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CHAPTER 5: AXES AND MEASURES

5.1 General requirements

This chapter provides an overview of the measures that will be supported in the 2007-13 SRDP. A full description of the measures that will be supported, and the indicators and targets that will be used in the monitoring and evaluation of the Programme are set out in Annex 3 to this document. Supporting information on payment rates, is given in Annex 4.

The 2007-13 SRDP brings together wide-ranging measures into a single programme of support. The Programme will contribute to each of the three objectives set out in Article 4 of Regulation 1698/2005:

• improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation (Axis 1);
• improving the environment and the countryside by supporting land management (Axis 2); and,
• improving the quality of life in rural areas and encouraging diversification of economic activity (Axis 3).

The selection of measures is also based on the need to implement a broad and balanced Programme in line with the minimum levels of expenditure under each of the Axes that has been stipulated by the EU.

The aim of the SRDP is to deliver an integrated set of measures that deliver outcomes across the three Axes. There are three key components to the Programme:

• Rural Development Contracts ( RDCs);
• The Less Favoured Area Support Scheme ( LFASS); and,
• LEADER.

In addition, crofting grants and larger-scale, non-farm-based processing and marketing grants operate as 'stand-alone' schemes under the Programme, as do the Forestry Challenge Funds. Further, it is important to note that funding for the new Programme will support sizeable multi-annual commitments from agri-environment and forestry measures made under the 2000-06 Programme that run into the 2007-13 Programming period (See Table 6.3).

Rural Development Contracts

Rural Development Contracts ( RDCs) represent the central part of the integrated approach to the 2007-13 SRDP. RDCs link support under Pillar 1 (the Single Farm Payment) with support under Pillar 2 (the SRDP) of the Common Agricultural Policy and, therefore, enable Pillar 1 and Pillar 2 to be considered together. Importantly, the linking of Pillar 1 and Pillar 2 payments in this way aims to encourage land managers to consider their Pillar 1 payments as a means of securing further rural development benefits, in particular to deliver or underpin actions to improve business viability.

RDCs combine economic, social and environmental measures under a single 'contract' of assistance to a land manager, other rural business, group or individual. Though apparently, complex, the aim of RDCs is to simplify the approach to rural development by providing a 'one-stop-shop' for applicants to seek advice on and apply for measures under the scheme. This innovative approach shows how different types of measures can complement each other in delivering outcomes. RDCs incorporate measures from each of the 3 main Axes of the RDR. A diagram presenting Rural Development Contracts in the context of European funding is presented below.

Figure 5.1 Rural Development Contracts in the context of European funding

RDCs comprise three tiers of support:

Tier 1 is the Single Farm Payment delivering Cross Compliance and securing a basic level of income, environmental protection, food safety and animal welfare. While Tier 1 is the foundation for RDCs, payments derive from Pillar 1 and are not, therefore, part of the 2007-13 SRDP.

Tier 2 was introduced in 2005 as the Land Management Contract Menu Scheme ( LMCMS) and has been developed in the new SRDP as Rural Development Contracts - Land Managers Options ( LMOs). This tier provides support for the provision of economic, social and environmental improvements across rural Scotland that go beyond those provided by Cross Compliance under Tier 1. It is a non-competitive, allowance-based delivery mechanism for rural development payments to farmers and other land managers who deliver a range of benefits beyond those delivered by EU and national legislation, including Cross Compliance, in recognition of the multi-functional nature of farming. Land managers are able to choose from a menu of options according to their particular circumstances and will receive support for delivering these measures up to the value of their LMO allowance. Further information on the development of LMOs is provided in the Appendix to this Chapter.

Tier 3 is a new introduction for the 2007-13 SRDP and will be known as Rural Development Contracts - Rural Priorities (Rural Priorities). Though new for 2007-13, this tier brings together a range of separate schemes previously available both within and outwith the 2000-06 SRDP, for example Rural Stewardship and Farm Business Development, and builds on these with new measures. This tier is a competitive, targeted scheme, open to a wide range of beneficiaries including land managers, members of farm households, rural businesses, and community groups. Funding will be available for a wide range of environmental, social and economic measures. The focus of the scheme is on delivery of priority outcomes, with an emphasis on collaboration to deliver integrated and/or landscape scale benefits. Priority outcomes are set at a regional level in partnership with stakeholders, but must fit within the context of the National Strategic Plan fully taking into account the requirements of the related national rural strategies. Those wishing to apply for support under Rural Priorities will have access to information about regional priorities, the advice of a case officer, and web-based information about appropriate packages of options to deliver priority outcomes in their region. Applicants will be expected to provide an outcome based plan with their application for funding and the applications will be assessed by Regional Project Assessment Committees (See Chapter 11), comprising Scottish Executive and other government officials with expertise relevant to the proposed project.

