Petitions
Less Favoured Areas Support Scheme (PE372 and PE384)
The first item on today's agenda is two petitions. The first is PE372, from Mr Robert Epps, which calls on the Scottish Parliament to ensure that a revised less favoured areas support scheme be introduced by 2002, giving priority to those farming in the most severely disadvantaged areas of Scotland. PE384 has been submitted by Mr Eddie Nicol and calls on the Scottish Parliament to take measures to redress the injustice of the current less favoured areas support scheme.
I understand that the petitions have been brought before the committee swiftly on the recommendation of the Public Petitions Committee and that both petitioners have been notified that their petitions are being considered today. Although the petitioners are not here, I gather that they are satisfied that the matter is being dealt with relatively swiftly.
Members will have noticed that the Minister for Environment and Rural Development is with us this afternoon. I understand that, as a matter of absolute necessity and on pain of severe sanctions, he must leave by 3.15. With members' permission, it might be helpful if the minister says a few words to begin our consideration of the less favoured areas support—LFAS—scheme on the short-term issue of the 90 per cent safety net and the long-term issue of substantive structural reform to the scheme.
As we had a statement from the Executive dated 19 October, it seems fair and courteous to offer the minister the opportunity to make some opening remarks and to bring us up to date on any developments.
Thank you. I would like to bring the committee up to speed. One of the issues that has been vexing members—and which was captured in the question put by the committee clerk—is the constitutional position on prosecuting our interests in relation to the LFAS scheme and whether we require the permission of the United Kingdom Government in so doing. I will try to address that as well as the other two issues that you mentioned, convener.
I intimated to Parliament and the public that we are pursuing modifications to the LFAS scheme for the next year. We are pursuing a change in the stocking density ratio and the recycling of funds into the area payments. We are also pressing for the 90 per cent safety net to be continued for a further year. I have pressed that matter in the European Commission and I wrote formally to Commissioner Fischler on 21 September. As things stand, I have not had a response to that letter. As I have said, my officials and I have pressed the importance of the Scottish case on various occasions. We have pointed out to the Commission that we need an early response in order to make the necessary adjustments to the scheme for 2002.
The committee clerk asked my officials whether the UK had written to the Commission. The question suggested that that might be a prerequisite. LFAS policy, along with other schemes, falls under the European Union rural development plan and as such is exclusively the responsibility of the Scottish Executive. There was therefore no need for the UK Government to write in support of our request and there was, and is, nothing to prevent Commissioner Fischler from considering our case on its own merits. Nevertheless, I invited Mrs Beckett, the Secretary of State for Environment, Food and Rural Affairs, to endorse my arguments, as I wished to exert all possible pressure on the Commission. As a result, the UK representative in Brussels has sent a letter asking the Commission to respond positively to the Scottish request. I will continue to press the case with the Commission in the coming days and if the committee would like to endorse that case I would be happy to relay its support to the Commission. That addresses the important constitutional question.
PE372 raises a difficult point; it talks about giving priority to those farming in the "most severely disadvantaged areas" of Scotland. The difficulty with that is that in Scotland we benefit—in some senses—from the fact that 85 per cent of Scottish agricultural land is designated as less favoured area. Some members, including Rhoda Grant, might want to argue that there are parts of the LFA that are more disadvantaged than others, but we must consider the fact that the writing of the scheme does not envisage a huge differentiation.
In other words, we start from the basic principle that if Europe designates an area as less favoured, there should not be huge differences within that area or between that area and others that are less favoured. We know, of course, that that is not the case. We have to be careful that we do not press this issue about the most disadvantaged to the point where Europe starts to reconsider its position and perhaps takes a view that only 15 per cent, or 10 per cent, or 35 per cent—I do not know—would qualify. We have to be careful reading the regulation and take it in the context that Scotland as a whole benefits from having 85 per cent of its agricultural area designated as LFA.
