Rural Economy and Connectivity Committee 24 June 2020
The agenda for the day:
Decision on Taking Business in Private, Agriculture, Fisheries, Aquaculture and Food and Drink (Impact of Covid-19), Subordinate Legislation, European Union (Withdrawal) Act 2018.
Decision on Taking Business in Private
Decision on Taking Business in Private
Good morning, and welcome to the Rural Economy and Connectivity Committee’s 16th meeting in 2020. The first item on our agenda is to decide whether to take items 5, 6 and 7 in private, to allow the committee to discuss its future work programme, its approach paper on pre-budget and financial scrutiny and its approach to the Dogs (Protection of Livestock) (Amendment) (Scotland) Bill. If any member disagrees, I ask them to indicate that now.
As no member has indicated that they disagree, we will take those items in private.
Agriculture, Fisheries, Aquaculture and Food and Drink (Impact of Covid-19)
Agriculture, Fisheries, Aquaculture and Food and Drink (Impact of Covid-19)
Item 2 is an evidence session with stakeholders on the impact of Covid-19 on agriculture, fisheries, aquaculture and food and drink. I welcome our panel. James Withers is chief executive of Scotland Food & Drink; Julie Hesketh-Laird is chief executive of the Scottish Salmon Producers Organisation; David Oxley is director of business growth at Highlands and Islands Enterprise; Jimmy Buchan is chief executive officer of the Scottish Seafood Association; Jonnie Hall is director of policy for NFU Scotland; Elspeth Macdonald is chief executive officer of the Scottish Fishermen’s Federation; and Nick Halfhide is interim chief executive of South of Scotland Enterprise.
Before we go any further, I ask members to declare any interests; I know that some members would like to do so. I will hear from Peter Chapman, Stewart Stevenson and Rachael Hamilton in turn, and if anyone else wants to declare an interest, they can do so.
First, I refer members to my entry in the register of members’ interests. I have an interest in a farming business and a freshwater fishery.
I declare an interest as a partner in a farming business in the north-east of Scotland.
I have an interest in a very small registered agricultural holding and derive no income from it.
I refer members to my entry in the register of interests. I am a shareholder in a small hospitality business in the Borders.
As no other member has indicated that they want to declare an interest, we move to questions. I remind everyone that, if we all keep our questions and answers succinct, we will get through the considerable number of questions that we have today. Peter Chapman has the first question.
I welcome the panel to our meeting today. I have two questions for the three representatives of the fishing industry—Elspeth Macdonald, Jimmy Buchan and Julie Hesketh-Laird. First, the committee would like to hear about the problems and impacts that Covid-19 has caused for your industry. If you have any figures and costings to back up your comments, they would be very useful. However, we are more interested in looking forward than in looking back, so the second question is this: what lessons can we all learn from the crisis and how can we get back to normality?
The second question is probably more important than the first, but we are also very interested in hearing your answers to the first, because we need to know how Covid has affected your industries. Who wants to go first of the three witnesses whom I named?
Do not start by inciting a riot, Peter. We will tackle the questions by starting with Elspeth Macdonald, followed by Julie Hesketh-Laird then Jimmy Buchan.
Elspeth Macdonald (Scottish Fishermen’s Federation)
Good morning, committee, and thank you for the opportunity to come and talk to you this morning. The fish-catching sector has obviously been hit fairly significantly by the impact of Covid. The impact came early, and parts of the industry were hit pretty hard. I think that it is fair to say that the shellfish fleet, which relies heavily on the hospitality and food-service sectors at home and abroad as markets for its shellfish products, was hit most severely.
When we look back at the period since the UK-wide lockdown began, we can say that the prawn fleet in particular has experienced the most significant hit. We are currently catching probably half the volume of prawns that we were catching at this time last year, and we are selling them for half the price. The impact has been significant.
There was also a significant and early impact on the inshore shellfish fleet—the smaller vessels that catch product that is exported live, such as lobsters, crabs, prawns and so on.
There have also been significant impacts on our white-fish fleet. That fleet managed to keep fishing, but there has been a significant reduction in its activity. For example, landings at Peterhead market between March and May this year were down by approximately 40 per cent on the same period last year. Obviously, due to social distancing requirements and so on, Peterhead market had to put in place measures to limit the landings that it could handle.
There have been significant impacts on the fishing sector, and the market has been very volatile. Although there has been a market for white fish, it has been very up and down and unpredictable, so it has been hard to plan landings to meet demand.
That brings me to the second part of Mr Chapman’s question. Over the past few months, there has been very good communication and collaboration across the supply chain in trying to manage a very difficult situation. The sector will certainly learn from that in trying to ensure, as far as possible, that we manage our efforts in a way that enables us to respond to market conditions.
Our experience has also highlighted the industry’s very high reliance on the hospitality sector. I do not know that there is much we can do about that in the short term. Food service and hospitality represents about 55 per cent of the UK seafood market, and that sector has been completely closed over the past few months—not only in the UK but abroad, where there is very good demand for our products. That has had a really significant impact on us.
It has been a very difficult few months. As I have described, the impact across the fleet has varied depending on whether people are in white fish or shellfish, or in the pelagic sector, which has been largely unaffected, so far. There is a lot to learn and reflect on, but there has been very good collaboration across the supply chain.
Julie Hesketh-Laird (Scottish Salmon Producers Organisation)
Good morning, everybody, and thank you for the opportunity to be here. The salmon farming sector was hit early by Covid. The Chinese market began to slow down significantly in January—China is our third-biggest market for farmed salmon exports—so we felt the impact very early, with other markets closing quickly afterwards.
With the lack of export opportunity, farmers had quickly to manage their farms slightly differently. There are fish in the water that are up to two years old, and fish welfare, as well as people’s welfare, has been really important throughout the Covid outbreak. Farmers worked rapidly to put in place measures to look after their fish, and to ensure that work patterns continued using a minimal number of people so that social distancing could be observed.
There were a lot of on-farm impacts, and we worked quickly with the regulators to make sure that fish-welfare issues could be dealt with quickly. The industry has worked resiliently, although not as it would normally, because of social distancing, and it has worked tirelessly throughout the Covid outbreak to keep fish healthy and to keep itself moving. The Government quickly scrambled to say that the food sector is an essential business, so the industry carried on getting stuck in, to keep providing fish for the UK market.
The UK retail sector has done pretty well for us throughout, because people stockpiled quite early, and there has been a small uptick in sales of fresh salmon. We have done well in the UK, but only roughly half of what we produce is for the UK market. Exports have been hit badly—exports to the US, China and France have been hit hard because of the food-sector closures there. There is light at the end of the tunnel; although I do not have data on the specific question, the light is beginning to come through.
One of the questions was about how we get back to normality. The industry has been working hard all the way through and will carry on doing what it does well. For us, the priority is getting UK restaurants and hospitality reopened, because those are big markets for us.
It is also important that we get back passenger flights to our major markets, because farmed salmon travels mainly in the belly of passenger planes. Therefore, the more passengers who travel, the more salmon will go. If passenger flights resume as the markets open, that will help to bring down the important freight costs to a level that is much more affordable for our members.
Jimmy Buchan (Scottish Seafood Association)
Thank you for the opportunity to engage and share my views with Parliament.
I will reflect quickly on what Elspeth Macdonald and Julie Hesketh-Laird spoke about. The shellfish sector has been worst affected. It continues to be affected, which is causing real concern because the scallop and prawn processors are still lying pretty low. That is the case purely because shellfish is an export product, so until we see hospitality sales in any sort of volume, the situation will continue.
On top of that, businesses were already sitting on what we would class as a very good harvest from the previous year, so they had quite high levels of frozen stock. Financial constraints mean that they now need to move some of their inventory to create cash flow and to create room in their cold stores in order that they can buy more stock. That has a knock-on effect on the catching fleet, so that side of things is quite difficult.
There have been sporadic problems with white-fish exports—mainly those to France, because France was running two to three weeks ahead of the United Kingdom. Therefore, France’s problems were reflected back at us at a later stage. Fish is now being moved into France, but there are still some small issues.
There are a couple of things that we could learn from the Covid outbreak. I feel that there was a lack of clear guidance for food producers in the initial stages: there was total confusion. We did not know whether we were key workers, and we were not given the correct guidelines quickly enough. Therefore, many businesses went into shut down when there was possibly no need to do so, only to find themselves two to three weeks later trying to get started again.
A clearer, concise set of rules would have helped every business to make an assessment, rather than having a grey and woolly situation, with some businesses remaining open and some not.09:15
The most important thing is that, while we live and learn from the past, we must move forward with the Scottish and UK Governments in the post-Covid, post-Brexit scenario. We will learn from the past, but we must start to focus on what we need for the food and drink sector—and, in my brief, for seafood processing—in the future. For me, that is the key thing that I would like you guys to take away from this.
