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CHAPTER 10: COMPLEMENTARITY WITH OTHER EU-FUNDED PROGRAMMES AND WITH DOMESTIC FUNDING

The Scottish Executive is committed to maintaining strong, prosperous and growing communities in Scotland. This places a responsibility on all Executive Directorates to ensure that they do what they can in furtherance of the commitment, including funding for rural development.

This chapter sets out the main measures and mechanisms adopted by the Scottish Executive to ensure that the European Agricultural Fund for Regional Development ( EAFRD) will complement each of the other main European funding instruments, in particular the European Structural Funds ( ESF) and the European Fisheries Fund ( EFF). The demarcation between funds is shown in Table 10.1. This chapter also considers other national government and domestic funding streams.

10.1. Managing complementarity with funding through other Community instruments

The Community Strategic Guidelines for rural development indicate ways in which demarcation could be organised using the scale of intervention and targeting. We will use the following parameters to define the activities to be supported through the SRDP. The SRDP will:

• encourage restructuring, diversification and locally added value in agriculture and forestry;
• support land management activities, including those required to address national, European and international outcomes and obligations;
• support business creation and diversification at a local level, and small-scale infrastructure, through actions that complement other EC funding; and,
• focus on gaps in provision in the key areas identified above.

The delivery of desired outcomes will be the key criterion for assessing eligibility for measures under the SRDP, although Axes 1 and 2 effectively limit support to particular types of applicant.

As a general principle, in comparison with support provided through ESF, EAFRD funding will be focussed on supporting diversification of rural economies at the local level. This includes interventions in agriculture, including supporting innovative farm diversification and woodland enterprises. Funding will also support direct product development by individual companies or by collaboration within the food supply chain. More widely, it will also include enabling growth of existing micro-enterprises and encouraging start-ups, and improving skills and employment opportunities for those individuals in the rural workforce on low pay where this support cannot be provided elsewhere. EAFRD monies will not be used to fund measures for any of the support schemes listed in Annex I of the EC implementing regulations ( i.e. Pillar 1 schemes).

Funding made available through measures in this programme has been designed not to overlap with support delivered through Pillar 1. In particular there is no overlap between measures in this Programme and the Scottish Beef Calf Scheme ( SBCS). The SBCS is a Pillar 1 measure funded through a beef national envelope, in accordance with measures agreed to as part of the 2003 CAP reform, to help the beef industry adjust to the new decoupled support regime. Payments are available through Scotland and are directed to beef bred calves produced from the suckler herd. This type of farming is important for sustaining quality beef production and for the environment. Depending on the outcome of the current CAP Health Check, the SBCS may require to be reviewed.

European Structural Funding will primarily address rural issues as part of a wider activity contributing to improved economic performance or as part of integrated employment and skills programmes. This will include interventions that help to develop the knowledge based economy at a strategic level, enable small and medium sized enterprises to become more competitive and more efficient in their use of natural resources, building sustainable communities, and increasing employment by breaking down barriers to work and increasing skill levels for all. Structural Funding will also cover support for wider innovation capacity of enterprises, for example the building of laboratory facilities and purchase of new testing equipment and research and development skills training, but not specific research and development projects and prototype development or testing. Structural Funds has two designated areas in Scotland, the Highlands and Islands and Lowland Scotland.

The European Fisheries Fund is an independent fund which will provide support to develop and manage viable and sustainable marine and inland fisheries, including aquaculture, as an integral part of coherent policies for safeguarding the environment. For the EFF the Highlands and Islands have been designated as a transitional-convergence region and Lowland Scotland as a non-convergence objective region. The overall aim for fisheries management in the UK is a fishing sector that is sustainable, profitable and supports strong local communities, managed effectively as an integral part of coherent policies for the marine environment.