That is not to say that as the minister I would not prefer a scheme that is more targeted. Members of the committee will be aware that when I submitted the original proposal for the scheme, it had four or five degrees of variation. It was rejected by the Commission as too complex and outwith the spirit of the scheme, which applies to the whole of the less favoured area.
With regard to PE384, there is no question but that we have examined carefully the analysis of injustices. There is no doubt that certain parts of the scheme are not operating as satisfactorily as I would wish. I have given a commitment to make amendments. The ones that I am prosecuting at the moment are intended to deal with what I regard as the greater anomalies in the scheme.
In the longer run, convener, you are aware that I wish to make more substantial changes, but I am bound to say that any detailed analysis of the LFAS scheme shows that it is almost impossible to change from a scheme that Scotland did extraordinarily well out of on the basis of headage payments, to an area-based scheme. The scheme was not designed in that way, which is why in the longer run—rather than in the short to medium term—I would be happier to pursue a completely different scheme, more along the lines of land management contracts such as those I described in my strategy. However, in the short term, I am committed to making the changes that I hope will deal with the worst anomalies. In the medium term we will be working with the group that I set up to find further changes, and in the longer run we will have to go outwith LFAS schemes to find a satisfactory solution that meets Scotland's needs.
Thank you for that information additional to the note of 19 October. I will begin questioning by raising the obvious concern that while committee members will be keen to support the 90 per cent safety net, there are stormy waters ahead because the intention is to reduce the safety net to only 50 per cent in the ensuing year. Has that issue been raised with the Commission? Is the Executive planning to ask for that 50 per cent limit to be increased to 90 per cent or some other figure? If not, could you give some idea of how you envisage negotiations for the lifting of the 50 per cent safety net progressing?
It must be understood that requesting a derogation for a 90 per cent safety net for a further year would be done on the basis that, contemporaneously, we would produce revisions to the scheme to remove some of the worst anomalies. In other words, the safety net is being argued for on the basis of the facts that have emerged rather than on what we envisaged when we set up the scheme, when we did not have the database.
The Commission is saying, "Are you putting it to us that you are looking for a further year in which to make a slightly more radical revision to the scheme, which would more satisfactorily meet the requirements?" The Commission is putting it to us that, given that the 90 per cent, 80 per cent and 50 per cent safety nets were derogations that had no basis in European law, it is reluctant to contemplate a derogation not just this year, but next year and thereafter. The onus that the Commission is trying to put on us in the current negotiations is that if it cedes the 90 per cent—which I hope it will—it will be looking to us to propose a scheme that will be less dependent on a safety net in future years.
I want to ask about the constitutional point that you made. It is obvious that the Scottish Executive and MSPs are aware of the constitutional situation. Can you confirm that Commissioner Fischler understands the constitutional situation? Your letter of 19 October seems to imply that we need to get permission from Mrs Beckett before we proceed with the proposals.
The Commission is quite clear on the constitutional situation. If it were not, it would have prevented my officials and me from dealing with it directly. It has never sought to do that. We have had no problem dealing directly with the Commission, with its officials and with the commissioner. Given that the United Kingdom, as the member state, has to deal with four separate entities—Northern Ireland, Wales, Scotland and England—the commissioner thought that it would be helpful if the member state confirmed that it is supportive of the approach that is being proposed. He did not intend to raise a constitutional impediment.
This year you are considering small revisions to the scheme and the extension of the 90 per cent safety net. I would like you to look to the future, when more major revisions may be made. I have repeatedly raised the issue of capping. Some less favoured area payments under the current scheme are intended to help areas with poor soil and low stocking density, but those areas are quite similar to large areas that are not well managed. It is difficult to see who the winners are, because we hear from the losers and not from the winners. I can only assume that those who have done well out of the scheme are people with large amounts of land and low stocking levels, who have not really worked their land. If we were to cap the amount of money that is awarded, that would help smaller farmers. There would be more money in the pot to distribute and there would no longer be big winners.