We are past the point of paying lip service and having a talking shop: we now need action. We are within six months of Brexit, and we still do not know what the future holds for us. One thing that business does not like is uncertainty, but that is what we are sitting with right now. That is my message to Parliament.
I have a quick question, which is for Elspeth Macdonald only, I think. Given that much of what is caught in our territory is caught by foreign vessels, does the SFF have any understanding of the effect of Covid on other nations, particularly those that fish in our waters?
That is a good question. We know that French vessels were continuing to land at Scottish ports during the height of the problems. Our understanding is that the fleets from the continent were experiencing similar problems with volatility in their marketplaces, including the very significant downturn in the hospitality market and the impact of that.
There were indications in May, when our market was particularly difficult to predict, that there was some trouble in getting Scottish product into France, which I think was because French processors were putting pressure on their retailers to stock only French product. It is fair to say that the continental fleets that have been affected by the outbreak have faced similar problems to ours.
I have a supplementary question for all three fishing industry witnesses. Elspeth Macdonald said that white-fish landings are down about 40 per cent for the past three months. What are the most recent figures? Over the past three weeks, for instance, have we been managing to uptick to a higher level?
It was interesting to hear how the fishermen have worked together to manage the market. Is that still working for the white-fish fleet?
Before Elspeth Macdonald responds, I will bring in James Withers, who I think is indicating that he has financial figures on the impact on fishing.
James Withers (Scotland Food & Drink)
Thank you, convener, and good morning to all.
The information that I have goes beyond fishing: it covers the total impact across farming, fishing, food and drink. The sector is a £15 billion industry, as the committee will know. Our latest estimate is that Covid will wipe about £3 billion off the value of the sector in 2020. That is based on a combination of things that we know now, including the first quarter’s export figures, as well as our assessment of how much of the food service and hospitality sector is closed. Elspeth Macdonald rightly identified that as being the critical problem over the past few months.
I should say that that estimate is probably at the more optimistic end of the spectrum, based on what some Government economists are saying. It is also based on a gradual unwinding of restrictions and reopening, and it does not factor in a potential return to restrictions or a second wave. That said, we can think about a £3 billion total impact in 2020 across the whole industry.
I will give Elspeth Macdonald, Jimmy Buchan and Julie Hesketh-Laird a chance to respond, but I must ask you to be brief.
As I said, landings to the Peterhead market, which is the biggest white-fish market not just in Scotland but, I think, in Europe, were down 40 per cent between March and May this year, compared with last year. Of course, there are other markets in Scotland where fish are landed—on the west coast and in Scrabster and Lerwick. Across the piece, landings overall were down by in the region of 30 per cent.
There were some geographical differences. The North Sea fleet was probably a bit more significantly hit than the west coast fleet, which managed to continue to fish the Rockall haddock stock, for which there was an on-going market. That meant that the west coast fleet could keep going.
I do not have the figures in front of me, but it is fair to say that white-fish fleet activity has increased over recent weeks. More boats are back at sea and Peterhead market has been able to relax some of the measures that it had put in place. The market had set a limit of 5,000 boxes a day at the outset of the pandemic, which reduced its capacity by half, because it can usually handle 10,000 boxes a day, but it has now raised the box limit several days a week.
The white-fish market is picking up, and landings are increasing. There was activity, particularly during May, when the industry worked with the Government to put in place an eight-day tie-up scheme to manage effort. However, we have not felt it necessary to do that in June.
I will bring in Julie Hesketh-Laird and then Jimmy Buchan, but I really need you to be brief.
I am not sure that I have an answer to the question, because it was about landings. I think that Peter Chapman had a different question for me.
Yes. Does the industry have plans to cut production in the near future, given the difficult situation with the market? Are growers planning to cut back a bit over the next six months or year?
Salmon take two years to grow, so we would have needed to cut production two years ago. We have salmon growing in the pipeline, as it were.
Companies will be looking closely at the markets that are going to reopen and will be hoping to sell into those emerging markets. The China food scare has been a problem for us, because things were really starting to move in the Chinese market but then suddenly stopped dead.
Undoubtedly, companies will be looking at their hatcheries and the number of fish that they put into the marine environment in due course, but I do not have figures for that. We hope that we will get through this crisis using all the fish that are in the water in a variety of ways, whether they go to different markets, food boxes or different parts of the UK food services sector.
I realise that growing salmon involves a long lead-in time.
Jimmy Buchan, how many processors do you know who are still shut down? Do you think that some of them will never reopen? What is the situation with the processing industry?
A number of processors, primarily the shellfish guys, are still shut simply because the market is not there. We just have to live in hope that tourism will pick up across Europe and globally and that people will start moving more freely, going out to restaurants and so on. That is a possibility.
I think that most white-fish processors are back, although certainly not to full capacity, because until the food services sector opens up, opportunities are restricted. Now that England is starting to open up, I expect that demand will increase. We will not get back to normality soon, but it is an improving picture.
I am sure that we have all welcomed the availability of fresh fish boxes, which have allowed us to enjoy the fish that has been landed in Scotland. I know that these are difficult times, but that is definitely a step forward.
Jonnie Hall, during lockdown, farmers and crofters have had to cope with fly-tipping, irresponsible outdoor access, initial closure of markets, impacts on beef and dairy prices and many more issues, which I am sure that you will tell us about. What have been the main impacts of Covid-19 on agricultural sectors, and how have they been distributed across sectors?
Jonnie Hall (NFU Scotland)
I would sum up the situation by saying that there has been no single impact on the agricultural farming sector, but when we drill down into the different sectors, whether we are talking about dairy, beef, lamb, soft fruit production, specialist crops or the cereals sector, we see that all sectors have experienced different impacts, largely due to supply chain issues, particularly early on in the lockdown.
I will come on to the availability of people to work on farms, which is an issue that has particularly affected the ornamental sector, the veg sector and the soft fruit sector.
First, I will go back a step. The first real impact of the lockdown for the agriculture sector was not about supplies beyond the farm gate and ensuring that the supply chain continued to function; it was actually to do with all the services and businesses that provide inputs to agriculture businesses. We were at a critical point in the year. March is the start of spring work, with calving, lambing, sowing of cereals and all the rest of it. At that point, there were grave concerns about the availability of seed, feed, fertiliser and fuel. Even the availability of sawdust was an issue, because sawmills had closed down, and availability of sawdust is an animal welfare issue for the people who use it. The availability of personal protective equipment is an on-going issue for people who use PPE all year round, in pig and poultry units and so on. There has been a vast array of different issues and challenges.
A huge number of businesses provide services or inputs to the agriculture sector across the rural economy. Because agriculture was largely enabled to keep going, as one of the critical national infrastructure components, the impacts have largely been okay for the wider rural economy. I echo the concerns that were expressed earlier about the lack of—or slow issuing of—guidance on social distancing and the appropriate measures that are needed to ensure that social distancing is robust and demonstrable in various situations, but we have engaged very much with the Scottish Government and other agencies on that and I think that the matter is well and truly settled.
You asked about different sectors. The dairy sector had some short-term and hard-hitting impacts as we switched away from drinking lots of milk from Costa Coffee and so on and it became all about retail. Depending on farms’ contracts and the processors with which they were aligned, there were different impacts. I think that Scotland fared far better than other areas—certainly the south-east of England. At one point, we faced the prospect of empty milk shelves in the supermarkets at a time when some dairy farmers faced the prospect of having to pour milk away, which seemed ridiculous. We are over that particular challenge.
The lamb price collapsed but then recovered very quickly. The beef sector has gone through a number of challenges, partly because of the need to realign the sector—I see the convener wagging his finger at me, so I will make this quick.
There are on-going concerns around the cereals sector that we are yet to fully understand, because of the slow-down but not necessarily the full stopping of the distilling sector and because of the possible overhang of supplies of grain that are already in store, given that we are about to hit the harvest—certainly, spring barley will be harvested next month. Where we will be in October remains to be seen.
Finally, I come to soft fruits. The availability of people to harvest fruit and veg is very important, and it remains an on-going issue because we are right at the crunch time for that.
So, yes, the impacts are variable. To go back to the original question, they include agri-tourism, fly-tipping, access and lots of other things that I could mention, but I hope that they are pretty much documented in our submission.09:30
I take on board what you say, but hindsight is a wonderful thing. The situation was unprecedented. The whole world has been shut down, and no one could have foreseen that. We have all had to grapple with it.
You have covered many issues. Have you been aware of any particular effect on the crofting and tenant farmer sectors?
I do not think that the crofting and tenant farmer sectors are facing any separate or different issues to those that are being faced by mainstream agricultural businesses. We have a significant membership from among crofters and tenant farmers, and those types of tenure have their own challenges, but I do not think they have been excessively adversely affected by Covid-19 over and above mainstream businesses.
