Constitution, Europe, External Affairs and Culture Committee

Meeting date: Thursday, December 16, 2021

Official Report 605KB pdf

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United Kingdom Internal Market

Good morning and a very warm welcome to the 14th meeting in 2021 of the Constitution, Europe, External Affairs and Culture Committee. This is our first virtual committee meeting in this session of Parliament.

We have two agenda items this morning. Item 1 is our inquiry into the United Kingdom internal market. Joining us is Jonnie Hall, director of policy at NFU Scotland. Good morning, Mr Hall, and thank you very much for your written submission to the committee.

We will move straight to questions. I will open with a question about the history and development of NFU Scotland’s involvement in the internal market. In your submission, you emphasise how important it is to the NFUS to have the option of divergence to meet the needs of individual nations and to protect particular aspects of farming, but you also see the principles of mutual recognition and non-discrimination as a threat to that opportunity. So that we can understand the history, what involvement did the NFUS have in the development of policies before the United Kingdom Internal Market Bill was introduced, and at what point did you start to see the opportunity to diverge in particular areas becoming a problem?

That is a very broad question. I will try to be brief and as concise as I can be. Our interest in the issue goes back the European Union referendum in 2016. Once we realised that we would be leaving the EU, we understood that that meant leaving the European single market and all the challenges that that would bring. This is maybe a discussion for another day, but leaving the EU meant leaving the overarching single market approach that we enjoyed within the EU, whereby all member states, including the devolved Administrations in the UK, enjoyed a certain amount of flexibility, although they still complied with the same regulatory and support frameworks.

I am talking about the common agricultural policy in particular—a policy that reached across the EU and allowed member states, including Scotland, of course, to adapt certain aspects in line with devolved circumstances. Behind the CAP there was a raft of environmental, animal health and welfare, food and other European legislation. To put it simply, all the players within Europe played to the same rules. At the very least, we all played the same game. We were not necessarily always on a level playing field, but we all played the same game with the same rules around some very important things.

We then fast forward to the summer of 2020, when Westminster recognised the challenges of devolved and diverging regulatory approaches and the potential impact that that might have on the UK internal market and its integrity. We share those concerns, because we want the UK internal market to operate as it has done recently and still does.

However, the consultation on the United Kingdom Internal Market Bill, and the act that followed pretty rapidly around this time last year, largely drove a coach and horses through the concept of and philosophy around devolved capacity in certain areas. We had always argued, as had others, and as had been the case under the relevant joint ministerial committee, that a lot of the issues did not require that sort of legislation if we could constitute effective common frameworks. The frameworks were discussed through the 2017 to 2019 period. We felt that the devolved Administrations, including the UK Government representing England, if you like, could agree things by consensus, rather than have what I might describe as a sledgehammer to crack the walnut of an internal market act.

While that sledgehammer has not necessarily materialised in reality for particular issues, there is still huge potential for the approach to cause problems for the internal market. The reason why I say that—the reason why the flag waves for me—is that we certainly have a UK Government that is starting to test the boundaries of diverging from the EU at the same time as we have the Scottish Government remaining pretty much aligned with the EU, especially on environmental regulation and so on. That is borne out by the UK Withdrawal from the European Union (Continuity) (Scotland) Act 2021, which the Scottish Parliament passed quite recently, and the notion of keeping pace with Europe.

I am still trying to square the triangle, if that makes sense, of Westminster, Edinburgh and Brussels and where that leaves the likes of Scottish agriculture and food producers operating within a single market in the UK. Maybe I can go into that further at some point. That is very much a snapshot of our history in relation to the issue, and of its importance.

I hope that I made it very clear in our written submission that the UK internal market is very important to the interests of Scottish agriculture and food production. It is less important to England, but the market for the devolved Administrations, which have smaller populations, is south of the border for so many things, and so the UK internal market matters. It matters not only that we maintain that level playing field but that we play to the same rules. The beginning of divergence in the rules could create a competitive advantage or disadvantage, depending on which way the divergence goes. We are starting to see some testing of those boundaries. That will create not only some political headaches, but practical and potentially market-distorting headaches for Scottish agriculture.