Land Managers Options

Eligibility

The Rural Development Regulation requires that agri-environment measures shall be made available throughout Scotland. Therefore all farmers, foresters and crofters are eligible to apply for funding through LMOs. The Regulation also stipulates that agri-environment measures can only be carried out on agricultural land, although other measures will be available to the owner or occupier of forests or non-agricultural land.

Financial Control

In a scheme that operates on a non-discretionary basis, a means of controlling expenditure is required. Applicants calculate their annual individual expenditure limit based on the total area of agricultural land they declare each year on the Single Application Form ( SAF). The allowance is calculated as;

• €109.50 a hectare for your first 10 hectares
• €43.80 a hectare for the next 90 hectares
• €1.46 a hectare for the next 900 hectares
• €0.15 a hectare for any hectares over 1000

A tapering hectarage limit ensures small farmers and crofters are able to participate in the Scheme in a meaningful way. A reducing limit for higher size bands reflects the fact that some of the measures have no area-based component and are instead related to acquiring skills or undertaking activities which apply at the business level and have benefits across the entire holding regardless of size.

This is demonstrated below in the following examples:

1. A farmer with a small holding of 15 hectares would have an annual allowance of €1,095 + €438 = €1,533 (which he could spend on any combination of measures).

2. A farmer with 150 hectares would have an annual allowance of €1,095 + €3,942 + €71 = €5,108 which he could spend on any combination of measures.

3. A farmer with 1500 hectares would have an annual allowance of €1,095) + €3,942 + €1,314 + €73 = €6,424 which he could spend on any combination of measures.

Payments

Once an applicant has calculated his allowance based on the land declared on his SAF he can choose to undertake as many options as he likes up to the value of his allowance. This can include both area based and capital options. Payment rates for carrying out these activities do not vary depending on the number of hectares managed.

The cost of measures with a commitment lasting more than one year will be deducted from the annual expenditure limit for subsequent years. Each year, applicants will be provided with a summary of the previous years' commitments and any ongoing commitments.

The rates which are used to calculate the allowance per holding may be changed depending on uptake and to manage overall expenditure on the Scheme. Any adjustments will take account of the value of ongoing commitments which will be honoured until the end of the commitment.

Applications and payment of claims

Applications to Land Managers Options will be integrated with the application to the Single Farm Payment Scheme ( SFPS) under Pillar I of the CAP. Applications will therefore be required by 15 May each year. Non- SFPS participants will be able to apply upon submission of an IACS application and the required Field Identification Sheet. The application form will be accompanied by a detailed guidance document.

Payments will be made for undertaking the measures applied for each year. All payments will be made annually in arrears. Evidence that measures have been carried out will be required before payment will be approved for the non land based measures and the guidance document will detail the required supporting evidence ( e.g. receipts).

It is a requirement that all agri-environment, animal health and welfare and forestry measures are additional to Cross Compliance.

Period of agreement

Payment for agri-environment and forestry measures will be for a minimum period of 5 years. The other payments are for one-off activities which can be entered into on an annual basis.

Measures and prescriptions

The measures can be grouped according to the primary benefit each delivers - be it environmental, social or economic - although in practice most measures will deliver a combination of these benefits. In addition, there are a number of planning measures which will help farmers to manage their farm business in a way which best delivers a range of these benefits.

The expected benefits are summarised below.

• Environmental measures - include a number of agri-environment and forestry measures. The agri-environment measures have been selected for their ability to deliver widespread benefits in any part of Scotland and for their suitability across the range of farming systems and diverse landscape types. They exclude measures which require tailored application or non-discretionary access to secure maximum value for money. They will contribute to soil protection, biodiversity enhancement, landscape improvement, and reducing diffuse pollution from agriculture.
• Social measures - address the need to broaden the range of measures available, in recognition of the multi-functional nature of farming and forestry. They will provide land managers with a route to enhance their skills through training, raise public awareness of land management and countryside stewardship, contribute to public health targets, and improve the links between rural communities and land managers.
• Economic measures - are designed to develop the underlying sustainability of farm and forest businesses. Adjusting to CAP Reform and decoupling will be important for Scottish agriculture to prosper under free market conditions and to ensure farming continues to contribute to the development of rural areas. The measures will encourage an improvement in the quality of output, with a focus on marketing and added value.

Land Managers Options comprises 21 measures. Some of these measures have sub-options. These measures are:

• Skills development
• Nutrient management plan
• Modernisation through electronic data management
• Management of genetically appropriate tree stocks for seed production
• Modernisation through electronic data management - forestry
• Access creation for sustainable forest management
• Membership of food quality assurance schemes
• Wild bird seed mix/unharvested crops
• Improvement of rush pasture for wildlife
• Summer cattle grazing
• Management of moorland grazing
• Management of linear features
• Management of grass margins and beetlebanks in arable fields
• Biodiversity cropping on in-bye
• Management of conservation headlands
• Retention of winter stubbles
• Woodland creation - small scale
• Sustainable management of forests and woodlands
• Improving Access
• Active management to improve the condition of vernacular rural buildings, archaeological or historic sites

Rural Priorities

Rural Priorities will integrate under a single mechanism a wide range of measures that were previously supported through a number of separate schemes. These schemes include:

• Farm/Agriculture Business Development Schemes;
• Rural Stewardship Scheme;
• Natural Care Scheme;
• Organic Aid Scheme;
• on and near farm projects under the Processing and Marketing Grant Scheme; and,
• Scottish Forestry Grants Scheme.

