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5.3.3 AXIS 3: QUALITY OF LIFE IN RURAL AREAS AND DIVERSIFICATION OF THE RURAL ECONOMY

5.3.3.1 Measures to diversify the rural economy

5.3.3.1.1 Diversification into non-agricultural activities

SUPPORT FOR DIVERSIFICATION OUTWITH AGRICULTURE (Rural Priorities)

Article 52 (a)(i)

Measure Code (311)

Rationale for Intervention

One of the strategic outcomes of the Scottish Executive and its partners is to encourage 'farm diversification and other rural development benefiting communities.' The Strategic Plan sets out priorities to support diversification and add value to rural goods and services, thereby improving business performance in rural communities.

There are a number of factors, including CAP reform and Foot and Mouth Disease, which have created a climate of caution in Scottish agriculture and which have discouraged primary producers across the sector from making significant changes to their business activities or exploring other potentially complementary sources of income. With the situation now more settled, we wish to encourage producers to examine their existing business activities in order to identify all possible opportunities for improving business viability, increasing market orientation and reducing their reliance on on-going subsidy. This will become increasingly important with the removal of export subsidies by 2013.

By sharing the cost of the capital investments required to set up or develop alternative activities outwith agriculture, we can pump-prime individual businesses to diversify their sources of income. Diversification is a way of improving the viability of existing land-based businesses and of keeping farmers and their families within the sector even in circumstances where the land-based business does not provide sufficient income on its own.

The need to respond to market demand is also likely to mean that successful projects will provide benefits, improve access to or widen the available range of services and facilities in the local community as well as the wider population.

Objectives of the measure

The objective of the measure is to encourage farmers and their families to set up or expand non-agricultural enterprises to complement or supplement their income from existing agricultural activities, with the intention of keeping the family within the rural community at the same time as reducing the household's on-going reliance on agricultural subsidies and creating employment opportunities.

Scope and actions

Potential beneficiaries can receive support for diversification into any non-agricultural enterprise, where it can be shown that there is a demonstrable market for the proposed product or service and that the potential beneficiary has or can acquire the skills and resources to provide these on a commercial basis. The potential beneficiary must also show that these diversified activities will improve the household income stream and complement existing agricultural activities.

The types of diversified activities which may be funded include those listed below, although it should be recognised that this is an illustrative rather than exhaustive list:

• Provision of leisure, recreation and sporting facilities;
• Retailing of processed agricultural products restricted to those classified as annex 1 of the Treaty;
• Processing of forest products;
• Provision of other commercial services (illustrative list only)
• Commercial storage;
• Contracting (building, fencing etc);
• Farrier;
• Gardening; and
• Sheep shearing/sheep scanning
• Provision of or upgrading of existing tourism accommodation and conversion of redundant farm buildings into rent - see note below.

Note: Projects involving provision of tourist or residential letting accommodation must not include more than 20 bed spaces. Housing for residential rent will require a lease agreement of not less than 6 months and must not include rental to a member of the immediate family of the eligible applicant or any of the employees of that business. Development will have to have a recognised demand and be consistent with local housing strategies.

Definition of beneficiaries

Farmers and other members of the farm household who are actively involved in agricultural activity.

Type of investments

The capital investments eligible for funding will include tangible or intangible costs related to:

• new or upgraded buildings or structures,
• changes in land use from agricultural to non-agricultural uses,
• the development or upgrading of services or other infrastructural elements,
• new machinery or equipment, the acquisition or development of information technology to assist the establishment or expansion of diversified enterprises,
• or general costs related to these expenditures ( e.g. architect's, engineer's or consultant's fees).

Type of aid

Capital grant

Aid intensity

Variable, dependent on requirement to allow the project to go ahead, with a ceiling of 50% of eligible costs.

Quantitative Indicators and Targets

* Quantitative data will be supplemented by qualitative judgement on change.
# Impact indicators will be estimated based on output and result indicators

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