Thank you for what you have told us. No one could have planned for this, but I think you have all coped really well. Thank you, convener.
I hate to do this, but I implore everyone to keep their answers short so that I can keep bringing members in with more questions. Any help that you can give me will end up with you getting more airtime.
Thank you, convener. I found the NFU Scotland submission very helpful, but I will not talk too much about it; I will go straight to my question.
Jonnie Hall has talked about the supply chain, and that interests me because there were supply chain issues pre-Covid. Dairy contracts are an issue that I know the cabinet secretary is picking up on. We have been talking about supply chains at the local, national and EU levels. I am interested in hearing about what needs to be done to future proof the supply chain for when we have a second spike or future pandemics. We did not plan for this, so we did not have any off-the-shelf guidance, but now we will know how to better prepare so that we can secure supply chains for the future. I am interested to hear what we can do about that.
There are some lessons to be learned. None of us were prepared for this, and I do not mind holding my hands up and saying that our organisation was not prepared either. My assessment is, however, that the response was pretty remarkable, particularly as industry, Government agencies and many others worked collectively to tackle things as quickly as possible.
There are lessons to be learned straight away. I can relate to some of Jimmy Buchan’s comments about the early days. The key worker issue was a mess in Scotland in the early days, because 32 local authorities were left to determine whether the food processing sector, for example, was deemed to be key and essential. Some plants draw their workforce from five different local authorities, two of which would have designated those workers as key workers who could access childcare while another three would not have done so. The mechanisms for tackling that early and collectively were pretty good, though.
For many of the issues that Emma Harper has referred to, such as the supply chain, all that Covid has done is shine a light on problems that were already there: access to labour; our balance of markets; the balance of hospitality versus retail, and domestic versus export; and equity in the supply chain. Recovery and the pace of recovery will be critical. A lot of industry bodies are working closely on a recovery plan and investment, which will help to ensure that we accelerate our recovery at the same pace as a lot of our competitor countries. To be honest, we know what we need to do.
Convener, do you want me to carry on, or are we seeking information from any of the other witnesses?
It sounds as though we have lost the convener for the moment. Does anybody else want to answer Emma Harper’s questions?
I would like to reflect on what James Withers just said. The various industry bodies really worked well. We are seafood specific—Scotland Food and Drink, Seafood Scotland, the Scottish Seafood Association, the Scottish Fishermen’s Federation—and basically we were—[Inaudible.]
I think that your connection has frozen, Jimmy. We will try to get it back. Does anyone else want to come in? James Withers, do you have anything to say about the supply chains from your angle?
I think that Jonnie Hall was looking to come in, and I will yield my time to him if he wants to make a point. I know that Emma Harper asked him a specific question.
I echo what James Withers just said about a clear light being shone on existing challenges that the supply chains face across the different sectors and different commodities. There are lessons to be learned and we need to learn them pretty quickly. There is an awful lot of fragility in how we manage the food supply chain. Just-in-time management seemed to collapse pretty quickly when we had to realign suddenly. For example, prime cuts of Scottish beef going into what was the Scottish food service sector suddenly became a significant demand for mince on the shelves of Tesco or other supermarkets. We definitely have to learn lessons from that, but I am not 100 per cent sure that we will fix it overnight.
James Withers talked about equity in the supply chain. We need not only equity and fairness but transparency in the supply chain, and that goes across all sectors.
I will hand back to the convener after this—I think that he is back.
Thank you for your responses. It occurs to me that I should have declared an interest, convener, because I am also a partner in a small bed-and-breakfast business. When we are talking about milk for retail versus milk for hospitality, and that is an issue that I am familiar with.
I am also interested in our fruit growers and the people who are picking the fruit. We now have quarantine issues with persons coming into the country who are normal folk who will pick fruit, and I am sure that they have challenges as well. It would be interesting to hear a little bit about that.
The challenges for the workforce, particularly for soft fruits and veg, has rumbled on throughout the piece. Initially, we thought that we might plug the gap caused by seasonal workers not coming over because of travel restrictions and so on, because a significant number of people were furloughed. We set up various portals through which people could make contact and express an interest in working on farms, particularly in Angus and Fife and places like that. A lot of people expressed an interest, but a lot of them did not follow through and make themselves available. At some points, there were real issues with the availability of a workforce that capable of picking fruit, in particular. We have overcome that to a significant degree with the movement of folk.
Emma Harper raised the issue of quarantine, and we have also managed to overcome that by working with Public Health Scotland and others to enable people coming into the country to essentially quarantine as a unit while they are still able to work on the farm. That is all being done with Scottish Government input, too. It has not been as challenging as it could have been. Through a lot of co-operation, we have got to the situation whereby, at this peak moment in demand for people, we are in a reasonably good place.
Thank you very much, Jonnie Hall, and thank you, Maureen Watt, for stepping in to convene. Obviously, one of the big problems that we have all faced is connectivity—nowhere more so than in the Highlands. I thought that I had rebuilt the system yesterday in preparation for today, but it has obviously failed. I hope that that will be the only time that you need to cover, Maureen, but you may need to step in again.
My questions are on rural enterprise, so I will direct them to Mr Oxley and Mr Halfhide. Mr Halfhide’s organisation has clearly had a baptism of fire, coming into creation during the pandemic.
Gentlemen, in addition to your ordinary work, I have a list of funds in front of me. There is the pivotal enterprise resilience fund, and your organisations are also referring people to the third sector resilience fund and the wellbeing fund.
Can you outline your assessment of how rural communities and rural businesses have fared during the pandemic and what particular issues rural enterprises have faced?
David Oxley (Highlands and Islands Enterprise)
There has been a particular challenge in rural communities and especially in island communities, where there have been significant issues around access to flights and ferries so it has been challenging for businesses to operate. Folks have mentioned some of the capacity constraints on flights and the impact on getting products out. The reduced frequency and capacity of the ferry sailings has resulted in delays to food reaching island communities. It has sometimes taken an extra day, which is not great.
It has been a huge challenge for businesses. Across the Highlands, roughly 25 per cent of the total workforce has been on furlough, which is about 60,000 jobs.
There has been a particular increase in unemployment in areas other than those where we have experienced it happening before, particularly in tourism hot spots such as Portree, Fort William and Broadford. That has been a challenge for us.
On business resilience, traditionally, most of the businesses in the food and drink sector are small and medium-sized enterprises that have been set up by individual entrepreneurs. They have not been particularly well capitalised in the past and the situation has hit them hard. Most of those businesses have not been sitting with significant cash balances, which has been a challenge for them. Many of them have been reliant on one particular market, often supplying the hospitality sector through hotels and bars and so on. That has been a challenge for them as well.
There are some lessons to be learned about diversification in relation to how businesses plan for things, but there has been a significant impact on many aspects of the most remote and rural parts of Scotland.
Nick Halfhide (South of Scotland Enterprise)
The situation in the south of Scotland is quite similar in many ways to the situation in the Highlands and Islands.
The picture has been varied. A small number of businesses have done very well out of the situation—those that have been able to pivot their businesses quickly or are providing things such as PPE. We have a number of companies in the south of Scotland that produce hand sanitiser or PPE, and they have done very well. We have been supporting them.
However, for the vast majority of businesses, it has not been a good situation at all. Many of them have gone into hibernation. We have had high levels of furloughing—around 30 per cent of employees in the Borders and in Dumfries and Galloway have been furloughed. The hospitality sector in the more remote areas is particularly important and it has been particularly hard hit.
However, there have been rays of sunshine in the sense that a lot of businesses have shown great resilience. Some have even been fairly energised by the situation and have worked with local communities in a very resilient way to help people through the most immediate negative impacts.
The difficulty will come in the months ahead. Even though we as an agency and the Government provide a lot of support to keep companies going, when they reopen and markets are not as robust, that will be pretty challenging for many of them.09:45
Our industry has shown particular resilience, especially in the Highlands and Islands, where there were immediately issues with transport. Public transport is very poor in some rural communities and companies have removed car sharing, but they have put on different modes of transport for people in the Highlands so that they can get to their work more easily while social distancing.
Access to ferries was initially an issue for some of our members, but we moved quite quickly to get templates of letters to people, so that they could demonstrate that they were key workers, and for their supply chains. That issue was overcome quickly with help from the islands task force.
Access to testing has been an issue, particularly on the western and northern isles. Getting Covid testing has been a major challenge, despite clear guidance from the Scottish Government that it should take place. There has been huge progress. There are problems still on some islands, such as Orkney, but we hope that they will be resolved soon.
Our industry has worked so hard over this period. Money is still flowing into Highland communities in the form of wages. There is a very good, high average annual wage in the farmed salmon sector of £34,000. Having that kind of constant input into rural communities has been a real help over this period.