Rural Priorities comprises 74 measures and sub-measures. Some of these measures have sub-options which result in a greater number of activities which can be funded (not including capital items such as fencing etc.) Funding will also be available for outcome based plans and a smaller number of specialist plans as part of the RDC application process. The RDC Rural Priorities measures are:

Axis 1 (14)

• Skills development
• Setting up of young farmers
• Specialist and outcome based plans
• Nutrient management plan
• Soil and water management programme
• Investment to Aid restructuring of Agricultural businesses
• Manure/slurry storage and treatment
• Support for renewable energy
• Short rotation coppice
• Improving the economic value of forests
• Processing and marketing grants (near/on farm)
• Co-operation
• Treatment of run off of nutrients and other pollutants
• Provision and upgrading of infrastructure

Axis 2 (49)

• Support for the conversion to and maintenance of organic farming
• Wild bird seed mix/unharvested crops
• Management of mown grassland for wildlife
• Management of mown grassland for corn buntings
• Management of mown grassland for corncrakes
• Management of grazed grassland for corncrakes
• Management of early and late cover for corncrakes
• Creation and management of early and late cover for corncrakes
• Management of open grazed or wet grassland for wildlife
• Mammal and bird control
• Supplementary food provision for raptors
• Wardening for golden eagles
• Control of invasive non-native species
• Management of species rich grassland
• Bracken management programme for habitat enhancement
• Creation and management of species rich grassland
• Management of habitat mosaics
• Management of wetland
• Creation, restoration and management of wetland
• Management/restoration of lowland raised bogs
• Creation and management of water margins and enhanced riparian buffer areas
• Management of flood plains
• Management of buffer areas for fens and lowland raised bogs
• Management of coastal and serpentine heath
• Management of lowland heath
• Wildlife management on upland and peatland sites
• Management of moorland grazing
• Management of moorland grazings on sites designated for the uplands and peatlands
• Moorland stock disposal
• Away wintering of sheep
• Off wintering of sheep
• Muirburn and heather swiping
• Management of hedgerows
• Management of extended hedges
• Management of grass margins and beetlebanks in arable fields
• Biodiversity cropping on in-bye
• Management of cropped machair
• Management of ancient wood pasture
• Management of scrub and tall herb communities
• Arable reversion to grassland/unfertilised grassland
• Livestock tracks, gates and river crossings
• Conservation plan with special measures for small units
• Grazing management of cattle
• Agri-environment planning
• Habitat grazing management
• Livestock tracks, gates and river crossings
• Woodland creation
• Sustainable management of forests and woodlands
• Woodland improvement grants

Axis 3 (11)

• Support for diversification outwith agriculture
• Support for the development and creation of micro enterprises
• Support for renewable energy
• Information and awareness raising
• Area access management, monitoring, creation and upgrading of paths
• Reducing bacterial contamination in water courses
• Provision of leisure, recreation, sporting, catering and other community services
• Active management to improve the condition of vernacular rural buildings, archaeological and historic sites
• Enhancing enjoyment and maintaining the character of rural landscapes
• Skills development in rural areas
• Production of local development strategies

Other Delivery Mechanisms

RDCs complement the two other main delivery mechanisms of the SRDP; the Less Favoured Area Support Scheme ( LFASS), and the LEADER initiative. These schemes have integral roles respectively in the Programme in sustaining land management in less favoured areas and in involving local communities in delivering development projects.

Less Favoured Area Support Scheme

LFASS compensates farmers and crofters for permanent disadvantage and will continue to support land management in primarily upland and remote areas. Appropriate management of this land is required to enable the delivery of wider environmental and social benefits. The scheme is an interim arrangement, pending the outcome of an EU-wide review in 2008 and the introduction of a new scheme in 2010.

LEADER

The LEADER initiative is a community-led approach that supports projects that meet development needs at a local level, and is managed by partnerships of local stakeholders (Local Action Groups). It draws on local knowledge in developing innovative development projects. Considerable experience in LEADER has been gained in Scotland since its inception at the beginning of the 1990s. It previously operated under the Structural Funds (and was managed by the then Enterprise, Transport and Lifelong Learning Department) but will now form an integral part of the SRDP.

The incorporation of the LEADER approach in the SRDP will bring added value in encouraging innovative, bottom-up solutions to local development needs. It provides added potential for collaborative approaches to rural development among all interests in local communities, including land managers, businesses, other individuals and community groups.

