Cabinet Secretary for Rural Affairs and the Environment Richard Lochhead
Wednesday June 11, 2014
Today I’m announcing decisions on how we will implement the new Common Agricultural Policy from 2015.
I will outline the key decisions on how we will implement Pillar 1 of the policy that is set to deliver £2.8 billion in direct support to our farmers and crofters between 2015 and 2020.
We are also publishing today details of the Rural Development Programme worth £1.3 billion over the same period, that’s being submitted to Europe.
My objective is to ensure that these investments support food production, our rural economy and spectacular environment.
And that the men and women who deliver these benefits are supported and rewarded for doing so in all parts of Scotland: island, mainland, lowland or upland.
We know this support is vital.
Total Income from Farming in Scotland last year was £829 million – including £583 million in farm payments.
So it’s vital that we get these decisions right - within the rules.
We now face difficult decisions on how to implement a policy that we want to underpin productive farming, but where support can’t be linked to production.
And a policy largely decided on a European basis, that needs to be moulded as far as possible to Scotland’s diverse circumstances.
It’s been a long rocky road getting to today.
But it’s now decision time. Time for clarity.
The new CAP is far from perfect and hasn’t delivered the simplification we were promised. But at least it’s far better than was originally feared.
At the start of negotiations, people thought the CAP budget could be cut by as much as 30%.
That didn’t materialise.
Thankfully, the UK government failed to abolish or phase out direct payments, on which our industry relies.
But Scotland has been left bottom of the table, in payments per hectare, in both Pillars.
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 it across the whole UK.
Other governments got uplifts in both Pillars and are deciding how to invest them.
Today, I’m having to deal with budget cuts and mandatory deductions.
And this coincides with the biggest-ever redistribution of CAP support.
Because, 10 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, by adopting the historic-based approach.
Today, further delay is not an option.
Europe moved away from activity-based support because of overproduction.
But in Scotland, with 85% Less Favoured Area, the risk is the opposite - land abandonment, and loss of activity.
The government has worked tirelessly with stakeholders and left no stone unturned to find the right solutions for Scotland.
I’m under no illusions - the package I’m announcing today will not please everyone.
Some farmers, who were disadvantaged under the old CAP, will finally move towards a level playing field.
Others will see their payments go down.
But I have looked at every opportunity to mitigate the impact on genuine farmers.
Overall this is the best possible package for the CAP in Scotland, 2015 to 2020.
Given the major redistribution of support, the speed of transition is vitally important.
New entrants have lobbied for the Pillar 1 changes to be implemented in one step.
Farmers whose payments will go down have argued for time to adapt.
I must look at the impact on Scottish agriculture as a whole. I believe that an overnight transition would pose a real risk to not just primary production but thousands of downstream jobs, in the livestock sector in particular.
Given the level of reduction that many intensive farmers face, convergence will therefore be achieved over the 2015 to 2019 scheme years.
But we negotiated the ability to put those disadvantaged under the old CAP straight onto the regional average, through the national reserve.
I accept that the National Reserve therefore needs to be substantially bigger than the standard 3% as a quid pro quo. Stakeholders support this.
Encouraging the next generation is very important to me.
That’s why Pillar 2 support will be expanded into a new entrant package.
Start-up grants will be the most generous allowed, at €70,000 - plus capital grants.
And the Pillar 2 advisory service will include specific provision for new entrants.
Importantly, in Pillar 1, we secured the ability to repeat the National Reserve in future years, so future new entrants are not excluded.
And a big priority is to ensure support targets active farmers, be they new entrants or long-established businesses.
We will make every effort to target every public pound at genuine activity - to target those who wear dirty wellies not comfy slippers.
This package tackles slipper farming.
Under the Scottish Clause, land with no farming activity on it will get no Pillar 1 payments.
I have also instructed my officials to add sporting estates, whose principal activities are not farming, to the ‘negative list’ - whereby claimants are excluded unless they can prove they’re a genuine farm business.
These measures will ensure no payment on land with no farming activity – currently estimated at 600,000 hectares.
I will also limit entitlements to the area claimed in 2013 – to prevent tenancies being manipulated for unfair gain. 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 the historic-based system helps.
Historic payments, by definition, don’t represent today’s activity.
There’s broad consensus on splitting Scotland into payment regions based on land quality - and on targeting coupled support at 8% on the beef sector.
And there remains broad consensus to treat better land as a single region, at around €200 to €220 per hectare including greening - depending on the number of hectares declared.
But there have been calls to improve the way rough grazing is dealt with, to avoid overcompensation for the least active.
And we have a new weapon in our armoury – extra coupled support.
Month after month, I battled a UK Government that originally wanted zero coupled support before moving to 5%.
Europe finally agreed 13% for some countries, 8% for the UK.
Following discussions with Owen Paterson and Commissioner Ciolos, we finally secured clearance in principle to go up to 13% - putting Scotland on a level playing field.
We also had a second breakthrough - on regionalisation.
We’ve identified a way to split the rough grazing which is deliverable, because it uses existing land classifications fixed at the outset.
With these new flexibilities, we will address the rough justice in the rough grazing.
Rough grazing in the non-LFA, and in LFASS grazing categories B, C and D, will be one payment region with a rate of around €35/ha including greening.
The poorest rough grazing, in LFASS category A, will be a separate region at around €10/ha including greening.
But in this third region, I propose to introduce coupled support for sheep at the equivalent of around €25/ewe.
This is subject to agreement by the rest of the UK, but we will work with stakeholders on how to implement it, to minimise the burden of inspections.