Thank you to the witnesses for their contributions. A couple have mentioned connectivity issues, and I will expand a bit on that with the two gentlemen from the enterprise agencies. The Scottish Parliament information centre produced a blog recently in which it says, perhaps unsurprisingly, that the local authorities with the highest proportion of premises that fall below the universal service obligation are in rural areas. Can you comment on the impact of that, particularly with regard to things such as home working, online communication and online transactions?
I think that the vast majority of folks have moved to home working, where that is possible, quite well and quite quickly. We have seen anecdotal evidence of folks wanting to move to the area. An effect of the crisis has been that everybody is only as far away from one person as they are from everybody else—everybody is the same connection away. If you are working in a remote, rural area, you are still only as far away from somebody in London as a person who is living in the next street to them. It might be a advantage in the long term if home working is seen as an option.
We still have significant challenges to overcome across the food and drink sector relating to some of the processes that have now been put in place. We have seen a lot of local activity—folks are shopping locally, using their local farmers market and their high street to buy things. That is great in the short term, but I am concerned about whether in the long term consumers will stay with that or go back to their traditional shopping areas.
There will absolutely be challenges in the hotel market. We still have a tsunami of redundancies to come, not just in the food and drink sector but across the whole of the economy. That will undoubtedly impact significantly on most rural parts of Scotland. I have seen estimates of 10 per cent unemployment across Scotland. The Highlands has typically had unemployment rates of 2 to 3 per cent, and we are already seeing a significant impact on the unemployment rate.
On the subject of digital, this is a game of two halves. The discussion has highlighted how good connectivity often is and how quickly many people who are able to work from home have been able to do so, but it has also highlighted where it is not really working, particularly when there are multiple folk in a house who are trying to work and do home schooling at once. That has been tricky.
The other interesting thing that has been highlighted by the situation is the gap in digital skills. It has exposed how, even where connectivity is good, some businesses have struggled to get online. Some businesses have approached us for support, we have said, “Go online,” and they have said, “We don’t really know how to do that.” There is a skills gap for some businesses and for many households, which will be particularly important when we are trying to get people back into work. We cannot just offer them a skills package digitally; we will have to find ways to help people who struggle with getting online to access support.
My questions are primarily follow-ups to those of John Finnie, and they are directed at Nick Halfhide and David Oxley. Given that the role of the two agencies is to deliver support that meets the needs of your areas, what specific support have you delivered for the food and drink sectors during the pandemic, over and above administering the national grant schemes?
Nick Halfhide can go first on that—you were in at the deep end.
Yes—we were in at the deep end. Most of our effort has gone into the Government grant schemes. As a new agency that started on 1 April with very few staff, we have had to devote nearly all of them to the grant schemes, and a number of businesses in the food and drink sector benefited from them.
The other key thing that I would highlight is the flow of information. We have made quite a lot of effort trying to gather information locally from the food and drink sector, for example, and feeding that into Government. Crucially, we have helped local businesses to access the information that the Government has provided, ensuring that businesses have everything that they can have, both in influence and in the ability to adjust their own businesses
Like South of Scotland Enterprise, we have been hugely focused on the resilience funds, in particular, and I think that food and drink sector received the second-highest amount of money, after the tourism and hospitality sector. That is not insignificant for HIE. We put out about £18 million across the region from that fund, which is a significant amount of money.
We have been pivoting our support to provide information digitally across all sectors, through webinars and podcasts. There has been a slight increase in demand for innovation, with folks wanting to consider how they can change their business model. We provide advice to businesses on that.
I will mention two areas where we have been working closely with others. One is UK market development, which has to be the opportunity for most food and drink businesses. It is great if folks can buy local but, in the Highlands and Islands, there are only a limited number of biscuits that the local baker can sell in their own small town, so they need to sell more widely than that, and the UK market must be the opportunity that they come to. We are therefore working closely with Scotland Food & Drink on that aspect of things.
The real focus for businesses has been on how to start up again. In some ways, closing down is relatively straightforward: you lock the doors and go away. Restarting in a safe environment, on the other hand, has been particularly challenging. I live and work in Moray, and some of the big food and drink companies there have been good at reopening safely and quickly. We have been able to utilise some of the intelligence that they have gathered, including what they have learned from other countries. Some distillers have been opening up more quickly in some parts of Europe than distillers here, and there has been a lot of learning from that. We are trying to ensure that that gets fed into the Scottish Government for the purposes of guidance for businesses as we go forward into the reopening phase.
I will come to future plans in a moment, but first I want to follow up on what Nick Halfhide said about the flow of information. I am sure that both David Oxley and Nick Halfhide have had emails in their inboxes that are similar to the ones that I have received. Much of the sector highlighted gaps in the schemes that HIE and South of Scotland Enterprise were administering. For example, there was the £51,000 rateable value cliff edge, and a high proportion of self-employed people could not apply for grants because of the rules on whether they had previously received universal credit.
Given that a lot of businesses in the food and drink sector were not able to access support, was any thought ever given to having a local grant scheme to meet the specific needs of businesses in your areas?
I ask you to answer briefly, because Colin Smyth has indicated that he wants to ask another question.
Many of the schemes were specific either to sectors or to a range of businesses. The resilience fund, for example, was in effect open to all SMEs across Scotland. It was good that the funds that we had available to give out increased over time, but that meant that the budget was a bit of a moving feast. It was £45 million, then £90 million and then £120 million. That is all great, but we were constantly getting applications.
We now have much more intelligence on the needs of individual businesses, both those that were successful in their applications and those that were not. We are considering what we can do to support other businesses, including those that were unsuccessful, as we move forward. However, the reality is that there is not enough money to go around. HIE is sitting with a budget cut in its revenue spend, which is where most of our support to those businesses would come from. We have had a £4 million cut this year, which is 13 per cent of our budget, so things are particularly challenging for us at this time.
As a new organisation, one of the first things that South of Scotland Enterprise did was to identify a section of our budget that we would make available as a hardship fund. That was overtaken by our running of the two funds from central Government, but we still have some funds earmarked to support a range of companies across the south of Scotland. We are already in dialogue with a number of those companies. Some of them were not successful in applying for the existing schemes or were not even eligible to apply in the first place. Our message to businesses in the south is, “Come and talk to us, because we are here to support you, and we have some money available to do that.”
Looking forward, given the importance of the food and drink sector, how are you planning to engage with it? Food and drink was never a priority area for SSE’s predecessor, the south of Scotland economic partnership. How will you engage with the sector, and what needs to be done to help it to rebuild?
Food and drink is a priority for us in the south, not only because it is an integral part of the economy but because it links in with other sectors such as hospitality.
Our ambition is to talk to all the businesses. If anyone wants to talk to us, they can. We are not dealing only with the big guys—many of our companies are small and micro businesses. Come and talk to us, whether directly or through Business Gateway, and we will support you as best we can. It might be through funding, but it is more likely to be through advice or by directing you to other areas of support.
As a slight caveat, South of Scotland Enterprise started operating only on 1 April, so we are still finding our feet, but our message is that we are here to help.
We have been feeding through intelligence that we have gathered from speaking daily to food and drink businesses, and every other business, to gather information.
We briefly touched earlier on e-commerce. Many of our businesses got caught out by developments in that area; there are definitely opportunities to help businesses to get online, whether that is a local butcher or baker, or a manufacturer. We will look closely at how we can support businesses to improve their speed to market.10:00
The next question is from Angus MacDonald.
Before I ask my question, I should—given that the impact on islands has been mentioned in evidence—refer members to my entry in the register of members’ interests. I own three properties in the Western Isles, from which I derive no income.
There is no doubt that Covid-19 has had an impact on the environment, not least as a result of the temporary regulatory changes that have been made throughout lockdown. In addition, there have been clear impacts on the agriculture, farming and forestry sectors. To give one example among many, peatland restoration is not permitted under the current guidance.
Has the Covid-19 crisis had any impact on your sectors’ ability to meet environmental regulations or carry out planned land management such as peatland restoration, tree planting or agri-environment interventions? It would be good to get some feedback on that.
We will come first to Jonnie Hall, followed by Julie Hesketh-Laird.
That is a very interesting question. Everyone has pointed to the fact that the lack of aviation and transport as a consequence of lockdown has certainly had an impact on reducing emissions. However, NFUS recognises that the climate change challenge that we all face in how we manage our land remains. As an organisation and as an industry, we are still up to addressing that challenge.
With regard to the specifics of on-going agri-environment schemes, we have had a lot of correspondence with the rural payments and inspections division of the Scottish Government on the governance and the requirements around fulfilling contracts. We have also corresponded with the likes of the Scottish Environment Protection Agency and Scottish Natural Heritage, because an awful lot of land-based inspections and particular operations have been put on hold simply because of the requirements for safe social distancing and so on.