Finally, a small number of measures available through the SRDP will be delivered outwith any of these key delivery mechanisms. These measures are:

Training (some elements)

Crofting Counties Agricultural Grant Scheme

Forests for People Challenge Fund

Woodlands In and Around Town Challenge Fund

Processing and Marketing Grant Scheme (other than on or near farm projects)

Requirements covering all or several measures

Ongoing commitments

Table 5.1: Correlation table for measures provided for in Regulation ( EC) No 1257/1999, Regulation ( EC) No 1268/1999 and Regulation ( EC) No 1698/2005

Cross-Compliance

As required under Article 39(3) of the RDR (1698/2005), new agreement holders from 1 ^st January 2007 will be required to meet the Scottish standards of Good Agricultural and Environmental Condition ( GAEC) and to comply with Statutory Management Requirements ( SMRs) relating to the natural environment, public health, plant health, animal health and welfare, and livestock identification and tracing. Further information on the standards relating to GAEC and SMRs can be found at

http://www.scotland.gov.uk/Topics/Agriculture/grants/Schemes/ccompliance. These requirements match the conditions of cross-compliance that apply to the Single Farm Payment and are a baseline for which no payments are made. Agri-environment payments are only made for actions that go beyond these standards, in accordance with Article 39(3) of the RDR (1698/2005).

Targeting investment

Targeting of investment under the Programme will be undertaken at a regional level, within the framework of priorities and outcomes set out in Scotland's Strategic Plan. It will therefore vary between regions, reflecting identified regional priorities. It may include:

Geographical targeting, for example

• on areas of economic underperformance
• high levels of deprivation

Sectoral targeting on certain types of activity, for example:

• Bio-energy/renewable energy
• Food chains

Thematic targeting, requiring projects to demonstrate characteristics, for example:

• collaboration
• innovation
• knowledge and technology transfer
• combinations of the above

Controls, Sanctions and Penalties

The following financial controls and sanctions will be applied to meet the requirements of the Controls Regulation 1975/2006. These procedures will apply in particular to land-based measures relating to agriculture and forestry. The administrative structure of the paying agency separates the three functions of authorisation, execution and accounting for payments. There is also separation between officials responsible for administrative checks, and those who carry out physical inspections. Each measure under the RDR will be subject to a Scheme Implementation Plan. The Scheme Implementation Plan will summarise the responsibilities for all the elements within the Directorate with a role in administering the scheme.

Computer controls

Access to the computer system used for processing claims will be protected and controlled in such a way that:

(i) all information entered onto the system is properly validated to ensure that input errors are detected and corrected;

(ii) no data will be entered, modified or validated except by authorised officials to whom individual passwords are given;

(iii) the identity of each official entering or modifying data or programmes will be recorded in an operations log; and

(iv) where documents relating to the claims authorised are retained by other bodies, procedures will apply so that access is provided for the paying agency staff who deal with the claim, the paying agency internal audit service, the body that attests the paying agency's annual declaration and mandated officials of the European Union.

Application processing

Detailed written procedures will guide the receipt of applications and the processing of applications and of claims. Each official responsible for authorisations will use a detailed check-list setting out the verifications that are required and will attest that these checks have been performed. Exhaustive checks will be completed, in accordance with prevailing requirements and the IACS Regulations ( EC Regulation 796/2004), between applications and claims under the land based schemes and IACS, both as an anti-fraud measure, and to ensure that expenditure under one scheme does not frustrate or duplicate expenditure under another. Checks undertaken and the results of those checks will be evidenced on registered files together with details of the checking officer.

Each valid application for an agreement/undertaking will, unless the application is withdrawn or rejected (in which case the reason for rejection must be specified), be considered in accordance with prevailing instructions and UK/ EC Legislation with regard to financial limits and targets where appropriate.

Apart from initial administrative checks, assessment of applications (including, where appropriate, pre-approval inspections) will be carried out by professionally qualified officers, who will provide advice on applications and provide an assessment to assist in decisions on which applications may be successful.

Agreements or approved applications will refer to the precise prescription(s) and conditions with which the agreement holder/applicant needs to comply and the areas of land subject to the proposed undertaking. For an agreement or undertaking to come into force it must be signed by the agreement holder or applicant, and authorised by a duly authorised official of the Scottish Executive or other government official. In deciding the levels and persons to whom this authority is delegated, due regard will be paid to the duration/nature of the agreement/undertaking, and the sums committed by the agreement/undertaking.

Claims Processing

Claims received will be processed promptly so that payments to agreement holders/approved applicants can be made within published timescales. Payment will only be made in respect of land or items specified in an agreement/undertaking that are compliant with the scheme rules and regulations. Individually named officials will be given authority to authorise claims for payment.

The databases used for processing claims record which items are co-financed and the relevant EU ceiling so that any potential breach can be identified when a claim is entered on the database. For areas under agreement/undertaking which receive payment for more than one measure, the two payments will be added together to ensure they do not breach the area payment ceiling. Where linear features are included in an agreement/undertaking and are co-financed, these will be claimed on an area basis.