Thank you, Mr Hall, for your written paper, which is very useful. I want to follow on from the comments that you have just made. In your written submission, you said that you see a major challenge in how things are developing, and that you think that common frameworks would be

“a more effective alternative to manage divergence, whilst respecting devolution, and so enable the UK Internal Market to operate without friction or distortion.”

Can you say a bit about the collective discussions that you have had on the farming side across the four nations of the UK, and what discussions you have had with the different Governments to get your view across?

With our colleagues at the National Farmers Union in England and Wales and our colleagues at the Ulster Farmers Union, we have been absolutely consistent and as one: we all agree that common frameworks would be a preferred approach in which things would be resolved through consensus, rather than there being imposition and the elements of the internal market act, particularly the mutual recognition and non-discrimination elements.

We have always argued that common frameworks, if constituted correctly, would allow for dispute resolution and for things to be resolved more constructively. Common frameworks appear to be the more pragmatic and effective approach to safeguarding the integrity of the UK internal market, which we all want.

That appeared to be very much the approach in the early days, in 2017-18. There was a lot of work going on behind the scenes with the Scottish Government and with Westminster and the other devolved Administrations to try to work up effective common frameworks, how they could be governed and how to ensure that dispute resolution could be done in a meaningful way. I have not been entirely sighted on the issue because that work was done by Governments and their officials, overseen by the JMC. However, we have not seen that work roll out into any practical evidence of the approach working in operation.

In 2020, and now in 2021, we have had the internal market act, which, as I said, almost drives a coach and horses through the principles of common frameworks and almost renders them redundant. Under the principles of non-discrimination and mutual recognition, it does not matter through what methods or means something is produced in one part of the UK, it has to be allowed access to other parts of the UK to be sold, used or whatever. The common framework principles are absolutely where we still want to be, but they seem to have been lost because of the internal market act. What does that mean for something that is produced in England and sold in Scotland, but which is produced to very different standards with different cost structures that might afford the English producer an advantage? Indeed, there might be some difference in relation to environmental issues or whatever. There is no comeback—there is no dispute resolution process. Because of the internal market act, such things would have to be absorbed and taken in. In that sense, the act does not allow devolved capacity to work effectively.

Have you been able to have discussions with ministers to get that point across? The key point that comes across very strongly in your written evidence is that the approach will undermine agricultural support, the environment, animal welfare standards and food production. You say you that are nervous about dispute resolution. What is the reality without common frameworks and without ministers bringing people together and negotiating?

The reality is that, because the legislation that is now in place covers the whole of the UK, there will be very little opportunity for dispute resolution. Along with other farming unions, we have raised the issue with the UK Government on several occasions. We have worked reasonably closely with the Scottish Government on trying to press the case for common frameworks across organic standards, environmental standards around pesticide use or issues around food labelling, food safety or animal health and welfare. A raft of issues that came under EU law have now been transposed back to come under UK and Scots law. That should allow for some flexibility in a devolved sense, but such flexibility is now almost secondary to the fact that the internal market act drives a coach and horses through that idea.

We continue to press the case. The Department for Environment, Food and Rural Affairs set up a grouping around agricultural support frameworks that is meant to bring together the devolved Administrations and key stakeholders such as ourselves to look at how agriculture is supported in different parts of the UK to ensure that there is no significant divergence that affords a competitive advantage or disadvantage. Quite rightly, England, Wales, Scotland and Northern Ireland are doing different things because of the different circumstances and profiles of agriculture. We are all on the same pathway to recognising that agriculture is now about food, climate change, biodiversity and so on, but we need to do it in different ways because what will suit England, where the profile of agriculture is very different, will not suit Scotland and vice versa.

09:15  

An agriculture framework exists, but the grouping seems to be nothing more than a talking shop. It has not met yet, despite our pressing for it to be up and running so that Governments and key stakeholders can feed into the process and so that everyone is aware of what is happening and can not only work towards what are, in many ways, the same end goals, but do that in different ways. That is the whole point of devolution.