Nevertheless, on balance, I think that most agri-environment management has carried on as usual. We are at a bit of a crossroads anyway with regard to how agri-environment aims will be pursued in the next wee while. We are coming to the end of the current Scottish rural development programme, and we are still looking for assurances as to the continuity of some schemes and the continuity of management, not only to deliver on existing biodiversity challenges in compliance with existing regulations but to make an even greater contribution to tackling climate change.
That relates to where we go next with another piece of business for the committee: the Agriculture (Retained EU Law and Data) (Scotland) Bill, which you have been dealing with recently. We are very much looking forward to 2021 in order to have that platform for continuity to ensure that schemes persist and are properly funded so that we can continue to deliver.
I suspect—this is anecdotal—that, apart from hot spots where there is a lot of public access and recreation in and around towns and settlements, the countryside has been quite a quiet place. Anecdotally, we have heard a lot of evidence that biodiversity in particular has had a real opportunity, especially given that we have had a very benign spring with good weather. There are reports that ground-nesting birds, lapwings, curlews and all sorts of other species are flourishing in some places because of a lack of disturbance. Some places are almost reverting back to the farming system of days gone by, as it were; you can read into that what you like.
With regard to meeting tree-planting obligations and targets and other such aims, we are still on a curve whereby we need to get things back up and running as quickly as possible.
Thank you. We come to Julie Hesketh-Laird briefly and then—as long as answers to both questions are relatively succinct—Elspeth Macdonald.
Our starting point is that salmon is a pretty carbon-efficient way to produce protein. The lockdown caused issues because it was tricky to get regulators out to sites. SEPA has been flexible about doing remote audits; its staff have been working from home and dealing with us in a more remote way. Regulation has not stopped, but it has had to be done differently. Farmers have asked SEPA for regulatory relaxation—I am sorry, I should get it right and say that they have asked for regulatory flexibility, not relaxation—in order for fish to be reared for longer periods and grown to a larger size and kept in the water longer.
I think that that has had no impact on the environment. The sector has worked with regulators to develop risk assessments and ensure that only farms that are a low risk are permitted to use the temporary measures, which include evaluations of compliance history, proximity to marine features and modelling. The sector is not using more medicines than before; rather, we sought to be able to use existing consented medicines in the management of our fish. Overall, I imagine that the farming impact will not be different from what it would have been, but as Jonnie Hall said, there are hugely reduced impacts in other areas of our activity, so overall the impact of the sector will have gone down.
Carbon footprint was mentioned by Julie Hesketh-Laird, and I point out that the carbon footprint of Scottish wild-caught fish is extremely low, and lower than some plant-based sources of protein.
Covid has had an impact on some of the surveys that are needed to undertake fish stock assessment. Scientific work is carried out by the Government—Marine Scotland—and by the industry to provide information for stock assessment for future fisheries management. A lot of that activity has been suspended during Covid and there will be knock-on consequences for the amount of data that will be needed for future stock assessments. That situation is starting to improve, but the data will have gaps when compared with other years.
I have a quick question for Julie Hesketh-Laird about the inability to harvest fish with the result that they have had to be grown slightly bigger. Are you concerned about external problems of lice and gill disease that may require more treatment because of this warm weather and this year’s warm sea temperatures?
You are right that this is the time of year when farmers have to be totally on top of lice issues, which is partly why we asked for the regulatory flexibility to make sure that the industry could do so. However, I am not too concerned; the lice figures look about normal for this time of year, because farmers have worked really hard to keep them there. I may jinx that now, but at the moment things are looking steady. If we can stay on top of it and get it right now, looking ahead, we will not end up with problems later in the year in the difficult period—the end of August, September and October—when things get difficult.
We have heard a lot about the business grant support that has been given from the UK Government and the Scottish Government. Although David Oxley and Nick Halfhide have already answered a number of them, I will go ahead with a number of specific questions, which are for any of the witnesses.
How effective has the support been? Is there anything to suggest that it could have been done differently? If there is a flare-up in the virus and businesses have to close, do you expect Government to intervene again? Will financial support stave off job redundancies in your sector, or do you expect there to be a tsunami of job losses?
Those questions are for everyone. I will go to Nick Halfhide first, and then to Jimmy Buchan and anyone else who wants to respond.
I will try and be brief; those are big questions. In relation to how effective the support has been, in the south we have been able to support more than 200 businesses, which is good. However, we have not been able to support all the businesses that are in need—there was never going to be enough money to do that.
As individual businesses have approached us, we have found that while some have been in genuine hardship and we have been able to support them, others have had sufficient reserves to ride it out and therefore have not needed Government support. In addition, when you reveal—as it were—the company’s books, you see that some of them were not very viable moving into this situation. In a small number of cases, Covid has exacerbated what would probably have been closures in the short to medium term anyway. I am thinking of the example of an energy company that was probably going to be moving to making redundancies, which Covid has brought forward; the company has had to speed up its consideration.
It is a very varied picture across the south. We have already seen closures, or announcements of potential closures, and I expect that we will continue to see that, particularly from some of the smaller businesses; the south has a predominance of micro and small businesses. Some of those will be headlines and others will not make it into the papers, but we will begin to see them coming through.
The speed with which the Scottish Government reacted for the seafood processing sector has to be applauded. It moved very swiftly to put in place a resilience fund that has definitely kept a lot of businesses from failure. For that, the industry is extremely grateful.
I note the speed at which, I think, more than 120 companies were the beneficiaries of a sum of money in excess of—I am led to believe—£5 million. I do not think that it stops there. I spoke about some sort of new normal services resuming, but a number of businesses will continue to need assistance in some way, shape or form, especially in rural Scotland. It is good that we have that documented, but it is maybe something that we can take offline with some of the other key players in that industry to try and find out a bit more. More needs to be done, but we are grateful for what was done in the first place, because it certainly saved many businesses and, importantly, the jobs that go with them.
I reiterate Nick Halfhide’s point, in that it has been said to me a couple of times that the way in which Covid has impacted on businesses is similar to the way in which it has impacted on individuals: those who had an underlying condition were more likely to be affected by Covid-19, and businesses that had an underlying financial condition have also been most badly affected.
The support schemes have been effective in keeping things going where possible; however, some difficult challenges are coming up as we move into the restart and recovery phase. The furlough scheme in particular has been widely embraced by businesses; it has kept folk going and made sure that businesses have not made major redundancies at this point. How that scheme is expanded or developed over the coming months is the really important issue. Without the furlough scheme, there would have been large-scale redundancies, and not simply in individual businesses; many small businesses would have got rid of two or three staff each, adding up to a real big issue. That is a real challenge.10:15
To build on what Jimmy Buchan said about seafood processing, we, too, want to record our thanks to the Scottish Government for the pace at which it moved to put in place financial support for the shellfish catching sector. The Government moved quickly, initially to provide financial support for the small, under-10m, fleet. There was then further support for the over-10m shellfish fleet. In total, the two schemes cost about £9 million.
The schemes were not perfect, but they were quick; they were put in place and helped a lot of people. I commend Fergus Ewing and his officials for the engagement and pace with which we were able to get that badly needed support to the fleet.
There are challenges to address, particularly in the prawn fleet. We will have to look at that carefully, and we are talking to the Government about it.
Agricultural businesses are highly diversified. Many agricultural businesses derive an income from outwith agriculture, and a lot of that hinges on tourism, farm shops and so on. Agritourism has fallen through the net and has not had support, primarily because holiday lets or campsites that are part of the agricultural business have not been recognised as businesses in their own right. They have failed to meet some of the eligibility criteria, either for loans or for grant support.
There are gaps in some of the support measures for agricultural businesses and I stress that agritourism, in particular, has struggled to access the available support simply because of how the business is set up.
I echo what has been said about the value of the response to the seafood sector. The Scottish Government moved very quickly. I do not underestimate how important the pivotal enterprise resilience fund has been. It was a little slow to get money out the door, but it was overwhelmed with applications. The trebling of that budget has been a lifeline for a number of sectors.
At UK Government level, furlough has been critical, but it has been less integral to the support of the food and drink sector than to many others. That sector has not been in lockdown; it has had to keep moving to keep the nation’s fridges and freezers full. Businesses have been running far less efficiently. They might have lost 40, 50 or 60 per cent of the business that came from selling to hospitality, but they still had to maintain a lot of their fixed costs to supply perhaps just 40 per cent of their normal market into major retail. There has been no way to use some of the mothballing mechanisms that tourism and hospitality have used.
The result will be that many businesses—including many well-established businesses—will come out of the crisis with a lot of the characteristics of new start businesses. Their balance sheets will be badly eroded and they will have a far more risk averse approach and less appetite for investment.
There are mechanisms that we should think about If we move into lockdown again. The rates holiday that was applied to retail and hospitality was massively valuable for that sector, but it did not extend to their customers or to the people who supply those businesses. Big supermarkets benefited from a rates holiday, but the food and drink suppliers that supplied to them did not. It was the same for smaller retail and for hospitality. Those mechanisms would be important.
