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29/01/14 17:29

Parliamentary debate on implementation of the Common Agricultural Policy

Cabinet Secretary for Rural Affairs and Environment Richard Lochhead
Scottish Parliament
January 29, 2014

This morning the Government published interim figures for the Total Income from Farming in Scotland for 2013.

Total income went up by £128 million – albeit the picture varies between sectors.

But the figures confirm the importance of the Common Agricultural Policy for farmers and crofters.

Out of total net income of £828.6 million, £561.9 million came from grants and subsidies.

So this debate is on a topic of great importance for the sector.

In 2011 the European Commission published its proposals. Following on from the MacSharry and Fischler reforms, these proposals represented the biggest changes to the CAP in a decade.

And Europe’s first ever attempt to redistribute CAP payments, to base them on fairness not history.

The Commission said that the new CAP must be – quote – ‘greener, fairer, more efficient and more effective, ….moving away from income support and market measures and focusing on environmental and climate change objectives’.

So Europe wanted farms to become greener, and more market focussed – supported with CAP payments, but not driven by them.

Here in Scotland, the government supported that general thrust. Brian Pack’s inquiry confirmed that the CAP must deliver clearer benefits for the money spent.

But we also insisted that Europe does not lose sight of the CAP’s primary purpose - to support viable food production.

We had specific negotiating objectives on slipper farming, coupled support, new entrants and so on.

It’s worth reminding ourselves how the Scottish government objectives differed from the UK government’s.

The fear that the EU might massively cut the CAP budget evaporated, thankfully. Even so, the UK still wanted a substantial reduction in CAP spending, especially Pillar 1 farm payments. They wanted to abolish coupled support, and phase out Pillar 1 payments completely.

The EU negotiations finished last autumn.

As always, the final compromise was far from perfect. But Scotland had some negotiating successes.

We secured the Scottish Clause to combat slipper farming.

We ensured that new entrants can be treated fairly.

We changed the details of greening, so that it fits better with real farm practices.

We fought off the risk that heather would be ineligible whether or not it’s genuinely farmed.

We ensured the timetable for changing the LFA system was realistic; and

We secured more flexibility, and we removed the worst of the bureaucracy in the original proposals.

But alongside these successes, there were some disappointments.

For example, coupled support is the only remaining tool in Pillar 1 for directly supporting production.

But Scotland is limited to 8% coupled support, when other member states can have 13%.

The UK government says it’s generously prepared to discuss letting us go higher.

But that offer is hedged round with conditions.

And it reminds us that they failed to negotiate what Scotland needed in the first place.

As they did on the budget.

We entered the negotiations with the worst budget deal in Europe on Pillar 2 rural development, and the third worst on Pillar 1.

The UK had the opportunity to get us a fairer deal. But they didn’t even try.

To add insult to injury, when dividing the budget within the UK, they took so-called ‘convergence’ money that Europe intended for Scotland, and spread it over the whole UK.

Leaving us with the worst per-hectare budgets in Europe - in both Pillars.

Whereas, as an independent member state, we would have got an extra billion euros in Pillar 1 – which could have generated two and a half thousand jobs.

And we would’ve been able to negotiate a fair deal in Pillar 2 – where, ironically, it’s easier to target support on active farmers than in Pillar 1.

Faced with an impossible situation, I had to take a decision in December on transferring funds between Pillars.

I was reluctant even to consider this. Pillar 1 payments are so important that I’d have preferred to leave them untouched.

But our Pillar 2 budget is so poor that without a transfer, we would have been unable to meet our rural development commitments.

Like meeting legal requirements on the environment, and protecting LFASS payments – which alone account for about a third of Pillar 2.

So after taking stakeholders’ views, I decided limiting the transfer to 9.5% would strike the right balance –limiting the damage to Pillar 1, while allowing a reasonable Pillar 2 programme.

Even with the transfer, our budget for the SRDP is extremely low – which requires tough decisions about prioritisation.

I look with envy at other member states, who are deciding what to spend their increases on – while we work out how to deal with decreases.

I’d love to be like Ireland – able to fund a big beef sector improvement programme in Pillar 2.

But Scotland’s budget is tiny compared with other countries.

My proposals for the SRDP will protect LFASS, and increase agri-environment by over £10 million a year.

But we’ve had to squeeze other areas.

In particular, farm capital grants will have to be more targeted – on new entrants, crofters and other small farmers.

These proposals are set out in a Scottish Government consultation, published in December.

And we have a separate consultation on Pillar 1, which finishes in mid-March.

To complement the consultation exercises, I’ll be writing shortly to all farmers who receive CAP payments.

The consultation documents have generated huge interest in the farming community.

Especially on Pillar 1.

Clearly the government won’t take decisions until after the consultations are over. But some key themes are emerging.

One is on slipper farming.

We worked hard to ensure the new CAP would end slipper farming, and were pleased when the so-called Scottish clause was included in the CAP regulations.

It’s fair to say we were disappointed with the Commission’s first draft of the implementing rules. They didn’t accommodate the Scottish clause in the way we’d envisaged.

If this rendered the Scottish clause toothless, then payments to slipper farmers might continue, and everyone else’s payments would be diluted as well.

But I am pleased to say the government believes such fears are unfounded.

We have proposals which will make the Scottish clause effective.

These will be discussed with our CAP stakeholder group next week.