Payments

There will be procedures in place to ensure that payment is only made to the claimant, to his/her bank account or to his/her assignee. There will be procedures in place to ensure that monthly and annual declarations are complete, accurate and timely and that any errors or omissions are detected and corrected in particular through checks and reconciliations performed at intervals not exceeding three months. The paying agency will recognise amounts due to EAFRD and record these sums in a debtors ledger.

On-the-spot checks/risk analysis

On-the-spot checks will be carried out to ensure that the conditions of the measures are being met by agreement/undertaking holders in accordance with EC Regulation 796/2004. Spot checks will cover at least 5% of beneficiaries each year. The selection of these beneficiaries will be based on a risk analysis that will take into account representativeness, the amount of aid involved, the number of parcels of land and area concerned, changes from the previous year, findings from previous checks and other relevant factors.

There will be a standard report for each type of on-the-spot control/measure covering the reconciliation with beneficiaries records, the method of counting or measuring or weighing or analyses applied, the quantity or area that was checked, the respect of other conditions relevant to the scheme and the results compared to the details declared.

In addition to those inspections, further (targeted) inspections may be carried out for a specific purpose; for example, if a particular problem is identified. These inspections will be undertaken in the same manner as other inspections, although they will be recorded separately. They will not be taken into account in the analysis of inspections in relation to the on-the-spot checks requirement. The results will be recorded in the usual way.

Once an inspection has been selected, it cannot be de-selected and claims under the selected agreement/undertaking must not be authorised for payment until a satisfactory inspection has been completed. All failures (non-compliance) found during an inspection must be reported by inspecting officers. The inspection will also involve an inspection of farm records where necessary. If the rate of significant irregularities exceeds a specified level, the inspection rate will be increased.

Calculations of payment rates

As set out in Article 27 of the Implementing Regulation (1974/2006), payment rates have been calculated on the basis of income foregone and additional costs incurred by recipients in complying with their commitments and, where appropriate, transaction costs. None of the payment rates for agri-environment measures includes an incentive element. The Scottish Executive commissioned an independent verification of payment rates for measures under Articles 31, 38, 39, 40 and 43 to 47 of the RDR (1698/2005) in accordance with Article 48(2) of the Implementing Regulation (1974/2006). This work was carried out by ADAS, a private firm of independent consultants, with support from the Institute of Chartered Foresters for some of the payments relating to woodlands. ADAS checked for "principles" and "assumptions" underlying calculations and the "accuracy" of the payment rates. ADAS endorsed the calculations although recommended some minor adjustments to several payment rates. These changes have been made. Information about the verified payment rates can be found in Annex 4 to this Programme.

As set out earlier in this document the baseline for the calculation of agri-environment payment rates have now been reviewed to take account of the requirements of the revised Nitrates Action Programme. The revised payment rates have been independently verified by ADAS Scotland and will apply throughout Scotland. Pending formal introduction of the revised Nitrates Action Programme in 2008, compliance with its requirements will be an entry requirement for receiving agri-environment support following SRDP approval.

Payment rates may be subject to further review if required, but any revised rates would be applied to new rather than existing agreements.

Intervention rates

Intervention rates shown in Annex 3 are in accordance with the RDR (1698/2005) and will be treated as maxima. We will vary intervention rates beneath these maxima in order to target resources most effectively. For example, lower intervention rates may be used in lower priority situations or to manage excessive demand for measures in the Programme. For some measures based on standard costs, we may invite applications based on actual costs in special situations where it can be shown that payments based on standard costs are inadequate. This is most likely in priority areas for biodiversity conservation (with Natura or SSSI designations) and for woodland investments in peri-urban areas where there may be special management requirements.

Breaches and Penalties

Financial support from the European Agricultural Fund for Rural Development will be provided in accordance with Commission Regulation ( EC) No. 1975/2006 which lays down rules for the implementation of the Rural Development Regulation with regard to control procedures as well as cross-compliance. Applications for support and subsequent payment claims will therefore be handled in a manner which ensures effective verification of compliance with the various conditions for granting support.

The verification of the eligibility criteria will consist of both administrative checks and spot checks. Where non-compliance with the conditions for granting support for land based measures is identified we shall take action in line with Commission Regulation ( EC) No 1975/2006. The action to be taken will depend on the extent, severity and permanence of the breach.

In general terms, the categories of extent for land based measures will be determined by the extent of the managed area covered. The categories of severity will be determined on an operation by operation basis on the impact on the objective of the criteria which have not been respected. The permanence of the breach will be determined by the timescale the breach can be rectified in if at all.

The Scottish Executive retains the flexibility in exceptional or unforeseen circumstances to allow operations being carried out by an agreement-holder to be suspended or stopped altogether; for example, where such operations would cause damage to a protected species that had migrated into the area during the agreement period.

