri-environment programme and the possibility of ongoing payments masking market signals. The Executive recognises the case for assistance beyond the conversion period where this can secure significant environmental benefits which might otherwise be lost, and will consult on options for payments for organic producers beyond the existing five-year period, including:

• spreading existing payments (subject to payment rate review) over a longer period;

• ongoing payments for all organic producers; and

• selective environmental payments for organic farmers after the initial five-year conversion assistance.

The Executive will decide which option to implement in the light of consultation responses and best use of available resources.

Timing

3.8 Changes to the way the Executive supports organic farming through the agri-environment programme will have to be agreed with the European Commission as part of annual revision of the Scottish Rural Development Plan. The Executive will consult on the proposed changes outlined above between now and March. In the meantime, we will be working with Organics Stakeholder Group members on refining the detail of some of the options, and will have regard to any possible consequences of the European Commission's current proposals for mid-term review of the Common Agricultural Policy. Ministers of the incoming Executive after the election will be invited to decide the way forward in the light of consultation responses, and subject to agreement with the European Commission changes should be introduced in time for applications to the 2004 Organic Aid Scheme selection round. Support arrangements for organic farming will be taken into account in the Executive's development of Land Management Contracts.

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