On land with the greatest risk of inactivity, payments and stocking levels will be closely linked.
One further related issue is the issue of huge individual payments.
The top 5 recipients in Scotland in the current CAP receive between them over £7½ million.
The changes set out will, in any case, reduce that by nearly two-thirds – or more if they don’t meet the activity tests.
But most farmers I speak to, and the general public, think there should be an upper limit.
So part-way through the transition we will introduce a cap on Basic Payments at around £400,000/year, after labour costs.
For the vast majority, this will have no impact. But it’s a safeguard, and fixes the principle that unlimited individual payments cannot be tolerated.
This is a “five-pronged assault” on inactivity: the Scottish clause, the negative list, a third region, more coupled support, and capping.
The link to activity is especially important for the beef sector.
Productive beef farms were high recipients under the old system. Their long production cycle means it’s hard to change quickly – with implications for upstream and downstream businesses
But beef is the engine room of Scottish farming, worth over £2bn to the economy.
A gradual transition will help.
And having fought hard for coupled support, I propose to retain 8% coupling for beef across Scotland, with 75% beef genetics.
But I am changing the payment profile, with double rate on the first 10 calves then a flat rate.
And subject to the necessary approvals I propose to introduce a coupled payment top-up on the islands at around €65/calf.
Compared with today, a 100 cow beef herd will get over 50% more coupled support.
There are, however, limits to what we can do in Pillar 1. So we must look to Pillar 2.
I have decided to introduce in the SRDP an ambitious Beef 2020 package.
My aim is to help the sector through the transition ahead but also encourage transformation.
Before deciding on the detailed shape of the package I shall want to digest next week’s recommendations from Jim McLaren’s Beef 2020 group.
However, I can confirm today that we will be making available £45 million of new money over 3 years for what will be a crucial and unprecedented investment in the beef sector.
Producers will be financially supported on issues such as genetics, performance and reducing their carbon footprint.
The beef package will be a good example of win-win outcomes between economics and the environment.
The CAP must support productive farming. But it must also protect biodiversity, reduce agriculture’s carbon footprint, and conserve landscapes.
In Pillar 2, despite the budget situation, I’ve already increased the agri-environment budget by over £10 million per year.
But the new CAP also has greening in Pillar 1.
The challenge here was how to deliver environmental benefit, without a disproportionate hit on farming operations.
For the 3 crop rule, we negotiated substantial improvements.
But there’s still an issue for specialist barley producers.
With stakeholders, we’ve identified an alternative approach based on winter cover that gives equally good environmental outcomes without affecting production.
This will have to be approved by the European Commission, and the approval procedure is not yet known.
But our intention is to implement this as soon as we can, in 2015 if possible.
I always said there should be more on climate change in the CAP package, and I am using Pillar 2 to fund carbon audits for farms.
We’ve also looked at options under the permanent grassland measure in Pillar 1.
Subject to Commission approval, farmers covered by the permanent grassland measure will need to have a fertiliser plan. In later years, we may ask for this to be backed by soil analysis.
This is a modest light touch requirement which many farmers do anyway to deliver the win-win of 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% EFA requirement.
I want to give farmers credit for the features they already have. But there’s a balance to be struck.
Counting every tree would create a mapping nightmare for farmers – and run the risk of EU penalties.
So after detailed work with stakeholders, I have decided to go as far as I can, and to include as EFA:
• buffer strips
• field margins – including hedges and ditches
• Catch and cover crops
• And Nitrogen-fixing crops – subject to management conditions that help biodiversity while allowing for crop production.
We will continue to work with stakeholders on the details, including the use of optional weighting factors and coefficients.
I have also decided to strengthen the rules on buffer strips under the ‘Good Condition’ element of cross compliance rules.
Scotland has a great story to tell. Our food production has a fantastic international reputation as clean and green.
But we must stay ahead of our competitors.
Farming is on a journey towards ever more sustainable systems. Today’s announcements are part of that, and I will convene a major conference early next year, to bring together these commercial and environmental agendas.
Impact of the new CAP
I’ve explained how this new CAP package will impact on some particular sectors within Scottish agriculture.
But in designing the package I have balanced the impacts across farming as a whole.
For example, these latest changes to improve targeting for beef and sheep have no real impact on the dairy or arable sectors who will also benefit from the five year transition.
Sectors that have been frozen out – 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 decided 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 business and of course the £459m LFASS budget is maintained to underpin our more fragile communities.
But, however well we have put this package together, there’s always the risk of unforeseen consequences.
Despite the EU’s rhetoric about simplification, this is the most complex CAP ever.
Under EU rules, some of the decisions I’m announcing today can be revisited each year – such as on coupled support.
But others can only be reviewed once, or not at all.
That doesn’t seem sensible.
Not when we’re working hard to underpin food production, but we’re not allowed to link payments to activity!
We’ve addressed the rough justice in the rough grazing. But no change till 2021 seems too harsh.
So I am calling on the EU to permit a full Health Check of the new CAP at the midpoint of the programme.
It would be naïve to pretend the new CAP, as decided by Europe, is perfect for Scotland.
Also there are important details still to be worked up, with stakeholders.
And that the package requires clearances and approval with the UK and Brussels.
Look at the new policy with a magnifying glass, and I’m sure we’ll find anomalies and rough justice.
But I believe the government has exploited the positive aspects, and minimised the anomalies.
Giving us the best possible package in the circumstances.
Despite the constraints in the EU rules, the outrageous budget position, and often turbulent market conditions, we are confident that this package reflects Scotland’s priorities and lays the foundations for a successful Scottish agricultural industry for years to come.