Interest Rate Subsidies

The interest rate subsidy to be used in the New Entrants measure will be in accordance with Article 49 of the Regulation. The subsidy will be equal to the interest actually paid by the farmer in each year of the loan (for up to 5 years), subject to a maximum of 3.5% above the Bank of England base rate and an overriding maximum of €40,000 over the term of the loan.

5.3. Information required for Axes and measures

The 2007-13 SRDP will provide support using the following Articles in the Rural Development Regulation (1698/2005). A detailed description of these measures is provided in Annex 3.

Axis 1 - Improving the Competitiveness of the Agricultural and Forestry Sector

The SRDP will address the Community objectives of Axis 1 by providing support for the measures shown below in Table 5.2.

Table 5.2. Measures in the SRDP under Axis 1

The measures under Axis 1 are designed to support and complement each other. For example, new entrants may be attracted by a combination of measures on skills development, modernisation of farm holdings, adding value to products and improving infrastructure. Management of run-off may be addressed by measures on Manure and slurry storage and treatment, Treatment of run off of nutrients and other pollutants and Provision of infrastructure. These and other measures under Axis 1 are expected to deliver environmental and social as well as economic benefits. The measure on Co-operation will encourage higher levels of collaboration, a major objective under A Forward Strategy for Scottish Agriculture: Next Steps. It is intended to act as a catalyst in business and product development and, as such, may complement measures to modernise, improve infrastructure and add value to production and processing in the supply chain.

Axis 2 - Improving the Environment and the Countryside

The SRDP will address the Community objectives of Axis 2 by providing support for the measures shown below in Table 5.3.

Table 5.3 - Measures in the SRDP under Axis 2

Linkage of proposed measures with the Scottish Forestry Strategy and with the Community Forestry Strategy

Forestry related measures within this Rural Development Plan are designed to help deliver the Scottish Executive's Forestry Strategy ( http://www.forestry.gov.uk/forestry/infd-6aggzw) published in 2006. Each of the Strategy's three principal outcomes is supported by measures in this Rural Development Programme as set out below:

The Scottish Forestry Strategy recognises the cross-cutting nature of many forestry actions and hence focuses delivery through seven key themes:

• Climate change
• Timber
• Business development
• Community development
• Access and health
• Environmental quality
• Biodiversity.

The Scottish Forestry Strategy recognises the role of the EU Forestry Strategy and the development of an EU Action Plan for Sustainable Forest Management. The Scottish Strategic Plan demonstrates how the Scottish Executive is linking forestry and other land-based activity within the vision of 'joined-up' delivery of rural support focused on priority national and international outcomes.

Cross Compliance and other regulatory standards

All beneficiaries of these measures must, as a mandatory condition of payment, maintain their land in compliance with Good Agricultural and Environmental Conditions ( GAEC) as set out in Annex IV of Regulation ( EC) 1782/2003, and adhere to environmental legislation in force, including the Statutory Management Requirements set out in that regulation.

All payments are for commitments which exceed the statutory requirements set out in Council Directive 79/409/EEC on the conservation of wild birds, Council Directive 80/68/EEC on the protection of groundwater against pollution caused by certain dangerous substances, Council Directive 86/278/EEC on the protection of the environment and in particular of the soil, when sewage sludge is used in agriculture, Council Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources, subject to the Commission being satisfied with the content of the Scottish Action Programme, and Council Directive 92/43/EEC on the conservation of natural habitats and of wild flora and fauna.

Agreements may be adjusted in case of amendment of the relevant mandatory standards or requirements, established pursuant to Articles 4 and 5 of Regulation ( EC) 1782/2003 and its Annexes III and IV, as well as of the minimum requirements for fertiliser and plant protection product use and of other relevant mandatory requirements established by national legislation. If such adjustment is not accepted by the beneficiary, the commitment shall expire and reimbursement shall not be required in respect of the period in which the commitment was effective.

For the specific purposes of Article 39(3) the minimum requirements for fertiliser and plant protection products used and other mandatory requirements; minimum requirements for fertilisers must include, inter alia, the Codes of Good Practice introduced under the Nitrates Directive for farms outside Nitrate Vulnerable Zones, and requirements concerning phosphorous pollution; minimum requirements for plant protection products must include, inter alia, requirements to have a licence to use the products and meet training obligations, requirements on safe storage, the checking of application machinery and rules on pesticide use close to water and other sensitive sites as established by national legislation.

All payments are for commitments which exceed the statutory minimum requirements set out in national legislation for fertiliser and plant protection products used, including requirements introduced under the revised Nitrates Directive Action Programme to be introduced in early 2008. All commitments also exceed the requirements set out in the Codes of Good Agricultural Practice for the Prevention of Environmental Pollution from Agricultural Activity. Although phosphorus is not specifically addressed under the Nitrates Action Programme, it is expected to have a positive impact on phosphorus pollution. There are no other specific requirements concerning phosphorus pollution in addition to those outlined above.

