Scottish Government

EXECUTIVE SUMMARY

Background

In June 2009, the Cabinet Secretary for Rural Affairs and the Environment announced an Inquiry into the Future Support for Agriculture in Scotland, the work of which will be used to inform policy decisions relating to the future direction of agricultural support payments. Following an earlier written call for evidence, the Inquiry published its interim report in December 2009 and a consultation was then undertaken. George Street Research was commissioned to undertake analysis of the consultation responses.

Overview of respondents

A total of 149 responses were received, comprising 99 responses from individuals and 50 from organisations. Responses were assigned to sectoral groups for analysis purposes.

Overview of responses

The Inquiry invited respondents to consider 28 questions. Some respondents addressed all or some of the questions while others submitted free text responses. The following paragraphs outline the key themes to emerge from the consultation responses.

The full report provides more detailed analysis and the relevant chapter numbers are highlighted in this summary. It is recommended that readers should refer to the substance of the report, which provides a more detailed understanding of the key issues.

Areas within the Inquiry's proposals with the highest levels of agreement or support from respondents were:

• The impact of area payments on rents is a real problem;
• There should be annual changes to eligible areas for support payments;
• Agreement with the Inquiry's stance on trade distorting measures (i.e. that Scotland should achieve a right to direct 15% of its National Ceiling to support Less Favoured Area and rough grazing utilised by livestock);
• The objectives identified by the Inquiry are valid and comprehensive.

Areas prompting the lowest levels of agreement from respondents were:

• The example model of an area payment scheme outlined by the Inquiry;
• That annual qualifying requirements for future area based payments are sufficient to capture active farming;
• The suggestion that forest areas should be eligible for payment;
• Use of the Macaulay Land Capability for Agriculture ( LCA) classification.

Principles and objectives

Question 5.1, which related to the Inquiry's 7 principles which future support schemes must follow, was answered by 79 respondents. Most of these either agreed (39) or provided a mixed response, e.g. they agreed with some principles but not others (27). See Chapter 2.

There was also broad agreement that the objectives identified by the Inquiry are valid and comprehensive (45 of the 84 respondents who answered Question 5.2 agreed, and a further 27 agreed while adding a caveat to their response). The most commonly supported objectives were to maximise the delivery of public goods and to maintain a productive agricultural sector. See Chapter 2.

The four main streams for future support

A total of 106 respondents answered Question 5.3, which related to the proposed 4 main streams for future support. Almost half of these (51) gave a mixed response, e.g. they partially agreed or expressed doubts about certain elements of the recommendations. A further 30 agreed with the proposed streams, while 12 disagreed. The direct payments stream received the most positive comments. Twice as many people raised concerns about top up funds ( TUF) as supported them, with several raising doubts about the administrative expense and fairness or access. More people supported the Less Favoured Area Support Scheme ( LFASS) than raised doubts about it. More people raised queries about the Scottish Rural Development Programme ( SRDP) than supported it. See Chapter 3.

Allocation of area payments

There was a mixed response to Question 5.4, which suggested using an objective system such as the Macaulay LCA for the allocation of area payments. Of the 98 respondents who answered this question, more disagreed (26) than agreed (18) with the proposed approach, and just over half of those commenting (50) gave a mixed response. Several criticisms of the LCA emerged, including that it is inaccurate and out of date. Alternatives were suggested such as the existing Integrated Administration and Control System ( IACS) categories. See Chapter 4.

Annual changes and qualifying requirements

Question 5.5 suggested that the area eligible for direct payments should change annually to ensure it reflects reality rather than having an historic base. There was support for this among the 74 respondents who answered this question, with 47 agreeing with annual changes so that payments are linked to activity. See Chapter 5.

However, of the 81 respondents who responded to Question 5.6, only 8 agreed that the proposed annual qualifying requirements are sufficient to capture active farming, while 32 disagreed and 23 gave a mixed response. See Chapter 5.

Example area payments and eligible areas

Views were relatively negative about the Inquiry's illustration of what an area payment model might look like. Of the 98 respondents who commented, only 9 agreed with the proposed model, and over half of those who responded (54) did not agree. Some raised issues with the principles behind the model, while others had concerns about the allocation rates and payment profile. See Chapter 6.