I would also like to raise the issue of farmers with natural disadvantage. That can be measured quite easily. On the islands, for example, there are costs associated with getting feeding stuffs on and animals off. Orkney Islands Council has provided assistance to farmers on Orkney. Is there any way that money from the LFAS scheme could be used to benefit farmers with more severe disadvantage than those in other less favoured areas?
I will deal with the first point first. I hear what Rhoda Grant is saying, but the best way to catch people who have large areas of land and low stocking densities is to use the stocking density ratio. The figures for this year show that although there is a large number of winners, the amounts awarded are not as large as we originally envisaged.
I understand where Rhoda Grant is coming from on her second point. Natural disadvantage as defined in the European Union regulation relates to soil condition. I am not dismissing the point she made: I understand that if a farmer is based on an island, at some distance from market, they have extra costs associated with bringing in feed and shipping their product—but that is not the natural disadvantage that is described in the regulation.
The regulation talks about natural disadvantage in terms of someone's being able to farm on a piece of land. It is about the soil and climatic conditions relating to the land. This is where official records become difficult. I am sympathetic to the view that Rhoda Grant expresses. The original proposals sought to have different degrees of assistance and to tackle the problem in a slightly different way, but I do not think that we can deal with it by saying that there should be an element in the payment to compensate for the fact that someone lives on an island. Gradations must be considered. Perhaps the Macaulay Land Use Research Institute report will give us a better handle and enable compensation for climatic, soil or other conditions to be worked into the scheme. I do not know the answer, but we must attack this in terms of the way in which the regulation is written.
I declare an interest in the matter, as I have a sheep farm in Argyll.
I take on board what you say about 85 per cent of Scotland's agricultural area having LFA status, which is a very good thing. In the past, there were categories for disadvantaged and severely disadvantaged areas. Is it not unfair to remote areas that that does not appear to be the case any more and that the scheme is to be based on only one category? You seem to be saying that there could not be different elements in the scheme. Would it be possible to include some sort of supplement for remote areas?
Do you agree that it is especially important this year and next year to maintain the 90 per cent safety net because the sheep annual premium is extraordinarily low, at £6.62, and because Highland hill farmers who cannot export their lamb are finding life especially difficult?
I can only repeat what I said. I would have preferred a scheme with much more gradation. If MLURI were to come up with practical proposals that would allow us to move towards longer-term, more radical change, I would be interested in doing that.
I encourage members to read the information that is now in the public domain and look at the figures. Although we still have a problem with individual holdings, there are a number of winners as well as some losers. Without question, the economy of the Western Isles as a whole benefited under the LFAS scheme's distribution; therefore, it is not quite right to draw the simplistic conclusion that all such areas are losers.
As I told the convener, I do not think that there is much chance of our pursuing the 90 per cent safety net for a further year, although we are pursuing it for next year. If the Commission were to concede the 90 per cent safety net, it would be on the basis that that would give us breathing space to make further changes to the scheme that would remove the inequality in it. I am reluctant to use the phrase winners and losers, as the Commission is not comfortable with it; nevertheless, there will be winners and losers.
I was always led to believe that the sheep annual premium was a safety net and that, when times were bad, there was always more of it. Times could not be worse than they are now. Because of the high prices of lamb in Europe, we in this country are getting less for our sheep annual premium. That seems unfair, but I believe that it is possible—within the European rules—to get a national top-up. Does the minister envisage trying to get that for our sheep farmers?
I have explained that matter to all UK ministers. There is no question but that I agree wholly with Jamie McGrigor's analysis—the situation is a real double whammy because we are not able to export and we are not able to get the benefit of the price going up. In fact, we might be the cause of the rise. When the price rises above the subsistence level or the intervention level the premium comes down. I agree wholly with the analysis that the Scottish sheep farmer is suffering a double whammy.
A top-up is in a similar domain to other issues that I have raised, such as agrimonetary compensation, which lie in the territory of what the UK Treasury might or might not pay. I have certainly raised the issue of a top-up, but at the moment, given the size of the bill for foot-and-mouth disease, I find the Treasury to be not tremendously sympathetic about the amount of money that is being paid to the agricultural sector. I do not necessarily agree with that point of view, but it is the reality.