Finally, I understand why there is an instinct to provide mechanisms to support SMEs. SMEs are eligible for most of the grant funding mechanisms, including the pivotal enterprise fund, whereas the only option for larger businesses is access to debt. Scotland has a few large businesses in the food and drink industry that account for a large amount of the turnover. Putting whisky to one side, those businesses are generally in low-margin sectors, with seafood processing being a good example. We need to think about the most consistent way to support some of the businesses that have more than 250 employees, given how important they are to the local and national economies.
Stewart Stevenson has a brief follow-up question to ask before the next questions from Peter Chapman.
Thank you, convener. I apologise for having to be absent for a minute or two.
What is your view on the UK Government’s business support schemes for the self-employed, particularly in relation to the fishing industry, in which there are a lot of self-employed people? The structure of employment in the fishing industry is a bit different—I am thinking of the catching sector, in particular, but I know that the point applies also to the processing sector. Perhaps Elspeth Macdonald could comment on that first.
The catching sector was relieved that the UK Government introduced the self-employed support scheme, because, as Mr Stevenson said, a large number of share fishermen are self-employed. That scheme has been of value. Not everyone was eligible for it, but it has been welcomed. The furlough scheme has been of value to those who employ crews, and the support scheme has filled a gap for self-employed share fishermen. It has not worked for everyone, but it is certainly welcome and many people have taken advantage of it.
There is not a lot to add to that. A lot of the business owners would count as self-employed. Some of them have managed to keep operating and have tapped into some of the business resilience schemes. James Withers raised an important point about the business rates relief. Some people have enjoyed that and others, who were down to 40 per cent capacity, have still had the same overheads—and are continuing in that vein. Although the initial resilience scheme helped them over a difficult period, that period may still be continuing for many of our businesses. We need to keep a close watch on that.
We have spoken a lot about financial support in one way or another, but my questions are about non-financial support. First, does any of the panel have an example of non-financial support that has made a real difference? James Withers might want to kick off, because Scotland Food & Drink set up a website for local food and drink customers. That is a really good example.
Secondly, what role have rural businesses in your sector played in providing support to local communities?
As in any crisis, the ability to build community quickly has been important. The speed of communication is very important, particularly in a fast-changing environment, in ensuring that businesses can understand what rules and restrictions they have to work to. The Support Local website was a quick response. Crisis can be a catalyst for innovation, and many smaller food and drink suppliers quickly created e-commerce on the back of it, recognising that their traditional routes to restaurants, hotels and bars were gone and that they needed to supply directly.
As Peter Chapman said, we created the first national directory whereby anyone in Scotland can search for people in their area who are supplying produce directly. David Oxley made a wider point about e-commerce, and, in the past week, we have been running e-commerce development webinars. If I am honest, if we had tried to get companies to sign up for those a year ago, we might have toiled; however, we are now having to add extra dates. Peter made an important point about the mechanisms for support. If we want to feel as though there is a recovery now, my sense is that we need to move beyond a simple approach of injecting money into individual businesses and think about how we invest in the wraparound programmes that will support all businesses. We need to try to capture some of the momentum that there is around local food and build on that in the longer term.
The next step in the development of the national directory could be to explore whether it is possible to have a national e-commerce platform for food and drink suppliers in Scotland that is run by them and for them. How we invest in programmes that drive sales across the UK, and building Scotland’s brand and activity overseas to support exports, will be important. That will probably mean that we will need to hold virtual meet-the-buyer trade events in a different way with Japan and the US. One of the risks is that the further west you go across the world map, the further behind countries are in the disease curve. It is only really the US that is behind the UK’s recovery trajectory, which means that our competitors have stolen a march on us in getting back into markets as they reopen. The investment that we make in those programmes now is going to be critical.
Scotland Food & Drink’s estimation is that £3 billion has been lost from the value of the sector. With some investment—and not much, by the way: we estimate that we will need in the region of £10 billion in the next few years—we could regain that in the next two to three years. Wraparound programme support could help, which would build on some of the positives for business that have come out of local market opportunities. That could be carried into international opportunities.
I will mention three things quickly. The convener spoke about the fish boxes that we are now able to buy. It is important to recognise the contributions of bodies such as Seafish, which have worked hard to support fishermen to sell directly—and to sell much more at the pier head and locally, among other things. That has been useful in some parts of the industry. Seafish, Seafood Scotland and the Scottish Government have worked collaboratively on campaigning and marketing to encourage people to eat different species of fish from those that they would usually eat, so that there is a greater uptake of produce. Seafood Scotland has also done some good work in trying to upskill chefs in their use of seafood, which will be helpful when restaurants start to reopen.
Finally, as well as providing financial and business support, it is important to think about welfare and to recognise the important contribution that charities have made to helping people through very difficult times. Seafarers UK and the Fishermen’s Mission have played an important role in making sure that individuals and businesses have had a port of call and somewhere to be pointed towards, whatever financial, emotional and welfare support they might need. That has been extremely important.
I echo Elspeth Macdonald’s last point about individuals’ wellbeing throughout this process. For the first six weeks of lockdown, our organisation shifted completely from being one that was focused on lobbying to one that was simply there to provide and signpost information and to answer the many questions that people had. The Covid-19 pages on our website have received unprecedented attention. We have been a focal point for information, which has been essential in keeping agricultural businesses in the know.
There are about 18,000 agricultural businesses across Scotland, from Shetland to Stranraer. Farming is isolated and can be a lonely business at the best of times, but with no agricultural shows to attend—the Royal Highland Show did not run last week—the lack of contact is starting to have an impact on some of our members. We are running far more meetings than we have ever run previously. Our board is meeting every week, and our levels of member engagement are off the chart. It is all about making sure that we retain contacts and links, and that people have the opportunity to feed in their views. We have obviously been working closely with Scotland’s agricultural and rural charity, RASBI.10:30
I have three things to point out. First, the webinars and events that James Withers mentioned have been important, and we have been working closely with Scotland Food & Drink to make sure there is co-ordination on those.
The Find Business Support Scotland website has been developed as the place to go for information, and it has been useful for all business.
I also want to highlight the role that many businesses have played in supporting communities. Individuals who have been furloughed or made redundant are facing the most difficult time of their lives, and many businesses have stepped up to support local food banks and make sure that the most disadvantaged in our communities can at least get enough food to keep themselves going.
On non-financial support, the Government has stepped in and helped with discussions and liaison with the UK retail sector, and that has been welcomed by our industry. Discussions have been held with the retailers about what more they can do to get British and Scottish food into the UK. Retail supply has been great at raising the issue and helping retailers to think carefully about where they buy their supplies.
To aid recovery in the future, the biggest non-financial support thing that would help us is the recommendation that Benny Higgins made to the First Minister earlier this week about having a better regulatory system to make food production more efficient and effective. Salmon farming is stuck in a regulatory regime under which small farms are favoured over larger, more efficient and effective farms. If we could break out of being bogged down in costly and inefficient ways of farming, that would help us to unlock recovery and Scottish salmon farming would be poised to help with Scotland’s and the UK’s recovery from Covid.
I reiterate what Elspeth Macdonald said earlier. Seafood Scotland, Seafish and Scotland Food & Drink have all played a huge part in moving the industry forward.
We spoke briefly about fish boxes. They have certainly opened up new opportunities for a lot of businesses. Selling direct from vessels is well within the law and above board, but we are aware that we also have to make sure that regulations are being adhered to. We are speaking about food, and certain species of shellfish come with an element of risk, so some sort of regulation that oversees that would be a good thing.
I am not getting to ask any questions, so, before I move to the next questioner, I will make a point about the fish boxes and how nice it is for people to be able to purchase local produce locally. That is important, and it would be a huge sadness if we lost that. That is the only comment I am going to make.
My question is about the resilience of the sector. Today, we have heard you all speaking about the issues that have affected it, such as the regulatory regime, packaging and processing factories impacting on supply, the supply chain and export market being closed, key worker classification, and seasonal workers. Has the pandemic exposed a lack of resilience in your sector? If so, how are you going to deal with that?
I do not think that the pandemic has exposed a lack of resilience in the agriculture sector, because we were very aware of a lack of resilience in the sector in the first place. The pandemic has probably sharpened our focus on the need to do something about it and how we do that. Some parts of the agriculture sector remain far too reliant on public support through direct support payments, which are currently under the common agricultural policy. The sector still gets an inadequate return from the marketplace for the investment that is made in producing the food that we eat.
There are two fundamental points to address. First, we need to switch the focus of support away from blunt, area-based payments that simply incentivise inertia, do not incentivise innovation and certainly do not build resilience. The sooner we do that, the better. However, that is a conversation for another time.