In Scotland, the Managing Authority for both EAFRD and for European Structural Funds is the Scottish Executive, with responsibilities lying in Rural Directorate and Enterprise, Energy and Tourism Directorate respectively. The SRDP and Structural Funds Programmes, along with the Scottish interest in the EFF (which will have a single UK Managing Authority) are being developed in parallel by the Scottish Executive with particular attention given to complementarity or areas where project eligibility could overlap. We have worked with structural funds and fisheries colleagues to identify eligible activities under each of the Programmes. These issues were also examined in the respective consultations and, in recognition of its broad interest, the Strategic Plan for the 2007-13 SRDP was circulated to the Scottish Executive Cabinet.

The Managing Authorities will oversee the projects funded and scrutinise their delivery against the specific outcomes and objectives that have been set at regional, national and European level. We will produce an annual report on implementation of each of the Funds which will be presented to the Commission as part of annual reporting exercises. The strategic and operational fit between the programmes will be part of the mid term and other formal evaluations.

Complementarity between EAFRD funding and other programmes of funding will also be ensured through joint working and, in some subject areas, membership of the respective Monitoring Committees and project assessment committees. This approach will enable funding under each programme to be focused on their strategic priorities and will be particularly important where Structural Funds programmes contain a rural priority. For example, support for micro-enterprises in rural areas will be permitted under the SRDP and under Structural Funds programmes but will be targeted to the delivery of the specific and distinct outcomes identified for these programmes.

For the EFF there will be a UK wide operational programme with the Marine Directorate of the Scottish Executive responsible for implementing in Scotland the operational programme in respect of devolved responsibilities and for carrying out functions in respect of the agreed Scottish allocation from UK funds for which the Marine and Fisheries Agency have been nominated by the UK as managing authority. As with the other Programmes complementarity will be secured through joint working and close co-operation including where appropriate membership of committees established to monitor or assess the implementation of EFF in Scotland.

10.2 Complementarity and demarcation lines within Axes 1, 2, and 3

Axis 1 - "improving competitiveness of the agricultural and forestry sector"

Support available under Axis 1 is targeted at the agriculture, agri-food and forestry sectors and, therefore, has little potential for overlap with other funding programmes. ESF will support business innovation and entrepreneurship but, where agriculture and forestry businesses are concerned, this support will be provided by the EAFRD. However, the development of new crops (for example, through genetic modification) will be eligible for ESF support as such work extends into wider research and development activities rather than the agriculture and forestry sector per se.

The agriculture and forestry sector is composed largely of small businesses and these will be the focus of support under the SRDP. An exception will be support for larger businesses involved in food processing and marketing which will be provided through the Processing and Marketing Grants Scheme under the SRDP. However, with regard to agri-food schemes, Structural Funds cannot support primary processing of agricultural and/or forestry products. Therefore, the EAFRD will have sole responsibility in this area. This applies equally to the EFF with regard to the primary processing of fish in that the SRDP will not support the primary processing of fisheries products.

Funding under EFF will focus on marine protection issues and support for the development of new fishing and aquaculture products. Market research measures will be included in both the EAFRD and EFF programmes; however, these measures will act independently within the respective sectors and no overlap is anticipated.

The EAFRD will also target the encouragement and retention of new entrants to agriculture and forestry businesses and growing existing businesses through increased diversification and competitiveness. This funding will complement Structural Funding support through the ERDF in the wider rural sector.

The EAFRD will provide support specifically to the agriculture and forestry sectors for training, business development and diversification and the use of modern technologies by land managers, and the development of new agricultural and forestry products and novel crops. (For clarity, land managers are defined as "the owners or legal occupiers of land that is being actively managed for agriculture, forestry, horticulture, equestrian interests, sporting interests or environmental benefits"). Support will also be available for investment in renewable energy, including activities to produce biomass, as part of Scotland's efforts to tackle climate change. The focus of support for renewable energy will be on small-scale provision by land managers. Where support is sought for larger investments or for energy sector projects per se, applicants are expected to apply for appropriate measures under the ESF programmes.

