Common Agricultural Policy
The next item of business is a statement by Richard Lochhead on the new common agricultural policy. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.
14:40
Today, I will announce decisions on how we will implement the new common agricultural policy from 2015, and outline the key decisions on how we will implement pillar 1 of the policy, which is set to deliver £2.8 billion in direct support to our farmers and crofters between 2015 and 2020. We are also publishing today more details of the rural development programme that will be submitted to Europe, which is worth £1.3 billion over the same period.
My objective is to ensure that those investments support food production, our rural economy and our spectacular environment, and that the men and women who deliver those benefits are supported and rewarded for doing so in all parts of Scotland: island, mainland, lowland and upland.
We know that that support is vital. Last year, the total income from farming in Scotland was £829 million, including £583 million in farm payments. It is therefore vital that we get the decisions right—within the rules, of course. We now face difficult decisions on how to implement a policy that we all want to underpin productive farming but which, of course, limits how we can support that in respect of how support is linked to production. We have, of course, a policy that is largely decided on a Europe-wide basis and which needs to be moulded, as far as possible, to Scotland’s diverse circumstances.
The road to where we are today has been long and rocky, but it is now decision time and it is time for clarity. The new CAP is far from perfect and has not delivered the simplification that we were promised, but at least it is far better than what was originally feared. At the start of negotiations, people thought that the CAP budget would perhaps be cut by about 30 per cent. Thankfully, that did not materialise, and the United Kingdom Government failed to abolish or phase out direct payments, on which our industry relies. However, Scotland has been left at the bottom of the table in payments per hectare—Europe uses that formula to give out the member-state allocations—under both pillars of the policy.
To add insult to injury, when Europe gave the UK over €200 million in convergence money because of Scotland’s low payments, the Westminster Government spread that money across the whole UK. Other Governments got uplifts in both pillars and are now deciding how to invest the money.
I have to deal with budget cuts and mandatory deductions, which coincides with the biggest-ever redistribution of CAP support in Scotland. Ten years ago, Europe committed to replacing virtually all activity-based support with area payments. The Scottish Administration at the time decided to put off the difficult choices until a later date by adopting the historic-payment based approach. Now, further delay is not an option. Europe moved away from activity-based support because of overproduction, but in Scotland, 85 per cent of our land is classified as less favoured areas, so the risk that we face is the opposite—it is land abandonment and loss of activity.
The Government has worked tirelessly with stakeholders and has left no stone unturned to find the right solutions for Scotland. However, I am under no illusions: the package that I am announcing will not please everyone. Some farmers who were disadvantaged under the old CAP will finally move towards being on a level playing field, but others will see their payments go down. However, I have sought every opportunity to mitigate the impact on genuine farmers.
Overall, the package that I am presenting is the best possible one for the CAP in Scotland for the period 2015 to 2020. Given the major redistribution of support, the speed of transition is vital. New entrants have lobbied for the pillar 1 changes to be implemented in one step. Farmers whose payments will go down—sometimes significantly—have argued for time to adapt.
I feel that is my duty to look at the impact on Scottish agriculture as a whole. I believe that an overnight transition would pose a real risk not just to primary production but to thousands of downstream jobs—in particular, in the livestock sector. Given the level of reduction that many intensive farmers face, convergence will therefore be achieved over the 2015 to 2019 scheme years. However, we negotiated the ability to put farmers who were disadvantaged under the old CAP straight on to the regional average, through the national reserve. I accept that the national reserve therefore needs, as a quid pro quo, to be substantially bigger than the standard 3 per cent, and I believe that stakeholders support that.
Encouragement of the next generation, who have been frozen out of the CAP up to now, is very important to me. That is why pillar 2 support will be expanded into a new entrants’ package. The start-up grants will be—at €70,000 plus capital grants—the most generous that are allowed, and the pillar 2 advisory service will include specific provision for new entrants. It is important that, under pillar 1, we secured the ability to repeat the national reserve in future years, so future new entrants will not be excluded.
A big priority is to ensure that support targets active farmers, be they new entrants or long-established businesses, so we will make every effort to target every public pound at genuine activity, and to target those who wear dirty wellies and not comfy slippers: this package tackles slipper farming. Under the Scottish clause that we negotiated, land on which there is no farming activity will get no pillar 1 payments.