What comes across very strongly is that you need the common frameworks but, at a basic level, it is about getting meetings going on things such as the agriculture framework. Your evidence is very clear and helpful.

Good morning, Mr Hall, and welcome to the committee. You mentioned the issues that you have raised around the internal market act. Your written evidence says:

“NFU Scotland remains significantly concerned that the UK IMA 2020 could potentially override all Common Frameworks relating to agricultural support, environmental and animal welfare standards”.

On animal welfare standards and the production of meat, can you give any examples of how your concerns might be made manifest? What situations do you think might arise?

I am not here today to say that something will absolutely happen as a consequence or that we will end up with widely differing animal health and welfare standards across the UK. However, there is a potential—we are already seeing it—for there to be different sets of regulations around certain things in the UK. An obvious example is that the UK Government, through DEFRA, has already consulted on animal transport regulations, and the Scottish Government has also consulted on animal transport regulations. Although it is likely that those sets of regulations will align pretty closely, there might be some differences of approach, depending on circumstance. We could end up with two sets of regulations governing the UK internal market. Animal transport does not respect the fact that there is a boundary between Scotland and England, and there is a need for livestock to be transported north and south of that border. If there is a UK approach to animal transport, will that adequately reflect some of the challenges and circumstances in the Scottish context? We have members in Orkney and Shetland, for example, who are extremely concerned about anything that might be imposed on them that might make practical or common sense in the south of England, but which might be extremely limiting in the context of journey times in the islands and Highlands of Scotland or other issues that need to be resolved. It all seems a bit exacting when we were already operating to a significantly high set of standards for animal transport under EU rules.

Without going into any great detail and saying that this or that will definitely happen, the fact is that the different devolved Administrations are now able to set different rules, and those rules could start to diverge. That is particularly the case if the UK Government wants to test the boundaries of divergence from Europe—after all, that was one of the rationales for leaving Europe in the first place. The Scottish Government has stated on a number of occasions, including through UK Withdrawal from the European Union (Continuity) (Scotland) Act 2021, that it wants to keep pace with Europe. Where does that leave the producers in relation to animal welfare and other regulatory requirements?

You have asked my next question—where does that leave the agriculture industry? I use the example of meat. In the scenario where meat was produced to different welfare standards in England and the internal market act obliged that that meat to be made available on the market in Scotland, how would that affect farmers who were endeavouring to use a different standard in Scotland? What would the reaction of the market be, particularly supermarkets, to that situation in Scotland?

There are two components. When we talk about animal welfare, what is right in terms of welfare is one thing, but adhering to welfare requirements has cost implications for business. First, animal welfare has to be at the most exacting and correct standards, but if we continued to operate at a high standard in Scotland and saw—this is hypothetical at the moment and it is not necessarily what will happen—a lower standard being set in the rest of the UK, or in England in particular, that lower standard would probably mean lower compliance costs, because compliance with higher standards brings additional costs. That would mean that a producer of beef in Berwickshire, for example, would have different cost structures from a producer in Northumberland. It would apply not just to meat or livestock production; it would apply to lots of other things. We would start to see different regulatory frameworks demanding different management from producers in different parts of the UK, which would create different production costs. We would argue that the Scottish product would sell at a premium anyway because of the high standards that we have but, nevertheless, the margin of that high standard could easily be eroded if, in maintaining those standards, we had escalating costs or, if not escalating costs, higher costs than in other parts of the UK.

You have also pointed to the fact that this model of legislating does not have any dispute resolution mechanism within it. Can you say a bit more about the consequences of that?

That is why we prefer the common frameworks approach. If common frameworks were established and constituted in the right way and there were proper dispute resolution processes in place for when those sorts of tensions arose, there would be a process to go through to get to a resolution, rather than what we have now, which is the internal market act. As you said, because of the very nature of the provisions in that act, there is nothing to prevent something that is produced to a different standard or to a different set of regulations and therefore at a different cost being sold or used in Scotland to either the advantage or disadvantage of Scottish agriculture and indeed not necessarily to the knowledge of the Scottish consumer.