I apologise for being a little late and missing the first part of the minister's statement.
I refer to the circular from the Executive about the petitions, in which the petitioners assert that Scottish producers would be better off under the Welsh or Northern Irish schemes. The Executive makes the point that comparisons between schemes within the UK are not especially relevant because of different sorts of terrain and so on. I note with interest that, if the Welsh scheme were adopted, the budget would be seriously oversubscribed. Why is that? Does that suggest that Scotland—given that 85 per cent of its land is less favoured—is possibly not getting its fair share of resources to be able to run the scheme?
No, not at all. There is no question but that consideration of the proportions and the scale of operations shows that Scotland is certainly getting its fair share and, indeed—at a level of £61.5 million—has sustained that share.
The Welsh and Scottish schemes are rather different. I have had conversations with Carwyn Jones, who is the Minister for Rural Affairs in Wales and it is interesting that, despite comments made elsewhere, he is quite nervous about the adverse comments on his scheme. He is under some pressure to make changes to the scheme, so it would be wrong to say that the scheme is universally regarded as a success—that is not the case, as I discovered while speaking to him. I wondered whether I had picked up the wrong message—that his scheme had been a huge success, while mine was not working terribly well. Conversation with him revealed that not to be the case. The Welsh will be considering changes to their scheme.
I presume that the fact that our budget would have been oversubscribed, had we had a similar scheme, is because of the proportion of a particular type of land in Scotland.
That is right.
The minister suggested at the start of his speech that 85 per cent of Scotland is classified as less favoured under the less favoured areas support scheme. I suppose that that is to be generally welcomed because it offers a blanket approach to the whole geographical area of Scotland. However, much of the concern that has been expressed to me and many of the complaints that I have received—as I am sure is the case with the minister—are to the effect that the islands communities are still of the opinion that the previous financial support schemes had built into them elements that took account of peripherality and rurality. Those communities see that such provision is diminishing under the current system and, in that, their argument is justified.
The minister has just pointed out that the criteria relate more to land use than to the remoteness of that land, but we must still be careful in agreeing that the 85 per cent classification is favourable at present. How will we address the situation in three years when there will have been a 50 per cent reduction in the support mechanisms? Is it envisaged that, because there is a change from headage to acreage, the quality of the animals produced will secure a higher price and so compensate for the loss of support? How do you see the longer term?
I know that we have a problem in agriculture that will not be sorted out overnight. We must look to the long-term future. I hope that the quality of animals produced after the three years will command a higher premium than at present when we are selling on headage.
There are a number of points to deal with.
Not only was 85 per cent of Scotland's land covered, but we used the system to our benefit extraordinarily well. Throughout Scotland, we do not indulge in much overly intensive farming. However, particularly in the north and other areas, we have a quite high stocking density ratio. We added to individual stock every top-up that we invented, created or were allowed. The amount of stock therefore became a crucial element in the amount of payment. That is why severing that umbilical cord at a stroke did deep damage to a scheme that had worked in Scotland for many years. The damage was not just to the 85 per cent, but to the way in which all the premiums were concentrated on the individual livestock herd. That is why it is so difficult to construct a different scheme.
On the islands, I refer back to what I said to Rhoda Grant. I am not unsympathetic to what John Farquhar Munro suggests, but that is not how to construct the scheme. We must consider a more detailed analysis of the soil and climatic or other conditions that might be a permanent disadvantage. It might be that the MLURI report will give us a better handle on that, which is what I said to Rhoda Grant.
The safety net was intended to give more time as the scheme progressed. There are farmers who have adjusted their stocking density ratio, particularly between cattle and sheep in mixed farms. Those farmers have found that such adjustments have ameliorated the effect of the change. The National Farmers Union of Scotland and our department have been advising farmers on that. By the time that we reach year four of the scheme—in terms of its effects rather than the quantum of money—I hope that we will have devised changes that will remove the worst of the anomalies from the scheme. Whether the safety net is 50 per cent or 20 per cent, or there is no safety net at all, I hope that we will have a scheme that is more equitable in its general content.