Axis 2 - "improving the environment and countryside through land management"

Axis 2 will support land managers to improve the environment and countryside of rural Scotland. It will tackle strategic objectives on water and soil protection, climate change, and biodiversity. We envisage that in time it will also deliver our strategic objectives in relation to animal health and welfare.

The environmental benefits under Axis 2 provide wider gains across the rural economy. They provide an infrastructure for rural development that we must sustain. Scotland's biodiversity and landscape are important drivers behind our successful and growing tourism industry; for example, by complementing the outcomes of other funding sources in the tourism sector.

With regard to biodiversity, and specifically to Natura 2000, the EAFRD and ESF will have complementary roles. Support under the SRDP will be used to fund land-based measures that sustain ongoing conservation and enhancement of biodiversity, in keeping with the principles of sustainable development. Measures under the ERDF will provide business development support for projects that may be related to Natura or other designated sites but will not fund ongoing management of these sites.

Two further sources of funding for biodiversity are pertinent to the SRDP. First, the LIFE+ programme will complement the SRDP by filling funding gaps where special support is required to meet Natura and biodiversity targets. Second, Scottish Natural Heritage will continue to fund outside of the SRDP some management agreements for SSSIs where there is no alternative to a purely compensatory agreement, where agreements must be offered leading to a Land Management Order (under the Nature Conservation (Scotland) Act 2004) or where special management is required that may be too complex to be arranged through Rural Development Contracts. Careful co-ordination will be maintained, as part of the On the Ground approach, between the Scottish Executive and Scottish Natural Heritage to ensure that support through the SRDP complements that provided by Scottish Natural Heritage.

EAFRD funding for biodiversity through land-based activities will provide measures that would not otherwise be open to fishing communities. Synergy with EFF is therefore most likely in coastal areas where activities supported under Axis 2 could benefit marine communities.

Axis 3 - "improving quality of life through diversification of economic activity"

In relation to Axis 3 and Axis 4 ( LEADER) in particular, scale is a major factor in determining whether projects would qualify for EAFRD or Structural Fund support. Projects funded by the EAFRD will focus on small-scale infrastructure and small and micro-businesses. Through the SRDP we will support local community infrastructure projects under Axis 3 and Axis 4 of the EAFRD whilst projects of more regional significance may be considered for funding using Structural Funds. The EC Strategic Guidelines suggest that, in relation to human capital, a priority for EAFRD funding would be to support training in the land-based sector, including diversification into other activities. The SRDP provides measures under Rural Development Contracts - Land Managers Options and Rural Priorities to support training for land managers and other individuals, businesses and groups to assist them to restructure their businesses or to diversify into other activities. Activity related to Axis 3 is included in these measures. Support from the SRDP for micro, small and medium sized enterprises will only be available to land based enterprises and not those funded through the EFF.

Fisheries activities may often be located in rural areas. We expect that such activities will be largely funded through the EFF (for some measures this is required under the Regulation), although there may be particular instances where funding may be provided through the SRDP as part of an integrated rural development project, provided such proposal are admissible and there is no overlap in funding. In establishing priorities and assessing applications at a regional and local level, we will pay particular attention to ensure that Axis 3 and Axis 4 of the SRDP and Axis 4 of the EFF programme dovetail in the provision of rural services.

There is considerable scope for adding value to Structural Funds and EFF activity through smaller-scale SRDP 2007-13 projects, including assistance for non-vocational skills, wider community needs, developing opportunities for family members and addressing general social and cultural needs. This is also relevant not just to Axis 3 but also to Axis 4 ( LEADER).

The SRDP provides opportunities to set up micro-enterprises, renewable energy schemes and generate energy from bio-mass. Thus, it encourages those from forestry and agriculture to diversify from historic business practices. Diversification of the rural economy is also a strategic priority for the Enterprise Network in Scotland over the period 2006-09. The involvement of representatives from the Enterprise Network in the regional administration of the SRDP will ensure that funds from the EAFRD complement those provided through Scottish Enterprise and Highlands and Islands Enterprise.