To continue the theme of questioning, through the continuity act the Scottish Government’s stated position is clearly that the default is to align with new EU laws as they are introduced. Given that that could cause divergence, how concerned are you about the impact of the continuity act on the level playing field across the UK?

I am concerned indeed. As I said in my introductory remarks following the convener’s initial question, how do we square the triangle when we have a Westminster Government that is clearly starting to test and probe its ability to diverge from what the EU is doing while still maintaining trade with Europe through the trade and co-operation agreement and, on the other side, we have a Scottish Government that is clearly committed to keeping pace with—that is the expression that the Government uses—regulation from Europe. That suggests to me straight away that we will start to see tension between the UK Government and the Scottish Government, and I think that we probably are seeing that. That gives me as much concern about the potential impacts of the internal market act, but almost in the reverse; it is the reciprocal of that in some ways.

I will give another potential example. I can foresee a situation in which Europe bans the use of a product called glyphosate, which is used in agriculture as a desiccant in the cereals sector but is also used in grassland to burn off grass to be reseeded. In that sense, it has some significant environmental benefits because it provides for minimum tillage when you are resowing grass and so on, but I will not go into the detail of that. Europe is clearly quite keen to move in that direction, as glyphosate is not such a big issue there because it does not have the climate that we have and it does not need to use things such as glyphosate to ripen crops in order to harvest them on time. If the EU goes in that direction and Scotland follows suit but England chooses not to, then, using the Northumberland and Berwickshire example again, the fact that grain could be produced in Northumberland using glyphosate for ripening off but that would not be allowed in Berwickshire would create a significant and obvious competitive disadvantage between people operating on either side of the Tweed, yet the internal market act would kick in and say that the grain that was produced in Northumberland would have to have access to Scottish markets. The Scottish whisky industry uses a significant amount of grain from Northumberland and other parts of England; it is not all Scottish stuff going into distilling in Scotland because we cannot grow enough of it. That grain would come in, but it would be produced at a different cost structure from the grain produced in Scotland, and that would disadvantage Scottish growers.

The triangle issue that I have mentioned a couple of times is yet to be tested and rolled out in practice, but I can see it being quite damaging when Scottish agriculture and the food and drinks sector get caught up in those tensions of divergence in three ways, as Scotland aligns itself to Europe, the UK tries to diverge from Europe and in comes the internal market act to quash any differences.

The glyphosate example is very useful, because it is perhaps the highest up on the risk register in terms of implications of the continuity act.

As a follow-up on common frameworks, I am keen to hear your thoughts on what the consequences would be if the Scottish Government did not sign up to the common framework.

I am not 100 per cent sure what the consequence would be, given that we now have the internal market act. My understanding from conversations with Scottish Government officials is that they would want to see common frameworks work just as we would, because common frameworks essentially respect the devolved capacity to make devolved decisions, but when devolved decisions across the UK can cause some sort of tension or potential trade distortion or a competitive advantage or disadvantage, that is when common frameworks processes for dispute resolution need to kick in. I do not see any resistance from the Scottish Government to utilising common frameworks more effectively. We would be in exactly the same place in that respect.

The work that was happening on common frameworks from 2017 to 2019 has almost been made redundant by the internal market act, which almost renders common frameworks useless.

09:30  

Thank you, Mr Hall, for submitting your evidence. Turning to one point you made, which you have already touched on in answering Ms Boyack’s question, I note that you state that

“agricultural support arrangements are currently, and must remain, devolved”

and you talk about the agriculture support framework across the UK that is yet to meet. I am interested in your thoughts on the Subsidy Control Bill that has passed through Westminster and is now in the House of Lords.

That is a very valid point, because the internal market act and what will be the Subsidy Control Bill overlap and interrelate quite significantly when it comes to the agricultural support element.