I have also instructed my officials to add sporting estates whose principal activities are not farming to what is known as the negative list, whereby claimants are excluded unless they can prove that they are a genuine farm business. Those measures will ensure that no payments are made for land on which there is no farming activity. That land, in terms of what is included in the current CAP, is currently estimated at an area of 600,000 hectares. I will also limit entitlements to areas that were claimed for in 2013, in order to prevent tenancies being manipulated, in particular for unfair gain by others.
At the other end of the spectrum, the challenge is how to reward the most active farms, especially in the livestock sector, where production per hectare can vary so much. Moving away from historic payments helps because historic payments, by definition, do not represent today’s activity. There is broad consensus now on splitting Scotland into payment regions based on land quality, and on targeting coupled support, at 8 per cent, on the beef sector. There remains broad consensus on treating better land as a single region at around perhaps €200 to €220 per hectare, including greening, depending on the number of hectares that are declared.
However, there have been calls to improve the way in which rough grazing is dealt with, in order to avoid overcompensation for the least active. We have a new weapon now in our armoury: extra coupled support. Month after month throughout the past few years I have battled the UK Government, which originally wanted zero coupled support, but finally moved to 5 per cent. Europe finally agreed that 13 per cent of some countries’ budgets could be used for coupled support, but the figure was 8 per cent for the UK. Following discussions with Owen Paterson, the Secretary of State for Environment, Food and Rural Affairs, the Department for Environment, Food and Rural Affairs and Commissioner Ciolos in Europe, we have finally secured clearance in principle to go up to 13 per cent of the Scottish pot being used for coupled schemes, which puts Scotland on a level playing field.
We had a second breakthrough on regionalisation. We have identified a way to split the rough grazing that is deliverable because it uses existing land classifications, which will be fixed at the outset. With the new flexibilities, we will address rough justice in rough grazing. Rough grazing in the non-LFA and in the less favoured area support scheme grazing categories B, C and D will be one payment region, with a rate of around €35 per hectare, including greening. In the poorest rough grazing—in LFASS category A—there will be a separate region at around €10 per hectare, including greening. However, in this third region I propose to introduce coupled support for sheep at the equivalent of around €25 per ewe. That is now subject to agreement by the rest of the UK, and we will work with stakeholders on how to implement that scheme to minimise the burden of inspections. On land on which there is the greatest risk of inactivity, payments and stocking levels will therefore be closely linked.
A further related issue is that of huge individual payments. The top five recipients in Scotland in the current CAP receive between them over £7.5 million. The changes that have been set out will, in any case, reduce that by nearly two thirds, or perhaps even more if the activity tests are not met. Most farmers to whom I speak, and the general public, think that there should be an upper limit. Therefore, part of the way through the transition we will introduce a cap on basic payments at around £400,000 per year after labour costs have been deducted. That will have no impact for the vast majority, but it is a safeguard that will fix the principle that unlimited individual payments simply cannot be tolerated.
What I have just announced is a five-pronged assault on inactivity; there is the Scottish clause, the negative list, the third region, more coupled support and capping.
The link to activity is especially important for the beef sector. Productive beef farms are high recipients under the old—the current—system. Their long production cycle means that it is hard for them to change quickly, which has implications for upstream and downstream businesses. However, beef is the engine room of Scottish farming, being worth more than £2 billion to our economy. The gradual transition that I have laid out will help and, having fought hard for coupled support, I propose to retain 8 per cent of the pot for coupling for beef across Scotland, using 75 per cent beef genetics to define the recipients.
However, I am changing the payment profile, with double rate on the first 10 calves and a flat rate thereafter, and I also propose, subject to the necessary approvals, to introduce on Scotland’s islands a coupled payment top-up of around €65 per calf to recognise the extra challenges and distance to market that our beef producers on the islands experience. Compared with today, a 100-cow beef herd will get more than 50 per cent more coupled support under the proposals.
There are, however, limits to what we can do in pillar 1, so we must also look to pillar 2. I have decided to introduce in the rural development programme an ambitious beef 2020 package. My aim is to help the sector through the transition that lies ahead, but also to encourage transformation at the same time—it is about both transition and transformation. Before deciding on the detailed shape of the package that I will deliver through pillar 2, I want to digest the recommendations that I will receive next week from the chair of Quality Meat Scotland, Jim McLaren, and his beef 2020 group.