Secondly, we need to focus on how the supply chain operates. That goes back to the point that James Withers and I made earlier about the need for equity and fairness in the supply chain, as well as transparency. We have seen significant supermarket profits throughout the current period, yet primary producer prices remain on a cost-of-production basis—if that, in some cases.
We have a lot of work to do on the back of the pandemic, but it has not shone any special light on the situation that Scottish agriculture faces. However, it might act as some sort of catalyst for change, alongside things such as Brexit.
I actually think that the Covid-19 pandemic has demonstrated the resilience of our food and drink supply chain. It was a pretty remarkable effort all round to keep the shelves stocked—with the exception of toilet rolls and pasta, which I do not think our sector can take too much responsibility for—in what has been an unprecedented crisis and a time of fear and disruption, and in what is, anyway, a just-in-time supply chain. A huge amount of credit should go to all sorts of people for that.
The pandemic has demonstrated the importance of the various links in the supply chain. For example, we have not mentioned our food and drink wholesalers, who are an absolutely integral link in the supply chain and who have faced huge challenges. It is thanks to the huge amount of work that they have done that we have been able to do things that we have not done before. For example, food boxes have been provided for the vulnerable, and more of the supply has swung into national health service and care settings from what was the hospitality and hotel industry.
One note of warning that I would strike is that the resilience of our sector will be built on a balance of markets. It will be about local, UK and international markets, and about retail and food service. There is a risk that the message that comes from coronavirus might lead to a backward step, because the one area that has done okay is companies that do all their business with major supermarkets. It is important that we do not see a retreat from other markets because of the nature of the pandemic and that we do not say that the future is just about major supermarkets. They are critical, but resilience is about building strong linkages back with our tourism and hospitality sectors. The food tourism opportunity in Scotland is phenomenal, and we should use the recovery of our tourism sector to accelerate that growth. It will also be about exporting.
Overall, keeping tables stocked and fridges full has been a pretty remarkable exercise in resilience for the whole supply chain, but we need a balance of markets and of customers, and we need to regain some of what we have lost.
James Withers was quite explicit, and I do not want to waste time by reiterating what he said. For the SSA and for all the organisations that are represented at this meeting, the Covid crisis has shown the importance of food security for our country. As James Withers rightly said, everyone in the food sector should be commended for the resilience that they have shown and for doing what they have done in the circumstances to keep the supermarkets stocked and to keep food flowing. Not just the primary producers, but everyone throughout the supply chain should be commended for their efforts to put food on our plates.
I apologise to those people I have not brought in, but we must move on to the next question, which comes from Richard Lyle.
I think that we should record our thanks to everyone, from the van drivers, suppliers and shop workers to those who work in the agriculture sector.
Has the Covid-19 crisis highlighted where in the rural sectors there is resilience? What policies or structures have helped to strengthen our rural sectors and communities? What have you learned from the pandemic?
As I did not let Elspeth Macdonald in on the last question, I will bring her in first on this one.
Excuse my land-line phone ringing in the background—it will stop in a moment.
In our sector, we have always been at the mercy of factors that we cannot control. It is an industry that is very affected by the weather and fluctuations in what is a natural resource. [Interruption.] I wish that the phone would stop ringing. [Laughter.] I agree with what James Withers said about building markets for the future; there is a lot that we all need to work through in that regard.
I have been in this job for only a relatively short period of time—I joined the industry less than a year ago—but what has been evident to me over the past few weeks is the way in which the sector has pulled together, collaborated and shared information. We have collaborated not only within our sector but with the wider food and drink supply chain and the wider food and drink stakeholder community.
I agree with the point that Jonnie Hall made. We all know that there will be places in our respective sectors where resilience is not as strong as it might be, but there has been strong cross-industry working to address those issues and to make us stronger and better for the future. We will all learn a lot from the Covid crisis. We can already see that on our side. I have mentioned several times the problems that we face with prawns, but discussions are now taking place across the supply chain that were not taking place previously.
There are a couple of points that I would like to make. I think that the crisis has accelerated some of the thinking that would probably have been done anyway, with Brexit looming, about the need for resilience by making sure that you do not have all your eggs in one basket. Some businesses—particularly ones with a strong food service offering—were caught out.
I suspect that the biggest change that we will see will be an acceleration of the need to not rely on cheap migrant labour coming in to support the food and drink sector. We might look back on this period and say that it was a turning point for the sector in that respect. There is a demand for automation and innovation in the sector so that we keep jobs at a sustainable, higher-paid level. That represents a real opportunity for the sector. I think that, in a few years, we will look back and say that this was the point when a shift took place from lower-value jobs to higher-value, sustainable jobs.
One learning for us was about how the Government and many of our regulators and stakeholders came together super fast to deal with issues because there was a burning platform to do so. That has really showed that, where there is a will, there is a way to speed up decision making in a way that is still robust and transparent. That has been great. The collaboration that we have had with our regulators and the Government has been exemplary, and I thank them for it. My sector has been able to bear up to seismic challenges, and salmon farms and all their supply chains deserve credit for that. I thank Richard Lyle for pointing that out.10:45
The situation has shone a light on the need to learn to be a little more self-sufficient in our transport infrastructure in Scotland. For instance, it would be fantastic if we could get chilled salmon out of Prestwick airport directly, instead of trucking it down to Heathrow. If there is a will, then let us find a way to help Scotland be more self-sufficient and less reliant on other parts of the UK to deliver chilling, freezing and warehousing facilities. Let us do it better and more locally.
That is a good point at which to move on to the next question, which is from John Finnie.
I beg your pardon, convener, but I do not have a question at the moment.
I can ask a question, if you want.
I am sure that Mr Finnie will be delighted with your helpful support. You can ask your question if it is brief, Mr Lyle.
Do you have any thoughts on how we can create better resilience and sustainable local economies through the Covid-19 recovery? Julie Hesketh-Laird made the point that we could freeze fish here and fly it out of Prestwick airport. We can do things better and we do not need to use Gatwick or Dover ports. Could we do things from Scotland rather than go through England?
Julie Hesketh-Laird has answered that, so I will ask James Withers and Jimmy Buchan for one brief suggestion each.
I support the transport and logistics suggestion, which we were trying to deal with in the run-up to a potential no-deal Brexit. Some of that preparatory work turned out to be useful as we hit the pandemic.
My one reflection about recovery is on community-based approaches. It strikes me that the industry that our panel represents has a huge potential role in tackling some of the bigger national challenges that flow through to our communities. We have a huge youth unemployment problem looming, a continued drive towards net-zero emissions and—as the convener inadvertently demonstrated—issues with internet connectivity in rural areas. We have a huge opportunity to invest in 5G, 4G and 3G technology, which would invest in our industry and businesses and spread the benefits through communities at the same time.
Our industry is uniquely placed, alongside tourism, to be able to address those broader national issues. We need to see it less from the perspective of what Scotland can do to support the food and drink industry and more from the perspective of what our industry can do to support those wider challenges. That would be a good approach.
Julie Hesketh-Laird raised some important points. Salmon is a global export entity, and there is a great opportunity for the wider seafood processing sector to tap into that. The one thing that restricts that, to a greater degree, is our dependency on a hub for exports. Julie highlighted that we might have the infrastructure, but we need to invest in it further and ensure that we tap into every opportunity.
Brexit is on the horizon and looks like it might happen, and for that reason more fish will be available. That means that processing will have to find either a bigger home market or a bigger, wider global market. It is important that we start that today. We need to get in that room and start to work collectively with the Scottish and UK Governments to not only find solutions but find new innovations and ways to recover that will benefit all of the community.
I want to pick up on the point about making more of the local market. Within a two-hour drive of the south of Scotland, we have a market of 14 million people in the north of England, and the south of Scotland is also the gateway to Northern Ireland and the Republic of Ireland. Let us make more of our immediate market, which is actually very close to some of our prime agricultural land in the south and some of our big processors. I am sure that we can do that.
I thank the witnesses for their contributions, which have been really useful. I look forward to looking through the Official Report, which will capture all that is being said.
The Covid pandemic has been a shock to all systems, and I hope that we all want to build back better. What are you doing now that you think that you do not need to do any more? I think that everybody wants a green inclusive recovery. What will each of your sectors look like? What changes need to be addressed post-Covid?
It was highlighted that some businesses operate on the edge and we need to think about whether they should continue. How do we ensure that rural businesses and rural communities are sustained? I suppose that I am just asking you to wrap up what you have all helpfully said this morning.
James Withers, do you want to try to tie that together?
Nick Halfhide made a point about the value of the local market, and there is a point about sustainable local supply chains. The market across the UK has become very centralised. In times of disruption, local supply chains can be the most resilient. If we start building those supply chains with primary producers—farmers and fishermen—at their heart, rather than have them at the final point of a transaction down the supply chain, as they often are, we will be in a much better place.