If you will bear with me for a second, we had four different versions of the CAP operating in the UK but all still operating under European common agricultural policy. That was absolutely right. We took choices here in Scotland that were right for Scotland. For example, we have some elements of coupled support for our beef and hill sheep, we have the less favoured area support payment, which other parts of the UK do not have, and so on. We still operate those schemes, by and large, but we note that the English approach is to phase out direct support payments over the period from 2020 to 2027 and to introduce the environmental land management scheme, which is just kicking off now. There will be a phasing out of direct support payments and the introduction of an agri-environment scheme to achieve outcomes that DEFRA wants to achieve in England. That is fine.

If we took an ELMS-type approach in Scotland and we phased out direct support and things such as less favoured area support for our more disadvantaged areas, that would be almost the death knell for Scottish agriculture. In Scotland, we are rightly starting to look at conditional payments rather than area-based payments. I will not go into the detail of all this. We will change our agricultural policy, and that is absolutely necessary; we need to change, but we do not need to change in the way that DEFRA is doing it.

To get to the point of your question, my concern is that, with the Subsidy Control Bill coming into place as well as the internal market act, I am convinced that it will not be long before certain agricultural producers in England who are more aligned to the type of agriculture that we have in Scotland—people in Northumberland and Cumbria, down the Pennines and in the west country, where the agriculture is more livestock-based and a bit more like Scotland’s—will see the support payment and the way in which Scottish Government is underpinning and deriving new outcomes from Scottish agriculture as being more advantageous than what they are being given from DEFRA. I am pretty sure that, before very long, there will be a kickback from farmers in England saying, “We cannot sustain these cuts in our support payments.” Rather than just having that argument with DEFRA, they will say, “Scotland is still doing that. Scotland is still underpinning farmers and crofters to deliver certain things and they are doing it in a way that works with agricultural businesses.” My concern about the Subsidy Control Bill is that it can be used as a tool to say that the Scottish Government has to stop giving this type of support to farmers and crofters in Scotland because it is not the same type of support that is being received in other parts of the UK and it is affording Scottish farmers an advantage. If that happened, that would all of a sudden take away from the Scottish Government the ability to apply devolved policy.

Sticking to the Subsidy Control Bill, I think there are already existing international safeguards in place to ensure that we do not overload payments to Scottish farmers in any way. We have something called the agreement on agriculture under the World Trade Organization. We will never have a big enough budget to overly support farmers and crofters in Scotland to the extent that they have an incredible advantage over producers in other parts of the UK.

You have highlighted an issue of concern. At what point does that become an issue that legislation will be very binary about? It will say that it is either right or wrong, whereas common frameworks would have allowed for some sort of adjudication and consensus to be built around what is required in different parts of the UK.

Thank you very much, Mr Hall, for that very detailed response. I would like to pick up on one of the points that you made with regard to Scottish public bodies looking to procure locally and why you think that the current structure of the internal market act may have an impact on that.

Public procurement is a hangover from EU legislation in many ways, but in its programme for government, the Scottish Parliament wants to revisit the issue of a good food nation. I would not want to pre-empt what might be in the good food nation bill and what the outcomes might be, but you would think that some of it might be about local procurement and public bodies being able, if not quite obliged, to buy locally—for example, to buy Scottish produce to put into Scottish schools, the Scottish health service, Scottish prisons or whatever it might be so that we have that almost circular economy piece happening around food. There is a risk that, although in Scotland we might have that legislation on local procurement and the intention to buy local, the non-discrimination element of the internal market act might say that we cannot do that and that we simply have to allow product to be allowed to compete on price in the market for public procurement rather than being exclusive about it. We think that we need to put in place measures that not only allow but almost compel public bodies in Scotland to buy Scottish produce.

It is good to see you again, Mr Hall. I want to drill down into a couple of issues. You mentioned animal transportation. If I were to be provocative, I would say that NFUS is arguing for weaker live animal transport regulations than those being proposed by DEFRA, notwithstanding the geographical challenges that you have outlined. How might you use the internal market act to allow—[Inaudible.]—or even challenge regulations that you see as undermining the needs and the interests of your members?

I am slightly taken aback by the suggestion that we would seek lower legislative standards than those in the DEFRA proposals. I do not believe that that is the case at all. We want to be able to operate to the highest standards because, ultimately, our customers respect the standards to which we produce food here in Scotland.