With reference to the paper of 19 October and the statement that the industry group is meeting on 30 October, the minister has kindly set out the procedure to be followed subsequent to that meeting with regard to implementing any amendments to the scheme. Would it be possible for the committee to be involved at an early stage in considering any draft statutory instrument that might be produced to give effect to the proposed changes?
That does not seem to be objectionable in principle. I have no idea what happens to draft statutory instruments. I am terrified of statutory instruments because they always go the Subordinate Legislation Committee, which always finds something wrong with them.
I am not on that committee any more, but I well remember that that is what it seemed to do.
With reference to previous significant statutory instruments—such as this will be—some members of the committee have expressed the desire to play a part in shaping the rules and to have those rules as early as possible.
I am not sure that I wish to commit myself to the principle that the drafting of a statutory instrument would become the provenance of a committee. I have no difficulty in agreeing to communicate with the committee about the principles on which we are about to proceed.
Thank you, minister. If you are happy to remain in situ, as it were, I invite the committee to offer suggestions on what we might do with the two petitions. I remind members that the Public Petitions Committee strongly recommended that, because the LFAS scheme raises issues about liaison with the European Community, we should consider referring the petition to the European Committee. The next meeting of that committee is 30 October, which gives us little time.
One of the options in the Public Petitions Committee members' briefing document is that this committee should consider whether the Executive's arguments appear reasonable. If members are of the view that they are, they might wish to agree to pass copies of the responses to the petitioners and to take no further action.
I have listened to the minister and I am confident that the Executive is getting a grip on the scheme. The Executive's arguments about the importance of ensuring that the scheme covers 85 per cent of Scotland and soil condition and the fact that areas of land are being considered rather than whether an area is an island convince me that I would rather leave the situation to the Executive to put right.
I can see why the alarm was raised in Shetland, given the statistics in the letter from the minister dated 11 September, which show that for the Lerwick area office, the mean loss per farm under the LFAS scheme 2001 would be more than 10 per cent. The same document, however, says that the Executive's amended proposals will result in a mean gain for the Lerwick area office. The Executive's arguments are robust and I hope that it continues to work to meet the needs of Scotland's farmers in the 85 per cent of the area that we are considering. We should follow the suggestion of the Public Petitions Committee clerk and refer the petition to the European Committee.
The minister mentioned that Margaret Beckett has added her support to the retention of the 90 per cent safety net. That deals with one of the problems that existed prior to this meeting.
A lot of what has been said today is helpful. As a first step, it is important that the committee agree to support the retention of the 90 per cent safety net.
However, we should pass the matter to the European Committee because there are larger issues about how European legislation is framed and how it restricts what we can do. It would be useful to have the European Committee's view on the scheme and on other legislation. We will find ourselves in this situation more and more often. We know that we are moving away from headage-based schemes to area-based schemes and we need to participate fully in that move. If we do not do that and engage the help of the European Committee, we will simply be putting the matter off until another day.
I know that other committee members have previously expressed the view that we should support the efforts that are being made to retain the 90 per cent limit. We might perhaps write formally to the Deputy Minister for Environment and Rural Development to express the support of the committee for that measure.
I agree that we should make a bold statement today saying that we support the retention of the 90 per cent safety net. As the petitions and other parts of the agriculture debate in Scotland have shown, there is a lot of concern about the future of farming policy and its implications, particularly for smaller, more remote farms. Clearly, the issue will not go away. I urge the committee to revisit the matter briefly at some point in the future to monitor progress. We must not let it fall off the agenda.
I get the feeling that the minister will be happy to assure us that the matter will not fall off his—or any other—agenda. However, I suggest that we note the petition, refer it to the European Committee and agree that the committee write to the minister to give our full support to the extension of the 90 per cent safety net for the coming year.
Members indicated agreement.