Plant Protection products

All Plant Protection products are authorised in accordance with the provisions of the Scottish Statutory Instrument 2005 No. 331 ' The Plant Protection Products (Scotland) Regulations 2005' which implement the Plant Protection Products Directive 91/414 and ' The Plant Protection Products (Scotland) Amendment Regulations 2006'. There are no EU requirements for the training, storage or the testing of machinery. However 'The Plant Protection Products (Basic Conditions) Regulations 1997' set out national rules for the training of all those who use, sell, supply and store pesticides. In addition the statutory Code of Practice: the Code of Practice for using plant protection products in Scotland sets out minimum requirements for pesticides stores and how they should be built etc. There are specific rules within the code for the spraying of plant protection products close to water courses.

The measures under Axis 2 will have wider economic and social impacts that contribute to wider objectives of the SRDP. Thus, measures often contribute to multiple outcomes both within and across the Axes of the RDR. For example, improvements to biodiversity will underpin the tourism sector, particularly with regard to the maintenance of habitats that support distinctive species that visitors wish to see. A further example is that a number of agri-environment actions in the Programme will contribute to reductions in air pollution in addition to their main environmental objectives. Annex 3, which describes the measures in detail, draws attention to such cross-cutting objectives.

A major objective of the agri-environment and afforestation measures under Axis 2 is to support effective management of Natura 2000 sites and SSSIs. Spending on these sites through SNH's Natural Care programme has been integrated with spending under Article 36(a)(iv) on Agri-environment payments and Article 36(b)(v) on Forest Environment Payments. Payments will only be made for operations that deliver environmental benefits above the level required for Good Agricultural and Environmental Condition. Benefits below this level will be achieved through Cross Compliance.

The Programme contains a number of operations which have been designed specifically for Natura and other designated sites: all the remaining operations under the agri-environment and forest environment articles will also be available to support the management of these sites. Effective and targeted support for Natura sites and SSSIs will also be ensured through the arrangements for establishing regional priorities for the SRDP (see Chapter 11). Natura sites and SSSIs will be major elements of these regional priorities. Further, it is important to note that the Rural Development Contract approach regards the management of Natura sites and SSSIs as integral both to wider land management and to broader objectives of rural development, for example in relation to recreation, tourism and quality of life.

The SRDP will contribute to important targets to bring designated sites, including the entire Natura network, into favourable condition. The target is to bring 80% of sites into favourable condition by 2008 (which will remain largely SNH's responsibility under existing Natural Care agreements), and 95% by 2010. The SRDP will be the principal means for achieving the latter target.

Management of Less Favoured Areas is critical to the delivery of socio-economic and environmental objectives in rural Scotland. Livestock farming is important for maintaining the countryside and it is only through sustaining farming and crofting activity, and retaining land managers in LFAs, that there can be effective uptake of agri-environment measures and delivery of environmental benefits associated with active management of land for agricultural production. LFASS is important in this regard. For the interim period 2007-09, the previous LFASS scheme is being rolled over, but to avoid coupling levels of support with current levels of agricultural production, factors used to calculate adjusted hectares will be based on historic values rather than current levels of livestock. This is in accordance with the decoupling principles of the 2003 CAP reforms. LFASS requires that land is actively farmed and that Good Agricultural and Environmental Condition is maintained; no payments will be made where land is abandoned. Controls and inspections carried out to implement the SRDP (see section 5.2) will check that appropriate agricultural management of the land is maintained to support the environmental integrity of LFAs.

Collaboration will also be an important objective under Axis 2. Collective action by land managers is critical in building viable networks of habitats and species. This builds on the approach adopted in the 2000-06 SRDP. Collaboration will be one of the criteria used in the assessment process for applications under Rural Priorities.

Axis 3 - Quality of Life in Rural Areas and Diversification of the Rural Economy

The SRDP will address the Community objectives of Axis 3 by providing support for the measures shown below in Table 5.4.

Table 5.4 Measures in the SRDP under Axis 3

Measures under Axis 3 will contribute to broad-ranging rural development objectives. For example, improvements to elements of the rural landscape, such as architectural and archaeological features, both contribute to the attractiveness of rural areas as a tourism destination or as a location for new businesses, and promote the enhancement of those features for the future. Axis 3 will facilitate further diversification of the rural economy and support locally identified need in relation to community services and infrastructure. A key objective is to build the capacity of communities to address local development needs and aspirations, and, for example, to tackle some of the causes of depopulation in rural areas.

Axis 4 Implementation of the LEADER approach

The SRDP will address the Community objectives of Axis 4 by providing support for the measures shown in Table 5.5.

Table 5.5 Measures in the SRDP under Axis 4

In line with the RDR (1698/2005), LEADER may be used to deliver measures across each of the Axes 1, 2 and 3, although we anticipate that it will contribute mainly to Axis 3. Local Action Groups will be responsible for drawing up LEADER strategies at a local level and for selecting projects that will be supported through the LEADER approach. Further detail on the LEADER approach in the SRDP is given in Annex 3.