Seventy-eight respondents answered question 5.8 relating to areas eligible for inclusion. Of these, 19 respondents agreed and 15 disagreed with the suggestion that as far as rough grazing is concerned, the area actually paid on should be on land supporting more than 0.12 LU per hectare. See Chapter 6.

The impact of direct area payments on rents

Question 5.9 related to the impact of area based payments on rents, and asked whether respondents believed this to be a real problem; the majority of the 68 respondents who responded agreed that it was (44). Fourteen respondents agreed that the Inquiry's suggested route would help address the problem, while 18 did not. Some suggested using top up funds to ensure the beneficiary of area payments is the working farmer. See Chapter 7.

Market price volatility and price stabilisation

Question 5.10 asked for views on the Inquiry's stance that a constraint on the sustainability of farm businesses is market price volatility and a lack of effective price stabilisation mechanisms. Of the 70 people who responded, 36 agreed with this view and a further 4 agreed but added caveats. Twenty-one respondents said they did not agree, while 9 were undecided. See Chapter 8.

Views of the proposed top up fund

Question 5.11 asked about the establishment of a top up fund. Views were divided among the 102 people who responded, with 24 agreeing and 23 disagreeing. Half of those commenting (51) agreed with the principle of a TUF but added a caveat to their response. The most common response in favour of the TUF was that it could help to facilitate public goods delivery. Concerns raised about the proposed TUF included that it may be complicated and expensive to administer and that it may duplicate what could be done under the SRDP. See Chapter 9.

Around a quarter (21) of the 86 respondents who answered Question 5.12 relating to the size of the proposed TUF broadly agreed that the TUF should be at least half the amount that would be paid out as new direct area payments. See Chapter 9. Suggestions for measures to be applied in the proposed TUF included environmental protection or encouraging the use of sustainable resources and improved efficiency or good land use management. Although some respondents argued that the TUF needs to be accessible to all sectors, others argued for support for particular sectors, particularly the livestock sector. See Chapter 9.

Trade distorting measures

The European Union ( EU) currently allows 3.5% of National Ceilings to be used for trade distorting measures (including coupled support) with the target very much being vulnerable areas and production. Question 5.16 asked for views about the Inquiry's proposal that Scotland achieves a right to direct 15% of its ceiling to trade distorting measures. Of the 65 respondents who answered this question, 35 said they agreed with this stance and a further 11 agreed but added a caveat to their response. Sixteen respondents did not agree, and 3 were undecided. See Chapter 10.

Eligibility of forest area

Question 5.17 asked whether respondents agreed that the area of forest created from 2009 should be eligible for payment. Eighty-seven respondents answered this question; around 60% (53) argued against this approach. See Chapter 11.

Short term considerations

Question 6.1 asked for views on the suggestion that the new scheme should not be implemented before 2014. Most of the 75 respondents who answered this question agreed with this approach (55), although there was also some support for an interim scheme to support new entrants. Key issues included the need for a phased transition to allow time for businesses to plan for and adapt to changes that the new scheme will introduce. See Chapter 12.

There was also broad agreement that the new scheme should be implemented in 2014 without a further transitional period (52 of the 81 respondents who answered Question 6.2 agreed with this suggestion). See Chapter 12.

New entrants

Question 6.3 asked for suggestions as to how to help support new entrants to farming. Suggestions included that they should receive Single Farm Payments ( SFP) as soon as possible, and the provision of additional finance such as cheap loans. See Chapter 13.

Minimum and maximum stocking densities

Sixty-seven people responded to Question 6.4a which suggested a minimum stocking rate of 0.08 LU/ha from the 2011 scheme year. Views on this proposal were mixed: 34 respondents agreed and 21 disagreed. Several respondents suggested changes to the stocking rates, regardless of whether they agreed in principle. There was little support for a maximum stocking density, with only 9 respondents agreeing with this proposal. See Chapter 14.