On the issues that would separate or differentiate between the proposals from DEFRA and the proposals from the Scottish Government, as you touched on, one of the main objectives of the DEFRA proposals is around animal exports. However, we are not necessarily talking about animal exports but about animals travelling within the UK.

You also touched on the issue of our geography, especially from the islands. Our geography is such that we must have more scope for longer journey times, given the lack of processing capacity and other things in Scotland. Irrespective of whether you are talking about beef cattle, sheep, pigs or poultry, the animals must spend longer times in transit either to get to destinations to be store animals—that is, for further breeding or whatever it might be—or to be processed. Therefore, it is important that we do not get sucked into having legislation that might be suited to shorter journeys in the south-east of England, or indeed, suited to export issues from the south-east of England to the continent, given that those journey times are greater than those when moving animals within Scotland. That is where we need to be pretty careful about those things.

Yes, but if your starting point is about high welfare standards for animals, does it matter on which stretch of water or roads the animals are being transported? This is about the length of journey time.

I understand the geographic case, and you have pointed to the need to increase supply chain development, mobile abattoirs and maybe local branding, including in the islands. There are other ways to crack the issue. I understand the argument that your members put forward. However, in this context, a challenge and different perspective is coming from NFUS. How might you use the internal market act and perhaps the common frameworks to challenge those rules, if that is something that you want to challenge?

Again, the important point is that the issue is not just about journey times, but about the ways in which animals are transported, which is to do with headroom, temperature, spacing, stoppage times and all the rest of it. However, that is another issue. We are not seeking to erode any of those aspects but let us not measure everything in journey times.

More than anything else, we want to identify to DEFRA the need to have at least a uniform standard across the UK that not only is practical and effective but retains a very high animal health and welfare standard while animals are in transit. In that sense—this goes back to the comments that I have made a number of times—we need to be able to operate to a single set of regulations across the UK’s internal market, otherwise we will start to see differences in standards, which would impose different costs.

I suspect that, if we ended up with limited capacity in terms of journey times on certain trips from, for example, Shetland, Orkney or Islay, let alone from other parts of mainland Scotland, that would pretty much be the death knell for livestock in those areas. The consequence of that would have a huge impact economically and socially in those areas.

You described a triangle in which there is alignment with the EU, alignment with the UK and Scottish regulations, too. I am again being provocative, but do you not have an advantage in that you can argue for alignment in some areas and for divergence in other areas? Does the triangle not enable you to pick and choose?

You make a particular argument about glyphosate. I do not want to get into the details of the pros and cons of that as an option. In a way, you are able to move around the different regulatory frameworks and position yourselves and your members. You can point to where there are high standards and where there is alignment, but you can also point out what aspects you do not agree with. Are there advantages to that, or are you still trying to get used to the landscape that you are in now, which is quite fluid, with the common frameworks not really working properly yet?

09:45  

The whole point—I have said this a few times—is that the internal market act drives a coach and horses through the ability to align in some ways and not to align in others. That then removes the ability to do things in a differentiated and devolved way. Although we might align ourselves with Europe on some things and align ourselves with the UK as a whole or parts of it on other things, as soon as the internal market act is in place, it renders all that irrelevant.

Let us say that Scotland aligns itself with Europe on glyphosate and the rest of the UK does not. The internal market act effectively says that Scotland’s approach does not matter and Scottish distillers will be obliged to use grain that has been produced using glyphosate. That would put Scottish agricultural producers at a disadvantage.

Finally, as a member organisation trade body, you have engaged with Europe a lot over the years. What does that engagement look like now? Are there lessons to learn from other regions across Europe? I am thinking in particular about the Nordic regions and how they align their markets effectively, given the complications. Norway is outside the EU and Sweden is in it, so there will be issues around trade in food, livestock and other products. Are there any examples from your international experience about how alignment of market regulation can work between countries that are sitting in very different constitutional arrangements, as we are, in post-Brexit UK?