However, I can confirm today that we will make available £45 million of new money over three years for what will be a crucial and unprecedented investment in Scotland’s fantastic beef sector. Through this unprecedented scheme, producers will be financially supported on issues such as genetics, performance generally and reducing the industry’s carbon footprint. The beef package will be a good example of a win-win in terms of outcomes for both economics and Scotland’s environment.
The CAP must support productive farming, but it must also protect biodiversity, reduce agriculture’s carbon footprint and conserve our landscapes. In pillar 2, despite the budget situation, I have already increased the agri-environment budget by more than £10 million per year, but the new CAP also has greening in pillar 1. The challenge here was to determine how to deliver environmental benefit without there being a disproportionate hit on farming operations. We negotiated substantial improvements for the three-crop rule, but there is still an issue for specialist barley producers.
With stakeholders, we have identified an alternative approach that is based on winter cover, and which gives equally good environmental outcomes without affecting production. It will have to be approved by Europe, and the approval procedure is not yet known, but we will put the approach forward and our intention is to implement the change as soon as we can—in 2015 if possible.
I have always said that there should be more on climate change in the CAP package, so I am using pillar 2 to fund carbon audits for Scotland’s farms. We have also looked at options under the permanent grassland measure in pillar 1. Subject to European Commission approval, farmers who are covered by the permanent grassland measure will need to have a fertiliser plan. In later years, we may also ask for that to include soil analysis. That is a modest light-touch requirement, and many farmers do it anyway in order to deliver the win-win of a reduced carbon footprint and improved profitability.
The final greening measure concerns ecological focus areas. We have to decide what features to count against the 5 per cent EFA requirement. I want to give farmers credit for the features that they already have, but a balance has to be struck. Counting every tree would create a mapping nightmare for farmers, and would run the risk of European Union penalties. After detailed work with stakeholders, I have decided to go as far as I can and will include as EFAs buffer strips, fallow land, field margins including hedges and ditches, catch crops and cover crops and nitrogen-fixing crops—albeit, that that will be subject to management conditions to ensure that we help biodiversity while allowing for crop production. We will continue to work with stakeholders on the details, including use of optional weighting factors and coefficients. I have also decided to strengthen the rules on buffer strips under the “good condition” element of the cross-compliance rules.
Scotland has a really good story to tell, and our food production has a fantastic international reputation for being clean and green, but we have to stay ahead of our competitors, so I will bring the industry together shortly to see how we can take the agenda forward.
I have explained how the new CAP package will impact on particular sectors in Scottish agriculture, but in designing the package I have balanced the impacts across farming as a whole. For example, the latest changes to improve targeting for beef and sheep will have no real impact on the dairy or arable sectors, which will also benefit from the five-year transition. Sectors that have been frozen out in the past, such as deer farmers, will be eligible for the first time, and the move to area-based payments is positive for crofters and for the Highlands and Islands.
In response to the consultation exercise, I am reinstating a separate capital grant scheme for crofters, with its own budget. The wider rural development programme supports rural communities, forestry, the environment, food and drink, small businesses and the £459 million LFASS budget, which helps to maintain and underpin our more fragile communities.
However well we have put the package together, there is always the risk of unforeseen circumstances. Despite the EU’s rhetoric about simplification, this is the most complex CAP ever. Under EU rules, some of the decisions that I am announcing today—such as those on coupled support—can be revisited each year, but others can be reviewed only once or not at all. That does not seem to be sensible; I will therefore call for a mid-term health check of the new CAP.
It would be naive to pretend that the new CAP, as decided by Europe, is perfect for Scotland. Important details still have to be worked up with our stakeholders, and the package requires clearances and approvals from the UK Government and Brussels. If we look at the new policy with a magnifying glass, I have no doubt that we will find lots of anomalies.
However, I believe that the Scottish Government has exploited the positive aspects of what is on offer, which we secured through tough negotiations, and that we will minimise the anomalies. That will give us the best possible package, in the circumstances. Despite the constraints in the EU rules, the outrageous budget position that we find ourselves in and the often turbulent market conditions, we are confident that the package reflects Scotland’s priorities and lays the foundations for a successful Scottish agricultural industry for many years to come.