Another emerging theme is on greening. We must deliver more environmental benefit from the CAP. But the risk of red tape is high. So getting the balance right will be crucial.

Concerns are also being expressed about the impact on beef producers, some of whom fear a reduction in their payments.

I understand their concerns and have great sympathy with them.

This is a crucial area of the new CAP. It’s important to understand some of the details.

First, some people are implying that the impact on beef farmers’ payments is entirely due to Scotland’s plans for regionalisation and transition.

That is not the case.

There’s general downward pressure on the Basic Payments budget. Everyone’s payments are going to be smaller than they would have been if Scotland had got a fairer budget deal.

Plus there are mandatory deductions imposed by Europe.

So some reduction is inevitable.

Secondly, some people think this CAP deal breaks a link between activity and payment levels. But the link between the size of a farmer’s payment and the size of his herd or flock was broken back in the 2003 reform.

There’s a contradiction here, in EU policy. Europe wants to support food production. But for a decade, it’s operated a policy that limits its ability to do so.

Not very logical. But we are where we are, and Europe’s not shifting from its direction of travel.

So it’s true that some farmers who are highly active, and have been getting high payments, may see their payments go down.

I understand, therefore, why some people are attracted to an alternative – the so-called Tunnel, which maintains historic-based elements from the Single Farm Payment. I know NFUS sees potential merit in it.

But when considering the options we have to be very careful.

There’s a dilemma here. Using the Tunnel, farms would get payments in 2019 or 2020, based on their activity in 2000.

It would protect payments to farmers who used to be very active, but now aren’t.

In one example, a farmer said his payments could be halved. But when I investigated, his activity level had also halved.

The Tunnel approach could also prolong the disadvantage suffered by new entrants.

A new entrant who started in, say, 2000, aged 35, might not get a fully level playing field till 2025 – by which time he’d be 60 !

Some people say that the government’s approach would move Scottish farmers more quickly to area-based payments than other countries.

But fifteen years will have passed between the decoupling of headage payments and full area-based payments.

So the Tunnel has attractions but also downsides.

Of course I understand the real concerns being expressed.

But we must not let our farm sector tear itself apart over this CAP reform. Every group has the right to argue for its interests. But we need overall solutions, that are best for our farm sector as a whole.

I want to avoid partial solutions that pit farmer against farmer – young against old, beef against arable, hill against lowland.

That’s what lies behind the government’s proposals – the big picture.

Our transition plans:
- give established businesses time to adjust;
- give new entrants fair treatment;
- and get the whole sector onto a level playing field by 2020.

Our activity rules will ensure no payments go to land where there’s no activity, or just token activity. Leaving more money to spread over the real farming community.

We will target the beef sector with coupled support.

Modelling shows that the impact of reform is complex. Overall, over 50% of farmers would get higher payments, and only 47% would get lower. Even within the beef sector, over 40 percent would receive increased payments.

But we acknowledge the impact on the beef sector. That’s why I’ve already said that if we are limited to 8 percent for coupled support, I will allocate it all to the beef sector.

And of course I’ve set up a group under Jim McLaren to look at the beef sector and its future.

From comments in the last couple of weeks, it’s clear some people think those measures don’t go far enough.

I’m very happy to receive those comments, which we’ll take seriously.

It may be, for example, that our regionalisation plans could be changed. I welcome the ideas NFUS sent me on that this week.

It would be wrong to signal any changes here and now. The whole point of a consultation is to hear views before final decisions are taken.

But I can confirm to Parliament that we are aware of the concerns.

We take them seriously, and we will look very closely at the detailed options before decisions are taken.

Some people have suggested the government’s proposals are designed not for the good of the industry - but for the convenience of the computer system.

I suspect no-one seriously believes that – especially the stakeholders who’ve spent the last three years working with us.

But there is a serious point.

The worst thing we could do, would be to ignore issues of deliverability.

We saw, in England, what happens when insufficient attention is paid to delivery.

Farmers suffered for years. Payments were delayed, and often wrong. Defra had to pay huge fines to Europe – leaving less money to pay for positive things.

So, whilst deliverability isn’t the only thing that matters, it is a key issue - in both Pillar 1 and Pillar 2.

And we shouldn’t overlook the potential role of Pillar 2 in helping the industry adjust.

With such a tiny budget, it would be naïve to see Pillar 2 as a silver bullet.

But wherever we end up on EU support, farmers I speak to realise more attention must be paid to technical performance, managing costs, and producing for the market.

Like every other kind of business, agriculture keeps evolving.

The government can help the sector address this challenge, for example through the new Knowledge Transfer fund in Pillar 2.

I look forward to the views of the Jim McLaren beef group on this in particular.

And I look forward to the results of the consultation exercises once they have been completed.

There are many other aspects of the CAP which the consultation documents cover.

Too many to go through in detail.

I’m keen to hear the views of Members. I’m sure a range of views will be expressed.

And I expect Members will agree that everything could have been a little less difficult, if we’d had a fairer budget settlement.

But above all I hope Members will agree with me that we must consider the needs of the whole industry – and not let the CAP debate descend into internecine warfare.

Of course individual groups must fight their corner.

But at the end of the day it’s farming as a whole that matters – young and old, livestock and arable, lowland and hill.

The solutions we need are ones that address the needs of all farmers in Scotland, and that’s what the government is aiming for.