Under Axis 3, the SRDP will provide scope for upgrading existing tourist accommodation and developing small-scale tourist visitor infrastructure. This will complement ERDF funding aimed at improving business practices and developing new products, and support by VisitScotland and the Enterprise Network aimed respectively at marketing tourism and investing in people and skills. There are two ERDF programmes: the Highlands and Islands ERDF and the Lowlands and Uplands ERDF, of which Priority 4 is specifically targeted at rural development.

The SRDP will also support action to add value to rural goods and services, build capacity in local communities, promote public enjoyment and understanding of the countryside, and promote the restoration and enhancement of historic architectural and archaeological features in the landscape. These actions will focus on specific areas of need , identified through regional priorities for the SRDP (see Chapter 11), and will be addressed through measures which will be examined for complementarily with the other funding streams such as ERDF and EFF.

Rural Development spending will be managed within Rural Directorate and close co-operation with other Executive Directorates, their agencies and local authorities will ensure compatibility between funding through the SRDP and other domestic sources of funding; for example, with Historic Scotland in relation to their Ancient Monuments Grants programme; with the Enterprise, Energy and Tourism Directorate in relation to the Executive's broadband strategy; and with Local Authorities in relation to local services and countryside access and recreation.

The Enterprise, Energy and Tourism Directorate is also responsible for the Scottish Community and Household Renewables Initiative ( SCHRI), which is directly linked to the Executive's strategic outcome on Rural development benefiting local communities. The purpose of SCHRI is to bring renewable energy to households and communities across Scotland. Beneficiaries include individuals, legally constituted community organisations and non-profit distributing organisations e.g. voluntary, charitable trusts, local authorities, and local rural partnerships. Individual farmers, foresters and landowners can apply but only if they are applying as home owners.

The SCHRI will end in March 2008 with the intended outcome to increase the number of small-scale renewable energy projects developed across a range of technologies in Scotland. This is also an area we will consider funding through the SRDP from March 2008, but to businesses rather than home-owners. This measure would help tackle climate change.

We are in close contact with colleagues to ensure appropriate demarcation lines for renewable energy investment. Our support for this sector will concentrate on land-based projects which will complement larger-scale energy production which will also support work to tackle climate change.

10.3 Demarcation criteria for Axis 4 ( LEADER)

LEADER comes under the provision of the SRDP for the first time in the 2007-13 programming period. Local action groups ( LAGs) will be set up in accordance with article 62 of the RDR. Their membership will include Community Planning Partnerships ( CPPs) and other community groups. The emphasis will be on including land-based groups, youth groups such as Young Farmers and women's organisations such as the Scottish Women's Rural Institute, as well as economic, environmental and social agencies and community groups. This wide-ranging membership will assist in guarding against overlaps in funding. Since Axis 4 is cross-cutting over the other 3 Axes LEADER has the potential to contribute to outcomes and priorities across the three Axes. There will be co-ordination between the Managing Authorities for EAFRD and ESF which lie in different Directorates of the Scottish Executive, and with the Strategic Delivery Bodies, that is Scottish Enterprise and Highlands and Islands Enterprise, as well as between LAGs and CPPS.

Activities to be co-financed under Axis 4 will be checked for consistency with such activities as are included in the Scottish ERDF regional programmes and in particular against the specific demarcation tables included in these programmes.

10.4 Complementarity with other Community financial instruments

Due to the long-term and high-value nature of the funding available through the European Investment Bank, we do not consider that EAFRD funding would be used to fund such investments. However, we shall continue to review this through meetings of the Monitoring Authorities and take any necessary action to ensure that no double funding takes place.

Table 10.1: Demarcation between EAFRD, ERDF, ESF and EFF activity

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