Appendix 1

Rural Development Contracts - Land Managers Options

Development of Land Managers Options

The Land Management Contract approach was initially developed with the help of modelling work carried out on 25 pilot farms during 2002-03. Further development of the LMCMS was undertaken by a Working Group, which included a wide range of stakeholder representatives covering farming and crofting interests, environmental and conservation groups, economic and rural development bodies, and regional and sectoral interests. A public consultation on the LMCMS was launched in the summer of 2004 and the scheme began operating in 2005. The farms participating in the initial modelling work were re-visited and views and feedback from the various forms of consultation were taken into account in the design of the scheme.

We independently reviewed the implementation of the LMCMS and have consulted extensively with stakeholders in 2006 on developing the new LMOs. We believe the new delivery mechanism will provide an integrated, simple and transparent approach, capable of delivering benefits throughout Scotland, and more targeted benefits to address particular concerns and opportunities in various localities.

As well as helping to achieve the objectives of the Forward Strategy for Scottish Agriculture - Next Steps, LMOs will further the environmental aims of Custodians of Change, and will contribute to the implementation of national, EU and international obligations including the Habitats and Wild Birds Directive, the Water Framework Directive, and the UK Biodiversity Action Plan, and the targets set out in the Scottish Forestry Strategy.

This approach also contributes to our vision for rural Scotland, outlined in 'Rural Scotland: A New Approach', and delivers on the Scottish Executive's strategic aims, particularly for a Greener and a Wealthier and Fairer Scotland. Specifically, the inclusion of socio-economic measures in the scheme contributes to the objectives of embedding farms and forest holdings more firmly in the wider economic base of rural areas and developing/enhancing social cohesion in rural areas.

While not currently included in the Programme, we envisage that LMOs will in future support the implementation in Scotland of the Animal Health and Welfare Strategy, which highlights the importance of raising animal health and welfare standards to the benefit of the animals, the farming industry and wider society.

Rural Development Contracts - Rural Priorities

Packages

In order to guide land managers towards measures and combinations of measures that will enhance the delivery of priority outcomes, the Scottish Executive, in consultation with stakeholders, has developed a range of "packages". These packages comprise a range of options for measures and sub-measures that will deliver the stated outcome through Rural Development Contracts - Rural Priorities.

The packages are particularly important for the 3 high level environmental outcomes under Axis 2, but packages also exist to support business viability in Axis 1 and Rural Communities in Axis 3. In total there are 36 packages as shown below:

Table 5(Appendix).1: Rural Development Contract - Rural Priorities "packages"

Natura example

Taking the example of packages that will enhance the management of Natura sites, at a high level measures 214 and 225 will help to protect and enhance habitats and species and contribute to the delivery of our Natura objectives. These measures give rise to 12 packages that are important for the enhancement of biodiversity in Natura sites as shown in the table below:

Table 5(Appendix).2: Packages to protect and enhance Natura habitats and species (from draft guidance on packages)

Taking the example of the package for Coastal sites, excluding Machair, the package contains 8 relevant measures and options that may contribute to improvements that will deliver our objectives in coastal regions. This package, and an expansion of the package for Native Woodland is provided in the table below:

Table 5(Appendix).3: Options included in the Coastal - except Machair, and Native Woodland packages

For each package, we will provide land managers with guidance describing why we are willing to fund each package, some of the threats associated with these habitats and species and what the package aims to achieve. Drafts of this guidance for the above examples is provided below:

Package No. 9

Coastal - except machair

Scottish coastal habitats have an internationally important range of biodiversity and geological conservation interests. Parts of Scotland's coastline are fashioned by very dynamic processes driven by wind, wave and tidal currents. Many coastal landforms and habitats have evolved with delicate balances, which if interrupted, may have far reaching consequences for flooding and erosion on adjacent areas. As our understanding of climate change improves, we are certain that the pressures on the coastline are likely to increase. This package will support appropriate coastal management and avoid unnecessary coastal defence works, allow natural coastal processes to take place and safeguard both coastal land use and the natural heritage.

What will this package achieve?

Though Scotland's coasts are in comparatively good condition, there are problems in some places. This package will help to manage coastal habitats to benefit wildlife, and support natural coastal processes and flood defences. It will help to restore and enhance coastal habitats or to continue to manage them as part of the croft or farm business.

Package No. 14

Native Woodland

Native, and especially ancient, semi-natural, woodlands have high biodiversity and historic value. Fragmentation poses a serious threat to their biological richness and to the species that depend on them. Intense deer browsing and sheep grazing, as well as invasive non-native species, has impacted negatively on the condition of native woodland.

The restoration and improvement in the condition of native woodlands is a target in the UK Biodiversity Action Plan.

What will this package achieve?

This package gives support for a range of management practices and operations that will help to maintain, enhance or restore the condition of native woodlands and their biodiversity.

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