The cabinet secretary will now take questions on the issues that were raised in his statement. I intend to allow about 30 minutes for questions.
I thank the cabinet secretary for an advance copy of his statement, although we have all been working to short timescales this afternoon. We have heard a lengthy statement, which is accompanied by briefing papers, and we all need time to analyse the impact of the decisions. I urge the Government to make time for a fuller debate on the announcement.
We should not forget the principles of CAP reform, which were to ensure best use of public money to support public benefit and reduce the environmental impact of agriculture, while rewarding investment in delivering environmental benefit and good land stewardship.
Scotland chose to delay the shift from historic to area-based payments—I suspect that the then Opposition supported that decision—and we are now at the stage when decisions must be made. In many ways, the debate has been dominated by consideration of the impact on those who currently receive support, but we are talking about change, not the status quo, so I will support measures that aim to achieve change. I welcome the measures to tackle slipper farming and I am pleased that sporting estates will be moved to the negative list, and that entitlements will be limited to areas that were claimed for in 2013.
The decisions were always going to be challenging and I appreciate how difficult it is to get the balance right. The cabinet secretary recognised that calls were being made for a quicker transition. There is concern that 2019 is at the top end of a transition period. Even when we take into account the new entrants measures, I am sure that some people will be disappointed that the timescale is not shorter. What will the national reserve level be? Is the cabinet secretary confident that it will meet the demand?
I have some concerns about pillar 2 support. The statement focused on agriculture, but yesterday’s emissions statistics show that an environmental focus is needed under pillar 2. Pillar 2 is also vital to supporting rural communities in the broadest sense.
When I argued for a larger transfer between pillars 1 and 2, I said that a lot of that money would go back to farmers, and the statement emphasised that. What will that mean for other demands on pillar 2—the cabinet secretary referred to them—such as those in relation to forestry, food and drink and the environment?
I understand that the new measures for the beef sector are intended to support the transition. Is a timescale attached to those measures? Will the £45 million come from pillar 2 resources?
The cap on payments is welcome but, at £400,000 after labour costs, it is pretty generous. Will the cabinet secretary say a bit more about why he decided on that level?
I thank Claire Baker for her questions and the way in which she posed them. She raised a number of issues, the first of which was the big issue of the pace of transition. As she can imagine, my shoes are not very popular just now—everyone has told me that they would not want to stand in them, because I have had to take tough decisions on issues such as the pace of transition.
Many new entrants wanted an overnight transition, but given the potential for such a transition to create shock waves throughout Scotland’s livestock sector and downstream industries—because many intensive livestock farms would face substantial reductions—I chose to use the duration of the next CAP for the transition, in the knowledge that new entrants will, from day 1, be put on the regional average for their basic payments. On coupled support and other payments, new entrants will compete on a level playing field with other farmers in Scotland, from day 1.
Claire Baker is right to say that we must look at the national reserve, in the context of how many new entrants are included and how far back we go in defining “new entrant”. As I said, the current 3 per cent will have to be substantially increased, as a quid pro quo. If there is to be a slower transition for the rest of the industry, we must maximise the benefits for new entrants by maximising the national reserve. We do not quite know to what figure that will take us, but I have secured agreement from senior stakeholders, and it is certainly the Government’s view that there will be a substantial increase from 3 per cent.
On the environment, I point out that the beef scheme in pillar 2, which Claire Baker mentioned, and which is new money over three years—£15 million a year for the first three years of the policy—will have an environmental dimension. Over and above that, in pillar 2 we are putting in extra resource for agri-environment schemes, which were announced as part of the consultation process, and substantial extra resource for restoring peatlands, which is an important measure. We previously announced that resource, too, which is additional to what was in the previous rural development programme. I am confident not only that policy in Scotland will be fairer, with targeted activity, but that it will be greener, as a result of measures that have been decided in Brussels and in Scotland, in the context of pillar 2 budget decisions.