People are less likely to go into an airport hangar-sized supermarket to do their shopping and more likely to do it online, with click and collect or delivery, from local suppliers. This is a moment in time to capture the momentum around those kinds of behaviours, because David Oxley was right when he said that the opportunity could dissipate. It is the industry’s responsibility to try to grasp that opportunity now. If we do that, it will drive the green recovery that we want. Climate-friendly food production will be at the heart of Scotland’s food and drink offer.
Covid in itself does not present any unique challenge to the agriculture sector, but it compounds existing challenges that we know that we will face. There has been little or very little mention of Brexit. We also know that our industry’s contribution to meeting the net-zero target will be critical. As an industry, we already feel the pressure of significant challenges. We do not know what the future relationship with Europe will be or what future trading arrangements we will have with non-EU countries, but we know that we are leaving the CAP. As I said earlier, the committee has already deliberated those issues an awful lot. The critical issue is what platforms are put in place to enable a degree of certainty and continuity for Scottish agriculture in 2021, 2022 and beyond. The Agriculture (Retained EU Law and Data) (Scotland) Bill is key to that.
However, it is not just about continuity and retention of the status quo—far from it. It is about how we use that platform for stability in the first place to bring about change. There are huge opportunities for Scottish agriculture and the whole of Scotland’s food and drink sector if we manage the process in the correct way. Although Covid, Brexit and other things apply pressure, it is out of pressure that we will bring about innovation, change, resilience and all the rest of it. If that means a significant restructuring of Scottish agriculture, so be it, but we need to manage the consequences of that carefully, because there are obvious knock-on implications. We have to grasp the situation as an opportunity rather than fear that the fall-out from Covid, Brexit and all those things will be too difficult and onerous for us.
A number of contributors have mentioned Brexit coming towards us at the end of this year; certainly, the SFF has made no secret that it sees the ability to catch far more of the fish in our waters as an opportunity. It is the industry’s ambition to not be in the common fisheries policy from the end of this year and to be able to control access to UK waters and have a fairer share of the fish that are caught there. There are real opportunities for the sector to flourish. I go back to some of the things that Jimmy Buchan said about making sure that the benefits that Brexit can bring can be applied right through the wider supply chain and the processing sector and so on.
On the point about a green recovery, it is encouraging that the Fisheries Bill that is going through the UK Parliament at the moment has a number of fisheries objectives that will underpin all of that. Climate change is at the heart of those, and I believe that the Scottish Government was keen to promote them in its work with the UK Government and the other devolved Administrations on the bill.
The direction of travel for us in future will be outwith the common fisheries policy; we will be able to catch more of the tremendous product in our waters and extend that benefit through the supply chain.
We have not yet talked about rural depopulation, especially in relation to the working-age population, but it is one of our underlying challenges and has in some ways been highlighted by Covid. That is a real problem in the south of Scotland and in other rural areas, particularly remote areas. Before Covid, we had pretty high employment and we were struggling to fill some sectors, in particular the care sector. For some new job opportunities, we were struggling to match people of working age with the new skills required. There were just not enough people of working age; that is an increasing problem and it is projected to increase in future.
I do not want to lose sight of that; we need to attract more working-age people into rural areas and keep those who we have if we are to sustain existing businesses, let alone realise the opportunities that we hope will be there through the green recovery.
If we are to reduce the mileage of tankers and things like that, we should add value to our primary products more locally, which perhaps means more creameries and cheese making, for example. If we catch more fish, we need to process it and add value to it in Scotland before it is exported, although we would still have raw fish exports. In relation to all those things to do with adding value, the industry needs to tell Governments what they need to invest in if they are to meet their targets.11:00
I am delighted that Maureen Watt has raised that excellent point. To summarise, right now, we can survive, but we need to thrive, and we need investment for that to happen. The SSA has started that journey. We are prepared to say what we need and are putting a paper together, which we will get to you very soon. That work is pivotal to the post-Covid, post-Brexit future. We all have to start working cohesively, with energy and enthusiasm. We can make it work, but everyone needs to be on board and pulling in the same direction. Thank you for raising that great point.
We have one or two comments on the meeting chat that say that it will not just be Jimmy Buchan who submits a list of requirements.
I have only one question, which is for Jonnie Hall. As we all know, the Scottish Government is working on a bespoke system of agricultural support from 2024. Has the Covid-19 emergency affected how the NFU wants the new system of support to be established and implemented?
Covid has not at all affected our position on the need for a more effective and focused agricultural support system after Brexit. As I said, Brexit is a fundamental catalyst for change in which we move away from blunt area-based payments and the CAP towards more targeted support that is related to productivity, building resilience and delivery on environmental obligations. If anything, our approach and focus have sharpened, and our sense of urgency around getting that work done sooner rather than later has sharpened as well.
NFU Scotland’s only note of caution is that we are going into particularly uncharted waters in 2021, in which public finances will be under significant pressure as a result of Brexit and the hangover from Covid. We need to build broader economic recovery across Scotland and the UK, which will make even greater the challenge of moving to a system that delivers more than just support payments to people who occupy areas of land. However, our determination to change things has not taken a backward step: we need to keep the pressure on the Scottish Government to deliver on its commitments. We will see what happens in the next few weeks and months, but the move into 2021 certainly is the opportunity to bring about meaningful change.
Mr Rumbles, do you want to follow up on that?
No, thank you. Jonnie Hall’s response was pretty good and I fully understand what he has said.
That completes our questions and answers and concludes the evidence session. I thank everyone for attending. We have through most of the questions, and Maureen Watt, who stepped into her deputy convener role, has proved that, although I was superfluous for a while, broadband is not. Thank you all for your evidence.
Plant Health (Official Controls and Miscellaneous Provisions) (Miscellaneous Amendments) (Scotland) Regulations 2020 (SSI 2020/176)
Item 3 is consideration of two negative instruments. Members will note from our meeting papers that one of the Scottish statutory instruments before us, the Plant Health (Official Controls and Miscellaneous Provisions) (Miscellaneous Amendments) (Scotland) Regulations 2020, is in breach of the requirement to have 28 days between laying and coming into force. A letter from the Scottish Government explaining the breach is included in our public papers.
The Delegated Powers and Law Reform Committee considered the instrument yesterday and has reported the breach to the Parliament. The DPLR Committee was content with the reasons provided for the breach.
No motions to annul have been received in relation to either of the instruments. I note that Mr Stevenson wishes to speak, and I thank him for the forewarning.
It is the next agenda item that I wish to speak on.
No one wishes to speak about either of the SSIs. No one wishes to make any recommendations on the instruments, so we are agreed that we will not do so, and we are happy to allow them to move forward as they are. We will therefore move on to the next agenda item.
European Union (Withdrawal) Act 2018
European Union (Withdrawal) Act 2018
Plant Breeders’ Rights (Amendment) (EU Exit) Regulations 2020
Item 4 is on the European Union (Withdrawal) Act 2018. We have received a consent notification in relation to a proposed UK statutory instrument, the Plant Breeders’ Rights (Amendment) (EU Exit) Regulations 2020, which is being laid in the UK Parliament under the 2018 act.
Several issues have been highlighted in our papers about the very short timescale that the committee has in which to consider the notification. That has prevented the committee from seeking specific additional information on the proposed regulations.
I have a couple of points. The proposed regulations are not going to take effect until the end of the calendar year, so I am not entirely clear why we are in the position of not having time to consider them.
I cannot find anything in the substantive proposals about which I have great concerns, although I have looked at the instrument at modest length. However, the proposed regulations raise a broader issue, which flows from a report issued a few days ago by the Environment, Climate Change and Land Reform Committee, of which I am also a member, about how UK SIs are being used by UK ministers to legislate within the Scottish Parliament’s competence. I will not go into huge details, but that leads me to one of the conclusions that was made. By the way, the report caused no division across the various political parties represented on the Environment, Climate Change and Land Reform Committee; it was unanimously supported.
In making our report on the proposed SI, we should look for both Parliaments to be jointly involved in the procedure of laying and approval for the proposed SI and similar instruments. That is not to permanently remove the possibility for more rapid consideration of things that are a matter of urgency; I am not trying to suggest that. In this case, there is no urgency that I can see, and I think that we should report that the matter should be considered under a joint process. My concern is with process, not content.
No other member wishes to raise any points on the proposed instrument. The principle that Stewart Stevenson describes is interesting. Once an instrument is laid before the Parliament, we have a duty to consider it within the timescale that is put before us. That is slightly restricted by the fact that Parliament is due to go into recess at the end of this week, which has driven the timetable. I take Stewart’s point. It is for the committee to note those comments when responding to the Government.
On the basis that no one has said that they are against the proposed instrument, we shall write to confirm our consent to the UK SI, as referred to in the notification. I assume that that is agreed. No one has indicated otherwise, so that is what we will do.11:09 Meeting continued in private until 12:00.