Views on top slicing

Sixty-seven respondents answered Question 6.6 relating to top slicing; 32 of these agreed with top slicing and 26 disagreed. Arguments in support of this approach included that it would help address the issue of new entrants without SFP and that a small amount of top slicing would help deal with unforeseen issues for vulnerable sectors or generate resources for short term priorities. See Chapter 15.

Article 68 measures

Questions 6.7 to 6.10 focused on Article 68 measures, which create funds to support specific regions or sectors, and were answered by between 35 and 65 respondents (see Chapter 16). Key findings to emerge were:

• Views on using an Article 68 measure to help stabilise beef production were polarised, with 35 respondents agreeing and 30 disagreeing;
• Of the Inquiry's proposed measures, the most popular were to maintain cows in the Less Favoured Area and an extended Beef Calf Scheme (both supported by 11 respondents);
• There was little support for the Article 68 measure to support sheep production in the North West (45 disagreed with this scheme while only 9 agreed);
• More respondents disagreed (16) than agreed (9) with the conversion of the Scottish Beef Calf Scheme from an Article 69 to an Article 68 measure.

Differences between sectors

Most of the key themes that emerged in responses to the consultation appeared across most sectors. To a degree, responses tended to reflect the sector in which respondents operate; for example, those in the Environment sector tended to focus on the wider public benefits of agriculture, while those from the Farming or Livestock / Supply Chain groups tended to provide more direct comments relating to agriculture and farming, focusing on the detail of the Inquiry's proposals. Key sector differences included:

• Local Authority respondents expressed particular support for the LFASS. They tended to disagree with the Inquiry's proposed annual qualifying requirements, but tended to agree with introducing new requirements into the Good Agricultural and Environmental Condition ( GAEC) rules. They generally argued that the TUF fund should be bigger. They also tended to agree with an implementation date of 2014 for the new scheme;
• Those from the Environment sector were the most likely to argue for a focus on public goods. They tended to agree with top slicing and felt that forestry should be eligible for payment. They also tended to suggest the TUF should be bigger than proposed (and used for capital investment) and that the proposed stocking rates should be lower. They were more likely to disagree than agree with the Inquiry's stance in relation to trade distorting measures;
• Respondents from the Farming and Livestock / Supply Chain sectors tended to argue for specific support targeted at the beef and / or livestock industries. They generally agreed with the Inquiry's views on market price volatility and in relation to trade distorting measures. However, they expressed doubts about the annual qualifying requirements outlined in the report and thought the Inquiry's proposed approach was unlikely to help deal with the issue of increased rents. They also tended to disagree with providing support for forestry;
• Members of the Livestock / Supply Chain sector tended to disagree with the principle of top slicing (there was no consensus among respondents from the Farming sector in relation to top slicing);
• The focus of many responses from Individuals suggests that they are involved in the farming or associated businesses, and their comments tended to focus on concerns about fairness and access to future funding schemes and the potentially negative impact of the proposed changes on their businesses.

Conclusions

Overall, responses to the Inquiry's proposals were set within the context of the need to support active farming, to move away from a historic base for payments and support new entrants, as well as linking support payments to the delivery of public goods and benefits.

Although some respondents queried the ordering or focus of the principles outlined in the Inquiry's interim report, overall there was broad support for the principles and objectives identified by the Inquiry as the basis for future support.

However, there was less support for the Inquiry's specific proposals, with respondents across a range of sectors querying elements of the 4 proposed funding streams, the payment rates set and the use of the Macaulay LCA. Respondents also highlighted potentially negative consequences of the proposed support scheme both for individual businesses and for specific sectors of the agricultural industry. Alternative proposals were put forward by several respondents, many of whom volunteered to discuss these further with the Inquiry team if required. However the new support scheme is structured, respondents emphasised that it should be as simple to administer as possible.

In relation to short term issues, there was broad agreement that the new scheme should not be implemented before 2014, and that there should be no further transitional period. Respondents highlighted the need for a phased approach to allow time for businesses to plan for and adapt to changes that the new scheme will introduce. However, there was also some support for an interim scheme to support new entrants until the new scheme is implemented.