On capping, a key principle that we should build into the new policy is that there is a cap beyond which basic payments should not go, as I said. As we go through the transition from historic payments to area-based payments over the next five years, people who have the most land will gain the most, so we should cap support. As I said, there will be no immediate impact on many farmers in Scotland, particularly in relation to payments for activity. However, there are mandatory measures in the CAP, such as 5 per cent regressivity—as it is known in European language—whereby big payments will have an automatic 5 per cent cut, notwithstanding the cap on payments that Scotland will put in place. For that reason, I think that policy will be fairer overall.
I thank the cabinet secretary for the advance copy of his statement. The statement’s contents will probably stop Jim Walker calling for Mr Lochhead’s head on a plate, although Brian Pack might now take up that call.
Let me briefly correct some of the comment that the cabinet secretary made about the role of the UK Government and previous Administrations. I have said hundreds of times that of course we would all have liked to have had the full convergence uplift, but I want to put that in its true context: if we had received the full uplift, it would have amounted to a 4.1 per cent increase in the total amount of CAP support. That would have been welcome, but it would never have solved all the problems that the cabinet secretary has faced.
On extra coupled support, I reject any notion that the UK Government was reticent in bringing the measure forward. Indeed, I argue strongly that it fought for it in Europe and has delivered it.
Finally, the decision of the previous Administration to stick with historic payments, which was so disparaged in the cabinet secretary’s statement, was unanimously backed in the Parliament. If I recall rightly, the cabinet secretary backed the decision as enthusiastically as everyone else did. There are perhaps some crocodile tears in that regard.
The cabinet secretary announced several measures that involve substantial amounts of new money. Where will the money come from?
If the transition is to be gradual, should not the introduction of capping follow the same model?
Vast amounts of money will be taken out of the most productive areas of Scotland, particularly in the beef sector. Will the cabinet secretary ensure that his Cabinet colleagues do everything they can do within their portfolios to help to mitigate the serious economic impact of the measures as they begin to bite?
I remind Alex Fergusson that I have been negotiating with the UK team for the past few years and have witnessed UK ministers seeking the phasing out of all pillar 1 support over the course of the current CAP, which would have left our farmers in Scotland with zero pillar 1 support by 2019, as opposed to the nearly half a billion pounds that we are discussing today.
On the convergence uplift, there is an important principle, in that the money was given to the UK because of Scotland’s low payments. That was Scotland’s money and it should have come to Scotland’s farmers, irrespective of whether it was £1 or £190 million.
Alex Fergusson referred to my having made disparaging comments about decisions that were taken back in 2003 and 2005, but I was simply making the point that it is difficult to implement an area-based system in Scottish circumstances. It was a difficult decision to make back then and, for understandable reasons and because there was an option not to do that, the decision was made not to go down the route of area payments. We supported that position back then—I am not arguing with that—because it was difficult to implement an area-based scheme in Scotland, given our circumstances, and because there was an alternative available. However, today we have no option and must go down the road of area payments.
On the economic impact that the changes will have on the most productive areas of Scotland, I tried to lay out in my opening statement, in the most reasonable terms, how we have gone to great lengths—indeed, to great expense through the pillar 2 injection—to mitigate, as far as possible, with the tools that we have available to us, the impact on the most intensive livestock farms, which play a crucial role in producing food for our tables. The situation is not uniform, of course. Some recipients may have de-stocked over the past few years and, therefore, should not get the same payments. Other farmers who are still farming intensively deserve appropriate support for their activity.
I recognise that this is a very important statement on complex issues, but a large number of members want to ask a question, so I would like questions and answers to be brief if that is at all possible.
I welcome the decision that the reference year will be 2013 as opposed to 2015 to prevent tenancies from being manipulated by landlords for unfair gain. Will the cabinet secretary expand on the overall measures that are being taken to encourage active farming and crofting despite the UK-brokered rock-bottom settlement, which cannot be unaffected by the UK’s rebate, which bedevils a fair settlement for Scottish farmers?
As Rob Gibson says, because Scotland has such an unfair overall share of the CAP budget it is important that we are as smart as possible with the resources that we have available in Scotland to support food production and environmental protection. That is why we are pursuing a five-pronged assault on inactivity in Scotland so that we can direct what funds are available to active farming. That applies to both the crofting counties and the rest of agriculture in this country. I think that that is the right thing to do, and it is supported by the people of Scotland. Every public pound should support genuine farmers.