To touch on your first point, yes, we absolutely have a keen interest in what is happening in Europe and how we align ourselves with Europe. We still have an office in Brussels—the British agriculture bureau—which we share with the other farming unions in the UK. We have full-time staff there because we still need to engage with Europe on how regulation and policy develop in Europe and what the implications of that might be. Equally, we need to engage on the outcome of the trade and co-operation agreement, which gives us tariff and quota-free access to the European markets but in a way that is far from friction free. That engagement is about how we resolve some of the on-going issues around the TCA, and the movement of people, which is a matter for the Home Office.

There is a raft of things that are still very much in that Brexit hangover, if I can call it that, which needs to settle down. We still need to understand how trade flows will work effectively going forward. We have asymmetric trade with Europe at the moment. Anything can come into the UK from Europe pretty much friction free, without checks, but our products going to Europe must still to go through cumbersome checks and all sorts of things like that. We need to work through all those issues.

I think that it will be an interesting few years before the operating environment between the UK and Scottish agriculture and the rest of Europe settles down. We will see whether we settle into being a bit like Norway. However, we are not the same as Norway because it has a different alignment with Europe, while we have a bespoke agreement with Europe. There is a lot to play out in many ways.

It is good to see you, Mr Hall. A lot of my points have been covered already by other questions. I have a general question about common frameworks. You have said a number of times that you view the internal market act as having driven a coach and horses through common frameworks. Do you think there is any future for common frameworks? It strikes me that they are still in their infancy—indeed, not many are operational—and there is still a possibility for them to work. The Scottish Parliament has scrutinised several of them already. Do you see that there is a future for them, notwithstanding your comments?

Yes, I do. The farming unions across the UK and the devolved Administrations still have an awful lot of work to do collectively to say where we can recognise the degrees of flexibility that are required in different ways for different agriculture and food systems within the UK’s internal market, where we can find common cause about common solutions that work effectively and where can we share information, as much as anything else.

I still see real value in having common frameworks. The policy discussion about the regulatory and support environments in which we should be operating is still very important, so that we can all be mindful and respectful of what is happening in other parts of the UK.

I go back to the issue of agricultural support. It is vital that the Scottish Government is able to continue to support Scottish farmers and crofters in a way that is most appropriate for Scottish circumstances to deliver the outcomes that we want around food production, climate, biodiversity and so on. That will be very different from how other parts of the UK will approach that. Sharing information about that is also very important, so that there is mutual respect as to why such differences happen. Ultimately, if we get that right, any issues that might be thrown up by the operation of the internal market act might become relatively insignificant.

As we all acknowledge, we have not seen the practical effect of the internal market act yet, if at all. I want to concentrate on agricultural support. At this point, I refer to my entry in the members’ register of interests and my interests in crofting and farming.

The Scottish Government’s stated intention is, as you have said, to keep pace with EU law. The Scottish Government’s policy on agricultural support is more aligned with the common agricultural policy and EU subsidy law, whereas other nations of the UK, for example Wales and Northern Ireland, have a different subsidy system. Can you foresee any issues arising from the internal market act in that regard and in relation to the other matters that we have spoken about already?

Yes, I can see lots of potential issues. I emphasise that those are potential issues; I am not suggesting that they are particular risks at this time.

I see the Scottish Government very much taking a pragmatic approach in terms of leaving the common agricultural policy. We have a period of stability in which we have retained many elements of CAP but are now developing a future policy through an agriculture bill, which will come to the Scottish Parliament in 2023. That will implement the Scottish Government’s proposal of about 50 per cent of support payments being conditional on meeting outcomes around biodiversity, the climate and so on. We are 100 per cent behind that. We would welcome that very different pace of and managed change. Other parts of the UK are doing their own thing as well.

You mentioned alignment with the EU. The EU is also going through a process of agricultural policy reform right now. The EU operates on a seven-year cycle and it is just completing another round of CAP reforms. If we were just to pick up and paste into Scotland the EU’s current agricultural policy, that would be extremely detrimental to Scotland. That would stretch agricultural businesses to breaking point, in many senses, it would not be reflective of what we need in Scotland in terms of underpinning active farming and crofting to deliver the outcomes that we want, and it would not particularly suit Scottish circumstances, not least in the west coast of Scotland, where we have much more extensive agricultural systems on large holdings.