Is the cabinet secretary confident that the whole new CAP takes into account robustly enough biodiversity, climate change and water quality for the public good? Yesterday, my colleague Cara Hilton expressed concern to the Minister for Environment and Climate Change, Paul Wheelhouse, about the 11.2 per cent of greenhouse gas emissions that come from agriculture. I welcome the farm carbon audit in pillar 2, but will the cabinet secretary give more detail about how agricultural emissions will be tackled and whether regulation might be needed in that context?
It is an important issue, and I laid out in my statement some action that we are taking to reduce the carbon footprint of Scottish agriculture. It is a win-win situation because we save a huge amount of money on farm for each farming business that takes appropriate action. There are around 10 green gains in the policy that we are announcing today, many of which relate to reducing carbon footprint. Today, Scotland is sending the clear message that we are a clean, green country and that, for the international marketplace, our food is going to be produced more sustainably than ever before and certainly more sustainably than food is produced in many other areas of Europe and the world.
I thank the cabinet secretary for providing an advance copy of his statement and for the courteous cross-party discussions that he has had on the CAP regime.
I broadly welcome the transitional support, the payment regions and the island cattle payment, which will be particularly important for Orkney. Nevertheless, the cabinet secretary will share my concern over the decline in cattle and sheep numbers. Since 2004, the number of beef cattle has fallen by 13 per cent and the number of breeding sheep has fallen by 17 per cent. Does he believe that the measures that he has announced today will reverse that decline? Does the complexity of the new CAP that he has announced today—indeed, about which he has expressed concerns today—especially regarding sheep support, mean that there will be more farm inspections, sheep counts and other cross-compliance measures? On the payment regions, is he able to state what the definitions are for the LFASS grazing categories A, B, C and D? That would be of help to farmers and crofters who are now trying to work out what the measures mean.
A key objective of the policy that I have announced today is to support livestock production in Scotland, particularly as the new system of area payments will have a huge impact on intensive farming in this country, be that in Shetland, in Orkney or anywhere else. Therefore, I think that it is the right thing to do to support livestock production, particularly the production of cattle and sheep.
As I said, tailoring a European policy to Scottish circumstances brings some complexity with it. We have been very careful to ensure that the third region option is implementable; if it were not, it would backfire. Brian Pack expressed concern about that, as Alex Fergusson mentioned. That is why we are using fixed grazing categories under the LFASS classifications to deliver the third region scheme.
As far as inspections and the bureaucratic burden are concerned, we will work closely with stakeholders to ensure that bureaucracy is proportionate while ensuring that we work within the rules.
I welcome the cabinet secretary’s confirmation that there will be a coupled support scheme for sheep, following extensive negotiation on the issue with the UK Government. Despite the mixed signals on coupling that are coming from the sheep sector, can the cabinet secretary confirm that the voluntary coupled support will be reviewed in 2016-17? Can he also confirm that the eligibility condition for coupled support will require farmers to identify and register animals as per the requirements of the sheep electronic identification scheme regulation?
There are mixed views in the sheep sector on the coupled schemes. The driving thrust of our policy is to target activity and genuine farming, and we have a limited number of tools available to us, one of which is coupled support. Therefore, I have taken the decision that it is right to utilise that, but it will be utilised in a limited fashion—it will apply in one of the three payment regions. In other words, not all sheep producers in Scotland will be part of the coupled support scheme for sheep. Only those that operate on certain categories of land will qualify, so it will be a modest scheme for the people who happen to be in the relevant parts of the country. Many sheep farmers will not be part of the sheep scheme.
I have already indicated that we will try to keep bureaucracy to a minimum, but we must act within the rules. Many sheep farmers to whom I have spoken have said that that is a price worth paying and that we should have the coupled support scheme because it is available to us to use.
In relation to how the scheme will interact with the sheep EID scheme, the chief agricultural officer will work closely with the sheep sector in an effort to understand how we can implement the regulations in a proportionate way.
The cabinet secretary will be well aware that the CAP regulations provide a one-off mid-term opportunity to review the flexibility between pillars. Will the cabinet secretary undertake to assess and review the outcomes that are delivered by pillar 2 spending over the course of the new Scotland rural development programme, particularly in relation to rural community development?
I should have said this in response to the previous question: we will utilise the reviews that are available, whether in relation to pillar 2—the rural development programme—or the coupled support scheme for sheep, which the previous question was about.
We have the opportunity to review the coupled schemes once a year. Other parts of the new arrangements either cannot be reviewed or can be reviewed mid-term, if we get the agreement of the European Commission. I will certainly take up that opportunity in relation to the rural development programme, in particular.
Like Claudia Beamish, I welcome the cabinet secretary’s announcement that he is to bring in and fund a carbon audit scheme for all farms, which is something that the Rural Affairs, Climate Change and Environment Committee called for. How quickly will that scheme come into operation? How does he expect it to influence on-farm behaviour? In years to come, might the charting of carbon footprint reductions—or otherwise—have a bearing on financial support levels if the scheme does not have the desired effect?
I feel that our farming for a better climate initiative is very successful. A number of farmers are participating in it in an effort to reduce their carbon footprint. They have found that they make significant savings on farm from using less energy, less fertiliser or whatever options they choose. I think that it is in the interests of Scottish agriculture that we roll out that initiative, which is why I am keen to fund carbon audits. I hope that, over the next five years, all farms will participate and we will have a win-win situation. I am keen to support that.
In addition, it is extremely important to the international marketplace that our farming system is seen to be just as green as, if not greener and more sustainable than, the farming systems of our competitors. That is in the interests of Scotland, both from the point of view of meeting our climate change targets and for the bottom lines of farming businesses. I will pursue that with vigour.
The cabinet secretary will be aware that Dumfries and Galloway has 20 per cent of the national beef herd, which is of particular importance to the region. Can he offer further detail on how pillar 2 will support improving the efficiency and sustainability of the sector, particularly in Dumfries and Galloway?
Dumfries and Galloway will, I hope, gain from some of the measures that we have decided to adopt since the consultation document was published.
The Dumfries and Galloway area is of course extremely important to the beef and dairy sectors, which is why we have put such substantial resources into pillar 2 for the beef improvement package. I expect that many of Scotland’s big beef areas such as Dumfries and Galloway, south-west Scotland and the north-east of Scotland will significantly benefit from this £45 million investment in the future of Scotland’s beef industry.
The rock bottom payment of only €10 per hectare for LFASS category A land is simply not enough. Even when coupled with the ewe headage payment, it is still going to be met with disappointment by those who saw this as an opportunity to regenerate hill sheep farming. It is simply too low—
Can we have a question, please, Mr McGrigor?
Will the cabinet secretary deal with the National Sheep Association to minimise the bureaucracy associated with the ewe scheme, given the fears of a flood of inspections and extra cross-compliance measures?
Yes, I will work closely with the National Sheep Association and other stakeholders to ensure that we do all that we can within the law to minimise bureaucracy.
Jamie McGrigor is completely missing the point about the payment rates in the third region. We want to reward activity, which is why the basic area payment is as low as possible in Scotland’s rougher rough grazing; the activity payment is then added in by the coupled sheep scheme. If the outcome happens to be, say, €35 per hectare when the money from the sheep scheme is added to the €10 payment, that will be the same as the payment for the better rough grazing land in Scotland. Regions 2 and 3 are aimed at supporting activity and getting the right payment to the right parts of Scotland.
The only people who will lose out from my proposals are large inactive landowners. I do not know which side Jamie McGrigor is on, but I think that most people in the Parliament will support our view that we are doing the right thing with this policy.
Is the cabinet secretary able to offer further information on how the Government will ensure that new entrants and prospective new entrants are made aware of the support on offer? What impact does the Government think that such measures will have?
I hope that this has come across over the past few years, but I care very deeply about attracting new blood into agriculture in Scotland. It is not always the easiest thing to support, given the world in which we live and the regulations that we have to cope with, but I genuinely believe that when our new entrants, who for very proper reasons were looking for an overnight transition, see what support is available to them from day 1 under the new regime I have outlined, as well as the other support available through the rural development programme, they will feel comforted that a huge step forward has been made for new entrants in Scotland as a result of the Scottish Government’s announcements today. We will continue to work closely with them in the years ahead, because our agriculture needs lifeblood and a new generation in Scotland that has the skills to produce food for our tables.