If that approach to keep pace with Europe was proposed, I would say to the Scottish Government, “Yes, we hear what you are saying about keeping alignment and keeping pace with Europe, but on that particular one, you need to be doing something that is far more bespoke to Scotland’s needs and you need to be sticking to a track that you have already set out to achieve.” If we simply duplicated the new CAP and imposed that on Scotland, I could see that being very detrimental to Scottish interests. I am not just talking Scottish agricultural interests; I am talking about Scotland’s interests.

Thank you for that very full answer. My final question is about the Subsidy Control Bill, which Jenni Minto asked about. I understand that the bill is going through the UK Parliament at the moment. Are there any particular provisions that you are concerned about in terms of threatening the ability of any devolved nation to design its own support system? I am not fully conversant with the legislation.

NFU Scotland, along with the other farming unions, argued very strongly in the first place that agricultural support should not be part of the Subsidy Control Bill because there are enough existing controls in terms of not overloading payments in one way or another through measures such as the WTO agreement on agriculture and so on.

However, a bit like the internal market act, the bill does have the potential to do that. We have an element of coupled support in Scotland for our beef and hill sheep producers, particularly the hill sheep producers on the poorest quality of land. If the Subsidy Control Bill allowed for coupled support to be removed, we would lose the option to retain that element of support in Scotland.

Therefore, a bit like with the internal market act, there is a potential to undermine Scotland’s ability to do what is right for Scotland by creating a one-size-fits-all approach. My concern is about what you can support and what you cannot support.

We are the first to say that we must move away from area-based payments and that we need to move to payments that are based on delivering outcomes. However, at the same time, as you know from your constituency and your part of the world, if we simply remove direct support overnight, it would be a case of the last one out turning off the lights. It remains vital to the social and economic fabric of many parts of Scotland that we continue to support farmers and crofters to a degree in the way that we do now but start to shift away from area-based payments towards delivering outcomes.

I have another follow-up question on glyphosate. It was given as an example of where the keeping-pace powers would be of concern to you. However, the Welsh Government has committed to the keeping-pace powers and the Protocol on Ireland/Northern Ireland says that Northern Ireland will implement any measures coming from Europe. Is it not more likely that, currently, any divergence would be between England and the other three devolved nations, not between Scotland and the rest of the UK? I ask that in the context of the work that you mentioned that your office in Brussels does with your counterparts from other countries.

I agree with that. England has by far and away the biggest agricultural base in the UK and the biggest market. Our market is England, by and large; it is certainly our biggest destination. I put some figures in my written submission about that. The UK’s internal market is far more important to Scotland, Wales and Northern Ireland than it is to England, because the internal market is England, if that makes sense.

Although we could say that we should align ourselves with Europe, with Wales, Northern Ireland and Scotland doing similar things, what England does in terms of agricultural support and other regulatory changes is important. England is a major market, but it is also the biggest producer of agricultural commodities and products in the UK.

10:00  

Would England be unable to export to Europe if it uses glyphosate?

Potentially. It all depends on where that fits into the trade and co-operation agreement, which, at the moment, is allowing continuous trade. If England and Europe were to diverge significantly, that might test the boundaries of the trade and co-operation agreement.

However, as the UK Government—on behalf of England, I guess—has been saying a lot, it is seeking export opportunities beyond Europe. In 2021, we have seen free trade agreements with Australia and New Zealand. In many ways, England continues to focus on developing markets beyond Europe, for all sorts of reasons other than agriculture, and it is quite happy to accept imports from other agricultural economies. The benefits of having trade agreements with Australia and New Zealand are not about farming or food; they are about financial services, tech, digital and all sorts of other things.

There are well-documented risk factors around some of the trade agreements. At this time, I do not think that the UK Government will be too concerned about the loss of markets in Europe or elsewhere for agricultural and food products.

We seem to have all exhausted our thoughts on the issue. I again thank Mr Hall for his submission and his attendance.

10:02 Meeting suspended.  

10:10 On resuming—