I note from the supporting analysis that Dumfries and Galloway will lose £18 million per annum by 2019 instead of the £22 million that we had expected. Although I suppose that that is of some comfort, the transition arrangements will be important in our region to enable farmers and the dependent businesses to adapt. Can the cabinet secretary expand on the arrangements for the transition period? For example, will reductions be equally spaced over the period or will there be different profiles? After all, it will be important to businesses that are planning to adapt over the period to have knowledge of the profile.
We can do only so much to mitigate the impact on Elaine Murray’s constituency, and the wider region in which she is based, of the move from large historic payments to area-based payments. However, the figures that Elaine Murray has highlighted show that we have at least mitigated as far as we can the decline in funding to that part of Scotland.
As for how the transition will be managed, we will have a formula for managing the move from historic to area-based payments over the subsequent five years. It is very difficult to predict the payment that any farm business will get, given that they are so diverse and different. Each farmer will be looking at today’s announcement and working out what it means for them, but we will make as much guidance available in the clearest language possible to help people understand the impact on their businesses in the weeks and months ahead.
I welcome the cabinet secretary’s statement, and I am pleased that the capital grant scheme is being maintained. Can the cabinet secretary indicate whether the scheme’s budget will be maintained at previous levels, or even increased?
All figures relating to the rural development programme should be available to MSPs this afternoon, if they have not received them already. Dave Thompson will find that we have protected the budget for the capital grant schemes for crofters in Scotland. We have listened closely to the representations that we received on the need for a separate fund in Scotland that does not confuse crofters with smallholders.
Overall, the deal is very good for Scotland’s crofters. Our crofting communities play a vital role in maintaining our environment and producing food, and the measures that we have announced today will help to target support to active crofters in particular, and even more to island crofters, so it is a win-win situation for many crofters in Scotland.
Before I call Alison Johnstone, I ask Jean Urquhart whether she wants to ask a question, as her name keeps appearing and disappearing from my screen.
My question has been answered.
Thank you. I call Alison Johnstone.
What formula was used to arrive at the cap of £400,000, which is notably higher than the cap of £254,000 for which members of the European Parliament voted? How many farms will that cap affect, and how much money will be distributed as a result among smaller and less well-off farmers?
As I indicated in my statement, there are already mandatory measures for reducing payments over a certain level by 5 per cent; that is happening to all payments. The cap that I announced is an overall cap for basic payments, and I have set it at €500,000.
The first of our announcements is aimed at rewarding activity. Given our experience with the current policy, those who get big payments but are inactive will now be frozen out completely if they remain inactive.
The top 10 recipients under the new policy will be different from the top 10 recipients under the current policy. The amount of funds that the next top 10 recipients will receive from the public purse under the new policy will be a fraction of what the current top 10 recipients receive under the policy at present.
That is a huge step forward for fairness. We picked the cap to put in place a safeguard for the transition over the next five years. As we move from historic to area-based payments, the payments for those with the biggest amount of land in Scotland, where there is sometimes less of a link to activity, will not go beyond that cap. If they qualify under the CAP, they would still have to be active farmers. We will keep that mechanism under review, but it will come into play halfway through the transition period.
We have a late bid for a question from John Scott.
Thank you, Presiding Officer. I declare an interest as a farmer. Does the cabinet secretary agree that the real losers under his proposals will be those in payment region 2 in the improved hill and upland areas that are still classified as B, C and D areas in the LFASS scheme?
The choices are difficult, but we have to draw a line between each of the three payment regions. The better land is in region 1, but deciding how to split the rough grazing area between regions 2 and 3 involves a complex and difficult decision.
We worked closely with stakeholders on the issue, and many—though by no means all—of them were adamant that we had to split the rough grazing into two regions so that we do not overcompensate the less active farms in the region that will have the coupled support for sheep scheme.
The wider policy is geared towards activity, and I hope that we have got the balance right across all three payment regions in Scotland. Of course, if we had had a better budget from Mr Scott’s Conservative colleagues in the UK Government, even bigger payments would be coming in the next five years. Unfortunately, however, we were left with the worst pillar 1 budget in the whole of Europe, and we have therefore missed the opportunity to increase the payments rather than having to reduce some of them, which Mr Scott thinks will cause difficulties.